The melt-up story is getting increasing play — and who’s to deny it? Even bulls seem to find it a little scary, though, since, after the melt-up, what then? I don’t know which prognosticator in the guru fever swamp is hyping the highest target for the Dow Industrials, but I’m on record below with my own at 25680. (I could stretch that to 26,940 in a pinch, incidentally, but I don’t want to play my hole card just yet.) The 25680 target is a Hidden Pivot that lies exactly 2352 points above Friday’s close. Even though there must be much higher guesses than that, mine will at least keep me in the game for the next year or so. I’m hoping we’re all wrong, since it will be very difficult to suspend disbelief as the broad averages climb to insane heights while the real economy remains, paradoxically, all too sane.
Melt-Up Scenario Gaining Converts
- October 23, 2017, 7:09 pm
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October 22, 2017, 11:17 pm
Or maybe we’re in, and have been in, the melt up at present.
Or maybe things aren’t as terrible in the real economy as you think.Or, maybe they are.
Or. maybe you should stop mouth farting about how weak the economy is, deflation, housing, yadda, yadda. It’s obvious that asset markets globally, especially equity and private sector debt, are explicitly targeted as having to incessantly rise as a key part of maintaining the status quo globalism path-and the US Fed is actually one of the most restrained central banks in terms of actual actions. Just follow your TA system, which seems to work pretty good, and quit forecasting and pontificating on anything other than that system.&&&&&&
Yeah, but supposin’ that mouth-fartin’ stuff proves to be right, Rantly — particularly my 0.6% forecast for rates on the long bond? If it hits, you will be eating shit by the ladleful. RA
Your comment might be amusing McTirade if what was coming were not so damned alarming. You did however hit the key words “deflation and housing” and that’s where the most pain will be felt when asset prices begin to fall back to Earth once more.
Sorry, but we are not at a permanently high plateau nor will prices just keep rising indefinitely. And yes, things are going to be just as bad as the deflation theorists have argued all along (if not a whole worse). This can be demonstrated with a number of charts but the one I will link is perhaps most appropriate for today.
The Case-Shiller home price index going all the way back to 1890 is tracing out the worst possible pattern for homeowners that anyone might have imagined.
After peaking in 2006 and crashing for several years it has bounced off its bottom seen in 2011 (just as gold peaked) and is making a run for what will undoubtedly be an ugly double top within the next two years.
Time of arrival can be comfortably measured by the angle of attack on the chart and the number of years for each period of the rise and fall.
Case-Shiller Housing Index since 1890
http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/
We are not there yet of course but the set-up is damning and does warn that every bubble eventually has its day. What is harder to guess at is how far down we will fall once the final top has arrived or how many years it might take for the housing assets to fully deflate.
Suffice to say that many millions of Americans (and Europeans, Canadians and Japanese too) are going to have a lot less of a retirement fund to work with than they might currently imagine.
To make matters even more painful we will be seeing commodity inflation on the rise just as homes, stocks and bonds are on the wane.
I predict a nasty long-term deflation in asset prices intermingled with flat wages due to automation. This will happen during a period of low growth caused by millions of retirements and as that happens we will see rising inflation in all the wrong areas (food, fuel and medical services) as commodities reassert themselves.
What we have coming might just be the worst combination of circumstances lining up to create a multi-decade stagflation that simultaneously eats away at both our retirement wealth and our discretionary pension income.
Best to start preparing now McTirade. What goes up eventually comes back down and what is priced for the trash bin always catches a bid when there is nothing else to buy with upside potential.
What I am saying is that sometime in the next 25 months, gold will have finally hit its cyclical 8 year bottom while stocks and homes will have finally hit their tops and if you still have that smug attitude of yours and not rotated out to greener pastures you will be one of the bag holders when the next “Great Deflation” gets underway.