Correction time, is it finally happening?

neink's picture
Rank: King Kong | banana points 1,094

Or is it too early to post Ron Paul.gif?

Pretty exciting. Take your guess, we'll see in a week who was right. Make sure to see the top comment below by UFOinsider.

Tuesday update:
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**Thursday update: **
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**End of the week update: **
I'd say the thread winning calls are from EnergyHou, traderlife and Dm100 so far. Many made longer term calls that might be proven correct in the next 2-3 weeks.

Also I'm a bit disappointed because I didn't get to post the nuclear Ron Paul version ''it's happening/you didn't listen/why didn't you stop it/you only had to listen''.

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Comments (183)

Feb 5, 2018

Idk, but it feels good when you sell at the 52 week high, then everything starts dropping even below the price where you bought. It is exciting.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

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Feb 5, 2018

ITS THE END OF THE WORLD AS WE KNOW IT

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Feb 5, 2018

TRADITIONAL FINANCIAL INSTITUTIONS CAN'T SAVE YOU NOW

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Feb 5, 2018

INVEST ALL YOUR LIFE'S SAVINGS IN BITCOIN

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Feb 5, 2018

ON A LONG ENOUGH TIMELINE THE SURVIVAL RATE FOR EVERYONE DROPS TO ZERO

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Feb 5, 2018

THIS CONTENT IS BROUGHT TO YOU BY ZEROHEDGE.COM

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Feb 5, 2018

You're content is very obnoxious. But I think that's what people love about you. Keep trolling and dirtying up WSO with more useless shit!

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

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Feb 6, 2018

It's not obnoxious if you had ever worked on a trading floor and realise what he means

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Feb 6, 2018

Spot on there, Lloyd.

Feb 9, 2018
Lloyd BIankfein:

THIS CONTENT IS BROUGHT TO YOU BY ZEROHEDGE.COM

OMG This is hilarious

Get busy living

Feb 9, 2018
Lloyd BIankfein:

ITS THE END OF THE WORLD AS WE KNOW IT

And I feel fine

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Feb 5, 2018

It would feel a lot more exciting if you sold at the 52 week high and things didn't yet even come close to where you bought it......just a thought

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Feb 5, 2018

Not to me. I think it makes my margin feel even more juiced up. The point is, it's classic Warren Buffett, focus on the fundamentals, and buy cheap scenarios that are being created right now.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

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Feb 6, 2018
iBankedUp:

Idk, but it feels good when you sell at the 52 week high, then everything starts dropping even below the price where you bought. It is exciting.

52-week high for the SPY was $286.63....right now it's trading at $265.36 on my screen. So, if that's below where you bought it, you're pounding your chest over a whopping 8% gain.....way to go Warren Buffet

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Feb 6, 2018
NoEquityResearch:
iBankedUp:

Idk, but it feels good when you sell at the 52 week high, then everything starts dropping even below the price where you bought. It is exciting.

52-week high for the SPY was $286.63....right now it's trading at $265.36 on my screen. So, if that's below where you bought it, you're pounding your chest over a whopping 8% gain.....way to go Warren Buffet

I didn't buy the S&P 500. And if I did, I would still hit my goal because I know the cost to expect. Trading stocks is not some magical event. I pay for risk and that's it. It has nothing to do with hitting some unlimited gains, for me, as I think that's what children do. Losing money on a stock at any time means I'm not doing my job, even if my return on a position is only 8%.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

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Feb 5, 2018

Everything is fine, just a healthy correction to clear out all the players that contributed to the parabolic rise last 3 months.

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Feb 5, 2018

This is obviously profit taking combined with algorithm selling.

GDP is increasing. Unemployment is low. Tax cuts passed. Inflation is within range. No macro events.

Is the market due for a correction? Sure. Is this 2008 all over again? Highly improbable.

And if you haven't been taking profit all this time, you deserve to lose money.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!
MSFHQ

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Feb 5, 2018
TNA:

This is obviously profit taking combined with algorithm selling.

GDP is increasing. Unemployment is low. Tax cuts passed. Inflation is within range. No macro events.

Is the market due for a correction? Sure. Is this 2008 all over again? Highly improbable.

And if you haven't been taking profit all this time, you deserve to lose money.

The macro event is interest rates. The economy cannot handle a rise in interest rates but the central bank's hands are tied. There was too much QE from 2008 on and it cannot allow that money to enter into circulation with rising velocity.

"Elections are a futures market for stolen property"

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Feb 5, 2018

https://www.bloomberg.com/news/articles/2018-02-05...
Not disagreeing that rising rates are or will have an impact. That being said, I think this is a algorithm driven and profit taking sell off.

Guess time will tell.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!
MSFHQ

Feb 5, 2018
TNA:

https://www.bloomberg.com/news/articles/2018-02-05...
Not disagreeing that rising rates are or will have an impact. That being said, I think this is a algorithm driven and profit taking sell off.

Guess time will tell.

Is market makers being short options an algo tho?

The problem we have IMO is that a whole bunch of vol got bought-- mostly by retail-- in the past two months, at really low levels of vol. And when you delta hedge a short options position (whether it's a call or a put), that means you have to buy stock as prices go up, and sell as prices go down. And trust me, retail isn't delta hedging their long vol.

So some of these guys are natural, permanent position sellers-- at least through expiry in a few months. Not some sort of tactical algo. They may not be excited about selling at these price levels, but to maintain the hedge, they have to sell.

I am not 100% sure what will happen tomorrow. My best guess is that we'll have another down 5% day. Not because of algos but because of the options market makers.

If you think you had a bad day, it could be worse. At least you're not short vol.

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Feb 5, 2018

I am simply saying that the velocity and sharp rebound has automatic trading programs written all over it. The flash crash is another example.

The market has been climbing without any real sell off for a while. I don't consider today or the previous couple days combined to be the market turning. Still a lot of fundamental good news.

That being said, I could be wrong. I also sold most of my retirement account out of equities 3-4 months ago. Market is definitely very high. I am not smart enough to see a top and more than happy to lose some upside vs. ride this all the way down.

I suppose we shall see in the next couple of weeks if this has legs or if this is short term.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!
MSFHQ

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Feb 6, 2018

What retail investors have been buying vol? Genuinely curious, if so, when did retail investors become the smartest guys around?

I normally think of retail investors as selling covered calls for "income" if they're doing anything with options.

Feb 11, 2018
DickFuld:

What retail investors have been buying vol? Genuinely curious, if so, when did retail investors become the smartest guys around?

I normally think of retail investors as selling covered calls for "income" if they're doing anything with options.

Single name buyers might be institutional, but when you get to ETFs like SPY, when you get to call options, my hunch is that it's retail. Maaybe some global macro guys, but I have a feeling it's the more sophisticated side of retail.

Feb 11, 2018

Back in the Bernanke days when we were helicoptering money to everyone we could and interest went to 0, the question wasn't IF it would pull us out... the question was always, "how do we pull the plug when things turn around?" There's a reason that during past recessions such "extreme" measures weren't taken, because central banks are supposed to balance what's occurring in the economy to steady it, not create a market by buying everything and giving away money to everyone. So we will see, you ask me Yellen is fortunate to have gotten out when she did, the waters are about to get a lot tougher as other central banks start trying to... ease the easing.

The recent turbulence, however, IMO is more due to the billions that were being spent shorting vol, keeping it artificially low... ironically, the VIX was created to track market vol, but leave it to us finance people turn it upside down, where instruments keep the measure low and allow markets to skyrocket because everyone looks for downward pressure that doesn't exist because so much money is tied up in an inverse / short vol position. This is more where algos that automatically arbitrage vol and markets play a YUUUGE role... indeed the tail wagging the dog, in both instances of central banks and the vol situation. Rant over.

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Feb 6, 2018

I'm as bullish as anyone.

But tax cuts are meaningless. Because deficit spending at a close to full employment economy just leads to rate increases.

Array
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Feb 6, 2018

The economy is no where near "close to full employment." People have simply given up and dropped out of the pool of those actively searching for work, distorting the official statistic.

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Feb 11, 2018
dsch:

The economy is no where near "close to full employment." People have simply given up and dropped out of the pool of those actively searching for work, distorting the official statistic.

I used to be on this bandwagon 100%, but because of demographics (i.e. baby boomers dropping out of the workforce as highest wage earners and millennial a entering as lowest wage earners) I started looking at median wage growth, which has been increasing even before we started seeing this more recent wage growth uptick. The more I've watched this, the more I am thinking that employment is closer than us doubters think. Like a conceded asshole, I'll just go Moana and say "you're welcome" ahead of time.
https://www.yardeni.com/pub/atlantawagetracker.pdf
I agree with the point about massive deficit spending and the tax cut, but I think it will go a long way in companies forking out for capex, which can have a very real impact, so I would say it's overall a big + for economy/markets (if they stay correlated), but like all things governments do, there's always a downside risk that cannot be foreseen until it happens.

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Feb 6, 2018

Algorithm selling?

Feb 11, 2018
ArcherVice:

Algorithm selling?

I do think TNA is kinda getting at something in the statarb space, but I don't want to just give it away. Let's keep calling it algo selling. Quant shops are dumb and the efficient market hypothesis always holds.

Still, I think the impact from the vol market dwarfs the quant shops.

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Feb 12, 2018
IlliniProgrammer:
ArcherVice:

Algorithm selling?

I do think TNA is kinda getting at something in the statarb space, but I don't want to just give it away. Let's keep calling it algo selling. Quant shops are dumb and the efficient market hypothesis always holds.

Still, I think the impact from the vol market dwarfs the quant shops.

+SB for you. I don't see how quants are going to push the entire market down for over a week. For a day, yeah, totally possible. But no way they hold the entire US stock market down for this long without the SEC shutting all quant trading down. I call bullshit.

Get busy living

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Feb 18, 2018

I think "algo" is the boogeyman for retail traders.

Feb 8, 2018

why the fuck is TNA getting MS for this? he's spot on. great economic backdrop (quibble all you want about the details, we're in global synchronous growth, and that's inarguable), so no need to worry about a recession in the short term. until the yield curve inverts, I'm a buyer.

also, if you guys are freaking out because we're 10% down from a record high, I would've hated to see you in 2008, or even August 2011 for that matter.

one of my gray haired partners says this smells like 1987. if he's right, strap in kiddies.

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Feb 8, 2018

I've lived through the tech bubble and the financial crises. People just need perspective. I'm buying on the dips. If I'm wrong, oh well. Long time span.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!
MSFHQ

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Feb 9, 2018
TNA:

I've lived through the tech bubble and the financial crises. People just need perspective. I'm buying on the dips. If I'm wrong, oh well. Long time span.

100% with you.

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Feb 9, 2018

I was pissed as my bonus hits in two weeks. No one on this site is seventy plus. Buy equities on the downside.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!
MSFHQ

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Feb 11, 2018

One of your grey haired partners?... you gotta let him know, "this time it's different"!
-guaranteed promotion, old Wall guys love hearing that!

Feb 5, 2018

My completely random and uninformed prediction is that it'll drop another 5% in the next two/three weeks followed by new ATHs by mid-March. Bull market still has another 20% to climb over the next year or two before it hits the wall, a new Occupy Wall Street movement starts up and Bernie Sanders wins the 2020 election by campaigning against the evil financier overlords, unless he dies by then, which is probably preferable.

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Feb 5, 2018

Interest rates have been rising...which caused stocks sensitive to interest rates to selloff...ultimately causing the stock indices to selloff....this caused Risk Parity funds (big, long stocks and long 20yr bonds) to liquidate last week (So, Friday, they were selling stocks and bonds). Today, trend following CTA funds (long stocks, short bonds) took Friday's close as an input, and they hit the liquidate button....so they sold stocks (just like Risk Parity funds) and the BOUGHT bonds (unlike RP funds). And that's where we are today.

Add into the mix short volatility funds are blowing up (XIV will go bankrupt overnight...among others)...that will cause margin $$ to come from somewhere...so the short vol "investors" will be selling what they own to come up with margin $$. This will cause a fire sale. In the near future, there will be good stocks to be had at bargain sale prices.

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Feb 5, 2018
want2trade:

Interest rates have been rising...which caused stocks sensitive to interest rates to selloff...ultimately causing the stock indices to selloff....this caused Risk Parity funds (big, long stocks and long 20yr bonds) to liquidate last week (So, Friday, they were selling stocks and bonds). Today, trend following CTA funds (long stocks, short bonds) took Friday's close as an input, and they hit the liquidate button....so they sold stocks (just like Risk Parity funds) and the BOUGHT bonds (unlike RP funds). And that's where we are today.

Add into the mix short volatility funds are blowing up (XIV will go bankrupt overnight...among others)...that will cause margin $$ to come from somewhere...so the short vol "investors" will be selling what they own to come up with margin $$. This will cause a fire sale. In the near future, there will be good stocks to be had at bargain sale prices.

Me gusta, SB for you

Curious what you see 18-24 months down the line?

Get busy living

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Feb 6, 2018

expect the stock market to chop around these lower levels for the next 4 weeks....then rally back to the highs...and then selloff again to these lows, all within the next 6 months

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Feb 6, 2018

What's your rationale for the second selloff?

Feb 6, 2018
Asymmetric:

What's your rationale for the second selloff?

pattern recognition

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Feb 12, 2018
want2trade:
Asymmetric:

What's your rationale for the second selloff?

pattern recognition

Lol +SB

What seemed obvious to me was that as QE wound down, stocks would soften by up to 20% or so over a couple years until the real economy caught up, and then they'd go back to growing. A soft landing would have made more sense. Everyone getting all excited over trump getting elected, that seemed foolish, he's just saying stuff the markets want to hear. The longer people try to prolong the bull market, the worse the correction will be. Which is fine, I'm not even bothered with that. What worries me is the self fulfilling prophesy aspect: people see markets going down, panic, and push them down further.

Seems that instead of just consciously cooling the economy when its overheating, people say "FUCKIT" and red line it until there's a blowout. More destruction, less creation, especially as it seems someone else is likely to have toclean up the mess (hint, it won't be a republican).

Now we see the infrastructure "plan", which is basically a 20% matching program for local/state spending. After Friday's dead cat bull trap bounce, markets thought it over for most of the day and then continued selling off. States/localities are already drowning in debt and can't pay for anything in cash...incentivizing them to take on more debt is just going to spook the market more. Had this been discussed a year ago it might...maybe...have worked, but now we are in a bind.

Seems that people would have learned in 2007 but they seem to need a good hard kick in the ass to wake up.

I'm all cash, waiting for the crash.

Get busy living

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Feb 6, 2018

Funny. Banks sold off hard too. Aren't higher rates bullish for banks like citi.

Array
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Feb 6, 2018
traderlife:

Funny. Banks sold off hard too. Aren't higher rates bullish for banks like citi.

Banks fund short term, and lend for long term...so banks want a steeper curve....but the curve has been flattening...so this is NOT good for banks.

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Feb 6, 2018

I get your logic, but why is this happening now? There's been no unexpected shock (FOMC meeting, central banker speech, economic data print, etc.) to the curve or any rates for that matter in recent days/weeks that would trigger such a random sell-off. The curve has been flattening for years, why are bank stocks being punished this week specifically.....

Feb 6, 2018

-Rising bond yields
-Full employment
-Fed tightening
-Weak dollar
-Rising deficits, spurred by tax reform

Sound familiar? It should. This was 1987.

10yr yields have been rising for the past month...and that was the tipping point

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Feb 12, 2018
want2trade:

-Rising bond yields
-Full employment
-Fed tightening
-Weak dollar
-Rising deficits, spurred by tax reform

Sound familiar? It should. This was 1987.

10yr yields have been rising for the past month...and that was the tipping point

I'll take a stab at the trigger - the state of the union speech.

Get busy living

Feb 5, 2018

Yeah, this is the correction everyone's been calling for. Not a recession, not a crash.

Before you start buying in your personal account, look for the VIX to start coming down.

In true forced sale bottoms, you sometimes see a V-shaped bounce like we saw in October 2008 and during the flash crash. But usually it doesn't come anywhere close to going all the way back up. That's why I think it's smarter to wait for the VIX to start coming down before you go out there and start buying hand over fist. Wait for the selling pressure to at least slow down a bit before you get in.

The futures market is already telling us we'll be down tomorrow. My guess is that we might see another down move the size of today.

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Feb 5, 2018
IlliniProgrammer:

Yeah, this is the correction everyone's been calling for. Not a recession, not a crash.

It's not a "crash" until it is. S&P 500 P/B, P/S, and Schiller P/E are all pretty damn frothy. If/when the 10-yr T clears 3.25%, watch out below. Commercial RE is going to get wrecked - watch the office and retail REIT's.

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Feb 5, 2018
InVinoVeritas:
IlliniProgrammer:

Yeah, this is the correction everyone's been calling for. Not a recession, not a crash.

It's not a "crash" until it is. S&P 500 P/B, P/S, and Schiller P/E are all pretty damn frothy. If/when the 10-yr T clears 3.25%, watch out below. Commercial RE is going to get wrecked - watch the office and retail REIT's.

Oh a crash is totally possible. I'm just saying 4% in a day is not a crash.

Feb 6, 2018

Tomorrow is unchanged or bid. Portfolio managers will buy size tomorrow. Quant stop out followed by real money buying.

Array
Feb 6, 2018

Nice call.

Feb 6, 2018

Even during the flash crash the next few weeks were spent auctioning the extreme of that tail.

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Feb 5, 2018

What scares me a bit here is that we've seen a lot of options volume in a low volatility market leading into this. Meaning that market makers have some pretty big short positions that they're all delta hedging. Whether it's puts or calls, a short options position means that you need to sell as the market goes down and buy as it goes up-- in a sense, a lot of forced sales.

So I'm a bit worried these guys have gotten themselves into a pickle here. Maybe it's a good idea to buy a few disaster puts on Options Clearing Corp. Actually, maybe there's some counterparty risk in that...

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Feb 5, 2018

Good time to sell some credit spreads. Options volume on puts are insanely heavy so it's worrisome.

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Feb 5, 2018
Pump And Dump:

Good time to sell some credit spreads. Options volume on puts are insanely heavy so it's worrisome.

I totally agree with you, but I generally don't have the balls to short volatility.

On the other hand, gambling on someone else's risk and financing with 5x your portfolio in notional was fun while it lasted. I was mostly rolled down when we hit the top so this crash will hurt, but not terribly, and not half as much as I made on the ride up.

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Feb 5, 2018

Yep. Funny enough, I'm noticing retailers and typical joe traders starting to put all their money in puts on the index. Good indicator to start accumulating shares soon ;).

But for now, I'm just sitting it out. /ES down almost 75 points right now. Algos gonna keep pulling 'da bids.

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Feb 6, 2018
Pump And Dump:

Yep. Funny enough, I'm noticing retailers and typical joe traders starting to put all their money in puts on the index. Good indicator to start accumulating shares soon ;).

Yeah nobody ever makes money buying puts when the vix is at 30% and the market is crashing. You're supposed to buy insurance before the hurricane hits, not while the storm surge is hitting your house. Dumb trades are a good contrarian indicator, but I'm not super-excited to stick my hand out and try to catch a falling knife.

That said, if this is options-driven, there's a real potential we get some sort of a crazy snapback.

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Feb 9, 2018

Lol the inverse volatility ETF crashed, and is getting liquidated

Feb 10, 2018
Pump And Dump:

Lol the inverse volatility ETF crashed, and is getting liquidated

Who is eating the loss on that? The sponsor? The broker?

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Feb 11, 2018

If by sponsor you mean Credit Suisse (XIV), then I don't think they ate the loss.

Brokers never lose, is this a trick question :D ?

Feb 13, 2018
Pump And Dump:

If by sponsor you mean Credit Suisse (XIV), then I don't think they ate the loss.

Brokers never lose, is this a trick question :D ?

Well whoever's long those contracts has still gotta get paid, and an ETN can't become a liability, even though the ETN wound up with a negative NAV.

So who is covering the loss? If not the sponsor or broker, it falls on the clearinghouse.

Feb 5, 2018

Good. The market has been way out over its skis. The Schiller PE is - after today - 32; double the historical average. That will come down as a) the 10 year trailing earnings age out of the financial crisis, and b) earnings grow into current prices.

This is a healthy dose of rationality, and we are a long way from an oversold market.

Feb 5, 2018
FellowTraveler:

Good. The market has been way out over its skis. The Schiller PE is - after today - 32; double the historical average. That will come down as a) the 10 year trailing earnings age out of the financial crisis, and b) earnings grow into current prices.

This is a healthy dose of rationality, and we are a long way from an oversold market.

Thanks for the caveats on the CAPE. I'm all for including a recession in the PE, but I'm not sure we're going to see a financial crisis in the next down cycle. Furthermore, the US isn't the same high-interest-rate, high-growth, low-capital market that it was back in 1920 or 1880 or even 1950. If you look at the average CAPE over the past 50-60 years, it's more like 20-25. I'd argue the US economy started pricing risk a bit more differently after we got the Fed, not to mention cars, telephones, electricity, etc.

The S&P 500 has a forward P/E of 17, and analyst expectations so far have been realized if not exceeded for Q4. If you're expecting 5% earnings growth simply in line with nominal GDP, you're looking at a 6% earnings yield and an 11% return vs 3% in treasuries. The calculation might change if we get past 4-5% treasury yields, but I think 10-11% nominal returns is pretty darned fair.

The market was a bit overpriced, but I think a lot of value investors are going to end their strike and start sifting through cheaper names if prices come down another 10%.

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Feb 13, 2018
Feb 5, 2018

It's not just a correction, it's a pre-war selloff.

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Feb 6, 2018
Neutrino_CFO:

It's not just a correction, it's a pre-war selloff.

Hyperbole or prophesy? I don't know. I just don't know.

Asia security advisor just went in records commenting that a strike on N Korea will help the gop this fall. But the current bunch says all sorts of stupid shit then does something else, so who the hell knows.

That there's no consistently communicated policy is cause enough for concern given the chaos that comes from not being able to plan anything.

I find it hilarious you got pood on but a war would be the typical political distraction from a failing economy,especially from the chicken hawk crowd.

Dibs on the upstate bug out hideout if they drop the big one

Get busy living

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Feb 6, 2018
UFOinsider:
Neutrino_CFO:

It's not just a correction, it's a pre-war selloff.

Hyperbole or prophesy? I don't know. I just don't know.

Asia security advisor just went in records commenting that a strike on N Korea will help the gop this fall. But the current bunch says all sorts of stupid shit then does something else, so who the hell knows.

That there's no consistently communicated policy is cause enough for concern given the chaos that comes from not being able to plan anything.

I find it hilarious you got pood on but a war would be the typical political distraction from a failing economy,especially from the chicken hawk crowd.

Dibs on the upstate bug out hideout if they drop the big one

For the record I'm totally with you on this one (and you know that I'm a bit more of a Trump supporter than you, albeit grudgingly). If Trump starts a war with NK as some sort of political gambit, it would really piss me off.

For that matter, if Trump tries to fire Mueller, I want him out. And Sean Hannity is sounding pretty desperate right now.

In any case, foreigners can't find Chicago on a map, so I'm pretty sure I'm safe from NK. For now.

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Feb 6, 2018
IlliniProgrammer:
UFOinsider:
Neutrino_CFO:

It's not just a correction, it's a pre-war selloff.

Hyperbole or prophesy? I don't know. I just don't know.

Asia security advisor just went in records commenting that a strike on N Korea will help the gop this fall. But the current bunch says all sorts of stupid shit then does something else, so who the hell knows.

That there's no consistently communicated policy is cause enough for concern given the chaos that comes from not being able to plan anything.

I find it hilarious you got pood on but a war would be the typical political distraction from a failing economy,especially from the chicken hawk crowd.

Dibs on the upstate bug out hideout if they drop the big one

For the record I'm totally with you on this one (and you know that I'm a bit more of a Trump supporter than you, albeit grudgingly). If Trump starts a war with NK as some sort of political gambit, it would really piss me off.

For that matter, if Trump tries to fire Mueller, I want him out. And Sean Hannity is sounding pretty desperate right now.

In any case, foreigners can't find Chicago on a map, so I'm pretty sure I'm safe from NK. For now.

Well hello sir, good to chat with you! How's the weather out there?

For the record, I'm donating money and time towards having trump impeached. So I wouldn't say I'm a supporter. And I grew up republican so you know it's bad.

I'm in NYC and I've lost family in 911, walked right past the planned NY FED attack a half hour before they brought the guy in, and had to coordinate my group's disaster response after the recent Port Authority bombing. Plus half my family is in the military, with some killing people in some random unofficial hot zone as we speak. So, any time some chucklehead politician provokes the baddies I have cheery daydreams of blowing their head off. Or sending THEM to fight. Hyperbole of course, smile I'm on NSA candid camera :)

For now, I'm content to watch the stock market burn.

But not today, I'm on a mountain far far away drinking Lagunitas and Gran Marnier :)

Get busy living

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Feb 6, 2018
UFOinsider:
IlliniProgrammer:
UFOinsider:
Neutrino_CFO:

It's not just a correction, it's a pre-war selloff.

Hyperbole or prophesy? I don't know. I just don't know.

Asia security advisor just went in records commenting that a strike on N Korea will help the gop this fall. But the current bunch says all sorts of stupid shit then does something else, so who the hell knows.

That there's no consistently communicated policy is cause enough for concern given the chaos that comes from not being able to plan anything.

I find it hilarious you got pood on but a war would be the typical political distraction from a failing economy,especially from the chicken hawk crowd.

Dibs on the upstate bug out hideout if they drop the big one

For the record I'm totally with you on this one (and you know that I'm a bit more of a Trump supporter than you, albeit grudgingly). If Trump starts a war with NK as some sort of political gambit, it would really piss me off.

For that matter, if Trump tries to fire Mueller, I want him out. And Sean Hannity is sounding pretty desperate right now.

In any case, foreigners can't find Chicago on a map, so I'm pretty sure I'm safe from NK. For now.

Well hello sir, good to chat with you! How's the weather out there?

For the record, I'm donating money and time towards having trump impeached. So I wouldn't say I'm a supporter. And I grew up republican so you know it's bad.

I'm in NYC and I've lost family in 911, walked right past the planned NY FED attack a half hour before they brought the guy in, and had to coordinate my group's disaster response after the recent Port Authority bombing. Plus half my family is in the military, with some killing people in some random unofficial hot zone as we speak. So, any time some chucklehead politician provokes the baddies I have cheery daydreams of blowing their head off. Or sending THEM to fight. Hyperbole of course, smile I'm on NSA candid camera :)

For now, I'm content to watch the stock market burn.

But not today, I'm on a mountain far far away drinking Lagunitas and Gran Marnier :)

Impeach Blumpfs? Oh boy.

    • 1
Best Response
Feb 5, 2018

If you're an academic, the market never corrects: it's always correct. YOU just got it wrong. Theoretically speaking of course...from a certain point of view.

Reality is, market participants collectively and individually get things REALLY wrong. All. The. Time.

One of two things happens now: We go into a downturn, or markets bounce back within a few weeks or so, climb for 3-9 months(ish) and THEN we go into a downturn, albeit a worse one.

Why? I call this post "it was late and I was tired" but here goes. Rising interest rates will force a rotation from equity positions to debt positions at a time when borrowing is superfluous. High corporate cash reserves rule out increasingly expensive debt financing needs, so you will see declining equity AND debt market prices. Not so bad in and of itself and would probably stabilize if it weren't for the game of hot potato where no one wants to be left holding a sharply discounted asset....hence the impending sell off arms race that acts as its own self fulfilling prophesy.

BTC and other digital toys crashing in the midst of this will weaken retail investors confidence in markets, and worse, reduce their risk appetite at a time when they should be looking for opportunities in a more volatile environment. Expect a shift to things like money markets or cash aka withdrawal from markets, further depressing prices (but not value). You or I losing a grand in the markets doesn't spook us but the average joe blowing a month's pay won't want to go near markets for a while. The irony here is that a bunch of people won't want to believe things are going south, hence the battle cry "fake news" until some point where they lose so much they have to sell off. I personally see a btc crash catalyzing a bad downturn, not unlike housing in 2006-7.

Sentiment? It was increasingly confident, as evidenced by growing participation for the better part of a decade. Now it's approaching irrationally euphoric, convinced of its own genius, expecting riches, and indulging in FOMO and excess....which never end well.

The things that can salvage the current economic position won't happen. Rates certainly won't be lowered and wages won't go up fast enough. While rates are low, Japan has already deployed negative interest rates thus proving it possible...but let's be real, it's politically infeasible here at this point. And it's true that a handful of companies are touting one time $1000 bonuses (500 bucks after taxes lol) for some employees or whatever nonsense but that's hardly enough to prevent a price drop caused by static demand and over supply of all asset classes. People have to have more money in order to spend more money! Consumer debt rising would only delay and intensify a blowout. The only things that push wages up in any meaningful way over the long term is either legislation raising the floor (minimum wage hike will not happen in current political environment) or sustained low unemployment...but if markets are tanking then rest assured unemployment will rise.

Even if the tax cut talisman somehow caused the economy to somehow simply outperform and beast mode through the next year, it wouldn't change the outcome. Globally, so much conflict and disruption is brewing that it would be a drag on all growth. N Korea is seeking to become an Iran type regional player, Iran has become a regional player, Uk is tearing itself away from Eu, Turkey and half a dozen other countries are poised to tear themselves apart....and how about Greece and a dozen other unresolved messes. I don't care to build out the list but feel free to add on.

And even that would be fine; US policies could be a source of mitigation but I frankly don't see it happening. Despite large amounts of aggrandizing talk, the only meaningful policy deployment in a year was a tax cut, but in every other instance it appears some strange deliberate mismanagement is rampant. The upcoming congressional elections will only push the partisans to their corners, making support for real solutions unlikely. Thinking a tax cut will solve the world, well, history tells us otherwise. Let's wait and see how that goes. Don't bet the farm on it!

The closest to any reinvestment in the US economy I see is the sad used car salesman act hilariously trying to get the American public to pay for a border wall. Walling the US off from a neighboring ally is in the same ill conceived vein of thought as picking a trade war with China....and that looks like it's going to happen too lately. (Never mind the libertarian view that it is now harder for Americans to LEAVE if they wanted, and US citizens now have less absolute freedom). Maybe companies will put repatriated cash to work, but not enough is coming home given other countries are cutting taxes to keep the capital there. Plus let's be real, companies don't prime the pump, they drink from wells other people dig.

Bush overextended us, Obama was wayyyy too reluctant to get entangled in international affairs, but trump and his crowd don't even seem to have any clear grasp of how to understand what is going on...and no will to be global leaders. They seem to think everyone should applaud the opportunity to service the US, so, I find their approach laughable. They're like Sacha Barron Cohen's character in "The Dictator" who acts like people should feel honored to blow him. Good luck with that.

What I was hoping to see....a massive infrastructure redevelopment campaign....has been substituted with massively corrupt appointments, gross incompetence, social discord, scandals, an active FBI probe, and a president more interested in maintaining a strong social media presence than spending even one solid day learning from career experts how anything works. And I'm watering down the criticism as much as possible given this is an economic analysis and not a political brainstorm. One does not have to be a democrat to see this as self evident.

I'm not optimistic and have moved to cash positions, and I look forward to some extreme bargains. Actually, full blown financial panics are not always a bad thing...from a certain point of view.

Or who knows, maybe I just have too much time on my hands and the DOW will be at 50K next year. Anything is possible.

Get busy living

    • 29
    • 1
Feb 6, 2018

+1. Please write more.

You said, "I personally see a btc crash catalyzing a bad downturn, not unlike housing in 2006-7." Could you expand a bit on your reasoning for this?

    • 1
Feb 7, 2018
Gutfreund_:

+1. Please write more.

You said, "I personally see a btc crash catalyzing a bad downturn, not unlike housing in 2006-7." Could you expand a bit on your reasoning for this?

Recessions and downturns are part of normal activity, but a crisis typically has a triggering event. The actual damage from the trigger event sometimes isn't even that bad but it destroys confidence and causes people to bid down prices or pull money out, or demand their manager do so. Here's an interesting article from the last few days or so that takes a look at this:
https://heisenbergreport.com/2018/02/06/why-cboe-i...

Get busy living

    • 1
    • 2
Feb 6, 2018

Now this is a great piece ! Makes coming to WSO all the more worthwhile

    • 2
Feb 7, 2018
DeltaDecay:

Now this is a great piece ! Makes coming to WSO all the more worthwhile

:D thanks dude

Get busy living

Feb 12, 2018

You're getting a silver shower of SBs from me.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

    • 1
Feb 6, 2018

Really good post but there's something I disagree with. The US doesn't need to be a global leader, nor it can afford it any longer.

The collapse of the US middle class has been going on for decades now, nobody managed to turn it around. The middle class are the moderate voters you are seeking, their numbers are shrinking, which leads to polarization and partizanship and that's what you have. If the US loses its bulwark of economic stability, then you can forget about internal political stability as well. No kind international agreement or invovement can fix that.

From the outsiders perspective, if you are economically and politically unstable, you lose your moral ground to lecture anyone else on their system. You can't afford global ambitions when your backyard is a mess.

There's an even bigger problem: not so many realize this and even those who do, have no good solutions whatsoever.

    • 2
Feb 7, 2018
neink:

Really good post but there's something I disagree with. The US doesn't need to be a global leader, nor it can afford it any longer.

The collapse of the US middle class has been going on for decades now, nobody managed to turn it around. The middle class are the moderate voters you are seeking, their numbers are shrinking, which leads to polarization and partizanship and that's what you have. If the US loses its bulwark of economic stability, then you can forget about internal political stability as well. No kind international agreement or invovement can fix that.

From the outsiders perspective, if you are economically and politically unstable, you lose your moral ground to lecture anyone else on their system. You can't afford global ambitions when your backyard is a mess.

There's an even bigger problem: not so many realize this and even those who do, have no good solutions whatsoever.

Maybe. Maybe not.

Isolationism always seems to come back and bite us in the ass. It's in vogue lately, but so are the hot iron and tide pod challenges. It's a travesty that the perception among the citizenry that global stability is "too expensive" at a time when we "can afford" tax cuts. There's no such thing as a power vacuum, someone always steps in to be in charge...the only pertinent question is who? America's role in the world is a separate conversation, or maybe its own forum completely, so I'll just leave it at that.

Get busy living

    • 4
    • 1
Feb 7, 2018
UFOinsider:
neink:

Really good post but there's something I disagree with. The US doesn't need to be a global leader, nor it can afford it any longer.

The collapse of the US middle class has been going on for decades now, nobody managed to turn it around. The middle class are the moderate voters you are seeking, their numbers are shrinking, which leads to polarization and partizanship and that's what you have. If the US loses its bulwark of economic stability, then you can forget about internal political stability as well. No kind international agreement or invovement can fix that.

From the outsiders perspective, if you are economically and politically unstable, you lose your moral ground to lecture anyone else on their system. You can't afford global ambitions when your backyard is a mess.

There's an even bigger problem: not so many realize this and even those who do, have no good solutions whatsoever.

Maybe. Maybe not.

Isolationism always seems to come back and bite us in the ass. It's in vogue lately, but so are the hot iron and tide pod challenges. It's a travesty that the perception among the citizenry that global stability is "too expensive" at a time when we "can afford" tax cuts. There's no such thing as a power vacuum, someone always steps in to be in charge...the only pertinent question is who? America's role in the world is a separate conversation, or maybe its own forum completely, so I'll just leave it at that.

There are two main issues here:
1) Confusing ''not chasing pointless wars'' with isolating yourself, giving up on international cooperation and/or action and closing the country. Very few suggest the latter. Most simply suggest being pickier in what causes to pursue internationally.

2)None of the international adventures of the US under Bush and Obama brought global stability. The Middle East is worse than before. Relations with Russia haven't been this bad since the Cuban missile crisis.

You complain about international peace being dubbed expensive, but the reality is, there are no results in that direction to begin with. So it's not expensive, it's a massive waste. Draining your middle class with taxes to cause global instability is suicidal. Eventually a retraction is due.

It also doesn't change the fact that to be a global leader, your system must deliver. The middle class is essential for political stability because it gives citizens the proof they need that if they work hard, then they can advance socially and economically. If you have a shrinking middle class, then people will perceive the system is rigged against them. Once the shrinkage is large enough, you'll have enough malcontent to get rid of you, which is what happening. At that point it's inevitable that your international order crumbles on itself. You don't even need foreign enemies to spearhead that, which is why your funding Trump impeachment makes me smile. Most of the problems are self-inflicted by the US leadership.

Feb 7, 2018
neink:
UFOinsider:
neink:

Really good post but there's something I disagree with. The US doesn't need to be a global leader, nor it can afford it any longer.

The collapse of the US middle class has been going on for decades now, nobody managed to turn it around. The middle class are the moderate voters you are seeking, their numbers are shrinking, which leads to polarization and partizanship and that's what you have. If the US loses its bulwark of economic stability, then you can forget about internal political stability as well. No kind international agreement or invovement can fix that.

From the outsiders perspective, if you are economically and politically unstable, you lose your moral ground to lecture anyone else on their system. You can't afford global ambitions when your backyard is a mess.

There's an even bigger problem: not so many realize this and even those who do, have no good solutions whatsoever.

Maybe. Maybe not.

Isolationism always seems to come back and bite us in the ass. It's in vogue lately, but so are the hot iron and tide pod challenges. It's a travesty that the perception among the citizenry that global stability is "too expensive" at a time when we "can afford" tax cuts. There's no such thing as a power vacuum, someone always steps in to be in charge...the only pertinent question is who? America's role in the world is a separate conversation, or maybe its own forum completely, so I'll just leave it at that.

There are two main issues here:
1) Confusing ''not chasing pointless wars'' with isolating yourself, giving up on international cooperation and/or action and closing the country. Very few suggest the latter. Most simply suggest being pickier in what causes to pursue internationally.

2)None of the international adventures of the US under Bush and Obama brought global stability. The Middle East is worse than before. Relations with Russia haven't been this bad since the Cuban missile crisis.

You complain about international peace being dubbed expensive, but the reality is, there are no results in that direction to begin with. So it's not expensive, it's a massive waste. Draining your middle class with taxes to cause global instability is suicidal. Eventually a retraction is due.

It also doesn't change the fact that to be a global leader, your system must deliver. The middle class is essential for political stability because it gives citizens the proof they need that if they work hard, then they can advance socially and economically. If you have a shrinking middle class, then people will perceive the system is rigged against them. Once the shrinkage is large enough, you'll have enough malcontent to get rid of you, which is what happening. At that point it's inevitable that your international order crumbles on itself. You don't even need foreign enemies to spearhead that, which is why your funding Trump impeachment makes me smile. Most of the problems are self-inflicted by the US leadership.

All valid points to be sure. I like that you'd write a thoughtful reply, it's a refreshing change from the monkey poo insult driven hooey that constitutes so much web commentary.

I suppose a lot of it lies in how you define "global leadership". If that means "ruling military junta" then the US is absolutely draining the life out of the middle class to pay for military dominance we don't need. There is no shortage of info on how overblown US military capabilities are compared to any conceiveable foe or alliance of foes, it's almost cartoonishly one sided.

One could argue that the US hasn't been the world leader for quite some time though. We aren't a world leader in infrastructure, crime rates, education, QUALITY OF LIFE, or even lifespan. Our healthcare system, or rather, our disease management system, is a disaster. As we speak, diplomatic and other organs of international cooperation are being neglected or dismantled. Military power isn't being used to further the sustainable spread of democratic republicanism....it's being used to guard oil wells. US power isn't being used in a way that results in a growing middle class, it's taxing the middle class to death. Long ago the US stopped supporting development of impoverished countries and chose to back local strong men who "maintained order", much to our own shame and regret:
https://en.m.wikipedia.org/wiki/List_of_authoritar...
Russia, frankly they just want their empire back. I'm part Russian and all I hear about from the old timers is how glorious the old days were. Which is bullshit and they are in desperate need of a real Renaissance.

The Middle East isn't worse, it's the same mess it's always been. Blame the white man all you want but before the British rolled through it was a war zone. Before the Soviets and the Americans aged their proxy war, it was a mess. Before Ghengis Khan and the Roman Empire...it was a mess. Before the Persian empire, it was a war zone. For all of history it's been a war zone.

To be fair, outside of US borders you have to provide your own police. History teaches that time and again. Europe is learning the hard way the folly of thinking they can have America handle security, and now they're going to militarize again. But the US increasingly setting up a police state....not sustainable. There's a big difference between LEADERSHIP and DOMINATION, and if you're curious what direction we are heading in, feast your eyes on this comic gold:

https://www.washingtonpost.com/politics/trumps-mar...
You can spot an incompetent administration a mile away because as soon as they realize they have no idea how to run a country, they change the subject and pick a fight, start a war.

I don't think that is global leadership, it's bumfuckery of the highest order.

On a side note, my phone's autocorrect screwed up sooo many words as I was typing this, including the word autocorrect (for real). Strangely, it did not have a problem with bumfuckery. Go fig.

Nice chatting with you

Get busy living

    • 5
Feb 8, 2018
UFOinsider:
neink:
UFOinsider:
neink:

Really good post but there's something I disagree with. The US doesn't need to be a global leader, nor it can afford it any longer.

The collapse of the US middle class has been going on for decades now, nobody managed to turn it around. The middle class are the moderate voters you are seeking, their numbers are shrinking, which leads to polarization and partizanship and that's what you have. If the US loses its bulwark of economic stability, then you can forget about internal political stability as well. No kind international agreement or invovement can fix that.

From the outsiders perspective, if you are economically and politically unstable, you lose your moral ground to lecture anyone else on their system. You can't afford global ambitions when your backyard is a mess.

There's an even bigger problem: not so many realize this and even those who do, have no good solutions whatsoever.

Maybe. Maybe not.

Isolationism always seems to come back and bite us in the ass. It's in vogue lately, but so are the hot iron and tide pod challenges. It's a travesty that the perception among the citizenry that global stability is "too expensive" at a time when we "can afford" tax cuts. There's no such thing as a power vacuum, someone always steps in to be in charge...the only pertinent question is who? America's role in the world is a separate conversation, or maybe its own forum completely, so I'll just leave it at that.

There are two main issues here:
1) Confusing ''not chasing pointless wars'' with isolating yourself, giving up on international cooperation and/or action and closing the country. Very few suggest the latter. Most simply suggest being pickier in what causes to pursue internationally.

2)None of the international adventures of the US under Bush and Obama brought global stability. The Middle East is worse than before. Relations with Russia haven't been this bad since the Cuban missile crisis.

You complain about international peace being dubbed expensive, but the reality is, there are no results in that direction to begin with. So it's not expensive, it's a massive waste. Draining your middle class with taxes to cause global instability is suicidal. Eventually a retraction is due.

It also doesn't change the fact that to be a global leader, your system must deliver. The middle class is essential for political stability because it gives citizens the proof they need that if they work hard, then they can advance socially and economically. If you have a shrinking middle class, then people will perceive the system is rigged against them. Once the shrinkage is large enough, you'll have enough malcontent to get rid of you, which is what happening. At that point it's inevitable that your international order crumbles on itself. You don't even need foreign enemies to spearhead that, which is why your funding Trump impeachment makes me smile. Most of the problems are self-inflicted by the US leadership.

All valid points to be sure. I like that you'd write a thoughtful reply, it's a refreshing change from the monkey poo insult driven hooey that constitutes so much web commentary.

I suppose a lot of it lies in how you define "global leadership". If that means "ruling military junta" then the US is absolutely draining the life out of the middle class to pay for military dominance we don't need. There is no shortage of info on how overblown US military capabilities are compared to any conceiveable foe or alliance of foes, it's almost cartoonishly one sided.

One could argue that the US hasn't been the world leader for quite some time though. We aren't a world leader in infrastructure, crime rates, education, QUALITY OF LIFE, or even lifespan. Our healthcare system, or rather, our disease management system, is a disaster. As we speak, diplomatic and other organs of international cooperation are being neglected or dismantled. Military power isn't being used to further the sustainable spread of democratic republicanism....it's being used to guard oil wells. US power isn't being used in a way that results in a growing middle class, it's taxing the middle class to death. Long ago the US stopped supporting development of impoverished countries and chose to back local strong men who "maintained order", much to our own shame and regret:
https://en.m.wikipedia.org/wiki/List_of_authoritar...
Russia, frankly they just want their empire back. I'm part Russian and all I hear about from the old timers is how glorious the old days were. Which is bullshit and they are in desperate need of a real Renaissance.

The Middle East isn't worse, it's the same mess it's always been. Blame the white man all you want but before the British rolled through it was a war zone. Before the Soviets and the Americans aged their proxy war, it was a mess. Before Ghengis Khan and the Roman Empire...it was a mess. Before the Persian empire, it was a war zone. For all of history it's been a war zone.

To be fair, outside of US borders you have to provide your own police. History teaches that time and again. Europe is learning the hard way the folly of thinking they can have America handle security, and now they're going to militarize again. But the US increasingly setting up a police state....not sustainable. There's a big difference between LEADERSHIP and DOMINATION, and if you're curious what direction we are heading in, feast your eyes on this comic gold:

https://www.washingtonpost.com/politics/trumps-mar...
You can spot an incompetent administration a mile away because as soon as they realize they have no idea how to run a country, they change the subject and pick a fight, start a war.

I don't think that is global leadership, it's bumfuckery of the highest order.

On a side note, my phone's autocorrect screwed up sooo many words as I was typing this, including the word autocorrect (for real). Strangely, it did not have a problem with bumfuckery. Go fig.

Nice chatting with you

The problem with the concept of global leadership is that it's based on what I call Fukuyama's syndrome. The intellectual, the political and the military class are deeply grounded in it. They are still stuck in the 90s mentality: the Soviet Union was done, the former Soviet bloc was embracing free markets and democracy, there was real world evidence that those principles were universal for different cultures in the form of Japan/S.Korea for East Asia and Turkey for the Islamic world. Clinton went into the Balkans with that idea: it takes just a push, socialism dissolves, people embrace ''liberal democracy''.

What was the end of history is, ironically, over. The role model for the Islamic world, Turkey, is now shifting back towards its Islamic identity. The pushes into the Islamic world to turn them into Turkey all failed spectacularly. The Western leadership has also become obsessed with multiculturalism and diversity, indeed based on the idea that liberal values counts regardless of the culture and the country, Eastern Europe and East Asia beg to differ, while the Western European nations which are being force-fed diversity are in turmoil. Fukuyamanism is now in shambles and the idea of a global order based on it, which is the premise of global (US) leadership is in tatters. Those who still cling to it, McCain, BHL, Kagan, Soros have become a burden for Western societies.

What also happened is the rise of China since the 2000s. I was in university until 5 years ago, the consensus among intellectuals was that ''with economic improvement, China would have to democratise'', based again on Fukuyama's reasoning. It's not going to happen. The more it wasn't happening, the more Western leaders became anxious about it and started doing mistakes. If China wasn't going to become a democracy despite the economic improvement, then it meant a second bipolar world, and the West would have to be ready for it, annexing as many countries as possible to its order before China could do the same. That was the meaning of relentless expansion into Eastern Europe and the Middle East: expand ''the West'' to contain China. There's one fundamental thing that went wrong with it and it's something I hinted previously: China built a 120 million strong and growing middle class, at the expense of the Western middle class, a detail that went overlooked for Western leaders until now.
While they were too busy playing world empire, they forgot about their base, their strongholds and those are falling apart.

That's where the containment backfired: not only the expansion failed, not only they are likely losing the Islamic world for good, looking at Turkey, unless you actually believe Saudi Arabia will be the new model for democracy in the Middle East, but the bulwark of Western stability, and that was the Western middle class, is being relentlessly crushed by China. And this is entirely to blame on the Western globalist elite anyway. Their discounting the national interest and the quality of life of the citizens, that elected them, is going to be their downfall. Under that aspect, it's kind of irrelevant if Trump succeeds or gets impeached, I don't see the trend changing. What's the point of getting rid of him? To continue policies like mass migration, enviromental regulations and military entanglements that are all net drains from the middle class? You'll get much worse than Donald Trump in a few years at that rate.

I'm rather pessimist about the future: there are a number of intellectuals, ironically from left-leaning preferences, that understood the issue, but none of their solutions would actually work, because again they are remain obsessed with the idea of global humanitarian leadership, which I don't think the West can afford any longer. The Russia collusion story is an unmitigated disaster under this perspective: it serves as an excuse for those who have contributed to the collapse of the Western middle class to continue their policy and shift the blame of popular upheaval on Russia. Thus if they return to power, they can keep saying their policies are right and if people are mad is only because they are listening to ''fake-news'' from Russia. This is infantile, it won't solve any problem, it'll piss off even more people until finally you have the infamous hard market correction (that apparently isn't happening this week), and people blow up.

    • 1
Feb 12, 2018

Why the fuck you calling names brah? Who the fuck is Fukuyama? You?

Shit just escalated quickly...

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

    • 1
Feb 12, 2018
My Name is Jeff:

Why the fuck you calling names brah? Who the fuck is Fukuyama? You?

Shit just escalated quickly...

Didn't see that coming, +SB for you

Get busy living

Feb 6, 2018

Disagree with you on BTC catalyzing a big downturn like 06-07. BTC is nowhere near big enough to cause that sort of disruption. Moreover, financial institutions are not holding BTC and are not levered to the hilt while doing so (as they were with subprime). BTC is mostly retail investors and tech anarchists with tinfoil hats.

What I do think could cause a more serious downturn is 1) surprise appearance of much higher inflation than expected, 2) somewhat related to the first point, but a more rapid increase in rates than expected at a time when there is still a lot of leverage in the system. This would cause debt burdens on consumers and the government to jump handily. This could lead to more political dysfunction around deficits and income inequality.

That said, financial institution balance sheets are in much better shape than they were in 06/07. We may have a recession, but I don't foresee anything close to an 06/07 crisis.

    • 5
Feb 7, 2018
More Leverage:

Disagree with you on BTC catalyzing a big downturn like 06-07. BTC is nowhere near big enough to cause that sort of disruption. Moreover, financial institutions are not holding BTC and are not levered to the hilt while doing so (as they were with subprime). BTC is mostly retail investors and tech anarchists with tinfoil hats.

What I do think could cause a more serious downturn is 1) surprise appearance of much higher inflation than expected, 2) somewhat related to the first point, but a more rapid increase in rates than expected at a time when there is still a lot of leverage in the system. This would cause debt burdens on consumers and the government to jump handily. This could lead to more political dysfunction around deficits and income inequality.

That said, financial institution balance sheets are in much better shape than they were in 06/07. We may have a recession, but I don't foresee anything close to an 06/07 crisis.

The average person has started putting money....too much money....into these toys. They're getting burned now, and they'll also want to dial down as much other risk as possible. More to the point though, it's the crisis of confidence in markets that this causes. Even if a financial advisor knows better, when your client calls you up and shouts MOVE ME TO CASH, you do it. BTC is going down around the same time as the general markets? Must be time to pull my money out, goes the thinking.

To be fair: you're right. Overall the the economy is much stronger but looks who's at the helm. Accomplishment in a whole year: tax cut aaand basically picked a fight with everyone who isn't in his immediate circle. Too busy with nonsense to deliver anything else and it only looks like it's going to get worse. Get mad, blame the dems, it doesn't matter...I'm pointing out how it is. There should have been mobilization efforts around an infrastructure plan a year ago, instead we are in a Twitter war with third world banana republics.

The confirmation of incompetence will be when they start beating the war drum. Then all hell will break loose.

As stated above, I'm not optimistic right now.

Maybe I just need coffee.

Get busy living

    • 3
Feb 10, 2018

Your mom puts a lot of money into toys and you never bother her

    • 1
Feb 12, 2018
duey_dun_did_it_again:

Your mom puts a lot of money into toys and you never bother her

Lol I had to take a break from boning you sister to throw a SB at you

Bunch of savages around this joint :)

Get busy living

Feb 6, 2018
UFOinsider:

Rising interest rates will force a rotation from equity positions to debt positions at a time when borrowing is superfluous. High corporate cash reserves rule out increasingly expensive debt financing needs, so you will see declining equity AND debt market prices.

I don't follow. Are you saying that investors will rotate from equity to debt positions because of an increased return on fixed income relative to return on equities in a rising rate environment? How will that result in declining debt market prices?

    • 1
Feb 7, 2018
Asymmetric:
UFOinsider:

Rising interest rates will force a rotation from equity positions to debt positions at a time when borrowing is superfluous. High corporate cash reserves rule out increasingly expensive debt financing needs, so you will see declining equity AND debt market prices.

I don't follow. Are you saying that investors will rotate from equity to debt positions because of an increased return on fixed income relative to return on equities in a rising rate environment? How will that result in declining debt market prices?

Yeah that part isn't worded well. Like I said...spitballing. The point is that the typical inverse relationship between debt and equities isn't going according to plan at this point. Equities have been inflated by a decade of QE and now that they're showing signs of going the other way, you'd like to put your cash into debt instruments. Here's the catch though: rates aren't going up fast enough to make it worthwhile. The hunt for yield is coming up empty handed. Also, as rates go up, many companies won't need to borrow because they have oodles and oodles of cash on hand. Between tax cuts, repatriating some money, and the ginormous cash reserves they're sitting on....what use do they have for a 5% loan?

So the investor is left with assets whose price is declining....but no real good options. For a while at least.

Get busy living

    • 2
Feb 6, 2018

Damn. I guess I will graduate into a recession.

Feb 7, 2018
lindsey:

Damn. I guess I will graduate into a recession.

Put another way, you will graduate into an opportunity. The average person hears the job market is tight and gives up. You will see that after a recession, there's usually a boom, and you want to be there for it...so you get in now, wherever you can. Even in the worst recessions people are hiring.

Get busy living

Feb 7, 2018

Wow. This is very optimistic of you. I'm surprised. Thanks.

Feb 7, 2018
lindsey:

Wow. This is very optimistic of you. I'm surprised. Thanks.

I graduated into a recession and while everyone was running away from banks, in 2009. Then banks started hiring again and guess who the boss is :D

Don't follow the crowd, they're a mindless herd

Yeah, motivation and stuff!

Get busy living

    • 1
Feb 9, 2018

you're clearly intelligent, so I'm not going to name call and launch ad hominem attacks. I'll just suggest that you seek opinions from both sides, because it's quite obvious you have a glass half empty view of the world and have probably held this thesis for many years and are now feeling vindicated that you're seeing a 10% decline from a record high.

I suggest letting the data guide your thinking. yes, we're overvalued, but show me when there's been a bear market without an economic recession? also, show me an economic recession with an upward sloping yield curve. all of those factors can change on a dime, yes, but right now, I'm not seeing any reason to hit the panic button.

you've put your money where your mouth is, I've put about 20% of my reserves to work. let's discuss this again in 12 months :)

to clarify, I define a bear market as a 20%+ decline that takes at least a year to unfold. there have been only 2 times when the market declined significantly outside a recession and it was over in 6 months of less (cuban missile crisis and 1987 crash). in other words, if there's not gonna be a recession, there's not a reason to act like it.

furthermore, this is only the US, there's plenty of opportunity outside our borders, despite what ray dalio just did

    • 2
Feb 9, 2018
thebrofessor:

you have a glass half empty view of the world

Not at all. An entity failing to take its own stated commitments seriously while cutting revenue and arguing for a debt limit increase...you'd short any company acting this way, and in this case that entity is the US government and affects every economy everywhere. Anyone with an overly rosy perspective at the moment should revisit their assumptions. Waiting for some 5-10 year lows to buy in, then rotating into a glass-half-full kind of feeling.

Get busy living

Feb 9, 2018

look, I worry about our debt and spending as much as the next person, but the point is this: we're not heading towards a recession, so to trade like we are is silly in my opinion.

Feb 12, 2018
thebrofessor:

look, I worry about our debt and spending as much as the next person, but the point is this: we're not heading towards a recession, so to trade like we are is silly in my opinion.

Soo, obviously the trend line is craptacular because I drew it with my finger on a smartphone while I'm falling asleep, but I think you see a pattern in the chart below. Of course there was money to be made the last few years as the economy recovered from the Bush years, but gosh if you don't move to cash in this scenario that's a foolish gamble with your profits. Money I put in the market in 2008/9 more than TRIPLED, not moving to cash here is like winning money at the craps table and then just handing it back to the pit boss....sheer lunacy. Why even risk it. If I'm WRONG and the market keeps going up then so what, I missed out on a few percentage points. If I'm RIGHT, I wait for things to get really ugly...and then buy EVERYTHING hahaha

Get busy living

    • 3
Feb 12, 2018

On a side note: I went back to correct a typo after I got some SB's (thank ya very much) and realized that I could have changed this to read "I like orange juice" or some other such nonsense. It would look like I got SBs for writing something stupid.

Is that a bug that we should report? Because if not, there's toooootally some old posts I'd go back and edit.

Get busy living

    • 2
Feb 16, 2018

Agree with most of your comments. I also shifted recently further into cash and I'm keeping some bullion (both physical and etf, physical backed). It's been quite a rising market for a long period, thus a healthy dose of profit taking and caution serves me well.

Meanwhile, others want to keep on raking profits while it lasts...feel free and good luck. The Democracy/freedom of the markets (like the XIV as well).

Any interesting alternatives you see to park it for a while? if in cash, any currency you would prefer? I'm in USD, CHF and some EUR.

BTW. I also gratuated (and burnt my fingers!) during a rough period (dot.com, pre-grad) and then post enron/worldcom (masters). Memories from long working nights with the CEO/CRO/CFO of the bank(s) during 2008 are still vivid. Perhaps that shape our flight for quality instinct, who knows.

    • 1
Feb 11, 2018

+1 not because I agree with the majority of your analysis, but it was a good read, and required some mental capacity to write lol. Anyone who writes something that long deserves come credit.

    • 1
Feb 12, 2018
NoseGoes18:

+1 not because I agree with the majority of your analysis, but it was a good read, and required some mental capacity to write lol. Anyone who writes something that long deserves come credit.

I can respect that, +SB

Get busy living

Feb 6, 2018

Correction after FED starts tapering and raises interest rates? I am absolutely shocked. Bull market continuing after FED announced both of these is the definition of irrational exuberance.