Our weekly chart reading, not to be confused with fortune-telling, on our subscriber side (www.peoplenomics.com) holds open the idea that as the week dawns, we are really in “make or break” time for not only the Global markets, but for the U.S. as well.
Friday, thanks to a couple of good rallies on Thursday and Friday, we were left sitting exactly on the bottom of a long-term trend channel which spans from 2009’s low through present day.
The fact that at first glance the Dow futures were down around 50 points is hardly conclusive evidence of what’s ahead for the week; stocks have moved that much in an hour (or less) recently.
It’s in situations like this (with the import/export data as presented on the subscriber side) and with Housing figures due out tomorrow morning, we expect that the bottom is in. Should any of our offspring call to wonder if it’s time to get back into stocks, we would only send them the trend channel chart which has a look of “completeness” to it if this is the fourth move since 2009.
The other big deal this week (as if housing data is not enough) is the Federal Reserve begins two days of meetings tomorrow. Although it is not getting too much press yet, in our long wave economics studies, there’s about an even-money bet that the Fed will raise again.
Not to sound like the Proverbial broken record, but in our parallels to the 1921-1929 market run-up, we estimate our position on the present timeline as somewhat analogous to the week of 10/27/1927 at the earliest, although it is more likely the week of 7/12/1928.
Admittedly, this is a fairly long stretch of history, encompassing a 9.5 month window, but equating the fiscal policies of one era with another is never exactly precise for numerous reasons. Not the least of which is that what was used as “money” through the 1920’s orgasmic peak was still being marked to something of underlying value: Gold and Silver.
The fiat (paper) money of the day was largely Silver Certificates which featured a promise of convertibility at any Federal Reserve Bank. The Wikipedia entry on the Silver Certificate gives us some other interesting background:
Silver certificates are a type of representative money issued between 1878 and 1964 in the United States as part of its circulation of paper currency.[1] They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which had effectively placed the United States on a gold standard.[2] The certificates were initially redeemable for their face value of silver dollar coins and later (for one year – 24 June 1967 to 24 June 1968) in raw silver bullion.[1] Since 1968 they have been redeemable only in Federal Reserve Notes and are thus obsolete, but still valid legal tender and thus are still an accepted form of currency.[1]
Large-size silver certificates (1878 to 1923)[nb 1] were issued initially in denominations from $10 to $1,000 (in 1878 and 1880)[4][5] and in 1886 the $1, $2, and $5 were authorized.[5][6] In 1928, all United States bank notes were re-designed and the size reduced.[7] The small-size silver certificate (1928–1964) was only issued in denominations of $1, $5, and $10.[8] The complete type set below is part of the National Numismatic Collection at the Smithsonian’s National Museum of American History
While we don’t expect the physical size of the U.S. Dollar to change, there is, nevertheless, a major campaign against paper as government ramps up its attacks on holding cash. The outsized mania to enforce total “accountability” on the transactions of citizens is nothing short of economic slavery combined with warrantless search, but the public’s attitude toward what “money” is has gone completely off the rails.
As evidence consider this: In the UK recently, following the death of David Bowie, some 38,760 Brits signed a petition to put David Bowie’s face on as unit of Kneeler currency.
From the exchange of nominal paper for a measurement of long-term precious metals to a simple pledge of value from a government which buried a ton of tax hikes in the Affordable Care Act to a suggestion in England that a note which we’d call a Bowie…it all serves to demonstrate the drift encountered when trying to make sense of one Economic Age versus another.
To be sure, while this looks like the week of June 28, 1928, the pre-Depression Fed raised rates in February, April, and July.
Since the Fed raised in December just past, the greatest chance would be that they will not raise at this meeting, but will wait until the subsequent one to raise again. Still, in terms of the “being on our schedule” another rate hike this week is not out of the question. The current Fed is running a tad behind the ‘28 Fed.
The first hike (in December) began to have its expected effects, as explained for subscribers. If you’re not one, you can click over here for the Fed H.8 report and see where the money has already started to move.
I would be blowing my own horn if I sent an email to my local serious bond trader-friend Don and reminded him that this is the first part of “Where will the money come from to blow the top off the Dow to an explosive Fifth wave finish?”
These things take a while to wind through the bowels of money-changing.
That noted, when you see that banks were running from the theatre after the last Fed hike, screaming that they were giving up on cash, trading assets, and interbank loans….well, the money has to go somewhere. And that somewhere is likely to be the stock market which is why I put it “out there” in a recent radio interview that we would likely see new all-time highs before Summer.
Seriously: Where else is there to put money?
Oil? Who wants to play “catch falling knives” although big players like the Saudis will likely use the period of weakness to roll-forward from some of their domestic assets into those of other countries, like the U.S.
Real Estate? Watch the home prices tomorrow morning when they come out. Although some markets are hot (SF, Seattle) others are not and the angle of the dangle begins to wangle. Childless coupling means smaller homes work. The Ure progeny are zero-for-three passing the mid-30’s…
Which also reminds us that the macro-trend to micro-homes and an all computerized life is driving, too. Who needs a computer room, or a library, or a den when you have a tablet with Win-10 and all spreadsheets synched, a zillion eBooks, and Tinder?
Put your life savings in Bonds? You mean here at the end-stage of a decline in the long-term yields that has been underway since 1981? You’d have to be mad.