Ok, Pabst - I've read your posts with great interest, so I want to ask you. Let's say your worst fears are realized. Where does that leave us? World war? Massive revolution with everyone starving in the streets? Gold at $10,000 and all currencies collapse? You actually think that would/could happen and world governments wouldn't just shut the whole thing down until calm came back?
Bubbles "destroy" vast amounts of consumer wealth. The consumer being the ultimate driver of the Global Economy. Consumers across all demographics usually get suckered in with enormous debt in the height of RE bubble tops. And, in the case of markets, see their entire portfolios wiped out or decades worth of growth destroyed. In the case of Japan, imagine investing your retirement at Nikkei 20K only to see half your cumulative savings wiped out 20 years later!! How would that affect current spending? And future? Now imagine that plus a 500K mortgage saddled with a 17$ per hour jobâ¦.. The result is forced austerity across demographics. To save and pay off debt. Further problems that exacerbate the meltdown. The US is the worlds economic engine. Japan suffered during the "lost decade" while America was in the midst of a Tech Bubble. If Japan couldn't be saved by America's late 90's boom, who saves America when we go down? Uruguay? Banks are insolvent. They've got trillions in derivative losses. X Trillions more in future derivative losses. Nobody knows for sure how much and whoâs holding it because the derivative market and accounting standards are so opaque. Further, total losses depend 100% on future Government hand-outs. Governments must bailout everyone or else massive D losses get booked - even after "netting" sessions. This is why Banks are hoarding cash. Everyone's holding the Old Maid, and no one knows if the Invisible Hand will axe them next. Commercial and consumer loans are thus more difficult and costly to get. Why loan if you might not be around next month? Or year? 30 year fixed keep rising despite Trillions minted and Given to Banks. They've also got to recoup past losses booked in the hundreds of Billions. The consumer itself is fucked. Their 401K and mortgage is only topped by consumer debt. We just blew out the funny money millennia juiced with 0% credit cards and home loans refinanced up the wazoo. The consumer shot its load in 2005-06. Not much to do now except suck it up. On top of that. All the Trillions handed over to banks will become very inflationary once the worst clears. The markets discount this accordingly. Another point of interest â since 1990, Corporate America has nearly quadrupled its profitability, according to the S&P. But if one looks under the hood, quadrupled earnings are rarely evident. Not even a mere doubling. That says hyped valuations are largely paper-based = asset inflation. And the ensuing Bear Market âdeflationâ which could take values way below Fair, well, thatâs a Big Problem. Fair value S&P is somewhere around 600. DOW at 3-5K. Thats what happened to the Nikkei. Return to fair value after an explosive run up in Money supply. Our Money Supply has been pumped since the 1995. We haven't corrected yet.
So you're not actually trading are you? Just posting threads with Bloomberg headlines every other day on how "things will get much much" worse? Let me guess. Rationalizing every day why you're sitting on cash instead of trading?
Thank you Achilles28 for your comprehensive well informed reply to my question! I think I better understand the gravity of the developments discussed in this thread.
Doing nothing is a stratgey, and not a bad one at this point. It's better to be on the outside looking to get in, then on the inside looking to get out. Lighten up Makloda!
Just to synthesize a few replies into one. Fractal analysis involves comparing past moves to what's happening now. There's been uncanny similarities from certain markets. Here's the rub. In the U.S. we have three "major" indices and each has it's own unique macro price action. The Nasdaq has been tracking the 1920's-1930's Dow for a decade and a half. The 90's rally in tech was the 20's Dow. The 1929-1932 "crash" was about the same percentage as the 3/2000-10/2002 NDX set back and the subsequent rally in tech from 2002-2007 was much like Dow 1932-1937. This recent year long break is much like the sharp 1937-1938 retracement. This particular fractal would suggest that a. the swing low is in. b. the world is headed toward war c. Obama is causing global markets Hitler like anxiety. (no I'm not saying Obama IS Hitler lol- but IMO Pakistan will be a theater of military conflict.) The 1966-1982 Dow period that RC speaks of doesn't look anything like NDX but it could resemble SPX. Back in the 60's-80's the Dow made almost a dozen failed attempts at 1000 with a decade and a half of trade in whip back and forth ranges of 20-30%. SPX 1500 could be our generations Dow 1000. 1974 was the outlier. VERY gruesome break. Much like this period in terms of fundamentals. A 1974 fractal would suggest a. the low is in b. We'll bounce but not "turn good" c. persistent stagflation d. Obama is Jimmy Carter. The Nikkei is an animal unto itself. In the 1980's the Nikkei exploded higher in tech like fashion far out-pacing American index averages. From 1989 to 2002 though the Nikkei in a stunning turn around gave back almost 80% of it's value. This coming during a period when U.S. markets were tripling in price. The Nikkei low coincided with the American/European lows in 02/03 and most fractal guys assumed those lows particularly in Japan and U.S. tech would never be tested again. In a "normal" 1937-1938 or 1974 plunge the Nikkei should have found support somewhere north of 12,000. Instead Japan came off with little bounce until it made fresh multi-decade lows. Bulls would argue "throw the Nikkei out. Focus on America. OUR fractals point to October 10 as being THE bottom. Forget Japan." To a degree I'd agree. I for one STUPIDLY shorted SPX throughout the 90's thinking we'd return to correlation with the Nikkei and suddenly rollover. It didn't happen until 2000. Two separate universes. Perhaps. But when an industrial titan with a positive balance of trade is on it's ass-a nation that INVENTED the modern bank bailout and implemented what we're doing OVER A DECADE AGO-if Japan is struggling to such degree then yes it causes immense pause. For me I'm operating with the expectation that our low is in. Am I wedded to that notion? In no shape or form. Like RC stated, we're long overdue for a cataclysmic panic. Does the indebted, wasteful, developed world deserve such calamity? Hard to argue no.....
relatively speaking it is because people were'nt nearly as leveraged as we are today. that is why relatively speaking today is worse.