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Growing number of indicators pointing to equities market about to crash  RSS feed

 
Dan Grubbs
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I hope this sparks some informed discussion and less drive-by comments. There are several indicators (market cap to GDP ratio, for example) and some analysts that are leaning hard to a market collapse. Of course there indicators and analysts who deny a crash is imminent. Now, we had a crash in 2009 and the markets recovered quite nicely, but what do people think; a) will / will not there be a collapse; and, b) if a collapse, what will be the effect outside of the investment community?

Ready .... GO!

 
allen lumley
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Dan G. : With Europe slowly climbing out of its hole and the dollar still strong and the preferred currency for world wide trading, especially Fossil fuels,
and a world wide surplus ! A rising tide floats all boats ! I do not think that we will see a trigger for a down turn anytime soon.

There will be more deaths in Africa and then more deaths related to sick countries not being able to feed their people, but My bent of pessimism says
this will not affect the world Market Garden ! Just my 2 cents Big AL

 
Cj Sloane
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Since '09 the market has gone straight up while volume keeps falling. That's an unsustainable trend.
There are several indicators of a reversal but:
the trend since '09 is intact
the trend since '88 is intact

What effect outside the investment community? If interest rates rise there will be trouble.
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allen lumley
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- This is not any kind of a trolling message but dead serious, What adjustments have been made for that part of the market that was middle-class investors
who got out of the market, 6 years ago to 4 years ago and will never ride that roller coaster again. From where I am sitting to big to fail resulted in nation
states providing fail safes for the big boys!

I am just reporting that I do not see the trigger, I am not a bury your head in the sand it can't happen pundit! A.L.
 
John Saltveit
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I think these are valuable questions to ask. I have a degree in economics, and I still can't very accurately predict the variablity in the stock market. I often hear people on TV saying, "I am a genius. I know exactly what is going to happen." Then it happens about 50% of the time. I do think that the general trends will be toward environmental sustainability, permaculture, local decision-making, broad based equity, and more cooperation, but I don't expect it to happen quickly.
John S
PDX OR
 
Cj Sloane
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allen lumley wrote:
I am just reporting that I do not see the trigger,


Q.E. Infinity hasn't worked to reflate the economy - just the market. The disconnect between the market and the economy is starting to fray. The banks are still broke. The consumer is broke.

In a larger sense I do believe that demographics drives the economy and the market. As the baby boomers retire in large numbers their spending & investing patterns change. That's the trigger.

This image works a bit too hard to make things fit but it's interesting none the less:

Insanely cheap money for the banks put too much money to speculative use the last few years driving the market higher than it should have gone based on the numbers. That will reverse.

How does that effect us? In '08 commodities were crazy high (oil & grain) and then crashed. Oil is starting to crash again - not sure about grain these days.
 
Cj Sloane
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allen lumley wrote:
I am just reporting that I do not see the trigger, I am not a bury your head in the sand it can't happen pundit! A.L.


Hey Allen! I came across this thread while looking for another thread. It's very possible that the crash in oil and other commodities could be the trigger. Sort of depends why you think the price has crashed. Everybody keeps talking about too much supply, but there are indications that it's actual lack of demand. Lack of demand for not just oil but iron, copper, and so on. I don't think new source of those metals have come online recently like shale oil.
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allen lumley
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Cj : Fast answer ( this gives me time to duck and cover !) There is more copper being recycled NOW than at any other time in history, and -
(mostly due to Crack-head scrappers ) It has been determined that for all AC current the Electrons flow only on a surface film of copper,
so that By Only coating electrical wires with a surface coating of Copper over steel wire the resulting wire is- as effective, cheaper, and not worth
a scrappers efforts to steal !

If the banks suddenly decide that the value of ingots of copper are only 1/3rd the value placed on them as collateral for short term notes ?
Do you remember when the banks called in the notes of two bros that had temporarily convinced the world they had cornered the Silver Market ?!

Several years ago the pundits/talking heads were calling the last slow recovery out of Recesion a jobless recovery I would call this a zero
wage increase recovery !

My understanding is the U.S. Has added more Workers than the whole of the EU ! Remember the old rule if your neighbor is out of work-
its a recession, if you are out of work its a Depression

Oil and Nat Gas prices in the EU (which banned Fracking ) are twice the US price, Oil is higher in Japan, with Nat Gas 3Xs current US prices
(nuke plant shutdown and a Power grid still in disrepair )

And Japanese population dropping like a stone ?! Within a few years their S.S. checks will be as unsustainable as ours ! THAT scares me !

It will be very interesting to see what happens to our neighbors to the north, the last figure I heard for the production of a Barrel (42gallons) of
Tar sands oil Was $84.00 (Canadian? US ? )

Much of this oil enters the US in R/R Tanker Cars down both sides of Lake Champlain, to the Port of Albany

Expect to see a major loosening of laws from the 70's banning Overseas Transport and Sale of 'Petroleum Feedstocks' !

Anyway, Yes I do see several potential triggers, not the least is being asked to pay for our adventures in Southwest Asia !

Worst comes to worst, I will have to kill a Bear to move into climate controlled housing ! Big AL !
 
Cj Sloane
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allen lumley wrote:...There is more copper being recycled NOW than at any other time in history, and -(mostly due to Crack-head scrappers ) ...

If the banks suddenly decide that the value of ingots of copper are only 1/3rd the value placed on them as collateral for short term notes ?
Do you remember when the banks called in the notes of two bros that had temporarily convinced the world they had cornered the Silver Market ?!


So you're saying more copper has come on line via recycling? Could be. I know people were breaking in to 2nd homes up here to steal the pipes but I thought that had dropped off when the price fell.

I do remember those brothers trying to corner the silver market. My initial reaction is to say the banks don't rig the price but... every day/week/month some rigging scandal pop up.

Japan does worry me too! They are on an opposite demographic pattern than us and this year should be the turning point. So far, the Western nations are following their failed policies of QE. James Kunstler has this fantasy that the Japanese will hit the wall and turn their backs on modern culture.

After the recent earthquake and tsunami, James Howard Kunstler believes that Japan may be propelled into a much different society very quickly — one that somewhat resemble his World Made By Hand vision. But JHK thinks that using less fossil fuel and decomplexifying their society might be a good thing for Japan as it may give them a headstart down the road that other complex societies like the U.S. are heading anyway.

I think we can individually "decomplexify" but not sure society can do that non-violently.

Now that you DO see some triggers... perhaps we should look at the other side?

 
Nick Kitchener
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It looks like the US stock market could be in for a 5 month correction, but I don't thing there will be a crash and here's why...

The US dollar is still the worlds reserve economy and it is the only place on earth capable of absorbing large flows on international capital. This means that as the economic turmoil in Europe, Russia, and Asia unfolds, the US dollar is the only place large amounts of capital can go.

At the same time, the US government is becoming more and more paranoid and desperate for cash as big government gets bigger, and spending runs unabated. Remember that there are huge unfunded liabilities coming due from government pension plans and medical.

This is translating into a shift in confidence in the ability of the US government to make good on its promises and so this international capital, seeking a relatively safe place to park, is increasingly steering clear of public assets (like bonds and US currency) and heading for private assets (like stocks). I'm expecting to see a continuation in US dollar strength as international capital flows toward the core, and the US stock markets benefiting in particular.
 
Cj Sloane
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Nick Kitchener wrote: I'm expecting to see a continuation in US dollar strength as international capital flows toward the core, and the US stock markets benefiting in particular.


I do think the dollar will strengthen but if demand weakens (as it has) and volume in the market drops (as it has) there will come a time when the disconnect is too large. P/E ratios, PEG ratios, dividends are all way out of historical ranges and eventually they will come back to mean if not undershoot.

And a slightly different topic... did everyone know that European bonds are at a 700 year low!!! 700 years!!! I've got to find a chart on that one.

OK found one:


Here's the article if anyone is interested

With the world almost in total agreement that rates can only go up, that the 30-year bull market in rates is over and a return to "normal" rates is timely, perhaps a glance at the following chart of 700 years of government bond yields will enlighten a little as to where the anomalies and what the "normal" is. All too often investors are caught up in their cognitive dissonance-driving recency bias when a bigger picture may just help those who always proclaim to invest for the long-term.
 
Nick Kitchener
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What we are facing is a huge global deflation. Never before has there been a global fiat currency system and we are in uncharted waters. You can throw out both Austrian and Keynesian economic models because they applied to antiquated systems.

I agree that the law of supply and demand still holds, but at this point, fear is the driving factor in the majority of global capital movement. There is only a few places to park trillions of dollars. The US dollar and US bonds are pretty much the only options. I'm not saying that they are good options, but they are better than the alternatives.

There is a generational change of attitude toward governments all over the world in case you haven't noticed. As governments become more tyrannical, both citizens and the corporations they run become more wary of trusting them with their finances. In fact, history tells us that hiding wealth from the government becomes a necessary part of survival. This is why I've warned in these forums about the delusion of being self sufficient on your own land. History shows us multiple times that governments will change the rules at any time to suit their own interests, raise property taxes without any regard for the land owner, and enact punitive laws so that they can simply confiscate wealth and then incarcerate the victim. We can see this happening right now with civil forfeiture. People bitch about Paul's stand of smoking dope on his property, but there are recent cases in the US where parents houses and other assets have been permanently confiscated under this law because their teenage kid was found to be carrying a joint during a random search in a public place.

It's this sort of thing that will drive the stock market higher. Not because the economy is great, corporations are good, or the technical analysis looks positive. But because the alternatives are simply untenable. With the bail-in laws just enacted, there is simply no safety in cash anywhere. Don't be surprised when this side of 2020, the US bails in the people to pay for their own superannuation fund shortfalls which are a direct result of theft by the same government that was entrusted to safe-keep it. The big boys know the game and they are already moving funds globally but there is nowhere safe, only relatively safe. For the little people like you and me, well, history warns that things don't go so well for us. We are just seeing the beginning.
 
Cj Sloane
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Nick Kitchener wrote:What we are facing is a huge global deflation.


Agreed.
 
allen lumley
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And Now for something different :

Bear with me I will link it all together! see link below :

https://www.youtube.com/watch?v=MlGbbYx6JT8

Now then, It is Past time that the U.S. follow this route, we have already (A long time ago ) gone this route with the American 1/2 cent, when It was retired
the 1/2 cent had more buying power than todays Penny !

Doing away with the penny will painlessly devalue the dollar as the nickel then becomes a new 1/2 cent in all but name ( expect it to change size and -
composition ) and the dime performs the same function as the penny did 50 years ago.

One side effect of this will be a new way to compare the actual earning power of the American Worker as he compares old coin values to the buying power
of the new coins!

A Worker employed in New York State with a new (January 2015 ) minimum wage of $8.75, will find he is earning 87.5 cents an hour, a candy bar costs
6 -7.5 cents,a newspaper 12.5 cents, a cup of coffee 30 -50 cents !

Do I realistically think this will happen, I think the U.S. and Australia are the last two hold outs !

Has anyone been on the floor of congress lately, do the politicians desks still have inkwells ? Just saying ! Big AL


 
I agree. Here's the link: http://richsoil.com/email
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