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Old 07-07-2009, 09:10 AM
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Default October Crash or "Green Shoots" turning into "Black Roots"



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There are many people, myselfe included, who expect that a major TSHTF will happen in September - November. For the most part this expectation is a gut feeling, but recent statement from Joe Biden about "misreading the economy" only enhances it.

This person in the video has some ideas as to why it will happen in October.

http://www.cnbc.com/id/31773276

"The economic time has to worsen and so these green shoots will morph into black shoots very badly, culminating probably in an October crash," Pfeil said.

"People will finally accept that the unemployment rates will have to keep rising, that productivity will have to keep falling," he added. That in turn will make earnings expectations "fall through the floor."

With a backdrop of rising unemployment and an excess supply of goods, Pfeil cited three other key reasons for expecting stocks to tank this winter.

Firstly, he thinks the much hoped-for economic recovery will not materialize and governments will be unable to keep showering the global economy with stimulus packages.

"What will become very apparent by then (October) is the so-called global recovery just is not going to happen. The governments have run out of ammunition, they cannot go on stimulating the economies," Pfeil said. "On top of which, you will find that China itself will be running out of ammunition."

A third reason to expect declines in October is simply the seasonal factor, according to Pfeil.

"Stupid as it sounds, this is normally when crashes occur, in October. I cannot tell you why," he said.
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Old 07-07-2009, 09:32 AM
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I would also second that notion of a market crash coming in the fall. The set up was this recent run up which took the S&P on an almost 50% retracement of the March lows. I believe, with a bit of empirical backing, that this bounce was due, but certainly not to this magnitude and for this duration. There is no fundamentals whatsoever to speak of, in fact, the worst thing has happened to fundamentals, that being that no one even knows the rules of the game anymore with all the intervention.

That being said, this recent rally was (IMHO) completely engineered to allow the banks to issue massive amounts of stock into equity market strength. The coincidence of the end of the feather tests, I mean the stress tests, are just too strong. The run up in the stocks that were the most trashed (and for good reason), ie the financials, do not serve as a new leadership for a new bull market. Quite the contrary.

Even at the March lows of 666 on the S&P the markets were way overvalued. There is no way we see $45 of earnings (top down, forget bottom up) on the S&P which would have put the March lows at a forward 2009 earnings multiple of almost 15. If you back out the massive government intervention in the financials, the Q1 and Q2 earnings will look bleak at best. We have never had a new bull market begin off of a multiple over 11 and since this is the largest global collapse of credit in history, I would not peg the multiple at over 8 which, if you assume $45 in 2009 earnings (wildly optimistic in my view), you arrive at S&P 360.

Even if you think we are going to grow in 2010 one cannot possible expect earnings for 2010 to be "that" much better than 2009. If you factor in maybe 10% growth (again, way too optimistic in my mind) you are at 2010 forward earnings of $50 (if you think 2009 will match 2008's earnings which are $45). That puts this market, S&P 900 at a smooth multiple of 18!!! NO WAY that makes any sense whatsoever in the face of what is occurring now.

What is even worse is how high the market is right now compared to earnings or any possible fundamental valuation you want to give it. S&P 900 right now puts 2009 multiple somewhere around 20 which is astronomical, even if you think we will hit $45 in earnings. If you back that earnings number down to a more realistic $35 or $30, you will see just how topsy turvy this market is right now... again setting it up for a huge fall.

From a technical standpoint we are seeing a lot of nonsense about the coveted "golden cross" on the S&P. Nonsense. Bloomberg spouts this out and people take it as the buy signal of all signals. Trash. We had room for a nice bounce off the March lows but that only should have carried us to S&P 800 or so, maybe 850.

This market is very dangerous and the fixed income market is even worse. The summertime is usually a period of low volume which is what I expect now until September. I do not like the way this is shaping up though for the fall when traders return in droves and the Q2 earnings numbers have trashed 2009 expectations.

Just my opinion though of course.
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Old 07-07-2009, 12:07 PM
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What I look at is the fall farm harvest. If we have a bad harvest or food shortage in October or November then we'll have serious financial trouble too. If the food shortage is bad enough, then we'll have starvation on a national level which will make everything even worse yet. One thing leads to another but the indicators show up in the fall with a trickle down effect for the following months. So if the fall farm harvest of '09 is good then the next few months, up until the fall of '10, will also be good. If the farm harvest of '09 is bad then expect food shortages which lead to an increase in sick people which lead to a loss of work time or production time/capability which leads to reduced economics and so on.
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Old 07-07-2009, 12:44 PM
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Well? I am hoping that this house of cards world economy DOES fall. I am part of the reason why the global economy is falling apart. I refuse to put another dime in it. In my opinion it was wrong to remove the protectionism that built our country into the most powerfull country on the planet. I stopped buying imported garbage years ago. I fought against N.A.F.T.A. and G.A.T.T. the World Trade org and the United Nations being given power over any nations soveriegnty. Ross Perot was correct when he said this was leading to our demise as a nation.

BUT!!!! This nation has survived worse! We have come back from a depression and two world wars. We will survive this as well. My brothers and sisters, look around you,what do you see? I see a whole army of my countrymen who will stand in defense of freedom! Those who abandoned us and took thier companies overseas let them die there. Traitors all! Hold up your brother here in this country. I tell you the truth , we dont need the Global authority and we dont need the Global economy. If you want to save this nation then start a business. Start building the things that we need. Start supporting your local economies first. Trade with your neighbors, work together and keep the money here where it does the most good. THE HELL with the Global elite!!!! They suck us dry with interest and rape our economy with inflations and controls. Its time to return to protecting what is ours, taking care of our own people first. The rest of the world is on thier own. Open your eyes and get to work we need you.Kingfish
Old 07-07-2009, 12:53 PM
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Just a question...Will this be a world wide crash or will it just affect the US? Okay, another question...Which is worse, if it is just the US that is struggling or the whole world? I was thinking if it was just the US it might be the end of us. If it was a world wide problem then people might be too busy trying to survive to attack us. I could be wrong though.
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Old 07-07-2009, 01:02 PM
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IMO it will be a world-wide crash. The world's financial centers, regulations, and policies are so interconnected that you can no longer tell where one starts and one ends. If a large player such as the US collapses, the rest of the world is going down with it. Each economy will act/react differently, some worse, some less worse, but all bad. It has become a race for resources for a reason. We have not drilled ANWR for a reason, and it has nothing to do with the spotted owl or polar bear.
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Old 07-07-2009, 01:04 PM
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Originally Posted by Nededah Jane View Post
Just a question...Will this be a world wide crash or will it just affect the US? Okay, another question...Which is worse, if it is just the US that is struggling or the whole world? I was thinking if it was just the US it might be the end of us. If it was a world wide problem then people might be too busy trying to survive to attack us. I could be wrong though.
The world's economies are interwined like the siamese tweens. If one goes up or down everyone moves along. Having said that, I believe that the US economy will feel the least pain for a very simple reason, our currency is still the world's reserve currency.

I think that Eurozone will suffer the most.
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Old 07-07-2009, 01:11 PM
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Flex, I wonder at what level the status of reserve currency no longer applies? I have never really thought about that in terms of a global meltdown where it truly became every country for themselves.
Old 07-07-2009, 01:18 PM
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Who cares about the the Global anything? That is the mindset that got us into this mess. Turn back to your neighbor, your small town, your county, your state. We are the most resiliant people on the planet and we do not need the the Global market to survive. Let it die.
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Old 07-07-2009, 01:21 PM
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Flex, I wonder at what level the status of reserve currency no longer applies? I have never really thought about that in terms of a global meltdown where it truly became every country for themselves.
I really don't know. All I know that the dollar probably will maintain a "safe heaven" status for at least some time.

It's kinda when we elect the next official. We no longer think that he/she is the best for the job, we vote for who sucks the least.
Old 07-07-2009, 01:37 PM
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Quote:
Originally Posted by Flex View Post
There are many people, myselfe included, who expect that a major TSHTF will happen in September - November. For the most part this expectation is a gut feeling, but recent statement from Joe Biden about "misreading the economy" only enhances it.

This person in the video has some ideas as to why it will happen in October.

http://www.cnbc.com/id/31773276

"The economic time has to worsen and so these green shoots will morph into black shoots very badly, culminating probably in an October crash," Pfeil said.

"People will finally accept that the unemployment rates will have to keep rising, that productivity will have to keep falling," he added. That in turn will make earnings expectations "fall through the floor."

With a backdrop of rising unemployment and an excess supply of goods, Pfeil cited three other key reasons for expecting stocks to tank this winter.

Firstly, he thinks the much hoped-for economic recovery will not materialize and governments will be unable to keep showering the global economy with stimulus packages.

"What will become very apparent by then (October) is the so-called global recovery just is not going to happen. The governments have run out of ammunition, they cannot go on stimulating the economies," Pfeil said. "On top of which, you will find that China itself will be running out of ammunition."

A third reason to expect declines in October is simply the seasonal factor, according to Pfeil.

"Stupid as it sounds, this is normally when crashes occur, in October. I cannot tell you why," he said.
this economy will fail this admin will fail this country will hurt for years to come.Stupidity is our worst enemy.
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Old 07-07-2009, 01:42 PM
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these guys have around 80% track record in forecasting

http://www.leap2020.eu/GEAB-N-36-is-...ves_a3359.html
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Old 07-07-2009, 01:43 PM
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Quote:
Originally Posted by Kingfish View Post
Who cares about the the Global anything? That is the mindset that got us into this mess. Turn back to your neighbor, your small town, your county, your state. We are the most resiliant people on the planet and we do not need the the Global market to survive. Let it die.
But that is like saying, "who cares about fire" when you are in the middle of a burning house. It is far too late in the game to scream protectionism in my opinion. The US is far more reliant on other nations than they are on us and we cannot close down shop and tell them to take a hike without destroying any shred of life left in our economy. In fact, our hopes of pulling out of this mess rest well outside our borders.
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Old 07-07-2009, 01:48 PM
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Quote:
Originally Posted by Cryptkeeper View Post
these guys have around 80% track record in forecasting

http://www.leap2020.eu/GEAB-N-36-is-...ves_a3359.html
Good read Crypt, where did you get the statistic that they are 80% spot on? Just curious.
Old 07-07-2009, 01:52 PM
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Quote:
Originally Posted by Cryptkeeper View Post
these guys have around 80% track record in forecasting

http://www.leap2020.eu/GEAB-N-36-is-...ves_a3359.html
I knew something was scaring me, now I know what it is. Seriously, it's a good read.
Old 07-07-2009, 02:22 PM
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Yeah, if there is a debt default by the US and/or the UK all bets are off, literally, pack up your stuff, leave work immediately, and get home or to your BOL.
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Old 07-07-2009, 02:26 PM
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Yeah, if there is a debt default by the US and/or the UK all bets are off, literally, pack up your stuff, leave work immediately, and get home or to your BOL.
I honestly can't see what other choice we have. Generating manageable inflation is clearly failing in front of our eyes.

It feels like an economic tsunami. Like you were saying, the deflation followed by hyper-inflation. Only God knows how long the cycle will last.

Last edited by Flex; 07-07-2009 at 02:34 PM..
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Old 07-07-2009, 02:35 PM
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Flex, you are right on the money. We cannot generate growth this time. We are probably only in the 4th or 5th inning of this deflationary period and instead of using this time to restructure the fundamentals of the system we are creating more and more slack by pumping money into the system (or trying to). These attempts to inflate/reinflate work until they do not. And that is where we are. All we are doing is destroying our currency, which is where the inflation will come from. Money supply is meaningless right now since there is no velocity and to try to inflate our way out of debt is such a dangerous game. Once foreign governments don't buy our debt, they don't need our currency.... supply and demand goes poooooooooffffffffffffffffffffffff. And the music stops.

Man, I need more preps.
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Old 07-07-2009, 03:18 PM
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I'm just curious -- what do you foresee happening in the event of a debt default that necessitates getting home that quickly?

Quote:
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Yeah, if there is a debt default by the US and/or the UK all bets are off, literally, pack up your stuff, leave work immediately, and get home or to your BOL.
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Old 07-07-2009, 03:25 PM
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By the time the masses hear about it, you will probably have 12 hours before panic sets in. The delay will be caused by those that do not have access to the news, or time zone differentials, or do not understand what it means. But the effects will be felt immediately by those who understand what it means.

If a debt default happens on a Monday - Friday, every "trading" market will be shut down immediately. Wall Street would essentially be shut down by regulators. The news would travel through all of the news agencies and the speculation and panic would ensue as the news stations marched experts on to discuss the plight.

A debt default by the US would have such massive ramifications for the USD and trade that literally the best move for someone would be to get home immediately and take stock of the situation. Tell your boss you have a raging headache and leave. By the time every one else floods the streets you will be home and secure.
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