Today's Stock Market Crash: Mr Reasonable

Serendipper · March 20, 2018, 12:26pm

As Jesse Livermore said, “Never know until you bet.”

Mr_J · March 20, 2018, 5:38pm

Serendipper:

Zero_Sum:

Serendipper:

Sounds good, but what will be the catalyst? Rate hikes?

Rate hikes, trade wars, debt out pacing GDP,

We can always recalculate GDP In europe they added prostitution and drug use to the GDP lol. They monkey with GDP all the time and have it so tweaked now that the recession of 2002 never happened fred.stlouisfed.org/series/A191RL1Q225SBEA They pull those numbers from their ass.

government revenue crisis,

What’s that?

treasury bond crash,

Fed can buy more. Just think if Volcker could have bought bonds instead of having to jack rates up to the moon.

dollar devaluation,

That would make US stocks go up.

divide between rich/poor in this country to which a widening amount of poverty will make it impossible for this debt ridden consumerist service economy to even function at all. In order to have a consumer service economy you need a large population with money or income to purchase goods and services which doesn’t much exist at all if a majority lives in poor land.

Yes and as Richard Wolff pointed out, the wealth missing from the lower classes has been replaced with debt. In the 50s, a whole family could be supported by one man and they had little if any debt. Today both parents work and have credit card debt, mortgage, car loans, student debt. Ironically, that’s the fault of conservatives and their tax cuts

Manipulating statistics, information, and data will only get you so far. It does nothing in changing reality on the streets where a majority live. Government revenue crisis in when large segments of the population are so poor or low income that the government enters a crisis in that nobody can afford to pay taxes and have very little income to tax.

You live in a fantasy world.

Mr_J · March 20, 2018, 5:41pm

Serendipper:

Zero_Sum:

One day they’ll be right also. I’ve been following economics since 2007 and a lot of us are surprised this shit show three ring circus has lasted this long but nothing has changed, the unsustainability of the system is the same (worse now)where it will inevitably collapse. The United States empire is terminally ill and is on life support, eventually somebody or something is going to pull the plug. Nothing will change this fact and no matter of political reform will stop this.

I personally look forward to this nation burning itself into the ground. This country needs a real revolution of change and many of the parasites that run it need to be executed.

Someday in the future forgotten men will have a public voice again and with that new found voice we will exterminate those responsible for our calamities or years of suffering hanging them on lamp posts. The forgotten man will rise out of the ashes when the collapses commences and his first word will be retribution.

I’d like to see it crash n burn too, but it will happen when no one visits zerohedge anymore. When all the bears are gone, that’s the top.

The crash of 2000-03, everyone was asking what short selling is because no one had a clue. There were a few guys predicting it… Bill Bonner, Jim Puplava, Bill Fleckenstein and of course the perma bears Schiff, Rogers, Faber.

Too many people are short today dailyfx.com/sentiment#pairsSPX500

And yet there are very few people buying into this market. Very few foreign nations abroad anymore are willing to buy United States debt. That day is approaching a lot faster than you may realize.

Mr_J · March 20, 2018, 5:43pm

I would make a bet with you but I am just a simple educated poor man where I have trouble enough in surviving month to month. I’ll bet you my wits against yours and that will have to suffice.

Mr_J · March 20, 2018, 6:01pm

$21 Trillion And Counting: Why This Time The Fiscal Wolf Is Really At The Door (Part 1)
By David Stockman. Posted On Monday, March 19th, 2018

That didn’t take long. The $20 trillion national debt marker was crossed on September 8th, but it only took another 186 days to vault over the $21 trillion level last Thursday.

Then again, you haven’t seen nothin’ yet. The annual deficit will approach $1.2 trillion in the coming fiscal year; breach the $2.0 trillion market by the middle of the next decade at the latest; and pile a total of $17 trillion onto the national debt over the next 10 years.

Moreover, these numbers are about as locked-in as tomorrow’s sunrise. So it is fair to say that objectively the public debt is already $40 trillion and that’s just within the decade of the 2020s. And as we show below, that monstrous inflation of the public debt could not come at a worse time in the political, demographic and monetary cycle.

Still, we get slightly ahead of the story. What’s relevant in the near term is that every bit of political resistance to the growth of Federal deficits during the Obama era is now over and gone. The nation’s fiscal accounts are now actually in free fall—and for as far as the eye can see into the future.

We have been christening the Donald as the Great Disrupter all along—the political accident that will at last bring the destructive rule of the Wall Street/Washington establishment to a thundering demise. And nowhere is that more evident than with respect to the Donald’s pivotal position at the center of the fiscal calamity now unfolding.

Needless to say, Trump has finally locked-up the gears of fiscal policy tighter than a drum. That’s because he embodies a trifecta of fiscal impulses that amounts to pure madness. To wit, the Donald is pro-Warfare State, pro-Welfare State and has just slashed Uncle’s Sam’s tax take to 16.6% of GDP----the lowest rate since 1950.

Accordingly, there is exactly zero chance of any legislative action to stem Washington’s exploding red ink (see below) until after the 2020 election, and it will be far too late by then.

That is to say, the Donald is not about to sign legislation that would raise taxes, cut Social Security/Medicare or sharply ratchet back defense spending. Nor is there any possible congressional majority to serve up even a down payment on this necessary fiscal fix in the first place.

Indeed, it is now evident that the Congressional GOP has thrown whatever vestige of fiscal rectitude it held onto during the Obama years to the winds.

In their desperation to show that they can govern apart from the mad man in the Oval Office, Congressional Republicans recently passed the most irresponsible, unfunded tax bill since the 1980s at the tail end of what is now nearly the longest business expansion in history; and then moved within weeks to blow the budget sequester caps sky high, thereby adding $300 billion to defense and domestic discretionary spending during the next two years alone—even as they shoveled-out another $120 billion of disaster relief spending with no honest offsets whatsoever.

Of course, the alternative of a bipartisan fiscal responsibility coalition emerging in the foreseeable future is about as likely as vows of chastity being taken in a whore house, and we do not employ that particular metaphor at random.

Indeed, Wolf Richter’s excellent chart below depicts the dismal fiscal cycle that is now operative in the Imperial City. To wit, what used to be called the debt ceiling has effectively become the debt floor.

That is, there is now a cycle in which the statutory borrowing limit remains temporarily in effect (flat areas marked “debt ceiling”) until the Treasury runs low on cash. Then the ceiling is “suspended” (rising squiggly line) as long as necessary for political convenience—during which time the Treasury borrows like crazy.

During the five weeks since the “ceiling” was lifted on February 9, for example, the US treasury borrowed a cool $535 billion; and during the two suspensions combined since last September it has issued a staggering $1.2 trillion in new debt obligations.

Never mind that computes to $6.5 billion per day. After all, as one talking head attempted to school your editor on CNBC last week, the Federal deficit is only 3.5% of GDP. What’s to worry?

Our short answer to this thirty-something hot shot, of course, is just about everything is to worry. That’s because Wall Street is way behind the curve in comprehending that the monstrous fiscal freight train coming down the tracks is no mere statistical factoid at 3.5% of GDP.

To the contrary, the current fiscal equation is sui generis. It embodies a freakish and incendiary confluence of politics, policy, demographics, the business cycle, central banking and global developments that is utterly different—and massively more dangerous---- than anything that has gone before.

So we commence this multi-part series not merely to rebuke the Halftime Report idiot who spoke for much of Wall Street when he averred it was all getting better on the fiscal front because current deficits are far smaller than Obama’s. It seems that the only rebuke perma-bulls like Joe Terranova and his ilk of day traders understand is getting hit upside the head by a 40% stock plunge, anyway.

Still, the Wall Street brokers are making another run at the retail mullets—even trotting out high powered and ordinarily sensible market technicians like JPMorgan’s Marko Kolanovic—to urge one last run at buying the dip.

The Donald’s contretemps to the contrary notwithstanding, the global economy is proceeding just fine, they insist. And besides, the chart points beckon: The 10% February dip–including two 1,000 point plunges on the Dow in the same week— is just August 2015 or February 2016 all over again. That is, a bullish pause that refreshes.

In a word, that is one giant load of Wall Street horse manure. And we are here to tell you that unlike the boy in Ronald Reagan’s favorite story, which we mentioned last week, there ain’t no damn pony anywhere in sight!

The world economy may bump along for a quarter or two, but structurally it’s a monumental mess because it all turns on a hideous freak of world economic history that we call the $40 trillion Red Ponzi. And in the jaws of the thundering monetary/fiscal clash looming just around the corner in the bond pits, there ain’t no stinkin’ trading charts that matter a whit, anyway.

What matters 1000X more than the daily stock charts are the following two epochal force vectors that we shall elaborate upon in the balance of this series. That is, (1) the explosion of giant structural deficits driven by demographics, political dysfunction and the ascendant Warfare State; and (2) the historically unprecedented pivot to quantitative tightening by the central banks or what amounts to a vast de-monetization of the public debt.

In combination, they guarantee a “yield shock” of biblical proportions, which will eventually eviscerate the cap rates upon which the entire towering bubble in the equity market is predicated.

The first vector, of course, is the exploding structural deficit, which will come as a huge shock to Wall Street. That’s because it has been house-trained for so long on the “deficits don’t matter” mantra owing to central bank monetization that it can no longer recognize or assess relevant scale.

To wit, the idea that the upcoming 6% of GDP deficit ($1.2 trillion in FY 2019) is at least not as bad as Obama’s deficits is just plain stupid. The largest Obama deficit was 9.8% of GDP and it occurred at the bottom of the worst US recessioin since the 1930s (FY 2009); it fell steadily from there t0 2.4% of GDP by FY 2015.

Bad as the Obama deficits were, what is materializing now is an altogether different kettle of fish. The huge Trump deficits will hit at the 10th year of what will be a record business expansion that will be 125 months-old by the end of FY 2019.

Stated differently, the Trump deficits stand squarely in harm’s way in front of the next recession; and, worse still, they are growing in size as a structural policy matter owing to the retirement time bomb otherwise known as the 80-million strong Baby Boom generation.

Wall Street’s inability to appreciate the cyclical and demographic context of these erupting deficits, of course, represents just one more case of the recency bias. The central banks have falsified bond yields so egregiously and for so long, that the unprecedented deficit magnitudes now baked into the cake are simply unrecognized.

For instance, the Fed did print the Obama Administration out of its giant deficits, but even then they set all time records. During Barry’s eight year term the Federal deficit averaged 5.8% of GDP, and one single fact points to the aberrational nature of the Obama record.

To wit, Obama’s 8-year deficit average of 5.8% of GDP exceeded the worst Reagan deficit (5.7%) at the very bottom of the deep 1982 recession.

Likewise, it was more than triple the 1.5% annual average during the George W. Bush years, and far above the 1% of GDP average during the Clinton years. It also far exceeded the 3.8% of GDP deficit average during the 12-year Reagan-Bush tenure, and also left big spending Jimmy Carter in the dust, whose average deficit amounted to 2.3% of GDP.

So here is the first chart that trumps (so to speak) anything in the short-term stock charts by a country mile. As will be detailed in further installments, the $2.4 trillion deficit projected for FY 2028 is hard-baked into the future, and represents the best case!

The actual deficit by the end of the 2020s will be far larger—once the next recession rips through the fiscal equation.

Still, the $2.4 trillion deficit projected below under Rosy Scenario amounts to 10% of GDP, and at a point that would be 230 months after the last recession!

So we’d say that what we are heading into ain’t no buyable dip. It’s a financial chasm like the world has never known, and one that the central bank pivot to QT (Part 2) will turn into an outright nightmare.

davidstockmanscontracorner.com/2 … nt-part-1/

Serendipper · March 20, 2018, 9:29pm

I hope so because I’m ready to get on with it, but I don’t think it’s near. I don’t think I will live to see any of it.

People live in the clouds and believe what you tell them. What was it you said about people thinking they are free being hopelessly enslaved? Yeah, it’s like that.

People seem to be living pretty well. They all have new cars.

Yeah I’m sure of that lol

I still don’t think I could spare enough to wager

Mr_J · March 22, 2018, 3:58am

Treasuries

Dollar devaluation

[youtube]https://www.youtube.com/watch?v=i28UEoLXVFQ[/youtube]

Mr_J · March 22, 2018, 3:04pm

DOW dropping 600 points

[youtube]https://www.youtube.com/watch?v=1lWJXDG2i0A[/youtube]

Mr_J · March 22, 2018, 3:38pm

With all the wonderful news coming out of the United States economy this year I surely can’t wait til October when the real fun begins. Buckle up lads as it is about to become very bumpy around here. Who shall pin the balloon first? Pop goes the weasel…

[youtube]https://www.youtube.com/watch?v=nFQhlpB6N2A[/youtube]

Mr_J · March 22, 2018, 6:41pm

Serendipper:

Zero_Sum:

And yet there are very few people buying into this market. Very few foreign nations abroad anymore are willing to buy United States debt. That day is approaching a lot faster than you may realize.

I hope so because I’m ready to get on with it, but I don’t think it’s near. I don’t think I will live to see any of it.

Manipulating statistics, information, and data will only get you so far. It does nothing in changing reality on the streets where a majority live.

People live in the clouds and believe what you tell them. What was it you said about people thinking they are free being hopelessly enslaved? Yeah, it’s like that.

Government revenue crisis in when large segments of the population are so poor or low income that the government enters a crisis in that nobody can afford to pay taxes and have very little income to tax.

People seem to be living pretty well. They all have new cars.

You live in a fantasy world.

Yeah I’m sure of that lol

Zero_Sum:

I would make a bet with you but I am just a simple educated poor man where I have trouble enough in surviving month to month. I’ll bet you my wits against yours and that will have to suffice.

I still don’t think I could spare enough to wager

I think it will occur between 2019-25. Of course I am hoping it happens more sooner. Between one to six years at the most. So unless you plan on dying in one to six years time it will happen in your lifetime. Yes, most are easily fooled by political rhetoric and propaganda but all of that is only as good (effective) as the supply chains of society keeps running. As soon as the supply chains wind down or collapse so too will the political rhetoric and propaganda collapse also. When that happens the world will become very interesting indeed.

Yes, everything seems nice and new when you’re running everything up on debt through credit. Just take a look at national credit/ debt rates. People are going to need some real wits to survive what’s coming and if they don’t have any they better find some very quickly as time is fast running out.

Serendipper · March 22, 2018, 9:01pm

Zero_Sum:

I think it will occur between 2019-25. Of course I am hoping it happens more sooner. Between one to six years at the most. So unless you plan on dying in one to six years time it will happen in your lifetime. Yes, most are easily fooled by political rhetoric and propaganda but all of that is only as good (effective) as the supply chains of society keeps running. As soon as the supply chains wind down or collapse so too will the political rhetoric and propaganda collapse also. When that happens the world will become very interesting indeed.

Yes, everything seems nice and new when you’re running everything up on debt through credit. Just take a look at national credit/ debt rates. People are going to need some real wits to survive what’s coming and if they don’t have any they better find some very quickly as time is fast running out.

What supply chains are you referring to?

The SP500 can’t go down unless the 500 best companies in the world go down the toilet and that’s just not conceivable. I mean, it can go down momentarily, but it will go right back up.

And I can’t imagine how the USD could go down before all the other currencies bite the dust, which will make the USD go to the moon.

As I said previously, once they start printing, they will have to print exponentially more just to hold the value down and the acceleration of printing may have to accelerate as well (4th order).

Watch the yen get stronger because they’ve slacked on printing more. To hold the yen down they will have to accelerate their printing. There is not enough ink in the universe to devalue the yen. Watch the Euro get stronger as well.

Serendipper · March 22, 2018, 9:15pm

[youtube]https://www.youtube.com/watch?v=U_X6qLBtRTA[/youtube]

Almost everything he said was wrong and it’s the same as what he is saying today.

“The bear market is going to get a lot worse”

“Inflation is going out of control”

“The market is overvalued”

“The US is in worse shape than before”

Deficits, debt, the sky is falling!

Doom porn can be fun, but don’t bet on it.

Mr_Reasonable · March 23, 2018, 6:44am

If he’d put 10 bucks into the market for every doomsday prediction he’s made over the last 10 years then he’s be halfway to retirement right now.

Mr_J · March 26, 2018, 7:49pm

Yes, everybody can be rich if only they buyed stawks!

Mr_J · March 26, 2018, 7:50pm

Mr_J · March 26, 2018, 7:56pm

Serendipper:

Zero_Sum:

I think it will occur between 2019-25. Of course I am hoping it happens more sooner. Between one to six years at the most. So unless you plan on dying in one to six years time it will happen in your lifetime. Yes, most are easily fooled by political rhetoric and propaganda but all of that is only as good (effective) as the supply chains of society keeps running. As soon as the supply chains wind down or collapse so too will the political rhetoric and propaganda collapse also. When that happens the world will become very interesting indeed.

Yes, everything seems nice and new when you’re running everything up on debt through credit. Just take a look at national credit/ debt rates. People are going to need some real wits to survive what’s coming and if they don’t have any they better find some very quickly as time is fast running out.

What supply chains are you referring to?

The SP500 can’t go down unless the 500 best companies in the world go down the toilet and that’s just not conceivable. I mean, it can go down momentarily, but it will go right back up.

And I can’t imagine how the USD could go down before all the other currencies bite the dust, which will make the USD go to the moon.

As I said previously, once they start printing, they will have to print exponentially more just to hold the value down and the acceleration of printing may have to accelerate as well (4th order).

Watch the yen get stronger because they’ve slacked on printing more. To hold the yen down they will have to accelerate their printing. There is not enough ink in the universe to devalue the yen. Watch the Euro get stronger as well.

All kinds of supply chains. Concerning companies they hold no loyalties or affiliations to any one nation anymore where I suspect you may be right about those 500 companies however if the S&P were to collapse quickly enough it will have tremendous consequences on nation economies where that is what really matters not some financial portfolio of a company.

Chinese yuan just became gold backed today which means it is the beginning of the end for the United States dollar. They’ve been printing for almost fifty years and it is no longer a winning strategy. You can only devalue a currency so much to stop inflation where it won’t work always.

They might try to buy treasury bonds or all kinds of bonds directly next but even that will have negative global market consequences.

The Japanese yen, Canadian loonie, and euro are so dependent on the American dollar that their plight is of little importance. Once the dollar faces a crisis their currencies will start faltering also.

Mr_J · March 26, 2018, 8:02pm

Damn, with the Chinese yuan being backed by gold increasing with value now might be a good time in buying up yuan currencies.

I will have to think and ponder on this deciding later. Currency trading is the smart money me thinks.

Mr_Reasonable · March 27, 2018, 3:38am

Historically, it has been among the best paths to accumulating wealth. I’m not talking about speculating and day trading.

Mr_J · March 27, 2018, 3:38pm

What are your thoughts on currency trading?

Mr_Reasonable · March 28, 2018, 1:55am

Same as everyone else’s. Don’t do it. Too risky. You don’t start trading currencies until you’ve invested in just about everything else and still have money left to play with.