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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Friday, August 28, 2015

My thoughts of the current crossroads in the market

We are at historical times, economically.
Leading up to 2008 crisis, the standard economics taught in the USA since world war 2 was generally in effect.  There was breaking from economic standards starting with Bill Clinton in 2000 with dismantling of Glass-Steagall act put into place in the depths of the Great Depression.

The purpose of these laws was to establish realistic accounting to value banks and keep monetary reserves and risk at acceptable levels.  The reason this is important is so private business does not become public liability if there is an issue.  In 2009 mark to market accounting was suspended.  Mark to market accounting is what non-banks live by.   For example, if you declare your house is worth 300,000 dollars, but the houses near you for equivalent assets sell for 200,000 dollars, you bank will use this information to value your house.

Since 2009 the stock market has risen to historic levels in the USA.  Ignoring the banking sector, corporate America has been doing pretty good, even for a critical eye like myself.   But while the companies are doing good,  the average American has not.  Companies are benefiting from huge gains in technical advancements that enable better profits with less people.

China has been advocated as a world leader of the NEXT generation of economics.  I have question this wisdom many times.  There are two primary drivers for me questioning this conventional wisdom.  First is the historic 1 child per couple and second is insane levels of mal-investment never seen in human history.  The combination of both makes China's future economic leadership questionable.

So here we are at end of August 2015, with China's stock market down 41% two days ago from June high.  USA is down 7% from all time high set on July 17th this past Monday.  As of today the USA SPX is down 6.5% since July 17th.   America is in an epic panic!  down 6.5% in little over 30 days after being up 300% since March 2006.  Oh the horror!

The Stock market was meant to be a risk taking event.  US citizens cannot take risk.  The only question left is what next?

And here my friends, I can no longer advise.  We are entering a world where corporate profits will hit record profits for the next decade, with majority of US citizens losing economic ground.  For the market is this good for the market?    China will need to shift to robotics leaving out 100's of millions of citizens without better income, is this good for the market?

China is actively trying to devalue it's currency along with many other nations to gain an economic edge through manipulation over innovation, is this good for the market?

With the realization that all laws are meaningless illustrated by the willingness of society to accept mark to fantasy accounting as perfectly fine to use logic and rule of law to judge outcome of this current events as at best pathetically optimistic.

We may be entering a time where the market soars beyond anyone's wild dreams leaving out 90% of Americans behind, with the world suffering from innovation investment due to risk tolerance.  We could see the USA market cut in half as it joins the world downturn and the realization of fantasy accounting is just that.

I no longer have faith in gold, oil, or any resource in the face of world economics being turned on it's head.  I have only faith in companies advancing technology to get reliable income for the next decade.   Tesla, Google, Facebook, Amazon (AWS), and others are world leaders in their sectors.

For now, I am stuck in the gold miners, with epic lows I have to think they will double or triple from here.  But who knows.  Good luck.

Monday, August 24, 2015

Market Rumblings

Now the public media is screaming panic over the markets.  Is this the next leg down? Possibly.
As long time readers know, for years now the next issue i said would come as we come closer to 2017.

I honestly don't know where this is going, but we do have several screaming warning signs.
First China's stock market has been in a freefall (chart below), along with natural resources already collapsed months ago.  The world's government bond markets have historically low rates, with some countries requiring YOU PAY THEM to buy their bonds! (negative interest rates).

The VIX (Volatility index) has been off the charts, with the markets not able to price the VIX for 30 minutes on Tuesday.

Gold and gold miners pre-collapsed before all of this.

What makes all of this disturbing is the world has already done everything within reason to keep the market valuation rocketing higher for the past few years.  The Banks since 2009 do not have assets valued by market prices, but rather mark to 'declared value'.   So the banks already have a positive an outlook as possible for valuations.  Combine that with interest rates at historic lows, and the Federal Reserve bank recently purchasing federal bonds directly with Quantitative Easing, owning trillions of US mortgages and bonds.

So the question is, assuming we do start on a year long decline, what will governments do next to spur the next leg back up?  I have no idea what that could be,  please put in comment what you think the world can do to spur demand like was done in 2001 and 2009.

Let me remind readers of a fairly neutral signal that has historically been a good indicator of long term downturns, see post here.

If there is a significant plunge still ahead, I am hoping for a snap back rally in days ahead, that will be the last place to get to safety.

To the charts!

Monday, August 10, 2015

Germany needs to CUT Greece NOW

I am tired of reading the torture the Greeks get to endure under the hand of the European Union, lead by the Germans.
Lets start at the beginning, Greece played some creative paper games with help of Goldman Sachs, allowing Greece to enter the European Union when they should not have been allowed.

So here we have a country that under the European union's own rules was not fiscally sound enough to join.
Fast forward that when 2008 hit, the mask is ripped off and we discover Greece is insolvent.  I can excuse 2009-2010 that Europe did not allow Greece to exit.  There was greater problems that may have required Greece to remain, even if it was not best for their citizens.

So Germany....I mean European Union....demands to be fiscally responsible.  A country that is already under water fiscally, with any math at all cannot pay backs its debts for 50+ years if they play their cards perfect.  Anyone can tell they are bankrupt.  Why should people not alive when the debt was created pay?

Ok, lets run with the fantasy, demand Greece take measures and somehow spark economic growth AND export cash out of the country to pay off creditors.
And...surprise...we have a debacle.

Greece unemployment is at 25%, with young at over 50%.  There are supply shortages and unrest.

So Greece holds a vote, the people VOTE to leave the union and take the economic hit of exiting.
Only to have their own politicians cave and continue economic slavery.

NOW Greece has influx of refugees, and combine that  with Germany demanding 86 billion from a bankrupt nation who needs help, not more blood.

At this point democracy is being ignored. the people want out.  The Politicians don't stand up for the people and the people suffer.  I do not believe in violence, but I am at a loss what it will take to free the people of Greece from slavery and let them...and us move on.