I’ve been spending too damn much time in my chair. Because we are in the “window” where a possible Replay of 1929 could turn frighteningly real. I’d suggest you reread a short history of the Salem Witch Trials not so much because the dems might accuse 200 people, also, at present run rates. But, because they are so instructive in the mechanics of manias – which we’re in right now.
The high-level economic view is that most of the “moving pieces” have fallen into place on the social dynamics side for 1929 to re-materialize: The sexual “shock force” of the late 1920’s was the “flappers” who, along with jazz music, were a major affront to what was then a prevailing norm. In much the same way, this role is filled today (and monetized, as were flappers) by the LBGTQ (r, s, t, etcetera) movements. With their own music, too.
In lieu of Prohibition and Gangsters like Capone, et al, we now have MS-13, et al. And instead of taking over Chicago, looks to us like the black tar epidemic is going bigger and in all major markets.
Then we have the Trade War rhyme ongoing. President Trump is reprising the mistakes of Herbert Hoover. And, we’ve been pretty sure for a few months that Elizabeth Warren will reprise Franklin Delano Roosevelt as the Newer Dealer. And she will be pressed by a socialist mob (as was Roosevelt) and like him, she will likely have to face war with China in the 2024 period, just as Roosevelt did.
That means, Warren (or whoever) (or Trump in round 2) will have to really focus on defense.
Our plan is to buy defense stocks after a crash. War is the traditgional economic medicine and the “death industries” do well before the sh*t starts to fly.
What’s different today is the out-of-phase echo of Teapot Dome, which happened well before Hoover’s time. And yet, just at we have Hoovervilles, there are people calling out Trumpvilles in places like Seattle. Not enough free lunch yet.
Core problem of Modern Times is “the Middle is Gone.” What I mean is, you either take the dole OR you work 100-hours a week. The 40-hour week middle is still there – on average. But have you looked for a 40-hour week job, lately? Most come with 20+ additional hours if you want to keep the job.
All of which lends support to the idea that there is a 90-year cycle (plus, or minus) a bit. And, coincidentally, there’s NASA work going back to the 2008 area that identifies both an 88 and 200- year cycle in climate, too.
As should be obvious, there was a lot to think about Sunday when my friend Robin Handler called. He runs the Options Signal Service.
We began with a discussion of what was in Peoplenomics Saturday. Namely that we should find out in the next few weeks how well the ’29 rhyme will play out for this cycle. As of this morning, here’s how the opening was headed based on early futures pricing:
There are a large number of caveats, and this is NOT trading advice! That “all declines are self-similar” is a key one disclaimer – along with others on the Peoplenomics side.
A discussion of the general lay of things ahead focused on three ideas. First is there’s a (smaller) chance of more or less instant BIG decline.
I’m not a fan of that – mainly because the chart suggests we could still have a week, plus a few days more, before things heat up. This got us to the second scenario and gotta say, we didn’t have much disagreement. Sideways a bit, and then onto the ledge.
Robin’s approach involves one set of methodologies (whatever LN Nodes are) and mine involve another (Aggregate Indexes and intermarket linkages). But a pretty ugly market before the end of the year and likely even before Thanksgiving is a fair summary, I think.
My work holds out that the skies could part and we move to new all-time highs next year, but short of a trade breakthrough, and democrats ending their witch hunt, that’s an also-ran – at least for now.
Handler’s view is the big play to watch in coming days will be the US dollar. He was kind enough to share the following chart with me to run it by you this morning:
In the early going this morning, gold was down another $12-bucks so the rally in the dollar could persist a bit longer.
Handler by the way offers UrbanSurvival readers 50% off on a his nightly service – click here if you’re interested.
Back on the dollar and the replay, there’s lots to think about:
- Remember market crashes don’t happen from the tops or even the middle of trends or trading ranges. They happen from when the market is really wrung-out.
- Thus, an ideal deal for a REAL 1929 replay of the Crash could come in late October, or early November, when we could drop down to levels touched over the Christmas Eve washout last year.
- In a “real” Crash, we could play along for maybe another week, or so, then head down when the WWT (Washington Witch Trial) gets underway. Once we start bumping into the lows from last year, well, that’s when you consider the odds of a REAL crash that might take the S&P 500 and the Dow, down to lows that were seen in 2009 (March/April of that year).
- Then, should THOSE fail… well, that’s when my other friend named Robin (Landry) sees the S&P in the 800 or lower range come in.
Is there some good news? Well…yes, and no.
The good news about the dollar is that it means foreign investors either still have confidence in the USA OR (and here’s where it gets ugly) everyone who plays in FOREX already sees this as a “buy the rumor” (of Witch Trial) this week which would be followed by a “sell the news” (from the Witch Trial hassing out Bic’s and gasoline) next week.
Another semi-good bit of news: It makes the markets act in a cohesive way PLUS is means that there’s even more money and more information in play which, in modeling, reduces the extreme volatility. Since crashes are ’emotional’ and relatively tied to information asymmetries that occur. 24-hour global markets are really a good thing…but only to a point.
Since part of the weekend was involved in time machine design (more Wednesday for subscribers, but the key thing I found was “In general, transverse waves occur as a pair of orthogonal polarizations…”) remember there was an equation that was taken as proof the sound barrier could not be broken.
Economists today, similarly hold that there are “laws in economics” that be broken. I expect several will be demonstrated as unreal when pressed to the extreme. One sometimes needs to be a generalist to see things, though. Cross-specialty templatizing is a hobby around here. Most SME’s (subject matter experts) are as narrow as tracing paper on edge.
In sound propagation, for example, acoustic shadows and wind can move sound around a LOT more than most people commonly believe. In fact “In the 1862 American Civil War Battle of Iuka, an acoustic shadow, believed to have been enhanced by a northeast wind, kept two divisions of Union soldiers out of the battle, because they could not hear the sounds of battle only 10 km (six miles) downwind.”
Same kind of “templates” may be at work in economics. Which is to say we likely have a ton of beliefs about the solidity and robustness of the global interconnected economies with hnyper-complex derivatives overhanging, that are just waiting to fail when put to a “real, uncontrolled stress test in real time.”
And should any one of those assumptions fail, it won’t be like a single bank (think Deutsche) going down. Nor would be be a region going bust (thing the European Union). It will be (replaying 1929) where the whole world implodes.
To wrap up, let me try to articulate the modern financial quandary this way:
Would you, at the time of the Salem Witch Trials, have sent money to Salem (or even Massachusetts) betting on a higher return than elsewhere? Or, would you run up the price in Salem as much as you could and then bail out before the bonfires get lit?
Yeah…something like that as next week comes into view.
Also Worth Knowing
Witch Trial Minutia Dept: 10 and shrinking: The House Democrats defying Pelosi and resisting Trump impeachment.
So, in the Great Historical Rhyme, is Hong Kong like the new Poland of Sudetenland? Only asking because China Plays ‘Fight the Landlord’ to Tame Hong Kong.
Good one on CNBC: Peter Navarro: Reports that US would restrict Chinese companies were ‘fake news’. Say, you don’t think it was a Trump-bash, do you?
Grease me up, Dept: Oil down more than 1% on trade war jitters and Chinese data.
And if your favorite breakfast food smolders, How Weedmaps’ major change in course may impact the cannabis industry.
Missing Links: You know we’ve been saying how climate hysteria will begin killing off jobs, right? Lookie here: Boeing and Airbus to see reduced jet demand as climate awareness grows, UBS says. From the mouths of banks, huh?
OK, futures have chilled down a bit (adjust that iirst chart down to just above Friday’s level in your head). Off to toss some eggs arfound and slug down more bean before the open.
Bon greed! Write when you get rich,