I think the market internals the last week and this week have turned VERY VERY NEGATIVE. The broad market continues to go down, only Blue Chips are making new highs on very low volume. My gut feel says last Friday was a major signal for traders to get into negative ETF's, ETF's that short stocks. THIS IS A TACTICAL MOVE for people who want to capture easy money. You can also go long short term wise, GOLD PRODUCERS, like Newmont, etc.
This Black Friday, may really be a Black Friday. I don't think the folklore of Christmas Rally, December Rally or Santa Claus Rally will apply here, I believe this could turn out to be a very very very negative Christmas stock market wise. Plus, people, rich folk, may sell stocks to buy expensive Xmas presents. Lots of negatives, if you don't want to short with neg. ETF's go to cash and count your blessings with some tax software this Xmas. HAPPY THANKSGIVING EVERYONE, I hate being so negative, but if you sell or short you are counting your blessings and they are all in the bank safe from an AIR POCKET vertical drop
Sentiment: Strong Sell
According to the FED, not the financial reporters, they will raise the FED fund rate in 2015. The members state considerable discussion on how to do this is being done weekly, you saw this in the last release of minutes. The FED is being very transparent. GDP just increase 3.9% and it looks like GDP is going to average 3.75-4% with weather adjustments. RAISING THE FED FUND RATE TO HALF OF THE GDP, OR 2% would give a signal to alot of businesses to invest and expand and it would create alot of jobs next year. Also, it would cause an adjustment in stock prices lower, which would raise dividend yields and thus make investments more rewarding cash flow wise which would be good for the deficit since more taxes will be paid on the interest income. THE FED SHOULD ACT ASAP, this is the perfect time to raise with oil prices headed lower, they need to offset the tax loss on Federal & State taxes on pump prices, and replace those taxes with higher taxes on higher interest income of taxpayers. I think they should do it right now with no warning, between Thanksgiving and Christmas.
Sentiment: Strong Sell
It’s worth noting that central banks quantitative easing and interest rate suppression are increasingly taking on a tone of desperation in the face of accelerating economic weakness in Japan, Europe and China. While the stated objective is to increase inflation, low inflation isn’t really the economic problem – low growth, intolerable debt burdens, and misallocated capital are at the core of global challenges. Unfortunately, QE only misallocates capital toward more speculation and low-quality debt (primarily junk and leveraged loan issuance), without much impact on real growth. China’s move was prompted in part by a surge in bad loans to the highest level in nearly a decade. The largest European banks now have gross-leverage ratios as high as 30-to-1. But liquidity does not create solvency, and with credit spreads widening, the growing desperation of monetary authorities is more a negative signal than a positive one. I would watch out where the central banks would want to try raising rates in an attempt to restructure the misallocation and distortion, something similar to pouring gum out in you gas tank and blowing out the carbon build-up. The economy has been so distorted that a FUEL SYSTEM cleanout is in order, what better than a Injector Called "XMAS EVE 2%" which is a FED FUND increase of 2% and see if it cleans out the low growth clogged economy, the FED has tried everything else, a Flash Crash may be whats needed to jump start growth.
Sentiment: Strong Sell
The FED uses current data in determining how fast or slow to change policy. They use a whole bunch of Rules that have mathematical expressions and the put weights on them. One rule, the Taylor Rule says they never go below 2% on the FED FUND rate, which they have violated, so they have to get this back ASAP according to this algorithm. Also, they have to take into account inflation and the job environment, there are equation, money velocity, a whole bunch.
But doing stuff slowly so as to not upset the markets, that is not their mandate, they are just being nice. Plus, when the data shows the markets will react the same to a 1/4% increase versus say a 2% or a 4% increase, that tells them they are pretty much can do either of these, the market reaction will be the same. Just write down the scenarios and estimate the market decline with each.
PLAN A: Your Plan
1/4%, 1/4%, 1/4%, 1/4%, 1/4%, 1/4%, 1/2%, 1/2%, 1/2%,1/2% = 3.5% INCREASE OVER 2 YEARS
ESTIMATED MARKET DECLINE = 65%
PLAN B: My plan Option 1
1.5 % increase on Christmas (2014) and 2% increase next Christmas (2015) = 3.5% increase over 1 year, ESTIMATED MARKET DECLINE 25-30%, PLUS 20% DECLINE IN 2015
PLAN C: Most Optimal Plan
4% increase on Christmas 2014
ESTIMATED FLASH CRASH OF 50%-60%, WITH 30% RECOVERY WITHIN 12 MOS. NET LOSS 30%.
I am talking the DOW, S&P500, and Russell 2000, the major indexes, the average stock will be down 70-95% in the first two and 60-70% in the last one.
Sentiment: Strong Sell
My favorite is buying AGNC for a 2 point pop, like at buying at 21 and selling at 23.25, doing this 4 times a year minimum for an $8.00 short term gain, on an average price of $22 WHICH IS 38% A YEAR.
Sentiment: Strong Sell
NO MORE QE.......THE REPUBLICANS ARE LOOKING TO DEFUND THE FED AND RETURN TO A FREE MARKET VERY SOON. If stocks go down and assets values, its Obama's fault and all the spending and QE they did this past 6 years. A time of reckoning is closing approaching.
Sentiment: Strong Sell
What does that have to do with the Trillions of assets that will be gotten at fire sale prices. Some of these Oil Barrons in USA have lost 50% of their wealth in 6 months, there is a lot of redistribution of wealth going on as we speak. Hamm, Icahn, Buffet all loosing $10's of billions of dollars in stock wealth as the everyday average Joe, who slogs to work 6 days a week, who has stagnant income and who gets a measely .01% yield on the few hundred dollars he manages to save for his future in his passbook savings account. This is all natural, it is a cycle of ups and downs.
The Saudi's will probably get Ford this time around and the Russian's will probably walk away with GM. China already got the Hummer Division and Germany got Chrysler in the last recession. People who borrow too much ussually end up loosing everything. I wonder how much leverage the M-REIT business has?????? I believe this will be a very very very Black December, like I predicted, it will go down in the history books.
Remember the Alamo.......Remember the Oil Patch Recession of the 1980's........capital was misallocated to oil production due to high prices, markets became more efficient and usage plummetted as supplies swelled. WELL GUESS WHAT.......HISTORY HAS REPEATED AGAIN..........HA HA HA HA HA........we have only seen half of the curve or cycle the last five to six years, the next 6 years will be like the "Oil Patch Recession" of the 1980's, it will take down banks, send whole states into insolvency, except this time their is godzillions more debt and leverage. I do think the Saudi's and Russia are doing the right thing, Saudi Arabia and Russia are debt free, it is ussually the debtor nations like Europe and USA and JAPAN that will be going down in this recession and the countries with cash will have opportunities of a lifetime to clean-up the mess.
Excuse me once again, this is not even the facts, it is just another title with some propositions, rough draft with spelling arrors. What will cause the trend of new highs to change, my proposition is that Funds will want to make up losses from their energy investments, they have pushed up Blue Chips to record highs while selling into the dumb new high momentum money, but this trade is very stretched, I believe sometime around Christmas or after, they will throw in the towel on new highs and start shorting to make up for extreme energy margin losses. The Hedge Funds will be just as dilligent on the ride down as there were with the vertical ascent up, it is like a Ferris Wheel, what goes up must come down. It worked with gold, silver, oil, commodities, oil stocks, debt, and now.................YOU DRAW YOUR OWN CONCLUSIONS..........IT IS REALLY YOUR MONEY.
Not made up and not that simple. My analysis is too big to put on a message board, my executive summaries are too big. My one - ten sentence titles like what you read are just that a descriptive title of some conclusion with maybe an inference of a proposition. The probability of STOCKS falling hard is very high based on very accurate data and probabilities. I talk about oil and commodities alot for past 12 mos., gold, silver, oil all falling, linear trend down. The aggregate affects on hundreds of vaiables are calculated and then probability distributions to predict outcomes. Some of my specific conclusions with 100% degree of confidence will be listed, you tie them together and draw your own conclusions:
1. Central Bank of OIL, OPEC - Is Popping the Bubble in Crude Prices, this is very similar to the Easing of Real Estate Prices in mid to late 2000's. They want to see what the market will take and who can survive. Its a Free Market.
2. Russia is slipping into RECESSION, it was starting after Obama's sanctions, now with dropping oil prices it will be a 'GREAT RECESSION". Venezuela, Saudi Arabia, Brazil, Nigeria, Iran, Iraq, Norway, Japan, China, too many to list are going into or are in recession.
3. Energy stocks just started falling, January will see emergency debt issues at double digit yield fail, and reorganization and insolvency of the loaded with debt and leverage ENERGY IMPLODES.
4. HEDGE FUNDS AND INSTITUTIONS loaded with stocks won't be able to raise cash, no one left to buy, will go into SHORT ETF's in droves to hedge against losses, EVERYTHING CRASHES, FREE MARKETS WILL REIGN ONCE AGAIN.
The biggest opportunity right now is this, from my perspective. I got ERY at $14, it is $21 and it will be 40-50 by Xmas. That is the biggest gain from my mathematical calculation, with high degree of confidence. Questioning why a sell-off occurs, like the one we hace in June, July August Sept, and Oct and now Nov., why would you question a trend, backed up with lots of good data and facts, supply/demand is on the shorts side, I mean the probability of gain is sky high. I am not going to question something that is a golden goose. Also, is energy collapse occurs, that means many many oil cos. and debt issues will default, this could take down banks big ones like mid 1980's, remember Continental, Bank of New England, and thatbig Savings and Loan, I think it was American S&L in Texas, and the OIL PATCH RECESSION, yes sir, sharp drops in oil do bring on RECESSIONS. This time it will be worst, becasue banks lent to oil companies 5X what they did in 2009 and everyone thought oil was the safest asset ever. I am going to really enjoy watching everything unwind, the next two years are going to be a big moneymaker. PS, so many funds and hedge funds go stuck with oil investments, that they are buying ERY to short ALL ENERGY as a hedge to unsaleable oil shares, the float is too thin or energy common stocks.
OIL is going down, down, down,........in DECEMBER.......Oil Stocks will Plummet for a Santa Claus Crash. Oil is going lower than anyone ever dreamed. Get into ERY it will be up to 80's by Xmas, still only $20. There is six times more oil supply than 2009 and demand is dropping everywhere at once.
There is 3-5 times for high yield debt banks loaned to oil companies and many have very little cash balances, everything is levered to the rising stock market and rising dividends, alll being chased by the YIELD CHASERS. This is going to end very badly.