Waiting for the other shoe to drop

I don't think I am alone in thinking we are nearing a generational crisis at the government financial level in the year ahead.  In case you don't have this thinking, let me run through some math, I am having a hard time being positive.

First, the crux of the issue is we live in a financial system that is debt based.  What I mean is, since WW2, america has owed money.  Each dollar created is created with new debt, and old debt is rolled over.  That means that we are on a trajectory that money borrowed in 1944 will NEVER be repaid.

So the rest of this rant is based on this ecosystem of debt.  We may be able to switch out of debt based to non-debt based money creation.   But historically that has lead to currency collapse.  My hope is we can stop creating bonds and just print money with no downside.  If your skeptical, like me, then lets look at the debt based problem.

First we have interest rates that have continually gone down since Volcker rose rates sky high about 1981.  The result is debt can be rolled over easier as the new rate is always better than the old rate.  If this ever shifted higher, our rolling over of debt for almost 40 years will come to an end.  That's quite a bit of debt 'tail' we will have to deal with.

Lets run the numbers:

US debt: 26 trillion and rising !

Federal Reserve bank 'assets' : 7 trillion running quickly to 9 trillion.  (keep in mind before 2008, it was ALWAYS under 1 trillion).

US public pensions underfunded: 5 trillion.

Corporate debt: 10 trillion

Personal Debt: 14 trillion

With debt rising quickly, lets round  to 65 trillion and rising.

The US stock market is worth 38 trillion, and lets say we have a 40% market correction (70% would be historically normal based on valuations), this would bring the market to  22 trillion.

The question is, with a stock market at 22 trillion, and GDP shrinking 8% down to about 20 trillion, and US total debt could easily hit 70 trillion in the year ahead, will it matter?

But to put into perspective, the  US derivative market is totaling 650+ trillion, so perhaps GDP, market value, and all other debts are just small potatoes.

I can't help but think this entire system is dry kindling, set a a flame by one of many choices.

War?  China and India, Israel vs Iran,  US Race war, 

Democracy turned dictatorship- Trump losing the election and refusing to leave office?  

Or just lose election AND leave office?

Or simply have the global pandemic go off the charts.

I really don't know where is best place to put money, except pay down debts, and maybe buy some gold and/or bitcoin as a hedge. Good luck!

Long term setup

Monday looks weak, as I expected.  I think we need a new low past Thursday before a reversal.  

I am looking to add to Bitcoin, and gold Miners.   But I think gold miners are 4-7 days away from their near low.   We aren't talking much downside, maybe another 5' max 10%.  

If you didn't get out in January as I warned, about 9 days ago was the time to get out.   I recommend you consider close enough and lighten the longs.

Good luck.

Decent down day, whats next?

I had thought we would have a few down days into Monday hitting S&P 500 3000 by then.

Instead it happened in one day!

I do think there is another leg up before new lows, and likely into July before it does start down.

But be careful, this could be the start of the new trend to below previous lows.  This would catch everyone off guard with no winners!

I am still thinking we may have a down open Monday before we can resume up.

I wouldn't be surprised if we have an up day Friday.   If I am convinced we are in the final leg up, I'll post.

Good luck!

Near term Market down

Market is looking soft, we may get a decent pullback. I expect Spx to tag 3000 and reverse.  Then we will get the final rally before we start to hit new lows for the year.  I expect market plummeting in August or September as we get closer to elections and second Covid surge.   The plunge could happen sooner if either or both take over the news.

I am positioned short, I expect miners to fall too.   Gold however may rise so any gold miners pullback should be shallow from here.

In the next Bitcoin bust, if there is one later this year, I am a buyer.

Good luck

Gold bottomed? Market softening?

The S&P 500 hit Friday 3049, my high end target was 3100.  With all the chaos going on, I look at the futures this morning thankful they aren't down huge.

I am going to dump as much as possible on the open, taking advantage of this gift.  We may even go to S&P 3200.  But after a gain of 39%  from March 21st to May 29th, with interest rates near zero, that is pretty good!

Gold also looks like it may have bottomed within the first week.  My concern is if the overall market tanks, I have a hard time believing that gold miners advance into the pullback.   Owning GLD (gold ETF), Bitcoin, or other hard assets may appreciate in a downturn.  Gold miners will quickly rebound if there is any weakness in prices.   But who the heck knows, maybe this time gold miners surprise and advance if rest of the market reprices.

I am going to stop posting until there is clarity.   My posts over the last few weeks have been all over the place as the market claws to the top.  I wouldn't be surprised if the market in 6 weeks hits 3200 before retreating.  I also wouldn't be surprised if 3049 on Friday was the top. (close enough to the 3100 target for me).   Guessing when the public 'market exuberance' ends to the day is beyond me.

Good luck!