Why We Should Be Nervous When Stocks Fall

Despite the poor start to 2014, there is still room to debate whether U.S. stocks have entered a bear market. My own forecast, made several months ago, calls for a final Dow run-up to 17622. I’d need to revisit that scenario, however, if January’s weakness gathers force in the weeks ahead.  One thing’s for certain:  If a bear market has already begun, the jig is up for the Fed’s crackpot scheme to borrow our way back to prosperity.  It will instead be Katie-bar-the-door-time – and deflation, here we come!  Japan will at last have company – not just from the U.S. and Europe, but from China, whose bubble-blowing days would not survive even a month  of U.S. recession piled atop the already suffocating weight of Europe’s deepening deflation.

As for the stock market, the dam could burst at any time with unimaginably destructive power. Keep in mind that the main catalyst for rising share prices is not bulls betting on a brighter tomorrow, but bears covering short positions gone awry. Indeed, merely bullish buying is rarely sufficient to drive stocks through the thick layers of supply that accumulate just below each successive new peak. It is only when those who have bet against the stock market are stampeded by margin calls that this gravity-defying feat can be accomplished.  Meanwhile, as long as easy money and institutional mindset are present to keep stocks buoyant during quiet stretches, bears are held in a jittery state of alert, ready to cover short positions with market orders at the first sign of an outbreak of irrational exuberance.

Bears Cover Prematurely

The bears also tend to be too-eager buyers on the dips – exactly what we’ve seen so far this year.  Each time they do so, however, the strength of short-covering grows a little more depleted.  Also, bears who use put options to play the downside  – who have probably been buying puts for years, only to see them expire worthless more than 90% of the time – are prone to cash out winners prematurely, settling for meager profits just ahead of the real trouble they’ve all been expecting more or less forever. That is exactly what happened in 1987, leaving the stock market crucially low on short-covering power after the Dow dropped an unprecedented 108 points on Friday, October 16.  The many traders who took profits at the bell manifestly failed to imagine that this was just a warm-up for the 508-point selloff that came on Monday.

This time around, no one need be told that a bear market in stocks would douse the psychological bottle rockets that have kept asset markets glittering and which were intended by the central banks to boost consumer spending via the “wealth effect”.  Let stocks fall hard for just a few weeks, however, and the paper-asset world could start to unravel, subjecting mortgage rates to – heaven help us! — market forces. Since inflated real estate values constitute such a big piece of the collateral, such as it is, for a quadrillion dollar card-house of dubious swap agreements and repos, it’s logical to assume that the derivatives market itself would be sucked into a deflationary black hole.  This would almost surely happen too quickly for the central banks to take effective inflationary countermeasures.

Increasing Strain

In the meantime, virtually all instruments of paper wealth are coming under increasing strain because of a mere $10-billion-per-month “taper” by the Fed. While the change in policy has had little discernible effect on the U.S. economy, it has generated enough nervousness around the world to cause a small upward adjustment in the rates that have fed the global derivatives behemoth.  Considering the size of the market, it’s conceivable that a mere 20 to 30 more basis points of forced tightening could cause the whole shoddy edifice to unwind (i.e., deflate).

And that is why we should be more than a little nervous to see stocks falling for a rare change as the new year begins.

  • VILE VLAD February 9, 2014, 11:32 pm

    I called for 3 things in the dji this week, and only got 2.

    I said forget rick’s 15,209 dji, for it either bases here (15,400+/-), or drops fast to 14,700 area.
    looked repeatedly at rick’s 15209 dji blip, but it made no sense; only his 14,700 dji, made sense.

    dji did base at 15,400 over 2 days time, and like I said at time, 3 times is charm, down or up fast.
    yet, I predicted down, did not get it, but did get fast move I predict, off that 15,400 dji base.

    so where is dji now. in 15,700 area. area that I predicted repeatedly, as COUNTER-rally area.

    so where to now. this is what I see. last 2 rally days have been so fast and strong, that,
    my final target, for big bear call to still have a shot, as I said 2 weeks ago, is, low 16,000.

    but, is the low 16,000’s dji are taken out, then, rick’s ultimate 17,600 dji is not only viable,
    but will probably be over shot, in a mad swift move, to near 20k dji, that will shock all
    (except that mad genius, el-garo, this site’s 2nd most boring poster; after el-mario china-boy).

    however, as always, I am a permabear, and I think, low 16,000’s will hold, and be resistance–
    for the vacuum, I am still waiting, for. vacuum. of zero overnight buy orders, just sell orders.

    as such, at low 16,000’s dji, I will scrounge up together a few hundred paper fiat ussa dollars,
    and buy 1 march put vs. the ussa overall market, and let the monkey ride, down to 14,700.
    there I sell. my foreign broker is full service, I pay fortune in commission. not like in ussa.

    fyi, situation in argentina is dire already. oligarch queen cristina is even more hated,
    than your oligarch ussa pres chimp, if you can believe that. yet, they were both, re-elected.
    but probably by ballot-box stuffings, in both cases. ha. just like when jfk beat nix, in 1960.

  • Phil Champagne February 9, 2014, 5:49 am

    I like very much how Mike Maloney presented this. Episode 4 of Hidden Secrets of Money was excellent and I refer to it so people can understand the deflation pressure we are going to.
    It won’t be pretty and they are likely to panic and print like there is no tomorrow (actually, it’s exactly that, there won’t be any tomorrow for the financial system, so they will print because there won’t be a tomorrow)

  • Redwilldanaher February 9, 2014, 4:02 am
    • gary leibowitz February 9, 2014, 7:03 pm

      Red, once again you just look for sensationalized headlines to convince yourself just how bad we are.

      Do you really want to use that figure? Lets break this down shall we. Where were we 6 years ago? Was it based on over leveraged credit? Was it sustainable?
      Are you saying that 6 years ago was a “normal” or stable economic scenario? Really?

      If you want me to concede your point, yup we have less jobs now than we did then. We also have HUGE, I mean huge corporate profits and gross margins that have exceeded that time. Any questions?

      Can you figure out who the BIG winner in all this is?

  • Andy Gutterman February 8, 2014, 11:03 pm

    This chart says we’ve seen all we are going to see for a decline, for now. Has to solidly break that uptrend to call it a bear market.


    How fast it gets to Rick’s Pick is another story.

    I can see it trading above the topping trendline going back to 2000 in a “false sense of security” rally, then turning down to begin the bear market.

    Of course, since the economy is doing just fine it could just keep making new highs, endlessly. What need of a bear market after all? Why not just a permabull?


    • gary leibowitz February 9, 2014, 8:36 pm

      Yes it looks like we will go higher and any drop will just test the moving averages. Rick, much to his annoyance, seems to have the technical picture correct. New all-time highs. This bull is not sustainable going forward however. The profit margins are way too high based on the norm. The ever increased price level on stocks is rising faster than profits. Without real wage growth credit expansion will hit a wall. While it took over 20 years from the 80’s till 2000 to do so, this time around we are starting at too high a level of debt. Saving is dropping as is increased borrowing. Without real inflation, wage growth, there will be an earnings drop. Whether that causes a cascade effect on houses and jobs remains to be seen. Odds favor a sizeable drop this year.

      I have stated this position all along yet because I am not a convert to your religion of fire and brimstone retribution, I get outcast. Perhaps I am naïve and can’t grasp the situation as others have. perhaps we will crash and burn with nothing left of our economic system. I however believe I will live a healthier life with these self-delusions. I know had I hunkered down these last 5 years expecting the worse my emotional state would have suffered.

  • kicker February 8, 2014, 8:28 pm


    Increases in credit/debt can offset the impact of dropping monetary velocity for a time since GDP equals the amount of credit in the system multiplied by the amount of times the cash is turning over.

    Our economic system is currently like a more complex version of the company stores in mining towns. Workers were paid in company script and could use the script to purchase goods or services at the company store. With no monetary black holes the system could be fairly balanced and self sustaining.

    However if the company store offered credit an outside economist would initially see an explosion in GDP and marvel at the economic miracle. The company store could sustain sales while increasing prices and corporate profits soared. Consumer standard of living were increasing in spite of flat wages.

    But the company store acts as a large monetary black hole in the system. Credit on its books isn’t fungible and can’t be spent on anything other than additional services from the workers (for which it has no demand). At some point the proprietor starts to doubt the value of the credits sitting on its books and starts calling in its debts.

    Sales start to plunge and so the proprietor raises prices to keep up profit margins (where else they going to go). Some of his customers who refuse to take company credit are reduced to eating rice and beans and the credit for his best customers explodes. At some point he begins to worry that even his best customers aren’t able to pay the bills and he starts calling their loans.

    The proprietor is friends with the Mayor and storms into his office demanding that he do something, anything, as long as he doesn’t raise property taxes. So the Mayor starts to purchase items on the towns credit and distributes them those who have been hit hardest by the ‘economic downturn’. But, after a while the proprietor is aghast at the flagrant spending of the Mayor and stops extending the town credit.

    So, the question is how do you write a happy ending to this story?

    • mava February 9, 2014, 12:58 am

      There is no happy ending, because the fake credit cannot result in real growth. The real credit, – that which was earned and saved by the workers as money, and later offered to whomever needed a credit for productive needs could result in real growth. But, this is not what is happening. The system is using fake credit, – money produced out of thin air specifically to become credit. This money look and feel all the same to everyone involved only due to being counterfeited. But such money do not represent the stored capacity.

      This situation is almost the same as without money. You can talk people into building things for free, and the first effect is that the community grows, however shortly thereafter it will stop growing and start dying.

      Money, being fake, could be considered by ourselves as no money at all, and then the result can be easily forecast. The only difference that the fake money brings is seen in two aspects: Those close to the distribution source of the fake money can be seen remaining wealthy, because they are able to use the productive power of others (slave labor), and that the system will appear functioning longer than if it wasn’t using no money at all – a worker bringing fake money home still is fooled into thinking that he has been paid – so he will impoverish his family much more before he will recognize that he is not being paid.

      • Rick Ackerman February 9, 2014, 1:34 am

        You, Gary and Kicker should play this discussion forward with a company store that sells $300,000 houses to workers on credit. That would be closer to what we’ve got than workers merely running a tab at the company grocery store.

      • gary leibowitz February 9, 2014, 6:54 pm

        Rick, the mortgage debacle is a direct result of credit run amok. I agree. But the direct result of this last crash was the foreclosures from these fringe homeowner. There has been direct consequence to the most leveraged homeowner. We still have, 5 years later, foreclosures, so the system is trying to right itself. We don’t have the lax rules that we had prior. Once banks and insurers got burned the situation becomes financial survival. One thing I realized thru this whole debacle is how well companies can fix their balance sheet and policy.

        The problem is not the amount of money on the books thru home mortgage loans. It is when individuals use that bubble asset growth to access even more credit. I believe homeowners have learnt their lesson and so has lenders. The next bubble should not involve homes. That’s not to say we wont have another bubble, but it seems unlikely in the next 5 years. I do agree that home values will drop as a result of another crash, but that is to be expected given the biggest expense is a home.

        I will say that the direct beneficiaries of this crash has been corporate profits. They have collectively decided to adapt a business model that they started 5 years ago as their permanent position going forward. Their survival mode mentality has now turned into a cash cow. They don’t want to give that up. The single reason why we have not seen much economic growth has been the unwillingness by companies to revert back to a model that shares with their workers the profits. There is no other explanation that I can come up with that sees such huge gains in corporate profits for 5 straight years. In fact the earnings and gross margins are at the highest it has ever been.

        Why this 5 year recovery is stalled is glaring us in the face. Companies, once burned, refuse to give up any profits. This by itself is preventing an acceleration in the velocity of money, and preventing inflationary forces to take hold. In this situation inflation is critical for recovery. Home value increases and reverting back to borrowing more, will not go very far. If it was the early 80’s we should see decades of credit expansion. Now however we are starting at a highly leveraged position. Without wage growth we will see deceleration of profits by companies. The last report was a catalyst for the market to advance, while it was a huge disappointment for future expansion. The recent productivity levels have once again surged as costs were driven down. Great news now for companies that are extremely short sighted. Earn big profits now and worry about the future later.
        Government “free money” is not going to offset this imbalance this time around. For the first time in a very long time, government jobs had a net negative of 29,000 this last month. Government austerity, private job austerity, will kill any chance of economic expansion.

      • VILE VLAD February 10, 2014, 12:33 am

        isn’t there an old song from 30’s, ‘I owe my soul to the company store.’ good analogy.

  • Iro Noiro February 8, 2014, 8:45 am

    Dow:Euro breaks out to new all time highs that might be the time to start calling tops in Dow:Dollar. Japan 1989?


    An interesting idea, Iro. Could you elaborate a bit — or better yet, at length — if you have the time?


    • Iro Noiro February 9, 2014, 1:27 am

      Very basic support for Dow:Euro rolls in around ~109. Perhaps I should lower my expectations a little bit and say, should Dow:Euro hit its ‘D’ target of ~130.34, which also happens to be the 2000-2001 high, then it might be time to start calling tops. But you know better than anyone else that those targets sometimes do fail and sometimes are taken out. Something has been goosing this market up and it may not be purely domestic.

      P.S. should taxes go up, for instance capital gains tax increases to 33.3%, could that in fact create an environment where a need is felt to ‘double down’ in a sense and actually spark parabolic rises in markets? for example pension funds requiring ‘X’ amount of returns to feed itself. To all who frequent this forum, if this is a stupid question, please, be kind. Thank you.


      “Through Inquiring of the Old We Learn the New”

  • gary leibowitz February 7, 2014, 7:00 pm

    Everyone hear talks in certainties. You start with a formula that is absolute and static. No one seems to question this formula but instead builds from that foundation. If 5 years of world market results contradict your formula you try and work out why that is, still assuming the base foundation of your premise is correct. I look at history as if I am a time traveler. I have no emotional allegiance to any era. I then try to formulate just what is the common thread throughout all these capitalist cyclical events. Clearly all financial crisis in the past seem to have very common traits. Over dominance, or rather an imbalance in the power structure. The greater the imbalance the sooner we bust. In all the prior cycles we not only recovered, but we have progressed as a people in every economic sense. Is this not true? It’s during the transition that we assume its a one way ride down. We are now experiencing this transition.

    If this blog was transported to say 1931 wouldn’t your opinion be exactly the same? Total devastation ahead with a collapse of our economic system. During that era there was no government help, no guarantees, no fair practice laws for the common man. I myself would be leading the parade carrying the end of the world sign.

    No back to the enormous debt burden we face. I stated a long while ago that this transition is going to take a lot longer than you imagined. Governments always fight to preserve what they have. Everyone is NOW well aware of your debt, and in fact is always the number one argument made by politicians for opposing spending bills. The will is now there, even if it hasn’t created a total convert. I expect it never will since most politicians are too detached from the working man that struggles to make end meet. Lets talk numbers. The federal deficit and QE drawdown is reducing the year over year debt surplus. The recent implosion in
    mortgage debt is something in the tune of 4.5 trillion. A huge staggering number. The last 5 years of very low rates, federally assisted rule changes, and infusion of money into the banking system, have helped stabilize the bleeding. There has absolutely unequivocally been a relief to home owners. Theoretically if governments can manage to keep rates low without falling into a deflation spiral, and without lenders panicking and demanding higher returns for their risk, we can slowly work our way to toward normalcy.

    The argument that the current debt is too much to already service is absolutely not true. Lets for argument sake say we are already at a point where the government doesn’t supply any QE. ZERO. Housing continues to improve with prices rising, delinquencies slowing. Inventory of toxic real estate that banks own is still very high, but lets take a leap of faith and decide that in time that too will be managed. Jobs are coming back, and in fact real full-time jobs, and at the same time government austerity is showing in the reports. I can better explain my position if I quote a recent articles talking points.

    “In the last year, full-time employment has increased by 1.8 million. Part-time jobs are up just 8,000. According to the household survey, the number of people working part-time for economic reasons fell by a whopping 514,000. So much for the Obamacare effect.”

    “Total government lost 29k jobs in a month. Government jobs—federal, state, a local—now make up the smallest share of the labor force since 2001.”

    Having defended the reasons why we could crawl our way back to normalcy I stand here stating that I give those odds as being small. External events, or internal greed of large magnitude, will most likely bust the recovery. I base this on human natures ability to screw thing up.

    If anyone can explain how the whole economic machine has hummed along these 5 years with faked manipulative means I would like to shake those peoples hands. Imagine being able to control the world economy for 5 long years based on mist. I am more pragmatic. I believe the despair by governments to hold these economies together has resulted in a concerted effort to hold fear down to a minimum. That required a commitment, an all in, to supply money at all costs to stem the bleeding. A huge gamble that was 100 percent expected. So far the last 5 years has stabilized the situation. Will we be committed to stay on the austerity program long enough? I vote no unfortunately. BUT, you should not deny what has already taken place. To assume throwing money at a situation didn’t help, you would need to deny all segments of this economies growth or at the least stability. the proof of what I say is simply the fact that 5 years later you struggle to come up with a plausible “other” reason.

    • kicker February 8, 2014, 12:02 am

      The fundamental issue is the same as the 1930’s, which is a sustained drop in the velocity of money.

      The Federal Reserve was created in 1913 and empowered to regulate reserve ratios which essentially gave them power over credit creation but not base money. But what did it matter? Base money only represented less than 15% of what people typically considered money.

      A time traveler to 1926 may have considered that the rules of the game had changed, since any serious economic panics had been largely avoided for more than a decade. The last serious panic to sweep the country was 1907. However, when the Great Depression hit the Federal Reserve quickly found out that its ability to regulate credit creation through manipulating reserve requirements was overwhelmed by the drop in monetary velocity.

      The net result was to put base money exclusively in control of the Federal Reserve (which promptly doubled it) and then fully under the control of the Federal Reserve when Nixon closed the gold window in the 1970’s.

      Now the Federal Reserve is facing a drop in monetary velocity but for entirely different reasons. There are huge demographic headwinds with Baby Boomers having passed their peak spending years. Any excess credit that makes it into a Boomer’s hand is essentially dead money and will be for a long time.

      The concentration of wealth has also created strong head winds. The ultra-wealthy are accumulating credit that will exceed their ability to consume (even at their current, orgiastic levels of consumption) for generations. As far as monetary velocity is concerned they are like black holes. Credit goes in and never escapes.

      The problem isn’t just the ultra-wealthy but also the CEOs and Boards that lock up a significant amount of credit overseas in a Double-Dutch-Sandwich. Yeah, maybe the middle-aged, middle-class 401K owner may have a fractional ownership over the hoards of Apple or Microsoft, but he has no ability to spend down that hoard. Of course he may be able to convince somebody else to forego their spending and purchase the share from him, but the net effect on monetary velocity is zero. Overseas corporate cash hoards are effectively monetary velocity killers.

      Throw on top of that high oil prices driving cash into OPEC hoards; Asian and Teutonic mercantilism that push credit into the hands of producers on the backs of their consumers; a rising middle class in Asia that hoards credit because they lack social safety nets; an upcoming generation in the US that may be the most fiscally conservative generation since the Great Depression; cash hoards associated with organized crime cartels that are large enough to control large sections of countries; capital controls in places like Argentina and Venezuela that effectively confiscate the countries’ wealth and funnel it into the hands of a few oligarchs; and rising commodity prices that effectively confiscate the discretionary income of half the world’s population.

      So the Federal Reserve is using their 1930’s toolset to counter the massive drop in monetary velocity. They lower interest rates to zero in order to slow, but not stop, the excess accumulation of cash in these monetary black holes. They try to stoke inflation and try to generate negative interest rates to try to get the Boomer to use his consumption today instead of saving it for the nursing home. Governments launch stimulus packages that spend our grand-children’s consumption. All to get monetary velocity up.

      But without structural reforms, I can’t see any way to keep monetary velocity up in the face of these headwinds.

      • gary leibowitz February 8, 2014, 2:29 am

        Some key points I wish to discuss. Whether the government intended to or not savings was increasing until this last quarter. Banks did tighten up rules that prevented risky lending, once again until this last quarter. The new medical program, like social security, creates an umbrella of coverage where before these programs you had to decide individually. The new medical program also reduces government costs and places the upper end insurer a greater burden to supplement the not so well off. A socialist program for sure.

        Your argument about velocity of money is an interesting one. I believe we are in a ratio near 1.6 a near 50 year low. The problem with just using this number is that we must first review our history. From the 1987 to 1995 the ratio went from around 1.7 to 2.1 a phenomenal move. I can only conclude that the spur of easy credit, and the advent of easy access to credit, like the credit card, has artificially grown that ratio. While demographics certainly play a role in why we are so low, the other glaring reason is the massive shift of taxation from businesses and the wealthy to the middle-class. All taxation will reduce to some degree the ratio, but the silly notion that by freeing up more money from the wealthy sector we will have trickle-down growth. The exact opposite has been true. You always want to favor the largest spending group in order to receive the biggest bang for your buck. Corporations have confiscated our taxing system. I will confess that the solution isn’t just to now tax the upper class. That in itself will not spur the velocity of money.

        The drop in the velocity of money has been dropping big time, from 1997 on, and in line with massive increases in both personal and government debt.
        The QE/mortgage debacle has accelerated this problem and will take a long time to reverse. I agree with everything you stated. But what choice did we have? In the early 20’s we had a spike in debt followed by a much higher spike in the 1930’s, followed by an even bigger spike with the run-up of WWII. Notice though that debt came way down from post WWII to the early 80’s yet the relationship to velocity of money wasn’t there. Debt by itself is not the driver of this phenomenon. I wish I can marry these graphs with the shift in tax burden. I suspect it is a double whammy when debt increases and the burden to pay off that debt shifts disproportional to the middle class.

        Finally, just like the post war era we managed to drop our debt without reducing our standard of living for decades. Can we do the same going forward? It is possible. We have to create an equal tax distribution and that will spur growth. The disparity between classes is startling. I guarantee if/when that shifts back the other way we will have an increase in monetary velocity. Surely no one argues that the very well to-do will cause an economic upheaval if they happen to revert the tax laws back to the way it used to be.

      • Jason S February 9, 2014, 6:11 am

        Great debate, Gary and Kicker. Good points on both sides.

        Gary, I agree with you that we could slowly pay off our debt over a long period of time if we would be disciplined enough to have our savings rate exceed spending and inflation over that long period of time. I just dont see the discipline or will in America to do that.

      • VILE VLAD February 10, 2014, 12:24 am

        amerikanus kicker,
        you skipped right past the most important part of your ussa money story,
        as far as non-ussa world citizens care about, that is. for you skipped right past,
        where ussa cheated, screwed entire world, via 1944 bretton woods ‘agreement.’

        at that (oligarchal) conference, it was agreed, by many world nations,
        that gold would no longer be ‘the’ standard of world currency, but–ussa dollar would.

        since, ussa leaders then swore, that ussa dollar would remain bound to $35 ounce gold,
        f-o-r-e-v-e-r. thus, ussa paper currency notes, could be used as world -reserve- currency.

        every nation then stocked up on ussa bearer notes, after that (of course, unresolved ww2,
        was a huge psychological background, for that deal, as all nations felt, they needed ussa).

        dull story, afterward. ussa lied, plain and simple, and everyone blamed nixon, in 1971.
        nix closed gold window because he was told to, when french, germans, came a-knocking,
        to get their gold, for they saw first, dubious fiat tides, of ‘big-society’/vietnam ussa scams.

        jig was up. quarter century of lies, as ussa became, richest beast country in world,
        while all nations of world, were holding paper notes devaluing at lighting speed,
        100, 200, 400, 800, 1600 percent, and worse, and as all amerikanus laughed,
        and en-poored the world, with their now, worthless trash FIAT ussa paper notes.

        and, ussa paper then, would have gone weimar style, IF it had not been propped up,
        on the backs of many countries of the world. so trust me on this, amerikanus kicker–
        the most HATED country in world, is the ussa. and foreigners cannot wait, until you all
        grovel in the dirt. and are more laughed at, than even the old chinese, with ‘made in china.’

        btw, both the ‘international monetary fund,’ and ‘world bank group,’
        were created
        right out of the bretton woods conference.

        so you tell me, who are more dangerous, they, or the ussa ‘fed.’ I think they are.

        I think the ussa fed is a transitionary depository,
        that will be ‘fed’ to the ussa masses,
        as sacrifice, eventually, so you all amerikanus can feel you can fnally ‘breathe easy’;

        however, the real power, real danger, to freedom of world, are the ‘imf’ and ‘wbg’. IMO.

      • VILE VLAD February 10, 2014, 12:42 am

        also, to use your time-travel analogies, kicker,
        a time-traveler to 1944 bretton woods new hampshire may have placed bomb on that conference,
        wipeing out all the aholes therein, and the world would have been rid, of that nwo scum;
        until of course, new scum came, as they always do. ha. for mucho money dinero corrupts.

  • SCHIZOPHRENIC VILE VLAD February 7, 2014, 1:55 am

    ‘USSA has been Wile E. Coyote for 45 to 50 years, just levitating off the precipice. How is that possible? It went from strained, to ridiculous to absurd to incomprehensible to unimaginable to magic to cinemascope illusion yet it still hovers.’

    redwill, your metaphorical say above is one of the best I have read in a while.
    and I specially like ‘cinemascope illusion.’ I am still laughing about that.
    must be from watching too many 50’s ‘colorized’ cowboy movies, for the first time.

    easy to manipulate humans, if you inseminate them early, with fake fairy tales. fake life forever.

  • VILE VLAD February 5, 2014, 10:43 pm

    and here is something else, adding to the permabear fun.

    february is 2nd worst performing month of year, historically, for s&p500 and dji.

    plus, this one additional juicy quote—

    “In fact, it (2014) was the worst start to February for the Nasdaq on record, and the worst for the S&P since 1933.”

    humm. 1933… what does that remind me of? haha.

    so here it is— enjoy, permabears.

    “If you thought January was bad for stocks, wait for February’



    btw, where have great vet writers, that make this site worth reading, disappeared to lately?

    haven’t heard a peep from great vet american john jay, or the great vet trader richie rich,
    in at least 2 weeks. hope they didn’t croak.

    for without them, this site is pure manure– with…mario
    and the droning, boring el garo, and the hyper-mad living-in-the-past old mava,
    and rest of smart middle-aged lads; but, that asks more questions, than give answers.

    one exception noted, that’s still here—
    that bullet manufacturer, redwilldanaher, and site’s resident political analyst, for freedom.

    • Mario February 6, 2014, 5:14 am

      V, I’ll be the one to tell you why, gently, straight, mano y mano.


      You have found an online home here and in fact you have valuable meaningful insights which you do add.

      But you blather on nonsensically, rhetorically, narcissistically, FAR too much. The entertainment sarcasm factor has worn its welcome and that’s why other folks including myself don’t enjoy being here as much.

      While it might please your ego to hear you have such influence on other people’s behavior, we need you you to turn that into a positive force as we face serious [email protected]$&ng problems. I admire Gary, for example, in that he takes great pains to clearly elucidate why he thinks what he thinks, no matter agreement or disagreement with his views.

      Cheers, Mario


      Vlad: Mario will get the last word here. Now, back to business. Okay? RA

      • VILE VLAD February 6, 2014, 7:08 am

        this is business, rick. and that is what you don’t get. shallow end of pool. or deep end. choose.
        when you tolerate lightweights, you diminish heavyweights. there is no ying yang.
        there is just, your stand. and I know you are host herein. so you call, roll of die.

        ackerman, I don’t come here, because I think like you. I come here, because you think like me.
        and I also have stated repeatedly, I only come here, for entertainment value. to amuse myself.
        kill time. as I study human nature further. the fools and the clowns, and the sages and saints.
        and occasionally, actually learn something. from someone. that says something, unusual.
        mario? haha. I wish I could could say he was a dime a dozen, but not even that. a penny a mil.
        and gary. well, gary does know a lot of shhtt. however, I am bored by those that repeat obvious redundant micro shht, without looking at big pic.
        earnest old mava I feel sorry for. enough said.
        yet I admire john jay. one of last true honest americans, IMO. but, no country for old men.
        and I respect that old shark from tahoe, crippled richie rich. I was in tahoe once. quite a place.
        as to you, ackerman, what impresses me most, is that you work 14-hour days, non-stop, brain flying.

        whatever. who gives a fok. we are all worm’s meat, soon. haha. should see woody’s ‘bananas’ soon.

      • Mario February 6, 2014, 5:32 pm

        V, I’m waiting for your response to my question above about global GDP. And I have another question.

        How old are you?

        The reason I ask is because we have an adorable 2 year old son at home who at times is a defiant selfish little brat the way two year old boys typically behave. Your behavior is so similar, so I was just sorta wondering…

      • Chuck February 7, 2014, 1:05 am

        not everyone has the ‘scorched earth’ mentality I guess….

    • redwilldanaher February 6, 2014, 5:44 am

      Vlad the line crosser. And with gusto!

      Your material is hilarious. I have to compliment you even if you’re too tough on Mario and other fellas. I emailed Rick many years ago regarding Mario while submitting an essay. I was a little shocked by Mario’s super positive 0utlooks, I wondered, if he was possibly cut from the same cloth as El Garo, since neither one of them (at the time) ever seemed to be able to find a cloud in the sky. Rick assured me that Mario writes in earnest. Over time I have come to agree with Rick. While I don’t always agree with Mario, I do believe he is genuine and frankly I allow that he could be more right about things that will come to pass than I may be. I doubt that will be the case but in a thoroughly corrupt world almost anything can be made to happen. I’ve learned that its about duration. I traded on the PHLX options floor for many years and felt that it was a functioning anachronism, yet 15 years later it was still viable. Technology said goodbye to it in the early 90’s but relationships, politics, influence, corruption etc. said good morning to it for 20 more years. The “ongoing” concern or body in motion principle at work I suppose.

      So yes, the USSA has been Wile E. Coyote for 45 to 50 years, just levitating off the precipice. How is that possible? It went from strained, to ridiculous to absurd to incomprehensible to unimaginable to magic to cinemascope illusion yet it still hovers. That’s pretty powerful stuff. If you showed someone from the 50’s the across the board hyper-degradation of all things Amerikan (political, societal, cultural, fiscal, economic, media, freedom, eduKational etc.), you’d have a hard time convincing them that USSA was still “on top” and that the survivorship biased / ever-rigged DOW was recently north of 17,000. Yet it was just there and we’re surely surrounded by morlocks and eloi. That’s powerful. As usual, I remain open to anything regarding the indices and where manipulation can take them to. Only an El Garo could possibly avoid reading ZH or something similar for the past however many years and act as if the few of us here that refer to this market as “centrally planned” or entirely artificial are the ones that are delusional.

      I haven’t been engaging as much lately or adding in a little research as a result of time and focus restraints. I wish I had the time to stay abreast of things as I normally do.

      I miss the gang too Vlad, but it’s possible that the good ole boys you mention are enjoying your moment to shine. Possibly they’re restraining themselves not to steal the thunder from your Belushiesque “the Germans bombed Pearl Harbor” roll?

      BTW, I am not an expert by any means but I recommend the Hornady Lock-n-Load AP ammo plant. There are many other pieces that can be purchased along with it to really ramp up production. While we’re on Hornday, Hornady .17hmr and Savage .17 rifles are a great low-cost combination. You can practice at distance with the low cost / low recoil rimfire round and it’s just a great round to have in case of a JITI system disruption that’s surely to follow a false flag in the not too distant future.

      Gotta change the coverage before the serfs revolt. And let’s face it, you just can’t count on the arrest of an illuminati-sponsored Candian punk every day.

      • Mario February 9, 2014, 3:47 am

        Hi rwd, I’ve learned to have meeting in the middle with views, I don’t hesitate to express how much participating on this site over the years has been good for the development and marketing of my views. I think we old timers here have learned to pick our battles better too. I’ll even go so far too say that IF you live in today’s America, having a gun or several including rifles and sticking up on bullets has its merits, not to create anarchy of course, but to help survive when the sh#t hits the fan. I suspect even you would be happy to be living in a country where such measures need not to be considered. But we have to deal with reality.

        Likewise, I’m big on sensible, evident real world reality. I just want to remind you and everyone here that I disdain the one sided extreme argument. I have come to focus on clarifying exactly what really is happening in the real world as being most important, so as to then figure out how to best move forward. On that note, I assure you that any of my positive info and data on reslity , mostly on China of course, is well-known and self evident, very little generalization or opinion.

        For example, the “Detroit” discussion posts up here often as an indicator. And how much foreign Chinese money is being invested in the US.

        Today I can share a more specific update, from the latest AmCham Shanghai Insights magazine, it is over 100 Chinese companies who have invested, put down stakes in the city of Detroit , though I don’t know the total capitalization, it is surely somewhere over $100 million or far more and I can safely assume that includes buying up large city blocks on the cheap. Chinese s play the long game, and play it well, they don’t focus on quarterly wall street reports, so there it is, we’ll see how Detroit unfolds this next decade.

        When I tell everyone here that China’s domestic market is still in strong expansion, that the private sector is making tons of money and is already larger than the industrial, infrastructure, SOE. sectors, that the decline in their manufacturing base is being more than offset by domestic expansion, that retail sales are still growing at over 13% , that Chinese households earn 3x what is officially reported and have trillions in off the books cash, that 21 millions cars were sold here last year and that number will continue to rise, I suppose I have to beg a little to get anyone outside this place to believe it, but there is no bbelieving or not believing. It is clearly evident, that’s not my fault! 😉 . If the situation were any different, I’d be the first one to let everyone know.

        Perspective helps: the size of the rising middle class is much larger at the outset ten years ago, than was the size of the US middle class when it’s rise began back in the 50s, it’s just simple math, there not much to argue about.

        Cheers, Mario

      • Redwilldanaher February 9, 2014, 5:01 pm

        Hi Mario,

        “I suspect even you would be happy to be living in a country where such measures need not to be considered. ”

        Of course I would. In fact, if you tell what planet that country exists on I will embark for there tomorrow! 😉

        Thanks for your response. I always read your material. My favorite point of yours had to do with China vs. the USSA. The governing processes may have a label, may operate differently but given how thoroughly corrupted all things Amerikan have become, what’s the difference at this point? Serfs on a board game owned by psychopaths.

  • VILE VLAD February 5, 2014, 9:23 pm

    on another note, for those that care about further ever mounting current evidence,
    that the all-stockmarkets bubble, and all-bonds bubble, are ever closer to imploding,
    is today’s free article at ewi, that shows that current ussa junk bonds 2013 purchases,
    have already DOUBLED the amount of similar type junk bond purchases, of 2007—
    same 2007 junk bonds that blew out fully and first, as 1 of the top factors for 2008 crash.

    title of piece is —
    (along with easy-to-see graph, for those care about mounting massive DEFLATION facts)

    A Credit Contraction to Make 2007-2009 Look Like “a Little Girls’ Tea Party”


    let me put it this way— for a major sudden crash to occur, all that is required,
    is extreme investor OVERconfidence, to the level that, they no longer care about,
    what caused the last major crash.

    plus, all that alltime high leveraged borrowing, which is, of course, also is a direct product,
    of extreme OVERconfidence (mega overconfidence like some little boys from china have):

    everything is in place, already, for a major crash to occur. and all that is required,
    from my view and experience, that a certain chart level is broken, and I’ve called it—
    ‘the rubicon is at 14,500 dji area.’

    I have done a lot of reading and chart viewing to day, and I stick by my call above.
    rick ha it at 14,700 dji area, I keep it couple of hundred lower, to be on safe side.

    however, I do agree with rick, I think the 14,700 dji will hold (MANY trendlines there);
    and a mighty COUNTER-rally will burst up from there, and in probably just a few days–
    up to 15,700 dji; in other words, a 1,000 point lightning move up, COUNTER-rally.

    and by repeating COUNTER-rally now 3 times, is that I no long agree with rick,
    on his 17600 dji top call. no. I think, from all I have seen, trend has already changed,
    major longterm trend, from bull to bear. so I now give this a higher probability, that the bull,
    is already dead. and that all there will be from now on, are fast and furious COUNTER-rallies.

    because, if I had any money still to bet (I don’t, but if I did), I would bet HARD,
    that when my expected fast COUNTER-rally up to 15,700 dji area occurs,
    the next major even will be— a series of cascading daily down moves, 2%, 3%, 4%,
    leading up to—THE GREAT CRASH OF 2014.
    and the start of ‘THE GREATER DEPRESSION.’

    hell, who knows. thinking about it now, I might be able to scrounge up 500 bucks for 1 put,
    and place it on the horse every currently laughs at, the nag in the back, named ‘swan dive.’
    at the right time, of course. then pull the trigger. and hope my broke broker pays. haha.

    • VILE VLAD February 6, 2014, 1:54 am

      forgot to say. this is a steeplechase race. so even slow nags in back of pack, got a shot.
      so go, longshot ‘swan dive.’ destroy them all. and finally bring truth and justice, to it all.

      for I can’t wait to see jumping out of wall street windows ’29 record, broken in 2014.

    • Sam February 6, 2014, 2:11 am

      Always entertaining to read your doom-mongering in impaler.

      While I agree there will be a day of reckoning, I disagree that the sentiment is yet indicative that this is imminent. We have yet to hit a mania in stock investment. We still have plenty of negative news site, such as zero hedge. Too many bears in waiting. It is my gut feeling that we are in this for the long haul (the really long haul) The one where ‘there’s a sucker born every minute’ but due to declining birth rates we have to wait a few more years before the ship of fools can set off on its titanic maiden (and sole) voyage.

      What really gets me is that we have to wait. What utter nonsense. Little has changed except mankind has become ever more accepting of his circumstances. It is this slow, slow grind which marks sentiment. Something which depresses the hell out of me. However, as you rightfully point out, what awaits us on the other side is something that is much worse.

      I give us until 2016 or later. This whole charade has to get even more bizarre.

      • VILE VLAD February 6, 2014, 3:55 am

        sam, I am not doom mongering. I am writing what I think. and I think, this is it.
        you say you don’t want to wait. but you think you will have to. up to 2016, for whatever.
        and I have also stated today, that I have pulled away, from any other higher market top.
        so I disagree with rick, on this detail. I don’t think any higher top, than end of 2013,
        will ever be seen again, in our lifetimes. at least 1 generation away minimum, IMO.
        I think the excess credit party, is already over. and the more ALL of you DISagree,
        SURER I am of it. with even ackerman vs. me. great. MASTER AND COMMANDER.

        but, I assure you of this, sam. when the deserved bigtime shhtt hits fan, real soon,
        and banks shut, brokers don’t pay, neither employers, since credit system halts,
        and money-market funds go belly up, and internationals go nationalistic,
        into trade and tariff wars, and even simple barter is tried to be controlled by big bro,
        along with any self-defense items, LIKE BULLETS, that I keep telling you all, to stock on–
        well, you will have wished, sam, that you could have waited, longer; and also, listened to me.

        enough said.

      • mario cavolo February 6, 2014, 2:55 pm

        V, I do wonder about your view on global GDP. Many supposed experts and amateurs expect it to rise from 40T to 200T in the next 30 years. Do you think it will and what do you think the Dow will go to as global GDP continues to rise?

        Even if we do have a big butt economic system collapse soon as you and others are expecting, (and it might!), that would certainly add a decade of economic misery across the globe but the global economy will rebuild from the ashes as it always has through history, post WWI & WWII being the most recent such events.

        Cheers, Mario

      • VILE VLAD February 10, 2014, 12:49 am

        maria, I already answered you, but r erased it.

        simple. your 30 year projections, are utterly worthless, of 5 fold world gnp growth.
        worthless. trash.

        just go and look at predictions by ‘great’ economists in 1929, and in 2007.
        all same bull you cite to me now. utterly worthless status quo projections.

        extrapolation of ‘current’ trends, ad nauseum, are a village idiots game. like astrology.

      • Mario February 10, 2014, 3:39 pm

        I do understand your point, that predictions can be worthless. However then we have a dilemma. Because there are real numbers that are really coming in. For example, China bought, oops, 21 MILLION cars last year and they WILL buy another 200 million over the next ten years whether any of us like it or not. They couldn’t give a rat’s ass about our opinion of predictions, they’re too busy enjoying buying more cars.

        See what I mean? Why do people insist on discounting any of the economics that are actually happening across the globe. I’ve said it again and again that the US indexes are GLOBAL. Nobody cares what is happening to the US middle class 150 million whose lives are worse not better any more, that group is a smaller and smaller player in the global game. They are already replaced by a rising middle class across the globe 5 times their size. This is plain reality, regardless of QE, blah blah…

        Cheers, Mario

  • Andy Gutterman February 5, 2014, 3:40 pm

    Broadening top.

    I wonder if the top line restricts Rick’s HP high from happening? In 2007 when it hit the line it traded back and forth just under it before starting the next bear market. Will it do the same today or break out above?




    Nothing ‘restricts’ a Hidden Pivot from happening, Andy; it either does or it doesn’t, and the target itself remains valid as long as the point ‘C’ high or low (in this case, a 14551 low) holds. As to the odds of 17622 being reached, we can determine that by watching to see whether corrections exceed their ‘p’ midpoints; or, more bearishly, their ‘d’ targets. Evidence of increasing strength or weakness in the dominant trend is nearly always manifest in ABCD patterns of the smallest degree. RA

  • Mario February 5, 2014, 9:01 am

    Way too much talk about the 200day ma, just look at the 3 year chart, the death cross, blah, blah, around the end of 2011. Well, it didn’t die and and trying to put a finger on the timing of our next date with financial Armageddon puts us in the same category as the Christians waiting for the second coming. I’m really tired of the deep gloom n doom talk and global economic pity party here led by our psychotic yet brilliant new cheerleader V to rally the troops for a bullet party.

    The market being currently overbought, over leveraged, and over whatever else you want to add to the list of bad news doesn’t tell us anything more than that US indexes are due for a healthy correction for the next few weeks, months, year or two down to the 12-13k level. So what?

    The die is cast moving forward for the global economic, societal and banking system. Just figure out how best to get with the program every step of the way in terms of both preparing for the worst AND in terms of where the opportunities lie. We need to intelligently assess and respond to the areas of progress and decline which have presented themselves to us in our lifetime. Societies have shifted, as they have throughout history, the latest version of the same story of the rise and fall of nations and the impact on their citizens, the rich mostly screwing the poor, good and bad governments. We ain’t special.

    Cheers, Mario

    Cheers, Mario

    • VILE VLAD February 5, 2014, 8:40 pm

      boy-george (er, boy-mario)
      this is now 4th time you call me ‘psychotic’, so let me see if rick let’s me answer you back.

      first of all, if you are the poster-boy for ‘how to win friends and influence people,’
      which is your daily toady grinning fool obvious ‘normalcy’ bible, then—
      I am DAMN PROUD to be a PSYCHOTIC then, so be the diametric opposite of you. You must practice your fake ‘don’t worry, be happy’ grin in the mirror every morning.
      “I’m really tired of the deep gloom n doom talk”, says the ever happy-chappy boy-mario. who cares what you are tired about? I am tired of your grinning-fool, happy-chappy patter,
      that ‘everything is peachy, in this best of all possible worlds, and my china-boys are king’?

      you are wrong. you are wrong about so many things, it is hard to list all. wrong. yet, I am glad you are wrong. and that you are so sure, that you are right. great. because, I can’t wait to read, when the stockmarket crashes, that you lost it all.

      and also btw, mario, I answered your question in last week’s blog,
      about the philosophical origin of the democratic concept and its purpose–
      a question that your oligarchic canadian bf posed to you, during pillow talk.

      • VILE VLAD February 5, 2014, 11:35 pm

        damn you, rick,
        you fully erased my best paragraph to boy-mario,
        about him/her being this site’s ‘tokyo rose.’ ha.
        it would have made many crack-up here,
        for it was a right on the nose comment.


        I’ve tried to balance the tit-for-tat, Vlad. Even when Mario referred to you as a psychotic, he did so, well, um…gently. RA

    • VILE VLAD February 5, 2014, 11:27 pm

      ‘Way too much talk about the 200day ma’
      says above, the ever cheery pansy-boy from shanghai.

      WELL, HERE’S MORE TALK ABOUT IT, ever-happy obelisk-sucking boy.

      200 day ma held, yet again, one more day. repeated retesting of it, today,
      but boom, all slapped right back, like an cheap boomboom shanghai bargirl.

      ok. 3 times is the charm. abcde, ew zigzag; or, just call it, 3 tries, then boom, or fail.
      so tomorrow, is crucial. and you know me. I always bet on bears, in this fake market.

      (however, I also do see, this also could be a basing, for a nice strong COUNTER-rally.
      but don’t think so. think slide will continue tomorrow. slide no one ‘understands’–
      since all is so ‘peachy keen, with no cloud in sight, only rosy sky–and… margin on tap.)

      so I think rick’s 14,700 crucible trendline, is dead ahead. in less than a week, I bet.

      and once there, buy FAST, as I already said. for there is a min. 1K COUNTER-rally, ahead.


      I’m looking for a bounce, first, from DJI 15209, and I expect it to be tradable. We’ll see how it goes after that. RA

      • VILE VLAD February 6, 2014, 2:50 am

        I know, you are looking for a 15,209 dji, as your MINI fall halt call, ackerman.
        but, I am looking at your BIGGER pic call,
        of 727 dji points down,
        from ‘here’ (here being yesterday’s 15,450 area),
        which places you in 14,700 dji area, as your PRIMARY call, where bull holds.
        I have checked this 14,700 area all day. it’s rock solid, at least for a BIG bounce.

        so ok. let’s watch. I think the dji either will rally from today, just under 200 day ma, or–
        it COUNTER-rallies from your MAJOR stop area, 14700 dji area, a week from now.
        for I think your 15,209 stop, is short-term mickey mouse. yet, I’ll admit if I’m wrong.

      • Mario February 6, 2014, 4:58 am

        V, looking at 2011’s 200 day ma gyrations, extremely volatile, reasonable to expect the same in coming days, weeks, months as correction threatens.

        Meanwhile Rick, I noticed an amazing highly visible deflationary indicator today.

        Amazon’s KINDLE platform.

        Which I love for many reasons and have become more familiar with since becoming an author.

        Search FREE KINDLE books. There are multiple thousands, including the highest quality authors any reader might expect.

        I downloaded TWENTY THREE books for free, it took me ten minutes. I could have continued for hours. What did I spend? What did I acquire?

        So, the price of books has plummeted. They used to cost $15. Now they average $5 to $9 but also a massive circulating promotional inventory at $0 to $1.99 based on the successful genius of Bezos. This is no small meaningless indicator of consumer behavior, consumption and the cost of goods.

        Cheers, Mario

      • SCHIZOPHRENIC VILE VLAD February 7, 2014, 3:32 am

        ok. 3 times is the charm. abcde, ew zigzag; or, just call it, 3 tries, then boom, or fail.
        so tomorrow, is crucial. and you know me. I always bet on bears, in this fake market.

        (however, I also do see, this also could be a basing, for a nice strong COUNTER-rally.


        I wrote the above yesterday. so the basing did come about.
        and also my 15,700 dji area target, and much faster than I thought.

        everything is happening really fast. and that is negative, IMO.

        ok, this is my last call on this matter, and then I sign out, for I have no stake in this.

        I think tomorrow’s dji market will churn in this same area, 15,700 dji, as I said.

        then monday, dji will drop again, for few days, seeking 14,700 area, as a major base.

        will it then take off to rick’s 17,600? or will it break fully, shattering my rubicon 14,500?

        don’t know. we shall see. but I always BET DOWN,

        at any rate, I no longer give a [hoot]. as I have no stake in this. just mind exercise.

    • Mario February 6, 2014, 4:40 am

      V I’m so glad you noticed. Because of your presence here, I’ve come to accept a touch of tit for tat to add a little spice to our intellectual debates on matters of otherwise great importance. And I won’t use that bad word to describe you anymore, feel better yet?

      Now, on to your ridiculous comments that I’m wrong wrong wrong. Such generalities abound from you! Parse it. Be a man. Prove it. Line by line, which of what I say is so wrong. Earn the respect, though clearly that’s not something you crave.

      I’m not wrong at all. Because when a person is describing what is self evident, happening, in place, there’s nothing to be wrong about. So, have at it.

      I’ve been invited to speak next week on China and the macro picture next week in front of Wharton, Yale, Columbia Alumni groups. And you know how I present the work found in my book?. It’s a dialogue, which makes it an argument, a debate, in the academic sense. And sweet heavens would I love to debate with you in front of them.

      Cheers, Mario

      • VILE VLAD February 6, 2014, 7:41 am

        I cannot debate you. rick won’t let me. I wrote a great repost to your post above, and hour ago, with no insults, and he erased it asap pointblank, to let you win without any fight, and make you feel good. you are rick-protected, boy. so I am writing pure vanilla now, so he does not erase it. but I assure you, child, you could not debate me, be it in a public ivy league forum, or in an online chat; for in either, I would tear you apart, limb from limb, and then you’d never leave your under-rock pretty-in-pink punk life, ever again.


        Vlad, the stuff I ‘erased’ wasn’t fit to print, and I did you a favor by not letting it see daylight. If you want to get back to business, you might try answering Mario’s latest question — asked of you directly — without attacking him personally.

        When you are good, your comments are enlightening and entertaining. But don’t act offended when I censor or suppress your schizophrenic side. RA

      • SCHIZOPHRENIC VILE VLAD February 7, 2014, 12:12 am


        ackerman, if you don’t post my post above, near verbatim, I doubt I will write here, again.
        because I can’t stand pretentious preening punks like maria. for at least gary, has some dignity.


        C’mon, Vlad. I can’t let you use this forum to conduct your inscrutable war against Mario. You have demonstrated that you have much more interesting things to say — about this, for instance:


        And if you should choose to respond, please don’t load your comments with unprintable references to our commie ‘Chimpanzee-in-Chief’ and such. Believe me, I like the guy even less than you do. Really. But let’s stick to the issues, where you have proven that you can make a real contribution to the discussion. RA

      • SCHIZOPHRENIC VILE VLAD February 7, 2014, 3:13 am

        ‘C’mon, Vlad. You have demonstrated that you have much more interesting things to say — about this, for instance:


        And if you should choose to respond, please don’t load your comments with unprintable references to our commie ‘Chimpanzee-in-Chief’ and such. Believe me, I like the guy even less than you do. Really. But let’s stick to the issues, where you have proven that you can make a real contribution to the discussion. RA.’


        well, I see you are getting tired of… simian-like persons, resembling, ‘planet of the apes.’


        I will provide many ‘related’ weblinks tomorrow.
        without commentary. so you all, pick and choose.
        ain’t gonna be pretty. ain’t gonna like it. but all true.
        and 1 of links will provide facts, about different races.
        finally wise-ing up, ackerman. about current ussa truth.


        Save your breath, Vlad. Again, I would ask that you stay on-topic. There is no reason for you to race-bait by punching up the well-worn arguments of Shockley et al. Obama’s miserable failure has nothing to do with race, even if his election was due entirely to it. RA

      • SCHIZOPHRENIC VILE VLAD February 7, 2014, 4:35 am

        rick, I am through with you. you are so narrowminded, it is incredible. [Snip!]


        I do not run this forum for the pleasure of an oft-insufferable narcissist, Vlad. I have neither the time nor patience to cleanse your dozen-a-day rants of all the ‘nigger,’ ‘shit’ and ‘fuck’ references, and my tolerance for your ad hominem attacks on Mario and others has been depleted to zero. If you can’t be civil in here, then take your flaming batons to ZeroHedge (where, as you must fear, you will barely stand out). RA

  • VILE VLAD February 4, 2014, 11:19 pm

    interesting day in dji today. weak attempt at penetrating already-broken 200 day ma.
    but could not do it. so dji still remains below yesterday’s sharply broken 200 day ma.

    tomorrow should be more interesting. tomorrow will probably bring a big sharp move.
    either up or down. I think down. could go under 15,000. possibly 400+ points down.
    yet wait and see how margin calls hold up, intraday. could be another all-day trickle down.

    but now the 200 day ma dam, is broken. so could be a swift cascade. even in night futures.

  • VILE VLAD February 4, 2014, 11:07 pm

    couple of weblinks most of you will enjoy—

    “CBO: Obamacare Will Lead To 2 Million Fewer Workers In The Labor Force By 2017”


    so it looks like the ussa congressional budget office, is not lying for dah hiphop presidant.


    “Economic recovery? That’s “offensive to a lot of people who are struggling,”


    nothing else needs to be said here.

    • gary leibowitz February 5, 2014, 10:03 pm


      “…almost entirely because workers will choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive. ”

      Wow! Looks like it is really hurting the people that can least afford to leave their jobs. Are you kidding me?

      The net gain is a HUGE reduction in government budget deficit.

      You certainly know how to pull a monkey out of a rabbit.

      • gary leibowitz February 5, 2014, 10:14 pm


        The daily ticker, the same news organization that gave you the negative views on this economic recovery.

        Gotta love the placement of those blinders. A myopic view of the world. You wont get confused that way.

        5 years into this recovery and everyone here is scratching their heads trying to reason how it was faked. I keep an open mind and not use my natural negative bias to mask what is happening in the real world. Yes negative bias. I have been a perma-bear for decades. I have ignored all positives and focused on my on goal, to prove my view is correct. I gave up on that path. I will let the real world using technical and fundamental facts to guide me. It certainly can’t be worse than seeing things at an extreme one-sided view.

        Done for this blog session. I have overstayed my unwelcome welcome.

      • VILE VLAD February 5, 2014, 11:59 pm

        el garo,
        you keep missing the point, rick and redwill (and a few others) tell you repeatedly,
        yet, you continue to ignore it. this market is ‘fake’, because it is solely based
        solely fueled, by ever mounting huge debt, and nothing else. debt and its burden.

        now, I will give you credence, for one moment, and I will pretend, you are honest.
        as such, in your best honest opinion, don’t you opine, that that, si the basis, for disaster?
        instant disaster? that no one expects, and it rollerballs fast, as margin calls
        are triggered, like in 2008, and 2000, and 1987, and 1937, and 1929, ad infinitum?
        be honest, for once in your life. don’t you see why we call this market fake? because it is.
        this market is solely fueled by other people’s money, and the children, of those people.
        and that’s all there is. and as to when the fake bubble market will break, fully implode?
        well, that’s a matter of longterm signals, charts, data, fundamentals and PROBABILITIES.
        you said you were an accountant, right, something like that? student of probabilities?
        well then, you of all people, should be aware, that projecting the status quo endlessly,
        is a sucker’s game; for, supposing your were a ‘life’ insurance agent, payer ALWAYS dies.
        and that’s top black swan event. death. so believe this—black swans are all around us.
        now. like hungry truth-equalizing buzzards. seeking their pound of long-deserved flesh.

      • VILE VLAD February 6, 2014, 1:08 am

        ever lost, card-carrying pinko el garo,
        where’s your commie report, that I must read?

        because all I see you write me above, is total monkey hogwash b.s., to me.
        yet question—did this missing report come directly from the oval zoo? (er, oval office).

      • gary leibowitz February 6, 2014, 9:54 pm

        Vale, please show me in what era the market wasn’t fake? Go as far back as you like and you will always see the same situation with the boom/bust. The only difference today is that wall street figured out how to replace cash and extend credit like never before. The game was always the same. Tulip, South Sea, Panic of 1893, Panic of 1901, 1907, 1929, Japanese Asset Bubble of 1991, etc…

        I agree we are due for another crash and purging out of mogul style oligarchies in finance. But that’s the game that has ALWAYS been played. Please look up these early crashes and tell me the middle and poor didn’t get wiped out.

        The fact is that no government in modern time would deal with a debt crisis any different. You complain after the buildup, but no one seemed too concern for decades as it progressed. Now it is the 11th hour. I totally agree. You complain its faked these last 5 years yet every single indicator says that the added debt has stabilized confidence. Its a game. As long as confidence that lenders will get paid back the system corrects itself. Is the growth really faked? Is the budget deficit being reduced? Is QE going away? Is rates low enough to spur business growth? Is rates low enough to deal with the excess debt? Are we trending in the right direction? When a DAM breaks, do you expect some miracle solution to replace that system right away? The only question that needs answering is do we have enough time to reverse the damage or will it run out.

        This crisis wiped out trillions of dollars of peoples money. You want a better fix? Good luck. In fact I find it miraculous we have managed to start on the road to debt reduction in 5 years time. The mentality of punish the offenders at all costs is an emotional response. I deal in unemotional responses needed to mend this broken system. I do not like the system as we have it today. I wish it was post WWII. I wish everyone played by the rules and the rules were enforced for everyone.

        Everyone states this is all a fake. There is no evidence that this government is trying to wean us back to fiscal responsibility? No one concedes this point? It’s all a sham to sucker us in because they are all masochists. Got it.

        5 years of fake jobs where most families don’t have the means to entertain themselves, eat out, buy unnecessary cloths just because it makes them feel good. No car purchases other than bare functionality.
        No recovery on mortgage indebtedness. In my mind the real problem going forward, and one where it could kill this recovery dead, is corporate greed. So far they have managed to stagnate wages, expect more from their workers, and continue to build their war chest of profits without rewarding their employees.

    • redwilldanaher February 6, 2014, 8:21 pm

      El Garo,

      Please read the report! For once!

      Charles Hugh Smith via ZH on corruption aka the mafia state of mind.


      • gary leibowitz February 6, 2014, 10:22 pm

        As usual you take the easy way out. Don’t bother to explain an economic system that you believe works better. Yes capitalism has been shown to be repetitive in economic extortion on one end and free enterprise on the other. I never stated it was my ideal system. Mr. Liberal prefers a more socialist system where we pay more taxes but receive a better way of life. Family child care, free medical, month long vacation, emphasis on education with low costs. I know every system has its good and bad. There is no such thing (ever) as a fair system for all.

        Most here love to whine, as in complain in a childish fashion. We complain from a high vantage point. In fact most of the people that are truly down trodden don’t have the energy or luxury to whine. We always want more and spend out energy complaining there is no more. Help others now instead of imagining a dire future and your perspective will change. Too much time on your hands. Take a pill and relax. The world is NEVER as dire as the one conjured up in your head.

        5 years of hearing people describe the horrors from Dante’s Hell. In your mind you are already living it. If anything is fake, it’s your expectation that the real world will ever meet your pain from the mental flagellation.

  • Buster February 4, 2014, 2:57 pm

    The debts have grown exponentially & all that that’s mustered is an historically small %increase in the stock market even with all that fleeting monetary value concentrated toward it, with little else getting a look in on the party. All the arguments on one side still fail to account for the fundamental nature of our monetary system, with certain ones sometimes angry resistance to understanding it revealing their inner turmoil on this most relevant point. Here’s a niggling clue.

    The debts cannot be extinguished without collapsing the money supply!
    They can get shifted around, hidden here & there but ultimately someone’s got to pay the piper either through repossession or war, unless more & thus yet even more is borrowed into existence, with ever diminishing effects on GDP (which is a complete joke for the record anyway) as the total debt load increases its relative burden.

    Let’s call it for what it is. Bob earns 100K a year with debts of 1million in the year 2000.
    Because the real economy sucks, having been stifled itself with every burden under the sun in order to cover the government’s…..you’ve guessed it….DEBTS!, he’s now earning 50k in 2014 & has had to borrow a further 10 million to keep going. Bob needs to borrow another 3 million this year alone just to stop the whole show from grinding to an unceremonious end, as his creditors say he hasn’t got the necessary bloodlines to escape his financial reckoning.
    Will someone here please lend Bob some money?

    Anyone? Please??

    Pretty please???

    If they will then I’ve got a few ideas that need some financing.

    Some will argue that the government can always pay its debts, having unlimited credit, but that’s the scam. The government doesn’t pay anything. Other people do, & if you’re wondering who’s the ‘Patsy’, then you should leave the casino a bit sharpish!
    As for QE changing this equation, I ask you……When will QE hit mainstreet?? as I reckon there’s quite a few repossessed & dispossessed who it’s way too late for who really want to know.

    ..Oh yes, just to save the replies from those who are lucky enough to still have their heads in the clouds, millions of able people who need government help!!?? (now there’s an irony!) just to survive doesn’t count for a recovery with 16 trillion of debts & counting, now does it?
    Oh I know the government are doing their best to get this figure down, but surely the groans coming from those in the firing line who are slapped with that burden can even be heard in that cloud??

    “It’s all about the debt, stupid!”

    …and it’s not that the rules of this corrupt, favouring monetary system can’t be reworked to keep it all going indefinitely, as they surely can. It’s just that those ‘reworkings’ always favour the powerful over the vulnerable…. & those hailing their plight surely should recognise that this injustice is what is at the rotten core? That predatory scheming should never be reconciled, nor the psychopaths who hide behind the curtain of it. Such a world as the one that they have envisioned is not even worth living in, even if it could sustain. Some sleepy heads just haven’t grasped that yet, having dodged the bullets maybe, unaware of what horrors occur daily in the factory farm’s slaughter house as they sit down to their daily feast, it itself merely the scraps.

    • gary leibowitz February 5, 2014, 9:57 pm

      Debt isn’t being paid off? I guess the 5 years of this recovery hasn’t directly benefited the home owners?
      Your answer is that the money that this government spends is totally wasted, gone into thin air. No net gain. Gee, not only has this government, and world governments, raised their debt, but they did so by adding more debt in the world for everyone. No net gainers or losers. Tell that to the homeowners that now have positive asset values, lower monthly mortgage payments, and higher home value. Looks to me that the real losers in all this were the lenders. They have regained footing at a slower pace with a sizable inventory overhang.

      Can governments reduce their debt? Ignore the budget deficit (real) reduction, winding down of QE, all with the very net positive of low rates. Servicing the huge debt is a BIG plus with low rates. Wouldn’t you agree? Homes have stabilize. Wouldn’t you agree? Jobs are coming back and firing is being reduced. Wouldn’t you agree? Even the recent report on Obama care is a very positive report. Because of Obama care budget deficit is expected to be the lowest its been since his Presidency. The loss of 2 million jobs because of this enactment is due to “volunteering” lower hours of work or leaving work force. NOT from employers, but rather from individuals that view the cost of staying employed as too high. It’s like a pensioner who is 65 and sees the benefit of leaving a job out ways the cost of staying.
      First we agree that the debt causes winners and losers, but than we dismiss any benefit seen to the home owners. TODAY we have positive ISM, and growing, lower debt burden on individuals that can least afford it, and a real tax on the wealthy to help reduce cost of medical treatment. If you want to complain about the unfair socialist practice of Obama care, due so while explaining why the rich have received HUGE wealth this past decades on the backs of everyone else.

      Yet another one sided doom/gloom assessment without looking at the 5 years of real data and its affect.

      • Buster February 6, 2014, 12:50 pm

        For your own safety I’d suggest only voicing your opinions in that cloud of yours, Gary, as voicing them on the streets may well get a surprising reaction.


        BTW. I’m bullish on humanity’s abilities but bearish on our debt based monetary system, which is unfit for purpose.

      • Buster February 6, 2014, 1:50 pm

        Further, since you like statistics, here are 32 that B/O (make that G/L) neglected to mention:


        To be fair, though, blaming the symptoms of the disease that is the ‘debt based’ monetary system on B/O is not really understanding the problem. If enough money isn’t borrowed into existence to keep the show rolling then there’s not a lot that any president can do about it unless they want to take JFK’s lead & try to issue ‘credit based’ currency….. & look where that got him!
        The same could be said for the stock market in regard to margin debt. Let’s hope the optimism of the cloud dwellers is matched by their willingness to increase it soon, or things might get ugly real quickly.
        I hope you’re supporting the effort & putting your money where your mouth is, Gary, since defiance of debt laws is surely a winner in your book?

      • gary leibowitz February 6, 2014, 9:12 pm

        I would certainly support giving homes away in ghost towns, yet you think that is a problem? The problem is there is no demand to live there, and a huge supply. If it spurs growth, bring it on!

        Placing blame on Obama is a bit silly since he inherited the debt implosion. You would be the first to complain had he done what the majority here suggested, let it burn.

        As for defiance of debt laws that certainly isn’t my position. Lax rules always favor the white collar and any repercussions hit the lower class hardest and first.

        Looks like the redistribution of wealth is certainly justified considering how everyone complains how the people in control are reaping huge rewards from the suffering of others. Obama care is doing just that. It not only helps the middle and lower class, it also reduces government spending. A win-win. Yet all I hear is how it will destroy the American Way. All I can say to that is it deserves to be destroyed if all we see is a caste society.

  • John Harris February 4, 2014, 2:51 pm

    Was it Chris B who called for someone to elucidate the derivative mystery? I too, would like to understand better. A comment above, questioned the collectablity of a derivative instrument. As with a futures contract derivative for corn, aren’t all derivatives contracts potential debts that would become a lien on any assets of the parties? I wish I could diminish my concern about the “derivative house of cards” by learning that credit default swap insurances, and the like, sort of wash each other out without immediately precipitating the next financial crisis.


    A quadrillion dollars’ worth of derivatives in service of a $70Tr global economy cannot shrink to nullity without hurting someone.

    • Iro Noiro February 4, 2014, 9:01 pm
    • Mario February 5, 2014, 4:40 am

      Am I right to offer the simplest explanation. A derivative, such as an option, is simply a bet. Just like the roulette table, the ongoing bets have ongoing value as they are in play, until they’re not in play any more. If the number you want doesn’t come up and you keep leveraging up your bets for when it does, and then it doesn’t, oops, you’re wiped out, you can’t even afford the buffet at circus circus. I don’t see the problem, there are two sides to the transaction. Ah wait! I borrowed all my bets from the banks! I got wiped out and so did the bank I’m not going to repay. Ah! The banks themselves are the bettors, betting depositors money! What fun our financial system is.

      Cheers, Mario

  • Iro Noiro February 4, 2014, 11:12 am

    Dow 32,000 by the end of 2015. Then all that primed stock market money makes an exit of biblical proportions and proceeds to penetrate the paper gold market like a giant multi-function donut filler cream injector. How’s that for a bedtime story. 🙂

    • Jason S February 4, 2014, 7:40 pm

      Oh God, Martin Armstrong’s prediction. It totally reminds me of Harry Dent’s Dow 35000 prediction in 1998. Who says quacks don’t echo?

    • Mario February 5, 2014, 8:30 am

      Well, yes it will get there, the relativity of numbers is rather obvious. Global GDP is expected to go from today’s 40T to 200T in the next 30 years, with the likelihood that at that time us share of global GDP will be 20% and China’s share 40%. While that may bother a few folks, that is the direction of the macro global economy and surely the indexes will reflect higher numbers accordingly. Of course the Dow will hit 30k 40k, in the future but what that number actually means relative to the cost of living, value of currency, cost and price of goods and services, is anyone’s guess….

      Cheers, Mario

      Cheers, Mario.

  • DK February 4, 2014, 11:03 am
    • Jason S February 4, 2014, 7:36 pm

      Yep, good news. At least as the world falls apart we will have ample weed to smoke to help cope with the crap.

      • DK February 4, 2014, 9:44 pm

        Industrial hemp and marijuana aren’t the same thing at all and there’s huge potential for various applications.

        However, on the health side, hemp is pretty impressive stuff.

  • VILE VLAD February 4, 2014, 4:54 am

    last comment for tonight (my time). best advice I can give you to survive, rick ruger or not.
    go to nearest store asap, buy as many bullets as you can, any kind. worth more than gold.
    for most of you dont have wisdom, of sc redwilldanaher, who has his own bullet factory.

    • Troll February 4, 2014, 8:27 am

      Yep, nuthin better than shootin’ dumb-assed mugs after our gold!

      Let’s go pickin’ cherries and shootin’ fish in a barrel!

      Yee Haw!

      • redwilldanaher February 6, 2014, 5:52 am

        Or maybe you could just plan to shoot small game that you’d never consider eating unless that was your only option after another round of state sponsored terrorism unfolds. Or maybe to protect your children when their safety is threatened. Or maybe I’m just a wannabe Korean grocer that wants to keep his livelhood protected when riots break out because Uncle Scam and Uncle Sham continue to squeeze tens of millions to the breaking point.

  • Troll February 4, 2014, 4:53 am

    Damn, I miss you guys 🙂

  • mava February 4, 2014, 2:15 am

    [No, I do not agree. It only appears that way to fools. In plain fact, the Government has already piled up more debt than it can service without creating much more debt to do this. This may look like ‘easier and easier’ debt service to you, but only because you’ve ignored the word ‘real’ in my phrase ‘the real burden of debt’. Consider also that even if The Government has fixed the game so that it can manage its debt, no one downstream of The Government has gotten the same benefit. Mortgage borrowers who re-fied at 3% might seem to be an exception, but that’s only because the real estate collapse begun in 2008 is only halfway to a bottom. RA]

    I have pointed out big time “someone”, who has their debt burden lowered. Doesn’t have to be everybody, since that is not what you asked for.

    Real burden of debt vs nominal burden of debt? I might be a fool, but I believe that the nominal burden of debt does stay the same, both, during the inflation and deflation. Where you defining a deflation as an increase in burden of debt, you meant “real” because the nominal burden can not change this way. Similarly, in an inflation, it is the real burden of debt that gets lighter, while the nominal burden of debt stays the same.

    Finally, when the government prints money, it is their real burden of debt that gets lighter, not their nominal burden, of course. And in fact, today, the real burden of governmental debt got a lot lighter. I am not trying to be sly or to evade your question. You seem to think that the real burden of governmental debt just got heavier? How so?

    [To say that it will ‘help everyone’ is to slyly evade my point. In fact, in a hyperinflation lenders would get totally, absolutely and completely screwed. Of course, delighted homeowners would finally ‘own’ their homes for the cost of a few ten-zillion-dollar bills they would peel from their wallets. Yeah, sure. Do you think such a thing as a ‘bond market’ would even exist if things are settled in that way? RA]

    Yes, although I did not intend to be sly here. Yes, it will not help “everyone”. Just everyone in debt and amongst them, those being indexed up with regards to their pay. Similarly, in deflation, not everyone is going to have an increased burden. Lenders would have a very good time, indeed. But since the government is the most powerful entity, and it is a borrower, then the deflation will never happen, because it will help the lender and not the debtor.

    I said nothing about bond markets. Outside of my scope here. But, if you care to know, of course not, they will be ruined.

    [A few paychecks? Again, an evasion. We’ll be paying perhaps a billion dollars for a loaf of bread, implying that one could pay off a mortgage with a single slice — and expect change. RA]

    I can not tell you now exactly what it is going to take. May-be exactly one slice of bread, may-be two, may-be your two paychecks, may-be ten. Why call me elusive? I am pointing to which way the change is going to happen. Yes, if it is today that your house debt “Worth” your 500 paychecks, then it will worth a LOT fewer paychecks, while at the same time, to obtain another house on debt would be near impossible.

    I think I can be called a fool (if I am just totally mistaken, as VLAD says), but I can not be called sly or evasive on this. I am pretty upfront and open on this.


    Okay, perhaps you are being obtuse rather than sly. I’ll let my original arguments stand, however, since I don’t think you’ve rebutted them. You appear to be arguing from a theoretical/hypothetical standpoint, while my arguments are rooted in the real world, albeit speculatively. For instance, you seem reluctant to accept that only one kind of hyperinflation can occur (‘maybe two paychecks…maybe ten’). I dismiss the possibility of a partial hyperinflation, since it is a quadrillion dollars worth of debt that is going to be hyperinflated (or, far more likely in my opinion, deflated) into oblivion. Like pregnancy, there cannot be just a little bit of hyperinflation.

    One other point in my commentary bears repeating: Nothing happening today in the real world — i.e., in Japan and Europe, chiefly — supports the notion that your would-be political/financial Masters of the Universe will be able to inflate much of anything when the day of reckoning comes. After all, what has the Fed and its central bank cohort accomplished so far with untold trillions of stimulus? Inflationists/monetarists have grown quieter and quieter over time, mainly because they can see clearly that the central banks are losing the battle against deflation — never mind inflating us out of the red zone or stimulating the economy back to health. Given the example of Japan, why should anyone think the Fed will succeed?


    • VILE VLAD February 4, 2014, 4:03 am

      ‘ I might be a fool’, says mava.
      indubitably you are, but an honest one.
      a rarity, these days. so keep on truckin, mava.

      ‘I said nothing about bond markets. Outside of my scope here.’ says mava.
      mava, do you know that ussa bondmarket, is almost twice as big, as ussa stockmarket?
      and you admit you know nothing about them? bonds are more important than stocks, mava.

      you are totally mistaken on all counts, mava.
      however, being mistaken, is not everything.

      everything is, fighting for what you believe,
      truthfully, until you die. and you have that.

      so keep on fighting for what you believe.
      maybe you’ll convince rick and I. haha.

      doubt it, but who the hell knows. because after all
      ‘a foolish consistency, is the hobgoblin of little minds.’

      • mava February 4, 2014, 6:01 pm

        I understand now what you meant by ‘maybe two paychecks…maybe ten’. Of course, there cannot be two hyperinflations. I just don’t have all the data to make a call exactly how many paychecks will it take. There are other variables too, if you wanted to calculate the exact degree of the coming hyperinflation. I don’t think that there can be any certainty about whether the dollar reaches one millionth in 2018 as compared to a dollar today, or merely one thousand.

        Rick, the inflation had happened already (by my definition). It is already “pent up”. It hasn’t been “marked to market” yet, that’s all. If I were to give you a stock analogy, then it would be that we are already invested in dog.com, but we haven’t yet realized that for all our millions there exist only one dog.

        When the realization happens, it is going immediately devalue the currency in circulation (this is what you define as inflation) and prices will jump up. Analogy – a sudden news that crashes a stock. Every share of that stock is devalued in price, but if you used shares of that stock as money, then everyone would suddenly want a lot more of that stock for you to buy anything, – the prices, enumerated in that stock shares, went up.

        At this point, the future inflation takes place (the one you referring to as impossibility), and this is the true, by the book, hyperinflation. It is hyper, because first it comes on the back of a very recent defacto devaluation, and secondly, because everyone is watching. So, every dollar the fed prints at this point, is accounted for immediately, and even more so, is factored in estimating the tomorrow inflation. The faster they print, the faster the money lose value, the faster yet they need to print.

        I am guessing I can’t offer an argument against the impossibility of future inflation. Either I don’t understand this as well as you do, or I don’t have the same facts as you do, but I see nothing that would prevent this from happening where you see no possibility.

        You are referring to Japan, why? Japan doesn’t make money. Their currency is not reserve. What they do don’t matter. Only the FED makes money (or at least what is counted as money today). But even in Japan, it could be easily shown, the inflation can easily be accomplished. Had the BOJ printed a triillions of yen and sent that to each Japanese citizen, do you not think the prices would skyrocket? Of course they would. But the BOJ didn’t do that. BOJ “said” they were “fighting the deflation”, and I can say I have been talking to Jesus. So what? Since we know that sending each Japanese citizen a trillion yen note would immediately take care of deflation (or you have to show why it wouldn’t), and we know that the BOJ didn’t do that, then how can it be said that the BOJ was fighting the deflation? At best, what they were trying to do is to create the inflation without creating the inflation. They were “trying to have sex and remain a virgin”.


        Japan’s fiscal policy has been hugely inflationary, at least in theory. FYI, QE is fiscal expansion by another name.

      • mava February 4, 2014, 6:05 pm


        Where did I do this: – “and you admit you know nothing about them” ?

        I think you have a trouble reading properly capitalized English. But not to worry. Here is a version I have prepared for you:

        “i said nothing about bond markets. outside of my scope here. but, if you care to know, of course not, they will be ruined.”

      • Jason S February 4, 2014, 7:32 pm

        Mava, for your scenario to play out, for hyper inflation to occur that will necessitate the dollar falling in value against other currencies or at least one other currency (which would then, by default, be the new reserve currency.) What country (or countries) has (have) this strength and confidence?

      • VILE VLAD February 4, 2014, 10:07 pm

        mava, when I read someone state, like you did,

        “i said nothing about bond markets. outside of my scope here.”

        ‘outside of your scope’, means, to me, you know nothing about bond markets.

        here, mava. here is someone that knows about bond markets, especially ussa bond markets.
        currently worth approx. 37 trillion, vs. 21 trillion for stocks, according to ewi.

        in 1928, the usa bond market crashed (LESS value), 1 year ahead, of stockmarket.
        and, in 2012, the ussa bond market crashed, 1 year ahead, of what’s, straight ahead.
        LESS VALUE, mava. less value. not hyper value. you are so clueless, you are funny.

        and as to ‘proper capitalized english,’ I write the way I write, because I feel like it, foolish woman.

      • VILE VLAD February 4, 2014, 10:25 pm

        jason, don’t waste your time with mava, she is a one-trick (hyper-obssessed) pony.

        since there is zero ZERO chance, of what mava constantly raves about, occurring.

        mava has zero understanding of current world debt, vs. actual money, and it’s import.

        all mava understands is her ruskie childhood inflationary past, she’s obssessed about.

        she’s always mega-boringly wrong, with her hyper-mania, constant singsong.

        so even the droning gary, is more pertinent. at least he actually knows something.

      • Mario February 5, 2014, 4:24 am

        That’s what I keep thinking Jason, there’s nothing on the radar that can cause a “crash” of the USD relative to the other major currencies and relative to how global assets are now a large connected share of its value. There’s much less separation of the value of assets in today’s global economy.

        What could happen? If the market plummets, the dollar goes up. If the bond market falls, interest rates go up, the market crashes, the dollar goes up. Crude goes down. Gold goes which way? Some say up, some say down. The only scenario that drives the dollar down are reports of weak US economy, which drives the dollar down, but then that improves the US export market, which is now growing at 10% per year to China alone, and which creates 60k jobs for every one billion increase in exports.

        I’m confused (and Vlad will surely say stupid and ignorant too, God love him he’s so psychotically adorable and genius smart), because the 2008 banking crisis caused the market to crash and the USD to soar, while I would think a US banking crisis would exactly cause everyone to bail out of dollars, the opposite happened, so then, it’s all relative, asset values are complexly linked and valued, no expert today can figure it out and do an accurate job of predicting the various what if scenarios that may unfold.

        Cheers, Mario

      • mava February 5, 2014, 5:52 pm

        Jason S,

        True. I don’t know of any currency being any different from the USD. Ostensibly, the great chinese powerhouse is said to be ready to offer gold backing to their paper, but this is only a speculation. It remains to bee seen if China does that and if it even be in the position to do that.

        Let us suppose it doesn’t. Just because there is no other currencies able to take the USD place, doesn’t mean the USD is safe, does it? Because, if the opposite was true, then we can keep racking up the debt, keep printing, keep increasing the size of the derivative volcano to no end?

        I think there need not to be a viable currency to take the place of USD, for USD to collapse. Such currency will be found afterwards, and may not even be any better that USD. There is no inherent bias in economic history for the things to improve. For instance when the Mark collapsed, the world got the dollar, which was arguably, to some people’s opinion, was worse than the Mark.

        It is not necessary to have a better currency, for USD to devalue. Look at the widely known chart of USD value vs. gold since the founding of the FED (the one usually represented in the form of a torn dollar bill) (like this one: http://www.exchangecurrency.com/wp-content/uploads/2012/05/us-dollar-devaluation.gif ). What it shows us is that while there was no viable currency to replace the dollar, the dollar value, nevertheless, was falling and falling, meaning that the dollar was and is in the process of devaluation against the gold.

        Finaly, to give a short answer to your concern, I don’t think the future dollar devaluation will primarily be against some currency. No, all the currencies will go down more or less together. But all of them will go down in value, i.e. being de-valued.

      • Jason S February 7, 2014, 8:54 pm


        For the dollar to hyper inflate, it has to do so against something that is used as a settlement instrument for accounts. Gold is not used as that any longer. In fact James Montier over at GMO did some great research that shows outside of the 1970’s inflation, gold historically performs poorly as an inflation hedge.

        What you are suggesting is that the globe all hyper inflate at once (and maybe that is what is going on right now) but like Mario pointed out I don’t see a scenario where the dollar gets crushed; it probably strengthens. I honestly think we will reach a point where like in the 2008 credit crisis the financial markets seize up and as they try to pump more money into the system it will create a greater distrust and seize it further. That then is the situation that requires a global reset and the eventual hyper deflation moment that Rick (and I and many others) fear. That is a life changing moment for everyone. No one has any idea what that looks like or the economic/political ramifications. It is then a Brave New World.

  • ChrisB February 4, 2014, 1:03 am
    • VILE VLAD February 4, 2014, 1:21 am

      indoctrination… indoctrination…
      is makin me late, keepin me waitin…

      And stay right here ’cause these are the good old days
      (These are the good old days)
      (These are the good old days)
      (These are the good old days)
      (These are…..the good old days)

      carly simon’s ‘indoctrination’ (er, ‘anticipation’)

      but don’t worry, be happy…

      • redwilldanaher February 4, 2014, 3:16 am

        Video is perfectly emblematic of this Age of Stupidity.


  • VILE VLAD February 3, 2014, 11:53 pm

    holy shinoly. going down faster than even I dreamt. I am speechless. 15373 dji close.
    under 200 day ma, strong. 3 prior 2013 peaks, ignored, like dust. things are really bad.
    margin calls must be buzzing off ussa phone lines like mad. incredible so fast. dust.

    ok. the vet advisers step in now, to their subscribers. SELL NOW, 100%. ALL CASH.
    weird. I did think it would occur this fast. but that is the nature of smug complacency.

    my 14,500 dji rubicon is next, to hold the line. and only cited last friday. this is bad.
    tomorrow should be an even worse dji day, than today. it’s those perky margin calls.
    unabated. due to overleverage. so let’s see, if I am wrong. but today’s action, is
    very dangerous. for can dji market bounce out, of an easy break, of 200 day ma?
    don’t think so. tomorrow. interesting action. also overnight futures, do not forget then.
    because by the time market opens tomorrow, you could be looking at opening bell shutdown.
    at least for a couple of hours. possible. things are looking bad, fast. all the margin calls.
    but let’s wait, a ‘silver knight’, could yet appear, to stem flow, and rally the fools, yet again.

  • VILE VLAD February 3, 2014, 11:19 pm

    “That is exactly what happened in 1987, leaving the stock market crucially low on short-covering power after the Dow dropped an unprecedented 108 points on Friday, October 16. The many traders who took profits at the bell manifestly failed to imagine that this was just a warm-up for the 508-point selloff that came on Monday.”

    ah, and I already see another personal anecdote coming, from that ever evil VILE VLAD.

    true indeed. because quote above from rick, triggered another memory, of that time.

    first, I will say, that I was able to get my HALF-price bluechip orders in for oct. 19, 1987,
    because my full-price broker then, was a personal buddy, where we bar-chased skanks.
    I placed my orders with him that weekend, while he laughed, told me not to waste his time.

    however, he was not laughing at end of trading day, monday oct. 19, 1987.
    for he was lazy, an inheriting multi-millionaire, that did not even need to work.
    so he did not work as hard as I. however, he did tell me a story, I have never forgotten.

    and here I go back to the rick quote I cite above, as most crucial, in the madness of sell panic.

    my bar-hopping bud told me exhausted, at the end of oct. 19 trading day, that,
    there was one amazing story, to tell me. that he had a long term crazy old hag client,
    very stingy with her money, but, very vet knowledgeable about the world stockmarkets,
    that, despite the 108 huge drop on friday oct. 16, right before it’s end, she placed a bet—
    $400 dollar put, on the dji. yep, right after the biggest dow drop of alltime, she putted again.

    and guess what. he told me, exhaused, end of oct. 19, that, her $400 dollar oct. 16 put,
    at end of oct. 19 crash day, was worth 16,000 dollars. and she cashed it out, cacklin in his ear.

    400 to 16,000 dollars, in only 1 day. best trade I have ever heard of, by a cacklin old witch.

    4000% profit, in only 1 day.

    and that’s what I am talking about, and so is rick.
    for after years of getting beat down, bears shirk at going further.
    yet that is the nature of man. overconfidence, or overfear. at the extremes. my opinion.

    • gary leibowitz February 4, 2014, 9:04 pm

      Once in a lifetime opportunity to get filthy rich. In 87 index options were brand spanking new and no one understood how to value the options. It was dirt cheap. Used primarily with insurance companies, as I understand it.

      Can you guess what the 400 dollar bet would bring if it was placed before the 16th?

  • mava February 3, 2014, 10:13 pm

    “Deflation can be recognized and understood perfectly by simply observing its chief symptom: an increase in the real burden of debt. Exactly which debts are growing easier to service these days?”

    What you saying is not a definition. But, let’s forget about that for a moment. Forget and take it as a definition.

    When there is a inflation, the burden of debt gets lighter, when there is a deflation, the burden of debt gets heavier. (True for some cases, but for the purpose of this argument, lets say it is always true).

    Which debts are growing easier to service these days?

    Answer: the government debt is easier and easier to service these days. Inflation is kept to the government, – their debts are easier to service. As planned, as designed.
    Do you not agree?

    [No, I do not agree. It only appears that way to fools. In plain fact, the Government has already piled up more debt than it can service without creating much more debt to do this. This may look like ‘easier and easier’ debt service to you, but only because you’ve ignored the word ‘real’ in my phrase ‘the real burden of debt’. Consider also that even if The Government has fixed the game so that it can manage its debt, no one downstream of The Government has gotten the same benefit. Mortgage borrowers who re-fied at 3% might seem to be an exception, but that’s only because the real estate collapse begun in 2008 is only halfway to a bottom. RA]

    There will be a time when all this new money gets thrown into circulation. When? Keeping the new money in the government does not ease the burden of debt for anyone else, so everyone else keeps bearing the burden of debt. This reflects poorly on economy. When it falters, the new money will be used to lighten the burden of debt of everyone else, just like it is used now to lighten the burden of debt of the government. And even if this will never happen as a matter of a policy, still, it will come to it simply as a consequence of the government paying it’s debts – what is paid goes into the circulation.

    Then your and mine debts will get easier to pay, and even by your definition you would have to call it an inflation.

    And this will help everyone to pay down the mortgage debt, – wiping out the capital at the same time, because the lenders will be receiving paper, in exchange for real wealth.

    [To say that it will ‘help everyone’ is to slyly evade my point. In fact, in a hyperinflation lenders would get totally, absolutely and completely screwed. Of course, delighted homeowners would finally ‘own’ their homes for the cost of a few ten-zillion-dollar bills they would peel from their wallets. Yeah, sure. Do you think such a thing as a ‘bond market’ would even exist if things are settled in that way? RA]

    Yes, the government is trying hard not to have to come to that end. But, it is not a matter of a desire. It is only a matter of time. The government will not, in the end, being able to pull the Baron Munchausen. Not any more than he himself would been able to.

    [I completely agree: It is not a matter of desire. Government is just a pissant here. RA]

    You will be able to pay your huge mortgage debt from your few paychecks.

    [A few paychecks? Again, an evasion. We’ll be paying perhaps a billion dollars for a loaf of bread, implying that one could pay off a mortgage with a single slice — and expect change. RA]

    That easy. If you have a paycheck by then. If you are borrower, good for you, for your road will be kept open by the government for itself, and you too will be able to travel it. If you’re a lender – tough luck. Your wealth will be confiscated by inflation. And you’d deserve this, – for you wouldn’t be able to say you had no warning, – they are abound.

    The end result? Will we happily live ever after? Of course not. The wealth will be gone – to the borrowers, who will destroy it. Without capital, and without gold, we will be reduced to a forever fighting with each other peasants.

    [So we do agree on something. To those who think we’ll all live happily ever after once debtors have screwed lenders out of trillions of dollars, I recommend Davidson & Rees-Mogg’s chapters in ‘The Great Reckoning’ concerning hyperinflation. Comes the day when debtors skip-and-go-naked, we’ll all be living by barter alone, since there will be no more lenders, nor bond markets, nor institutional conduits of saving. RA]

    • VILE VLAD February 3, 2014, 10:52 pm

      ok. okey dokey. but I am due back on planet earth, as woody told chris, in annie hall.

      yet now back from your commercial, to remake of wizard of oz, starring rockhead mava.

      I repeat, you are utterly clueless. you are living in your own past. you see nothing else.

      but that is your right. to continue to fight, for what is totally absurb. so go go go, mava!!!

  • VILE VLAD February 3, 2014, 9:09 pm

    looks today like shht is hitting the proverbial fan, even faster than I predicted lat week.

    I cited 2 specific spots, I considered crucial, 15,500 dji, and my personal rubicon—14,500.
    and I wrote it’d take few days for 15,500 to be tested. but nope. in just 1 day, tested. ouch.

    15,500 area is important, because it holds the 3 (2013) ‘peaks’, from which ‘dome’ dropped.

    but even more important, 200 day ma, is just below, the 15,500 dji. and lots of vet-folk bail out here.
    for as the old vet saying goes, ‘those that panic first, panic best.’ therefore, if today, dji closes impulsively, below the 200 day ma, then—tomorrow
    could be a ‘bad day at black rock.’ in other words, a double the size drop, as today.

    and under 15,000 dji easy. area which I have labeled near ‘rubicon’ area, 14,500, of dji market.
    because, if 14,500 does not halt this daily bleeding, and produce a big rally from there, then,

    you are looking at, IMO—the end. thus it would end, with a vacuum whimper, and not a bang.

    so keep an eye on the CLOSING today, since the closing bell, has always been old timer crucial.
    and, if it closes deep strong under 200 day ma, with powerful last tick down (as yesterday),
    I recommend, BAIL OUT. do not wait to watch if your chute opens or not, following day.
    since those that panic first, panic best. and return of capital, is better than return of profits.


    and on that note, here is something I read today, and from an ex-harvard economy professor—
    whom has decided just in this last week, to take out of bank of amerika, his over 1 mil bucks.

    “former Harvard economics professor, author of “Mean Genes” and “Mean Markets and Lizard Brains,” who spoke at last year’s Socionomics Summit in Atlanta.

    Last week I had over $1,000,000 in a checking account at Bank of America. Next week, I will have $10,000.

    Why am I getting in line to take my money out of Bank of America? Because of Ben Bernanke and Janet Yellen, who officially begins her term as chairwoman on Feb. 1.

    Before I explain, let me disclose that I have been a stopped clock of criticism of the Federal Reserve for half a decade. That’s because I believe that when the Fed intervenes in markets, it has two effects — both negative. First, it decreases overall wealth by distorting markets and causing bad investment decisions. Second, the members of the Fed become reverse Robin Hoods as they take from the poor (and unsophisticated) investors and give to the rich (and politically connected).

    Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.

    Let me explain: Currently, I receive zero dollars in interest on my $1,000,000. The reason I had the money in Bank of America was to keep it safe. However, the potential cost to keeping my money in Bank of America is that the bank may be unwilling or unable to return my money. They will not be able to return my money if:

    Many other depositors like you get in line before me. Banks today promise everyone that they can have their money back instantaneously, but the bank does not actually have enough money to pay everyone at once because they have lent most of it out to other people — 90 percent or more. Thus, banks are always at risk for runs where the depositors at the front of the line get their money back, but the depositors at the back of the line do not. Consider this image from a fully insured U.S. bank, IndyMac in California, just five years ago.

    Some of the investments of Bank of America go bust. Because Bank of America has loaned out the vast majority of depositors’ money, if even a small percentage of its loans go bust, the firm is at risk for bankruptcy. Leverage, combined with some bad investments, caused the failure of Lehman Brothers in 2008 and would have caused the failure of Bank of America, AIG, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Stearns, and many more institutions in 2008 had the government not bailed them out.

    In recent days, the chances for trouble at Bank of America have become more salient because of woes in the emerging markets, particularly Argentina, Turkey, Russia and China. The emerging market fears caused the Dow Jones Industrial Average to lose more than 500 points over the last week.

    If the chance that Bank of America will not return my money is, say, a mere 1 percent, then the expected cost to me is 1 percent of my million, or $10,000. That far exceeds the interest I receive, which, I hardly need remind depositors out there, is a cool $0. Even a 0.1 percent chance of loss has an expected cost to me of $1,000. Bank of America pays me the zero interest rate because the Federal Reserve has set interest rates to zero. Thus my incentive to leave at the first whiff of instability.”


    • Mario February 4, 2014, 4:47 pm

      And put it where?

      • Jason S February 4, 2014, 8:20 pm

        Put it in the market, of course. Safe as houses there and 20% per annum.

  • C.C. February 3, 2014, 6:54 pm

    We live as much in a ‘Political-economy’ as we do a market-based one. And guess what? It’s a mid-term election year! So perhaps this time around, the Fed decides to sacrifice public sentiment about an ‘improving economy’ on the altar of $USD confidence? Can’t have both in the current environment. Either this ‘improving economy’ is strong enough to move forward on its own, and the end of QE is already fully priced in or… What is going on right now provides perfect cover for the Fed to ‘rescue’ the markets by March.

  • redwilldanaher February 3, 2014, 5:16 pm

    We all have technical projections that we work off of and I handle them the same as Rick, have them but chart the action as it unfolds and try to adapt to it as it rarely transpires exactly in the way that you envision it. It may hit your level but in my experience it usually will hit it later than expected but in some cases much sooner. Perhaps this is a case of much sooner for the correction and much later for the next bull leg? When rules and laws no longer matter things can change in a hurry so we will see.

    Ultimately most of us expected that the worldwide bubble ponzi would meet an ugly end and I’m sure that most still feel that way. My gut tells me they have another series of tricks to play before no one has faith in the gimmicks and Rick’s scenario finally plays out.

    Great write-up Rick!

  • BDTR February 3, 2014, 4:15 pm

    A budding solution to oscillating tensions feeding market highs nervousness has suggested a shifting focus from inflation/deflation to inhalation/exhalation.

    As demonstrated recently at near sea level swamplands, comfortable relationships of elevation and humidity imply significant bearing to success rates of applied inhalation at sea level opposing to that apparently exercised above, say, 5,280′.

    Stunningly negative results of applied inhalation at altitude provides insight to remedial Wall Street prospects of future success of overcoming the inflation/deflation quandary by remedy of ending its aversion to holding one’s breath for extended enough periods and silently sitting in circles in sub-basement Manhattan locales. Perhaps in now emptied gold vaults!

    A joint discipline perhaps offers our best bet for establishing new narratives for endless cyclic discussion exchanging a franticly nervous mindset for more mellowed, if yellowed, fraternity of endless oneness of agreement.

    • Jason S February 3, 2014, 6:05 pm

      BDTR, and here I thought you were going to reference recreational inhalation at a mile above sea level and the mind alteration that comes from that now in the state of CO. By-the-way, Rick, can they still not keep the 420 mile marker on the freeways there?

      • Rick Ackerman February 3, 2014, 6:40 pm

        They’ve wisely replaced them with 419.9-mile markers.

      • BDTR February 3, 2014, 8:07 pm

        (419.99, actually. .999 would have been even better for us purists;)


        And, Jason, thanks for gently revealing just how misplaced my inclination was to engage a keyboard so early post-dreamstate. Oh, well. Best, etc.

  • mava February 3, 2014, 8:01 am

    Deflation, – only if you define deflation as a decline in prices of some classes of assets, you say? May-be. And only at first.

    In any case, deflation classically defined (decrease in money supply), in my opinion, is not possible.

    • VILE VLAD February 3, 2014, 4:27 pm

      mava, mava, mava.
      you are so clueless it is actually funny.
      don’t you understand anything of what rick wrote above?
      it’s very clear, point by point.
      and it is exactly what I have been writing about herein for several years now.

      for what he describes above, IS UNAVOIDABLE. and the only question left is, WHEN.

      don’t you ever understand that the current entire world ACTUAL ‘money supply’,
      despite you being correct, that it is being further diluted daily, and worldwide,
      don’t you EVER understand that that ENTIRE CURRENT money supply,

      don’t you ever get it? the hyper-inflation argument is moot. obsolete. give it up.
      for all there that is real, is an avalanche of instant deflation, just waiting for it’s day
      of reckoning.

      however, I will say, that I agree, with your ‘only at first’ comment.
      yet, to my observation, that ‘only at first’, could be of MANY YEARS of length.
      I’d say at least 5 to 10 years, IMO, from all I know.
      and for many reasons.


      Those who have been making the inflation/hyperinflation argument have hit a wall, since, looking at the real world and what has actually been occurring, it’s plain to see that deflation is bearing down on the global economy with irresistible force. Well, the inflationists can always retreat to the lettuce bin or meat counter, where prices keep rising. RA

      • VILE VLAD February 4, 2014, 11:01 pm

        gary, you (honestly?) ask–

        “I wonder why my assumption that easy credit is the KEY to a sustained recovery”
        (CAPS MINE)

        ‘sustained recovery’ is based on an entire core of fundamentals; and ‘easy credit’,
        is only 1 factor. and you are constantly focusing only, on what you only want to see.
        for you repeatedly avoid seeing what others tell you, to also see, take into account.

        but for once, i’ll address you earnestly, and give you a multi-year period where ‘easy credit’,
        did not pull off your trick of a rebound; and of course, of avoiding a major stock crash—-

        the early 1930’s, in commie fdr’s ussa. because in 1937, there was a major crash,
        despite zero interest lending rates for 7 years, and look at their overlaid dji charts,
        of ’37 compared to today’s, identical, in angle of rise and drops, created by ‘easy credit’


        and if you lie to me, tell that you don’t believe in chart extrapolations or trendlines,
        plus in highest AAI bull/bear ratio of 4/1, highest since 1987, well, I’ll you a liar.

    • Rick Ackerman February 3, 2014, 5:12 pm

      Forget this stupid, worthless definition of deflation, Mava. To repeat myself for perhaps the 500th time: Deflation can be recognized and understood perfectly by simply observing its chief symptom: an increase in the real burden of debt. Exactly which debts are growing easier to service these days?

      • gary leibowitz February 3, 2014, 9:06 pm

        Well I agree that Money Supply will not decline and the amount of debt is huge but you can’t make a conclusion to this story until it is over. the 5 years of debate has proven this point. The ability to keep interest rates so low without falling into a deflation panic has allowed everyone to continue to ride this episode out. I stated years ago that as long as rates stay low without another crisis causing panic we can reduce our debt and change course. While most here think that statement is naïve, you fail to realize that that is exactly what has happened so far.

        The Federal Budget Deficit is expected to be 280 billion in 2014, the lowest since 2006. You can explain it away, or wait to see if revenue can keep the current pace to allow this to happen. While it doesn’t get rid of this monster overhang it does tame it. As for the QE program that people state will do us in, I believe the Fed is well aware of this dilemma. No one thought they would actually be on the path of tapering, but Wall Street knows the consequence all too well. There is a hangover from this take away. Will we grow enough to continue to allow this addicting infusion of money to cease? Don’t have an answer.

        Not one single person on this board predicted we would be holding our own 5 years after the crisis. Perhaps that in itself should give you reason to doubt your original assumptions. I know that the costs were more debt, but for the last 18 months we are trying to tame this monster. If we free ourselves of QE all together our chances of succeeding are that much better.

        I don’t believe everything is so clearly defined and our outcome can only be total destruction of this economic system. There are too many factors and circumstances that can and have changed the assumed path. Why are we talking about the “eventual” demise some 5 years after the demise should have rolled over us by now?


        Gary, I knew I could rely on you to post something that is wrong in every possible way and which fails to address whatever in-one’s-face point I have made. RA

      • VILE VLAD February 3, 2014, 9:29 pm

        well, said, el garo.
        and I concur, you have been the rightest over last 5 years, on this site, overall.
        however, this bull (shhtt?) is old. it’s 5 years old now. decrepit, by historical standards.

        for even you admit above, as necessary, ‘without falling into a deflation panic’, huh?
        because, tell me, el garo, when have ‘deflation panics’ been prior preciently avoided,
        when the overleveraged for years, over confident for years, like most are right now,
        as testified by the current AAI’s greatest bull/bear ratio since the 1987 huge crash?

        so you are playing with fire now, boy. to keep your droning boring baloney, still rolling.
        besides, history repeats itself. human nature does not change. period. end of story.
        and shape of bullmarket charts, right before crashes of 1929, 1937, 1987 and 2008,
        are near identical in angle rise, to today’s long, tired, decrepit, debt-driven bull’s.
        and all those 4 prior charts based, on same steroided overleveraged overconfidence.

      • gary leibowitz February 3, 2014, 11:42 pm

        Yes here we are 5 years later and not ONE explanation as to how this was accomplished? You can of course hold an open ended argument that some day we would crash and burn but that doesn’t address the mechanism that is at play here.

        Is the stock market like a volcano? Today we know more than to state all active volcanos will blow in days. It’s not the end game that’s important, it’s the road getting there. If you can understand how it was done you can figure out what to look for that would derail the situation.

        All I hear is the same suggesting’s why we would immediately fail, whether it was told 4 years ago or today. That is not a scientific examined response. You use your technical system with precise charting instead of out right guessing. WHY? Your general sense of a doomed economy has no such patience or argument that can discern a guess from an intelligent premise. It’s like saying an active volcano is going to blow any day know, without understanding the dynamics. I agree we have an active volcano. I do not agree we have any understanding as to when it will blow. I am trying to explain away the here and now with plausible reasons. You dismiss the here and now as if it isn’t happening.

        Perhaps this time this active volcano will blow. It’s a pure guess using your method. I work backward to explain why it already didn’t blow. Right or wrong no one has come up with an explanation other than its random. I don’t buy that.

      • gary leibowitz February 4, 2014, 2:14 am

        Another of my assumptions relating to why the market has been humming along. As suspected bank lending has eased as borrowing increased. The big question is whether the taper has any adverse affect on lending. I suspect it does.


        For someone that just doesn’t “get it”, I wonder why my assumption that easy credit is the key to a sustained recovery, seemed to have gone hand in hand over the last 3 months of the year as the market responded in kind. Now the hard part, tapering. Will banks be as willing going forward?

      • gary leibowitz February 4, 2014, 8:33 pm

        Vlad, glad to have your discourse without any name calling. I might not be a very good economist, nor do I pretend to understand all the facts that cause deflationary pressures to mount, but I do know that credit expansion is the number one factor to determine if we are in troubled waters. As for corporate profits you have to look at unit labor costs verses productivity. That barometer is no where near danger zone yet.

        The credit market is getting frothy with debt to income hitting over 24 percent. I look to see if credit tightens or consumers are less inclined to borrow. The only scenario that remotely mimics this market is 1937. I have said all along that we should experience a decent drop this year. Unlike 37 we now have interconnected global markets, where the ability of other powerful nations can soften our economic depressions. We also have a concerted effort from global policy makers stemming any long lasting panic on the monetary front.

        As for the ever mounting debt that is a big problem, but one where it can take a very long time to materialize. The personal and corporate debt will have more of an immediate impact on this stock market. We are “attempting” to reduce gov. debt and “trying” to wean ourselves from the Fed QE policies. I stated a long time ago that if this government manages to keep rates low without major spikes higher, or a spiraling deflation ensuing, we have a chance to normalize our debt.

        I would have liked my assumptions to have been cross-examined years ago to determine who had the best track record. That in itself doesn’t prove one theory over another, but it does discard ones that already predicted doom/gloom.

        Since we replaced cash with credit stating in the early 80’s it is hard to use models that have not changed to reflect this new dynamics. Using old models we are in the stratosphere where it seems impossible to occur, yet here we are. Either the formula must be re-examined or we believe the last 5 years are a fake. To me that’s like insisting the earth is the center of the universe.

        If banks and consumers continue to expand on credit we are not yet in danger of another great depression. If we have an event(s) that cause this again it will be telegraphed with enough time to liquidate your holdings. It’s more about emotional willingness to accept these warnings as it is to physically change course.

        To your steep rise in stocks over the last 5 years, how do you explain the 1982 to 87 rise, followed by a 24 percent crash, and the largest and biggest bull run ever lasting till 2000. Surely once we quickly got back to the prior 87 levels it was reasonable to expect another big fall. Chart patterns only make sense after the fact. Trying to determine when we have another big fall is ludicrous.

        Looking at the 82 to 2014 run would you call that one hell of a steep rise? Now tell me at what point in that long run would you have gotten out? Could the 2000 to 2014 run be nothing more than a very big consolidation period where we go nowhere? Is that even remotely possible? I see the whole 18 year cycle starting at 2000 as a possible consolidation. That suggest to me that we will have more large moves down and up until we start another uptrend cycle. I even expect a possibility of going down over 50 percent from these levels and still consider this big pattern as consolidation, as strange as that sounds.

        I do not believe our way of life, and our economy, as morphing into some C rated horror movie where we have total devastation.

    • ChrisB February 3, 2014, 6:58 pm

      Mava is right – the money supply cannot decline. It is out there, and unless you physically burn it (or outlaw it), it will remain in existence. I also agree with Vlad – the debt overhang is enormous, and with our method of issuing money as debt, there most certainly isn’t anywhere near enough money to cover these debts, and never will be. So where does that leave us? We have reached a point where the overhanging debt has smothered 2/3 of the worlds economy, and China will soon join that club. We cannot “muddle through” indefinitely, as the debt MUST grow to meet obligations, and it must grow exponentially.

      There are rumblings in the Euro zone of negative interest rates at banks. Perhaps the Treasury could issue bonds at negative interest, and the Fed could buy them – trillions of dollars worth.

      There could be a debt forgiveness event.

      There could be a new currency created in cooperation with G7 countries with controls similar to the Euro currency.

      There could be WWIII where assets are stolen and debts are defaulted on. The chaos and destruction would create an environment where the least of your worries would be the value of your portfolio or how stable your bank is.

      None of these possibilities are attractive, and all would result in a great restructuring of all things financial. In my opinion, it will come to pass, that if you don’t possess your assets physically, then you will come to possess some small fraction of what you THINK you possess (or nothing at all).

      The inflation/deflation discussion I think is rather moot. The current system is due for its inevitable destruction. There will be massive inflation in some assets, while there will be incredible deflation of others. A gigantic reset is looming, and TPTB will decide who the “winners” will be, and who will lose. If you aren’t included in the 1%, you have already lost (but it will get worse). If you are in the 1% group, you had better be making some very serious plans, as there is a big red target on your back, and only the .001% will come out of this as winners. After all, they designed this flawed system, and they will design the next flawed system – to their advantage of course.


      I’ll ask you the same question that I’ve asked scores of others concerning the mastodon in the room: mortgage debt. How will it be settled? As far as I’m concerned, no other aspect of the inflation/deflation conundrum matters even remotely as much. Personally, I don’t think there’s a chance in a hundred that mortgage debt will be inflated away.

      As for the money being ‘out there’, I see the opposite: it doesn’t exist…cannot be ‘actualized’ without causing it to vanish. I view the alleged $2Tr corporate surplus in the same way. RA

      • Jason S February 3, 2014, 8:25 pm

        Rick, I can see a situation where the Govt and Fed attempt to continue to muddle through. They buy up the mortgage debt through QE directly. Even if they stop QE they can continue to buy it up indirectly by using the interest and principal received on the assets they hold to continue to purchase it. My understanding is that this has been going on from the beginning.

        I think the market would disapprove if they used all QE to buy that junk, but once they start buying it with interest and returned principal the books are so opaque no one knows what garbage they own. At that point, the banks have cleaner balance sheets, the Fed is eventually paid back either by the borrowers or eventually the tax payers. It could take 30-40 years, maybe longer but that’s OK. I think they are used to it since we still pay interest on debt incurred for the Spanish American war.

        The one caveat is that we stop increasing the mortgage debt out there, at least the risky stuff. This of course would cause prolonged economic stagnation and probably an increase in the loss of standard of living. I don’t see that happening so I think the Fed and Govt are just delaying (and exaggerating) the inevitable debt implosion.

        One bit of interesting information; I have a friend who works in the default department at a title company. She said that they are now working on defaults that began back in 2008. In many instances the people have been living in these homes payment free since that time.


        I am not talking about the Fed hoax through which it purports to ‘buy’ mortgage paper. My question — for the umpteenth time — is HOW WILL THE ACTUAL LOANS ULTIMATELY BE PAID????????????? How many times must I ask this question to get an answer? RA

      • ChrisB February 3, 2014, 9:20 pm

        “mortgage debt. How will it be settled?”

        It could be settled in many different ways, or any combination. We could become a planet filled with renters, with the mortgage holders collecting the rent. The Fed could continue buying the toxic debt and since they are never audited, carry it on their books at full value in perpetuity. We could simply let it all collapse and have true price discovery. Will the price be in Dollars??? What if it isn’t? Is the new “price” higher or lower? It will be simply a grand re-shuffling of assets imho. There will be some huge winners, and everyone else will start over – same as it ever was.

        “As for the money being ‘out there’, I see the opposite: it doesn’t exist”

        I really don’t understand how you can say the money doesn’t exist. The “value” assigned to an asset may not exist, but the money used to purchase that asset most certainly exists. Whether it is in digital or physical form, it simply gets moved around unless it is physically deleted/destroyed, or outlawed. Perhaps you can educate me as to how this money “disappeared”, or how it failed to be created when the debt was issued? Even if we used every phys/digital Dollar in existence to pay of all debts, the money would simply end up back at the Fed in their accounts, along with a bunch of physical assets (gold) because there was not enough “Dollars” to cover the debts. In other words, the money didn’t disappear, it simply returned to it’s creator – along with a pile of gold that they got for free. In my opinion that is the sole purpose of the Fed and it’s system of debt as money.

        Some are preparing for Inflation, and some are preparing for Deflation, but I think everyone should be preparing for confiscation. It’s been going on for decades covertly, but only recently have TPTB begun to openly confiscate, and I don’t believe Cyprus will be the last example of this.


        Thank you for addressing the mortgage question. I happen to agree with you — that ultimately, all homeowners with mortgages will effectively become renters. Meanwhile, he who says that the money ‘out there’ exists is, by implication, saying that the quadrillion-dollar derivatives edifice is real money. My contention is that it is not real money; rather, it is a large pile of false assumptions whose value, when settled against liabilities, is zero.

        And incidentally, when we speak of ‘assets’, there is no point in talking about anything BUT the derivatives edifice, since it is at least 12 times the size of global GDP. Under the circumstances, no other ‘assets’ even remotely matter, save those which will produce a stream of revenues after the system collapses. RA

      • ChrisB February 4, 2014, 12:58 am

        Derivatives… now there is something I most certainly do not pretend to understand completely. Does anyone? I have read many articles that attempt to explain their purpose and nature, but how do you explain something the size – as you say – of 12x Global GDP?

        In my simple understanding, derivatives are financial insurance. They are “IOU’s” if a predetermined set of circumstances come to pass. But not all derivatives are created equal, just as not all bonds are created equal, and hence we have a market to decide how much a derivative is worth? Sheesh, someone please correct me if I misunderstand this. And what could possibly go wrong here???

        I don’t see derivatives as money, but simply IOU’s that may or may not require honoring. But, I would like very much if someone could explain in concise detail exactly how a derivative IS money – the main reason I read this site daily is to learn from the many great minds here, and from the diversity of views. Perhaps it could be the subject of a future essay here at Rick’s Picks.

        The biggest problem I see with derivatives, is that it would take generations in court to decide who was owed what, in the (likely) event of a true global crisis – how do you sort out a quadrillion dollars worth of IOU’s? Seems like it would be a crisis worthy of the creation of a new World Government to “protect” us all from this monster ever preying on our financial system again. Now, who would benefit in such a scenario?

      • redwilldanaher February 4, 2014, 2:15 am

        Loving Rick’s smackdown of El Garo.

        Come on El Garo, is that all ya got? Same old absurdity/obtuseness?

        Several people acknowledge that TPTB could levitate and misdirect for a spell but not forever.

        Do you mix what forums you propagandize?

        The explanation has been given thousands of times here: “smoke and mirrors” is best label to put on it. Nearly everyone that’s come here has managed to come away understanding save for the one, the only, El Garo.

        I can’t believe that you are sincere in the least. Or if you are, that you have refused to do any research over the course of the last 5 years that would easily lead you to the source being smoke mirrors.

        Most people here have tired of providing you with free research as you simply ignore what is served up to you. This is why you’re scoffed at, even by Rick at times and he’s a fairly patient host from where I sit.

        Seriously, it’s time El Garo takes the next step on his own…

      • redwilldanaher February 4, 2014, 3:23 am

        Since you can’t seem to figure it out El Garo, this is what happens to centrally-planned, entirely artficial markets after EOY is booked and bonuses are paid.

        The hint of less artificiality…

      • Mario February 4, 2014, 4:44 pm

        Hi Rick, let me look at your question of how those loans will be payed from a different viewpoint. Supposedly the market “price” has everything priced into it, all the good and all the bad, including the fact that those loans and lots of other debt is never going to be repaid, and including any economic strengths too.

        What I see overall is that Europe is weakest, followed by the U.S., China is strongest, and I mean that literally, even with its current debt levels. That encompasses our three main global players, all deeply linked together. The only other factor that makes a difference is interest rates / the bond market. As many of us have said all along, if interest rates rise too much from current levels, this party comes to a screeching halt one way or another, that’s the new world order.

        If it weren’t for the current high leverage level again, I spend little time worrying about a “crash” in the financial markets or llobal economy. Considering all weakness and strength, the global economy has some horsepower under the hood. However concerning the current high leverage levels again / derivatives market, as that is multi trillions of leveraged bets that could start cascading, then it’s going to be a Holy Guacamole Batman disaster.

        I can only look at the charts and notice that 13k ish on the Dow marks a healthy 20% correction and chart support, but maybe that’s a fool’s dream.

        Cheers, Mario

      • Buster February 4, 2014, 5:13 pm

        “I am not talking about the Fed hoax through which it purports to ‘buy’ mortgage paper. My question — for the umpteenth time — is HOW WILL THE ACTUAL LOANS ULTIMATELY BE PAID????????????? How many times must I ask this question to get an answer?” RA

        …..In blood & tears, mixed in with diminishing hopes of beating the odds.

      • gary leibowitz February 5, 2014, 9:11 pm

        Analyze the facts on current mortgage debt and tell me there hasn’t been a huge net benefit with low rates these past 5 years. The good: Fannie May portfolio continues to shrink at an accelerated pace. Foreclosures continue to shrink, and the preferred mortgage type these last 5 years has been the fixed 30 year loan. The not so good: Troubled mortgages are still very high compared to pre-crash conditions. Inventory rising due to slower pace of home purchases as home prices keep rising.

        On balance we had a huge benefit with the very low rates these last 5 years. The losers are fixed income individuals, but the largest burden individuals have is home mortgages. On balance they have made out in a big way. Why doesn’t anyone acknowledge this. Why isn’t the slow recovery over the last 5 years seen as a result of home mortgage burdens being lifted, with lower monthly payments, and rising asset values. The recovery is largely due to rising home values against the mortgage loans. This is a huge relief for homeowners that had negative asset values.

        I hope we maintain a range on the interest rates for another 5 years. This surely has a net advantage to purge out the huge excesses of the boom years.

        I guess people manage to complain no matter what this government does. It has managed to lower government and personal mortgage overhang and maintain a slow jobs recovery. Latest report confirms this. Jobs, still seen in the 200K range going forward, steady upward growth in hiring verses firing, ISM non-farm manufacturing still at solid growth. The recent rise in rates have caused a slowdown in purchasing homes, which affects future sales and construction BUT the rates have once again fell significantly enough over last few months to counter that trend.

        I try to explain why the market is humming along these last 5 years while everyone here looks to cherry-pick reasons why we are doomed to an immediate crash.

        My premise from the start has been that accelerated growth will cause lower productivity and higher costs. That is what is happening over the last 4 months. Will that trend continue? If so, expect an earnings based bear market, not an economic train wreck.

        But hey, what do I know? Ignore my premise and slew of data that seems to confirm this and stick with trying to rationalize why we are about to crash any day now. I might be naïve, but I “try” to base my argument on real 5 year data points. Your arguments haven’t changed in 5 years. It’s as if this world economy is meaningless since you have concluded 5 years ago any attempt to “fix” the problem is doomed to fail, and should have failed immediately if it wasn’t for the global conspiracy to hide the evidence. In the end though you seemed to have missed the point that 5 years have gone by when you were assured that could never have happened. Now that it has you are more convinced that your theory is correct, which places more absolute controlling evil power in the hand of the select few. Your logic is backwards. Simple solution is to view the worlds actions, whether being able to succeed or not, as being one of trying to relieve the worse aspect of this debt debacle, mortgages. In that regard they have stabilized the patient.