Hopefully not, but those of us who prefer the “short side” of trading were looking at the early futures today and wondering if we’re not getting closer to a dramatic replay of 1929. A couple of charts will explain the problem:
As you can see here, when we line up the October 3 peak in the present-day markets (*using our Aggregated Markets view), we are “hanging out” over what could turn into a Valley of Death for investor assets.
An Aggregate View is necessary, because of inter-market arbitrage. That is, if the New York Dow 30 goes up 1 percent, there’s no gain in a balanced portfolio if the S&P and the NASDAQ are both down 2 percent. Instead, there’s a loss.
This approach has allowed us to evolve certain market views, though not specific investment advice, that our Peoplenomics.com subscribers find useful.
This second chart bears directly on point:
Some further discussion of the yellow highlight in the (lower center) zoom-in: The yellow line warns us that IF (or once) we break lower than this, we will likely experience free-fall for a ways. While I’ve credited by friend Robin Landry with his 2,520 S&P area call, in the Aggregate view, we could be into the 2,475 range on the S&P.
Our slower-moving indicators (that we apply to strategic non-equities, too) have been in cash or short since October 18th. We don’t offer trading advice, but when our oscillator crossed under our arbitrary long/short indicator, the Aggregate was at 23,493. Based on futures pricing early today, we’ll be in the 22,369 area, so our indicator pointed to cash or short 4.78 percent higher than where we could trade this morning.
The scary part, however may be yet to come. IF we are indeed about to begin a similarly-sized free-fall, the equivalent to 1929 in the Aggregate work could be down in the 5,000 range. From the “get into cash” marker, that might be a decline on the order of 78.7 percent in the coming year.
I’m not saying that will happen, though…
No one wants to see the whole system implode. A decline of that magnitude would drop the Dow into the 5,530 range. Which would – on a purchasing power basis – be the next level down from the 6,500 range the Dow was hovering at at the depths of the Housing Bubble implosion in early spring of 2009. That was 10-years ago.
The reason for (limited) optimism is that the Fed still has a firm had on the economic levers. A strong case exists to touch the S&P 2,500 level and then roar on for one more series of final all-time-highs before the once-every-three-generations disaster comes calling.
Much will depend on the public mood…but you can see in one of our indicators (and more on this for Peoplenomics subscribers Saturday) something changed a while back. Not certain what, but the very way the markets traded on a semi-regular basis of ups and downs began to oscillate out of “usual bounds” and the trouble of today can be traced back, I think to whatever that change was.
Another Useful Dream…
I awoke with an amazing crackpot theory, that came to me in a dream early today and maybe there is something to it.
The idea was that as part of the Tax Reform Act – the one that brought a lot of fat American company bank accounts back to our shores – the last bubble up of the market began. Under our theory of Consumer Super-saturation, it has been nearly impossible for CEO’s to desk real earnings, so they went for the next-best thing: Synthetic Earnings.
Pretend you were the CEO of a major company and you were suddenly handed half a billion dollars. What would you do with it to make money? How about some stock manipulation?
That’s exactly what I would do if i could get it through legal: I’d tell my CFO to run out and buy all the Call Options on earth involving my company stock. As soon as the options were in the company account, I would then begin a modest stock buyback program. Shares would soar,
This would be a “two-fer.” Not only would I be moving up my stock’s share price, but I would also make a killing on close-in (time-wise) options because the closer-in an option strike date, the smaller the time premium paid. It’s value would all be based on stock price…and as CEO and CFO, care to guess who has their hands on them levers?
Even with prohibitions on such shenanigans, it would be simple enough to work with a co-conspirator. One of the private banks. Oh, sure, in the files would be plenty of PowerPoints and dog & pony crap, but in the hall, the “wink-wink” department would give those knowing the head’s up when the stock buys were coming.
But, the money supply hasn’t been infinite. So, once again, the CEO/CFO can maybe sell a little stock back into the market after a run-up. Either through a company account, or a co-conspiring organization, the “players” would buy up a huge number of put options – options that make money on the way down.
As soon as the “wink-wink” came, options would be acquired, and as share prices softened, the option earnings – this time being on the short side – would soar.
I realize this is wild conjecture on my part. But the variance in our oscillators began in a time-frame that seem to fit, at least superficially.
Sure, it’s somewhat conspiratorial…yep, no question. But there’s my oscillator and there’s the market shuffle.
At a broader level, such stock price manipulations would be very useful for American companies, were there not rules against it. Our theory has long been that as we begin the Manufacturer’s Resource Wars period of modern history, companies will be largely reduced to making no money through conventional manufacturing or service means. Commoditization’s a bitch. No one has pricing power.
And that, dear reader, is the kind of nightmare that goes through my head. At some point, is their an Evil Cabal of folks in the financial industry who are brighter than me and in positions to pull off such operations>
It would be a toughie to prosecute. The CEO and CFO would have been, at all times, operating in the shareholders interests – trying to make as much money as possible. That we might, as a country, be going through what might later be called The Tax-Cut Collapse would be mostly coincidental.
Besides, there’s enough “news” going on that people wouldn’t be looking for such a cynical group. Instead, prompted by the left-wing media, there would be a further assault on president Hoover-Trump…who would be left holding the bag for even suggesting such things as tariff reforms.
Then, like the liberalista rise in the 1930’s, we will see an ascension of the radical left and, in time, the benevolent liberal dictator, along the lines of FDR, who was the reason we put in president term limits as an Amendment to the Constitution.
While all this rolls out, we will see the specters of hunger in America, massive unemployment, and eventually war. After that’s done, and world population is reduced by three-quarters….well, like I said, this ain’t financial advice.
But if you read 20-years of UrbanSurvival, you’ll see that we’ve been careful to “walk the talk” and “going rural” is a very wise thing to have done by now, plus being debt-free, and owning some of your own “means of production.”
Because, in the kind of world we’re seeing off in the distance, if you can’t work with your hands, you won’t be able to work, at all.
With Bitcoin down scraping along the $3,700 range this morning, we will close this grim POV with two simple questions.
- Why would any Central Bank feel that they would need to offer anything in exchange for a cryptocurrency?
- And why would any Central Government leave the Internet up and operating when it would just service to offer millions a “demand path” to make good on financial representations?
On that, note, the future is coming. And we’d best be ready for it when it shows up.
A few headlines now?
Jobs Data Landing
As we’ve been saying, we seem to be riding past a “Peak Employment” bubble. Just out is the Challenger Job Cuts report for November: 53,073 whacked. But it was the tone of the press release that grabbed us:
“CHICAGO, December 6, 2018 – Companies around the globe are beginning to announce largescale layoff plans, possibly signaling an upcoming downturn. The number of planned layoffs announced by U.S.-based employers totaled 53,073 in November, according to a report released Thursday by global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc.
In November, Japanese tech and energy conglomerate Toshiba announced plans to cut roughly 7,000 workers, while German pharmaceutical giant Bayer announced 12,000 cuts following its merger with Monsanto. It remains to be seen how these announcements will impact the U.S. workforce. Challenger tracks job cut announcements by U.S.-based companies or those that occur in the U.S., as specified by the company.
The big story in the U.S. last month, however, was the announcement by General Motors that it would cut 15 percent of its workforce, or up to 14,000 employees, after offering 18,000 buyouts to workers in an effort to save over $6 billion. Challenger counted 14,000 cuts due to cost-cutting. GM’s announcement is the 7th largest single job cut announcement by an Automotive company since 2001, according to Challenger’s tracking.
“Announcements like GM’s will not be the last, as companies adapt to shifting consumer behavior. We’ve already seen major plans in the U.S. from Verizon, Wells Fargo, and Toys“R”Us for exactly those reasons,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc.
There is other data to consider as well, including the ADP report:
It showed jobs created in November at 179,000 – which is not what we’d like to see with a holiday season at hand. Here’s the drill-down:
Globally, China was down almost 2-1/2 percent (2.47) overnight, so we expect that with Europe dropping similar amounts, the “financial contagion” may be getting started. Just remember, when you see gold selling begin, it can be an indicator that “someone big” is in trouble and they’re throwing everything they can overboard. And yes, that includes the cryptos – because banksters are stupid, too.
More for your Data Dancing & Digestion
Next, we have trade data out from Census.
Remember, so of this was “stocking” for the tariffs, so we will likely see a slump in early 2019…
After that, we get to Productivity is just out from Labor….
“Nonfarm business sector labor productivity increased 2.3 percent during the third quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 4.1 percent and hours worked increased 1.8 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.)
From the third quarter of 2017 to the third quarter of 2018, productivity increased 1.3 percent, reflecting a 3.7-percent increase in output and a 2.3-percent increase in hours worked. (See tables A1 and 2.)
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.
Unit labor costs in the nonfarm business sector increased 0.9 percent in the third quarter of 2018, reflecting a 3.1-percent increase in hourly compensation and a 2.3-percent increase in labor productivity. Unit labor costs also increased 0.9 percent over the last four quarters. (
BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.
What matters? U.S. third-quarter unit labor costs revised lower.
Later on today, factory order, PMI, ISM, and ee-aye, ee-aye, owe..
Remember, even with the futures sucking wind, we were lower than futures priced levels on November 23rd, so not quite time to panic, yet. We’re pretty sure the Plunge Protection Team (and no, it’s not a myth…) is arbing up the open a bit…they don’t want panic, either.
Let’s Play! “Useful or Useless?”
Score ’em as you please:
- Jennifer Aniston responds to Dolly Parton’s threesome comments: ‘My mouth just dropped’
- OK, see if this rocks you: Stonehenge Site Damaged During Road Construction, Archeologists Say
- How intimacy coordinators changed how Hollywood films sex scenes
- And as long as we’re talking about screwing, OPEC agrees oil output cut, no final figure yet: delegate.
- And, it all comes out in the wash as France fines washing machine makers $214 million for price rigging.
Time to warn the pigs and chickens…Ure’s off to break the fast.. but we plan moron the ‘morrow…when we will see which of the “50-shades of gray” the market delivers…ankles ready?