I've been talking about a longer term bear market for equities for three years now, yet markets continue up. Everyone calling for a big crash keeps getting mocked. This actually happened prior to 1929 - many people kept on warning of a crash, but things just kept going up up up.
Anyway, on the top, you can see the Dow Jones divided by M2 (cash). On the bottom, is the value of the DJI itself. As DJI/M2 remains between the two green horizontal levels, it seems likely smart money is accumulating cash. You can see this reflected in the "surprising" bullishness of DXY. Meanwhile, this has all happened before.
There's a lot more to talk about here, but these are just a couple of simple charts. Between 1965 and 1985, DJI did not make a new high. During the same time, the amount of cash in existence increased by a fair amount. You can see that in the decline in DJI/M2, versus sideways movement for DJI/USD. This means that we could be near a pretty disastrous period - a breakdown from the green horizontal level would have (previously) resulted in more money printing. But at this point, more money printing would be even worse for inflation. So all they can really do is just let it crash and unwind.
If no more money is printed, we can see DJI/M2 return to one of the lower horizontal levels (between 0.4-0.7). That means a substantial bear market for stock indexes. DJI can decline by 50-80%, while the more bubbly indexes like SPX and NASDAQ can decline by 90% (great depression levels).
If money continues to be printed, the US is likely to see hyperinflation for the first time. We're really at the point where fiscal policy determines the future of the US economy, and the global economy by extension. It's no wonder that cryptocurrencies are gaining popularity, even though those valuations would probably deflate in a market meltdown as well. Exciting times! Let's see what the future holds. Perhaps the developments will be surprisingly positive, but things don't seem to be aligning that way yet.
This is meant for speculation and entertainment only, and is not meant as financial advice.
-Victor Cobra
코멘트
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I will also add - I don't see a long bear market/consolidation period for markets as bad. During those periods, I think we can see substantial investment into what matters - infrastructure, education, social programs, and the environment.
코멘트
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Look at the period after the last Great Depression as an example. I just hope the cycle of war doesn’t repeat along with the 100 year debt cycle….
코멘트
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Looks like the cycle of war is indeed aligning with the debt cycle.
So nice to hear my favorite technical analysts, taking entirely different approaches in there analyses, coming to the same conclusion. Wow!
Jack-Strainer
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“At its most recent meeting, the Fed initiated the “Taper”. It will begin reducing the amount of money it prints each month from now until June next year. At that point, the bond buying orgy stops, and the market believes they will then raise policy rates above zero.”
The fall will commence soon… there stoping the printing
I told everyone a few days ago to move into cash immediately and they removed my post. This board cencors in violation of the 1st Amendment. Look what's happening. Watch what's coming!
The_Royal_Dutchman
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again very interesting. It's tempting to bring obvious arguments to table that seem to be at this time: dollar losing face, energy transition, china/us diplomacy, even Covid. I did a presentation years back about world power/reserve currencies changing hands throughout history. A key feature was boom, bust, great-depression, technology shift (like coal/iron around and war. Then the power was grabbed up by the next in line, usually the nation that lended money in the financial downfall of the leading country. So it makes one stroke his beard and go 'hmm'' . Next to all that, I always had a feeling around 2000 that is felt like the pinnacle of something, and that it would be downhill form there. But many every generation has that feeling.
I think you really stand out with these posts. Thanks for that!
makindea
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Time dilation is real. Two decades today is literally what 100 years felt like a few decades ago. That's too long for a shift in mass psychology.
VictorCobra
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@makindea, this is an interesting point - but time dilation has also resulted in our society/culture evolving past what evolution has provided (in terms of our psychological and even physical limits). So now even though we’re not biologically evolved when compared to our hunter/gatherer ancestors, we have this crazy tech-driven world that has only been around for a microscopic portion of our existence as humans. So I actually think we need a pretty big reset. The guy who wrote “Sapiens” would probably just say we’ll become cyborgs and that will be the next step in evolution. Possible it happens within the coming century.
-Victor Cobra
BCBackerBacker
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I'm going with 42K on the DOW before an 85-90% crash. Gentleman's bet anyone?
VictorCobra
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@BCBackerBacker, I think maybe 50k :) Then crash down to 10k and the bottom light blue trendline for an 80% drop.
-Victor Cobra
BCBackerBacker
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@VictorCobra, Hmm you might be right. I thought TSLA would peak above 1100 and then come crashing down hard but has not happened...yet.
VictorCobra
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@BCBackerBacker, we’ll see! No one knows! I really find the TSLA/Bitcoin relationship interesting. Would be even more interesting to look at the market caps of both.