We’re all saps in the stock market’s shell game
Insight: Investors’ exuberance will end badly, as it always does
…And
just like in Three-Card Monte, investors are looking in the wrong
places for information. Instead of being mesmerized by the all-time
highs, investors should be focused on the market’s deteriorating
internal conditions.
For example, as the
market climbs higher on lower volume, fewer and fewer stocks are
participating (i.e. making new highs). This is a red flag.
Also, sentiment indicators are reaching extreme levels. The VIX VIX +3.36% is
at a six-year low; the RSI (relative strength indicator) has surpassed
70 (meaning the market is overbought), Investor’s Intelligence is over
60% bullish (the second-highest ever). So many large cap stocks have
gone parabolic, there has to be a day of reckoning.
Moreover, margin balances are at record levels. When the market goes south, the excess margin will accelerate the downturn.
All of this translates into a stealth market bubble that keeps growing, but is happening so slowly few see it.
Everyone’s a winner
As the market makes
all-time highs, more investors are lured into the game. One exuberant
host on a financial program boldly stated: “This is a market that will
never go down!” Another guest recently predicted that the stock market
won’t go down for another two years.
Read more:
May Retail Sales Miss, Core Retail Sales Unchanged, Control Group Declines
Another swing and a miss for the so-called Q2 GDP surge.
After
April data was revised higher, with headline retail sales pushed from
0.1% to 0.5%, and core retail sales ex-autos and gas boosted from -0.1%
to 0.3%, May showed a big drop in whatever momentum may have resulted
from the March spending spree. As a result May headline retail sales
missed expectations of a 0.6% increase, printing at 0.3%, with the
entire positive print due to auto and gas sales. Indeed, when looking at
core retail sales excluding autos and gas, these were unchanged from
April, printing at 0.0%, far below the 0.4% expected.
As
the table below shows, segments that saw a decline in May were
Electronics stores (again), as well as food and beverage stores, health
and personal care, clothing stores, sporting goods stores, restaurants,
as well as general merchandise stores. In other words a decline across
the board.
IMF Warns Of Housing Crashes- World Bank Says ‘Now Is The Time To Prepare For Next Crisis’
Yesterday, the IMF and World Bank issued warnings about the global economy.
The International Monetary Fund
(IMF) warned that the world must act to contain the risk of another
devastating housing crash. The World Bank warned that the anticipated
rise in interest rates will hit global growth this year – and presumably
house prices too.
“We are not totally out of the
woods yet,” Kaushik Basu, the World Bank’s Senior Vice President and
chief economist and he warned that “now is the time to prepare for the
next crisis.”
The warning from the IMF came
as it published new data showing house prices are well above their
historical average in many countries as covered in theFinancial Times today.
The data shows how an acceleration in house prices in many countries
from already high levels has emerged as one of the major threats to
global economic stability.
The Winter Was So Cold No One Got Sick! Lower Health Spending To Push Q1 GDP To -2%
The U.S. economy may have contracted more than previously thought during the first three months of 2014, private economists said Wednesday based on new health care-sector data from the government.Some analysts said economic output may have contracted at a 2% pace in the first quarter. That would be its worst performance since the recession.The Commerce Department’s latest estimate of gross domestic product, the broadest measure of output across the economy, said GDP shrank at a seasonally adjusted annual rate of 1% in the first quarter. A revised estimate will be released June 25, and it could show an even larger contraction.…
Goldman Slashes Q1 GDP Estimate To -1.9%
Global Death Cross Accelerates As World Bank Slashes Growth
IMF: Housing Markets Are ‘Overheating’ Again
Three charts you need to see before you buy another stock
Wall Street’s “fear gauge” flashed a sell signal at the end of May.
But
since then, the stock market has continued to work even higher. The
S&P 500 hit a new all-time high last Friday. And some folks might be
wondering if the sell signal is a bust.
It’s not.
As you can see from the following chart, the Volatility Index (“VIX”) once again closed below its lower Bollinger Band last Friday…
Once
the VIX rallies and closes back inside its Bollinger Bands, it’ll
generate another broad stock market sell signal. That will be its second
sell signal in about two weeks.
And this time, a couple other indicators are shouting “sell” as well…
12 Numbers About The Global Financial Ponzi Scheme That Should Be Burned Into Your Brain
When
Americans think about the financial crisis that we are facing, the
largest number that they usually can think of is the size of the U.S.
national debt. And at over 17 trillion dollars, it truly is massive.
But it is actually the 2nd-smallest number on the list below. The
following are 12 numbers about the global financial Ponzi scheme that
should be burned into your brain…
-$1,280,000,000,000 -
Most people are really surprised when they hear this number. Right
now, there is only 1.28 trillion dollars worth of U.S. currency floating
around out there.
-$17,555,165,805,212.27 - This is the size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 - This is the total amount of money that the global elite have stashed in offshore banks (that we know about).
-$48,611,684,000,000 - This is the total exposure that Goldman Sachs has to derivatives contracts.
-$59,398,590,000,000 -
This is the total amount of debt (government, corporate, consumer,
etc.) in the U.S. financial system. 40 years ago, this number was just a
little bit above 2 trillion dollars.
-$70,088,625,000,000 - This is the total exposure that JPMorgan Chase has to derivatives contracts.
-$71,830,000,000,000 - This is the approximate size of the GDP of the entire world.
-$75,000,000,000,000 - This is approximately the total exposure that German banking giant Deutsche Bank has to derivatives contracts.
-$100,000,000,000,000 - This is the total amount of government debt in the entire world. This amount has grown by $30 trillion just since mid-2007.
-$223,300,000,000,000 - This is the approximate size of the total amount of debt in the entire world.
-$236,637,271,000,000 -
According to the U.S. government, this is the total exposure that the
top 25 banks in the United States have to derivatives contracts. But
those banks only have total assets of about 9.4 trillion dollars
combined. In other words, the exposure of our largest banks to
derivatives outweighs their total assets by a ratio of about 25 to 1.
-$710,000,000,000,000 to $1,500,000,000,000,000 -
The estimates of the total notional value of all global derivatives
contracts generally fall within this range. At the high end of the
range, the ratio of derivatives exposure to global GDP is about 21 to 1.
Most
people tend to assume that the “authorities” have fixed whatever caused
the financial world to almost end back in 2008, but that is not the case
at all.
In
fact, the total amount of government debt around the globe has grown by
about 40 percent since then, and the “too big to fail banks” have
collectively gotten 37 percent larger since then.
Our “authorities” didn’t fix anything. All they did was reinflate the bubble and kick the can down the road for a little while.
I don’t
know how anyone can take an honest look at the numbers and not come to
the conclusion that this is completely and totally unsustainable.
How much debt can the global financial system take before it utterly collapses?
How recklessly can the big banks behave before the house of cards that they have constructed implodes underneath them?
For the
moment, everything seems fine. Stock markets around the world have
been setting record highs and credit is flowing like wine.
But at
some point a day of reckoning is coming, and when it arrives it is going
to be the most painful financial crisis the world has ever seen.
If you plan on getting ready before it strikes, now is the time to do so.
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