2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

[BK]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

There are lots of signs a correction has begun - computer trading gets out of the dogs as they collapse and move into things that are going up.

Look the number of smaller stocks that are collapsing:
http://finance.yahoo.com/echarts?s=F...=FEYE;range=1y
http://finance.yahoo.com/echarts?s=N...l=NOW;range=6m
http://finance.yahoo.com/echarts?s=W...=WDAY;range=2y
http://finance.yahoo.com/echarts?s=C...=CNQR;range=2y
http://finance.yahoo.com/echarts?s=A...=ATHN;range=5y

Keep in mind there are more - I just need to grab a coffee with my lovely bride....Athena Health looks like a down right collapse.
Remember, computers trade 70% of the volume today and a crash in 2014 won't be like a collapse of 1987 or even 2000-2001.

regards.

[BK]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

Here is a list of more momentum stocks that have corrected...

I failed to mention the high flier and hot stock of the year twitter - hit $73 last December and is currently available at $30 a share....this must be a buying opportunity.

I found the list here:http://www.testosteronepit.com/home/...of-stocks.html

[lektrode]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

and more on the margin debt reversal:
This Happened Twice Before, And Each Time Stocks Crashed

Thursday, May 22, 2014 at 1:23AM

also thot this was quite interesting:

But it’s even worse. While shrinking import volumes were concentrated in the emerging markets, there was “a remarkable increase” in imports by Japan. And there was a reason, a very temporary one.
Japanese households and businesses have been front-loading major expenditures, including building materials, machinery, cars, jewels, electronics, etc. in anticipation of the consumption-tax hike that took effect on April 1. The tax is very broad based, and by front-loading durable-goods purchases, buyers were able to save 3% (a tax free gain!) in a country where 10-year government bonds have been yielding below 1% for years. Front-loading was one heck of a deal. Everyone did it. And imports soared [here is my chart of Japan’s increasingly out-of-whack trade deficit from 2011 through Q1 2014].
That temporary jump in imports by the third-largest economy in the world papered over some of the trade weaknesses elsewhere. Without that buying binge in Japan, trade momentum in the first quarter would have been even worse.

[DSpencer]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

Where is the bad call? EJ has not announced a time to short. He only has raised the potential for a crash this year, but has also said it could extend as late as 2014.

You might want to reread carefully what was written, plus the followups by EJ on the forum.

EJ has clearly said that forecasting this decline is being made very difficult by the manipulation by the Fed and other central bankers.

Saying it's difficult is probably a huge understatement. I wouldn't dare make any prediction as it would be pure guessing.

The problem is that from a standpoint of evaluating the "correctness" of calls, what are we to make of calls that mention the potential for a crash? Is it a good call if a crash happens? If so, isn't it a bad call if it doesn't happen? Or is it simply not a "call" at all?

[vinoveri]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

As everyone observes predicting a top/crash etc is very difficult b/c of the continued intervention by the authorities (e.g., Fed and other CBs). I'm starting to believe that downturn in the markets can be controlled/limited by the Feds (by purchasing equities for instance) and the Feds can also deliberately cause a crash if they choose, so again I'm back to a controlled market but cognitive dissonance is perhaps preventing me from accepting this - where is all that private capital, where are the bond vigilantes, in short where are the private actors that drive markets??

What I'm trying to get my head around is how much control the authorities actually have (or don't have). Some folks say its a strictly controlled market while others say it is a result of capital flows by private investors (although these privates are still reacting to actions and anticipated actions of the authorities).

So, fellow iTulipers, if you had to estimate how much top-down control the CBs/sovereign govs have on the markets on a scale of 0-100% where:
100% means the authorities are in complete control e.g., can determine largely what the bond and equity indices do
0% means no control over the markets

What would you say? Are you in the a 30%, 50% or 70% range?

[Polish_Silver]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

Sorry to be so blunt EJ, but this looks like another bad call. Your not the first to predict the end of this, fake, bull market, but trying to time its end is a fools game.

A call without a time window is meaningless. I think EJ gave a rather broad window, but I can't recall details.

[vt]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

EJ's conclusion at the end of the 1/31/14 article

"Today as Yellen takes her turns in the barrel she faces conditions that no other Fed has ever faced in history.
Inflation is low, growth is slow, all of the major economies of the world are still recovering from the AFC, China's
Great Wall of Money is breaking down as growth slows, the pre-mature end to the Bernanke Fed's ill-conceived
price fixing operation is beginning to rattle markets around the world, which in unison reached a new real
peak in Q4 2013. If a recession occurs in 2014, there is not much Yellen can do The environment will be similar
to pre-WWII after the 1938 a mid-gap recession. War provided the political cover for the level of fiscal stimulus
that was needed to finally close the output gap created by the 1930 to 1933 recession then re-opened in 1938.
In my estimation if a recession occurs in 2014 we will need deficit spending on the order of 15% to 20% of GDP
to provide sufficient stimulus to prevent a deflationary outcome.

What else can the Fed do? In addition to QE4, referring back to the Fed's 2003 Deflation Playbook there remain two items that could be moved from the "Not Allowed" to the "Allowed" column of the list of assets that the Fed can purchase. The Fed cannot purchase them legally per the Federal Reserve Act via open market operations. The Act restricts the Fed to purchase "any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States." Asset-backed securities are not on that list but are on the Fed's balance sheet nonetheless. By the same principle, additional assets that the Fed can buy illegally to produce a fresh round of asset price inflation are equities and corporate bonds.

Which is why I am loath this time to short the market."



We all need to go back and very carefully reread the article. In the first two charts EJ said "Time to short #3, NOT yet"

In the next chart he had a projection of the S&P 500 possibly hitting as high as 2,600 by December, 2015. He also said later in the article that the central banks game could go on until 2018.

In my opinion there has been no call, only a warning that one could come as early as this year. In a later comment after the initial article he did suggest that we may see a correction and that S&P 500 1,850 or 2% overshoot could be a correction level, but not a short level. Maybe a 2011 type up to 20% correction?

March, 2000 and December, 2007 were perfect calls, as was the call to buy gold in 2001 and sell silver in April, 2011. In his writings recently there are warnings but no call yet to sell as far as I read.

We are in uncharted territory: a Fed manipulated bond market without a major war. Is it any wonder that forecasting is difficult?

[Chris]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

We are in uncharted territory: a Fed manipulated bond market without a major war. Yet.

Things are definitely starting to get heated under the covers.

[Forrest]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

Things are definitely starting to get heated under the covers.

With today's manipulated media, do we really need to get into a war for them to break the remainder of the rules? With China, Russia, and the East Asian Countries lining up in a slightly seperated market, and encouraging each other to market locally, surely the Europeans will be in such bad shape as to need some interesting stabilization plan that could get the laws bent a little more...so we don't have to go to war. Much cheaper!

[Slimprofits]

Re: What is a "debt deflation"

EJ: The Fed's balance sheet isn't really infinite, despite what Greenspan used to assert. Can it be expanded to $10 trillion or $20 trillion to hold corporate bonds and junk bonds and all of the other debt that grew out of the Fed's yield curve manipulations?

Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10tn corporate bond market.

Officials are concerned that bond funds are becoming “shadow banks”, because investors can withdraw their money on demand, even though the assets held by the funds can be hard to sell in a crisis. The Fed discussions have taken place at a senior level but have not yet developed into formal policy, according to people familiar with the matter.

[..]


Exit fees would seek to discourage retail investors from withdrawing funds, thereby making their claims less liquid and making a fire sale of the assets more unlikely.

Introducing exit fees would require a rule change by the Securities and Exchange Commission, which some commissioners would be expected to resist, according to others familiar with the matter.

http://www.ft.com/cms/s/0/290ed010-f...44feabdc0.html

[thriftyandboringinohio]

Re: What is a "debt deflation"

Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10tn corporate bond market.

Officials are concerned that bond funds are becoming “shadow banks”, because investors can withdraw their money on demand, even though the assets held by the funds can be hard to sell in a crisis. The Fed discussions have taken place at a senior level but have not yet developed into formal policy, according to people familiar with the matter.

[..]


Exit fees would seek to discourage retail investors from withdrawing funds, thereby making their claims less liquid and making a fire sale of the assets more unlikely.

Introducing exit fees would require a rule change by the Securities and Exchange Commission, which some commissioners would be expected to resist, according to others familiar with the matter.

http://www.ft.com/cms/s/0/290ed010-f...44feabdc0.html

Thanks for posting that , slimnprofits.
Capital controls by any other name smell just as sweet......

[EJ]

Re: What is a "debt deflation"

Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10tn corporate bond market.

Officials are concerned that bond funds are becoming “shadow banks”, because investors can withdraw their money on demand, even though the assets held by the funds can be hard to sell in a crisis. The Fed discussions have taken place at a senior level but have not yet developed into formal policy, according to people familiar with the matter.

[..]


Exit fees would seek to discourage retail investors from withdrawing funds, thereby making their claims less liquid and making a fire sale of the assets more unlikely.

Introducing exit fees would require a rule change by the Securities and Exchange Commission, which some commissioners would be expected to resist, according to others familiar with the matter.

http://www.ft.com/cms/s/0/290ed010-f...44feabdc0.html

Anti-poom regs already? That's not a good sign.

[davidstvz]

Re: What is a "debt deflation"

Could drawing up this kind of regulation itself be a trigger?


If not, do you think this regulation can really contain the damage much?

[thriftyandboringinohio]

Re: What is a "debt deflation"

Could drawing up this kind of regulation itself be a trigger?...

It is for me.
I have some money parked in a bond fund; I'll have it closed out within the next week or so.

[GRG55]

Re: What is a "debt deflation"

Anti-poom regs already? That's not a good sign.

You told us some time ago that after many years of manipulating the bond market higher the Fed feared another bond market disconnect similar to 1994...