A Hundred Scenarios Favor This Bet

The wave of cash that flowed into U.S. Treasurys late last week should serve to remind us of the myriad ways investors can profit by betting on a rise in T-bonds prices and a corresponding decline in yields (details below).  All it took to set these flows in motion on Friday was some unsettling news from Ukraine. What was the news? That’s the point. Whatever it was, it barely registered on a global-crisis scale so weary of horrifying headlines that no story, no matter how ugly, stays above the fold for more than a few days.  Even so, the news from Ukraine was sufficient to coax idle cash from around the world into U.S. debt paper. Just imagine what would happen if a real crisis unfolded.

It could come from any one of a dozen geopolitical hot-spots where low-grade troubles have continued to fester without resolution:  Iraq, Syria and Gaza, to list the current headliners. War-torn hot-spots aside, Ebola could erupt into a global plague. Or Europe’s supposed economic recovery, an even bigger hoax than the one said to be muddling along in the U.S., could implode, turning their banking system into one big Banco Espírito Santo.  What else might favor Treasury Bonds as an investment?  How about a U.S. slide into recession-or-worse? It’s not as though the moribund long end of the yield curve hasn’t been predicting this since January, even with the Fed constantly “managing our expectations” with ridiculous talk of an overheated economy and the return of serious inflation.

What Recovery?

What rubbish!  It is only auto sales at this point – or rather, auto leases that make expensive cars “affordable” for the masses  – that are still registering a pulse. In the still more important real estate sector, re-fi activity remains dead; the surge in home prices has abated despite the return of sub-prime loans and nothing-down deals; and the market for first-time buyers remains lifeless. As for the retail sector, sales remain flat at low-end chains such as Walmart, Kohl’s and Target, but the sluggishness has begun to infect the likes of Macy’s as well. At the very low end, dollar store chains have been consolidating just to stay alive.

Against all this the spinmeisters would have us believe the economy grew at a 4.0% clip in the last quarter, reversing a negative 2.1% adjusted figure for the quarter before it. Which do you believe?  Bond yields surged on the bullish number, but we used this fleeting moment of mass stupidity to make hay. Specifically, Rick’s Picks subscribers were instructed to buy bullish calendar spreads in TLT, an equity vehicle that tracks T-Bonds maturing in 20 or more years.  TLT was trading for around 115 at the time, and we positioned our spreads to pay off on a rise to just above 118.  We expected the rally to take a few weeks, but last week’s bond-buying frenzy got us there in just two days. The bottom line for us was that call spreads whose cost basis had been reduced to 4 cents by some simple, weekly tactical maneuvers were pushing 90 cents as the week ended.

Calendar Spread Zaps Risk

Because we are confident the bond rally will continue, even picking up speed as it slowly dawns on the mindless herd that the manufactured illusion of recovery is fading, we are currently focused on higher strike prices and further-out expirations. The trend is just warming up, but it is bound to explode when the bull market in stocks begun in 2009 draws its last breath. All of that money will have no other place to go. I first described our bullish T-Bond strategy here a couple of weeks ago, but I am repeating it because the investment world still doesn’t seem to get it. And as long investors act stupidly, their common sense warped by Svengalis like Janet Yellin, the investment opportunity of the decade will go begging.

As to those who say the economy is picking up speed, these self-promoting charlatans are thumbing their noses at the most powerful economy-killer of them all: a bear market in stocks.  For to blithely assert that the economy will continue to chug along is to ignore the prospect of a market downturn.  When it finally comes, as it surely will, it may be for no apparent reason; or, less likely, triggered by a true geopolitical catastrophe; or, potentially worst of all, by a failure of confidence in the banking system as occurred several years ago. Need we remind investors in the meantime that the very illusion of recovery is sustained more by high stock prices than by any other factor — least of all, by corporate earnings that could vanish overnight?

If you believe that bull markets do not go on forever, the T-Bond strategy described above offers a low-risk, high-leverage play against the popular wisdom. Click here if you would like to be apprised of our continuing tactics in real time.

  • gary leibowitz August 24, 2014, 2:28 am

    The straw clearly clings to you. For 6 years you gave absolutes. Those got taken out one by one year after year. You cling to an impossible notion that any government, let along ours, could actually orchestrate a sham for 6 years. Done so well that in all appearances it actually looks like it occurred on their own. You keep showing as proof to this sham weak retail sales, death of the brick and mortar, no wage growth, anemic job growth, and weak credit expansion. Yet isn’t that EXACTLY what the data showed? Your conclusions that it has to cause the economy to fail is so bizarre that it borders on lunacy. Consumer contraction by its definition means they “HOLD BACK”. As a result they have more discretionary money, repaying debt at a lower rate, and whether by choice or circumstance didn’t add to their debt burden other than what was necessary. Student loan explosion was a given considering the job market. Revolving credit actually slowed down in these 6 years.

    You see every action as NOT having an equal but opposite re-action. Push someone and they fall in perpetuate. The mysterious notion of gravity is lost on you.

    Please review your handiwork from all those past years and defend them now if you can.

    I guess you will wear me out. Perhaps I can come in on a more mundane topic later.

  • gary leibowitz August 24, 2014, 2:06 am

    Contrary to your assumptions there is real growth in manufacturing and factory orders. QE is all but gone yet the exact opposite expectation happened with yields. Seems the world is running for cover here in the US of A. The super-tanker of an economy is gaining speed. Slow but real. The real talk by the FED is when do they start raising rates. I know no one here believes its even a remote possibility. If the QE debacle can end so smoothly without anyone here giving counter arguments why that is so, than the likelihood of a rate hike becomes all the more real. Do all people on this board ignore economic data that points to strength? Is every single sector that shows life a mirage? Can you really dismiss or explain away all the reports?

    I keep hearing the same arguments for years as if the news relating to the pulse of this economy doesn’t matter.

    I was told in no uncertain terms there will never be a stop to the QE programs. I was also told that there is not enough credit expansion to create the need for rate hikes. I wonder what this board will say if the FED actually does raise rates in 2015. All I know is that the mortgage debacle caused a huge contraction in economic activity and resulted in fear. That was perhaps the single reason why consumers decided to re- balance their books. It certainly didn’t create a clean slate, but did allow for more savings, reduced debt payments and more discretionary money. All this despite the anemic wage growth. These facts are clearly indisputable for a vast majority of economists. Why you don’t acknowledge the reasons why we have survived so long is something I will never understand. Can we actually start seeing wage growth outpace inflation? Too early to tell. If it does occur than the pressure on rates will be real, despite the huge appetite from overseas to own a piece of America.

    This macro view has been expected by me, but to date hasn’t really accomplished what I thought it would, namely credit expansion and rate hikes. I wonder if we do get that 4th wave down during times of improvement. It makes sense since corporate profits rely on low costs. My impatience from years ago compressed the whole cycle to be over with by now. The slow movement has only taken us to a point where we “can” see the last phase of accelerated credit expansion. The big question still remains, can it.

    I expect the current top to occur anytime now. Most likely in October but can be sooner. It certainly doesn’t look like it will result in a crash, but it can be scary if it drops 20 percent in 5 months or so. Stay tuned!

  • Jason Laver August 23, 2014, 8:17 pm

    The trajectory of intelligence is always onward, upward, uplifting, and clarifying. The trajectory of fearful is always balled up, destructive, contracting, and foreboding. Which side are you on?

    &&&&&

    I’m on the side of facts, Jason. Do you think they augur a happy outcome for the economy? RA

  • Baseball Bill August 22, 2014, 7:33 am

    Ackerman of Boulder CO says, golds drop looks “unavoidable”…outside his other cheek he claims the Dollar will die in heartbeat.

    So how do I place me bets at this point Mr. Rick? Do I make a few bucks on golds drop, or dig a bomb shelter? At least suggest how much of my time and money I might spend on each, or either, if you please dear seer.

    &&&&&&

    Re-read today’s tout for December Gold, Bill. It’s all there, including a precise correction target.
    RA

  • redswilanding August 21, 2014, 6:24 pm

    i am sure this site is super bullish on gold and now claiming everything is rigged and scammed and soon housing prices will be worth 99% less. this has been going on here for way to long. rick, can you count the times you called for a reckoning and bearishness and gold higher and stocks lower? maybe a zillion. this is what happens when left alone and the internet becomes your sounding post. sad. anyhow i hope all your followers keep staying super bearish and negative on the world.

    &&&&&&

    I’ve never been ‘super bullish’ on gold, Red, nor am I now. Think of me as the anti-Jim Sinclair: No pie-in-the-sky price targets, I just call ’em the way I see ’em, always trusting my technical tools above all. That said, the libertarian skew of my commentaries has attracted more than a few gold bugs, and if there’s anything ‘hopeful’ (I am not a fan of that word) in the technical picture, I will try to emphasize it without going overboard.
    RA

    • Farmer August 21, 2014, 7:42 pm

      The time of reckoning is known by none, Red, but you can bet your bottom dollar it is coming. The inevitability has merely been forestalled, not averted. I guess you could say that exceptional interventions of our Central Banks have put the risks in hibernation and given us all a little extra time to organize and prepare. Don’t fall asleep at the wheel though because a sh*t-storm is still on the horizon. Meanwhile, you might just want to contemplate today’s dive in gold and the Dow’s rocket approach of the past days towards its July peak. I think that tomorrow will see a new high on the Dow and a slightly lower price for gold. But watch out for Monday. This corrective period has not ended in my view and I am strongly suspecting there will be reversals beginning next week. This is not the end of the world of course. So no need to panic. But lets not be surprised to see 15% or more peeled off stock markets before September is over.

  • redwilldanaher August 20, 2014, 11:10 pm

    Snippet from ZH:

    At the end of the day, the Fed has spent over $3.5 trillion. The Fed’s own research concludes that between this and ZIRP, it has lowered unemployment by 0.13%. Indeed, the Fed admits that without all of its policies, unemployment would be 1% higher than it is today.

    That’s a truly staggering admission, particularly when you account for the fact that this is the Fed’s own research (you’re never going to hear the Fed state that unemployment would be lower without Fed intervention).

    Where is the eternally clapping seal?

    • redwilldanaher August 20, 2014, 11:14 pm

      More seal food:

      http://www.zerohedge.com/news/2014-08-20/car-repos-soar-70-auto-subprime-bubble-pops-its-contained-promises-fed

      More signs of real health. Pretty sure this happened a lot in the ’50’s too…

      • gary leibowitz August 21, 2014, 12:55 am

        I agree we are not in a healthy position economically speaking. I can state this as being true even before the mortgage debacle. In fact for decades we have used credit as if its true collateral. But where is the point of no return. Nope, didn’t happen after the mortgage debacle. It allowed corporations and individuals the means to contract by reducing spending and lowering debt. It was done with the trillions of government money pumped into the system just to allow stability. Yes I agree things are a mess. For investment purposes things are actually pretty good for the next few years, IMHO. That’s where we have always differed.

        Just because we are on a river that has a waterfall at the end, doesn’t mean you can’t enjoy the ride. I call this betting, not investing.

      • redwilldanaher August 22, 2014, 4:10 pm

        109,631,000 Americans lived in households that received benefits from one or more federally funded “means-tested programs” — also known as welfare — as of the fourth quarter of 2012, according to data released Tuesday by the Census Bureau.

        When those receiving benefits from non-means-tested federal programs — such as Social Security, Medicare, unemployment and veterans benefits — were added to those taking welfare benefits, it turned out that 153,323,000 people were getting federal benefits of some type at the end of 2012.

    • Redwilldanaher August 21, 2014, 4:19 am

      I can’t recall one person @ Rick’s ever arguing that money couldn’t be made or that the market couldn’t rise. I do however recall, countless times in fact, that you have argued that there is legitimacy associated with all things rigged. That’s where you depart from reality and nearly everyone else round these parts keeps on keepin’ it real…

      • gary leibowitz August 22, 2014, 9:20 pm

        You don’t read the daily articles either presented by Rick himself, or the other contributors it seems. Show me ONE headline in the past 5 years that suggests the market will actually hit the target of 2019. Even Rick doesn’t believe his own technical analysis. He constantly dismisses it and prefers to “see” crash scenarios. These points are obviously missed by you. It’s like seeing clear skies, using the weather forecasters to confirm this, yet still believe a storm is right around the corner. Very strange behavior.

        As for legitimacy of the market, please explain what you mean by that? I believed “Profits” and “Earnings” would do well these past 5 years. I have been proven correct. You want to re-write my words I urge you to reference any remark I made that contradicts this. I legitimize the market because all the rules and regulations were done “above board”. Please show me a hidden policy? Just ONE. Just because you don’t think the changes were fair doesn’t negate their legitimacy. This is about understanding the government policies and adjusting your bet accordingly.

        I don’t think its fair that Social Security is enjoyed by all, yet the rich don’t pay into it after they reach a “modest” threshold of earnings. Should I call the system not legit? Should I dismiss its affect on people just because I rail against its policy? Ridiculous. yet here we are 6 years into the recovery and real verifiable profits and earnings resulted.

        I have disproved all the arguments concerning the fake economy simply by showing the “real” results.

        1 – Unreported joblessness. Job growth only done with part-time workers or minimum wage workers. Wage growth flat and inability to increase discretionary spending.

        If this was true for the last 6 years than please explain the real data that shows discretionary spending increased. It gest “confirmed” with real corporations receiving real revenue and real profits. If the above were completely true than either the earnings are faked, or they received them “despite” the weakness. All I know is that the disastrous jobs picture was enough to spur corporate earning to unprecedented levels. Highest in history, even pre-crash. Perhaps low rates really DID help the consumer? Perhaps lower mortgage and borrowing rates DID help the consumer. Tighter home borrowing DID help the consumer. It prevented more bankruptcies and delinquencies. As it is it is still very high.

        Always a one-sided issue with a one-sided result. Guess again!

        So yes I legitimize the system. I accept what the FED did. I accept the current consequences of it. I don’t have to agree with their policy to believe the last 6 years were real. I don’t even have to accept they are on the right path. In simple terms, I review their decisions and evaluate the short, intermediate, and long term consequences. My short and intermediate term evaluation seems correct. have no idea if my long term one is true. If it wasn’t legit than I got luck anyway these last 6 years. I guessed what will result from their “bad” policy. I accepted that policy as real and acted accordingly.

        Everyone here seems to be in shock over the results. Please look at history and you will understand that it can take a very wide rift for things to fall apart. Right before the Great Depression no one would have guessed it could go that long with such an ever increased rift, yet it did.

        &&&&&

        Another 576 words of non sequiturs, Gary. Yours is the most overstuffed straw man that ever was. RA

      • gary leibowitz August 22, 2014, 11:03 pm

        As someone on TV said, the recover is a “balance sheet” recovery over wage growth. Simple one sentence answer. The next phase needs to be confirmed in order for this to continue, that being wage growth.

      • mario August 24, 2014, 7:31 am

        Well Gary, GEEZ, when outrageous, corrupt, unimaginable practices suddenly become regarded and accepted as normal and “above board” in the new world of one sided global economics, that don’t make ok!!

  • gary leibowitz August 20, 2014, 12:44 am

    What recovery you ask? Perhaps that is the single best reason you have been bearish all these years. I use actual data, and you use excuses to stay bearish. WalMart might be hurting since this great country of ours decide that reducing spending on the poor is the answer to salvation. Republicans wanted 40 billion cut and got 9. Subsidies will be cut at the bottom. the trickle up theory. Every single report relating to the economy is showing better than expected results. Service sector is on fire. Manuf, and future orders way up, and even housing is showing a very steady upward move. So the fundamentals look good and earnings look good. I sure can expect a crash from that? Call me crazy but if the economy is improving, despite the rhetoric here, and earnings are coming thru, the only possible answer to a crash would be external. Maybe we get an escalation in war, defaults, trade wars, etc…

    So keep looking for reasons to stay the course. Citing companies problems is most likely either company related or a change in consumer habits. Brick and mortar is still being discussed as a reason for an imminent crash? really?

    What ever happened to the inability to keep bond rates down (if) the government decided to disband the QE programs? If became a reality. But keep the troops in line with talk of a future disaster for autos, and retailers.

    I will reiterate my point and macro view that was stated right here so many years ago. Reacceleration of credit will result in immediate higher earnings return and profits for companies. GDP will rise higher than anyone here reasons possible. We will spend more and borrow more and get into debt more. The mortgage debacle caused a retrenchment by consumers. the feel good times will come back and with it the same over stretched credit expansion. For now however expect an over reach on earnings and a 5 to 8 month correction of at most 20 percent. this could start by October earnings season. The longer term however sees much higher levels as the 4th and 5th wave take hold. I repeat myself so the misrepresentation by some here get squashed. A long term bear that sees a euphoric level of good times right ahead that will peak in perhaps 2 years.

    • gary leibowitz August 21, 2014, 12:42 am

      Nice how you explained the two sides to the reasons. it’s your conclusions I don’t agree with. For instance the last quarterly reports showed companies beat on revenue not just earnings.

      An excerpt from Aug 14th article in Zack’s.

      “The composite picture for Q2, combining the actual results from the 464 S&P 500 members that have reported with estimates for the still-to-come 36 companies, shows total earnings reaching a new all-time quarterly record, and increasing by +8.0% from the same period last year on +4.4% higher revenues. This is a material improvement over the preceding quarter, when total earnings and revenues were essentially flat.

      Estimates for the 2014 Q3 have started coming down, with the current +4.0% total earnings growth expected in the current period down from +6.3% at the start of the quarter. But the magnitude of negative revisions in Q3 thus far is the lowest we have seen in more than a year.”

      My problem with most here is that the bias is so strong that you look for reasons to see a disastrous future. Please look at your own posts over the months and years and tell me your conclusions weren’t off. I t could very well be that companies are front loading their earnings in preparation for a bad year. It could also be that they see their stock value as undervalued and the best way to make appreciation on their money is to invest in their own shares. I do know that the CEO conference was the most optimistic in 6 years. They actually predict a slow down in earnings in the immediate future but conclude 2015/16 will be the best earnings ever. Sure they could be wrong. Sure it’s only a guess. I do however place their insight and front line vision high.

      Why I am on the brink of Rick Extinction by being right all these years is beyond me. I don’t use foul language or place my statements as absolutes. Just my view of the world.

  • Rick Ackerman August 19, 2014, 12:51 am

    Although no one has commented on it, I banned Vile Vlad from the site a couple of weeks ago, this time for good. The last straw was a post so rancid, hateful and filled with anti-Semitic slurs that I cannot print it here to show you how very sick he is. There is little point anyway in providing evidence that he is the sociopath we’ve suspected he was all along, since no one knows his identity.

    • Oregon August 19, 2014, 2:34 am

      The silence of Vlad is deafening. There is absolutely no loss from this blog by removing him, actually long overdue. I withheld comment only because I didn’t want to jinx what seemed too good to be true.

    • mario August 20, 2014, 2:38 am

      Thanks Rick. We don’t need people who feel being rude and obnoxious is more important than offering observation and argument, especially after they have been told repeatedly to follow protocol.

  • SA1 August 18, 2014, 10:51 pm

    In case one of you here just crawled out of a cave, whether Afganistan or Kentucky, and happened onto this web site, let me say that your prayers have been answered. You are extremely fortunate to have landed here.

    Secondly, to summarize what you have missed while in hibernation, Gary has been giving us giggles and grins (and heartburn) for 2 or 3 years, but Rick has been making us money (a lot of money) for at least the last 8 years that I have been following his advice.

    Those who have not taken advantage of his “free” trial offer, at a minimum, should retreat to their caves and wait for the apocalypse because they don’t have the gumption behind any desire to make money in today’s markets.

    If, after a free trial, you still can’t find the nominal fee to continue (hard to imagine unless you truly were in a cave for 10 years) , then follow him on twitter… @RickAckerman The nuggets that he drops on that path, and he may disagree, can be even more valuable than those he drops in his chat room. I think it may be because he is more discriminating there and tweets his best ideas. This is not to say chat roomers are short changed, they are not. They get “all” of Rick’s Ideas, answers to their questions/concerns, and the ideas of knowledgeble traders many of whom were trained in Rick’s Hidden Pivot methodology.

    Disclosure: I am currently not a Rick’s Picks subscriber, but I am forever indebted to Rick for my trading success. He took me from 10K to 6 figures in under 4 years. I follow him on Twitter. Thanks, Rick for tweeting…especially GLC (Gold futures), ES (E-mini S&P’s), TLT (20 yr bonds)
    Dale (aka SA1) [@NikkiDodi]

    &&&&&&

    Hey, Dale: You made my day! Thanks for your terrific endorsement. Anyone wanting to follow his advice can click here for that free trial. RA

    • Farmer August 19, 2014, 10:25 am

      “Real verifiable earnings. Real verifiable profits” — Gary

      I am not sure “real” is the correct word to use in this case Gary. Not when what you are really seeing is companies buying back their own stock to squeeze just a little more juice and prove earnings are rising if only by pulling shares off the market.

      That tactic always comes with a price. Business that are borrowing to buy back overpriced stock to improve earnings are sacrificing something else in the process. That something is what we used to call growth.

      But the trend now is not towards reinvestment in capital, plant, innovation and productivity but rather to merely push up valuations by manipulating financial tools of the market. This is thus financial engineering and that puts the idea of genuine profits in doubt longer term.

      Similarly, mergers and acquisitions are not really representative of true growth even if they create the appearance of expansion. If acquiring another business was all that was needed to prove growth then why would anyone bother with the risk of building and developing companies in the first place? All you need is money under that scenario, not ingenuity or hard work.

      My point is that what we are seeing is just another form of credit expansion. But this kind of folly is what plants the seeds for the eventual correction (or crash). What do you suspect is really implied by borrowing for stock buybacks anyway? And those investors who pile in to buy that improving stock are participating in full with margin accounts which themselves are again just another form of credit expansion.

      So what happens when investors hit their borrowing limit or when companies cannot get the appearance of anymore earnings per share improvements anymore? You know, the popular myth about “real” earnings is going to get tested one of these days under less forgiving circumstances and what will remain is a lot of stinking debt taken on in an effort to massage quarterly reports.

      • gary leibowitz August 20, 2014, 1:08 am

        Farmer, buybacks historically have not shown to be all good or bad for their future earnings growth. In a low interest environment it makes sense, especially if they think their share price is undervalued. The economic reports are so numerous and one-sided to the positive its hard to imagine CEO’s want a short term boost at the expense of longer term. Do you just ignore the daily reports that paint a full picture of the economy, past, current, and future. This market move this year is not a fluke. Go to Bloomberg’s on a daily basis and look at the economic calendar. Read the pulse of the nation relating to fundamentals. It is very true that sometimes there are problems that aren’t seen on those reports. I only use that as one of the ways to gauge where we are. While credit is just starting to extend for the consumer, and M1 is slowing, the real expansion is below the surface. The banking system between banks and hedge funds are once again expanding at an alarming rate. Nothing is as it seems on the surface. It is hard to keep an open mind and explore all the ways we can create bubbles if we are fixated on one theme. I will keep with my long standing Macro theme until proven wrong.

      • Farmer August 20, 2014, 10:06 pm

        “Farmer, buybacks historically have not shown to be all good or bad for their future earnings growth” — Gary
        ———
        Based on what Gary? Ordinarily when a company buys back its own shares it should suggest that management believes those shares are undervalued. That would be the logical reason they would use excess capital to repurchase stock rather than take that same money and reinvest it back in the company for growth. But that is not what is happening. Instead we see companies cynically buying their own stock merely to push up earnings per share and the reason they are doing so is because money is cheap enough to make it worthwhile. But this is happening at a time when some assert stock prices are highly overpriced. So while it may be advantageous to take such a route because the outcome is that share prices keep rising (which benefits shareholders and management) it is not necessarily sensible if it deprives the company of working capital or if it burdens the business with new debt. What is actually happening in many cases is that a new liability is being created in place of where equity previously existed. That tool is a means to push up equity values even further. The exercise is not a true wealth generator though. It cannot go on indefinitely either as it only represents an internal corporate transaction (assumption of new debt in this case) that plays off an existing financial trend (rising stock prices). So what remains once the exercise is over and the trend reverses is a company that is in less capable shape than it was before it began to buyback its own shares. It has not in the meantime expanded its operations nor materially impacted any aspect of the business itself but rather only created the appearance that profitability and results are better than they were relative to the number of outstanding shares. That is a tail chasing exercise when cash reserves are high and money is cheap but it is not a way to build a company by employing capital to expand, acquire new assets or improve plant and equipment. And the downside is that balance sheets are going to be impaired in advance of when the economy invariably turns down. So I don’t know what history you refer to when you say that stock buybacks are neither good nor bad for future earnings growth unless you are only referring to when the economy is in expansion. At the end of a major credit cycle though the story is a little more complicated. Being cash short and debt thick is not the place one wants to be when the trend turns against you. And keep in mind that all the talk of what a great cash position most US companies are in these days is a myth in many cases anyways. Many are equally indebted with the cheap money that is available lately which renders those great cash positions a little less potent in real terms.

      • Jason S August 22, 2014, 5:57 pm

        Farmer,

        Great analysis of what has been happening. In times of regulatory or economic uncertainty corporate repurchase happens with greater volume. I think this time it is also occurring in order to line executive and large investors’ pockets. Buy back shares, drive up prices in order to dump the pumped up shares in someone else’s lap. So the shareholder value is really only transitory and for speculators’ benefit.

  • Rick Ackerman August 18, 2014, 7:13 pm

    (Reposted to current commentary for Gary, with my comments below.)

    Rick, you want an answer to the topic. Well lets try not to characterize ever single move up for the past 6 years as an attempt by the “sleaze balls”. Lets not have every single post by you salivating for the moment that the “Big One” is here. Please look back at all your old posts with the same fervor that its all about to end. You make claims and when they don’t pan out you shout manipulation. Your arbitrary Fibonacci declarations are just that, arbitrary starting points. Why the obsession?

    Point of facts. We have had crashes before so your argument that “DaBoys” can control the market is hogwash. You insist the market is being fooled and is about to wake up any moment, yet in hindsight you are the one that has been fooled. Real verifiable earnings. Real verifiable profits. Are you still stating that the last 6 years was false? Clearly you have to adjust your model to accommodate the facts. It shouldn’t be the other way around.

    I do agree with some of your technical analysis, but when you try to tweak it to fit a crash scenario it all falls apart. I agree that we are due for a 20 percent correction soon. I agree that the top could very well be at SPX of 2020. I have a slightly wider range in that regard. 2020 – 2070.

    As for the current market reaction, I would say that the gyrations are externally motivated, while domestically we are doing as well as we have since the crash occurred. You accept the deep drop in last quarters GDP, yet call foul the current 3 percent move up. You insist that the debt load is too great now to allow for further expansion yet we are seeing more spending and borrowing. You deny the accuracy of jobs, earnings reports, factory orders, service sector expansion, and optimism from CEO’s. You dismiss the world view until the world adjusts to yours.

    There is an obvious debt problem that went on steroids when the mortgage implosion occurred. The analysis on your part is flawed. There has to be other reasons why we are still holding up. Mario mentioned Asian growth, I mentioned low rates that relieves the largest debt burden, mortgages. The reason we are only muddling along has actually been a good one, consumer reluctance to borrow more. In 2009 consumer debt to GDP was at 97 percent. it is now at 80. The largest debt burden, mortgages, has been coming down, even as the others, such as student loans and autos, has been rising. The fact that consumers and borrowers contracted created a scenario where corporations would profit from it. No pressure on costs and wages is the reason we tripled from the lows. Perversely however is the fact that as we feel more confident the old habits will re-surface, as they are right now. That will eventually cause the next debt implosion. I just don’t see that happening in this cycle. It takes time for pressures to reflate.

    I wish I could encapsulate my thoughts in three paragraphs.

    &&&&&&

    Today (August 18), I am using a longstanding, bullish Hidden Pivot rally target at 168.03 in DIA to get short (via Aug 29 167 puts). I expect subscribers to make money on this bearish trade regardless of whether the Dow goes higher. This target anticipated a rally of several hundred points, but I still have an outstanding rally target at 17622 for the Dow that was disseminated long ago, when you were making the same, ignorant claims you’ve repeated above about what it is that I think, and how I trade.

    Concerning the sleazeballs, I’ve been around the block a few times, Gary, including as a market maker on an exchange floor for a dozen years, so don’t presume to tell me what makes stocks move. It’s all one big sleazy, game, my friend, and it is rigged like a carnival midway so that the rubes almost never win. RA

    ps: Something for you to read concerning today’s moronic rally. Stockman gets it exactly right in this essay: Click here.

    • Jason S August 19, 2014, 5:09 pm

      Rick, you have experience and the wisdom born of experience. Gary has a pocket of magic beans and the folly that accompanies them. If I remember correctly, he has stated that he has believes in Government largess because he has benefitted from it and seen the good it has provided him. I also remember reading accounts of slaves fighting to maintain the status quo because the change that came with freedom frightened them more. You cant have a rational debate/argument against fear.

  • Iro Noiro August 18, 2014, 4:44 am

    How will you know this bull has run its course? When mainstream media starts professing the “Sky is the limit” and “Next stop, Dow 100,000”, until then the beat goes on.
    There is no sign of exhaustive buying, there has been no breach in support, just a strong steady stride. What very well may be taking place is the set up to the great great granddaddy of all shorts, Japan 1989.

    _Iro

  • D.B. August 18, 2014, 3:33 am

    When the markets do turn down all those corporate profits used to buy back their own shares at elevated levels will turn into corporate losses. Another big waste produced through fiat chicanery and Fed. policy.