WARNING -MARKETS BLOWING OFF-1929 COMING, NOT 1900greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I am answering here a question put to me by the Virginian,, as he may not see it way down the list on the thread from yesterday. Some updated info:
Jim Stack of INVESTECH www.investech.com says he DOESN'T believe that the markets are being manipulated by the FED OR any others. I actually disagree with that. This was in last night's newsletter right off the site.
We had the miraculous turn last month, if you remember, on Oct. 18, when the indexes were in a crash-wave formation, and aborted.
We are seeing things going on in the markets that we will , in a very short time, be able to look back on and only shake our heads, or hang them in shame. The markets, due to mass psychology, are at such an extreme that they dwarf ANYTHING SEEN IN 1929, and perhaps even the South Seas Bubble of the early 18th century.
All technical indicators are hard into SELL, many for many months, so there is only so much upside that can be left, as it is taking an exponential amount of money just to keep up the parabolic rise in the Nasdaq and Intenet indexes.
One of the Elliott wave possibilities is that we are seeing now an "inverted flat", which is the exact wave , when you think about it, that would allow this manic blow-off, seeming as if we are going to see new highs in the DJIA, when in fact that waveform presages a massive fast drop down, FASTER than the rise up. It is THE perfect "sucker's rally" waveform for the time.
Jim Stack points out that NEVER in the history of the markets has there been a day like Thursday past, which saw the DJIA rise 150 points with NEGATIVE BREADTH. NEVER.
The DOW Transports lost the equivalent of 400 DOW points this week, keeping intact, by a large margin, the classic Dow Theory Sell signal that is NOT ever mentioned on the mainstream press.
Also, there is something BAD being predicted when the airlines, which trade at a P/E of 7, (absolute bargains in this mania), and are part of the Transports, cannot rise up.
Ecxluding CISCO and one or two other stocks in the Nasdaq100, THAT INDEX IS TRADING AT OVER 2000 TIMES EARNINGS.IT is a PARABOLIC RISE-BLOWOFF THAT WILL END BADLY. PARABOLIC RISES ALWAYS DO.
At least that index HAS earnings. The IIX, Internet Index, has astounding valuations, and some are literally at infinity because there are NO earnings, ONLY LOSSES.
I guess to make a long post short, I would be in cash, if ever there was a time in history to be there.
-- profit of doom (firstname.lastname@example.org), November 20, 1999
Profit of doom, what role if any does the Fed's injection of pre-Y2K cash for liquidity purposes play in this rally? I would like to hear what you have to say about this. Thanks in advance.
-- ryan white (email@example.com), November 20, 1999.
A correction (indexes) would have been a bright spot but my be was that we would likely approach the market highs one last time before the drop. This would create a warped double (triple?) top formation. Remember there is a lot of money and stocks to churn before the trap door opens. Transports cannot rise with the rising oil prices, but then transports aren't not as important as they once were. The money chase going on in NASDAQ is propping up this whole PONZI scheme. Cash is the safe bet, considering risk vs reward.
In a crash cash is king, but you must be somewhat liquid.
There is a possible play (your call not mine) in Treasuries if money rushes to the US as a safe harbor.
-- squid (Itsdark@down.here), November 20, 1999.
What you said makes sense, in fact, it made sense a few hundred points ago. The run up has continued beyond the realm of imagination. I think its in the Twilight Zone now. But nothing seems to matter anymore. P/E, so what, profitability, not important. Apparently the bubble is made from some substance not of this galaxy. The infusion of continued investment seems to be inexhaustible, powered by the sun. Why hasn't it popped already?
-- Guy Daley (firstname.lastname@example.org), November 20, 1999.
Go to www.dailyreckoning.com There, you can sign up, FREE for an EXTREMELY informative daily e-mail, which has news that is NOT in any of the press(surprise) and is from ALL over the world.
To answer, it just so happens that in yesterday's(19th) e-mail, Bill Bonner makes the point that monetary RESERVES are rising at a 78% ANNUAL rate! THAT is where the massive sloshing of liquidity is coming from.
BTW, you can download past e-mails there at the site, so you can get this exact one.
Anyway, past mention was made of Volker (FED chairman in the early 1980's)who had the same conundrun--the .25% rate increases were looked upon by the markets as just more juice for the punch bowl to keep the partiers drunk! So, he REMOVED THE RESERVE MONEY, and the recession occured.
We have had the same thing recently. The measly .25% "hikes", 3 in a row now, just make the partiers party hardier! Greedspin really must be senile, as was mentioned in an article about 5 weeks ago at www.gold-eagle.com. How else to explain his gross misbehavior, despite having the advantage of massive amounts of historical data, AND knowledge of the 1929 crash, when he ALSO announces that the FED is going to a NEUTRAL bias on rates? That is totally inexcusable. Rates should have been hiked .5%, then there would have been a message of "I mean business". Instead, as pointed out by Jim Stack, and www.elliottwave.com, we see that a FED rate decision is now greeted by a big RALLY in the markets!?
This is the epitome of greed and foolishness for this to have happened. It is too late now to deflate this hot-air balloon. It will come crashing down very soon, for the reasons I gave earlier.
What is amazing is that with a knowledge of Elliott wave theory, this does not come as any surprise. It was foretold--Iknew about it in 1995, yet I still find it absolutely fascinating to see it unfold almost EXACTLY as foretold.
When I go back and re-read passages from "At The Crest Of The Tidal Wave", IT IS NOW AS MUCH A HISTORY BOOK AS IT IS A PREDICTOR OF THING YET TO COME.
-- profit of doom (email@example.com), November 20, 1999.
A couple weeks ago on the CNBC morning show before the bell. The typical cast was going over the typical reports, I think cpi was due in at 8:30am.
They were all commenting on what the market was sure to do. As the day progressed they were all stupified beyond belief. Its almost as if they (joe Kirnen sp) wanted to convey how they could not believe what was going on,ie nothing seemed like it made any sense!
-- db (firstname.lastname@example.org), November 20, 1999.
Meanwhile, you see these TV commercials where a bunch of "regular guys" are shooting the breeze. Not about women, cars or football, but rather their stock market investments. It's so EASY. ANYONE can do it. ALL can get rich fast.
-- King of Spain (email@example.com), November 20, 1999.
You might want to take a look at www.prudentbear.com/bbs/index.cgi?read=36380
-- me (firstname.lastname@example.org), November 20, 1999.
"I would be in cash, if ever there was a time in history to be there." What does this mean exactly? How would you be in cash? Physical gold, physical paper money? Where would you keep it--in a bank vault or hidden at home? Money Market Funds, CDs, and Treasuries are all "cash" but they are also digital. Are you one of those folks who distrust digital wealth in any form (ie, the y2k critique) or are you merely alarmed at speculative excess, which does not have anything to do with y2k.
-- Lars (email@example.com), November 20, 1999.
To say that the Federal Reserve is not manipulating, is pretty naive. We don't necessarily know that they're looking at stocks, specifically, but as far as "liquidity" goes, they have been rather consistent the last few years.
The original reasoning given to create the Federal Reserve System in the first place, way back just before WWI, was because "money was inelastic" - which means it was not liquid enough according to them. "Them" in this case were the big commercial banks. Liquidity to a bank means much more than it does to most people. A bank with lots of "liquidity" can loan out that money, and "pyramid" it in many ways to yield stunning profits.
The one thing that has to be remembered, here, is that the FED works for the banks, not the other way around. So when the FED increases "liquidity" or what it should be called "credit", the big banks get to loan out even more faster.
To show you how that works, just look at the last two years. The market almost tanked in '98. Greenspan pumps in "M2" (aka "Credit"), and the market recovers, and then goes screaming past the previous highs, and skyrockets past 11,000.
A couple of months ago, the market is AGAIN in a tailspin, briefly falling below the psychological 10,000 market. Greenspan AGAIN floods the market with liquidity - this time by allowing banks to use less reliable assets as collateral for loans. Basically, the same thing as raising M2 again.
Repealing most of the Glass-Steagal (sp?) act also allows more players into the market. Combined with less stringent requirements for collateral, and you get the market skyrocketing again.
I predict that the DOW will easily reach 12,000 before it tanks. The place is awash with credit, and it hasn't all been used up. NASDAQ - well, it's already streaking, and who knows how high it can go.
Massive credit was used by speculators in the '20's. That exact thing is happening now. The form it has taken is different, but it's still CREDIT. And the amount of credit used now is MUCH higher than in the '20's. And by a much larger group of people. Most of these people rely on the market going UP. Any downward trend, and they get fried.
-- Jollyprez (firstname.lastname@example.org), November 20, 1999.
A few comments on your post.
Jim Stack has been bearish so long that I suspect he has lost quite a few subscribers along the way. Thursday was definatelt a strange day, with the negative AD and a DJI rise. However, the AD of common stocks was slightly up that day, but preferreds were down because bonds were soft. There are no preferreds in any of the indexes, so it pays to watch the common stock AD for a better indication of what is happening. Also, almost twice as much volume went into the rising stocks than those that declined. In other words, most of the action was in stocks that advanced.
You are exaggerating when you state that "all technical indicators are hard into SELL." There are scores of widely used indicators, assessing different market timeframes, and they are not all negative. The most venerable of all primary trend indicators is the 40 week moving average, and that is positive.
Any objective analysis will tell you that the direction of least resistance is up. That could, of course, change, but it will probably be up at least into January. I think we are likely to get new highs, and you can begin counting off 55 days to the next crash at that point.
This market run will end when the buying pool dries up and not before. There is an old saying among market players: "Wall street's graveyards are filled with men who were right too soon."
-- mike (email@example.com), November 20, 1999.
""only a FOOL holds out for top dollar and loses""
-jack kennedy-circa 1929
-- db (firstname.lastname@example.org), November 20, 1999.
Good analysis. I think you're right about the parabolic wave, it cannot defy gravity indefinitely, and ultimately crashes back down upon itself. The dangerous part is that the bigger the wave and the higher it rises, the bigger the crash.
I have a feeling Grrenspan isn't as much of a DGI as some may think. He may have raised the rates .5%, except I think he knows that Y2K is going to set it back more than that. I'm sure he doesn't believe it will do as much damage as I do, but he doesn't dismiss it entirely.
-- Hawk (email@example.com), November 20, 1999.
profit of doom:
What we are witnessing is the greatest historical grand blow off of all time. The speculative mania is securely settled within the minds of the dreamy investors. They are blind to any bad news and sincerely believe that any minor bad news will not hold a candle to the future potential profits.
But that is the basic plan for surprise. God will suddenly cause a worldwide catastrophe which will shock everyone.
And then you will witness the quick collapse of the stock market. Everyone will be surprised and caught unaware.
Those who are greedy will be ensnared.
What most people fail to recognize is that there will be a direct SUPERNATURAL judgment on the stock market.
-- Randolph (firstname.lastname@example.org), November 20, 1999.
MIKE; Don't know if you're sincere or just trying to be a smart ass by twisting my words to suit yourself.
I meant the MAJOR LONG-TERM TECHNICAL indicators, no the ones that bob and weave and oscillate (in fact, some of them are oscillators--do you know what the definition of that is?) SHORT-TERM,changing by the week.
The A/D line peaked in APRIL 1998--if you subscribed to even one technical newsletter you'd know that. Do you think that is insignificant?
IN TWO weeks, at the present rate, this A/D line decline will become LONGER THAN THE ONE IN 1929. Is that insignificant?
You also seem to be totally unaware of a simple concept called "selling at the margin". I explained it last night in a post, so I'm not going to repeat.
Suffice to say that this alone can negate ANY amount of liquidity inflows that the govmint attempts, simply because once it is started, you have a mass panic sell-at-any-price psychology that is based on primal FEAR-which is the STRONGEST human emotion, bar none.
Even if the DJIA goes to 12,000 can you calculate the % rise that is ? How does that compare to the RISK?
Obviously you have no concept of risk/reward, so I hope you are not in the markets.
As for being a perma-bear, remember the time frame. Greedspin gave his first(useless) warning about "irrational exuberance" in 1996! That was over 4500 points ago.
Jim Stack was earlier than that, stating that it was a mania about a full year before that. This was based on , as I say, 70-year historical norms, which dopes today don't have a clue about, but who are about to get a very intense and brief lesson on .
Do you really believe that the market cap of stocks today, which is reflected in people's personal net worth statements, will ever be REALIZED i.e converted into actual money? NOT A CHANCE IN HELL. Only a VERY FEW get out at the top ; the rest will see their Internut stocks revalued to where they started-ZERO. But since they are so clueless about mathematics, history, and the self-interests of the whole whoring Wall Street gang, they won't even know it till AFTER the fact.
I am taking the chance that I MAY miss 5-10% upside max. but I am getting 4% on my cash.
Hogs get slaughtered. The blood-letting starts very soon.
-- profit of doom (email@example.com), November 20, 1999.
-- db (firstname.lastname@example.org), November 20, 1999.
CNN headkine news is running a short segment over and over tonight on top stories advising working class people to pull their mutual funds from aggressive indexes to long term secure funds. Sounds to me like some of the big boys are needing some bail out money. Add in the new credit limits extended to "qualified buyers" AND THE HANDWRITING IS COMING CLEARER AND CLEARER ON THE WALL.
-- Nikoli Krushev (email@example.com), November 20, 1999.
I have been perplexed about the Al greenshades. He did indeed comment on the "irrational exuberance" of the markets and then orchestrated the liquidity to raise the market 100%. Greenshades talks a good game he is concerned about the stability of the market but his actions differ. He has been trapped by the Clintonista's plan to create short term budget surpluses by shortening the term of the US debt and shaving a few % (a few % of a couple trillion is REAL money) and saving some cheap money. If greenshades were to have removed the punchbowl the dollar would have tanked along with the economy.
The technicals are not necessary in agreement this is true. But when discussing indicators remember some are trailing unless adjusted. The A/D has provided some "fake" bear signals when the market was in transition but this market no longer appears to be a transition. The exact turning (inflection) point is anybody's guess. If you were out of the market why rates were dropping and fundamentals were so positive because of a perma bear your loss. If you stay in the market because of a perma bull after the market tanks, shame on you too.
-- squid (Itsdark@down.here), November 21, 1999.
I wasn't being a smart ass by twisting your words- I was QUOTING you, for heaven's sake. I have no idea what you mean, I only know what you said. Apparently, there was a difference between what you said and what you meant.
Now, let's deal with the sarcastic part of your response. Yes, I am aware the AD peaked in April, 1998. Actually, it peaked on 4/3/98 when the Dow was a shade under 9,000. AD is just one indicator and, if that's all you follow, you would have lost a 22% Dow move.
AD usually tops before the averages, but there is no regularity as to the time lag. The nasty 1980-82 bear market began in 11/80, 3 1/2 years after the AD high. The date of the AD peak in a bull market tells you nothing about precisely when the averages will top out.
I'm going to watch some hoops now, so flame away if you want- I'll catch up with the thread later.
-- mike (firstname.lastname@example.org), November 21, 1999.
I'm sure there's God, but I don't think He watches the stock market. Definitely doesn't play it. Probably not much interested in our silly, futile, goings on, either. Created the Law, then it's up to us.
-- Fatso (Fatdo@morso.com), November 21, 1999.
I thought for sure that the market would be the trigger for Y2K and that by now the market would be in a downward spiral. But I underestimated the power of the spin docs and to be honest was unaware of the PPT till it was brought up here.
The market could have been the trigger, and still may be. I think it's being held together with duct tape and band-aids. The P/E's are outrageous, A/D still bad, technicals are bad, etc. Why keep propping it up? Simple, if the market goes, the hedge funds go, the people get nervous and the banks go. If, and a big if, they hold it together through the rollover, and the banks escape the Y2K scare, they will let the market go where it will go, where it naturally should go.
Going out on a limb now, (been out there so much this year, I have a treehouse now,) the movie starts the snowball going on Monday. It will be considered a correction after a good run up the talking heads will say. Profit taking. My guess is that this is the top. No crystal ball stuff, just gut feeling. Based on my track record this year, I wouldn't put any money on it though. My DGI sister-in-law, who has her life savings in the market (not that much, but a lot to her) has been ignoring my pleas to pull it out for months, and just chuckles and says, it keeps going up.
The wild card will be oil. Watch the oil market, and if it keeps rising, we have seen the end of the bull market. The inflation caused by rising oil prices will put us into a recession and Y2K will be the final blow. Rising gas prices will hurt all sectors and the production problems overseas and at home will be the back breaker.
BTW, I hope I'm wrong. Even a blind squirrel finds an acorn now and then, and this time my gut feeling may be right.
-- Bill (email@example.com), November 21, 1999.
Not to start anything but the Book is full of money talk and government/Kingdoms. He is very interested.
-- Mark Hillyard (firstname.lastname@example.org), November 21, 1999.
profit of doom,
You wouldn't be Dave Elliot now would you?
-- Cherri (email@example.com), November 21, 1999.
Someone commented that rising oil prices may quickly end this bull market. I agree completely. Rising oil prices were associated with market declines in 73-74, 1980, and 1990.
-- Dave (firstname.lastname@example.org), November 21, 1999.