The ride up, until its down

The market is at all time highs, and its anyone's guess if this continues into next year.  With the world printing cash, the cash must flow to assets.  And right now, USA is the best place for assets in a world having challenges.

This does not mean average Americans are being prosperous.  It means loose cash finds whatever the world thinks is a safe investment.   When the loose cash ends or people panic, no one can predict exact timing.  But it will end in 2025 (if not sooner).

When it does, fear will take over hard core, and US bond rates should plummet.  When this happens it will be the LAST time you see rates this low easily for a decade.  Ideally move out of bonds into energy, commodities, gold, bitcoin, even oil.   Can also invest in technology such as AI or biotech.

What could change my outlook? Average Americans having lower costs, gainfully employed, paying down debts, and growth in consumerism.  Without this mix, we will all struggle to keep things afloat.

I do think after this crash we may see inflation in the decade ahead balloon as the world prints its way out of debt, and its obligations to baby boomers. 

Buckle up!  Enjoy this stock market, for it won't be the same ever again.  Easy money days are almost over.

A Lesson of when you are right, but wrong

 My last post asserted SPX hitting 4900, it hit 5120.  This is a prime example when you are right, but yet still wrong.  This is what the market is excellent on doing.  We did get a market decline and rally into the election as I asserted. 

But what I did not get is a decline to the target I thought.  Lesson is always trade out of positions when you are right, and don't wait until perfectly right.

I did close out of short positions, in the case of shorting Stellantis, it all worked out well.  But for SPX, I let quite a bit go back.

Looking ahead, while the market should be topping, I am reserving this from a declaration.  The reason is China is printing printing printing.  With loose money it will flow to whatever it thinks is a good investment.  I expect gold, bitcoin, and potentially the US stock market to benefit.  The reasoning is China's economy is a disaster, I question if the CCP will be in control by 2030.

Worse yet, we will likely get inflation in the USA, and the world, because of the Chinese printing flowing into hard assets.  Also Russia is attacking Ukraine international grain ships that will result in less world wheat.  These two items will force the FED to not cut rates, ensuring our economy doesn't get the support it needs.  I suspect the FED will know this and will ease in "different ways", like its special operations.  The interest rate lever is used to pretend it is the master controller of inflation, and while a component, it is hardly the largest one.

If assets do rise, the US pundits will use this to confirm the US economy is doing great.  Far from it.  The housing market is turning bearish (click).    And I personally know multiple people unemployed, some over a year in IT.   There isn't a crazy amount of layoffs, companies are simply hiring at a minimal level.  This is the first step to having an employment problem as the unemployed accumulate.

Where does that leave us?  With China printing we may get another goose up.  If it does Bitcoin & Gold is a good play, and the market.  Stay into the market going up, but if you get concerned listen to your gut and capture gains.  There is nothing wrong with sitting on a portion of your cash in fixed and sit watching into Q2 next year IMO.

Short to spx 4900

 We didnt reach the low into the election, when things hit below spx 5000 i will cover most things.

So if you are long in the next week or two, be prepared for some pain.  Ill join you as a short term bull soon.

We just experienced a counter rally, going down or up is never in a straight line.

Whats next?

 When the FED started to raise rates in March 2022.  At that time the Fed said it takes time , over 12 months before the effect of raising rates can cool down the economy.  The Fed raised incrementally rates from March 2022 to July 2023.  The overnight rate went from 0.25 to 5.5%

Since July 2023 the stock market has reached new highs and bond rates have actually fallen.  

The stock market had issues at the same time Japan had issues last Friday into this past Monday.
Now the market is calling for the Fed to cut.  Does anyone doubt the fed will cut if unemployment rises or the stock market destabilizes?

While its possible they don't cut, even the Fed set expectations they will in September.  What is the rate we are talking about?  Its the rate the Fed will pay some financial institutions to deposit their cash with the fed at a set annual rate on a nightly basis. 

Notice, this is NOT the 1/2/3/5/7 year, 10 year, 20 year, or 30 year US bond rate.  It is not car loan, credit card, or mortgage rates.    So a rate cut of the fed rate doesn't automatically cut borrowing costs.

It took 2 years from March 2022 first cut to have material inflation decline about March 2024.  Why do people think reducing rates by 0.25 or .5 from 5.5 to 5.0 will positively impact the economy quickly?

It can't because what the Fed rate does is influence financial institutions to seek gains from different financial activity instead of parking cash at the Fed.  When banks and other institutions change their investment strategy it takes TIME.

Therefore it isn't possible for a fed rate cut to 'save the economy'.  There are potential other events that will give a really good boost for a bit even if unemployment continues to rise.  But barring dramatic events, the dice is cast, the market has peaked.

Could we see a new high in the next couple of months, of course.  But when the Fed does cut rates, its them saying "we see the economy has taken a turn for the worse", and their action will start to help the real economy, in a year or two.

Now for other potential bad events, last week the reason the US market tanked was Japan had material challenges in their economy, including their stock market falling over 10% in a day, and the Yen appreciating dramatically.  This hurt US financial institutions using Japan as a "safe place to borrow money cheaply and use it to invest in USA or world".  A shift of rate hikes, Yen appreciation, and Japan market decline basically forced financial institution borrowers  to liquidate assets to have enough cash to cover the shift.

This is NOT the last major event, it is the first.  Think January 2008 when US market dislocated on a Monday.  Its a warning shot.

What to do? Secure assets in financial institutions that explicitly state FDIC insured up to 100K, or buy TLT ETF.  

When the Fed cuts, beware of long duration bonds as I expect markets to have long term rates rise in anticipation this next round of Fed Rate cuts will be followed by even higher hikes to tame inflation again.

If you can remain financially well of, I do expect investments of a lifetime available in 2026-2030 that will be the rocket ride of a lifetime with AI bringing in profits.

Good luck!

The top is in, now what?

 Hello! Its been a while since I posted.   I sold all my crypto a few weeks ago except my core bitcoin.  I lightened up on longs (not that I had much!) a few weeks ago too.

Now the market is correcting.  I will be exiting my shorter term puts between here and S&P 500 between 4,800-5,000.
I really doubt we will see a 2008 crash.  I do think we will see insane swings in the market, with an overall trend down.  The market is opening up insanely down today, and we could get more.

But when the S&P500 is below 5,000 its getting a little over-sold on such a short term.

In the chart below is the SPY, and we will see the 50 day moving average hit at between 4,800-5000 depending on the day in the weeks ahead.

I do expect August as a month to be DOWN, so I am not talking a meaningful bottom here.
My goal will be to roll over puts dated 2025 to 2026 and hold.

Overall, safest is 1-5 year US bonds and/or investments in core companies you think are worth it for 10 years.  I do think the next 5 years will not be great for the stock market, but I do think eventually AI will be explosive.  Its just a little too soon just like 2000 with the internet.

Good luck.

Latest and Greatest

 Been a while!  Watching the index slowly drift higher has been a bit boring. :)

The stock market is holding, but there are so many cracks its hard to understand how it drifts higher.
We have bitcoin breaking down,  skyrocketing household debt, bankruptcies skyrocketing, car repos skyrocketing, new/used car market collapsing, US bond market rallying hardcore today,  CVS/Walgreens/Rite Aids closing ,  Banks failing,  Market Crash signals triggering, Housing prices collapsing in SOME areas of America,  some commodities (like lumber) falling so hard being sold at a loss, unemployment rising, and so much more!

If we see a stock market fall, there is so much leverage that all assets should lose value.  This includes crypto.  I recently sold all my crypto except bitcoin.  My safety position is in cash, shorts, and some outside USA investments (INDA, MSCI).

The only reason I can see America's market continue to levitate is out of all countries, it is still the best bet.  Canada, Europe, China, Russia, and other major economies are facing very strong negative economics.

China isn't dumping US bonds, it is failing as a nation being forced to sell US bonds to try to prop up its currency.  

Such a cheery post!  I been expecting this moment since 2009 to peak between 2020-2024, that I am tired of it and just want the next shoe to drop.

Pay down your debts, stay in a safe job, lower risk investments and buckle in!

I am not sure even the  Donald promising he can fix everything will turn this around.  If AI makes some insane breakthrough it may help the USA remain the best of a debt ridden, demographic disaster situation.

No Flash, Shorts covered

 I covered almost all my shorts Monday, as Friday or Monday did NOT get a meaningful low.
We are in an "A wave" down, following Elliot Wave Theory".  We will get  a B wave up, probably around SPY 5005-5050 range, and then we will get a major wave down bottoming in May.

So enjoy the ride up over the weekish again before the pain train returns.
I am looking for re-entering shorts in the range above.  Good luck!

Flash Crash Ahead

Leading up to April 9th I went heavy short.   With news of explosions of Iran combined with 5 days of market weakness, a flash crash maybe on the table.

If we get an extreme market down, I expect SPY 4900-4800 range to hold.  If correct, the counter rally will be very painful if short.

Its very hard to cover shorts when your finally in the green.   Lessons from the past, nothing goes in a straight line.  I may go long or simply wait to get reshort.

If we break on a closing basis SPY of 4800 its going to get very interesting, and being short would be huge.   But I cant take that chance with such a sudden drop.

Good luck

Is the top Finally in?

 If you look at the market leader NVDA, it has been moving sideways since first week in March.  This is either eating time off the clock for a new explosion up or there is material selling occurring since then.  If the latter once the late comers have exhausted their purchases, we can expect a 20-25% cut in price.

Since NVDA market cap dwarfs all other stocks in the S&P 500, this would be a material top until a new 'growth story' like AI with NVDA can drive the market higher.  

Consider stops to keep profits and be ready with some cash.  I expect this bear market be a up, down, up, down, repeat through the election. 

The BEST guy to watch for daily targets is: https://www.youtube.com/msforecasting/videos

The end of the middle class

This blog started in 2008 with the pending global financial crisis was about to begin.
Since then, I have been concerned as the global financial system and the future of Americans financial future.

Back in 2009, I called out the demographic challenges, the future decade of inflation, and the decade of increasing interest rates.   Since then in January 2020 I raised the pending pandemic.

Since then I dramatically reduced my post-rants and typically post only when I see more extreme situations.

I been following YouTubers that are very good, they have more time and ability to share information than I do.  We are on the precipice of a financial crisis that will be felt for a decade.    AI will produce immense wealth, for the few.  If you have money you can increase your gains providing you can own part of these companies.  If you don't, things will get harder.  

I urge you to learn more on what the world is facing, and get ideas on what you can do.

Eurodollar System - The driver of the world economy

Zeihan covering the changing Global order.

News on the second largest Economy, China, Uncensored.

A Fun stock market guy, mostly for entertainment, he does call out key news.

You want to get rich day trading? You will IF you do exactly what he says

And finally The Real Estate Ninja started on real estate, and his scope is now beyond to the American middle class.

Good video on Dollar end game

The dollar strengthening is actually a sign of dollar end game.

This works until all treasuries are sold by foreign banks.

Santa rally?

 I think we are in a bear market now.  What that means is while the market trends down, we will have insane rallies and resume the downtrend.  If we break all time highs, then this thesis is wrong.   Otherwise I think I’ll be covering the remainder of my shorts this week.

My goal is to slowly over the year to add to india (INDA) for long term stability, and income. The remainder I’ll trade in and out, mostly going short st toppish rallies but also going long in extreme pullbacks   I may even cover some shorts, put on some longs, and sell the one that goes against me.

The down trend will go into 2024

Back on failure line

 Looks like I had it right last week, load up short.  The action Monday and Tuesday was to shake people like me off the shorts.  The market is on the line for a material market downturn.  I am still short, but the last two days I did take some off the table.

Good luck

That was quick!

There was no follow through BEFORE the market open.

I put sells in to sell about half my shorts on the open, and stop losses on the rest.

Good luck!

I am short the market

I have been ultra quiet on the market, as I do think America is decently positioned for deglobalization.  But the shift from globalization to deglobalization should bring the world major pain, and China is getting hit insanely hard already.  America does have financial stresses itself. Friday the stock market is on the edge of breaking the up trend line from 2020.

This past week I am now over 50% short the market between short term bonds and shorting.  My current 401k is in fixed 5% rate.   Next week is key to confirm a bear market.  

If we get a close next week BELOW Friday's low, we are in a technical bear market.  In my opinion cash is king, which can take in the form of 1 year treasury.

This doesn't mean the market crashes, it just means we are in a multi-year downtrend.

The KEY numbers are breaking the low Friday, this will break the uptrend from April 2020.  The next key is breaking the uptrend from 2008. The next key is the up trend line from 1982,  The worst possible trend line is the uptrend from 1942.  The unthinkable, impossible uptrend line is from the bottom of the great depression, starting from 1932. 

It is impossible to know which line is the bottom, but one of them should be.  I am actually optimistic for America in a world of turmoil, as our economy is positioned well for the future.  Given that optimism,  my disposition is rock bottom is the uptrend from 2008 (next year) or 1982 around second half of 2025. (My target) 

Investing in this environment is really tough.  Buying 1 year treasuries offers a decent return, almost no risk (unless republicans cause a default!), and ability to pivot if we hit rapidly a 2008 bottom.  Bitcoin could come into it's own, but it could fail miserably.  With Bitcoin ETF being approved in the next 6 months, we could see a pop up.  I no longer like gold, but in the short run it could be a surprise upside.  Countries like India that I have posted optimistically is also poised to lose millions of jobs as lower-class office jobs are replaced with AI.  With USA being reserve currency and leader in AI, this could be a winner take all moment.

My gamble is TZA, triple inverse small US companies, that unfortunately I think will get crushed in this wave down.   Click here for a really bullish youtuber who on Friday has become concerned.  Good luck!

2008 and now

The global economic forces of change culminated in 2008, and rather than allow the free market economy to find new footing, the global financial system decided to try to keep things 'normal'.

Fast forward to 2023, the rich vs the poor has never been greater in our democracy, the middle class can barely pay their mortgages, and consumers have over 1 Trillion dollars in credit card debt with interest rates of over 30%.

I'll be posting soon, the stock market will eventually reflect the future earnings.  For now, money has to go somewhere, and the world looks at America as the best of the bunch, keeping money in our stocks and bonds.

To see how the world has changed economically, a good, but rather long winded video

China and Russia Failing, Economic Global impact

Since end of WW2 the world has been continuously moving to open global trading.   The supply chain issues during COVID highlighted this.  History books will mark the start of COVID as the end of peak global trading.  The truth is global trading was strained and retracting from China started before then.

The result is we are headed to a multi-polar world, with different countries aligning as trading partners.  

Russia

With the invasion into Ukraine, the free world (minus India) has moved away from trading with Russia.  International companies withdrew from Russia practically overnight.  Russia removing itself from global open trade, combined with destruction of it's military arsenal, global banking freeze on US assets, and economic turmoil will continue to take a toll.

The ruble is falling as Russia spends its reserves to maintain Ruble value.  This isn't sustainable as Russia is no longer net importer of US dollars.

China

China raised its rhetoric of invading Taiwan before COVID, and started to take steps by removing westerners from its country.  The hostility of the environment rose, and post COVID accelerated.  Western countries have exited China en-mass for being the manufacturing hub of the world.

Even Chinese companies are exiting China to setup manufacturing outside of China simply to remain relevant.   If these companies didn't take this step, they would have collapsed.

China Yuan is in a freefall, with levels not seen since the start of COVID.  Real estate has declined 25-50%+, and unemployment skyrocketing to over 20%

The result is exodus out of China to leave en mass, with an estimate of 90 million people.

Inflation - here to stay.

The world has under-invested in resources, and resources like Oil will continue to see costs to produce rise.  Since WWII energy has continuously become cheaper.  For the first time in over 80 years we will see perpetual energy costs rise until alternate energy sources become more viable as a major source of energy.

The issue is the Federal Reserve is trying to fight inflation, when the real threat is increasing energy production.  The result will likely be a Fed that punishes companies from investing, including into energy due to higher borrowing costs.  This could become an economic death loop.

Affect on US and world

Money must reside in a place.  People living in these countries, and countries negatively affected by these failing states have the option to move money.   Moving money will also be affected by inflation concerns. Some will choose to purchase Bitcoin or other Crypto, European assets, US assets including stocks.  The net is a stronger dollar and a more robust US stock market.

The Risk

Assuming Russia or China does NOT start WWIII or other global dislocating event, as these countries destabilize, the result will be a less robust global economy.  How this plays out is difficult to predict.  The question out there is moving your assets to protect.

What to do?

INDA is a good bet, as it is a free country that also trades with Russia. It has benefited from the exodus from China to other countries.  India has 1.2 billion people and has low global debt. It does have weakness of depending on imports, and could get caught in a political issue between US and Russia.

Bitcoin historically falls and rises with the US Stock market.  Therefore as a hedge against US market it isn't that good.  Same for Gold, in times of downturn it takes a massive hit.  In times of massive printing or lowering rates it benefits.

The best investment is in yourself, including solar panels by reducing future living costs.  Divesting to countries like India is a good longer term hedge including a rising Rupee or India economy booms.

US stocks over the longer term does actually look better now, with emphasis on Bio-Tech (IBB), AI (BOTZ) , and other new tech sectors.  I believe normal companies will continue to suffer creating a wealth divide of larger money moving to tech. 

The US market could go higher from here due to the global instability, or take a nose dive with the world.  The nose dive I do believe is inevitable just not guarantied the next destination.

Good luck!

3d printing - Getting started

I typically use this blog about global economics and US stock market, today going in a different direction, 3d printing! My son was given a 3d printer from his maternal grandmother, and I have gotten hooked!

 What is a 3d printer? It is a device you can use to 'melt' materials to create an object, typically types of plastic. Click here to see a time lapse of it at work! 

There are metal 3d printers, but the price point is beyond anything I can afford right now! There is also laser cutters, CNC machines (video of wood. video of metal), and resin printers. 

Resin printers offer greater detail to create small objects but the cost of the printer and the material is at a premium. It also needs a little more post-processing steps.  To see how a resin printer works click here:

 

What printer to buy?

There is always new versions being released, with different optimized features. Some features include speed, printing detail, different materials you can print with, dual-use printers (like laser cutting), cost, and ease of use. My priority currently is different materials, ease of use, and dual use. As of Dec 2022, this is a good printer and adapter to consider.

Creality Ender -3 S1 Pro

Features I liked was automatic bed leveling (ease of use), max temp of the print head of 300c (different materials) and allows allows for wood etching (dual use).

Market bull or bull trap?

I am more convinced than August 2008 when I started this blog that a global recession is upon us. Back then there was only one result a market downturn unlike seen since the great depression. What about this time? 

 Its a bit more complicated. This time the market failure is global, NOT being led by the USA. One could argue China is leading this downturn, something I predicted would end the next bull run after 2009 bottom. The 2020 pandemic was a detour of our destination. Lets recap the evidence we are on the brink of an epic multi-year market failure. 

Russia economy 

Russia's demand and free trade with the world severely curtailed.  Russia's economic demand is no longer a world influence.  Their influence is restricted to possibility of refraining from selling natural resources and buying weapons.  Hardly a global leading position.

CHINA failing

China was closed for years due to COVID, they re-opened with expectation that China demand would fan global economy and inflation.  Instead they opened and their economy is in a freefall.  The real estate market has collapsed upwards of 50% in the last year and isn't letting up.  Unemployment soaring to over 20% for younger workers.   Their demographics are so bad, even China had to adjust their total population DOWN by a 100 million, a stunning development for a country that the world assumes lies on all fronts.  To compound matters, China ordering destruction of farms to replant with wheat with predictable bad outcomes ahead.  Finally capital flight out of China continues, forcing the yuan to fall to new lows with no bottom in sight.

Saudi Arabia & Oil

Saudis are slashing production stating oil prices will soar, only to continue to see oil prices fall.  Steel prices are falling, copper, and soon to be gold IMO.    There is no hiding in resources in this downturn of demand.

USA

US dollar is the global reserve currency, and it's bond market is in contango.   Near rates are higher than longer rates.  This indicates the future has lower rates due to a slower economy.  Further USA has been laying off, unemployment is rising, and prices are falling.  Some areas of the country are seeing material lower prices for homes.  Covid and technology are going to depress commercial space for a generation.  USA does have going for it a stronger economy than other developed nations.  Also onshoring (bringing work back to USA) and tech developments like AI.  Lastly in a deflationary world, many may bring their wealth to US assets.  This could mute any stock market decline and create a new USD bull run.

But all of this isn't a robust economy, its relative to other countries.

Timing

Market could make new highs or the market is going down shortly.   I think we will have our decline starting before or early July.  Given we had a bull run since 2020, and before that a bull run since 2009, timing by a month to squeeze out a little more profit is a fools game.

USD short term bonds (1-2 year) is best, pay off debts, and longer term holds in INDA or EWW.

Good luck!

Inching closer to deflationary event

We are inching closer to a more material market decline.

I am still mildly hopeful that its weeks or months away, but it could be days.

The reason for my optimism is across the world, as bad as we see it in US with layoffs and banking failures, other countries are dealing with their own issues.

As the global reserve currency, it gives us strength to deal with challenges.

I suspect for USA the catalyst will the government spending less due to debt ceiling.  This should accelerate liquidity issues.

China is in a free fall AFTER they opened their economy.  Companies across the world are exiting China as fast as they can.

It will be interesting to see how CCP will deal with their economy implosion.

Assuming they survive, it doesn't look good for them as their demographics is a disaster.

To learn about China's current debacle of an economy, here is one of many videos I have watched.

NOTE: the only safe place for money now is US "1 year" treasury bonds.  Even if USA defaults, I suspect all payments will be made whole.

I don't advise any bond over 2 year, as I do think we will have odd market action into a global decline.

Good luck!