re: There are some major issues lurking in the US financial markets

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What people on this board FAIL to REALIZE about me is that I honestly hate seeing innocent people get hurt in market carnage and I am a big believer in charitable contributions.

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I hate seeing it too. what I hate more is watching a financial illiterate spout off nonsense like he has the inside track to predicting the market.


none of us can be sure but when something will go up or down. the safest bet is to keep putting your money with the market knowing over the long run big business has always prevailed.

I certainly don't agree with everything you post here, but it's interesting that you seem to be arriving at nearly the same conclusions that I am, while holding different opinions and using completely different methods.

I've never been much into technical analysis beyond simple 9-month momentum, and maybe some short-term dispersion metrics or bond spread signals that signal market cycle transitions. Given that my fundamental analysis has made me bearish, however, and that now I have to actually deal with implementation / execution of a shorting strategy, I'm much more curious than I normally would be.

So just for fun, how often do you trade, and at what time horizons, to get 55% YTD? Do you really base your trading methodology on support levels and resistance charting? I typically reallocate about 1-3 times per month, and although I'm happy to be positive this year, I'm nowhere near 55%. I also don't use technical analysis though. I suppose my recent pullbacks from earlier short positions would be a special case where I actually have used TA (at least to a very limited degree)... but even most of that was just being conservative and locking in profits before EOY.

When retail sales are the highest in 6 years and retail stocks have historic declines in the same month December, a month that historically is good for equities, it is weird.

At the end of the day though, it’s all about the earnings.

And here is what might constitute the fuel for the clearing rally going into the first week or two of the new year...

CNBC: " China says it has made plans with the US for a face-to-face trade meeting in January"

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“The two sides have indeed made specific arrangements for face-to-face consultations in January in addition to continuing intensive telephone consultations,” he said, without elaborating.

U.S. and Chinese officials have spoken by phone in recent weeks, but a meeting next month would be the first in-person talks since U.S. President Donald Trump met his Chinese counterpart, Xi Jinping, in Buenos Aires on Dec. 1.

Trump and Xi agreed to stop escalating tit-for-tat tariffs that have disrupted the flow of hundreds of billions of dollars of goods between the two nations. The two leaders also agreed to launch new talks while the United States delayed a planned Jan. 1 tariff increase until March.

In response, China has resumed purchases of U.S. soybeans for the first time in six months, even though hefty tariffs on U.S. cargoes remain in place.

Tariff suspensions

China has also said it will suspend additional tariffs on U.S.-made vehicles and auto parts for three months starting Jan. 1, adding that it hopes both sides can speed up negotiations to remove all additional tariffs on each other’s goods.

A U.S. trade team will travel to Beijing the week of Jan. 7 to hold talks with Chinese officials, Bloomberg reported on Wednesday, citing two people familiar with the matter.

A person familiar with the matter told Reuters last week that talks were likely in early January.

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There's no way that the Trump Administration will pass up an opportunity to talk up the stock market a few percentage points if it can. However, a lot of the effects of what happened last year are already coming through the economic pipeline. (See e.g., " US tariffs will hit China harder next year, analysts say.")

The other method of pumping up the market through expectations of more relaxed tightening schedules from the Fed will likely start to lose its pop. We may have reached the point where Fed signals of more loosening will be increasingly viewed as bearish indicators for the underlying economy that approximately wash out the intended effects.

In any event, neither of these things (U.S.-China trade relations and current-day Fed policy) form the core of the bearish case.

My projections are extreme enough to where they may appear to imply a major U.S. recession or implosion event for the global financial system, but I don't think that's necessarily so.

My argument is based on an overvaluation of assets, rather than on any underlying weakness of the economy. In terms of U.S. historical comparisons, the multiples today appear most closely aligned with 1929 and 2000. But the fallout won't be anything like 1929. It also won't be like 2000, since that occurred with relatively high interest rates, and with a more concentrated focus in the tech sector.

Japan in 1990 is really the best example I can give for why my projections appear so extreme. In that case, there was no huge implosion or drop in economic activity. You can get different numbers from different places (like LINK, LINK, or LINK), but GDP growth was positive in Japan for 1989, 1990, 1991, etc. According to this series from the St. Louis Fed, Japan experienced positive real GDP growth every year from 1975 through 1997. And yet the slow-motion implosion of asset prices that occurred was very real.

Thus, the Nikkei 225 lost a shocking 5.01% on Christmas Day two days ago; but even more shocking was that it ended 12/25/2018 down 50.83% from its high on 12/29/1989.

Do I think we will see anything as extreme as what Japan has experienced? Of course not. But I still cite it as an instructive example, because I think what we'll see will have some elements of the Dot Com bubble mixed in with some elements of the Japanese asset bubble.

Regarding the Dot Com bubble, recall that the S&P 500 market peak was in March 2000, even though the civilian employment ratio ( LINK) didn't peak until April 2000. People today say that the 10-2-year spread hasn't quite gone negative yet, but then people seem to forget the context that the 2-year yield was never as low in those other examples as it is now.

So I guess my main two points here are (1) that the Japanese example shows that you can have an enormous bear market without much underlying economic chaos, and (2) that there are some signals showing that a minor recession, or at least a deceleration of economic activity, could occur prior to 2020. I suppose I could also throw in (3), that it's hypothetically possible to have strong economic growth (especially with strong wage growth) occur simultaneously with sharp negative growth in corporate profits, but I tend to believe that a minor recession is probable to occur sometime in 2019 or 2020.

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Do I think we will see anything as extreme as what Japan has experienced?

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The similarities between the current U.S. economy and Japan are really interesting. Aging populations with shrinking workforce, extreme central banking interventionism, currency devaluation (this is my prediction after the next round of QE+deficit spending), extreme debt levels. We should mirror Japan's economy in a few decades. Yay or at least that's what I use as a proxy for our countries future.

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Doc Fenton

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You and Huss are a riot. You should both consider stopping though, your baseless paranoia is going to freak people out. The Japan comparison as justification for a 50% decline is ridiculous.

Doc Fenton is very smart. To suggest the statement “asset prices are grossly overvalued” is baseless paranoia seems misguided

Back above 23k!

Wtf happened today


Looked once mid day: down 568

Checked final: up 260