“JPMorgan Presents ‘The Era Of Central Bank-Driven Equity Rallies’”
‘Back in April, when the S&P500 was at 1580 we forecast that the price target on the S&P500 for the global central bank syndicate was 1900. The S&P closed the year at 1850, just barely missing said target, which was merely a function of the correlation between the stock market and the straight-line, diagonally expanding consolidated central banks' balance sheet (yes, it is a "market" for idiots, but such is life under central planning... while it lasts).
‘Incidentally, there was a time as recently as two years ago, when saying the Fed is merely propping up stocks, was blasphemous in polite economist circles. Since then even the most tenured economists (not to mention the US Treasury) have finally admitted the truth…
‘…will the Fed finally be kind enough to release a newsletter each morning laying out where the S&P will close that day?’ ZeroHedge
“Gold’s friends will ask why this process did not affect gold.
“And answer that it probably did.”
John Brimelow, JBGJ, LLC, 1/2/14
Maturing and Nascent Trends and New Developments should increase Social and Economic Turmoil and Greatly Increase Volatility in the Markets in 2014. Result: Mega Moves in Key Markets, the Most Salient of which we outline here.
These Mega Moves will create Great Opportunities for Profit for the Nimble and well-informed, and Great Losses for the Purblind or those in Denial of Economic and Financial Realities.
A Critical Reality is the ongoing Release of Bogus Official Data by U.S., Chinese and other Major Nations. In fact, Real U.S. GDP is a Negative 1.7%, with Real U.S. Inflation at 8.81% and Real U.S. Unemployment at 23.2% (Shadowstats.com – see Note 1).
Honest John Crudele, Business Writer for the NY Post Notes one such Specific Release of Bogus Data.
“In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington…
“The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated…
“And the Census Bureau, which does the unemployment survey, knew it…
“Just two years before the presidential election, the Census Bureau had caught an employee fabricating data that went into the unemployment report, which is one of the most closely watched measures of the economy…
“And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.”
It is highly likely that the Release of the Politically Correct (i.e. Bogus) Data will continue.
A related phenomenon will be the intensifying (because Economic and Financial Realities are increasingly Politically Unacceptable to Powerful Interests) use of Perception Management – called “Communications Policy” by The Fed, and more accurately known as “Propaganda”, or “Brainwashing”.
This results in the Dissemination of Fictions such as “the Economy is Recovering”, and in often Unreliable “News” in the Main Stream Media.
The Reality in the U.S. is for example, that the Middle Class is increasingly Impoverished with Steadily Diminishing Purchasing Power. The Income Gap is widening with the top 10% Earners now receiving 51% of Income.
Coupled with increasing unemployment and underemployment in the U.S. and Eurozone, even if the Economy were recovering the “Recovery” would be, (and is) stillborn. Indeed, this Reality demonstrates that Fed, ECB and BOJ QE Policies do not help the Middle Class and “Main Street” but do help their Mega Bank Clients/Owners First and foremost, and the owners of Capital in the form of Securities, secondarily. Unfortunately, “Main Street”, Savers, and Retirees have been generally seriously hurt by such (e.g. ZIRP) Central Bank policies. This Reality will have significant Market Consequences in 2014. For example,
The foregoing Trend will make a Recovery Driven by the Middle Class Impossible, and the following related Trend will further Impair Real Recovery Possibilities.
As a result of Fed Policy, Corporate Earnings are a “Mirage” as Savvy Investor Carl Icahn Notes. This is because Fed QE has kept borrowing costs artificially low; thus artificially elevating corporate earnings.
The foregoing Trend of Increasing Central Bank/Government Interventionism in the Economy and Markets will increase to the extent the Public allows it. This means that Investor focus on Interventions, and Interventional Patterns is often as important, and at times much more important, than Fundamentals or Technical Analysis. For example, attention to all three facilitated Deepcaster’s making Accurate Market Timing Projections which resulted recently in quite Profitable Outcomes for recommended Trades in our Speculative Portfolio (Note 2).
The Trend of Interventionism is the Economy and Markets will be increasingly, unfortunately, replicated in the rise of a Police/National Security State. This is already being Manifested in increasing Surveillance (cf. NSA) Invasion of Privacy, Suppression of “Politically Incorrect” Speech and Reporting, and Use of Government, Globalist, and Police Entities to Control/Suppress Opponents of those in Political Power.
The Consequent Growth of the Orwellian State is buttressed by the increased numbers of those dependent on Government benefits, most of whose complicity is thus (often reluctantly) “bought”. This “Complicity in Silent Submission” is not merely reflected in many of the 50% of those in the U.S., for example, who receive some kind of government aid, but also in those business enterprises worldwide which receive large Government Contracts, and/or obtain favorable Tax and Regulatory Policies.
As well, the increasing use of “Social Media” communication and centralized “Private” date on “The Cloud” increase Vulnerability to State Control as well as loss of privacy and loss of protection of Vital Business Data. (Is it prudent for any business to “store” data in The Cloud?!!)
All the foregoing works to achieve increasingly Centralized State Power and diminished Individual Freedom.
Major Trends, such as Rising Interest Rates which we earlier Forecast, are already “baked into the Financial Cake” as it were. The Timing of Most other Major Moves will be crucially Important Going Forward. Therefore, regarding Timing, we are Monitoring Key Signals which serve as Timing Indicators. We set forth such Indicators Signals in our Forecasts for the Sectors we cover.
For example, when the Yield on the U.S. 10 Year Note has multiple confirmed back to back closes substantially above 3%, that will signal that a significant U.S. long Bond Takedown is ready to launch. Sovereign and other large Investors are already Moving Away from the $US and US Debt due to the increasingly apparent U.S. Financial Insolvency. The $US has been supported above 80 (basis USDX) thus far by “Retail” Investors who are increasingly buying $US denominated Assets (such as U.S. Equities) and by Fed Bond purchasing, just as the Sovereigns and Pros. are selling.
The aforementioned Indicator is one of several which will Signal when that “Moving” away is Morphing into “Running” away from the US Dollar and US Debt.
Re. Equities, we have earlier forecast that the Ongoing Equities Rally will Reverse into a Crash some time in 2014.
This is why we have utilized a Congeries of Topping and Timing Indicators based on Fundamentals, Technicals and Interventionals.
Indeed, there are already important signals of Topping and Subsequent Major Takedown in 2014.
For example, as we write there have been 5 Distribution Days on the NASDAQ and 6 on the S&P.
This is a sign Professional and other Major Investors are Selling just as Small. “Retail” Investors become more Bullish.
In addition, 59.6% of advisers are Bullish and only 14.1% Bearish according to a recent report from Investors Intelligence. This disproportionately Bullish Opinion is seen at Market Tops, just weeks or even a few months before market Crashes.
And there are four other indicators that signal that Mid and Long Term, Equities are set to Crash beginning in the next few months.
a)Long term Equities Charts with their Expanding “Jaws of Death” Wedge, are quite Bearish. It is a harbinger of what is coming.
b)Interest Rates are Rising (the U.S. 10 yr. T-Note Yield has already bounced up over (and around 3%as we write!) and
c)Excessive Leverage/Margin Debt is at record Highs -- over $400 Billion as of October 31.
d)The Russell 2000 was Trading at 75 times reported Trailing Earnings recently – Quite Unsustainable.
Stay tuned re. Timing and our Recommendations.
Perhaps the Most Significant Market Movers for 2014 will be the $US and US Long Bond.
Very significantly, the $US moved briefly below 80 basis USDX, recently, and it has been making lower highs and lower lows in recent months (check out a $US Chart). Not a Good Prospect for the $US.
And also very significantly and nearly simultaneously the Key 10 Yr. U.S. Treasury Note Interest Rate moved above 3% briefly recently. Both these Moves are Quite Important Harbingers of much weaker $US and long-term U.S. Treasuries, to come.
Indeed, a move below 78 basis USDX would mean Sovereign and Other major $US Holders have started dumping the $US en masse. We expect such serious dumping to begin sometime in 2014, (and we will discuss “Refuges” as the year progresses).
Up to now, most have been “merely” selling.
Ongoing Fed QE, a $17 Trillion US Budget Deficit and about $100 Trillion downstream unfunded liabilities have probably already doomed the $US as World’s Reserve Currency.
This means of course, that the $US’ purchasing power is headed for a Dramatic Decline and likely replacement as the World’s Reserve Currency by a Gold-backed Chinese Yuan. Consider well the Significance of the fact that the Chinese are now the World’s largest Importer, as well as the World’s largest Producer of Gold.
A main reason the $US Crash has not already begun is that other Fiat Currency Printers with Currencies in the USDX (e.g. Euro and Yen) are also devaluing their currencies.
A Currency Devaluation War is quietly underway and it will end very badly for the Economy and the Markets.
A Major Consequence is that as the $US (and other Major Fiat Currencies) Tanks, we expect it will be reflected Mainly in appreciation of the Price of Tangible Assets e.g. Crude Oil (we are already seeing this) and Gold and Silver (see our Forecasts).
In the last two years, Paper Gold and Silver and Miners Prices have remained in Thrall to continuing Cartel Price Suppression and to the Perception that since the Economy is ostensibly recovering they are not needed as Safe Havens.
But we have forecast their artificially Depressed Prices will likely not Persist much longer.
Looking ahead, the Prospects for The Great Launch Up for Gold, Silver and the Miners beginning in 2014 are increasingly bolstered by the fact that Physical Bullion Supplies available for Delivery continue to Deplete – A recent report from the Comex shows the Registered (Available for Delivery) has shrunk to about 630,000 ounces.
And we must not forget that the Crude Oil Price is perhaps the most Tangible “Honest” Market Mover for 2014.
Weeks ago we forecast WTI Crude would hit $100/bbl by year-end and indeed it has. A Harbinger of things to come for Tangible Assets.
Partly this is the result of 4th straight weekly drop in Crude Supplies and the EIA report that showed U.S. above-ground supplies were the lowest since September, and in part because Chinese and certain other Asian countries’ demand continues to increase, albeit more slowly than prior to 2009.
Going Forward, we think the prospective Equities Rally beyond Year-End is likely to be sufficiently Strong that, coupled with increasing Chinese and Asian Tiger demand, WTI Crude Oil will launch up toward $110. $110 WTI is a likely to be the maximum short term top, by or before, early to mid 2014 as Equities top.
Only the launching of The Great Crash, likely beginning later in 2014, will likely serve to deflate Crude Prices significantly once again, but only for a while.
Focus on the aforementioned Macro Market Movers is Essential for Investors’ Profit and Wealth Protection.
January 3, 2014
Note 1:Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider
Bogus Official Numbersvs.Real Numbers(per Shadowstats.com)
Annual U.S. Consumer Price Inflationreported December 17, 2013 1.24% / 8.81%
U.S. Unemploymentreported December 6, 2013 7.0% / 23.2%
U.S. GDP Annual Growth/Declinereported December 20, 2013 1.97% / -1.70%
U.S. M3 reportedDecember 28, 2013(Month of November, Y.O.Y.) No Official Report / 4.14% (i.e, total M3 Now at $15.489 Trillion!)
Note 2:140% Profit on Equity Index Call on December 27, 2013 after just 10 days (i.e., about 5200% Annualized)
40% Profit on Equity Index Call on December 19, 2013 after just 2 days (i.e., about 7500% Annualized)
135% Profit on Equity Index Call on October 28, 2013 after just 13 days (i.e., about 3800% Annualized)
110% Profit on Equity Index Call on October 22, 2013 after just 7 days (i.e., about 5800% Annualized)
120% Profit on Equity Index Put on October 9, 2013 after just 16 days (i.e., about 2700% Annualized)
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