Bigbusiness
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Joules MM1 said:
I thought the volatility expanded during the bear phase and was lower during the bull phase? 2002 was a year for the bears and at times was extremely volatile. Perhaps volatility expands towards the end of a bull phase and shrinks towards the end of a bear phase. Would be interesting to see a chart of the VIX during the 90's bull market.
ajaskey
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Joules MM1 said:
Julian,
I don't have time to respond point by point to your post now but will get to it sometime this weekend. Of course, I am no expert in most of these areas and don't have a response to much of what you said. It is probably true, but I don't think it is as important as you do.
As for the 1995-96 comparison, I've been looking at 1934-35 as a better comparison as to what happens after a market crash. http://stockcharts.com/charts/historical/djia1900.html
After the crash was a big move - then a year or two of flatness - then a double.
Attachments
I think that we could be near a top on the SPX with resistance at 1295. Unless it can break through this level into clear air above 1300 then we could be heading back down to test 1265 and if this cracks we could go considerably lower.Joules MM1 said:
mark twain uk
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Joules,
Did you mean to say "1295 is the majic marker..."?
If so, I wold be surprised if there would not be a fake breakout, the temptation to set up a bull trap would be too hard.
If not, what is the significance of 1259?
Did you mean to say "1295 is the majic marker..."?
If so, I wold be surprised if there would not be a fake breakout, the temptation to set up a bull trap would be too hard.
If not, what is the significance of 1259?
ajaskey
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SPX 1259 is 90 degrees down from 1295. Interesting that 1296 is a natural square of 36 which is a natural square of 6. May mean nothing but it is interesting. SPX 1259 may be the midpoint of the correction and go down another 36 to 1224 which is also another 90 degrees down for a total correction of 180 degrees.
Until we close strongly over 1295, my belief is that this is an a-b-c after 5 waves up from 1168. We are now in the b wave. Ninety days from the 11-Jan top will occur in mid-April.
Until we close strongly over 1295, my belief is that this is an a-b-c after 5 waves up from 1168. We are now in the b wave. Ninety days from the 11-Jan top will occur in mid-April.
mark twain uk
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Someone else thinks that the US fundamentals are in a bad shape and the good times may soon be over:
COMEDY OF THE ABSURD
by The Mogambo Guru
I was sitting right there in the audience when the overlords at the US Labor Department trotted their quants out of the dank, diseased cellars where they live, and had them say soothing things to us stupid, unwashed masses.
Looking right at me with their beady little eyes, they snarled, "Everything is fine, but you are stupid! And ugly!"
So you can see how Bloomberg News got it all wrong when they reported that the words the Labor Department used
were: "US consumer prices unexpectedly fell for a second month in December as energy prices declined, a government report showed. Excluding food and energy, prices rose no faster in 2005 than the year before, supporting the Federal Reserve's view that inflation remains tame."
They went on, despite my very loud protests, saying, "The 0.1 percent decline in the consumer price index follows a 0.6 percent decline in November, the first back-to-back declines in two years. Core prices, which exclude fuel and food, rose 0.2 percent for a third month."
It is perhaps coincidental that we got this laughable report on "tame" inflation so soon after I personally wrote to the Federal Reserve about this very topic. I mean, just that morning I had written them, starting the letter out with the usual salutation...
"Dear butthead Federal Reserve idiots that are killing the dollar and America with your insane monetary- inflation stupidity..."
But this is not about the first 225 pages of my inflammatory letter to the Federal Reserve...nor how they were devoted to describing how much I hate their guts for being lying scumbag trash about creating monetary inflation, which creates price inflation, which they also lie about, and which is actually running much, much, much higher than they say.
Back at the press conference, they finally got a little closer to the truth when they admitted, "For all of 2005, the core index rose 2.2 percent." This is, remember, the "core" rate of inflation, which is akin to your showing up at the emergency room with your toes and fingers reduced to dead, blackened stumps by severe frostbite, and the doctor jamming a rectal thermometer up there and saying, "Nothing to worry about, as his core temperature is almost fine! Tame, in fact!"
I think all this talk about rectal thermometers got them nervous, and just before bounding from the room, they hurriedly said, "Consumer prices were up 3.4 percent for the 12 months ended in December compared with a 3.5 percent year-over-year gain the previous month. They rose 3.3 percent in 2004." Then they were gone!
So I was sitting there, stunned at the revelation of 3.4% inflation. Any price inflation is worrisome, and when price inflation is over 3%, it is - historically - supposed to have central bankers and governments jumping out of windows in panic, and citizens rioting in the streets, shouting, "Viva, Mogambo!" at the egregious mismanagement of the economy by the Federal Reserve and Congress.
Just remember that Richard Nixon once seized unprecedented dictatorial powers over wages and prices in the United States because inflation hit, one stinking year, an intolerable 4%. And now, fast-forwarding to today, 3.4% inflation, which we are suffering year after year, is somehow "tame"?
I feel a Mighty Roar Of Mogambo Outrage (MROMO) building deep in my chest at the very thought.
Just to show you a taste of the horror of inflation, the Labor Department said, "Weekly earnings of workers, adjusted for inflation, rose 0.1 percent in December after rising in November by 0.8 percent." Hahaha! If you use the ridiculous "core rate" of inflation to dilute the buying power of nominal wage increases, then workers are essentially standing still! But if you devalue those wages by the real rate of inflation, which is running somewhere north of 7% (a number that I randomly pick from the air because it seems "right"), then US workers are suffering a huge drop in their standards of living.
This is manifested in having to make the choice of buying less stuff every week, or going further into debt every week. Whoopee...
And what accounts for this drop in prices that only government statisticians can see? They rounded up some unnamed "economists" to explain. "Discounts on automobiles and markdowns to lure holiday shoppers,"
they figured, "probably held down the consumer price index last month." Hahahaha! Lower prices to hold a big store-wide sale brings prices down? Wow! No wonder these geniuses make the big money...
But to be fair, it is not only government wonks and unnamed "economists" that say stupid things. How about "the median estimate in a Bloomberg poll of economists taken Dec. 23 to Jan. 8," which breezily announces, "Price gains for all [US] goods and services may slow to
2.8 percent this year as fuel prices stabilise."
Hahaha! Fuel prices stabilising? Hahaha! What a comedy of the absurd!
Apparently, these guys do not share the same crystal ball as Kurt Wulffounder, of McDep Associates, whom Matt Badiali quotes as saying, "We'll have $150 per barrel oil by 2010."
And you can bet that Iran is not setting up a new oil- trading centre so that they can sell cheaper oil to Americans and the British!
Toni Straka, of the PrudentInvestor.blogspot.com, says that he is tired of hearing about
1.) Inflation in fuel costs...and
2.) About me trying to borrow five lousy bucks for some petrol.
Inflation, he says, is a function of what you use as money. "Would you pay your crude oil bill in the universally accepted currency of the last 6,000 years - commonly known as gold - your barrel would have become 28.4% percent cheaper since the nominal record high reached last August."
Thus, the value of a stable currency is again demonstrated, this time as less inflation at the pump.
And if we are talking about pricing oil in ounces of silver, it is cheaper yet.
See why I am always yelling about how only gold and silver should be used as money?
For those of you who like your market indicators moving in a more glacial vein, Richard Russell of the Dow Theory Letters writes, "From a Dow Theory standpoint, the [US] markets continue to face a major non- confirmation in the Averages. The Transports have risen to new record highs while the Dow has failed month after month to confirm. Thus, from a Dow Theory standpoint, this is a dangerous market. It's particularly dangerous because of this truly spectacular divergence and non- confirmation in the Averages."
Now, as today's obligatory lesson containing real "educational content", let's analyse this linguistically. First off, we note that he uses the adjectives "major", "record", and then "dangerous" - twice - and ends up with the word "spectacular". What was the author saying?
Well, I could call him up on the phone and ask him, but I am far too lazy and far too cheap to do that for one thing. And for another thing, I can just read his mind with my Amazing Mogambo Paranormal Abilities (AMPA).
Like thus...
I close my eyes. I concentrate. I send out waves of mental energy, locking onto his mind, sort of like a Vulcan mind-meld. I probe his mind. Probe. Probe.
Finally, I see what he means...
"Get up and buy gold, silver, platinum and oil, because these are the kind of tremors that happen at the Big Moment When The Tides Turn (BMWTTT)!
Regards,
The Mogambo Guru
for The Daily Reckoning
COMEDY OF THE ABSURD
by The Mogambo Guru
I was sitting right there in the audience when the overlords at the US Labor Department trotted their quants out of the dank, diseased cellars where they live, and had them say soothing things to us stupid, unwashed masses.
Looking right at me with their beady little eyes, they snarled, "Everything is fine, but you are stupid! And ugly!"
So you can see how Bloomberg News got it all wrong when they reported that the words the Labor Department used
were: "US consumer prices unexpectedly fell for a second month in December as energy prices declined, a government report showed. Excluding food and energy, prices rose no faster in 2005 than the year before, supporting the Federal Reserve's view that inflation remains tame."
They went on, despite my very loud protests, saying, "The 0.1 percent decline in the consumer price index follows a 0.6 percent decline in November, the first back-to-back declines in two years. Core prices, which exclude fuel and food, rose 0.2 percent for a third month."
It is perhaps coincidental that we got this laughable report on "tame" inflation so soon after I personally wrote to the Federal Reserve about this very topic. I mean, just that morning I had written them, starting the letter out with the usual salutation...
"Dear butthead Federal Reserve idiots that are killing the dollar and America with your insane monetary- inflation stupidity..."
But this is not about the first 225 pages of my inflammatory letter to the Federal Reserve...nor how they were devoted to describing how much I hate their guts for being lying scumbag trash about creating monetary inflation, which creates price inflation, which they also lie about, and which is actually running much, much, much higher than they say.
Back at the press conference, they finally got a little closer to the truth when they admitted, "For all of 2005, the core index rose 2.2 percent." This is, remember, the "core" rate of inflation, which is akin to your showing up at the emergency room with your toes and fingers reduced to dead, blackened stumps by severe frostbite, and the doctor jamming a rectal thermometer up there and saying, "Nothing to worry about, as his core temperature is almost fine! Tame, in fact!"
I think all this talk about rectal thermometers got them nervous, and just before bounding from the room, they hurriedly said, "Consumer prices were up 3.4 percent for the 12 months ended in December compared with a 3.5 percent year-over-year gain the previous month. They rose 3.3 percent in 2004." Then they were gone!
So I was sitting there, stunned at the revelation of 3.4% inflation. Any price inflation is worrisome, and when price inflation is over 3%, it is - historically - supposed to have central bankers and governments jumping out of windows in panic, and citizens rioting in the streets, shouting, "Viva, Mogambo!" at the egregious mismanagement of the economy by the Federal Reserve and Congress.
Just remember that Richard Nixon once seized unprecedented dictatorial powers over wages and prices in the United States because inflation hit, one stinking year, an intolerable 4%. And now, fast-forwarding to today, 3.4% inflation, which we are suffering year after year, is somehow "tame"?
I feel a Mighty Roar Of Mogambo Outrage (MROMO) building deep in my chest at the very thought.
Just to show you a taste of the horror of inflation, the Labor Department said, "Weekly earnings of workers, adjusted for inflation, rose 0.1 percent in December after rising in November by 0.8 percent." Hahaha! If you use the ridiculous "core rate" of inflation to dilute the buying power of nominal wage increases, then workers are essentially standing still! But if you devalue those wages by the real rate of inflation, which is running somewhere north of 7% (a number that I randomly pick from the air because it seems "right"), then US workers are suffering a huge drop in their standards of living.
This is manifested in having to make the choice of buying less stuff every week, or going further into debt every week. Whoopee...
And what accounts for this drop in prices that only government statisticians can see? They rounded up some unnamed "economists" to explain. "Discounts on automobiles and markdowns to lure holiday shoppers,"
they figured, "probably held down the consumer price index last month." Hahahaha! Lower prices to hold a big store-wide sale brings prices down? Wow! No wonder these geniuses make the big money...
But to be fair, it is not only government wonks and unnamed "economists" that say stupid things. How about "the median estimate in a Bloomberg poll of economists taken Dec. 23 to Jan. 8," which breezily announces, "Price gains for all [US] goods and services may slow to
2.8 percent this year as fuel prices stabilise."
Hahaha! Fuel prices stabilising? Hahaha! What a comedy of the absurd!
Apparently, these guys do not share the same crystal ball as Kurt Wulffounder, of McDep Associates, whom Matt Badiali quotes as saying, "We'll have $150 per barrel oil by 2010."
And you can bet that Iran is not setting up a new oil- trading centre so that they can sell cheaper oil to Americans and the British!
Toni Straka, of the PrudentInvestor.blogspot.com, says that he is tired of hearing about
1.) Inflation in fuel costs...and
2.) About me trying to borrow five lousy bucks for some petrol.
Inflation, he says, is a function of what you use as money. "Would you pay your crude oil bill in the universally accepted currency of the last 6,000 years - commonly known as gold - your barrel would have become 28.4% percent cheaper since the nominal record high reached last August."
Thus, the value of a stable currency is again demonstrated, this time as less inflation at the pump.
And if we are talking about pricing oil in ounces of silver, it is cheaper yet.
See why I am always yelling about how only gold and silver should be used as money?
For those of you who like your market indicators moving in a more glacial vein, Richard Russell of the Dow Theory Letters writes, "From a Dow Theory standpoint, the [US] markets continue to face a major non- confirmation in the Averages. The Transports have risen to new record highs while the Dow has failed month after month to confirm. Thus, from a Dow Theory standpoint, this is a dangerous market. It's particularly dangerous because of this truly spectacular divergence and non- confirmation in the Averages."
Now, as today's obligatory lesson containing real "educational content", let's analyse this linguistically. First off, we note that he uses the adjectives "major", "record", and then "dangerous" - twice - and ends up with the word "spectacular". What was the author saying?
Well, I could call him up on the phone and ask him, but I am far too lazy and far too cheap to do that for one thing. And for another thing, I can just read his mind with my Amazing Mogambo Paranormal Abilities (AMPA).
Like thus...
I close my eyes. I concentrate. I send out waves of mental energy, locking onto his mind, sort of like a Vulcan mind-meld. I probe his mind. Probe. Probe.
Finally, I see what he means...
"Get up and buy gold, silver, platinum and oil, because these are the kind of tremors that happen at the Big Moment When The Tides Turn (BMWTTT)!
Regards,
The Mogambo Guru
for The Daily Reckoning
Racer
Senior member
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So far this earnings season, 65 companies in the S&P 500 have missed analysts' forecast for revenue, more than double the 30 companies that missed revenue forecasts a year earlier, according to Reuters Estimates.
"For the last two or three years, the earnings just shot through all the forecasts," said David Dreman, chairman of money manager Dreman Value Management. "We're still in a strong earnings environment, but at the same time we're getting somewhat more misses, and that, coming to a somewhat more jittery market, I think is leaving people concerned."
U.S. companies have also tried to rebel from Wall Street's focus on short-term profits this year, and some stopped making quarterly forecasts altogether. That trend could eliminate the need for pre-announcements, and also throw market expectations off course, analysts said.
"Many companies are now saying we're not going to make any (pre-earnings) announcements. There's no upside ... because of how badly they get beat up when they miss," said John Gimpert, a partner at auditing firm Deloitte & Touche LLP.
"For the last two or three years, the earnings just shot through all the forecasts," said David Dreman, chairman of money manager Dreman Value Management. "We're still in a strong earnings environment, but at the same time we're getting somewhat more misses, and that, coming to a somewhat more jittery market, I think is leaving people concerned."
U.S. companies have also tried to rebel from Wall Street's focus on short-term profits this year, and some stopped making quarterly forecasts altogether. That trend could eliminate the need for pre-announcements, and also throw market expectations off course, analysts said.
"Many companies are now saying we're not going to make any (pre-earnings) announcements. There's no upside ... because of how badly they get beat up when they miss," said John Gimpert, a partner at auditing firm Deloitte & Touche LLP.
The Greenspan Legacy
Adam Hamilton January 27, 2006
Alan Greenspan has left an inflationist record that includes price fixing, market manipulations, and poor decisions that will be plaguing us for years.
January 31st, 2006 marks the end of a financial era. The long-time Chairman of the Federal Reserve, Alan Greenspan, will retire after 18 years at the helm of the United States’ central bank. Widely lionized at the pinnacle of his career, Greenspan’s legacy will profoundly affect investors worldwide for many years to come.
The Federal Reserve is not a capitalistic entity compatible with free markets. Instead it functions just like the miserably failed old-school command-and-control Communism model. The core philosophy of the Fed and its Federal Open Market Committee that controls short-term interest rates is that mere mortals meeting in secret like a conspiracy cabal are better suited at setting the price of money than the free markets. Regardless of who leads the Fed, the whole organization exists because price controllers, no different from those in 20th century Russia, think they alone can divine the price at which the supply of savings equals the demand for savings. The price of money, or interest rate, leads savers to decide how much of their income to save and debtors to decide how much of someone else’s savings to borrow.
Bubbles are the ultimate case in point. Whenever too much paper money floods into a financial system, which is the inevitable result of artificially low interest rates, it floods into some class of goods or services or investments and inflates prices far beyond where they would be if interest rates were set by free markets. When artificially-low-interest-rate-driven excess money floods into technology stocks or tract houses in suburbia, Americans rejoice and think it is a great thing until the resulting bubbles inevitably burst and wreak great pain. But if this same excess money drives up the prices of general goods and services and commodities like gasoline, inflation is considered bad. The Greenspan Fed spent much time trying to jawbone money into inflating politically correct assets like houses instead of politically incorrect ones like commodities.
As these torrents of paper money freshly created out of thin air cascaded into the economy, many of them gravitated to the stock markets. The surge in monetary inflation that started at the Greenspan discontinuity marked the very moment in time when the US stock markets left a reasonable normal growth ascent slope and went parabolic. While the Fed-fed equity bubble may have been fun for a few years, its ultimate consequences will continue to be catastrophic. After five years of relentless monetary inflation pouring into stocks, by March 2000 the flagship S&P 500, the 500 biggest and best companies in America, was worth about $13t, a staggering sum of capital. Yet all this was only an inflation-fed fiction just like past bubbles. These companies didn’t have the earnings to support these tremendous valuations, but investors just bid them up indiscriminately anyway because Fed money kept flooding in. But the Greenspan bubble, like every other bubble in history, eventually had to end. It topped in March 2000 and its first Great Bear downleg lasted until March 2003 or so. Over this period of time the S&P 500 companies lost about 40% of their bubble value, about $5.5t in these elite companies alone! This loss is just mind-blowing, and it damaged the investor class immeasurably. Monetary inflation hurts the wealthy too when the bubbles it creates suddenly pop and wreak great havoc.
At this point Greenspan, if he had loved free-market capitalism, would have acknowledged he screwed up in the late 1990s with his monetary promiscuity and he would have stepped back to let the necessary painful readjustment happen. But instead he did the dumbest thing he could possibly do, something that fits in with his true character as a central planner and market manipulator. He brazenly attempted to bail out stock speculators by slashing interest rates to artificial half-century lows.
Early in Greenspan’s career he established the precedent of slashing interest rates rapidly for long periods of time in a Keynesian attempt to centrally plan and manage economic growth. It appeared to be successful at the time, but now a decade later the folly of this approach is quite evident. If interest rates hadn’t fallen so far in the early 1990s then the speculative culture that helped drive the stock-market bubble would probably not have taken root to such an extent. But the biggest mistake Greenspan made was when he launched his bold gambit in early 2001. Even though artificially cheap money had never stopped a bubble bust from fully running its course in history, Greenspan’s supreme hubris led him to try anyway. He didn’t want his precious public image and acceptance tarnished so he decided to bail out stock speculators. Rather than letting stock speculators learn from their own mistakes, Greenspan mollycoddled them.
Greenspan’s Gambit of artificially low interest rates created other problems. Capital markets rely on a balance between savers and debtors, between savers earning a fair return on the income they didn’t spend and debtors paying a fair price for the income they didn’t earn. When interest rates are not where the free-markets would set them, the saver-debtor transactions are no longer mutually beneficial and capital flows are grossly distorted. Thanks to Greenspan aggressively punishing prudent savers to subsidize wanton debtors, savings rates in the US fell to all-time lows. Rather than save capital and put it into productive assets that will make America a stronger nation, many Americans instead stuck it into overvalued real estate and created the housing bubble. The bursting of this second Greenspan-spawned bubble in housing will be far more devastating than the stock crash since it will affect all Americans with a mortgage, not just the wealthier stock-investing class. And when the housing bubble spawned by Greenspan’s attempt to bail out stock speculators with artificially low rates bursts, watch out. Markets are cyclical and artificially low prices are always followed by higher than normal ones to balance things out regardless of what the manipulators want. Hence the price of money is headed a lot higher. The economic pain as real estate prices correct in most places and crash in some is going to be tremendous. It is all courtesy of Alan Greenspan’s brazen interest-rate manipulations.
During the latter 2/3rds of Greenspan’s reign, his highly inflationary policies led to enormous misallocations of capital into first tech stocks and then houses. With capital flowing into these counterproductive bubbles, industries that really needed this very capital starved and withered. This contributed to a massive structural undersupply of crucial commodities. And this capital-starved commodities industry is highly physical, unlike information industries that can be wished into existence overnight. It will take more than a decade to find and deliver enough oil, natural gas, copper, gold, silver and other key commodities to meet today’s demand. Not only are commodities prices rising because their producing infrastructure was starved in the 1990s, but Greenspan’s massive monetary inflation is also filtering into commodities boosting them directly too.
The bottom line is Alan Greenspan, despite his huge fan club today, is no different from the Communist party bosses of Russia before the Cold War ended. Rather than sitting back and letting the invisible hand of the free markets determine the price and growth rates of money, Greenspan chose to play God and horribly messed everything up like all other would-be demi-gods in history. Price manipulators always fail in the end! Greenspan’s legacy is one of a failed market manipulator and price fixer, a dangerous enemy of free-market capitalism in sheep’s clothing. In five or ten years from now once the full spectrum of the consequences of his highly-inflationary and moral-hazard-ridden policies become apparent, I suspect Greenspan will be remembered as a goat, not a guru, a blight on our great nation and economy.
Adam Hamilton January 27, 2006
Alan Greenspan has left an inflationist record that includes price fixing, market manipulations, and poor decisions that will be plaguing us for years.
January 31st, 2006 marks the end of a financial era. The long-time Chairman of the Federal Reserve, Alan Greenspan, will retire after 18 years at the helm of the United States’ central bank. Widely lionized at the pinnacle of his career, Greenspan’s legacy will profoundly affect investors worldwide for many years to come.
The Federal Reserve is not a capitalistic entity compatible with free markets. Instead it functions just like the miserably failed old-school command-and-control Communism model. The core philosophy of the Fed and its Federal Open Market Committee that controls short-term interest rates is that mere mortals meeting in secret like a conspiracy cabal are better suited at setting the price of money than the free markets. Regardless of who leads the Fed, the whole organization exists because price controllers, no different from those in 20th century Russia, think they alone can divine the price at which the supply of savings equals the demand for savings. The price of money, or interest rate, leads savers to decide how much of their income to save and debtors to decide how much of someone else’s savings to borrow.
Bubbles are the ultimate case in point. Whenever too much paper money floods into a financial system, which is the inevitable result of artificially low interest rates, it floods into some class of goods or services or investments and inflates prices far beyond where they would be if interest rates were set by free markets. When artificially-low-interest-rate-driven excess money floods into technology stocks or tract houses in suburbia, Americans rejoice and think it is a great thing until the resulting bubbles inevitably burst and wreak great pain. But if this same excess money drives up the prices of general goods and services and commodities like gasoline, inflation is considered bad. The Greenspan Fed spent much time trying to jawbone money into inflating politically correct assets like houses instead of politically incorrect ones like commodities.
As these torrents of paper money freshly created out of thin air cascaded into the economy, many of them gravitated to the stock markets. The surge in monetary inflation that started at the Greenspan discontinuity marked the very moment in time when the US stock markets left a reasonable normal growth ascent slope and went parabolic. While the Fed-fed equity bubble may have been fun for a few years, its ultimate consequences will continue to be catastrophic. After five years of relentless monetary inflation pouring into stocks, by March 2000 the flagship S&P 500, the 500 biggest and best companies in America, was worth about $13t, a staggering sum of capital. Yet all this was only an inflation-fed fiction just like past bubbles. These companies didn’t have the earnings to support these tremendous valuations, but investors just bid them up indiscriminately anyway because Fed money kept flooding in. But the Greenspan bubble, like every other bubble in history, eventually had to end. It topped in March 2000 and its first Great Bear downleg lasted until March 2003 or so. Over this period of time the S&P 500 companies lost about 40% of their bubble value, about $5.5t in these elite companies alone! This loss is just mind-blowing, and it damaged the investor class immeasurably. Monetary inflation hurts the wealthy too when the bubbles it creates suddenly pop and wreak great havoc.
At this point Greenspan, if he had loved free-market capitalism, would have acknowledged he screwed up in the late 1990s with his monetary promiscuity and he would have stepped back to let the necessary painful readjustment happen. But instead he did the dumbest thing he could possibly do, something that fits in with his true character as a central planner and market manipulator. He brazenly attempted to bail out stock speculators by slashing interest rates to artificial half-century lows.
Early in Greenspan’s career he established the precedent of slashing interest rates rapidly for long periods of time in a Keynesian attempt to centrally plan and manage economic growth. It appeared to be successful at the time, but now a decade later the folly of this approach is quite evident. If interest rates hadn’t fallen so far in the early 1990s then the speculative culture that helped drive the stock-market bubble would probably not have taken root to such an extent. But the biggest mistake Greenspan made was when he launched his bold gambit in early 2001. Even though artificially cheap money had never stopped a bubble bust from fully running its course in history, Greenspan’s supreme hubris led him to try anyway. He didn’t want his precious public image and acceptance tarnished so he decided to bail out stock speculators. Rather than letting stock speculators learn from their own mistakes, Greenspan mollycoddled them.
Greenspan’s Gambit of artificially low interest rates created other problems. Capital markets rely on a balance between savers and debtors, between savers earning a fair return on the income they didn’t spend and debtors paying a fair price for the income they didn’t earn. When interest rates are not where the free-markets would set them, the saver-debtor transactions are no longer mutually beneficial and capital flows are grossly distorted. Thanks to Greenspan aggressively punishing prudent savers to subsidize wanton debtors, savings rates in the US fell to all-time lows. Rather than save capital and put it into productive assets that will make America a stronger nation, many Americans instead stuck it into overvalued real estate and created the housing bubble. The bursting of this second Greenspan-spawned bubble in housing will be far more devastating than the stock crash since it will affect all Americans with a mortgage, not just the wealthier stock-investing class. And when the housing bubble spawned by Greenspan’s attempt to bail out stock speculators with artificially low rates bursts, watch out. Markets are cyclical and artificially low prices are always followed by higher than normal ones to balance things out regardless of what the manipulators want. Hence the price of money is headed a lot higher. The economic pain as real estate prices correct in most places and crash in some is going to be tremendous. It is all courtesy of Alan Greenspan’s brazen interest-rate manipulations.
During the latter 2/3rds of Greenspan’s reign, his highly inflationary policies led to enormous misallocations of capital into first tech stocks and then houses. With capital flowing into these counterproductive bubbles, industries that really needed this very capital starved and withered. This contributed to a massive structural undersupply of crucial commodities. And this capital-starved commodities industry is highly physical, unlike information industries that can be wished into existence overnight. It will take more than a decade to find and deliver enough oil, natural gas, copper, gold, silver and other key commodities to meet today’s demand. Not only are commodities prices rising because their producing infrastructure was starved in the 1990s, but Greenspan’s massive monetary inflation is also filtering into commodities boosting them directly too.
The bottom line is Alan Greenspan, despite his huge fan club today, is no different from the Communist party bosses of Russia before the Cold War ended. Rather than sitting back and letting the invisible hand of the free markets determine the price and growth rates of money, Greenspan chose to play God and horribly messed everything up like all other would-be demi-gods in history. Price manipulators always fail in the end! Greenspan’s legacy is one of a failed market manipulator and price fixer, a dangerous enemy of free-market capitalism in sheep’s clothing. In five or ten years from now once the full spectrum of the consequences of his highly-inflationary and moral-hazard-ridden policies become apparent, I suspect Greenspan will be remembered as a goat, not a guru, a blight on our great nation and economy.
mark twain uk
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Adam Hamilton is scathing in his judgement of Alan Greenspan and quite rightly so. I believe that dc's prediction of a dow fall of 1000 points in two days will come true this year, I only hope I will have a short position when that happens.
mark twain uk
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funny the results you get when you search "trannies" in google
ajaskey
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Possible Timeout
Some 90 day cycles play out in multiple directions. It will be 30 days from the top on Feb 10. The square root of 1295 is 36 which is Feb 16 is adding 36 days to Jan 11. I'm not predicting anything but it would not be surprising to see a turn back up in next week. A quick drop to 1224 is 180 degrees down and could setup wave 1 of big wave 3. Wave 2 could retrace to complete the remainder of the 90 day cycle from the Jan 11 top.
Some 90 day cycles play out in multiple directions. It will be 30 days from the top on Feb 10. The square root of 1295 is 36 which is Feb 16 is adding 36 days to Jan 11. I'm not predicting anything but it would not be surprising to see a turn back up in next week. A quick drop to 1224 is 180 degrees down and could setup wave 1 of big wave 3. Wave 2 could retrace to complete the remainder of the 90 day cycle from the Jan 11 top.
Racer
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Shelby Says U.S. Should Accuse China of Manipulation (Update2)
Feb. 8 (Bloomberg) -- U.S. Treasury Secretary John Snow should name China a currency manipulator in his semi-annual report to Congress, Senator Richard Shelby, chairman of the Senate Banking Committee said.
``Treasury should call it like it is,'' Shelby, an Alabama Republican, said in an interview. ``If the Chinese are manipulating the currency, as I believe they are, and he's got evidence of that, then he should say so.''
Shelby joins other lawmakers from both parties in pressuring Snow to accuse China of managing the value of its money for trade advantage. Senators Charles Schumer and Lindsey Graham are backing legislation that would punish China with high tariffs if it doesn't make its currency more flexible. A formal accusation by the Treasury in its next report, due in April, would make it easier for lawmakers to justify sanctions.
rest at:
http://www.bloomberg.com/apps/news?pid=10000080&sid=ajxLgXfuyRh8&refer=asia
Feb. 8 (Bloomberg) -- U.S. Treasury Secretary John Snow should name China a currency manipulator in his semi-annual report to Congress, Senator Richard Shelby, chairman of the Senate Banking Committee said.
``Treasury should call it like it is,'' Shelby, an Alabama Republican, said in an interview. ``If the Chinese are manipulating the currency, as I believe they are, and he's got evidence of that, then he should say so.''
Shelby joins other lawmakers from both parties in pressuring Snow to accuse China of managing the value of its money for trade advantage. Senators Charles Schumer and Lindsey Graham are backing legislation that would punish China with high tariffs if it doesn't make its currency more flexible. A formal accusation by the Treasury in its next report, due in April, would make it easier for lawmakers to justify sanctions.
rest at:
http://www.bloomberg.com/apps/news?pid=10000080&sid=ajxLgXfuyRh8&refer=asia
ajaskey
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SPX Bottom 1206 on March 13th
Expanding on this previous post from January 24th :
The reason I like 1206 is that the SPX has consistently bottomed on a vibration off the 768 bottom. On the wheel of price and time, 1206 squares out on March 12th (Sunday) while 1224 squares out on April 27th. I don't have much faith in these dates but they sound as good as any others. Wave 2 of the first major wave from the Oct02 bottom also ended in March.
Other squareouts from 768.
The Mar03 low bar covered 90 degrees up from 768 at 797.
The Aug04 1060 low had a weekly bar covering 1071 which was one cycle and 180 degrees up from 768.
The Apr05 1136 low was right on 3 complete cycles of 360 degrees from 768.
The Oct05 1168 low was within 3 points of 1171 which was 90 degrees up from 1136 and 3 cycles plus 90 degrees from 768.
If I learned anything from Gann it is to find these vibrations and ride them until they stop. SPX1206 is three complete cycles and 180 degrees up from 768 (and one complete cycle up from 1071 and 90 degrees up from 1168).
For those into astrology, March 14th is a full moon...
ajaskey said:
Expanding on this previous post from January 24th :
The reason I like 1206 is that the SPX has consistently bottomed on a vibration off the 768 bottom. On the wheel of price and time, 1206 squares out on March 12th (Sunday) while 1224 squares out on April 27th. I don't have much faith in these dates but they sound as good as any others. Wave 2 of the first major wave from the Oct02 bottom also ended in March.
Other squareouts from 768.
The Mar03 low bar covered 90 degrees up from 768 at 797.
The Aug04 1060 low had a weekly bar covering 1071 which was one cycle and 180 degrees up from 768.
The Apr05 1136 low was right on 3 complete cycles of 360 degrees from 768.
The Oct05 1168 low was within 3 points of 1171 which was 90 degrees up from 1136 and 3 cycles plus 90 degrees from 768.
If I learned anything from Gann it is to find these vibrations and ride them until they stop. SPX1206 is three complete cycles and 180 degrees up from 768 (and one complete cycle up from 1071 and 90 degrees up from 1168).
For those into astrology, March 14th is a full moon...
Racer
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