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| M. Ahmadinejad (Wikipedia) |
"In the context of historical evidence and outcomes, present market conditions give us no choice but to remain highly defensive. Valuations remain rich on the basis of normalized earnings (which are better correlated with subsequent returns than numerous popular alternatives based on forward operating earnings, the Fed Model and the like). Investor sentiment is overcrowded on the bullish side even as corporate insiders are liquidating at a rate of eight shares sold for every share purchased – a surge that Investors Intelligence describes as a “panic.” Market conditions remain steeply overbought on an intermediate and long-term basis, with the S&P 500 still near its upper Bollinger bands (two standard deviations above the 20-period moving average) on weekly and monthly resolutions. We continue to observe wide divergences in market action, from century-old criteria such as the weakness in transports versus industrials (which suggests an unwanted buildup of inventories) to more subtle divergences and signs of exhaustion in market internals."
via: HussmanFunds
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| Source: Wikimedia Commons (#4 is the K-27 nuclear submarine) |
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| Source: Wikimedia Commons |
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| Source: Wikimedia Commons |
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| source: wikimedia commons |
US Fiscal Cliff Biggest Near-Term Threat to World Economy
The US fiscal cliff represents the single biggest near-term threat to a global economic recovery. While it is not our base case, the dramatic fiscal tightening implied by the fiscal cliff could tip the US and possibly the global economy into recession. At the very least it would be likely to halve the rate of global growth in 2013.
Under current law US tax increases and spending cuts worth USD600bn, equivalent to 4% of GDP, will take effect in fiscal 2013. With most of the measures scheduled to take effect at the beginning of calendar 2013, the fiscal contraction would be equivalent to more than USD800bn (5% of GDP) on an annualised basis, according to the Congressional Budget Office. The scale and speed of this fiscal tightening would be likely to push the US economy into an unnecessary and avoidable recession. We therefore think the cuts will be pared back to a more manageable 1.5% of GDP (see our Special Report, “US Fiscal Outlook – Mired in Uncertainty”, published in July 2012, for more detail).
David: Because Greece is a $300 billion economy. Tiny. A rounding error in the great scheme of things. It's – last time I checked – about eight and a half months' worth of Walmart sales. Okay? That's a little different than when you have the $15 trillion heartland of the world economy, and the $11 trillion Treasury market which is at the center of the whole global financial system buckle and falter. That's the risk you're taking if you say, "Mañana. Kick the can; let's just wait for something good to happen."
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| Source: Wikimedia Commons |
Watch a live video stream of the protests in Madrid, Spain at http://www.rtve.es/noticias/directo2/. Below are pics from the video. People are protesting against new austerity measures as Spain suffers from a severe deleveraging cycle and an unemployment rate above 20%. In order for Spain to get bank and sovereign debt bailouts, it is being forced to reduce its deficit with tax hikes and spending cuts. |
| Source: Markit |
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| June 19 inverse head and shoulders w/breakout |
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| SPY decouples from IYT, 2y chart (source: FreeStockCharts.com) 9/18/2012 |
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| Source: flickr |
"The state passed Nevada in the second quarter in the rate of homeowners with seriously delinquent loans -- those 90 days late or in foreclosure -- according to the Mortgage Bankers Association. Only Florida had a higher rate of serious delinquencies, and that fell 1.2 percentage points from a year earlier to 17.5 percent of mortgages. In comparison, New Jersey’s rose 1.3 percentage points to 12.7 percent."
As the Wave Principle forecasts the different phases or segments of a cycle, the experienced student will find that current news or happenings, or even decrees or acts of government, seem to have but little effect, if any, upon the course of the cycle. It is true that sometimes unexpected news or sudden events, particularly those of a highly emotional nature, may extend or curtail the length of travel between corrections, but the number of waves or underlying rhythmic regularity of the market remains constant [emphasis added].
R.N. Elliott, R.N. Elliott's Masterworks, pp. 158-159
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| source: Bloomberg.com |
"To be clear, we do believe that we are currently in a recession." - Lakshman Achuthan
"Looking at annual numbers, the outlook is even more dramatic: if nothing extraordinary happens in the last few months of this year, 2012 will be the worst year for American newspapers since 1950. Professor Mark J. Perry of the University of Michigan estimates print advertising revenues of $19 billion this year. Taking inflation into account that is a 71 percent decline from the peak in 2000 and below the level of 1950."
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| source: esoloviev/Flickr |
"George Soros has issued a passionate plea to the German government to lead the eurozone out of recession by boosting growth, creating a joint fiscal authority and guaranteeing common bonds, or itself leave the currency union to save the future of Europe."
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| Source: Reuters |
"basically you're gonna lose $10s of billions related to Countrywide, and there's just nothing you can do to stop it. You're going to lose maybe $10 billion in the State Attorney General lawsuit. You're going to lose, who knows, maybe $30 billion in this new lawsuit from the FHFA. You're going to lose $10s of billions as a result of private lawsuits. You're going to lose another set of $10s of billions related to simply the mortgages not paying back, or the home equity loans not paying, and there's just nothing you can do about it. All you can do is sit there and absorb these losses, which is one of the primary reasons that you have to restructure the company so dramatically; why you have to fire the 30,000 people, close the 600 branches, and shift the emphasis of your business away from loans toward capital market activity."
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| Beaver Valley Power Station in Pennsylvania (Source: U.S. Geological Survey) |
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| Federal Reserve at Night (source: dctim on Flickr) |
"As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation. The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.
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| U.S. Adjusted Monetary Base/GDP since 1929 (St. Louis Fed) |
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