Is The Bull Market Complete?

With all possible counts for a basic advance from the 2011 lows having expired and a right shoulder (9/17/14) printed and confirmed by middle section counts we know that the bull market is complete. However, it never hurts to have some affirmation along the way that rallies like Friday's are nothing more than hiccups in the bear market.

The key to knowing if Friday's rally was the beginning of a new basic advance is in understanding the nature of Thursday's low. The low on Thursday was confirmed by the high of a flattened top (or point E of a non-symmetrical descending middle section) on 11/30/07. It counts 1,249 days to the high of the previous basic cycle (black) on 5/2/11. Thursday's low was exactly 1,249 days beyond the high in 2011. This is the first of two steps in identifying the sort of low that the bears would be worried about.

Thursday's low was also forecast with a count from an important low on 10/18/00. It counts 2,549 days to the high of the multiple cycle (green) on 10/11/07. All important lows must be confirmed with forecasts from both the basic and multiple cycles. Thursday's low was exactly 2,548 days beyond the high in 2007.

But here's the rub for the bulls. The multiple cycle forecast is a low-high-low count and not a middle section forecast. All important lows have always been confirmed with middle sections. The fact that one of the forecasts used a method other than a middle section should be a big red flag for anyone who expects higher highs in the Dow.

By: Ed Carlson 

‘We may be at the start of a commodity uptrend’

When companies do well, they buy natural resources, says the Global Head of Commodities at S&P Dow Jones Indices

Jodie Gunzberg is responsible for managing S&P’s commodity indices, including the bellwether S&P GSCI, regarded as the leading measure of commodity price movements globally. In an interaction withThe Hindu BusinessLine, she talks about why, after a six year lull, commodities may be back in action.

What has been the trend in global commodity markets in the last few years?

In the past few years, supply has outweighed demand, especially from 2008. When the global financial crisis hit, demand dropped off, so supply slowed to let the excess inventories draw down.

During this time, commodity performance was relatively weak. Finally, in 2013, commodities started to see shortages again. That continued through the second quarter of 2014 and performance made a comeback. However, since July, a combination of perfect weather for grains and fewer oil supply disruptions have built up inventories in several major commodities.

Precious metals have been down on decent retail sales in the US, but may strengthen, depending on Russia-Ukraine tensions. Also, gold, after having dropped significantly in the last one month, seems attractive to China for the mid-autumn festival and to India ahead of the Dhanteras and Diwali festivals in addition to the wedding season. Industrial metals is the only sector that has held strong, mainly from supply constraints and strategic stockpiles. Overall, the strengthening dollar has been a headwind for commodities, though much will depend on weather and supply disruptions, especially for commodities with sensitive inventories.

Do you think commodities will under-perform stock markets in the next one year?

This depends on a number of influences. If inflation materialises, interest rates rise and shortages persist, it is likely commodities will do relatively well. It also depends on where the commodity/equity cycle is and when the turning point may happen.

We have now seen six years straight of equity out-performance. As companies have raised capital, they may buy more natural resources to make their output grow further. This may increase demand for commodities and may be the beginning of the mid-cycle. Equities have historically led the cycle.

The economic revival in the US and Europe should help commodity prices revive, isn’t that so?

Stronger demand may help commodity prices, but again, there are other factors such as the strength of the dollar. Supply shocks also matter and when inventories are low, that may not only spike commodity prices but also drive down correlations down between commodities and other asset classes.

Will oil prices continue to fall?

Many factors may determine the future price of oil. Currently, oil is sensitive to slowing Chinese demand growth and euro zone manufacturing growth that may be further diminished by sanctions against Russia. Also, concerns have eased over supply disruptions from Libya and Iraq.

After rallying in the first few months of 2014, gold is now moving down. Where will prices go from here?

Gold historically acts like a combination of a commodity and a currency. Gold has suffered from the economic revival, strong stock market and stronger dollar.

Last time gold dropped as much in a year (in 1981) as it did in 2013, it took 25 years to recover.

What should a commodity investor watch out for?

There are two major opportunities to capture returns in commodities — cyclical opportunities and systematic opportunities. Trend-following systems can capture cyclical opportunities because only price can respond to supply and demand balance.

This is because commodities, in the short run, cannot be drilled and mined, causing relatively slow cycles of inventory building.

So when there is a supply/usage imbalance in a commodity market, its price trend may be persistent, which may be captured by trend-following programmes.

However, currently commodities are hovering at near equilibrium. Short-term disruptions can swing the pendulum quickly, leading to opportunities to bet on mean-reversion.

It is debatable whether the shortages that appeared in 2013 and the first half of 2014 are gone for good.  The inventory build-up may be temporary based on weather and geopolitics.

However, one must keep focus on longer-term factors such as the strength of the dollar, which is historically inverse to commodity prices, rising inflation, rising interest rates and demand forces coming from China and other parts of the world.

US Stock Market 7 Year Cycle of Boom and Bust

Large numbers of people believe that an economic crash is coming next year based stock crash images-1 on a 7-year cycle of economic crashes that goes all the way back to the Great Depression. Such a premise is very controversial – some of you will love it, and some of you will think that it is utter rubbish – so I just present the bare bone facts below for you decide for yourself if it is something to seriously consider protecting yourself from in 2015.

As can be seen below economic crashes of one kind or another occur approximately every 7 years going all the way back to the Great Depression.

• 2008 :Lehman Brothers collapsed, the stock market crashed and we were plunged into the worst recession that we have experienced as a nation since the Great Depression.

• 2001: The dotcom bubble burst, there was a year of recession for the U.S. economy, big trouble for stocks and that little event known as “9/11″ happened that year.

• 1994: Yields on 30-year Treasuries jumped some 200 basis points in the first nine months of the year, hammering investors and financial firms, not to mention thrusting Mexico into crisis and bankrupting Orange County.

• 1987:The stock market plummeted 25% on “Black Monday” on September 27th of that year – the greatest one day stock market crash in U.S. history up until that time (surpassed by the massive stock market crash of September 29, 2008).

• 1980:In 1980, the S&L crisis was blooming and everyone was talking about the “stagflation” that we were experiencing under Jimmy Carter. The Federal Reserve raised interest rates dramatically to combat inflation, and this helped precipitate the very deep recession that we experienced early in Ronald Reagan’s first term.

• 1973 was the year of the Arab oil embargo, super long lines at the gas pumps, and a recession which ended up stretching all the way until 1975.

• 1931 Those that have studied these things say that the pattern keeps going back all the way to the Great Depression pointing out correctly point that the stock market crash which began the Great Depression was in 1929, but actually the worst year for the stock market during the Great Depression was in 1931 – and 1931 fits perfectly into the cycle.

Conclusion

As you can see from the above we have this pattern of economic crashes occurring approximately every 7 years so what should we make of all of this?

I am sure that some of you will dismiss this as pure coincidence and speculation, others will find it utterly fascinating, but one thing is for sure – people are going to be talking about this seven year cycle all over the Internet.

"The Ingredients Of A Market Crash": John Hussman Explains "Why Take The Concerns Of A Permabear Seriously"

Why take the concerns of a “permabear” seriously?

The inclination to ignore these concerns is understandable based on the fact that I’ve proved fallible in the half-cycle advance since 2009. That’s fine – my objective isn’t to convert anyone to our own investment discipline or encourage them to abandon their own. Somebody will have to hold equities through the completion of this cycle, and it’s best to include those who have thoughtfully chosen to accept the historical risks of a passive investment strategy, and those who have at least evaluated our concerns and dismissed them. The reality is that my reputation as a “permabear” is entirely an artifact of two specific elements since the 2009 low, but that miscasting may not become completely clear until we observe a material retreat in valuations coupled with an early improvement in market internals.

For those who understand and appreciate our work, I discuss these two elements frequently because a) I think it’s important to be open about those challenges and to detail how we’ve addressed them, and b) it’s becoming urgent to clarify why we view present conditions as extraordinarily hostile, and to distinguish these conditions from others that – despite an increasingly overvalued market – our current methods would have embraced or at least tolerated more than we demonstrated in real-time.

For us, the half-cycle since 2009 has involved the resolution of two challenges.

The first: despite anticipating the 2007-2009 collapse, the timing of my decision to stress-test our methods against Depression-era data – and to make our methods robust to those outcomes – could hardly have been worse. In the interim of that “two data sets” uncertainty, we missed what in hindsight was the best opportunity in this cycle to respond to a material retreat in valuations coupled with early improvement in market internals (a constructive opportunity that we eagerly embraced in prior market cycles, andattempted to embrace in late-2008 after a 40% market plunge).

The second: I underestimated the extent to which yield-seeking speculation in response to quantitative easing would so persistently defer a key historical regularity: that extreme overvalued, overbought, overbullish market conditions typically end with tragic market losses. Those extremes have now been stretched, uncorrected, for the longest span in history, including the late-1990’s bubble advance. My impression is that the completion of the present market cycle will only be worse as a result.

The ensemble approach we introduced in 2010 resolved our “two-data sets” challenge, and was moreeffective in classifying market return/risk profiles than the methods that gave us a nice reputation by 2009, but our value-conscious focus gave us a tendency to exit overvalued bubble periods too early. During the late-1990’s, observing that stock prices were persistently advancing despite historically overvalued conditions, we introduced a set of “overlays” that restricted our defensive response to overvalued conditions, provided that certain observable supports were present. These generally related to an aspect of market action that I called trend uniformity. In the speculative advance of recent years, we ultimately re-introduced variants of those overlays to our present ensemble approach.

As I observed in June, the adaptations we’ve made in recent years have addressed both of these challenges. See the section “Lessons from the Recent Half-Cycle” in Formula for Market Extremes to understand the nature of these adaptations. When we examine the cumulative progress of the stock market in periods we classify as having flat or negative return/risk profiles (and that also survive the overlays), the chart looks like the bumpy downward slope of a mountain. Present conditions are worse, because they feature both a negative estimated return/risk profile and negative trend uniformity on our measures. The cumulative progress of the stock market under these conditions – representing less than 5% of history – looks like the stairway to hell, and captures periods of negative market returns even during the bull market period since 2009. The chart below shows cumulative S&P 500 total returns (log scale) restricted to this subset of history. The flat sideways sections are periods where other return/risk classifications were in effect than what we observe today.

Though we’ve validated our present methods of classifying market return/risk profiles in both post-war and Depression-era data, in “holdout” validation data, and even in data since 2009, there’s no assurance they’ll be effective in the current or future instances. As value-conscious, historically-informed investors, we remain convinced that the lessons of history are still relevant. Our efforts have centered on embodying those lessons in our discipline.

While all of these considerations are incorporated into our approach, we’ve had little opportunity to demonstrate the impact we expect over the course of the market cycle. Applied to a century of historical market evidence, including data from the present market cycle, we’re convinced that the adaptations we’ve made have addressed what we needed to address.

Our concerns at present mirror those that we expressed at the 2000 and 2007 peaks, as we again observe an overvalued, overbought, overbullish extreme that is now coupled with a clear deterioration in market internals, a widening of credit spreads, and a breakdown in our measures of trend uniformity. These negative conditions survive every restriction that we’ve implemented in recent years that might have reduced our defensiveness at various points in this cycle.

My sense is that a great many speculators are simultaneously imagining some clear exit signal, or the ability to act on some “tight stop” now that the primary psychological driver of speculation – Federal Reserve expansion of quantitative easing – is coming to a close. Recall 1929, 1937, 1973, 1987, 2001, and 2008. History teaches that the market doesn’t offer executable opportunities for an entire speculative crowd to exit with paper profits intact. Hence what we call the Exit Rule for Bubbles: you only get out if you panic before everyone else does.

Meanwhile, with European Central Bank assets no greater than they were in 2008, and more fiscally stable European countries quite unwilling to finance the deficits of unstable ones, the ECB has far more barriers to sustained large-scale action than Draghi’s words reveal. Moreover, to the extent that the ECB intends to buy asset-backed securities (ABS), which have a relatively small market in Europe, the primary effect (much like the mortgage bubble in the U.S.) will be to encourage the creation of very complex, financially engineered, and ultimately really junky ABS securities that can be foisted on the public balance sheet. Watch. In any event, even if such monetary interventions continue indefinitely, I have no doubt that we’ll have the opportunity to respond more constructively at points where we don’t observe upward pressure on risk-premiums and extensive deterioration in market internals.

I should be clear that market peaks often go through several months of top formation, so the near-term remains uncertain. Still, it has become urgent for investors to carefully examine all risk exposures. When extreme valuations on historically reliable measures, lopsided bullishness, and compressed risk premiums are joined by deteriorating market internals, widening credit spreads, and a breakdown in trend uniformity, it’s advisable to make certain that the long position you have is the long position you want over the remainder of the market cycle. As conditions stand, we currently observe the ingredients of a market crash.

Extracted from John Hussman's "The Ingredients of a Market Crash"

Major Sell Program Trips 50-DMA, Sends Stocks Sliding

A "huge" institutional sell order, covering almost 200 individual stocks, is rumored to have been responsible for getting this morning's weakness across stocks going as equity indices catch down to bonds and credit. The S&P 500 broke key support at its 50-day moving-average (for first time in 2 months) and is back at 6 week lows. The Russell 2000 is now down 4.25% from the FOMC meeting last week...

S&P 500 cash breaks key technical

What Wall Street Thinks About Today's Selloff

Aside from Russian threats, weaker-than-expected Durable Goods, and #Bendgate, here are nine other reasons for today's sell-off...

Via FBN Securities' Michael Naso,

Thoughts from the Options Desk and the Technical Desk about this Mornings Action

Month End:  It’s the last day for underperforming or performing hedge funds to get names off the books so they don’t show up in quarterly report which equates to selling pressure.

Position Closing: Chatter that there was and maybe still is a massive asset allocator selling equities and buying bonds to rebalance books as the equity move made them a bit too long equities which again equates to selling pressure.

Holiday: There is very little liquidity because of the Jewish holiday making any selling pressure magnified however as of noon the S&P 500 is running +20% vs its 30 day average volume.

High Yield: Many High Yield traders have been trying to sell HY and IG bonds today with quarter end upon us, much like they did at the end of the June Qtr. Given the lack of liquidity and participants today, HY sellers have no bids to hit, so they have turned to selling equities and underlying names to hedge their positions or de-risk. Tuesday the slope of the BofA Us High Yield Master II OAS 200 dma turned higher for the first time since May 2012.  The changing of trend has forewarned of equity markets largest reversals since inception of this HY index.

SKEW: SPX Skew is at some of its highest levels in years, showing traders are running for out of the money puts, usually spike skew is closer to a bottom then a top.

Volatility: VIX is up 18%, its biggest 1 day % move since July 31st.

TRIN: Highest intraday TRIN reading since Feb 3rd '14, which is an indication of material selling pressure (the Feb 3 spike marked the years low).

Sentiment: Bears in the AAII survey jump to a 7 week high, majority of the new Bears moved from the Neutral camp rather then from the Bullish camp.

S&P 500 Levels of Support: 1954.50 ( 100 dma), 1946-44, 1936

Chart Below Showing High Yield putting pressure on Small caps which in turn is applying pressure to the S&P 500

Miracle Panic-Buyer Lifts Stocks Green From 50DMA

Do you believe in miracles? With death-crosses crossing, Hindenburgs Omening, bonds and credit diverging, breadth deteriorating, stocks on the verge of the worst run of thge year, and the S&P 500 testing the crucial 50-day moving average... it should be no surprise that a combination of VIX-slamming, USDJPY-ramping, PBOC-firing, Fed-speaking sent stocks to their biggest gains in 7-weeks after the worst selling in 5 weeks (and people think the BoJ is the only one buying stocks). Treasury yields rose but nothing like the exuberance in stocks. HY credit markets deteriorated notably (bounced with stocks but notably less so). The USD surged (apparently on PBOC rumors) early (+0.3% on the week). Gold & Silver dropped, copper rose modestly but WTI oil prices exploded higher with stocks' exuberance (and Benghazi headlines). VIX was banged from over 15 to under 13.5. S&P 500 2,000 (1,999.79 achieved) and getting back to green post-FOMC was all that mattered today - and Mission Accomplished... before a slightly weak close.

Dead cat bounce? Perfect 50% retrace of the drop...

and The S&P 500 desparately wanted 2,000 (but failed 1999.79 highs)

WTI outperformed Brent - spread back to almost $4

BofA Warns "Risk Of Selloff" After September's FOMC

While BofAML's Michael Hanson expects Yellen’s overall tone to remain dovish, market perception will be key. The combination of changes to the forward guidance language, upward drift of the dots, and any comments seen as potentially hawkish, could lead to a selloff...

Via BofAML,

Risk of a hawkish read

The September FOMC meeting may be the most anticipated in nearly a year. We expect no fundamental changes in Fed policy, despite revising the statement to clarify policy data dependence and some upward drift in the dots. The FOMC should taper by another $10bn as well. Fed Chair Janet Yellen’s press conference will set the tone for the market reaction. While we anticipate she will continue to support a patient and gradual normalization process, the risk is that markets may sell off on the perception of a less dovish Fed.

Textual analysis

The FOMC statement has been the focus of much market speculation recently. The “significant underutilization of labor resources” phrase should be retained, in our view, given the soft August jobs report and only slight improvement on net since the July meeting. Conversely the “considerable time” language is likely to revised, in our view, as several Fed officials worry it sounds too much like calendar guidance. To reinforce the data dependent nature of policy, the FOMC could suggest that they will maintain the current 0 to ¼ percent funds rate target range until there has been “considerable progress toward the dual mandate objectives.” We also expect the statement to note that these changes do not reflect a shift in policy preferences, and for Yellen to reiterate that point at the press conference. Still, the risk is that markets see these revisions as a hawkish move in the timing of liftoff.

Drifting dots

The Summary of Economic Projections (SEP) should reveal a slight revision lower for the unemployment rate forecasts for this year and next. We expect a modest upward drift to the 2015 and 2016 dots as well, as some centrist Fed officials have recently shifted to “midyear” from “second half” for their expected start to the tightening cycle. (We just updated our own forecast for the Fed’s first rate hike to June 2015 from September.) The 2017 forecasts will be included for the first time; we look for the median dot to be between 3.25 and 3.50%, with the median ex-hawks at that lower bound. The median longer-run policy rate projection should remain at 3.75%.

Recall that Governor Lael Brainard participates in the SEP for the first time at this meeting.

Market risk also drifts up

Markets are priced well below just about any reasonable variation on the median dot, and a recent San Francisco Fed paper noted that the market seems both too dovish and too certain about Fed policy as well.

Drifting dots thus represent a significant risk for a selloff in the markets. While we expect Yellen to de-emphasize the dots at the press conference  - they are not a consensus policy tool, after all - markets may have difficulty looking past them this time.

*  *  *

Meet the press

Finally, Chair Yellen will likely continue her more balanced discussion of the labor market outlook, yet still emphasize a patient approach to policy normalization. She also may update the discussion around the revised Exit Strategy Principles, but a formal restatement may not appear until later this year. While we expect Yellen’s overall tone to remain dovish, market perception will be key. The combination of changes to the forward guidance language, upward drift of the dots, and any comments seen as potentially hawkish, could lead to a selloff, particularly at the short end of the yield curve.

Gann's Financial Table Still Working

Gann did respect cycles. The cycles of human nature, boom bust boom, so where are we now based on Gann Financial Calendar.

Learn more about Gann here.

The funny tihng is that the table below was built before 1930s, and like any cycle study it tends to correlate well most of the time. The last 20 years it gets a mark above 80% so it worth 60 seconds of your life to learn about it. Like many living cycle master today, many are forecasting doom over the next few years (Charles Nenner, Martin Armstrong, Dan Ferrera) and the Gann Financial Calendar is no different.

Hey, if you see clouds on the horizon, you do tend to get rain!

Matched to the SP500

NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote...

"After exhaustive researches and investigations of the known sciences, I discovered that the Law of Vibration enabled me to accurately determine the exact points to which stocks or commodities should rise and fall within a given time. The working out of this law determines the cause and predicts the effect long before the Street is aware either." ~ William D Gann

"Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected." ~ George Soros

Stocks Have Reached A Permanently High Plateau

Stocks Have Reached a Permanently High Plateau  

A permanently high plateau of stock prices is a marvelous innovation.

Somebody said this before, of course, but one glance at a chart of the S&P 500 tells us that stock prices have
reached what looks like a permanently high plateau. How can we identify a
permanently high plateau? One sign is price never touches the 50-week
moving average (MA), much less the 200-week MA: prices just keep
marching higher in a volatility-free permanently rising plateau.

It's almost like a film set, where the special effects department (i.e. the Financial Singularity) has been called in to get rid of pesky volatility and fluctuations.

Memo to Head Office: Done. The MACD indicator has been locked into a permanently high plateau as price marches higher in an orderly fashion.

A permanently high plateau of stock prices is a marvelous innovation: you can practically set your watch to the steady tick of new all-time highs, and all you need to plan your retirement or cash-out of your stock options is a ruler and a pencil--just extend the price line as far forward as you want, and calculate your wealth.

The only downside of this permanently high plateau of stock prices is that it eliminates the need for the financial punditry and the workforce of money managers. With bearish influences and volatility both eradicated, there is nothing left to talk about except the upward slope of the permanent plateau.

As for money management--for most people, there's no need to play around trying to beat the index by a tiny percentage: just lock your money up in a index fund and watch it grow, month after boring month, year after boring year.

The Federal Reserve's testimony to Congress will be boringly predictable: "stock prices continue to rise in an upward sloping permanently high plateau." Congress and the Fed will congratulate their outstanding management of the economy, and once behind closed doors, congratulate the Special Effects crew for their fine work maintaining the permanently high plateau.

Our permanently high plateau of stock prices greatly simplifies life. If you own enough of the stock market, you can calculate your wealth next year and order a new private jet right now, because you know you'll be $25 million richer by then.

And of course the economy will thrive on this steadily rising permanently high plateau because those new private jets will need to be manufactured and maintained, and small airports in wealthy enclaves will need to add space for the new private jets.

Let's face it: this permanently high plateau of stock prices is financial nirvana. Permanently high plateau has such a nice ring to it, doesn't it? Let's say it three times just for the pleasure of the alliteration: permanently high plateau, permanently high plateau, permanently high plateau.

Sourced from Charles Hugh Smith from Of Two Minds

Here's Why The Market Could Crash - Not in Two Years, But Now

Markets crash not from "bad news" but from the exhaustion of temporary stability.

Yesterday I made the case for a Financial Singularity that will never allow stocks to crash. We can summarize this view as: the market and the economy are not systems, they are carefully controlled monocultures. There are no inputs that can't be controlled, and as a result the stock market is completely controllable.
 

Today I make the case for a crushing stock market crash that isn't just possible or likely--it's absolutely inevitable. The conceptual foundation of this view is: regardless of how much money central banks print and distribute and how much they intervene in the markets, these remain complex systems that necessarily exhibit the semi-random instability that characterizes all complex systems.
 

This is a key distinction, because it relates not to the power of central banks but to the intrinsic nature of systems.

One of the primary motivators of my work is the idea that systems analysis can tell us a great deal about the dysfunctions and future pathways of the market and economy. Systems analysis enables us to discern certain pathways of instability that repeat over and over in all complex systems--for example, the S-Curve of rapid growth, maturation and diminishing returns/decline.
 

One ontological feature of complex systems is that they are not entirely predictable. An agricultural monoculture is a good example: we can control all the visible inputs--fertilizer, seeds, water, pesticides, etc.--and conclude that we can completely control the output, but evolution throws a monkey wrench into our carefully controlled system at semi-random times: an insect pest develops immunity to pesticides or the GMO seeds, a drought disrupts the irrigation system, etc.
 

The irony of assuming that controlling all the visible inputs gives us ultimate control over all outputs is the more we centralize control of each input, the more vulnerability we introduce to the system.

Those arguing that central banks (and their proxies) can control the stock market have the past six years as evidence. Those of us who see this heavy-handed control as increasing the risk of unpredictable instability have no systems-analysis model that can pinpoint the dissolution of central bank controlled stability. As a result, we seem to be waiting for something that may never happen.
 

Despite its inability to predict a date for the collapse of stability, I still see systems analysis as providing the most accurate and comprehensive model of how complex systems function in the real world. If the economy and the market are indeed systems, then we can predict that any level of control will fail no matter how extreme, and it will fail in an unpredictable fashion that is unrelated to the power of the control mechanism.
 

Indeed, we can posit that the apparent perfection of central-bank engineered stability (i.e. a low VIX and an ever-rising market) sets up a crash that surprises everyone who is confident that central-bank monocultures never crash. In the real world, manipulated stability is so vulnerable to cascading collapses that crashes are probabilistically inevitable.
 

That raises the question; why not crash now? After all, all the good news is known and priced in, and all the bad news has been fully discounted. Why shouldn't global stock markets crash big and crash hard, not in two years but right now?
 

Markets crash not from "bad news" but from the exhaustion of temporary stability. The longer that temporary stability is maintained by manipulation, the greater the severity of the resulting crash.
 

As I noted in The Coming Crash Is Simply the Normalization of a Mispriced Market, this line from songwriter Jackson Browne captures the ontological falsity of permanent market stability: Don't think it won't happen just because it hasn't happened yet.

Sourced from Charles Hugh-Smith of Of TwoMinds blog,

"Printed" Money For Nothing

World GDP growth expectations just hit their lowest in two years... and stocks didn't

Icahn, Soros, Druckenmiller, And Now Zell: The Billionaires Are All Quietly Preparing For The Plunge

"The stock market is at an all-time, but economic activity is not at an all-time," explains billionaire investor Sam Zell to CNBC this morning, adding that, "every company that's missed has missed on the revenue side, which is a reflection that there's a demand issue; and when you got a demand issue it's hard to imagine the stock market at an all-time high." Zell said he is being very cautious adding to stocks and cutting some positions because "I don't remember any time in my career where there have been as many wildcards floating out there that have the potential to be very significant and alter people's thinking." Zell also discussed his view on Obama's Fed encouraging disparity and on tax inversions, but concludes, rather ominously, "this is the first time I ever remember where having cash isn't such a terrible thing." Zell's calls should not be shocking following George Soros. Stan Druckenmiller, and Carl Icahn's warnings that there is trouble ahead.

Billionaire 1: Sam Zell

On Stocks and reality...

"People have no place else to put their money, and the stock market is getting more than its share. It's very likely that something has to give here."

"I don't remember any time in my career where there have been as many wildcards floating out there that have the potential to be very significant and alter people's thinking," he said. "If there's a change in confidence or some international event that changes the dynamics, people could in effect take a different position with reference to the market."

"It's almost every company that's missed has missed on the revenue side, which is a reflection that there's a demand issue," he said. "When you got a demand issue it's hard to imagine the stock market at an all-time high."

He also lamented about how difficult it is to call a market top. "If you're wrong on when, that's a problem." His answer: "You got to tiptoe ... and find the right balance."

"This is the first time I ever remember where having cash isn't such a terrible thing, despite the fact that interest rates are as low as they are," he added.

On Obama and inequality...

"Part of the impact of these very, very low interest rates is that we've creating this disparity. The wealthy are benefiting from government policy and the nonwealthy aren't," he continued. "So we have a president who says we've got to fight this disparity and we have a Fed who's encouraging it everyday."

On Tax Inversion...

"This is both legal and accepted. If the government doesn't like the result, change the law," he said. "You have to have a rational tax policy." He said the top tax rate should be changed and the U.S. should not tax worldwide income.

Zell also said it's unfortunate that "this inversion thing has been captured as a political, electioneering item."

Source: CNBC

* * *

Billionaire 2: George Soros

Soros has once again increased his total SPY Put to a new record high of $2.2 billion, or nearly double the previous all time high, and a whopping 17% of his total AUM.

*  *  *

Billionaire 3: Carl Icahn

Ironically, Carl Icahn - poster-child of the leveraged financial engineering that has overtaken US equity markets on the back of Central Bank largesse - told CNBC that he was "very nervous" about US equity markets. Reflecting on Yellen's apparent cluelessness of the consequences of her actions, and fearful of the build of derivative positions, Icahn says he's "worried" because if Yellen does not understand the end-game then "there's no argument - you have to worry about the excesssive printing of money!"

*  *  *

Billionaire 4: Stan Druckenmiller

Simply put, Druckenmiller concludes, rather ominously, "I am fearful that today our obsession with what will happen to markets and the economy in the near term is causing us to misjudge the accumulation of much greater long term risks to our economy."

*  *  *

And here the BIS explains broken markets so easily, even a Janet Yellen can get it:

Financial markets have been exuberant over the past year, [...] dancing mainly to the tune of central bank decisions. Volatility in equity, fixed income and foreign exchange markets has sagged to historical lows. Obviously, market participants are pricing in hardly any risks.

Growth has picked up, but long-term prospects are not that bright. Financial markets are euphoric, but progress in strengthening banks’ balance sheets has been uneven and private debt keeps growing. Macroeconomic policy has little room for manoeuvre to deal with any untoward surprises that might be sprung, including a normal recession.

*  *  *

So now we have a quorum of billionaires and the BIS all flashing warning signals which can only mean one thing: stocks are undervalued so buy, buy, buy...

Seven Charts That Leave You No Choice But To Not Feel Optimistic About The US Economy

Seven charts that leave you no choice but to (not) feel optimistic about the US economy

At the end of July, 2014, Quartz posted an article called “seven charts that leave you no choice but to feel optimistic about the US economy”.

Although the facts that they presented are correct, the conclusion that they drew is not.

In the following sections, we will examine and refute each of the seven pieces of evidence that were presented by QZ.

Jobs

Growth in nonfarm private payroll employment (NFP) has been steady since 2012.

That said, it’s taking more money printing – aka Quantitative Easing (QE) – to achieve the same number of job gains month over month.

The following chart shows that if you deflate the gains in NFP by the increase in the Fed’s assets then you’ll see a diminishing return on QE.

Despite the fact that the labor markets have been improving for years, the Fed’s actions are having less and less of an effect.

Unemployment

The unemployment rate has been in decline since it peaked it late 2009.

But that’s not the whole story.

In contrast, the employment to population ratio has barely moved since 2010.

The next figure shows that, since the financial crisis, the falling unemployment rate has not been matched by a rising employment to population ratio.

This means is that unemployment rate is falling for the wrong reasons; i.e. because people are leaving the labor force.

Job Openings

Job openings have been on the rise since the middle of 2009 and are now as high as they were in 2007.

Be that as it may, job hires have been lagging openings since the summer of 2010.

As you’ll see in the following graph, hires are still well off their peak in 2006.

The labor market is better than it was but it’s still far from strong.

Housing

The housing market has improved significantly since the last depression but it’s still extremely weak by historical standards.

Often times, the financial media will present housing statistics that begin right after the last crisis.

That’s a great way to show the improvement that’s occurred this cycle; however, it doesn’t give you the proper context.

The subsequent diagram shows that new one family houses sold are still at a level that’s been associated with recessions in the past.

If this recovery was as strong as some people say it is then new home sales would be much higher than they are.

Autos

As a result of cheap financing, car sales are now at post-crisis highs.

But is the auto market as strong as it seems? Maybe not.

The ensuing chart shows that domestic auto inventories are now at their highest levels since early-mid 2001.

This means that, although sales have been rising, so has the number of autos available for sale.

If demand starts to fall off then there will be a lot of outstanding supply.

That scenario would not be good for the auto market.

Consumer Sentiment

Sentiment has been increasingly positive since 2009.

That said, it’s still lower than it was in 1995.

The succeeding figure shows that consumer sentiment has been making lower highs – i.e. lower peaks – since 2000.

This could be indicative of a loss of confidence in the financial industry.

In other words, after each bubble – first the Nasdaq, then the housing, and now the Fed bubble? – the consumer loses confidence in the system.

Intuitively this makes sense because of how many people were negatively affected by market crashes.

Stocks

The S&P 500 has been on fire since it bottomed in early-mid 2009.

S?t?e?v?e? ?L?i?e?s?m?a?n?  Some will argue that its performance is a reflection of an improving economy.

Others say that it’s been driven by the Fed’s monetary policy.

Take a look at the following graph – the S&P 500 divided by the Fed’s balance sheet – and then decide for yourself.  ;)

This chart is just hilarious.

It goes to show that the Fed is to the S&P what steroids were to Barry Bonds.

Do I have to?

After reading through this piece, it should be quite clear that you don’t have to be optimistic about the US economy.

Yes, there are some bright spots; but everything’s relative.

The current expansion has been ongoing for quite some time.

Therefore, it’s unlikely that “this is just the beginning” of secular bull market.

Sourced from Shane Obata-Marusic of Triggers