Much is being made in the MSM of the 100-year anniversary of the 1920s, which famously became known as the Roaring Twenties. Many believe this one will be just as good. But will it?
Happily, I wasn’t there at the time but it was well documented in print and film. The Great Gatsby captured the mood of excess in print and Charlie Chaplin kept us amused and in good spirits in common with the positive mood of the time. His tramp portrayal showed us that even someone homeless and poor could succeed. The following 1930s Depression decade showed the opposite attitude to tramps with the Forgotten Man discarded by society.
The conditions at the start of both decades are totally disparate. In the 1910s, conditions were tough as international trade was hampered by the gold standard and the US economy was just recovering from a series of recessions. Bullish sentiment was on the floor. That was the time to buy shares low – and reap the huge manic bull run that terminated in the Wall Street Crash of 1929.
In reality, the 2010s should be called the Tearaway Teens in homage to the Roaring 1920s.
But today, we have just had one of the longest economic expansions in history – aided and abetted by the central banks who created mountains of funny money that most definitely was not tied to the gold standard. Since 2008, there has been unlimited scope for them to create the perfect conditions for the current asset bubbles. Last time, I showed a chart of the present stock valuations which are only the second largest in history.
In recent blogs, I have highlighted the current extreme bullish readings in several measures. Any anyone who subscribes to the above favourable comparison with the 1920s is demonstrating overwhelming confidence in the next ten years. And that is when bull markets turn – when complacency is off the scale.
But yesterday, a new dynamic has entered with the sudden escalation of Middle East tensions with Iran. The current strong rallies in the PMs is testament to this factor (we are long Gold, Silver and Platinum for the Club).
It is the Nasdaq index that is showing textbook Elliott waves and Thursday’s surge to a new ATH at the 8900 area – and the rapid pull-back off the upper tramline – that has been in force since September – that looks very much like a buying climax (and a reversal signal)
Providing the pink zone can be broken, I expect a rapid run down to the lower blue tramline around 8650. My expectation is that the 8900 high made on the first trading day after the holidays will stand for a long time.
So my outlook for the 2020s is that they will be roaring alright – just not in the way most intend. More in the nature of a conflagration.
And here is another prime example of extreme complacency by a stock market pro:
An appealing alternative to investing in funds (index or otherwise) is accumulating a diversified handful of quality single stocks and holding them for decades.
Only someone thoroughly seduced by the Dow’s 25% gain last year and the Nasdaq’s huge surge in tech (see chart above) could hold that view. He is projecting the previous trend to continue for ever. Has anyone ever seen a price chart that runs up and up for decades? I certainly haven’t.
My friends, this is the mother of all Bull Traps. Instead of buying stocks for ‘decades to come’, the wise long term investor will be looking to liquidate while the getting’s good and sitting on the cash. I may have even nailed the top here!
And make no mistake – this is the end of the Great Bull Market that started in 1602 when the Amsterdam Stock Exchange began public trading. If we can nail the 400-year turn within a few days, we will be doing what very few people could even attempt. Not that many are expecting a top soon as they have their school rulers on their charts which are pointing skywards..
We are at the end of the Cult of Equities and sometime in the future, investing in stocks will be seen as a mug’s game (and that will be time to buy them). But first, the overwhelming extent of blind faith in the potential of equities to generate wealth will need to be corrected. It will not be a pretty sight – except for we bears who are correctly positioned.
And since this is a once-in-several-lifetimes event, volatility will be huge with wild swings either way and trading it will be like the proverbial trying to catch a running tiger by its tail.
The War on Meat is on. Long live Cattle Prices!
Markets are full of contradictions, aren’t they? The War on Meat is in full swing with the rabid extremists, including the BBC, the Guardian and most MSM outlets, yelling at us: “How dare you eat meat!” to paraphrase Saint Greta.
In the UK, Greggs has jumped on this particular bandwagon and is successfully selling fake meat sausage rolls, steak slices and more to appeal to the newly-converted army of vegans. Major supermarkets now also have a wide range of vegan and vegetarian products on their shelves.
If you had just arrived from Mars, you would think that meat prices, which are relatively high, would be suffering from lower demand, especially beef. But you would be 100% wrong! Here is the long term Live Cattle chart
The main feature is the massive pink band of support from at least 2008 at the 100 level and the latest test in September was met with success. Since then, the market has surged by 25% off the large momentum divergence.
And if it can break above the blue trendline, a move to the 136 area is on the cards.
So, what conclusions can be made? Certainly the vegan movement, which is getting extensive publicity, is not adversely impacting the price of beef.
And I am now wondering if this principle can be applied to other markets. Can the move away from the ‘evil’ fossil fuels to ‘green’ EVs actually give the crude oil price a boost? Stranger things have happened.
Platinum in strong bull trend – and we are long
The Platinum futures market is a lot smaller than the two majors. But it is following the roadmap I set out for it last year.
On the face of it, this is a tough pattern to trade – and it has not been easy. But there was one standout feature that pointed to a bull run – the declines were in threes, which is always a sure sign of corrections to a bull trend. And as the year wore on, the strong advances were in fives – another sure sign of a bull trend. Also, we have a series of higher highs and higher lows – a bull trend.
VIP Traders Club members have been buying on these dips and we currently hold excellent positions with the current market testing the old high at the $1,000 mark.
As we know from experience, when a big round number target is achieved (or nearly so), there is often a correction of decent size.
But with shares at or near a major turn, will the PMs surge even higher in a flight to safety. Recall my long-term view is that all asset prices will decline together in value when in the grip of the coming deflation period.
2020 will be a lot different from 2019!
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