Bernard L. Madoff

Equity Indices/Markets

843 posts in this topic

...And tor, had you read this right in the first place...

wtf?

People get pissed and post on the internet. Sometime the obnoxious people are sober.

I figure we all have two choices; try and stop people from being obnoxious / drunk or just ignore people we find offensive.

You post messages in a phraseology which makes it appear you think you know what you are doing. If other people find your posts to be inane then they have a choice to trash you or not.

I get my posts trashed on a regular basis, I am sure most people that post their opinions feel they have been too at some time or another.

For me it is part of life and if it bothered me in any way I would put the person on ignore.

In this case it appears you said "Oil price seems too random for me to get a gauge on markets at all. Everything else has come connectivity, but oil is an outlier." Someone gave you information you can learn from. If you don't like the way the information was presented at least appreciate the fact someone cared enough to help you learn.

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wtf?

People get pissed and post on the internet. Sometime the obnoxious people are sober.

I figure we all have two choices; try and stop people from being obnoxious / drunk or just ignore people we find offensive.

Really? So I should just put Bernie on ignore so he is free to diminish my every post because he is obsessed with them, so I can't see what he is saying? Here's the thing. I try to avoid Bernie, because I don't have any interest in being told what to do by him, nor being belittled by him, nor being "educated" by him. Despite being asked, Bernie is unable to stop himself, although he asked about my self-discipline once- how many times does he have to be asked to just let it go, before he can get a grip? This forum has rules around civility, and he just can't stop himself. He has targeted me for too long now. Initially I ignored it, laughed it off, then I addressed it. I have continued to do so because I don't like it. One good thing is that now he is leaving other people alone- a sole target is easier, and others can just put articles from zerohedge to get on his good side. For me, no. The more he insists on how I should be, the more I will just avoid, avoid. Other people see a bully, and try to deal with the bully, tor. You ask me to put the bully on ignore- nice work.

You post messages in a phraseology which makes it appear you think you know what you are doing. If other people find your posts to be inane then they have a choice to trash you or not.

Not to my mind, I don't, but you see it differently- fine. I barely make any posts on here. Why would I when I have Bernie following me around? It's unpleasant. Sometimes, I like to make a comment- big deal. If other people find my posts to be "inane", then they might like to discuss that outside the forum. I am sure there'll be an audience for it. Within the forum, I have an expectation of just making the odd comment, and if people disagree with it, fine. Bernie doesn;t discuss my comments- he just rages over them. If you think that is normal, I don't.

I get my posts trashed on a regular basis, I am sure most people that post their opinions feel they have been too at some time or another.

For me it is part of life and if it bothered me in any way I would put the person on ignore.

As I said, should I put Bernie on ignore, so he can just carry on this way, or should he try to take a step back? I find many people on here to be rather nice, and if he is just left to brutalise everything I say, because that becomes the culture of the forum, but I should just not be able to see that, then it is not good for people on here- noone wants to see this kind of thing. However, I will reply to what he says- not the economics bit- I don't care about that- I avoid him- but his trashing of me, because his attempt as passifying me won't work. I will still make the odd comment, because I feel like it. Deal with the bully.

In this case it appears you said "Oil price seems too random for me to get a gauge on markets at all. Everything else has come connectivity, but oil is an outlier." Someone gave you information you can learn from. If you don't like the way the information was presented at least appreciate the fact someone cared enough to help you learn.

In fact, there are plenty of people on here who have great ideas about the world. "cared enough to help you learn"- what a joke. Most things I say make Bernie's blood boil so much that it appears his replies to my comments have barely any relationship to them. Hatred does that- it is blind. I don't know how this situation came about, nor do I care. Blind Freddy can see it, tor, and it's not good for the forum. See the problem how it is, and without seeing it as me being desired to be "educated". I have my own views of the world, and am just here to make an occasional comment. I have not criticised Bernie- I merely ask him to let go. If he can't, what then?

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Turbo Timmy says that the USD has reached a bottom. Is he calling a stock market crash?

TOKYO (MarketWatch) — U.S. Treasury Secretary Timothy Geithner said the major currencies are “roughly in alignment now,” a suggestion that he sees no need for the dollar to sink more than it already has against the euro and yen, according to a Wall Street Journal interview published on its Web site Thursday.

Geithner emphasized that the U.S. is not pursuing a deliberate policy of devaluing the dollar, echoing comments he made earlier this week at a speech in Palo Alto, Calif.

Dollar versus SP500

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Interesting thought on what happens if Ben doesn't deliver on QE2. Need to click the link to view the graphs as I couldn't include them in this posting.

If QE2 Flops, Will Stocks Dive?

There is a general belief that the pre-announcement of QE2 in late August drove the September-to-Remember rally. The market is in a sloppy, overlapping wave action seems to be somewhat headed higher pending the mid-terms on Nov2 and the expected QE2 announcement on Nov3. This indicates it is churning ahead of those events. It is beginning to take the shape of a converging wedge or ending diagonal, although it is not following the rules, according to the STU. Perhaps it gets to 1220 or thereabouts in a final thrust, but it is behaving as if it will hold up into those dates. If so, we may have a double setup for buy-on-rumor, sell-on-news.

I have already discussed how a Repub victory would likely lead to gridlock, and gridlock may not portend well for stocks. Mad Hedge Fund Trader goes further and characterizes gridlock as a market myth. When the Repubs embraced supply-side economics (aka voodoo economics) in 1980, gridlock with a Demo Congress/Repub President created a dynamic of increasing spending, eschewing the balanced budget, as shown in this chart. Milton Friedman had argued that large deficits would constrain spending increases, and Congress proved him wrong. Bush 42 began to reverse the deficits, and this continued under Clinton, especially after the Repubs took the House in 1994; deficits decreased and we got the fabled balanced budget. Possibly, then, gridlock with an austerity Congress will constrain spending, but after 1994 we had a President willing to triangulate to the center, whereas Obama seems determined to hang onto his reforms.

[/url]

Similarly, the Fed's actual QE2 announcement is fraught with risk for stocks. There still is a debate inside the Fed as to how large and committed QE2 should be. At one end Krugman urges as much as $10T; and the other is the feeble talk of a mere $100B. If a large slug of QE2 is priced in, the actual announcemnet may disappoint.

Let's go a step deeper. Krugman's call for $10T QE is not as dangerous as it sounds. The hyper-inflationists hyper-ventilate that this is simply printing money! Yikes!

They need to get a grip. It may very well be that even Krugman's QE would have little effect. John Hussman, coming from a very different perspective, essentially agrees. He starts with the impact of being in a liquidity trap, captured in this chart:

Cutting through the fairly dense econo-speak that surround the concept of a "liquidity trap", what this means is at zero interest rates, a short-term bond is the same as cash. Get a bond that pays no or little interest; why not just get a batch of currency? So when the Fed engages in QE by buying bonds, it is not so much printing money as simply swapping a bond that would have issued anyway for currency.

Hussman's analysis is interesting in that it challenges the deeply held belief that increasing money is what causes inflation. He shows that as the currency base increases, velocity decreases, offsetting the inflationary impact of more money. Mish does a good summary of the analysis. The implication is that monetary manipulations have less impact than economists take for granted. This explains why QE had little effect to save Japan from its two lost decades. As Hussman summarizes:

Simply put, monetary policy is far less effective in affecting real (or even nominal) economic activity than investors seem to believe. The main effect of a change in the monetary base is to change monetary velocity and short term interest rates. Once short term interest rates drop to zero, further expansions in base money simply induce a proportional collapse in velocity. ...

Quantitative easing promises to have little effect except to provoke commodity hoarding, a decline in bond yields to levels that reflect nothing but risk premiums for maturity risk, and an expansion in stock valuations to levels that have rarely been sustained for long (the current Shiller P/E of 22 for the S&P 500 has typically been followed by 5-10 year total returns below 5% annually). The Fed is not helping the economy - it is encouraging a bubble in risky assets, and an increasingly unstable one at that. The Fed has now placed itself in the position where small changes in its announced policy could have disastrous effects on a whole range of financial markets. This is not sound economic thinking but misguided tinkering with the stability of the economy.

Hussman is now in agreement with Krugman on the impact of QE. Credit Writedowns does a good job of comparing the two arguments:

Krugman says that the result of this equivalence between short-rates and cash means that the Fed’s QE is really just a duration change by the Treasury. In quantitative easing, as contemplated in this next round, the Fed will be buying long-dated Treasuries. Given the preceding analysis, it’s as if the Treasury started issuing a huge slug of short-term debt and retired a bunch of long-term debt, making short-duration bills relatively more plentiful than ten-year or five-year Treasury bonds. I really didn’t think about it this way until I put the Hussman piece together with my November article. But Krugman’s characterization of this is true.

Hussman goes one step further, however. He has a view of what would create inflation, or the dreaded hyperinflation:

One of the most fascinating aspects of the current debate about monetary policy is the belief that changes in the money stock are tightly related either to GDP growth or inflation at all. Look at the historical data, and you will find no evidence of it. Over the years, I’ve repeatedly emphasized that inflation is primarily a reflection of fiscal policy – specifically, growth in the outstanding quantity of government liabilities, regardless of their form, in order to finance unproductive spending. Look at the experience of the 1970′s (which followed large expansions in transfer payments), as well as every historical hyperinflation, and you’ll find massive increases in government spending that were made without regard to productivity (Germany’s hyperinflation, for instance, was provoked by continuous wage payments to striking workers).

My take: the Fed has now created an Expectations Trap: if they fail to deliver the high expectations of QE2, stocks will fall. If they do deliver and it has little impact, stocks will fall. For traders the arbitrage is between the Nov3 announcement and the discounting of future ineffectiveness of QE

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Interesting article amongst the chaff

The immediate prospects for corporate earnings are tightening, not only because of higher commodity prices due to what some think is a positive effort by the FOMC, but also to a fundamental shift in our economy as that relates to The Investment Rate. The Investment Rate is a tool that tells us the rate of change in the amount of new money slated to be invested into the economy by U.S. consumers over time.

It is this new money that moves the markets and the economy. Only new investment dollars can allow the market to grow; we cannot churn old money and expect positive results. One asset class may outperform another in that case, but the overall market cannot grow without the infusion of new money. The Investment Rate tells us the rate of change in the amount of new money every year.

I have been using The Investment Rate as a leading indicator since I developed it in 2002. It was then a bullish indicator because it told me that the amount of new money available to be invested into the economy every year between 2002 and 2007 would also increase every year during that time span. In 2007 I warned everyone that The Investment Rate was at a turning point in that demand had peaked and a transition lower would begin soon. On CNBC, I was nicknamed the Grim Reaper. The IR had turned bearish. Well, the Grim Reaper is back.

The third major down period in U.S. history began in 2007. It is nowhere close to over. During periods of weakness, akin to the Great Depression and the stagflation period of the 1970s, bounce backs are normal. In fact, we were long from March of 2009 until April of 2010. Admittedly, the past two months took me by surprise, but my longer-term outlook remains firmly intact. The recent increase is doing nothing to influence the longer-term trend. This is a bounce higher within a longer term down period. The only way earnings growth will continue is if it is focused solely overseas, and even with that, margins are still going to tighten given high commodity costs.

http://www.marketwatch.com/story/the-grim-reaper-is-back-2010-11-01

More on the Investment Rate

http://www.agreaterdepression.com/

http://www.stocktradersdaily.com/Main/services/investment%20rate.html

TA or Fundy types please comment on this.

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This is something I've been noticing for quite a while. Whilst the S&P500 has been rising, the US banking index has not! I read somewhere that in 'real' bull markets, the finance sector should be rising with the rest of the market. Obviously, this time it is different! :blink:

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The S&P500 needs to clear the April top at 1220, otherwise it might become a victim of a rising wedge or a double top. Perhaps QE2 will fix all problems like it did for Zimbabwe's stock market!

post-148-035160100 1288777126_thumb.jpg

Edited by cobran20

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I support Faber on this matter - the Fed will have QE1, 2, 3... n. This will result in higher precious metal prices, lower $US (duh!), higher stock prices (remember Zimbabwe) and higher interest rates. They will pullback on bloating the money supply only long after they feel the economy is on the road to recovery - and high inflation is well & truly baked into the economy. When they begin to shrink the money supply, remember to bail out of stocks and probably gold!

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I support Faber on this matter - the Fed will have QE1, 2, 3... n. This will result in higher precious metal prices, lower $US (duh!), higher stock prices (remember Zimbabwe) and higher interest rates. They will pullback on bloating the money supply only long after they feel the economy is on the road to recovery - and high inflation is well & truly baked into the economy. When they begin to shrink the money supply, remember to bail out of stocks and probably gold!

When?

Japan has had zirp since 99 and QE since 2001 with no end in sight.

jap-ppi-interest-rates-jan-29-20071.JPG

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When?

Japan has had zirp since 99 and QE since 2001 with no end in sight.

jap-ppi-interest-rates-jan-29-20071.JPG

I think a lot of Japan's problems are caused by their ageing demographics. Commodity prices are rising. Nothing stopping Ben from its QE being spent more directly on consumers via programs similar to what Krudd did with schools, home insulation, etc. We gained a big boost in (wasted) spending and a deficit to boot! Whilst the stock markets don't roll over, it can only mean inflation ahead.

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I think a lot of Japan's problems are caused by their ageing demographics. Commodity prices are rising. Nothing stopping Ben from its QE being spent more directly on consumers via programs similar to what Krudd did with schools, home insulation, etc. We gained a big boost in (wasted) spending and a deficit to boot! Whilst the stock markets don't roll over, it can only mean inflation ahead.

Japan's Nikkei rolled, rallied, rolled, rallied etc

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The Nikkei rally from 2003 - 2007 was 140%.

The comparison between the Nikkei post 1989 and current western markets is no longer vaalid. The Nikkei top, like the Nasdaq in 2000, was quickly down, even allowing for the 50% retracement rally that initially occurred. It is now over 1.5 years since the March 2009 bottom and we're still rising. I'd say that we're most likely climbing a bull market's wall of worry. The bloating of the money supply seems to be quickly reaching the stock markets. I'd have to see the July lows get decisively smashed before we can conclude that we're in a bear market again.

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The bloating of the money supply seems to be quickly reaching the stock markets. I'd have to see the July lows get decisively smashed before we can conclude that we're in a bear market again.

Do you mean situations like:

  • QE2 plans announced = market goes up
  • Slashing of spending in Europe = market goes up
  • Unemployment increases but less than expected = market goes up

What would the market do if employement increased?

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Do you mean situations like:

  • QE2 plans announced = market goes up
  • Slashing of spending in Europe = market goes up
  • Unemployment increases but less than expected = market goes up

What would the market do if employement increased?

I don't know what the market will do if employment rose - I'd have to consult the chicken guts at the time!:rolleyes:

What I'm saying is, like Zimbabwe, people are putting their money in things that are rising to try to maintain their purchasing power. Whether through direct intervention or via the Fed' 'friends', money seems to be going in stocks. This seems to be happening for most western stock markets. Until things roll over, the trend is still up.

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The Done Deal: QE2.x, China To Cash in Treasury's, Dollar to Devalue, Yuan Rise

Today's announcement of Quantitative Easement 2.x was not a surprise. QE2.x refers to the fact that the FED had previously revealed it would be purchasing Treasury's with incoming moneys from mortgage payments of principal and interest and mortgage payoffs. This had been estimated as between $200 and $300 billion over the next year. Today added $600 billion to that in instant money creation, also known as "printing" over the next six months.

Hints have been dropping everywhere lately that the goal actually IS to create inflation and to devalue the US dollar in an orderly manner. Most aware investors have known intuitively for some time that inflation and devaluation is the inevitable outcome, but it has been confirmed by people in the know a number of times recently. The puzzling part has been why QE2.x is necessary at this time. It came down to "what do THEY know that we don't know?" We've all seen the lists of possible causes existing behind the screen. This in itself has resulted in political and market anxiety. Volatility. Where is the shoe that hasn't dropped yet? Bank failures we don't know about but they do know about? The lists go on.

Why couldn't Bernanke produce a clear explanation? He's the self-admitted expert on curing depressions, but he's been amazingly silent or vague. Why did some peripheral FED officers--Kansas

City's Hoenig comes to mind--keep insisting QE wasn't necessary and could be dangerous? It could be part of an overall plan or perhaps he's simply out of the loop. What were the G7, IMF/World Bank, G20, and US/Chinese meetings really all about? Did the looming elections keep a lid on it all.

How does it all fit together? It comes together just the way it looks, as a friend always refers to clues being hidden "right out in the open". One key to "getting it" is the size of QE2.x, of about $900 billion which is close to the size of Chinese Central Bank holdings of US Treasury's. The real deal in QE2.x is that China and the US have negotiated to redeem China's T Notes and Bonds over the next six to twelve months during which time there will be a staged progressive float of the yuan. This deal is the inflation and devaluation the FED thinks we need, the currency float the Treasury and Congress think we need, and the cashing in of their huge hoard of Treasurys the Chinese think they need. This is the equivalent of Roosevelt's resetting the gold price in 1934, greatly devaluing the dollar, and supposedly jump-starting the economy. This is China's long hoped-for gain on their US bonds. This is the capstone of Bernanke's career of studying the 1930's. This will be done, they all hope, in an orderly manner. Only the citizens of the US will suffer an enormous loss of purchasing power! The clear judgement is that they are too dumb to know what's happening to them. Central banks never want us to know.

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Copper to gold ratio since 1900

[quote

Ever get the feeling we have reached the end of an era? That maybe the GFC was more than the slipped disc the doctors are suggesting it was. Maybe it really is time to hang-up the hot pants and slip into something more comfortable.

We are witnessing the breakdown of the US$ as the world’s reserve currency. It won’t all be one way, but the longer those in charge follow the currency debasement strategy, the more likely the outcome becomes inevitable. We are simply searching for a bookend to the Nixon shock – which heralded the last changing of the guard.

On August 15, 1971, in response to prolonged selling of the US$, Nixon unilaterally declared an end to dollar/gold convertibility – thereby bringing to a close the Bretton Woods international financial exchange system that had reigned since 1945. The gold price soared.

copper-ratio-since-19001-500x270.jpg

That the ratio has been swimming in the shallows since the demise of Bretton Woods suggests that our paper money has been on the wane for many years. Financial deregulation, that took off post the floating of currencies and the onset of the oil crisis, had been the catalyst for this trend. With the unfolding of the Great Moderation, that commenced in the early 80′s, the expansion of credit reached its apogee. Until the GFC that is. Since then its been left to governments to keep the credit balloon afloat.

________________________________________________________________________________________________

Can the Fed credibly argue that it is not monetising the Treasury’s debt when expectations are that the Fed will effectively buy all of this year’s debt issuance? (The consensus budget deficit estimate for FY11 is $1.214 trillion versus 12 months of QE at $100bn per month.) They can try – as suggested by this exchange at the Treasury Borrowing Advisory Committee (here):

It was pointed out by members of the Committee that the Fed and the Treasury are independent institutions, with two different mandates that might sometimes appear to be in conflict. Members agreed that Treasury should adhere to its mandate of assuring the lowest cost of borrowing over time, regardless of the Fed’s monetary policy. A couple members noted that the Fed was essentially a “large investor” in Treasuries and that the Fed’s behavior was probably transitory. As a result, Treasury should not modify its regular and predictable issuance paradigm to accommodate a single large investor.

This is like the lung arguing that the heart is an irrelevant patsy in its oxygen sequestering scheme.

________________________________________________________________________________________________

The Bank of England was established in 1694 with the single mandate to buy the sovereign’s debt. William of Orange was caught up in the Nine Year war with France and had cleared his coffers by this time. The Fed is simply returning to its roots.

That the birth of the BoE happened to occur in a period of currency debasement that was forestalled in 1696 by 25% inflation and the Great Recoinage (overseen by none other than Isaac Newton and John Locke) that lead to a default by the BoE followed ultimately by the introduction of the British Gold standard is just coincidence. Funny, too, that it was when credit was first beginning to blossom in the English economy.

As the Duke of Beaufort remarked 5 May, 1696 (from a paper by Charles Larkin here):

…at this time all money is refused unless it be new money or very broad, of which there is but little stirring. I was forced to enter my name in a book to pay for my dinner, for they choose rather to trust than take even passable sixpences. The Exchequer had a double guard these two days, and the common people began to grow a little mutinous.

________________________________________________________________________________________________

The GFC was the defribullator – a quick shock to kick start the pulse. You can see it in the copper/gold ratio – a spike in demand for money. Since then the US has adopted its QE strategy, and the flight of capital out of the US$ and into commodities, junk bonds and emerging markets has begun in earnest. Even the US equity market has benefited at least in devalued US$ terms. But that of course was the objective.

All else being equal, the liklihood is that the Fed will continue down this road until it becomes untenable. The swinging pendulum will take us back to a capital controlled world – a reincarnation of the spirit of Bretton Woods. Where credit is more tightly controlled and money is tight. Basel III is only the beginning. When that time comes, it might be time to short gold and buy copper.

]

I might add to the last sentence, it would also be time to exit stocks as well as gold.

I

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Trade flows following currency movements

Follow-up on an earlier post (here) where we suggested that recent moves in currencies were impacting trade flows, Markit (here) reports that world trade was up in October lead by exports from developed economies – and in particular the US.

PMI-New-Export-Orders-344x500.jpg

Note that new export orders for Australia, Brazil and Russia were all down for the month. While China and India were the laggards in export growth. The USD and EUR leading the way.

To see the AUD currency effect from a different perspective, here is the latest RBA Commodity price index. Note the climb in the AUD continues to outpace commodity prices:

RBA-commodity-price-index-500x272.jpg

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Looks like Ben is planning to hurt the yanks badly in the hip pocket!

You been reading my facebook page? :thumbsup::laugh:

I just commented that Ben's ethos of higher stock prices flowing positively into the broader economy will backfire with higher commodities (eg Wheat) and will bash mainstreet through higher gasoline and heating oil.

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Looks like Ben is planning to hurt the yanks badly in the hip pocket!

You been reading my facebook page? :thumbsup::laugh:

I just commented that Ben's ethos of higher stock prices flowing positively into the broader economy will backfire with higher commodities (eg Wheat) and will bash mainstreet through higher gasoline and heating oil.

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