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Will Real Estate Prices Collapse In Conjunction With The Stock Market?

A comprehensive look (see full article below) at the current state of California real estate market and why, for the most part, most Californians are priced out. With home ownership rates hitting levels not seen since the early 1990, the future of California real estate does not look bright. While the majority of market participants believe we have reached a high plateau in real estate prices and will remain here for the foreseeable future, I do not share their optimism. In fact, I believe the market will decline substantially over the next 3-5 years. To the tune of 30-50%….. in some areas of California. This decline will occur in conjunction or as a result of a severe bear market/recession (2014-2017) that our timing and mathematical work predict. If you need a more comprehensive analysis of the real estate market you can take a look at this comprehensive report Real Estate Collapse 2.0 Why, How & When

california-home-ownership-rate-investwithalex

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Will Real Estate Prices Collapse In Conjunction With The Stock Market?  Google

Dr. Housing Bubble Writes: Welcome to Feudalfornia: the golden sarcophagus and the investor. Acceleration to price out masses.

California housing affordability may seem like an oxymoron.  Many younger buyers are priced out in many markets across the state.  The latest data from the California Association of Realtors (CAR) finds that still only 1 out of 3 families can actually afford to buy a home in the state in which they live.  We also have a record number of young potential buyers (more likely potential renters) living at home with their parents.  Starting in 2008 a large portion of housing sales started going to investors.  These investors may have different timelines on when they will release property out into the market.  In fact, this might be another big reason as to why so little inventory is out in the market.  Some investors are looking to securitize cash flows and may be limited in terms of selling.  Instead a regular buyer potentially looking to capitalize on equity and move up in more traditional times, you have different motivating factors.  Since 2008 over 30 percent of all Californiahome sales went to this group.  Another group is baby boomers locked into their golden sarcophagus.  This group from what I have found for the most part is house rich and cash poor.  The notion that many will sell and cash in their lottery ticket is simply not happening in the market. Many are seeing kids move back home, many still have a desire to keep their place (even if it means living in an area gentrified by dual high income households/investors), and finally a large growing rental base.  In essence the continuation of California becoming more feudal is still very much intact.

 

Welcome renters and growing wealth gap

There is little doubt that people would like to own.  The entire 2000s were dedicated to a time when anyone with a desire to buy could.  The sales figures reflect this.  Yet the home ownership rate is now back to where it was in the early 1990s.

We can argue that the 2000s were a time of excess.  Yet remove this excess and we are back to 2000 yet the home ownership rate is now back to levels last seen in the early 1990s.  Even as prices rise, the home ownership rate remains depressed:

california home ownership rate

Now how is this possible during a time when home prices went zooming up?  Part of it has to do with the groups of people buying homes.  The traditional home buyer is a minority in the California housing game.  Low sales volume and a desire to buy from Wall Street and other investors has propelled prices higher:

california home prices

The bounce statewide is unmistakable although is tapering out as investors begin to pullback.  All of this is accomplished on very low sales volume:

home sales la-oc metro

home sales san francisco

The data used in the S&P Case Shiller figures is pulled from the Greater Los Angeles area looking at L.A. and Orange Counties (this area covers close to 13 million people) while the San Francisco-Oakland-Fremont MSA covers close to 4.5 million people. The current sales volume is lower than what we saw in the early 1990s.  In fact, current sales are the lowest since the market imploded a few years ago.  What gives?

The current trend was driven by low inventory, investor demand, and house lusting buyers.  As investors pull-back and affordability falls, it is natural to expect volume to naturally pickup as it has.  Yet California is largely becoming a renter state.  We have a growing group of people that are deep into poverty:

california-food-stamps

The recession ended officially in the summer of 2009 yet we have added close to 1.5 million people to the food stamp figures.  Does this reflect a booming economy?  I think people in pocket markets have blinded themselves to their miniscule areas and forget that for the state overall with rising poverty, stagnant incomes, and a massive drop in housing affordability things are simply getting tougher financially.  It would be one thing if prices were rising because of the big addition of good paying jobs and rising incomes.  These things are absent but what isn’t is a record number of investors.

Are investors distorting the natural inventory cycle?

Investors have caused a unique boost in the housing market.  The bigger play here since the crash was to buy homes for rentals.  A modern day Wall Street landlord system.  Big investors have been busy buying up distressed property in California:

Trustee-Sale-Purchases-by-LLC-and-LPs

Even in 2013 big investors were buying up over 60 percent of all distressed property.  These are usually better priced deals.  A good portion of foreclosures were bought before they even hit the MLS so those thinking they had a chance to buy at rock bottom prices are out to lunch (unless they had full financing to go to auctions and out-bid these people).  Plus, many bought with “all cash” and then spent more money renovating – many house lusting households barely have enough to move in and furnish the place after they plop their 20 percent down payment.  Clearly the dominant force here was the “all cash” buyers.

Don’t think that these investors will suddenly turn around and sell their properties even with this big rise in prices (or will run when prices correct):

“(LA Times) These are income properties for us,” Rose said. “Eventually we’ll exit, whether it’s an IPO or selling them off. But that’s years down the road.”

That is a very different mindset from the home owner or home debtor crowd.  First, we still have a giant pool of underwater owners in California:

CA-Homeowner-Equity

1.2 million home owners are fully in the red.  Again you should look at the sales volume data above.  This market is being driven by very low sales volume, tight inventory, and people simply stretching to buy.  The investor crowd is pulling back:

“Prices have gotten to the stage where we cannot buy a house, renovate it, rent it and still make a reasonable return,” said Peter Rose, a spokesman for Blackstone, which owns roughly 41,000 rental houses nationwide. “There was a moment in time where it made sense.”

Among the 20 firms buying the most California real estate since January 2012, purchases are down more than 70% compared with last year in each of the last four months, according to DataQuick. At the 20 biggest foreclosure buyers, including arms of Blackstone and Colony American Holdings, purchases have fallen at about the same rate.”

As we have said big money is not dumb and the numbers just don’t work anymore.  However the herd is chasing the past trend and house lusting buyers are always a part of the California market, come boom or bust.  But for the large part of households in the state, many are simply looking at renting even if they want to buy based on current home prices and incomes.  This isn’t 2006.  You have to document your income to buy.  Unfortunately the pool here is not as big as some would like to believe – hence the gap being filled by big money investors.

The assumption is that somehow, we have this massive hidden group of people ready to buy.  The data shows us something completely.  You have a small group that is looking to buy in very targeted markets.  Yet the state overall is facing some bigger issues when it comes to housing affordability.  Many boomers have underfunded retirement plans and a large part of their money is locked in their golden sarcophagus. I’ve seen it argued that people should forego retirement savings to stretch and buy a home.  Some then argue that a reverse mortgage is fitting but now you are eating into any wealth you would pass onto your kids.  These arguments are prevalent in California where real estate is a religion for many.

The market is changing and we will see how things go in the typically hot spring and summer months.  The weather argument can only go so far.  Canada doesn’t exactly have beach weather and they are more manic with their real estate.  Other factors are at play here.  Most of the e-mails I get are from folks in their 30s and 40s (many dual income high earners) running the numbers and wondering if buying is really a good bet.  For some it is if their income is stable enough. Yet some plan on having a family and losing one income for a short period followed by the high cost of good childcare here in California.  Plan on sending your kids to college?  Not exactly getting cheaper there which means putting money away unless you want your kid deep in student debt.

The flood of boomers selling their homes isn’t going to happen.  First, many have kids coming back home.  Second, many have no desire to “downgrade” their living situation.  The only way to capitalize on the golden sarcophagus is to go where housing is more affordable.  From the people I’ve spoken with they have no desire to leave.  They can’t even imagine going from L.A./O.C. to the Inland Empire which is less than a one hour drive. It is interesting to hear from some when they say “if I had to pay current taxes on my current home I would be priced out!”  So basically what is being said is that they no longer have the income makeup of those living in their current area yet enjoy all the amenities of living in said area (i.e., schools, safety, etc).  For example, in Pasadena you may have someone paying annual taxes on a property being assessed in the $200,000 range while next door someone is paying $1 million.  So you have someone paying $2,000 a year or so while next door someone is paying $10,000 and more per year for the same benefits (5 times more for a similar property).  You don’t see much of this across the state thankfully but it is prevalent in these tiny niche markets were dual income professionals are looking to buy.

Investors?  You already got their perspective above and it is unlikely they would flood the market (especially if these are sold off to investors as income streams).  Slowly inventory is rising and prices are stalling out but that does not erase the current trend.  The bigger picture shows this: a growing renter class, a high number of lower income households, and a smaller group of people able to afford in certain areas.  Prices are likely to correct based on the current trend but looking at income figures I doubt this is going to open up buying opportunities for most households in the state.  Welcome to Feudalfornia!

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US Congressmen Are Underpaid, Can’t Afford A Decent Apartment?

According to at least one asshole, Rep. Jim Moran (D-Va.), at $174,000/year and multiple other perks, members of congress are being severely underpaid. Despite earning 3.5X median household income, Jim goes on to say…..

 “There are too many members living and sleeping in their offices. And it’s wrong. When you look into it, it’s not that they’re cheap, it’s not that they’re trying to game the system. They can’t afford to live here. It’s wrong.”

After shedding a few tears for our members of Congress I quickly came up with a reasonable solution. Abolish the FED. That way we won’t see asset/price inflation alongside massive bubbles. The best part is, if that happens Jim should be able to afford anything his greedy little heart desires on $174K. 

us congressmen are underpaid investwithalex

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US Congressmen Are Underpaid, Can’t Afford A Decent Apartment? Google

 RT Writes: Congressmen are ‘underpaid,’ can’t afford to ‘live decently’ in DC

Members of Congress make more than three times the median income of an American citizen, but one representative believes it’s not enough.

Speaking with CQ Roll Call, Rep. Jim Moran (D-Va.) said that the $174,000 annual salary lawmakers receive is not adequate enough compensation for their role in the government, to the point that their quality of life in Washington, DC, is affected.

“I think the American people should know that the members of Congress are underpaid,” Moran said. “I understand that it’s widely felt that they underperform, but the fact is that this is the board of directors for the largest economic entity in the world.”

Moran claimed that since lawmakers have to maintain two households – one in DC and one back in their home state – their allotted salary keeps them from living properly and spending time with their families.

Though Moran believes his compensation is too low, it’s still well above the median household income in the United States. As noted by CNN, that number was roughly $51,000 in 2012, statistically the same as the year before but down 8.3 percent since 2007.

According to the Associated Press, Congress has frozen its pay at $174,000 since 2010, and the House of Representatives is moving to keep the freeze in place another year. This approach did not garner the support of Moran, who is proposing an amendment that would grant congressional members a per diem payment to lessen the cost of housing.

“Our pay has been frozen for three years and we’re planning on freezing it a fourth year. … A lot of members can’t even afford to live decently in Washington,” he told Roll Call.

“There are too many members living and sleeping in their offices. And it’s wrong,” Moran added to the AP.“And when you look into it, it’s not that they’re cheap, it’s not that they’re trying to game the system. They can’t afford to live here. It’s wrong.”

Despite his move, Moran admitted to local 

 

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Warning: Tech Stocks Get Hammered….What’s Next?

After two weeks of heavy selling, Nasdaq investors are starting to get worried with put option volume soaring to the levels unseen since the 2010 flash crash.  Still, a lot of traders/investors are not concerned. 

The selloff last week isn’t a cause for alarm, according to BB&T Wealth Management’s Walter “Bucky” Hellwig, who said he wouldn’t be making any large changes to his stock holdings.

“For all the stocks that have done really well, there’s a trader that will say, ‘I want to nail down some of these profits,’” said Hellwig, a senior vice president at BB&T Wealth, which oversees $17 billion. “One day of sloppy trading isn’t going to cause us to change direction.”

Should you be worried?  

Absolutely!!! Listen, most market participants and pundits anticipate a typical market correction (at worst) before this “cyclical” bull market continues. However, that is not what our timing and mathematical work shows. On the contrary, it indicates that a large bear market in equities is just around the corner. When it starts it will quickly retrace a significant portion of the 2009-2014 bull move. If you would be interested in learning exactly when the bear market will start (to the day) and its internal composition, please Click Here.

As such, use market’s action over the last few weeks/days as a warning shot. 

 

fab 5 stocks

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Warning: Tech Stocks Get Hammered….What’s Next?  Google

Bloomberg Writes: Technology Traders Head for the Exit as Put Trades Surge

Two weeks of selling in the Nasdaq 100 Index, where valuations are double the rest of the market, has sent anxiety among options traders to the highest levels since the flash crash four years ago.

More than 1 million put options on anexchange-traded fund tracking the Nasdaq index changed hands on April 4 as investors sought protection during a 2.7 percent drop in the gauge. That’s the most trading in bearish contracts since May 7, 2010, the day after $862 billion was erased from the value of U.S. stocks in a matter of minutes. King Digital Entertainment Plc has slid 16 percent since going public March 26.

While the selloff has been orderly this time, technology shares with valuations twice as high as the rest of the market are being hit as traders dump the biggest winners of the bull market. The Nasdaq 100 fell the most in two years on April 4 with declines in all but four stocks. Traders took shelter in shares such as Coca-Cola Co. (INDU) and McDonald’s Corp.

“The market is preparing itself for further trouble and going to more GE instead of gee-whiz type of companies,” Matt McCormick, who helps oversee $11 billion as a portfolio manager at Cincinnati, Ohio-based Bahl & Gaynor Inc., said in a phone interview on April 4. “Their valuations are inexcusable.”

Investors have shifted money out of Internet and biotechnology stocks and favored companies with stable dividends and earnings. General Electric Co., which pays shareholders 3.4 percent (GE), is up 1.4 percent in the past month, while Tesla Motors Inc. (TSLA), Facebook Inc. and Netflix Inc. slumped more than 16 percent. The Nasdaq 100 has rallied 239 percent in five years.

Lehman Brothers

In Asia, Tencent Holdings Ltd. slumped to a two-month low today, and a gauge of Internet companies erased its advance for the year. European technology companies fell the most, with Alcatel-Lucent SA losing 3.1 percent and Nokia Oyj sliding 2.8 percent. Nasdaq 100 futures declined 0.7 percent at 6:31 a.m. in New York today.

The selloff boosted options trading as investors looked for strategies to protect equity holdings from declines and speculate on future swings. More than 2 million contracts on the PowerShares QQQ Trust changed hands on April 4, the most since Lehman Brothers Holdings Inc. filed for bankruptcy in 2008.

“We’re still seeing a significant number of put buyers” in the QQQs, Kurt Ayling, a technology, media and telecom desk analyst at Susquehanna Financial Group LLLP, said in an April 4 phone interview. “People are still putting a lot of protection on the Nasdaq.”

About $480 million was withdrawn last week from the PowerShares QQQ Trust ETF, data compiled by Bloomberg show. The fund ranks as the fourth-largest in the U.S. with $47 billion in assets, data compiled by Bloomberg show.

Price-Earnings

The Nasdaq Composite (CCMP) Index trades at 31.8 times reported earnings of the companies in the index. That’s almost twice the ratio for the S&P 500, which trades at 17 times earnings. The Nasdaq 100 Index of the biggest technology stocks sank 0.9 percent for the week after surging 35 percent in 2013.

“It feels like maybe a large liquidation in a tech fund,” Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston, said in an e-mail. “The move seems excessive for profit taking.”

Lurches in technology shares have become more common in the last two months as traders reassess equities that have posted annual gains of 25 percent since 2009. Losses accelerated on April 4 as the Nasdaq 100 slid 2.7 percent and a measure of biotechnology shares tumbled 4.1 percent. The Standard & Poor’s 500 Index fell 1.3 percent.

Biggest Declines

Nasdaq 100 stocks with the 10 biggest declines on April 4 had rallied an average of 134 percent in 2013, according to data compiled by Bloomberg. Among them are Micron Technology Inc., Netflix and Tesla, which saw their shares triple or quadruple last year.

Concern that the retreat will worsen has made options more expensive. The Chicago Board Options Exchange NDX Volatility Index, tracking contracts on the Nasdaq 100, jumped 11 percent on April 4 to 18.79, a three-week high.

The volatility gauge is now 35 percent higher than a similar measure for the S&P 500, thebiggest gap since 2007, data compiled by Bloomberg show. That shows investors are more concerned about declines in Internet and biotechnology shares than the overall market.

No Alarm

The selloff last week isn’t a cause for alarm, according to BB&T Wealth Management’s Walter “Bucky” Hellwig, who said he wouldn’t be making any large changes to his stock holdings. The retreat may be a short-term reversal after the S&P 500 hit a record, he said in an April 4 phone interview from Birmingham, Alabama.

“For all the stocks that have done really well, there’s a trader that will say, ‘I want to nail down some of these profits,’” said Hellwig, a senior vice president at BB&T Wealth, which oversees $17 billion. “One day of sloppy trading isn’t going to cause us to change direction.”

Even after the drop, Tesla shares are still up 41 percent in 2014 and Micron is up 3.8 percent. The Nasdaq 100 ETF, known by its ticker QQQ, has slipped 1.8 percent this year to $86.37.

Seven of 10 most-owned options on the fund are bullish. April $89.63 calls, with a strike price 3.8 percent above the close, had the highest open interest, followed by $90.63 and $91.63 calls expiring at the same time.

Further Valuations

Excessive valuations mean further gains in technology stocks will be harder to come by, said Sean Sun, an equity research analyst at Santa Fe, New Mexico-based Thornburg Investment Management Inc.

Amazon.com Inc. (AMZN), an online retailer, trades at 572 times reported earnings while Netflix, an Internet video-subscription service, is valued at 141. About 15 percent of the Nasdaq 100 companies have a price-earnings ratio of 35 or more, data compiled by Bloomberg show.

“These are tech stocks trading at high valuation levels already, even with the selloff,” Sun said by phone on April 4. Thornburg oversees over $90 billion. “With the selloff accelerating, sentiment has turned more negative and given that, who knows where it ends.”

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The Groundwork For Russian Invasion Of East Ukraine Is Being Laid Out

I continue to believe Russia will go into East Ukraine one way or the other. It appears that Moscow has changed their supposed direct military invasion approach to a more settled “independence movement” from within. At the end of the day, it’s all the same. A large group of pro-Russia activists have seized a number of government buildings in the industrial city of Donetsk, declaring region independence.  Now, it is just a matter of time before Donetsk region holds a referendum to become a part of Russia. I would expect this to play out throughout the rest of the East Ukraine. 

Further, I would define this action as a brilliant strategical move by Russia. If this works, you will see Russia take over East Ukraine without crossing the border and without firing a single shot. Should the Ukraine’s interim government send in the troops to protect it’s interests, you will see Russia go in under the pretext of “protecting ethnic Russians”. It appears as if Russia, once again, outmaneuvered it’s Western counterparts in the region. It will be interesting to see how the West reacts once East Ukraine falls under Russian control. One thing is for sure, the stock market is not pricing this in……just yet.  

Groundwork for russian invasion of Ukraine investwithalex

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The Groundwork For Russian Invasion Of East Ukraine Is Being Laid Out  Google

Activists declare Donetsk republic after capturing regional administration in Eastern Ukraine

In the eastern Ukrainian city of Donetsk, a group of activists have declared their region independent from Kiev. This comes after protesters stormed a local government building last night.

Mass demonstrations against the country’s new leadership started peacefully on Sunday, but the situation quickly escalated.

Pro-Russian protesters in Donetsk have seized the local power building, including the headquarters of the Security Service of Ukraine and proclaimed the creation of a People’s Republic of Donetsk.

Ukraine’s police and security services have not interfered, although officials in Kiev are threatening punishment for the rioters.

Protesters have erected barricades around the Council building.

 

Pro-Russian activists guard a barricade set at the Ukrainian regional Security Service building on the eastern city of Donetsk on April 7, 2014.(AFP Photo / Alexander Khudoteply)

Pro-Russian activists guard a barricade set at the Ukrainian regional Security Service building on the eastern city of Donetsk on April 7, 2014.(AFP Photo / Alexander Khudoteply)

 

Today at 12:20 local time, a session of the people’s Council of Donbass (Donetsk region) took place in the main hall of the Regional Council and unanimously voted on a declaration to form a new independent state: the People’s Republic of Donetsk.

The Council proclaimed itself the only legitimate body in the region until the regions in southeast Ukraine conduct a general referendum, set to take place no later than May 11.

“The Donetsk Republic is to be created within the administrative borders of the Donetsk region. This decision will come into effect after the referendum,” the statement said.

The Council in Donetsk issued an address to Russian President Vladimir Putin, asking for deployment of a temporary peacekeeping force to the region.

“Without support it will be hard for us to stand against the junta in Kiev,” said the address.

“We are addressing Russian President Putin because we can only entrust our security to Russia,” the statement said.

 

Screenshot from ustream.tv user artem77

Screenshot from ustream.tv user artem77

 

Rallies in support of the federalization of Ukraine continue in a number of cities in southeast Ukraine. Thousands of citizens have joined the protests, demanding the earliest possible federalization of the country.

Ukraine’s Ministry of Interior said that last night unknown persons stormed the Security Service of Ukraine building in the city of Lugansk and seized a weapons warehouse there. During the night’s clashes, nine people were reportedly injured.

 

Pro-Russian activistshold a rally in front of Ukraine's regional security service of Ukraine in Lugansk on April 6, 2014.(AFP Photo / Igor Golovniov )

Pro-Russian activistshold a rally in front of Ukraine’s regional security service of Ukraine in Lugansk on April 6, 2014.(AFP Photo / Igor Golovniov )

 

In the city of Kharkov protesters erected barricades around the buildings of the city and the regional administrations and the regional headquarters of Security Service of Ukraine.

There were brief clashes between supporters of the federalization of Ukraine and pro-EU demonstrators in downtown Kharkov. Protesters on both sides used fire crackers and stun grenades.

A demonstration against political repression in Ukraine has also being held in the southern regional center of Odessa.

 

Pro-Russian activists near the Kharkov city administration.(RIA Novosti / Chekachkov Igor)

Pro-Russian activists near the Kharkov city administration.(RIA Novosti / Chekachkov Igor)

 

The chiefs of security agencies of Ukraine are reportedly heading to the cities engulfed in protests.

The interim secretary of the National Security and Defense Council of Ukraine, Andrey Parubiy, together with acting head of the Security Service of Ukraine, Valentin Nalivaichenko, are set to visit Lugansk. Interim Deputy Prime Minister Vitaly Yarema will visit Donetsk and acting Interior Minister Arsen Avakov has reportedly already arrived in Kharkov.

The coup-appointed acting president, Aleksandr Turchinov, has threatened that counter-terrorist measures could be taken against those who take up arms against the Kiev authorities, RIA news agency reported. On Thursday, the Ukrainian parliament will tighten laws regarding separatism and could possibly ban certain parties and organizations , Turchinov warned.

“What happened yesterday is the second stage of the special operation of the Russian Federation against Ukraine,” announced Turchinov in an address televised on Monday, sharing that an “anti-crisis command was set up last night” to deal with the crisis, Interfax-Ukraine reported.

Ukraine’s interim Foreign Minister Andrey Deschitsa announced on Monday that if the situation in the eastern regions escalates, the coup-appointed government in Kiev will take “much harsher” measures than those on the reunion of the Crimea with Russia. Deschitsa gave an assurance that members of the government are already working with local authorities.

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Weekly Stock Market Update & Forecast. April 5th, 2014. InvestWithAlex.com

daily chart April 4th 2014t

Weekly Update & Summary: April 5th, 2014

An interesting week. Even though the markets sold off on Friday, the Dow ended the week with a gain. In fact, for the week the Dow Jones was up 90 points (0.55%) while the Nasdaq declined 28 points (-0.67%). Structurally, the market did very well by closing most of it’s gaps. While the Nasdaq closed all of its gaps, the Dow has a number of large gaps left, leading all the way down to around 16,050 (indicating further downside). I believe the market will go back to close these gaps when the bear market initiates.

WEEKLY REVIEW:

Is Another 1987 Type Of A Market Crash Around The Corner?

1987 crash investwithalex

The chart above has spread around the financial community like a wildfire, predicting a 1987 type of a crash (20% down in 1-2 trading days) Is it legit? The chart is legit, but comparing today’s market environment to 1987 is like looking up horses ass to see its teeth -OR- it confuses cause and effect. 

While I am not suggesting that the crash is not possible, you could compare today’s market to many of the 5-year cycles I have described on this blog. Click Here to read some of it. In a nutshell, today’s market matches many other 5 year cycles, not only 1987….1924-1929, 1932-1937, 1961-1966, 1982-1987, 1994-2000, 2002-2007, 2009-2014, etc…there are many others. 

When the 5 year cycle completes itself the market tends to roll over. It will not be different this time around. Whether the market will crash or simply roll over into a sustain long term bear market is irrelevant here. What is relevant? The bear market of 2014-2017 is just around the corner and it will slam stocks over the next few years. If you would like to know exactly when it will start (to the day) and its internal composition, please Click Here.

Why Job Numbers Are Irrelevant

While everyone is scouring recently released Bureau of Labor Jobs Report, looking for any sign of economic clarity, I am here to tell you that such data is for the most part irrelevant when it comes to forecasting financial markets and/or the economy. If you are still wondering, March payroll came in it at 192,000, keeping the unemployment rate unchanged at 6.7%. Giving further indication that any tapering or tightening by the FED might come later than anticipated and not be as benign as some have feared. Great news for Wall Street. 

Yet, all of the above is irrelevant. If you have been following this blog for any period of time you know that I have stated, a number of times, that the FED will not be raising interest rates anytime soon due to an upcoming bear market of 2014-2017 and the subsequent US recession. While the job report above could be viewed as “no tightening”, it should be viewed as “any existing economic recovery/growth is running out of gas”.  Once that settles is, expect the markets to sell off. 

Janet Yellen: Forget About Rate Hikes

As per report below, according to Janet Yellen’s indicators the US Economy is nowhere near where it should be for the rates to rise anytime soon. That is despite the stock market being up over 150% over the last 5 years. In fact, today’s ADP Job Report missed the mark for the 4th month in a row with 191,000 jobs created VS 195,000 expected. Becoming just another confirmation of what we have been saying all along here.

Forget about any rate increases over the next few years. That becomes more apparent when you look at our mathematical and timing work forecasts. Once again, they predict a sharp bear market between 2014-2017 and a subsequent deep recession in the US Economy. Under such circumstances, the FED will be looking for every possible avenue to re-inflate the markets instead of raising rates. In other words, as of today, most market participants are positioned in precisely the wrong way.  If you would be interested in learning exactly when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here.  

MACROECONOMIC ANALYSIS:  

Ukraine/Russia  continues to  be the most important issue. In fact, things might escalate significantly over the next few weeks.  

Even though it seems as if the situation in Ukraine is de-escalating and no invasion will occur, that in itself might be misleading.  I continue to believe the US/NATO and Russia are one spark away from reigniting this conflict and going at each other on multiple levels.  While I don’t believe NATO and Russia will get involved into a direct military conflict (for the time being), any misstep here by either side might lead to Russia invading East Ukraine.  Such a move will spark a number of economic sanctions (from both sides), political storm, war rhetoric and a million other unforeseen consequences.  As you can imagine, this would be incredibly unsettling for financial markets.

TECHNICAL ANALYSIS:  

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market. The Dow did set a new high during the week, indicating continuation of the bull market. Yet, that in itself can be misleading as per our timing analysis discussion below.

Intermediary-Term: Since February 5th, intermediary term picture shifted from negative to positive. Giving us a technical indication that both the intermediary term and the long term trends are up. Yet, that in itself can be misleading as per our timing analysis discussion below.

Short-Term: While the short-term trend remains bullish, it might be misleading as per our timing analysis discussion below.  

Again, even though all 3 trends are bullish for the time being, that might be misleading. Please read our Mathematical and Timing Analysis to see what will transpire over the next few weeks.    

MATHEMATICAL & TIMING ANALYSIS:  

First, a review. Thus far, our forecasts have been, right on the money.

(*** Please Note: This time around about 90% of the information contained within this section has been deliberately removed as it contain too much technical information. Particularly, exact dates and prices of the upcoming turning points. As well as trading forecasts associated with them. I deem such information to be too valuable to be released onto the general public.  As such, this information is only available to my premium subscribers. If you are a premium subscriber please Click Here to log in. If  you would be interested in becoming a subscriber and gaining access to the most accurate forecasting service available anywhere, a forecasting service that gives you exact turning points in both price and time, please Click Here to learn more.Don’t forget, we have a risk free 14-day trial).  

Based on our mathematical and timing work the next turning point is located at

Price: XXXX
Time: XXXX

Trading:

I am now fully committed to the short side of the market with 10 individual positions taken at the prices outlined below. A lot of them have done incredibly well thus far and I hope you were able to benefit as well. I might add just one more short position over the next few weeks. That would be XXXX

Remember, you should have an exact strategy and entry/exit points based on the forecast above. 

The list below is for your reference point. It entails my investment strategy for my own investment purposes. While you are free to follow me, please do so at your own risk. Do not take this as a trading advice. Please note, most of the positions below have already been triggered.    

Stock

Entry Point ($)

Action Taken

Stop Loss @

XXXX

XXXX

Went Short

XXXX

XXXX

XXXX

Went Short

1250

XXXX

110

Went Short

121-123

XXXX

74

Went Short

80

XXXX

XXXX

Went Short

260

XXXX

XXXX

Went Short

460

XXXX

35

Went Short

39

XXXX

65

Went Short

70

XXXX

120

Went Short

120-130

XXXX

100

To Short

 

XXXX

112

Went Short

120

Otherwise, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action. (This is continuation of our previous positioning).

If You Are A Trader: XXXX

If No Position:  XXXX

If Long: XXXX 

If Short:  XXXX

CONCLUSION: 

An incredibly important week is coming up. We are now looking for our forecast to be confirmed over the next few trading days/weeks. I have also described what to anticipate over the next few months and exactly what you should do. With increased volatility, multiple interference patterns and an incredibly important long-term turning points coming up over the next few months we must be very careful and risk averse here.  Those anticipating the moves and those who can time them properly will be rewarded appropriately.

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start. 

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Weekly Stock Market Update & Forecast. April 5th, 2014. InvestWithAlex.com  Google

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What Today’s Business Headlines Say About Our World Will Shock You. I Know They Infuriated Me.

business headlines about our world

With the amount of stupidity out there sometimes I wonder how we have made it this far as a human race. Pure dumb luck must have played an important role. I present you with today’s glimpse…..

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What Today’s Business Headlines Say About Our World Will Shock You. I Know They Infuriated Me.  Google

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Stock Market Update. April 4th, 2014. InvestWithAlex.com

daily chart April 4th 2014t

A massive down day with the Dow Jones down 160 points (0.96%) and the Nasdaq down a bone crushing 110 points (2.60%). 

On Monday, both the WSJ and CNBC stated that statistically April is the best month to be LONG. Apparently, April has missed the memo thus far. In fact, you wouldn’t have been caught off guard if you were following our mathematical and timing work within our subscription section.  Not only was this sell off predicted a long time ago, but what comes next is as clear as night and day as well. Plus, believe it or not, today’s sell off had nothing to do with the jobs report, as my post at the open indicated. 

In particular, the Nasdaq and the iShares Nasdaq Biotechnology (IBB) took the brunt of the beating with IBB collapsing 4.01%. While most market pundits will view this in a typical “buy the dip” kind of mentality, this is so much more than that. It will be just a matter of time before the S&P and the Dow begin to play catch up. Remember, as our mathematical and timing work shows, the bear market of 2014-2017 is just around the corner. As I have mentioned yesterday, it will pay off to be very conservative here.

If you would be interested in learning exactly when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here. 

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Stock Market Update. April 4th, 2014. InvestWithAlex.com  Google

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Idiots Can’t See Bubbles Through The Bubble Forest

I am constantly amazed how people can look at today’s market and declare that the market is cheap or as this gentleman puts it… “market have pockets of silliness”. Sure, it’s all fun and games until stocks get slammed 20-40% on the downside. Which is exactly what is going to happen over the next few years according to our mathematical and timing work. I have already discounted the notion that markets are cheap based on the P/E ratio or any other similar nonsense. Click Here To See The markets are, indeed, in a massive speculative bubble perpetuated by a huge amount of credit. In other words, everyone maxed out their borrowing ability to speculate in the stock market. When such environments end, stocks tend to collapse.

That is exactly where we find ourselves today. As mentioned earlier, our mathematical work clearly shows a bear market and a severe US Recession between 2014-2017. If you would be interested in learning exactly when this bear market will start (to the day) and it’s internal composition, please Click Here.  

can't see bubbles investwithalex

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Idiots Can’t See Bubbles Through The Bubble Forest  Google

The Daily Ticker Writes: Market has “pockets of silliness” but is “far away from a bubble”: Howard Lindzon

Even as U.S. markets flirt with new highs, Stocktwits Chairman Howard Lindzon has only 40% of his portfolio invested in stocks. But this conservative approach can’t be attributed to concerns about a market bubble: “We’re as far away from a bubble as possible,” he says in the video above.

Lindzon believes there are pockets of “silliness” right now and chooses to invest in stocks that he can “explain to his children,” including Charles Schwab (SCHW), Interactive Brokers (IBKR) and robot maker iRobot (IRBT).

“There’s enough good companies to own,” he declares. “I am bullish on stocks.”

He’s avoided some of the sectors that have risen just as sharply as they have fallen — namely biotechs — and explains that a “stealth” rotation has been happening — investors are moving away from momentum stocks to previously unloved sectors like banks.

He admits that this market may seem “confusing” to many investors but he steadfastly dismisses talk that today’s indices resemble the dot com era.

“This is a very different environment from 1999,” he says.

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At Least One Industry In Afghanistan Is Booming. Truly Disturbing

The US has a perfect track record at least in one thing. Every country we have directly invaded or meddled in over the last 20-30 years if fucked up beyond repair. Iraq, Afghanistan, Syria, Egypt, Libya, Ukraine, Kosovo, etc… are all disasters. But, it’s not all bad. America has helped one industry in Afghanistan to fully recover, boom and dominate worldwide markets. HEROIN.  

“Since the US came down on the Taliban and occupied Afghanistan in 2001, heroin production in the country has surged almost 40-fold. One year ago the estimated number of heroin addicts dying due to Afghan heroin in the preceding decade surpassed well over one million deaths worldwide. Last year, Afghanistan harvested a record quantity of opium. The annual report of the International Narcotics Control Board maintains that Afghan poppy fields now occupy a record 209,000 hectares, a 36 percent increase from 2013.Today more than half of the provinces in Afghanistan are growing opium poppies. Reports say Afghanistan is responsible for production of around 80 percent of the world’s opium and heroin.”

And that’s where your taxpayer money went. Well, that, plus blowing up a few mountain caves and an an inhalation of 351 of 1976 Toyota Pickups full of Taliban fighters. I guess I shouldn’t be surprised since the US has destroyed its own financial base, political system and any hope for true future economic growth (anytime soon). Oh well, at least the Biggest Loser is on tonight.   (see full report below). 

one industry in afghanistan is booming

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At Least One Industry In Afghanistan Is Booming. Truly Disturbing  Google

 

RT Writes: Afghan H-bomb: Record opium harvest, billions burn in ‘war on drugs’

Finding a solution to the thriving heroin production in Afghanistan has been on the back burner ever since the Americans occupied the country. The new Afghan president who will be elected next weekend will have to battle record opium harvests.

Since the US came down on the Taliban and occupied Afghanistan in 2001, heroin production in the country has surged almost 40-fold. One year ago the estimated number of heroin addicts dying due to Afghan heroin in the preceding decade surpassed well over one million deaths worldwide.

Last year, Afghanistan harvested a record quantity of opium. The annual report of the International Narcotics Control Board maintains that Afghan poppy fields now occupy a record 209,000 hectares, a 36 percent increase from 2013.

Today more than half of the provinces in Afghanistan are growing opium poppies. Reports say Afghanistan is responsible for production of around 80 percent of the world’s opium and heroin.

US soldiers from 4th platoon Alpha company 5/2 ID Stryker Brigade Combat Team (SBCT) 1-17 infantry batallion patrol near a poppy field in Shahwali Kot district Kandahar on May 11, 2010. (AFP Photo / Tauseef Mustafa)

US soldiers from 4th platoon Alpha company 5/2 ID Stryker Brigade Combat Team (SBCT) 1-17 infantry batallion patrol near a poppy field in Shahwali Kot district Kandahar on May 11, 2010. (AFP Photo / Tauseef Mustafa)

Heroin takes toll on Afghan society

Yet the country’s probably most disastrous problem is that the Afghan people not only produce record amounts of opiates, they are actively consuming them, with a heroin vortex sucking in more Afghanis every year.

According to the UN, 1 in 30 Afghani is a drug addict – that’s over a million people in a 30-million population. This makes Afghanistan not just the main producer, but at the same time one of the world’s leading drug consumers.

Afghan drug addicts smoke heroin on a street in Jalalabad on February 7, 2014. (AFP Photo / Noorullah Shirzada)

Afghan drug addicts smoke heroin on a street in Jalalabad on February 7, 2014. (AFP Photo / Noorullah Shirzada)

The new Afghan president will have to find ways to save his people from domestically produced drugs, which also form the backbone of the national economy.

Despite declaring war on drugs in Afghanistan, all efforts to disrupt the production of heroin have not helped to solve the problem in the slightest, with more drugs flowing out of the country every year. Earnings from the trade are clearly considered worth the risks. And Afghan heroin is spreading in all directions, and in particular – Russia.

Because the International Security Assistance Force (ISAF) headed by the US remains the dominant power in Afghanistan for the second decade now, Russia has been repeatedly asking Washington to curb heroin production in the Afghan mountains, albeit with poor results.

Russia’s President Vladimir Putin blamed the ISF for doing almost nothing to eradicate drug production in the occupied country. At the same time the US maintains that since 2002 it has spent $7 billion on fighting drug production in Afghanistan, and allocated $3 billion on agricultural programs trying to encourage Afghan nationals to grow other crops in place of the opium poppy.

 

An Afghan government official (L) and two Afghan National Army soldiers (C and R) cut down opium poppies in Bihsood district, some 25 kms north of Jalalabad , 08 April 2004. (AFP Photo / Shah Marai)

An Afghan government official (L) and two Afghan National Army soldiers (C and R) cut down opium poppies in Bihsood district, some 25 kms north of Jalalabad , 08 April 2004. (AFP Photo / Shah Marai)

 

In 2014 things deteriorated with the escalation of the political crisis in Ukraine and the Russia-US row over Crimea separating from Ukraine to reunite with Russia.

The US introduced sanctions against Russia and a number of its officials, thus breaking many contacts established over the years.

The new blacklist included the head of the Russian Federal Drug Control Service, Viktor Ivanov, who also co-chairs the Russia-US Presidential Commission workgroup on countering the illegal drug trade. Russia’s anti-drug tsar accused Washington of attempting to hide its responsibility for the drug crisis in Afghanistan.

NATO has also announced that it is suspending all military and civilian cooperation with Russia over the Ukrainian crisis.

On Wednesday news came that NATO is giving up its joint program with Russia, which is currently teaching Afghan helicopter pilots. Washington also intends not to buy original spare parts for Russian-made helicopters used by the Afghan army.

Although NATO Secretary General Anders Fogh Rasmussen announced that the alliance will continue cooperating with Russia in countering drugs in Afghanistan, the real future for such cooperation looks grim, particularly after the US President’s deputy drug czar, Michael Botticelli, refused an invitation by his Russian colleague to come to Moscow, citing Russia’s actions in Crimea as the major reason.

The lack of international dialogue could allow this business to grow even further, Dr. Bidit Dey, an expert on Afghanistan from the University of Northumbria told RT.

“The West, and of course the US in particular, have to set aside all geopolitical interests when it comes to global security,” Bidit Dey said, stressing that “There is a lack of cooperation between Russia and the West and that would be a huge threat to Europe’s security and also to overall social stability.”

While Washington is trying to avoid shouldering the responsibility for allowing heroin production in Afghanistan to burgeon, there is growing agreement that this deadly business simply can’t go on forever.

With the presidential election set in Afghanistan for April 5 and the American troops expected to leave the country by the end of 2014, does the world stand a chance for a real change?