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Investors who expect the stock market to decline.
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Current Situation
I just spent several hours checking the financial websites I read periodically, the news is not good to say the least.
Gerald Celente, director of the Trends Research Institute is predicting a financial Panic (his exact words) in 2008. He sees the dollar in Free Fall , gold over 2000.00 per ounce, etc. He corectly predicted the subprime mess and the dollars decline over one year before both started happening, and also predicted golds current rise last May.
His gloomy forcasts is this "We will shortly see economic times like no living person has seen since the great depression"(presumably because all those folks who lived through that are dead!)
In the next 9 months, 2 million homeowners with over 600 billion dollars in Adjustable rate mortgages will be getting big increases, if even 20% of them default, that will be a big hit.
Thomas Lawler, the former chief economist at Fannie Mae, says and I quote exactly "We all know that more hits are coming from the subprime loans but don't know how it will happen or how to stop it!"
Well, if he and his buddies don't know, who should?
The big Banks globally are bleeding red ink, 500 billion in potential losses altogether, but even more scary is the fact that Pension funds and mutual funds have invested in all these bad mortgage paper also, putting everyone who has a pension or is invested in a mutual fund in jeopardy also. And most of them don't even know it.
Robert Shiller, professor at Yale and renouned expert in the real estate market says we could experience a drop in house prices of 30% before it's all over, just like between 1925 and 1930.
This has already happened in one area of California, Antioch in the East Bay area. Whole streets have abandoned houses from foreclosure, creating safety hazards for those still living next to them, squatters and drug dealers, etc. The owners are stripping them of everything before leaving them, even the wiring and copper plumbing.
So what are the rest of us to do, buy a shotgun and load up on canned food?
Gerald Celente, director of the Trends Research Institute is predicting a financial Panic (his exact words) in 2008. He sees the dollar in Free Fall , gold over 2000.00 per ounce, etc. He corectly predicted the subprime mess and the dollars decline over one year before both started happening, and also predicted golds current rise last May.
His gloomy forcasts is this "We will shortly see economic times like no living person has seen since the great depression"(presumably because all those folks who lived through that are dead!)
In the next 9 months, 2 million homeowners with over 600 billion dollars in Adjustable rate mortgages will be getting big increases, if even 20% of them default, that will be a big hit.
Thomas Lawler, the former chief economist at Fannie Mae, says and I quote exactly "We all know that more hits are coming from the subprime loans but don't know how it will happen or how to stop it!"
Well, if he and his buddies don't know, who should?
The big Banks globally are bleeding red ink, 500 billion in potential losses altogether, but even more scary is the fact that Pension funds and mutual funds have invested in all these bad mortgage paper also, putting everyone who has a pension or is invested in a mutual fund in jeopardy also. And most of them don't even know it.
Robert Shiller, professor at Yale and renouned expert in the real estate market says we could experience a drop in house prices of 30% before it's all over, just like between 1925 and 1930.
This has already happened in one area of California, Antioch in the East Bay area. Whole streets have abandoned houses from foreclosure, creating safety hazards for those still living next to them, squatters and drug dealers, etc. The owners are stripping them of everything before leaving them, even the wiring and copper plumbing.
So what are the rest of us to do, buy a shotgun and load up on canned food?
Greenspans Guilt
Alan Greenspan will go on T.V. Tonight on 60 minutes to sell his book. I can hardly wait. Advance notices are saying he will admit he had no idea how bad the housing situation would get. This man's ego is the principle reason we are entering into the "Twilight Zone" of financial disaster ahead.
First of all, The "Federal Reserve" is a private corporation, and Mr. Greenspan was a private employee of that company, it has investors just like any private company. His job was too look out for them, the public is secondary.
The inside joke in the industry is "It's not Federal and there are no reserves!"
The job of controlling money was given to them after the panic in the early 1900"s when J.P. Morgan singlehandidly had to rescue the banking systme from a meltdown.
(At least that's what I have read).
I don't argue that he's a good, honest person, but his motives are questionable.
After the dot. com bubble burst, in 2003 he lowered the interest rates to only 1% to make cash available, and kept it there for over a year. This was exactly the wrong thing to do, it was EASY cash that fueled the dot com bubble in the first place. He should have let us go into recession at that time, and let the excesses work their way out of the market, but his EGO would not let that happen, no sir, not on HIS watch!! The white knight rode to the rescue, so what happened, all the HOT money went into the housing market, creating an even bigger bubble which is about to burst. Since most people own homes, and not stocks, this will have an even worse consequence for more people, and possibly the entire financial systme.
So what's the current Fed Chairman gonna do, why, lower interest rates!!! That's like giving a drunk who's got the D.T.'s a bit of the hair of the dog that bit him, it won't work, the markets are exhausted.
Besides, if they try to lower rates anymore, the dollar will collapse. Hang on folks, it's gonna be a bumpy ride!
First of all, The "Federal Reserve" is a private corporation, and Mr. Greenspan was a private employee of that company, it has investors just like any private company. His job was too look out for them, the public is secondary.
The inside joke in the industry is "It's not Federal and there are no reserves!"
The job of controlling money was given to them after the panic in the early 1900"s when J.P. Morgan singlehandidly had to rescue the banking systme from a meltdown.
(At least that's what I have read).
I don't argue that he's a good, honest person, but his motives are questionable.
After the dot. com bubble burst, in 2003 he lowered the interest rates to only 1% to make cash available, and kept it there for over a year. This was exactly the wrong thing to do, it was EASY cash that fueled the dot com bubble in the first place. He should have let us go into recession at that time, and let the excesses work their way out of the market, but his EGO would not let that happen, no sir, not on HIS watch!! The white knight rode to the rescue, so what happened, all the HOT money went into the housing market, creating an even bigger bubble which is about to burst. Since most people own homes, and not stocks, this will have an even worse consequence for more people, and possibly the entire financial systme.
So what's the current Fed Chairman gonna do, why, lower interest rates!!! That's like giving a drunk who's got the D.T.'s a bit of the hair of the dog that bit him, it won't work, the markets are exhausted.
Besides, if they try to lower rates anymore, the dollar will collapse. Hang on folks, it's gonna be a bumpy ride!
Get these audo tapes!
The Restructuring of America, How to Survive and Profit.
Produced just before the recession in 1990. The author called the recession back in 1987 before the stock market crash. Learn about the " Recession Cycle" engineered by the Bankers and Major Financial Institutions ( Including the Federal Reserve).
These tapes serve as a handbook of survival in the coming world wide financial debacle now just around the corner. Thousands sold during the 1990's.
2 AUDIO TAPES FOR ONLY $ 29.95.
Order at research@equidata1.com.
Send check or money order to Equidata1, POB 47534, Tampa Florida 33647.
You won't be sorry.
Produced just before the recession in 1990. The author called the recession back in 1987 before the stock market crash. Learn about the " Recession Cycle" engineered by the Bankers and Major Financial Institutions ( Including the Federal Reserve).
These tapes serve as a handbook of survival in the coming world wide financial debacle now just around the corner. Thousands sold during the 1990's.
2 AUDIO TAPES FOR ONLY $ 29.95.
Order at research@equidata1.com.
Send check or money order to Equidata1, POB 47534, Tampa Florida 33647.
You won't be sorry.
Money Market Fund Warning
Sentinel Management Seeks to Freeze Redemptions (Update1)
By Jenny Strasburg and Katherine Burton
Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., a Northbrook, Illinois-based money manager, has asked regulators for permission to halt investor withdrawals.
The firm contacted the Commodity Futures Trading Commission for approval to halt redemptions ``until we can honor them in an orderly fashion,'' according to an Aug. 13 letter to clients.
The firm managed $1.6 billion as of last month, according to a filing with the U.S. Securities and Exchange Commission. Sentinel's investments include short-term commercial paper, investment-grade bonds and Treasury notes, according to its Web site.
``Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade,'' according to the client letter, which does not specify which funds are affected. ``We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.''
Eric Bloom, the firm's president and chief executive officer, didn't immediately return a call seeking comment. An assistant who declined to be named said the CFTC hasn't granted the firm's request yet.
view link
By Jenny Strasburg and Katherine Burton
Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., a Northbrook, Illinois-based money manager, has asked regulators for permission to halt investor withdrawals.
The firm contacted the Commodity Futures Trading Commission for approval to halt redemptions ``until we can honor them in an orderly fashion,'' according to an Aug. 13 letter to clients.
The firm managed $1.6 billion as of last month, according to a filing with the U.S. Securities and Exchange Commission. Sentinel's investments include short-term commercial paper, investment-grade bonds and Treasury notes, according to its Web site.
``Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade,'' according to the client letter, which does not specify which funds are affected. ``We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.''
Eric Bloom, the firm's president and chief executive officer, didn't immediately return a call seeking comment. An assistant who declined to be named said the CFTC hasn't granted the firm's request yet.
view link
Summer of 2008 crisis
My expectation for a systematic crisis in the summer of 2008 comes from the volume of resetting adjustable rate mortgages (ARM's) which peak next March. There are over $500 Trillion in derivatives world wide. Some of those Trillions directly play off the mortgage backed securities (MBS) that are now worthless since no one will give a bid to buy them when hedge funds and pensions must sell them.
The unfortunate homeowners lose their houses when their mortgage reset to higher monthly payments according to the terms of the adjustable mortgages (ARM's) ending their teaser, introductory, low rate periods. These mortgages have been bundled together when they were first made and sold to investors as bonds labelled MBS's. The MBS's also were accumilated in colateralized debt obligations (CDO's) which function like mutual funds that instead of being full of stocks are full of MBS's and derivatives. Banks, pension funds, insurance companies and other financial institutions bought these MBS's and CDO's because the rating agencies described much of the MBS's and layers of the CDO's as AAA, AA, and A, which are the labels for the very best investment grade bonds and financial instruments. Much of the CDO's and MBS's came from mortgages that defaulted or will default over the next 18 months. The term used for these mortgage related complex financial instruments which no one will buy and thus have little or no value is 'toxic waste'.
Everyday now the main street media is full of TV and print stories about houses being foreclosed. The financial media is full of hedge funds and banks losing vast sums of money from the toxic waste. The worst is still ahead. The first peak in resetting ARM's is in October. It takes at least six months for a house mortgage to go from the first nonpayment of the mortgage to the bank owning the house (REO). This is a downward spiral that lowers that comps that other houses get their prices. Add to this that house sales have declined and more houses are being built, the future for toxic waste can only be worse.
One index that tracks the declining value of toxic waste used for derivatives called the ABX shows in dramatic detail the collapse of derivatives: view link
There you can see how the rating agencies such as Moody's, S&P and Fitch have done horrible jobs of describing MBS's as AAA, AA, A, BBB and BBB- because the prices of these bond bundles and bonds have collapsed reflecting them as toxic waste. Rating agencies are starting to regrade the toxic waste to lower labels, but that is like shooting a dead horse then pronouncing it dead when it was already dead before shooting it.
Now comes the politics of the Democrats promoting a bailout and the politics of the President rejecting a bailout of the unfortunate, stupid people who signed up for the ARM's, the banks that made and sold the MBS's and the world wide investors of MBS's, CDO's or derivatives based on toxic waste. Ms Clinton's proposal will be a campaign issue. But, if my evaluation plays out, then the US and the worldwide investors will be in deep shit by next summer well before the fall 2008 elections.
I have tried to make this simple and readable. The financial instruments involved remain far more complex. It takes days and weeks for experts to place a true price on the financial instruments by pricing them to what real buyers will pay for them. This mark-to-market price remains difficult and the lack of clarity in what they are worth changes moment to moment so they are decribed as having a lack of transparency or opaque. When investors try to get their money from funds having toxic opaque waste, the funds can deny them access to thier money claiming that there is no bid or they don't know what their toxic waste is worth.
Added to this horrible development, the Federal Reserve (Fed) is coming to the rescue of the banks through its primary broker dealers on Thursday, Friday and Monday. The Fed makes temporary loans to its primary broker deals called repurchase agreements (repos). The Fed takes the toxic waste as collateral and gives the banks Treasuries notes to use. The repos must be repaid in 3 days by the banks. World wide Central Banks such as the Fed have added over $300 Billion dollars on Thursday, Friday and Monday.
Please remember that the worst is still ahead.
The unfortunate homeowners lose their houses when their mortgage reset to higher monthly payments according to the terms of the adjustable mortgages (ARM's) ending their teaser, introductory, low rate periods. These mortgages have been bundled together when they were first made and sold to investors as bonds labelled MBS's. The MBS's also were accumilated in colateralized debt obligations (CDO's) which function like mutual funds that instead of being full of stocks are full of MBS's and derivatives. Banks, pension funds, insurance companies and other financial institutions bought these MBS's and CDO's because the rating agencies described much of the MBS's and layers of the CDO's as AAA, AA, and A, which are the labels for the very best investment grade bonds and financial instruments. Much of the CDO's and MBS's came from mortgages that defaulted or will default over the next 18 months. The term used for these mortgage related complex financial instruments which no one will buy and thus have little or no value is 'toxic waste'.
Everyday now the main street media is full of TV and print stories about houses being foreclosed. The financial media is full of hedge funds and banks losing vast sums of money from the toxic waste. The worst is still ahead. The first peak in resetting ARM's is in October. It takes at least six months for a house mortgage to go from the first nonpayment of the mortgage to the bank owning the house (REO). This is a downward spiral that lowers that comps that other houses get their prices. Add to this that house sales have declined and more houses are being built, the future for toxic waste can only be worse.
One index that tracks the declining value of toxic waste used for derivatives called the ABX shows in dramatic detail the collapse of derivatives: view link
There you can see how the rating agencies such as Moody's, S&P and Fitch have done horrible jobs of describing MBS's as AAA, AA, A, BBB and BBB- because the prices of these bond bundles and bonds have collapsed reflecting them as toxic waste. Rating agencies are starting to regrade the toxic waste to lower labels, but that is like shooting a dead horse then pronouncing it dead when it was already dead before shooting it.
Now comes the politics of the Democrats promoting a bailout and the politics of the President rejecting a bailout of the unfortunate, stupid people who signed up for the ARM's, the banks that made and sold the MBS's and the world wide investors of MBS's, CDO's or derivatives based on toxic waste. Ms Clinton's proposal will be a campaign issue. But, if my evaluation plays out, then the US and the worldwide investors will be in deep shit by next summer well before the fall 2008 elections.
I have tried to make this simple and readable. The financial instruments involved remain far more complex. It takes days and weeks for experts to place a true price on the financial instruments by pricing them to what real buyers will pay for them. This mark-to-market price remains difficult and the lack of clarity in what they are worth changes moment to moment so they are decribed as having a lack of transparency or opaque. When investors try to get their money from funds having toxic opaque waste, the funds can deny them access to thier money claiming that there is no bid or they don't know what their toxic waste is worth.
Added to this horrible development, the Federal Reserve (Fed) is coming to the rescue of the banks through its primary broker dealers on Thursday, Friday and Monday. The Fed makes temporary loans to its primary broker deals called repurchase agreements (repos). The Fed takes the toxic waste as collateral and gives the banks Treasuries notes to use. The repos must be repaid in 3 days by the banks. World wide Central Banks such as the Fed have added over $300 Billion dollars on Thursday, Friday and Monday.
Please remember that the worst is still ahead.
Credit Crunch
On Friday, August 3rd, the stock market fell 281 points in one afternoon, after a bad week to begin with. What's going on here?
At 2 PM EST, Standard and Poor, the rating agency lowered Bear Stearns credit rating from stable to negative. The Chief Financial Officer held a conference call and admitted the turnoil in the bond markets was as bad as he had ever seen in 22 years. This sent the market into free fall, the only thing that stopped it was the end of the day of trading. It should be interesting to see what happens this coming week.
Bear Stearns has another hedge fund about to go belly up.
Also, several high profile home lending institutions are going out of business because they can no longer get any funding. This is shaping up to be a severe credit crunch, I.E. nobody will lend any more money on mortgages because of the poor quality of buyers in the past who are now defaulting. The rating agencies must now reprice all the junk out there at their real value which is much less than currently stated.
Several big banks are on the hook for billions is bad loans. If worse comes to worse, they will be screaming for a bail out like the savings and loan debacle .
Meanwhile, the stock market is developing a bad case of Irritable bowel syndrome!
At 2 PM EST, Standard and Poor, the rating agency lowered Bear Stearns credit rating from stable to negative. The Chief Financial Officer held a conference call and admitted the turnoil in the bond markets was as bad as he had ever seen in 22 years. This sent the market into free fall, the only thing that stopped it was the end of the day of trading. It should be interesting to see what happens this coming week.
Bear Stearns has another hedge fund about to go belly up.
Also, several high profile home lending institutions are going out of business because they can no longer get any funding. This is shaping up to be a severe credit crunch, I.E. nobody will lend any more money on mortgages because of the poor quality of buyers in the past who are now defaulting. The rating agencies must now reprice all the junk out there at their real value which is much less than currently stated.
Several big banks are on the hook for billions is bad loans. If worse comes to worse, they will be screaming for a bail out like the savings and loan debacle .
Meanwhile, the stock market is developing a bad case of Irritable bowel syndrome!
Coming Financial Fiasco
Wow, I'm so glad I found this forum. I was beginning to think I was the only one on Eons who actually thinks we are headed for a financial meltdown.
I began reading books about this subject over 15 years ago. As soon as I got this computer 2 years ago, I started finding and reading contrarian websites, I now read all updates on several every week, takes quite a few hours. Myfriends and family are convinced nothing of this sort can happen.
I not smart enough to guess if we will have a deflationary or hyperinflationary depression, but I'm sure it will be one of them.I think it will be lead by a crack up in the housing market, brought on by defaults in several hedge funds, the first Bear Stearns very shortly, with others to follow, to many to be bailed out like Long term Capital was. Bill Gates has just unloaded ALL his home building stocks.
The deritives mess is a toxic swamp waiting to be discovered. Some people who are trying to keep their homes have hired lawyers just to try and find out WHO actually holds their mortages.
The arabs have allready started to sell their oil in Euro's, they arn't dumb, they know the dollar is headed for a fall.
The Austrian school of economics calls what we are currently in a "Crack Up Boom". I'm so glad I have a secure income, Social Security and a pension from my late husband , who was born and raised and worked in Germany before emigrating. It's paid out in Euro's thank God! And while I don't have any assets in real estate or the stock market, I don't have any debt either, I can weather what ever is going to happen.
I began reading books about this subject over 15 years ago. As soon as I got this computer 2 years ago, I started finding and reading contrarian websites, I now read all updates on several every week, takes quite a few hours. Myfriends and family are convinced nothing of this sort can happen.
I not smart enough to guess if we will have a deflationary or hyperinflationary depression, but I'm sure it will be one of them.I think it will be lead by a crack up in the housing market, brought on by defaults in several hedge funds, the first Bear Stearns very shortly, with others to follow, to many to be bailed out like Long term Capital was. Bill Gates has just unloaded ALL his home building stocks.
The deritives mess is a toxic swamp waiting to be discovered. Some people who are trying to keep their homes have hired lawyers just to try and find out WHO actually holds their mortages.
The arabs have allready started to sell their oil in Euro's, they arn't dumb, they know the dollar is headed for a fall.
The Austrian school of economics calls what we are currently in a "Crack Up Boom". I'm so glad I have a secure income, Social Security and a pension from my late husband , who was born and raised and worked in Germany before emigrating. It's paid out in Euro's thank God! And while I don't have any assets in real estate or the stock market, I don't have any debt either, I can weather what ever is going to happen.
Overvalued, overbought, and overbullish
Overvalued, overbought, and overbullish conditions have generally resulted in disappointing market returns, regardless of other features of market action. Yet the past several weeks have quietly added a new ingredient: Treasury bill yields are now higher than they were 6 months ago, and Treasury yields of all maturities have popped higher in recent weeks. While this might seem like a trivial and low-magnitude event, it actually contributes to a syndrome that has invariably been negative for near-term market outcomes (not to mention the negative long-term results that overvalued market conditions have historically produced).
We've got overvalued, overbought, overbullish conditions, coupled with upward pressure on yields. I'll just go ahead and give it a name: “Ovoboby.”
To convey some idea of the potential risks, I've assembled a very simple set of conditions that, taken together, have usually been followed by awful near-term returns, not to mention long-term disasters. Importantly, these conditions have been unfavorable even when earnings have been growing, interest rates have been reasonably low, and the prevailing trend of the market has otherwise appeared quite strong. The general results aren't particularly sensitive to alternative criteria. Indeed, stocks tend to produce tepid returns under far broader and more subtle definitions, but my hope is that a simple, specific example will drive the point home:
Hazardous Ovoboby
Overvalued
S&P 500 price/peak earnings greater than 18
Overbought
S&P 500 at a 4-year high, and at least 5% higher than its level 6 months earlier
Overbullish
Investors Intelligence percentage of bullish advisors above 53%
Yield pressure
3-month Treasury yield higher than its level of 6 months earlier
Here is an exhaustive list of the instances where we've observed this set of conditions on a weekly closing basis (I've used Dow Jones Industrials data for easy reference):
April 30, 1965: The Dow advanced less than 2% to its May 14, 1965 peak, 10 trading days later. The Dow then skidded -10.5% lower over the next 30 trading days.
December 18, 1972 and January 5, 1973: The Dow advanced less than 2% from the first instance, and a fraction of a percent from the second instance, to its bull market peak on January 11, 1973. The Dow then toppled -12.3% over the next 50 trading days, and collapsed to half its value over the following 22 months.
August 14, 1987 and August 21, 1987: No remark is really necessary, but for the record, the Dow advanced less than 2% from the first instance, and a fraction of a percent from the second instance, to its bull market peak on August 25, 1987. The Dow then crashed -36.1% over the following 38 trading days.
April 3, 1998: The Dow advanced another 2.5% over the following 6 weeks to a preliminary high on May 13, 1998, and quickly dropped -6.3% over the following 22 trading days. The market then enjoyed a short-lived 8.1% rebound over the next 22 trading days to a fresh high on July 16, 1998, before suddenly plunging -19.1% to its August 31, 1998 low, 32 trading days later (overall, a -16.1% loss from its April 3 level).
April 23, 1999: From a longer-term perspective, the market was already floating on the suds of the late-1990's bubble. Indeed, despite the recent high in the S&P 500, its total return has underperformed Treasury bills in the years since then. Still, from a short-term perspective, this was the most benign instance on the list. The Dow advanced less than 3% to a peak on May 10, 1999, followed by a selloff of -4.9% over the next 13 trading days. The lack of a deep correction, however, left subsequent gains open to repeated selloffs, erasing them even before the bear market began in earnest.
July 2, 1999 and July 16, 1999: The Dow advanced less than 2% from the first instance and about 1% from the second instance, to a peak a few weeks later on August 25, 1999. The Dow then fell -11.5% over the next 36 trading days.
December 23, 1999 and December 31, 1999: The Dow advanced less than 3% from the first instance and less that 2% from the second instance to the final peak of the market bubble a few weeks later, on January 14, 2000. The Dow then plunged -16.4% over the next 35 trading days.
March 24, 2000: The actual bull market high already behind it, the Dow had enjoyed a bounce off of an early-March low. It advanced less than 2% further, to a short-term peak 12 trading days later. The Dow then dropped -8.8% over the following 32 trading days. Over the following 30 months, the stock market would lose half its value.
November 17, 2006, December 8, 2006 and January 12, 2007: We'll find out shortly...
view link
We've got overvalued, overbought, overbullish conditions, coupled with upward pressure on yields. I'll just go ahead and give it a name: “Ovoboby.”
To convey some idea of the potential risks, I've assembled a very simple set of conditions that, taken together, have usually been followed by awful near-term returns, not to mention long-term disasters. Importantly, these conditions have been unfavorable even when earnings have been growing, interest rates have been reasonably low, and the prevailing trend of the market has otherwise appeared quite strong. The general results aren't particularly sensitive to alternative criteria. Indeed, stocks tend to produce tepid returns under far broader and more subtle definitions, but my hope is that a simple, specific example will drive the point home:
Hazardous Ovoboby
Overvalued
S&P 500 price/peak earnings greater than 18
Overbought
S&P 500 at a 4-year high, and at least 5% higher than its level 6 months earlier
Overbullish
Investors Intelligence percentage of bullish advisors above 53%
Yield pressure
3-month Treasury yield higher than its level of 6 months earlier
Here is an exhaustive list of the instances where we've observed this set of conditions on a weekly closing basis (I've used Dow Jones Industrials data for easy reference):
April 30, 1965: The Dow advanced less than 2% to its May 14, 1965 peak, 10 trading days later. The Dow then skidded -10.5% lower over the next 30 trading days.
December 18, 1972 and January 5, 1973: The Dow advanced less than 2% from the first instance, and a fraction of a percent from the second instance, to its bull market peak on January 11, 1973. The Dow then toppled -12.3% over the next 50 trading days, and collapsed to half its value over the following 22 months.
August 14, 1987 and August 21, 1987: No remark is really necessary, but for the record, the Dow advanced less than 2% from the first instance, and a fraction of a percent from the second instance, to its bull market peak on August 25, 1987. The Dow then crashed -36.1% over the following 38 trading days.
April 3, 1998: The Dow advanced another 2.5% over the following 6 weeks to a preliminary high on May 13, 1998, and quickly dropped -6.3% over the following 22 trading days. The market then enjoyed a short-lived 8.1% rebound over the next 22 trading days to a fresh high on July 16, 1998, before suddenly plunging -19.1% to its August 31, 1998 low, 32 trading days later (overall, a -16.1% loss from its April 3 level).
April 23, 1999: From a longer-term perspective, the market was already floating on the suds of the late-1990's bubble. Indeed, despite the recent high in the S&P 500, its total return has underperformed Treasury bills in the years since then. Still, from a short-term perspective, this was the most benign instance on the list. The Dow advanced less than 3% to a peak on May 10, 1999, followed by a selloff of -4.9% over the next 13 trading days. The lack of a deep correction, however, left subsequent gains open to repeated selloffs, erasing them even before the bear market began in earnest.
July 2, 1999 and July 16, 1999: The Dow advanced less than 2% from the first instance and about 1% from the second instance, to a peak a few weeks later on August 25, 1999. The Dow then fell -11.5% over the next 36 trading days.
December 23, 1999 and December 31, 1999: The Dow advanced less than 3% from the first instance and less that 2% from the second instance to the final peak of the market bubble a few weeks later, on January 14, 2000. The Dow then plunged -16.4% over the next 35 trading days.
March 24, 2000: The actual bull market high already behind it, the Dow had enjoyed a bounce off of an early-March low. It advanced less than 2% further, to a short-term peak 12 trading days later. The Dow then dropped -8.8% over the following 32 trading days. Over the following 30 months, the stock market would lose half its value.
November 17, 2006, December 8, 2006 and January 12, 2007: We'll find out shortly...
view link
Not pessimistic but....
Jeffolie's post continues to resonate. I have been noticing other "signals", as I've attempted to hedge my diverse portfolio, notably in looking at puts on SPY, a couple of numbers jump out at you - >40K OI in SFBNL(Feb 142) and >88K OI in SFBOJ(Mar 140). Clearly, some big money agrees with Jeff's doomsday scenario(not far fetched - I would add an 8th reason - a dirty bomb in large metro area). I also agree with his hairball thesis - it is humanely impossible to track the impact of a sudden downward spiral on the opaque derivatives universe. If we remain in slow motion, Jeff does what no media economist will/can do - a specific forecast -market to top between now and March. However his next step into the abstract needs the disciplined rationale brought out in his 7 reasons. Look forward to his next post.
Seniors and Debt
SENIORS IN DEBT
by Tim Iacono
January 18, 2007
Recent stories about the plight of seniors bring to light the growing problem of money not stretching as far as it once did. Today, the elderly are in the unfortunate situation where they benefit very little from cheap imported goods manufactured in Asia - the key to what some call an "era of low inflation".
Their money is increasingly spent on life's essentials - food, utilities, and medical costs - all of which have risen at a brisk pace in recent years. In many cases, the combination of a pension and a paid off home has been replaced by a meager retirement income, high bills, and a reverse mortgage.
A decade ago, homes were routinely passed on free and clear to surviving children, ten years from now heirs may be surprised to find out how little is left after years of borrowing by their parents to make ends meet.
According to this report from the U.K., inflation is now running at almost 10 percent for pensioners. With interest rates rising, those on fixed incomes who must access credit to square the books each month find themselves getting further and further behind.
Stateside, an increasing number of senior citizens are turning to reverse mortgages and credit cards to make ends meet. It didn't used to be this way and it flies in the face of government pronouncements that inflation is under control.
For decades, social security and pensions provided a stable income in retirement. That is still mostly true today, the problem is that living expenses are rising much more quickly than income as demonstrated a year ago when the average monthly social security increase was about $35 while Medicare premiums increased $28.
In this report from Texas, we learn first hand what it is like for some:
When Miss Daisy, 65, totals her monthly bills they amount to usually $200 more than her income. She relies on credit cards to bridge the difference. 'I have no savings, so I have no choice,' she said.
When she adds up her monthly bills for her mortgage, car loan, electricity, gas, water and phone, they exceed her income from Social Security and a part-time job by almost $200.
"I rely on my credit cards to make ends meet," said the 65-year-old Dallas woman, who asked that her last name not be used. "I have no savings, so I have no choice."
She owes more than $7,000 on three cards.
Seniors who grew up in frugal times and have usually been reluctant to go too far into debt are turning increasingly to credit cards to make do in retirement, says a study by the National Consumer Law Center.
"Older people have generally held less credit card debt than younger consumers, but their generation is catching up," said Deanne Loonin, the principal author of the report by the Boston-based consumer advocacy group.
The study quantifies a trend that credit counselors have seen recently. It found that the average credit card debt for consumers 65 to 69 skyrocketed 217 percent over the last decade to $5,844. Researchers calculated the inflation-adjusted increase by examining Federal Reserve data on the assets and liabilities of American families.
The consumer advocacy group's report blames the trend on a combination of seniors' shrinking or stagnating incomes, higher expenses for housing, medical care and utilities, and creditor practices that push seniors to borrow.
"It's not just that elders have more debt than before, but that many are buried in unaffordable debt," Ms. Loonin said.
It's a sort of long, slow squeeze for most seniors and it must be particularly hard for those who have eschewed credit and debt for most of their lives to be forced to rely on it now.
Ask retirees what they think of lower prices for iPods and PCs and the low inflation rate of only two percent - you are likely to get an earful.
Unfortunately, things are probably going to get worse as baby boomers enter their golden years - an entire generation has been conditioned to accept high debt loads in exchange for rising asset prices. In the end, this may not prove to be a very good long term plan.
A 2004 study by Demos, a New York-based research institute, found that consumers within 10 years of retirement are spending an average of one-third of their income on debt payments.
That's partly because some had children later in life and are paying for their youngsters' college education into their late 50s and early 60s. Others have become caretakers for frail parents. Still others have simply spent too much.
"For a variety of reasons, boomers won't have the nest eggs they'd like, and they won't have the pensions and health care benefits that many of today's retirees enjoy," Ms. Cobb said. "Things will only get worse."
It looks like the baby boomers are going to get a retirement wake-up call in coming years.
It didn't have to be this way.
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by Tim Iacono
January 18, 2007
Recent stories about the plight of seniors bring to light the growing problem of money not stretching as far as it once did. Today, the elderly are in the unfortunate situation where they benefit very little from cheap imported goods manufactured in Asia - the key to what some call an "era of low inflation".
Their money is increasingly spent on life's essentials - food, utilities, and medical costs - all of which have risen at a brisk pace in recent years. In many cases, the combination of a pension and a paid off home has been replaced by a meager retirement income, high bills, and a reverse mortgage.
A decade ago, homes were routinely passed on free and clear to surviving children, ten years from now heirs may be surprised to find out how little is left after years of borrowing by their parents to make ends meet.
According to this report from the U.K., inflation is now running at almost 10 percent for pensioners. With interest rates rising, those on fixed incomes who must access credit to square the books each month find themselves getting further and further behind.
Stateside, an increasing number of senior citizens are turning to reverse mortgages and credit cards to make ends meet. It didn't used to be this way and it flies in the face of government pronouncements that inflation is under control.
For decades, social security and pensions provided a stable income in retirement. That is still mostly true today, the problem is that living expenses are rising much more quickly than income as demonstrated a year ago when the average monthly social security increase was about $35 while Medicare premiums increased $28.
In this report from Texas, we learn first hand what it is like for some:
When Miss Daisy, 65, totals her monthly bills they amount to usually $200 more than her income. She relies on credit cards to bridge the difference. 'I have no savings, so I have no choice,' she said.
When she adds up her monthly bills for her mortgage, car loan, electricity, gas, water and phone, they exceed her income from Social Security and a part-time job by almost $200.
"I rely on my credit cards to make ends meet," said the 65-year-old Dallas woman, who asked that her last name not be used. "I have no savings, so I have no choice."
She owes more than $7,000 on three cards.
Seniors who grew up in frugal times and have usually been reluctant to go too far into debt are turning increasingly to credit cards to make do in retirement, says a study by the National Consumer Law Center.
"Older people have generally held less credit card debt than younger consumers, but their generation is catching up," said Deanne Loonin, the principal author of the report by the Boston-based consumer advocacy group.
The study quantifies a trend that credit counselors have seen recently. It found that the average credit card debt for consumers 65 to 69 skyrocketed 217 percent over the last decade to $5,844. Researchers calculated the inflation-adjusted increase by examining Federal Reserve data on the assets and liabilities of American families.
The consumer advocacy group's report blames the trend on a combination of seniors' shrinking or stagnating incomes, higher expenses for housing, medical care and utilities, and creditor practices that push seniors to borrow.
"It's not just that elders have more debt than before, but that many are buried in unaffordable debt," Ms. Loonin said.
It's a sort of long, slow squeeze for most seniors and it must be particularly hard for those who have eschewed credit and debt for most of their lives to be forced to rely on it now.
Ask retirees what they think of lower prices for iPods and PCs and the low inflation rate of only two percent - you are likely to get an earful.
Unfortunately, things are probably going to get worse as baby boomers enter their golden years - an entire generation has been conditioned to accept high debt loads in exchange for rising asset prices. In the end, this may not prove to be a very good long term plan.
A 2004 study by Demos, a New York-based research institute, found that consumers within 10 years of retirement are spending an average of one-third of their income on debt payments.
That's partly because some had children later in life and are paying for their youngsters' college education into their late 50s and early 60s. Others have become caretakers for frail parents. Still others have simply spent too much.
"For a variety of reasons, boomers won't have the nest eggs they'd like, and they won't have the pensions and health care benefits that many of today's retirees enjoy," Ms. Cobb said. "Things will only get worse."
It looks like the baby boomers are going to get a retirement wake-up call in coming years.
It didn't have to be this way.
view link
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