The 2020 Stock Market Crash Thread

Tail Gunner

Hummingbird
Gold Member
SlickyBoy said:
The dollar may indeed crash from hyperinflation, but no, one should not expect to conducting barter with Krugerrands or any other form of gold for a variety of reasons.
As I stated earlier, I do not expect hyperinflation in the U.S. But, if the U.S. did ever experience hyperinflation, that would be the perfect scenario where people would pay farmers directly for food with silver coins or buy a house with gold. Of course, the farmer or the home seller would eventually convert those PMs into cash when the economy improved.

Let's face it, during a period of hyperinflation, why would anyone who holds hard assets (food, cars, houses, etc.) trade that hard asset for anything else than another hard asset (gold, silver, platinum, gems, jewelry, etc.) when the fiat currency is depreciating on a daily (or even an hourly) basis? You would be foolish to sell hard assets for anything less than another hard asset. In short, there are indeed certain extreme economic scenarios where precious metals may act as a secondary, or even a primary, currency.
 

SlickyBoy

Ostrich
Tail Gunner said:
SlickyBoy said:
The dollar may indeed crash from hyperinflation, but no, one should not expect to conducting barter with Krugerrands or any other form of gold for a variety of reasons.
As I stated earlier, I do not expect hyperinflation in the U.S. But, if the U.S. did ever experience hyperinflation, that would be the perfect scenario where people would pay farmers directly for food with silver coins or buy a house with gold. Of course, the farmer or the home seller would eventually convert those PMs into cash when the economy improved.

Let's face it, during a period of hyperinflation, why would anyone who holds hard assets (food, cars, houses, etc.) trade that hard asset for anything else than another hard asset (gold, silver, platinum, gems, jewelry, etc.) when the fiat currency is depreciating on a daily (or even an hourly) basis? You would be foolish to sell hard assets for anything less than another hard asset. In short, there are indeed certain extreme economic scenarios where precious metals may act as a secondary, or even a primary, currency.
I'm not suggesting anyone would prefer cash during such a scenario. They would instead conduct barter to feed their families. The exact situation happened during hyperinflationary Austria likely very often

(see P.52):

The State still accepts its own money for the scanty provisions it offers us. The private tradesman already refuses to sell his precious wares for money and demands something of real value in exchange for them. The wife of a doctor whom I know recently exchanged her beautiful piano for a sack of wheat flour. I, too, exchanged my husband's gold watch-chain for four sacks of potatoes, which will at all events carry us through the winter.

Maybe you can buy four sacks of potatoes for a gold coin, maybe not. But the seller has to know for sure your coin is a gold coin, what it weighs, that it hasn't been shaved around the edges, the purity level is what it is. Few will be in a position to conduct a reliable assay of the metal, but a "branded" item like a Maple Leaf of Krugerrand would help. But then there's the high likelihood you'll wind up overpaying for everything (or flat out getting robbed), unless you've got very small denominations of gold.

Junk silver is a better bet for such transactions. Gold is an overrated pain in the ass during hyperinflation.
 

NoMoreTO

Pelican
Tail Gunner said:
SlickyBoy said:
The dollar may indeed crash from hyperinflation, but no, one should not expect to conducting barter with Krugerrands or any other form of gold for a variety of reasons.
As I stated earlier, I do not expect hyperinflation in the U.S. But, if the U.S. did ever experience hyperinflation, that would be the perfect scenario where people would pay farmers directly for food with silver coins or buy a house with gold. Of course, the farmer or the home seller would eventually convert those PMs into cash when the economy improved.

Let's face it, during a period of hyperinflation, why would anyone who holds hard assets (food, cars, houses, etc.) trade that hard asset for anything else than another hard asset (gold, silver, platinum, gems, jewelry, etc.) when the fiat currency is depreciating on a daily (or even an hourly) basis? You would be foolish to sell hard assets for anything less than another hard asset. In short, there are indeed certain extreme economic scenarios where precious metals may act as a secondary, or even a primary, currency.
I had this conversation recently about scrap metal on the farm. It'd be nice to do a cleanup but in these times you might as well keep a lot of the old junk around and see what happens to the price of scrap.
 

Emancipator

Hummingbird
Gold Member
NoMoreTO said:
I had this conversation recently about scrap metal on the farm. It'd be nice to do a cleanup but in these times you might as well keep a lot of the old junk around and see what happens to the price of scrap.
Reminds me of most of RPG games I was playing as a kid decade ago.

Always hoard the junk and scrap, for usefulness or barter/sell.
__________________________

I'm still majority out sitting with USD, but still maintain my biotech plays/positions which is more speculative gambling rather than investing. Always keeps a small bit of ammo for anything that pops up daily.

Considering using this to play around with DraftKings, figure once the big sports leagues get their playing strategies in place and start competing might see a jump or some meme hype magic akin to SPCE/TSLA. Already happened a bit these past few days.
 

Tail Gunner

Hummingbird
Gold Member
For those who have not noticed, for the last fourteen trading sessions price has remained in a trading range within 100 points of the 2,800 level in the S&P 500. A break above 3,000 is a buy signal -- and, if that happens, a move to the prior record-high close of 3,386 is likely. On the other hand, a break below 2,675 is a bearish signal and sets up a potential downside target perhaps as low as 1,700 or more (a potential 1,000 point drop).

The chart of the S&P 500 index below shows those levels, which are highlighted by a blue box. The dash-line represents a 50% retracement from the prior low. While the S&P 500 index price hovers between these two levels, it is probably best to wait before making any big decisions because there is still a great of risk in the current market.

[attachment=43731]


Personally, I think it far more likely that the market will decline to at least test the previous low. First, that would follow historical precedent (see my prior post). Second, market breath is absolutely horrific, with a relatively small number of stocks carrying the present rally.

[attachment=43732]
 

Attachments

kurtybro said:
How much silver, for how much house?
If memory serves, he estimated that it would be a medium-sized, one-family house for 10,000 ounces. I have no reason to believe he's right, though, since he always predicts that silver is about to spike in price...regardless of what's actually happening. When the price goes up, he says that's proof it'll keep going up. When it goes down, he says that's proof a turnaround is right around the corner. I've learned to stop listening to such people, even if his overall view of the economy is pretty enlightening.
 

NoMoreTO

Pelican
Tail Gunner said:
For those who have not noticed, for the last fourteen trading sessions price has remained in a trading range within 100 points of the 2,800 level in the S&P 500. A break above 3,000 is a buy signal -- and, if that happens, a move to the prior record-high close of 3,386 is likely. On the other hand, a break below 2,675 is a bearish signal and sets up a potential downside target perhaps as low as 1,700 or more (a potential 1,000 point drop).
S & P is now at 2,927.

I'm having a hard time buying into this market.
 

kurtybro

Sparrow
Suspended
MichaelWitcoff said:
kurtybro said:
How much silver, for how much house?
If memory serves, he estimated that it would be a medium-sized, one-family house for 10,000 ounces. I have no reason to believe he's right, though, since he always predicts that silver is about to spike in price...regardless of what's actually happening. When the price goes up, he says that's proof it'll keep going up. When it goes down, he says that's proof a turnaround is right around the corner. I've learned to stop listening to such people, even if his overall view of the economy is pretty enlightening.
Just like our buddy at Gold Money, same Schiff different day.
 

joost

Kingfisher
MichaelWitcoff said:
When the price goes up, he says that's proof it'll keep going up. When it goes down, he says that's proof a turnaround is right around the corner. I've learned to stop listening to such people, even if his overall view of the economy is pretty enlightening.
This should be written inside every Financial Analysis book.


With Bitcoin is even worse. "To The Moon" is their motto. I like Bitcoin a lot but all the "gurus" with their graphs and predictions are bothersome.

With shitcoins the matter is even worse. They hire a bunch of bots to write comments in social media to hype the coin.
 

Freebird Flying

Woodpecker
NoMoreTO said:
Tail Gunner said:
For those who have not noticed, for the last fourteen trading sessions price has remained in a trading range within 100 points of the 2,800 level in the S&P 500. A break above 3,000 is a buy signal -- and, if that happens, a move to the prior record-high close of 3,386 is likely. On the other hand, a break below 2,675 is a bearish signal and sets up a potential downside target perhaps as low as 1,700 or more (a potential 1,000 point drop).
S & P is now at 2,927.

I'm having a hard time buying into this market.
I'm deploying cash slowly the next few months. That way if it goes down I'll get it cheaper, if it goes up, I still have a lot of shares.

Feels like a win win for me, assuming the value is up in 3 to 5 years, which I think it will be almost certainly.

I'm 65/35 stocks to cash ratio at the moment
 

Deepdiver

Hummingbird
Gold Member
I do trading of S&P and from the roughly 3400 high to the 2172 low we are roughly making a .618 retrace in a classic A wave down and B wave retrace likely to test the 200 Day moving average $3K with a C impulsing wave down equal to the A wave.

Second and Third quarter earnings will be dismal accelerating the C wave down as ultimately earnings drive the Markets... Ironically the FAANGs are doing well and may not correct as much as the S&P... The S&P zero earnings Zombies cos will correct hard.

Silver to Gold ratio is approx 117 highest ever meaning Gold is expensive priced in silver and vice versa.

Harry Dent is warning that due to retiring Boomers and out of work Millennials and Zoomers that a dramatic deflation in demand is upon us and if you are up on Gold good time to go to cash as deflation impacts demand for Gold along with Real Estate as every biz renegotiating debts and leases from large to small... Many left out in the cold... One gent I know bought his building with half SBA loan and half bank loan and his biz has had to close the front door and trying curb side pickups but most of his customers at home so the SBA has forgiven 3 months but the bank no while he got his PPP paperwork in but funds dried up and not sure if he will get phase 2 PPP... 75% Has to cover payroll and 25% for rents, mortgages and utils...

He has 5 locations and not sure he will survive. He already closed his sixth location.

So expect many small biz to close adding to Dent's global deflation. Good time to take Gold profits and go to cash when you can rebuy Gold when it retests $1K and most stocks correct hard over the next two qtrs.

The Gold Schills like Peter Schiff are ignoring pending global deflation.


###
 

Tail Gunner

Hummingbird
Gold Member
Deepdiver said:
So expect many small biz to close adding to Dent's global deflation. Good time to take Gold profits and go to cash when you can rebuy Gold when it retests $1K and most stocks correct hard over the next two qtrs.

The Gold Schills like Peter Schiff are ignoring pending global deflation.
That always seems to be the question during a financial panic. Inflation? Deflation? Both at the same time, but in different sectors? Gold did not experience any deflation in 2008-2009. Instead, it experienced a price decline when sliding market prices forced investors to deleverage. That is not the same as deflation, although it still results in a price decline.

It would be great if Dent were correct, because it would present a great buying opportunity -- and, based on past history and cycles alone, an inflation or stagflation cycle will eventually arise to provide a great profit-taking opportunity. Although I enjoy reading Harry Dent's articles, he has claimed that "gold will drop to $750" for almost a decade. So, I guess that his prediction may eventually prove correct.
 
Deepdiver said:
Harry Dent is warning that due to retiring Boomers and out of work Millennials and Zoomers that a dramatic deflation in demand is upon us and if you are up on Gold good time to go to cash as deflation impacts demand for Gold along with Real Estate as every biz renegotiating debts and leases from large to small... Many left out in the cold... One gent I know bought his building with half SBA loan and half bank loan and his biz has had to close the front door and trying curb side pickups but most of his customers at home so the SBA has forgiven 3 months but the bank no while he got his PPP paperwork in but funds dried up and not sure if he will get phase 2 PPP... 75% Has to cover payroll and 25% for rents, mortgages and utils...

He has 5 locations and not sure he will survive. He already closed his sixth location.

So expect many small biz to close adding to Dent's global deflation. Good time to take Gold profits and go to cash when you can rebuy Gold when it retests $1K and most stocks correct hard over the next two qtrs.

The Gold Schills like Peter Schiff are ignoring pending global deflation.
See, this makes sense, but we also have a government with an infinite money cheat that really wants to prevent deflation.
So it feels like we're not just trying to predict what the markets will do, but what the politicians will do as well.

Feels like a much harder situation to figure out.
 

Deepdiver

Hummingbird
Gold Member
TG agreed Dent is one of the few guys who knows wave theory cold and combines it with demographic econometrics... He has been advising his large OZ following to sell inflated OZ real estate and go to cash and wait for Gold to correct in along with the markets and then buy back when it looks like March 2009 wave low all over again.
 

Tail Gunner

Hummingbird
Gold Member
Deepdiver said:
Second and Third quarter earnings will be dismal accelerating the C wave down as ultimately earnings drive the Markets... Ironically the FAANGs are doing well and may not correct as much as the S&P... The S&P zero earnings Zombies cos will correct hard.
Are you sure about this reasoning regarding earnings? [BTW: I basically said the same thing as you did here in post number 806, just in a completely different way, so I am simply playing devil's advocate here.]

I read an article a few days ago that blew my mind, showing me in great detail how little I still know about how the markets function. I actually bookmarked the article, which I rarely do -- because I go through so many financial articles. Bear in mind that the key quotation below is from Stanley Druckenmiller, so it is not as if I am quoting some hack.

Historically, US corporate share issuance has rarely exceeded 2%. Over the last three and a half decades corporates have been reducing their share count through buybacks and M&A at an average annual rate of 2%.

While the number of shares available to trade has been steadily falling, the amount of money (cash+credit), has been steadily increasing.

Over the last 50 years, the money stock in the US has gone up at an average annual rate of 8% a year.

So…… over the last five decades the supply of equity (available shares) has been dropping at an average rate of 1-2% a year while the total money stock has gone up at an average rate of 8% a year.

Let’s disregard the total market value and investor allocation preferences for a second. Just taking this straight forward mismatch of supply and demand alone, we get a structural supply deficit of approximately 9.5% a year.

You want to guess what the average annual return of the stock market has been over this same period?


Banana…

No, sorry, I mispoke… the banana part comes later. The correct answer is 9.5%… 9.5% is the average annual return of the S&P 500 over the last 50 years. And it’s also the average yearly deficit of equity supply in our stock market supply and demand model.

Coincidence you may ask?

Not at all. It’s just math.


If investors keep their portfolio mix (their allocation preference between stocks, bonds, and cash) relatively constant, then the market value of stocks has to rise at the same level of the supply and demand mismatch caused by share reduction and money creation — 9.5% a year.

Eye-opening stuff, isn’t it?

I hope this changes the way you view the broader market cycle. The GOAT, Stanley Druckenmiller, instinctively figured this out, even if he gets the actual mechanisms at work wrong. But it’s this phenomenon he’s referencing when he says things like:

"Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets."

So to sum this section up… overtime, the market has to rise because we operate in an inflationary system. A system where the quantity of money is always going up (over the long-haul) and the corporate sector’s aversion to dilution keeps share growth at a minimum to a net negative.
https://macro-ops.com/markets-as-a-banana-the-most-important-fundamental-part-2/


The thesis of this article is that earnings do not matter because liquidity means that investors will always buy more equities regardless of earnings or value -- just like the "art connoisseurs" who now pay $150,000 for a banana affixed to a wall with duct tape.

The lesson: no matter how out-of-sync with reality you think that the markets behave because of government intervention, it is actually far worse -- and far more rigged -- than you think.

This is the reason that I only buy dirt cheap stocks in beaten-down cyclic sectors at market bottoms. I am completely serious. If the markets do not, at a minimum, re-test the March bottom I will avoid the markets like the plague. I will await the Great Reset. I refuse to accept high risk for low yield.
 

Deepdiver

Hummingbird
Gold Member
Since Druckenmiller looking at 50 year trend he is at the larger supercycle... His trends are correct looking at his time period. Earnings are more quarterly focused on a smaller waves cycle.

The creator of wave theory famously stated that there was no Great Depression just a proper wave correction and that news is noise irrelevant to wave theory.

With B wave retrace approx .618 of A to the 200 Day MA... The C wave can either equal the A wave or can extend 1.32, 1.50 or 1.618 times A .. the fed is buying markets hard which is why current wave four exceeded past wave 1 down thus converting to a larger ABC.

The Fed buying pressure is like a rubber band that snaps back on the quarterly sized waves and considering it's taking nearly $8T stimulus to retest $3k on the S&P. Goldman Sachs provides kosher target wave numbers to the Fed and Treasury which is why I expect at least a 1.38 C wave down from B turn at the 200 DMA will take a while for C since A was so fast C likely to be a bit more congestive.

No way for the Fed to cancel waves only shape them a bit.

March wave A low is going to be retraced and tested exceeded by at least C length equal to A.

###
 

Tail Gunner

Hummingbird
Gold Member
Just so people know what Deepdiver is talking about. Personally, I see wave theory more like technical analysis (e.g., providing good entry and exit points) rather than something that is necessarily predictive. I believe that fundamental analysis factors override all other considerations.

[attachment=43738]
 

Attachments

Tactician

Kingfisher
Oh! Tail Gunner, you read Macro-Ops, too? I really like those guys & that Banana article in particular is a favourite! The authors are cool cats & lay out many solid calls while emphasizing fallibility & risk-management.

I think these charts worth a look at with respect to the Banana article:

From this page: http://www.shadowstats.com/alternate_data/money-supply-charts



and in particular:
From this page: http://www.shadowstats.com/charts/monetary-base-money-supply





Even M1 exploded.

I don't know enough to verify the precision of shadowstats, but these charts seem to match the news & price action recently. As such, I'm wary of fighting the tide of new money chasing the scarce assets of US equities (and gold & Bitcoin). Might be a while before the stars line up.
 

Tail Gunner

Hummingbird
Gold Member
NoMoreTO said:
Uneducated Economist says we'll have a big deflationary period as Unemployment continues to rise.
That is what I meant, in several prior posts, by potentially experiencing inflation and deflation at the same time. His analysis makes perfect sense from the standpoint of everyday people and the M1 money supply. More unemployment means more saving by ordinary folk (and more liquidation of luxury items) which means less money velocity in M1 which means increased deflation.

On the other hand, that analysis does not apply to the money supply created by the Fed and the U.S. Treasury that allows institutional investors to go on a spending spree to buy stocks and real estate, which inflates the prices of those assets. That is the inflationary aspect of this process. Rather than hope that deflation will bring stocks in line with the true value of the underlying companies, it is far more likely that a temporary panic will induce a second liquidation of stocks and perhaps even precious metals, allowing an entry point for savvy bargain-hunting investors. After that, it is most likely banana-time again -- at least until the Great Reset.
 
Top