spiralcalendar.com » Editorial

About That Money Pump

ChrisC — Wed, 25 Apr 2012 18:48:08 +0000

I am increasingly convinced that the monetary efforts of the central banks are overriding the natural cycles and whatever other forces normally determine the course of financial market prices. My own proxy for this central bank “money pump” is a smoothed sum of the FED’s balance sheet and 20% of the ECB’s balance sheet converted to cdollars. This pump proxy is shown below compared to both the S&P 500 and gasoline futures prices for the past six plus momths.

One gets the feeling that the cost getting gas prices to come down for the election might be a stock market collapse. It appears that the Barry & Bernank show will have to make a choice; do they want lower gas prices, or an inflated stock market?

I’m going to show this proxy money pump chart regularly for subscribers, as I now think this is critical information for guaging the trend of the market now.

click chart to enlarge

War on Speculators

ChrisC — Wed, 19 May 2010 19:09:50 +0000

A favorite saying from my floor trading days was, ‘When the revolution comes, first they shoot the speculators.’ I usually envisioned the speculators being rounded up by the revolutionaries in this scenario. But with a war on speculators being declared by government types, I suspect I had the details all wrong. Germany’s intent to curb ‘speculation’ through curbs on some types of short-selling shows us that once again people will do whatever they can do prevent markets from going where they want to go. And as we know, the markets will get to where they’re going anyways.

No person, no fund, no government is larger than the markets. The urge to over regulate markets is damaging in two ways. It postpones markets’ natural ability to seek their proper level, thereby delaying the benefits of matching the greatest number of buyers and sellers at auction. But also in defeating market participants’ faith that the market will be there for them when they need to buy or sell. And as particpants lose faith, they exit the market and take liquidity with them. Everyone is a loser when markets become overregulated.

We seem to have reached a point in the system where governments and bankers find their backs against the same wall. Governments have enabled the bankers to become very rich in the current credit bubble and bankers have enabled governments to accumulate huge amounts of power via cheap credit and deficit spending that enabled vote buying. These two entities are doing all they can to maintain the status quo, but their inevitable failure is perhaps the only certainty in these uncertain times.

Hussman Commentary

chris — Mon, 09 Mar 2009 18:44:02 +0000

…Make no mistake. Buying up “troubled assets” will not materially ease this crisis, nor will it even improve the capital position of financial institutions (see You Can’t Rescue the Financial System if You Can’t Read a Balance Sheet). Homeowners will continue to default because their payment obligations have not been restructured to any meaningful extent. We are simply protecting the bondholders of mismanaged financial institutions, even though that bondholder capital is more than sufficient to cover the losses without harm to customers. Institutions that cannot survive without continual provision of public funds should be taken into receivership, their assets should be restructured to better ensure repayment, their stockholders should be wiped out, bondholders should take a major haircut, customer assets should (and will) be fully protected, and these institutions should be re-issued to the markets when the economy stabilizes.

The course of defending the bondholders of insolvent institutions is not sustainable. Do the math. The collateral behind private market debt is being marked down by easily 20-30%. That debt represents about 3.5 times GDP. That implies collateral losses on the order of 70-100% of GDP, which itself is $14 trillion. Unless Congress is actually willing to commit that amount of public funds to defend the bondholders of mismanaged financials so they can avoid any loss, this crisis simply cannot be addressed through bailouts. Bondholders have to take losses. Debt has to be restructured. There is no other option – but the markets are going to suffer interminably until our leaders figure that out…

John Hussman – read the whole thing.

Golden Parachutes

chris — Mon, 09 Mar 2009 16:04:12 +0000

M.C. Escher – Economist

chris — Fri, 27 Feb 2009 17:04:30 +0000

More here.

click image to enlarge

In My eMail Box

chris — Wed, 21 Jan 2009 23:13:33 +0000

“Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism”

Karl Marx, Das Kapital, 1867

The quote may not be authentic.

Merry Christmas

chris — Thu, 25 Dec 2008 02:56:27 +0000

UBS’ Christmas card.

Where We Are

chris — Fri, 24 Oct 2008 13:25:54 +0000

In 1997 I was publishing a service entitled Fax-On-Time to clients interested in short-term market movements. As the Asian panic unfolded, I used my knowledge of the lunar nature of the 1929 and 1987 crashes to inform clients that the low should occur on October 28. Friday October 24 saw a huge reversal and rally on Wall St. as well as Asia and many assumed the bottom was in. It was not. Monday October 27 was a massive down day on Wall St. and the subseqent low in Asia was made October 28 while Wall St. was closed overnight.

click chart to enlarge

The timing of the Asian panic low was dramatic confirmation of my theories first outlined in the book, The Spiral Calendar, published in 1992. In the following months I wrote the research paper, Autumn Panics: A Calendar Phenomenon, which received the Charles H. Dow award for 1998 for best technical analysis research paper from Dow Jones, Barron’s and the Market Technician’s Association. The paper is available to be read here at the MTA site. The paper introduced the concept of the ‘dark days’ – that period of time in the autumn when markets are vulnerable to panic.

Now we arrive at 2008. Panic is once again enveloping not only Wall St., but markets world wide. The point of maximum panic as calculated by my research is this Sunday, October 26. With markets closed for the weekend, today’s selling should be the final washout in The Panic of 2008.

Where We Are is that the markets are once again confirming my original research into the effect of the lunar calendar of mass psychological behavior. The panic is at its maximum right now. Beginning next week, calm and more gentle price swings will slowly but surely return to the markets.

click chart to enlarge

Jim Cramer is the Worst Analyst in Modern Times

chris — Mon, 06 Oct 2008 15:43:40 +0000

And that fact my friends, is now the stock market’s best and brightest hope for a bottom to be put in.

It’s just two days short of the 10-year anniversary of the October 8, 1998 low – the low that cemented Jim Cramer’s reputation as the Worst Analyst in Modern Times. Mid day on October 8, 1998 things were looking bleak for stocks when Cramer penned his ‘looking into the abyss’ mid day update. He pretty much told everyone that we had reached the end of the world. Minutes after the release of that update, stocks rocketed skyward. And now, one decade later, he’s doing it again. I’m willing to wager that Mr. Cramer is just as much the blithering idiot now that he was back then. Maybe the guy can pick stocks. He certainly is an entertaining television variety act. But his ability to call general market direction is abysmal and to read his comments today, must warm the hearts of stock market bulls everywhere.
Here’s the scoop…
Jim Cramer: Time to get out of the stock market

“….In what Curry called a “dramatic statement,” Cramer emphatically urged any investor who has money they may need in the next five years tied to stocks to pull their dough out….he’s now saying retreat is the best position in the face of some of the worst financial news in decades. The bank lending default crisis that put financial firms around the country on the brink of collapse could bring “as much as a 20 percent decrease in the stock market,” Cramer predicted…”

Look – I’m long-term bearish too, and yes we will lose 20% in the next couple of years. So in the long run, Cramer will be right. But his track record for exhibiting extreme, vein-popping emotion at exactly the wrong time over the years argues for a short-term low now.

Credit Poison

chris — Mon, 06 Oct 2008 13:01:15 +0000

I titled Friday’s intra-day update ‘poised’ – perhaps it should have been ‘poison.’ Pay attention or pay the offer has done a pretty good job identifying the 20-40 point eMini swings in advance, but Friday’s call was an egg. It happens. It also illustrates what I think is the bigger, and more dangerous picture. Events in stocks are being dictated by the credit collapse and panic. As a technician who’s partial focus is on stock index futures, it is time to be aware that the credit situation is calling the tune, and no amount of bullish indicators are going to change the direction of stocks until the panic runs its course.

And when will that be? New readers are encourged to read Autumn Panics: A Calendar Phenomenon – which is available here on the MTA website as the 1998 Charles Dow paper. It remains the standard research report on panic timing and I’m proud to be its author.