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

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Have you added to your short position now that SP has crossed 2600?

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Yes, I have.

The markets have followed global central bank monetary actions to a remarkable degree the past several years, and recent weeks seems to me to be following the same pattern. So, yes, we get some positive headlines from Netflix, but the big market story this week has been a surprising injection of Chinese monetary stimulus.

CNBC: " China just injected a record amount of money to stimulate its economy" ("On Wednesday, the Chinese central bank injected a net 560 billion yuan ($83 billion) into the banking system, the highest ever recorded for a single day.")

It's difficult to tell if we should be alarmed at the emergency-type feel of the action, or impressed with the iron-grip power of China's authoritarian control over the economy, or perhaps reading tea leaves about shifts in bargaining power regarding the ongoing U.S.-China trade negotiations.

Over in the U.S., we've had recent comments from Bostic ( on Jan. 7) and Yellen ( on Monday) indicating that the Fed may not hike rates at all in 2019.

The question you've got to ask yourself, I suppose, is whether this recent monetary loosening is (A) yet another round of life support that will continue to be a boon to a lengthy bull market; or (B) the last stages of realization that a global recession is upon us, acting as a temporary salve that will ultimately be drowned out by the larger background story. I'm going with (B).


P.S. -- In the realm of "signs of the apocalypse," I present to you Jim Cramer...

CNBC: " Cramer says the bear market in stocks ended on Christmas Eve"

Interpret the implications of that headline at your own leisure.

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Just remember that number on AMZN: 1676.16

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Do you own it?

Trade tariff risk just lessened

WSJ Link

I dunno, too many predictions to keep track of

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Why does it have to be one or the other

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Good point. Why do I break the current situation into binary options? I would say there's not much middle ground, because recent bond and equities market reactions are giving us starkly different interpretations that can't both be right. I think one of these interpretations is going to give way, and then the dam (either for the bulls or for the bears) will burst.

We've seen the European sovereign debt crisis in 2011, and the Chinese market crash from 2015-16 (which is still crashed, by the way Shenzhen / Shanghai / Hong Kong), which are good examples of bumps on the road within a larger bull market. The bullish case says that late 2017 falls within the same category.

So you might ask: Why can't we have something more serious than either 2011 or 2015, but which at the same time doesn't amount to something like 1929 or 2000? I can give several reasons.

First, the market moves since October have been so sharp and compressed, that it's difficult to imagine that serious underlying bear-vs-bull battles aren't still underway. That doesn't suggest a happy medium. That suggests sharply bi-modal market expectations from two distinct sets of investors (which I think could clarify some issues related to lynxcat's apparent bewilderment).

I previously cited (back on pg. 6 of this thread) Hussman's theory of classical market crash patterns having identifiable points "A" through "G".

A -- 2939.86 in intraday trading (10/3/18)
B -- 2603.54 (down 11.4%) in initial selloff (10/29/18)
C -- 2815.15 (still down 4.2% from 10/3 peak) (11/7/18)
D -- 2631.09 (down 10.5% from 10/3 peak) (11/23/18)
E -- 2800.18 (down only 4.75% from 10/3 peak) (12/3/18)
F -- 2351.10 (down 20.03% from 10/3 peak) (12/24/18)
G -- 2700??? (that would be down 8.2% from the 10/3 peak)

So far, we still haven't reached Point G. Even prior to 12/24, Hussman had been expressing his surprise that a "scorching rally" had not occurred, given the "compression" of the market drops earlier in the month of December. Once the rally began after Christmas, he threw up his hands and said it could go to 2500 or 2600 or 2700, but he also indicated (i) that he didn't think it would make it to the 2800-level associated with Point C and Point E; (ii) that he had some internals that suggested a possible top at 2580-2630; and (iii) that the path to Point G was typically a small 1-2 week rally.

We're a little off from (ii) and (iii), given that the rally is now 23 days old, but I am inclined to believe that the bigger picture of (i) still holds.

The reason the rally from Point F to Point G is taking such a (relatively) long time is because there are artificial policymaker actions at play--namely, unusually bullish remarks from Powell, Bostic, and Yellen; unusual monetary stimulus from China; and an unusual ability of the White House to manipulate market moves with leaks about the status of U.S.-China trade negotiations.

But the bears arrived and began ripping into the market with a vengeance on 10/3, 11/7, and 12/3, and I believe they will do so again.

Why? Because the market moves are so sharp and compressed (suggesting bi-modal investor expectations), and because of what I cited about Wall Street's almost uniform, lock-step EPS projections for 2019 in the $170 - $178 range. We won't make it anywhere near those projections, and that's true regardless of what the Fed does, and regardless of any U.S.-China tariff reductions. That's the real story here.

I used "global recession" in the common news media sense of the term (industrial recessions in China, Germany, etc.), but the housing markets and the bond markets are telling us a very different story than what the equity markets had been telling us prior to October 3.

So far, and for the past 8 or 9 years, the U.S. equity market has mirrored global central bank liquidity with a very high correlation. But the theory that loose monetary policy can indefinitely forestall a market crash (and conversely, that Fed rate hikes "cause" market crashes) is mistaken. Once investor expectations start to bifurcate, and guidance on future corporate sales revenue began to slip, there's nothing that can stop the plunge downward.

As LSUtoOmaha remarked at the bottom of pg. 6, "if we cannot handle one quarter of one percentage point increase, or even a full percentage point if you assume rate hikes continue next year, then what does that say about the weakness of the economy in general?"

It says that the prior expectations of U.S. equity investors were completely and totally different from actual reality, and that there won't likely be a lot of middle ground this time like there had been in 2011 or 2015.

Now, the market may continue drifting up well into February. The Fed has already shot its load in terms of talking up the markets, and any more attempts to ease markets by pulling back from its balance sheet unwinding schedule is likely to cause panic and do more harm that good. The White House still has some dry powder on U.S.-China relations, and may even succeed in pushing the market above 2800, but its ability to positively move markets is waning (and its ability to negatively move markets is waxing). Eventually, this over-inflated whale of a bull market has to die.

So use whatever metaphor or analogy you like about bulls, bears, sharks, whales, or blood in the water; but I do smell blood in the water, and I promise you, I will be there for the kill if and when it happens this year.

You said previously there would be a crash, then you argued you never said it, and now the crash is back on



ETA: I know, I know. You traded the dot com bubble, black Monday, and the crash of 29

Russian has quoted you several times. I’m not going check your edits