Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

[c1ue]

http://www.martinarmstrong.org/files...th-12-6-09.pdf

Here, once you get through all the cyclical gobbledygook, Martin Armstrong asserts the following:

1) Dollar will continue falling
2) Stock markets around the world will continue to climb

This appears to be based on the view that a dollar carry trade will subsidize the stock markets of the world, with inflation driving up the US stock market.

Comments?

[phirang]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

Seems a pretty safe fade to me.

[ThePythonicCow]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

http://www.martinarmstrong.org/files...th-12-6-09.pdf

Here, once you get through all the cyclical gobbledygook, Martin Armstrong asserts the following:

1) Dollar will continue falling
2) Stock markets around the world will continue to climb

This appears to be based on the view that a dollar carry trade will subsidize the stock markets of the world, with inflation driving up the US stock market.

Comments?

I wouldn't call the cycles gobbledygook. There are always a confusing and conflicting variety of forces imposing on the various markets of the world. One must get a sense of their natural cycles in order to know which are waxing and which waning at anytime, just as one must know the seasons in order to know when to sow and when to reap.

I read Armstrong as saying that debt funded and government backed assets are or soon will be on the wane, especially real estate as it is fixed in location and too easily taxed by stressed governments, and that private assets that can be bid up in global markets, such as gold and even stocks will rise in nominal value, due in good part to weakening currencies, especially the dollar.

[phirang]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

I wouldn't call the cycles gobbledygook. There are always a confusing and conflicting variety of forces imposing on the various markets of the world. One must get a sense of their natural cycles in order to know which are waxing and which waning at anytime, just as one must know the seasons in order to know when to sow and when to reap.

I read Armstrong as saying that debt funded and government backed assets are or soon will be on the wane, especially real estate as it is fixed in location and too easily taxed by stressed governments, and that private assets that can be bid up in global markets, such as gold and even stocks will rise in nominal value, due in good part to weakening currencies, especially the dollar.

What happens when the Fed signals tightening? You guys are going to get blindsided here.

[ThePythonicCow]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

There is another, even more recent , Armstrong that I linked to from The Dow & The Future (Martin A. Armstrong)

[sishya]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

What happens when the Fed signals tightening? You guys are going to get blindsided here.

But can FED do that ? won't that cause another dip ? what is this whole FED policy becoming - a joke ? If it is Liquidity draining, what happens to the Mortgage security values, further chain reaction.

Instead of Money Draining the better option would be raising interest rates, because small Business will not be effected much but only bank rate difference profit.

[c1ue]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

What happens when the Fed signals tightening? You guys are going to get blindsided here.

The problem with your statement is that the Fed tightening conflicts with Armstrong's assertion of the dollar carry trade inflating world stock markets. A rising interest rate in the US would at least hurt or possibly kill any interest in a carry trade.

The reason the Japanese carry trade worked so well for so long is exactly because Japan did not raise its ZIRP for more than a decade.

As for Armstrong's thesis - in general it is hard to argue with the scenario of inflation in the US. The question, of course, is whether the stock markets will continue to rise on the weak dollar/rising multinational market capitalization.

Looking at the '70s, there was a period where the falling dollar drove the nifty 50 into an 18 month tear - but this was followed by a multi-year bear market.

Secondly Armstrong does not address at all the other aspect of the dollar carry trade: that unlike Japan the US is a net debtor.

While it is conceivable the dollar as a reserve currency is an equal or better replacement than the Japanese currency account surplus, at the same time the notion of the dollar falling out of reserve status is on the table - another item not addressed.

There is another, even more recent , Armstrong that I linked to from The Dow & The Future (Martin A. Armstrong)

Oops - I dug through 6 pages of News to see if this had been posted, but didn't look at other sections. My bad.

[don]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

I tend to agree with the Big Dog here. EJ feels that the Fed will only raise rates in response to rising employment. China, in this regards, be damned.

[jk]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

if there's one thing ben will NOT do, it's repeat the mistake of 1937 and tighten prematurely. since it's hard to know when premature ends, he'll lean against actually tightening, though he will always threaten tightening.

[GRG55]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

The problem with your statement is that the Fed tightening conflicts with Armstrong's assertion of the dollar carry trade inflating world stock markets. A rising interest rate in the US would at least hurt or possibly kill any interest in a carry trade.

The reason the Japanese carry trade worked so well for so long is exactly because Japan did not raise its ZIRP for more than a decade.

As for Armstrong's thesis - in general it is hard to argue with the scenario of inflation in the US. The question, of course, is whether the stock markets will continue to rise on the weak dollar/rising multinational market capitalization.

Looking at the '70s, there was a period where the falling dollar drove the nifty 50 into an 18 month tear - but this was followed by a multi-year bear market.

Secondly Armstrong does not address at all the other aspect of the dollar carry trade: that unlike Japan the US is a net debtor.

While it is conceivable the dollar as a reserve currency is an equal or better replacement than the Japanese currency account surplus, at the same time the notion of the dollar falling out of reserve status is on the table - another item not addressed...

if there's one thing ben will NOT do, it's repeat the mistake of 1937 and tighten prematurely. since it's hard to know when premature ends, he'll lean against actually tightening, though he will always threaten tightening.

Exports are climbing on the back of the weaker Dollar

US based multinationals reporting in Dollars will see foreign earnings increases on the exchange conversion alone...so increases in nominal stock prices aren't inconceivable;

The trade and current account imbalances are narrowing [to China's detriment];

I also doubt Bernanke will tighten...and I don't think there will be any need for him to tighten regardless of the unemployment trend. After the above, the next thing the markets are focussed on is the US fiscal deficit. Any material improvement in that figure will be taken as a sign that recovery is entrenched, and I suspect will put a bid under the US Dollar...thus relieving one of the pressures on the Fed to raise rates.

So, rising [nominal] corporate earnings, a belief in an entrenched recovery, falling deficit, rising Dollar, falling commodity prices...Goldilocks returns. If I was a share-monger on Wall Street what's not to like about that story...:rolleyes:

[bill]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

a share-monger on Wall Street what's not to like about that story...:rolleyes:

http://www.bloomberg.com/apps/news?p...d=atsocHBN.pdw
dollar carry player

Dec. 17 (Bloomberg) -- Pacific Investment Management Co. hedge-fund manager Changhong Zhu will leave the firm to become chief investment officer of a Chinese sovereign wealth fund.

equities player

El-Erian, a former deputy director at the International Monetary Fund, shares the position of investment chief with Gross. On Dec. 7, Pimco hired former U.S. Treasury official Neel Kashkari to help oversee new investment initiatives as the firm makes a push into equities.

BTW keep an eye on these guys.
http://www.bbh.com/company/releases/...fice090909.pdf

[jk]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

Exports are climbing on the back of the weaker Dollar

US based multinationals reporting in Dollars will see foreign earnings increases on the exchange conversion alone...so increases in nominal stock prices aren't inconceivable;

The trade and current account imbalances are narrowing [to China's detriment];

I also doubt Bernanke will tighten...and I don't think there will be any need for him to tighten regardless of the unemployment trend. After the above, the next thing the markets are focussed on is the US fiscal deficit. Any material improvement in that figure will be taken as a sign that recovery is entrenched, and I suspect will put a bid under the US Dollar...thus relieving one of the pressures on the Fed to raise rates.

So, rising [nominal] corporate earnings, a belief in an entrenched recovery, falling deficit, rising Dollar, falling commodity prices...Goldilocks returns. If I was a share-monger on Wall Street what's not to like about that story...:rolleyes:

i like a heart warming bedtime story, but what will make the fiscal deficit improve? i kind of missed that part of the tale.

[Jay]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

since it's hard to know when premature ends...

Might be tough, but I know for damn sure it ain't even close to today, they tighten and we get chaos.

[ThePythonicCow]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

c1ue wrote:

Oops - I dug through 6 pages of News to see if this had been posted, but didn't look at other sections. My bad.

No problem. I'm rather clueless when it comes to choosing in which forum to post.

You probably know this, but for the possible benefit of interested lurkers, I recommend using the Search facility to look for prior contributions. On the menu bar near the top of most of these pages, click on Search, then choose Advanced.

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[GRG55]

Re: Latest Martin Armstrong (12/6/09): divergece vs. Ka-Poom (discussion thread)

i like a heart warming bedtime story, but what will make the fiscal deficit improve? i kind of missed that part of the tale.

Haven't you heard? Recession's over. The banks passed the stress test. TARP's being paid back. GM has been saved. The "Jobs Summit" was a success. The "Green Economy" has arrived [at the same time as the shale-gas-for-all economy for you die-hard hydrocarbon fans]. And by this weekend it'll be certain the USA economy won't have the bear the cost of cutting carbon emissions, as Copenhagen collapses.


Seriously, I am convinced the Administration is going to find a way to rig the books to show a reduced deficit going into the mid-terms. Two potential components that we might expect to see:

• they recycle TARP funds that were accounted for in the 2009 deficit, and therefore don't show as additional borrowing on the 2010 accounts;
• if that isn't sufficient, then they throw the long term unemployed under the bus [on another thread I postulated that the chronically unemployed remain in plain sight, but "disappear"...because the media just stops writing about them as that bad news story doesn't sell papers any more].

I think this Administration is under increasing pressure to cut the deficit, and by some combination of real cuts [no further unemployment benefit extensions?], reallocation of funds like TARP, off balance sheet accounting tricks, and whatever else, they are going to accomplish it. The appearance of improved "fiscal prudence" is an integral part of this election year bedtime story and can no more be left out of the script than the milk and cookies...:p

Let's remember, in this madhouse world, where the solution for too much debt is more debt, we don't actually have to get there...we just have to believe we're heading towards "and they lived happily ever after". [That alone should be good for another +150 S&P points]

Cynical? Me? Nah...