Posts Tagged ‘economic cycles’

New Bubble Threatens Global Rebound

New Bubble Threatens Global Rebound

bubble economyCourtesy of Mish

Although Belief In Wizards Runs Deep there are a few free thinkers who don’t see it that way. Andy Xie is one of them. Please consider New Bubble Threatens a V-Shaped Rebound.

In a normal economic cycle, an inventory-led recovery would be followed by corporate capital expenditure, leading to employment expansion. Rising employment leads to consumption growth, which expands profitability and more capex. Why won’t it work this time? The reason, as I have argued before, is that a big bubble distorted the global economic structure. Re-matching supply and demand will take a long time.

The process is called Schumpeterian creative destruction. Keynesian thinking ignores structural imbalance and focuses only on aggregate demand. In normal situations, Keynesian thinking is fine. However, when a recession is caused by the bursting of a big bubble, Keynesian thinking no longer works.

The lifespan of a bubble depends on how it affects demand. The longest-lasting are property and technology bubbles. The multiplier effect of a property bubble is multifaceted, stimulating investment and consumption in the short term. The supply chain it impacts is very long. From commodity producers to real estate agents, it could stimulate more than one-fifth of an economy on the supply side. On the demand side, it stimulates credit growth and financial sector earnings, and often boosts consumption through the wealth effect. Because a property bubble is so powerful, the negative effects of a bursting are great. Excess supply created during a bubble’s lifespan takes time to consume. And a bust destroys the credit system.

A technology bubble occurs when investors exaggerate a new technology’s impact on corporate earnings. A breakthrough such as the Internet improves productivity enormously. However, consumers receive most of the benefits. Competition eventually shifts temporarily high corporate profitability toward lower consumer prices. Because the emergence of an important technology brings down consumer prices, central banks often release too much money, which flows into asset markets and creates bubbles. While an underlying technology leads to an economic boom, the bubble feels real. More capital pours into the technology. That leads to overcapacity and destruction of profitability. The bubble bursts when speculators finally realize that corporate earnings won’t rise after all.

The cost of a technology bubble is essentially equal to the amount of over-investment involved. Because a technological breakthrough expands the


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DEEP THOUGHTS FROM RICHARD RUSSELL

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DEEP THOUGHTS FROM RICHARD RUSSELL

economic cyclesCourtesy of The Pragmatic Capitalist

Regular readers know that I am a huge fan of Richard Russell’s work.  For those who aren’t familiar with Russell, he is the author of The Dow Theory letters.   Obviously, he is a student of Dow Theory (perhaps professor is more appropriate).  Most importantly though Russell is about as experienced an investor as you’ll find on the planet.  He has lived through cycles that no one else can even remember.

I like to think that the market works on a different clock from the rest of the world.  Economic cycles are often long and drawn out.  It can be hard for humans to comprehend economic cycles because the length of an economic cycle is not based in years or months.  It can literally work on its own clock.  The current deleveraging cycle is particularly frustrating for investors because these types of recessions tend to be long and drawn out unlike your average 8-16 month recession.  A full economic cycle can be anywhere from 5 years to 25 years from peak to trough.  Humans, particularly investors, have trouble seeing past the next 5 to 25 minutes.  It’s safe to say that Mr. Russell has seen more cycles than anyone and his educational and priceless commentary is evidence of this.  I’ve included some of his notes from this latest week and highly recommend his newsletter.  His ability to grasp the big picture is truly unmatched:

Question — Russell, you seem to think this is going to be a world-class bear market. Why do you think that?

Answer — The US and its people have been borrowing and leveraging for decades or ever since WW II. There’s never been a true correction in the economy, although there have been corrections in the stock market (1973-74 and 1957-58). Consumer buying makes up 70% of the Gross National Product of the US. For the first time in decades, US consumers are dealing with massive unemployment. This is scaring them and causing them to cut back in their buying and now they are actually saving. Fear is the strongest of all human emotions, and US consumers are finally dealing with naked fear. I believe this fear will bring on years of saving and a long period


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Zero Hedge

Visualizing The 150 Apps That Power The Gig Economy

Courtesy of ZeroHedge. View original post here.

Go back in time a decade, and you’d have a tough time convincing anyone that they would be “employed” through an app on their phone.

And yet, as Visual Capitalist's Jeff Desjardins explains, in a short period of time, the emergence of the smartphone has enabled the gig economy to flourish into a multi-trillion dollar global market. And by leveraging apps like Uber, Airbnb, and Etsy, it’s estimated that ...



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Phil's Favorites

What's going on with Blue Apron?

By Ilene 

The Blue Apron business model appears, perhaps, flawed. While the service is convenient, I think it would appeal mostly to very busy people who don't have time to shop for food -- but enjoy cooking -- and have enough money that the trade off between paying for food delivery vs. spending time shopping is worth it. Here's the unfortunate stock chart and some numbers from Yahoo:

The company has been losing money, and is projected to lose money again next year. Revenue is projected to decrease in 2019 from the 2018 level, but pick up again in 2020, though still below 2018's revenue. Maybe a larger company that could integrate APRN's services into its existing infrastructure should acquire APRN and save it from its apparent...



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Chart School

Palladium minor cycle bottom

Courtesy of Read the Ticker.

Once again RealVision TV posts another trade idea, long palladium. We shall review it with our RTT cycle tools and parallel channels.







Any trader will be concerned with the supply shock at $1800 which pushed down price quickly. Profit taking maybe, sure! The question, is there more supply out (or more profit taking) there ready to dump on the market, either now or after any minor advance. This why waiting for the 'C' wave of the A-B-C to form over some more time is a good idea, and once done, we want to see solid buying moving price up before acting, after all we do not want to be early or a lonely bull (Richard Wyckoff logic). 

The parallel channel highl...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Kimble Charting Solutions

Banks Sending Bearish Message To Stocks, Says Joe Friday

Courtesy of Chris Kimble.

Quality bull markets prefer to see Banks stronger than the broad markets or at least keeping up with it. Concerns often crop up when banks reflect relative weakness compared to the S&P.

This chart looks at the Bank Index (BKX) over the past few years, reflecting a falling channel of lower highs and lower lows has taken place inside of falling channel (1). This falling channel has now been in play for the past 15-months.

The index hit the bottom of the channel in December of 2018 and a counter-trend rally took place. The rally off the December lows saw the index hit the top...



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Insider Scoop

Analyst: US Sanctions 'May Not Kill Huawei'

Courtesy of Benzinga.

President Donald Trump signed an executive order Wednesday that limits how "foreign adversaries" conduct business with U.S. companies.

What Happened

The Department of Commerce said China's Huawei and 70 related companies will be included in the "Entity ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

Reminder: We are available to chat with Members, comments are found below each post.

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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