Think I mentioned a likely Sep 11 focus in here from a few weeks ago ........ spirals 6th anniversdary, lunar new Moon and partial solar eclipse coincident. Usually allow T +/- 1 day or so.
Long term, earnings will come down and PE ratios will be more appropriately rated according to gloomdoom psychlology. Historically PE 7 for Depressions.
If earnings halve from here cos plebs have no spending power left, even as USD starts moving down at warp speed to try and maintain some kinda global business advantage, and historic PEs are used, thats a formula for a 75% fall in the equity markets over a period ........ 2 years ?
Reality is USD wont fall too much cos everyone else will be devaluing same time to keep some kinda business balance, so paper will burn globally and gold will soar in what evolves as a HYPER-STAGFLATION scenario (Alf's latest term) to last well beyond, say, initial first two years of plunge.
Derivatives pool has swelled from 80 trillion in 2002 to 400 last years figures, to now est 700 trillion according to Santelli from the CBOT pits. Yet Capitalism demands periodic clean sweep for its ongoing health. No amount of PPT intervention will prevent this.
Hence survive and thrive policy for mine is
(1) Nil debt, plenty of cash and some bullion in hand;
(2) Cash is king in debt-default black hole asset deflationary wave down (started) over next year or so(?
(3) No equities other than couple quality, undervalued, emerging resources producers with NIL debt NIL hedging possies;
(4)Short XJO and financials for some protection of what you own;
(5) Wait for the dust to settle and go VERY LONG precious metals stox from their lows as they too are temporarily caught in the initial cash-out.
Simply
asset deflation + paper burn inflation = (hyper) stagflation
This is ultimatley likley to emerge as an inflationary depression (1970s many times over) unlike the pure deflationary depression of the 1930s.
Only prob is the black hole will IMO happen FIRST followed by an extreme pump prime to try and recover ..... they have been trying pre-emptively but too little too late cos the problem is unprecedently BIG, so suspect we will get mid term pure asset deflation first. In any case all contingencies need to be allowed for.
Snippet from Green-spam appropriate to this :
#####Waddayaknow, Greenspan sees turmoil ahead.
Mr Greenspan said: "The behaviour in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907.”
Mr. Bernanke probably wishes that Alan Greenspan would tone down his remarks. After all, the Wizard behind the Curtain doesn’t want us looking into things too deeply. We might lose confidence in his job performance. Of course, Alan doesn’t have to worry about the consequences of his words. After all, he’s only a highly paid consultant###########
U just gotta stay in control and nimble enough to move with the mega-punches coming.
All personal opinion / strategy to suit me only.
Lost 8% in first stop out of XJO short week ago. Re-entered XJO short last Tuesday (one day too early). Should be very green on Monday.
PS I always HOPE I'M WRONG but cant afford to ignore the macro-signs so try and prepare for all. Am at nil debt / 40% cash atm, tho probably not enough. Only reason why reluctant to go much more into cash is cos dont trust the financial system so probably lean more towards unencumbered resources / precious metals in the ground than cash in "which bank" bank, even if cash is likely to be initial focus.
Agree that before any "crash' we are likely to see pre-shocks. Also likely "crash" this time is a staged zigzag down (sincerely HOPE so) than total loss of control. Personally looking for retrace DJIA toward 9800- 10600 mega pivot (upper figure cos of allowance for constituent fudge factor) range and only if that doesnt hold (probable for mine) will panic then set in ..... derivatives mayhem.
Thats what Im expecting SHORT - MID TERM but of course hoping it doesnt happen so we can continue wearing our rose coloured glasses.
(20min delay)