The Cycle
Tim Iacono, proprietor of themessthatgreenspanmade, on "The Bernanke Cycle"
>
- Federal Reserve cuts interest rates
- Equity markets surge
- Dollar decline accelerates
- The price of oil and gold soar
- Treasury reiterates "strong dollar policy"
- Housing market problems get worse
- Credit market problems get worse
- Dollar decline accelerates
- The price of oil and gold soar
- Federal Reserve talks tough on inflation <----- YESTERDAY
- Treasury reiterates "strong dollar policy"<----- YESTERDAY
- Equity markets plunge <------------ YOU ARE HERE
- Go to step 1
>
Great observation. Thanks, Tim!
Friday, November 09, 2007 | 04:15 PM | Permalink
| Comments (54)
| TrackBack (1)
add to de.li.cious | 
digg this! | 
add to technorati | 
email this post
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00e54f9273528834
Listed below are links to weblogs that reference The Cycle:
» Bernanke-Zyklus from Anlegen in ...
Der Herr Bernanke hat letzte Woche mit seinen Bemerkungen die weltweiten Aktienmrkte mal eben weiter auf Talfahrt geschickt. Mein Portfolio hat auch gelitten, obschon ich gestern auch noch Gewinne mitgenommen habe (Wacker Chemie).
Montag werde ic... [Read More]
Tracked on Nov 10, 2007 6:01:05 AM
Comments
Lather rinse , repeat.
I perceive a connection.
On days like these I am grateful that there are short and ultra short etfs.
Nice to have choices. I am beginning to have a problem (okay I have had it for awhile that it seems as if all the talk shows only talk about going long. I have no problem with going long, but I think they got a coin that has heads on both sides.
Remember bull markets tend to last longer than bear ones, except when they don't.
Posted by: alexd | Nov 9, 2007 4:26:50 PM
step 1: Steal Underpants.
step 3: Profit
What's step 2?
Seriously, if this doesn't have all the elements of a liquidity trap...
Posted by: Byno | Nov 9, 2007 4:30:02 PM
so we should be buyers then????
Posted by: SINGER | Nov 9, 2007 4:45:48 PM
Ah, but Barry... As soon as one recognizes the pattern, it's all over! LOL.
Posted by: muckdog | Nov 9, 2007 4:53:42 PM
In the immortal words of Rita Rudner, the comedian now playing at Harrah's in Las Vegas, 'now that's funny'.
As a side thought, maybe Rita would make a better Fed chairman! At least we would all be laughing while were getting screwed. My apologies for the poor analogy but I can't think of anyway to sugar-coat it.
Phil
Phil
Posted by: phil | Nov 9, 2007 4:55:05 PM
Step 12.5
Stocks plunge into abyss...
Posted by: X | Nov 9, 2007 5:33:47 PM
Without free money they were nothing. They built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear. Men began to feed on men.
On the roads it was a white line nightmare. Only those mobile enough to scavenge, brutal enough to pillage would survive. The gangs took over the highways, ready to wage war for a tank of juice. And in this maelstrom of decay, ordinary men were battered and smashed.
Except for one man armed with an AK-47, and a Honda full of silver.
Posted by: FC.classic.line | Nov 9, 2007 5:50:26 PM
Sure smells like a liquidity crisis but I've seen some good arguments that the problem is also fundamental; e.g., http://tinyurl.com/2na4ku
IMHO a lot of paper is going to become heavily discounted or completely worthless and a lot of ABS holders, banks included, are going to see real reductions in cash flows on top of their escalating balance sheet write-downs.
The Fed can intervene, possibly grant more time to the severely distressed, but liquidity, serious as it is, is not the greater long-term problem; i.e., calling the bottom on financials is going be about as successful as calling the bottom on real estate (which is to say not very successful at all). JMO
Posted by: RW | Nov 9, 2007 5:52:32 PM
Does anyone think that the recent route is incumbent upon the implementation of FASB 157 next Wednesday especially when a good proportion of the hit was to the financials, and the likelyhood of the route to continue though implementation, or is this now priced in and time to jump back in to the market,
any thoughts
Posted by: Stormrunner | Nov 9, 2007 6:12:01 PM
this old bear says the PPT Cavalry haven't given up yet
so don't go ultra short
mate of mine called all the sub prime fallout right down to the wire in June
and got creamed shorting the financials early
make sure you can carry the trade
as "adam smith" said "wall street is a dangerous place to be if you don't know who you are!
am curious about 2 yr bonds and shorter though this rally surely helps the "Chinese" to reallocate without much collateral damage
their massive incremental cash flow facilitates reallocation without a shift in long held core assets
I'm only a provencal please advise
rgdspcm
Posted by: peter from oz | Nov 9, 2007 6:12:26 PM
We need Greenspan to come back and explain that people have to much equity in their houses and they need to refinance. (Full disclosure, I have a house for sale.}
Posted by: JL | Nov 9, 2007 6:22:01 PM
Well I'm (I admit) weirdly happy about all this.
I've been hosed by this economy. From my seat, it appears the financial industry and Wall Street and globalized corporations have been driving Main Street into the ground.
Folks, I'm not invested, because you've really, really messed with my livelihood. I'm one of those middle aged folks trying to raise a kid with a mortgage and now I need 're-training' (on my own dime, of course).
So now, 'masters of the universe', your dirty linen has really been hauled out to dry. American style financial capitalism is synonymous with toxic waste. YOU did that.
This economy is now YOUR baby, not mine.
I'm glad it's going down the tubes.
I hope the dollar ends up as toilet paper.
Posted by: dissent | Nov 9, 2007 6:25:26 PM
Right on cue, NBC Nightly News had Cramer on tonight to demand that the Fed step in and save the stock market. Cute, eh?
Posted by: Florida | Nov 9, 2007 6:56:24 PM
You beat me to it. Saw Crazy Cramer telling Brian Williams we are DOOMED if the fed doesn't come to the rescue. I guess Corporate America can't operate anymore without interest rates at 1%.
Free markets my ASS.
.
Posted by: VJ | Nov 9, 2007 7:18:54 PM
Bernanke must sit up nights wondering why he wasted time going to college, getting Phd economics, becoming professor at Princeton, when his job boils down to taking Cramer's calls. hysterics call the shots for this Fed, Ben's left holding the bag
Posted by: scorpio | Nov 9, 2007 7:22:55 PM
and another thing, while i'm at it. was anyone else just gob-smacked by the C article in WSJ today? CFO crittendon freaking that no one had hedged their mortgage exposure? where was he the last 2 years? ABX collapsing since the beginning of '07
Posted by: scorpio | Nov 9, 2007 7:24:48 PM
Interesting...
I don't remember seeing any any posts from Fred or Nova Law this week.
I guess we won't hear from them again until we cycle back to Stage 2.
Year-to-date scorecard:
S&P500: +2.5%
DJIA: +4.7%
Nasdaq: +8.8%
Silver: +20.0%
Gold: +31.66%
"Got milk gold?"
Posted by: Pool Shark | Nov 9, 2007 8:12:08 PM
This is funny
Paulson reiterated his support for a ``strong'' dollar and also said a currency's value should be based on economic fundamentals.
You can hear the desperation
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIsxZfrrBWGs&refer=home
Posted by: sr | Nov 9, 2007 8:12:49 PM
I don't generally pay too much attention to cycle analysis, but the 9 month cycle bottom is supposed to be about December 11. Guess what happens on that day?
I am guessing that there will be a 50-100 basis point cut either coupled with or preceded by a massive dollar buying spree on the part of our Asian trading partners to minimize the impact on $USD. Posturing aside, none of them can afford to see the dollar drop much more than it has already. I also expect to see a massive drop in gold prices around the same time.
My personal issue is whether to continue to hold these Jan QQQQ calls that were so green a few days ago or punt them or buy Dec SPY puts? By any objective technical analysis, the only thing that $NDX (and QQQQ) has going for it is that it has not broken the 200 day MA; then again, financials are mainly responsible for this selloff but were actually up today. So where do the long-only fund managers put money now and how do they get their bonuses?
It has occurred to me that if a bonus is dependent on outperforming the S&P, then one way of snagging it is to drive prices down while taking the short side, so we might be seeing Plan B in action now via short and ultrashort etfs, but that just doesn't seem likely.
==whipsaw==
Posted by: whipsaw | Nov 9, 2007 8:38:55 PM
Barry, great blog.
You are always right, this economy has us more then scared, it has us petrified.
"Who would bear these burdens if they weren't scared of something..." Shakespeare
Posted by: David | Nov 9, 2007 10:39:53 PM
Another 12 step program?
Posted by: Christopher Laudani | Nov 9, 2007 10:53:42 PM
Further rate cut means further dip of the Dollar and it appears the U.S. has given up on the Dollar so as to boost exports to fight China imports as well as erosion of confidence of the American Economy and any move by the central banks of the Far East like China to dump US assets, the doomsday of the US Economy is clicking and further loss of confidence of the Dollar would be a catastrophe not only to the U.S. but also the World Economy and I guess the U.S. is bitting on the fact that foreign central banks would not physically dump the Dollar in large scale as it would also be disastrous to the economy of the Asian Countries which rely so much on the export of goods as well as services to the U.S.
Posted by: Steven Soh | Nov 9, 2007 11:39:06 PM
Pool Shark said:
I don't remember seeing any any posts from Fred or Nova Law this week.
I guess we won't hear from them again until we cycle back to Stage 2.
I really wonder why so many of the posts here suffer from this "us vs. them" mentality? Ultimately, everyone is in the same soup anyway and in a true bear market, everybody suffers, including gold bugs who are just holding even, not winning.
This has been an extremely bad week for stocks which should suggest that next week will either be much worse or see an amazing turnaround since options are expiring- that's up to the ringmasters and their time horizons. In any case, there should be some bounces as most markets are oversold and nothing goes up or down in a straight line.
What I really wonder is what all of you fans of a purifying recession are going to be saying in 6 months once you understand what you wished for? Are you still going to be students of the Austrian School when you are looking for another job and can't find one? I rather doubt it.
==whipsaw==
Posted by: whipsaw | Nov 9, 2007 11:57:58 PM
Whipshaw,
Shame on YOU.
A "purifying recession"!!!!!
That is Chop......
-You use it as an excuse
-You are putting blame on someone else.
(Bears v Bulls)
-A bad weeek in stocks-does not relate to a recession if you believe the stock market is not about the USA economy????
SO....
-What are economics in the USA really about????
-Look at the big economic picture for the USA and give a full anlaysis...sans bears or bulls...
NO YUPPIE SYNDROME ALOWED!!!
Posted by: MarkTX | Nov 10, 2007 1:06:43 AM
It looks like some people always need someone to blame when capitalist economy goes into a crisis phase, although this phase belongs to capitalism like storms and rain to the weather. They look for sinister forces allegedly causing it by their deliberate doing.
Bernanke is an easy target to serve as scapegoat, isn't he?
Posted by: jan perlwitz | Nov 10, 2007 1:22:51 AM
