In Reno houses are at below replacement cost and have declined atleast 50 pct off the 2005-2006 top. It is classic bubble deflation as the area never had the earnings power to support these prices. Another 20 pct down and prices will approach 1990 or earlier levels(some areas are already there).
If the Bush tax cuts which were supposed to end in 2010 had been allowed to lapse as planned, the budget problems would have been on the path to self-correction.
In Reno houses are at below replacement cost and have declined atleast 50 pct off the 2005-2006 top. It is classic bubble deflation as the area never had the earnings power to support these prices. Another 20 pct down and prices will approach 1990 or earlier levels(some areas are already there).
Was today's action capitulation?, too early. We have a primary 3 wave off the 2009 bottom and have a classic head and shoulders top. My guess is if the Fed stands pat and waits the market could continue to sell off hard. The Fed is out of bullets so to speak,so I would expect further declines. Breaking the round numbers of 11K and 10K especially probably signals the end to this Fed induced liquidity driven rise.
The only good news is that we are in the 3rd or 4th year of this downturn and hopefully the consumer and corporations have to some extent reliquified their balance sheets. The bad news is that the USGOV and Fed have transferred all the bad debts to their balance sheets and that could signal a possibility of hitting a wall.
If we continue down further through next week and then have a failed rally,it could get really ugly as the chances are that breaking 11K would not be a 4th wave correction and we have seen a historical high in the market.
If we continue down further through next week and then have a failed rally,it could get really ugly as the chances are that breaking 11K would not be a 4th wave correction and we have seen a historical high in the market.
There is a theory used by market technicians developed by Ralph Nelson Elliot. His theory simply put is that the market moves in waves of psychology..The waves are either 5 waves or 3 waves which would be countertrend to the Primary trend. It is very complicated in the medium to short trend,but usually looking at 5,10,20 and 50 year charts usually brings clarity.
A 4th wave would signal a further advance to a new high,but breaking through the previous 4th wave bottom would signal a probable change in trend. I suspect there will be no doubt if we have indeed topped,because this drop in theory should be faster and deeper than the 2007-2009 decline.
From Yahoo Finance,......... the Wave Theory seems to make sense
Fear on the Street: Inside the Stock Sell-Off
By Jeff Macke
Stocks posted a severe drop today, with the Dow Jones Industrial Average falling 4.3% and the Nasdaq crumbling over 5%.
By the end of the day there were few places left to hide. Gold, silver, crude and yields on Treasuries all fell sharply as traders looked for safety and were met by nothing but falling prices. Over the last 10 trading days stocks have lost more than 10%, the traditional definition of a market correction.............
Yeah I pulled everything out last week. It's all in cash now and really, there's nothing to do now but watch and wait. This much I can tell you, when I go back in, I'll go back in very conservative and watch and wait some more. I've been watching and waiting for somebody, anybody in Washington to recognize the real problem and do the right thing, and they're doing the opposite, IMO. Interesting times.
So where did the dough go after the sell off? In the banks in the form of cash? Around the globe in emerging markets? Is shorting illegal over there? It is here.
I was a week late. The people getting out now are killing their gains. If it keeps diving, I may have to get back in next week when I can see the bottom of the tank. Fear. The mind-killer.
So where did the dough go after the sell off? In the banks in the form of cash? Around the globe in emerging markets? Is shorting illegal over there? It is here.
When you get a big sell off it usually goes into very short term U.S. T-Bills. In fact one U.S. NYC bank said they had such a influx of cash that they might start charging customers. That's plainly a bad sign as it is a negative rate and that happened in Japan.
The outstanding shorts in SPY's is at a huge record and the fuse on that Keg of dynamite is you have record margin debt with record low cash on hand by institutions. The Fed has been in a pure fog of idiocy, The market if it chooses could unleash a solid wake up call if it chooses.
My guess shorting won't be legal for long. That will be a big mistake as the shorts provide liquidity in a sell off as the buyers head for the exits and you get a no bid market. very few politico's understand this, along with everything else.
Well the market knew it was coming. S&P downgrades the U.S. from AAA to AA+
"Well, so much for the conspiracies. S&P has just released a scathing critique of the total chaos that this country's government has become. "The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability." What to expect on Monday: " it is possible that interest rates could rise if investors re-price relative risks. As a result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in 10-year bond yields relative to the base and upside cases from 2013 onwards. In this scenario, we project the net public debt burden would rise from 74% of GDP in 2011 to 90% in 2015 and to 101% by 2021." And why all those who have said the downgrade will have no impact on markets will be tested as soon as Monday: "On Monday, we will issue separate releases concerning affected ratings in the funds, government-related entities, financial institutions, insurance, public finance, and structured finance sectors." Translation: unpredictable consequences: you are welcome!"
