Markets: Running Out of Hype?

Nowhere near it — yet.

We need to be clear on something: Yes, the market went up yesterday. But in my (admittedly weird) approach to markets, that places us only about where we were two weeks ago.

Yeah, sure, the Dow is in record country and so is the S&P. But in our work, the Techs (NASDAQ Composite) weighs equally.

This approach, which we track more closely for subscribers on our site ($40 bucks a year, and yes, it’s worth it) has its origins in the aftermath of the Internet Bubble popping in 2000-2003.

Wasn’t the market decline caused by ‘terrorism’ back then?”

Yes….and no.

You see losses were on the order of a $5 to $7-trillion dollars of market cap that took place. Yet, because it was isolated from the Dow (and largely the S&P) when you talk to your “financial advisor” most will hold up period charts and brush off the Tech Wreck almost like it never happened.

Yet when it comes to money, it occurred to me that those losses were real, painful, and the bubble in techs did decline.

So the way our index is constructed, I look with equal favor on the three major indices. Dow? Looks peachy. S&P? Just grand. But the NASDAQ Composite (previous high for the year was 5,400 plus, is still a shade lower.


Oh, there is nothing preventing new all-time-highs in the index. Look at the dynamics in play.

For one, bonds and fixed income assets face the specter next week of a bond rate hike. A drop in the 10-year yesterday helped to fuel the stock rally. Still, when rates go up, bond prices on the street drop. So the bond types will – as we’ve been preaching to the skeptical multitude for almost a year now – will look at shifting a few of their assets into common stocks/equities.

Since the bond market is bigger than stocks, in terms of dollars, this should ripple into a fine repeat of the last massive ultra-bubble; that was the Great Depression.

We point to the market break in 1921, the last of four mini-depressions set off perhaps by the San Francisco earthquake of 1906 which then rumbled through the economy and may have tilted things toward the Knickerbocker crash of 1907.

Regardless, there were other breaks as well, but the last of them arrived in 1921 and by our reckoning was about the equivalent of the 2008-2009 Housing and subsequent market collapse.

By 1922 – and in more recent times, since 2009’s spring low – the market has been going gangbusters.

There are plenty of rhymes going on: The LBGT Movement doesn’t realize, for example, the “harmony” off the Flapper Era.

Prohibition is weed…and the lists go on.

I haven’t seen too many articles pointing out the similarities between Herbert Hoover and president-elect Donald Trump, but they are in plain view for those able to generalize about historical roles.

My particular fascination with the parallels is that we have three “zones” where the mass rally from the Housing Bubble Bottom could reach its zenith..

Some very wise traders I know argue that the top should come in January. Looking at the news flows, this could foretell troubles at the Electoral College, depending on the threats and faithless electors willing to sell the will of the people down the river. And we don’t discount the Fed raising rates, although the 10-year seems to be pointing to a quarter, not a half.

In that case, something happens and Trump’s inaugural is a mess and we are “in the soup” from there.

The second scenario is one I favor. March 4, 1929, Herbert Hoover took office. So with an Excel spreadsheet set up for date maths, we can easily calculate the number of days from installation to market peak. That gets the peak into July and the Crash of a Lifetime into the mid-Fall 2017 period, rather than early Spring.

About in the middle is how the plots of the market line up. In terms of dates this way, we are now into the first week of June of 1929 and you can work the numbers to the all-time high September 3 of ’29, I think it was.

This view of history is not precise, of course. But I have found it somewhat more reliable than a purely linguistic approach, although the Rise of Trump certainly echos the sense of isolationism that beset America as the markets peaked, and then crashed. We figure you will look up the history of the Smoot-Hawley Tariff Act, if you’re serious about futuring and the ways of social shift.

Even if you’re not, the way the calendar (and social mood and urge to isolation) is moving, noting that March 13 of 1930 marked the birth of Smoot-Hawley, and knowing this is the first week of June, one of our “loose” predictions for 2017 is that the analog to Smoot Hawley is due to be introduced in mid to late September (October?) of 2017.

We could, of course, make other predictions. We’re just about 2 ½ years from the the harmony point with the Lindberg kidnapping of 1932. Sadly, we don’t have any idea who the vic or the perps will be, but we can guess at it. Regardless, that kind of “crime to outrage a Nation” are still to come.

We have also “slapped the timer” (as chess players to) when comes to getting a bead on the Global War. Unlike the relative niceties of nerve gas the the napalm that sparked humanity’s first firestorms (Dresden) we see the next go round, as many as 10-years off, as kicking off genetically targeted diseases and other such atrocities.

Nice cheerful way to begin the morning, huh? And yes, the mood carries into our Coping section as well.

90-minutes ahead of the opening, Dow futures were up another 30. But since we should have another three months of rally before the top under “Rhyme Theory” that is hardly surprising. We are just getting to the “last vertical rise”that was played out in the 1921-1929 period. While we may get a brief pullback (*around 3% tops) the sky seems like the limit.

Just as it did back then.

With sites like Drudge putting pictures of the president-elect on $20-bills, we should see the “light off” and great sucking sound as sheep are drawn – moth-like – into what will become the bonfire of the equities.

It is, as always a matter of knowing when to hold ‘em and when to fold ‘em.

And when to go massively short.

EU: Circular Economics

The headlines about how the EU is extending their bond-buying through 2017 is only part of the story.

Here’s how the scam works:

Let’s say you and I are two countries. Oh, and we’re both broke. How do we paper-over everything?

I issue a pile of bonds to float my economy and you agree to buy them.

Since your country is broke, too, you also issue a pile of bonds and I agree to buy yours.

Rinse and repeat indefinitely, or until the whole house of cards tumbles down. In the meantime, talk about tapering off the financial heroin. Yeah, that will play.

Oh well…like we said, not YET.

Woes of a Liberal Icon

Black employees are suing CNN.

Liberal Border Dreams Come True

2,000 illegals per day are surging into America. Their efforts to bust the budget are certainly coming to pass, by the look of it.

Would it be fair to label this Obama’s “scorched earth” policy?

Eyes on the Trumpedency

Trump names Scott Pruitt, Oklahoma attorney general suing EPA on climate change, to head the EPA” says a headline in the WaPo this morning.

They seem to have a knot in their knickers about how this is the third Trump pick that differs in thinking with the purported mission of the agencies they will head.

But here’s the thing: I don’t see the even-handed discussion of the other point – namely Obama making up laws through executive fiat to implement things like the Paris Climate Accord as though it were law.

It’s not, of course and Scott Pruitt knows that better than most.  Reasonable pick in our view.

Life Expectancy Declining

The U.S. CDC/ National Center for Health Statistics is out with a bummer; no make that many bummers:

Life expectancy for the U.S. population in 2015 was 78.8 years, a decrease of 0.1 year from 2014.

•The age-adjusted death rate increased 1.2% from 724.6 deaths per 100,000 standard population in 2014 to 733.1 in 2015.

•The 10 leading causes of death in 2015 remained the same as in 2014. Age-adjusted death rates increased for eight leading causes and decreased for one.

•The infant mortality rate of 589.5 infant deaths per 100,000 live births in 2015 was not significantly different from the 2014 rate.

•The 10 leading causes of infant death in 2015 remained the same as in 2014, although two causes exchanged ranks.

Is this a coincidence? Or planning at a Dr. Mengele sort of level?

Thinking the unthinkable, reducing the average life-span is certainly one way to reduce the budget load of Social Security and Medicare, is it not?

Statistical quirk, we hope, but we fear being right as always. Now if we here of a new disease from some hot zone that targets seniors? Now THAT would really light up our conspiracy thinking.

Off to the doc’s place for the periodic blood draw. It’ll be another tough round of negotiating what’s healthy versus what’s happy…  Still eating the oatmeal and losing weight, though.

6 thoughts on “Markets: Running Out of Hype?”

  1. This may be minor, but in the world of seasonal adjustments, I’m wondering if the difference in inauguration dates will play into the timeline. It appears your thoughts adjust for that, but one of my lessons learned the hard way revolves around being “right” too early. I think Jan vs. Mar postpones the timeline, but does not change the outcome.

  2. As someone of the same vintage as yourself and quite familiar with blood draws have you ever considered using the latest bleeding edge technology developed and sold by Theranos? The results could be to your liking plus you might consider buying their stock. I hear it is a bargain these days!

  3. George did call a blow-off top forming going into 2017. Oh, what was it – six months ago when he said that?

  4. So are you saying your expected pull back in the markets a la your short, has evaporated? You going long now or waiting for your expected 3% backtrack???

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