Let's see if I can describe today's e-mini action starting from yesterday's close: 25 points down, 25 up, 30 down, 30 up, 30 down... Doesn't seem like anyone has any convictions about this market.
In any case I am sticking with my view that the S&P is headed for 890.
16 comments:
they rallied about 20 points after your comments
U seems to be lacking in conviction...u anticipate the market to go up but shorting it in action....the market will go up from here....fear is leaving the market....IMO
Hi Carl,
Some months ago you were bullish on the US economy and the outlook for the next decade or so. Since then we've witnessed perhaps the biggest financial meltdown in modern times, along with the biggest government bailout. And it ain't over yet. In fact, just today I read an article by an economic forecasting group that predicts the US will default on its debt by next summer, if not sooner. So to some analysts at least, things are looking pretty grim.
How about you, has your longer term outlook changed? Do you still say the chance of a worldwide 30's style depression with 25 percent unemployment, or worse, has a less than 1 percent chance of actually happening? Or is that scenario looking a little more plausible?
Thanks for your thoughts on this and for your great short-term calls on the market.
What does your expert elliott wave interpretation of this market tell you now?
Greg, maybe you can explain how the US Government will default on their debt? then tell me where your money will be when that event happens... then tell me what your money will be worth? get my point?
Tim,
The debt default is not my idea, it's something a group of economic "analysts" say is likely to happen. My point was not that it will or will not happen (seems pretty far-fetched to me), but rather that at least to some "economists" things are looking pretty dire. Carl has been bullish thru-out most of this decline and I was just wondering if, with the super bears front and center on the main stage now and forecasting such bleak scenarios, he's still bullish on the American economy.
If that horrific scenario were to unfold, who the heck knows what would happen to our money, would we see hyper inflation, would our money be worth anything at all? As to how they would default, I haven't the foggiest. Would they just say, hey, you know all those bonds and notes and things we sold you guys, well, as of today they are worth the paper they are written on and that's about it...? The world would be turned upside down to say the least.
On the other hand, we have been running our economy on fiat currency for a few decades now and I don't believe history has even one example of a fiat currency not going belly up sooner or later.
Hi Greg
Would you please explain to us all how the US government will default on its debt when the US dollar is a fiat currancy and the US government controls the printing presses? I would love to know the name of this 'economic forecasting group' who needs to retake high school economics.
If you think that is even remotely possible, I suggest you buy well out-of-money puts on the long bond and make a fortune. Why would you even bother posting here.
Thanks Carl for all your candid posts. You are much appreciated here.
pjm
Perhaps the traders of the 10 year treasury credit default swaps (which recently hit a high of 40, meaning it costs $40,000 year to insure 10 million dollars of 10 year treasuries) would be interested to learn there is no possibility of a government default.
spf5
OK, anonymous. Why don't you then explain to us dimwits how the US government could default.
PS 'Traders' of treasury default swaps? Sure, tell me who they are and I would be more than happy to teach them. It is a very thin market exchanged by private counterparties and generally reguarded as a joke.
pjm
pjm
pjm,
Just because you don't agree with someone or don't understand their reasoning doesn't necessarily mean that they need to retake high school economics.
If you want more detail about US debt default, here are some links:
http://piggington.com/us_to_default_on_its_debt_summer_2009
http://seekingalpha.com/article/95822-is-u-s-debt-losing-creditworthiness
http://rurzag.wordpress.com/2008/08/24/will-usa-default-on-their-debt/
try googling it, you'll get more than a few hits
As far as why I would bother posting here goes, how about: because I like reading Carl's blog and even though I know he seldom answers questions, I would like to hear his thinking about the long term outlook of the US and world economy. And, from time to time I like to post a "thank you". He's made some great calls and continues to do so.
Cheers,
Greg
Greg,
I don't need to look them up. I AM A BOND TRADER AND WORK AT A MAJOR BOND TRADING DESK, DO YOU?? I also have masters degree's in both economics and finance. DO YOU?? You list of sources are BLOGS. Hell, I probably could find a few blogs that believe in Bigfoot & UFO's.
You still haven't answered the questions. Will you PLEASE explain to an obvious idiot like myself how the US government could default.
And yes, I also think Carl does great work.
pjm
OK, lets calm down.
I think the point pjm is making, Greg, is that the U.S. government can "print money". The debts of the U.S. government, in particular its bonds and currency, only promise repayment in the form of this very same money.
Therefore, the U.S. government can avoid default simply by printing money to pay off the bonds. Of course it remains true that the purchasing power of the money offered in repayment may be very much less than what was "promised" when the bond was issued
Thanks for clearing that up Carl.
That was the reasoning behind my recommendation to buy well out of the money long-bond puts and make a fortune if you believed that was going to happen.
pjm
Hi Carl,
Thanks for your response. I realize that the US can just print money to pay off its bonds. Perhaps that is what is meant by defaulting on its debt. How do other countries default on their debt? It's happened, right? Argentina fairly recently, no?
To elaborate on your last paragraph, one could say that the US has been defaulting on its debt for decades because of the continual devaluation of the currency. You bought a US bond 30 years ago and the US repays you today the same number of dollars that you paid when you bought the bond. But the dollars the US gives you in repayment today have half the purchasing power of the dollars you gave the US when you purchased the bond. So in a sense the US has defaulted on its debt. If we get into a high inflation or hyperinflation scenario, then that "default" takes place at a much more rapid rate.
Generally speaking, foreign countries can default on debt which is denominated in something other than their domestic currency. So, for example, Argentina sold bonds on which it promised to pay interest in dollars, so when it refused to do this it was in default.
Carl,
Yesterday you called for a Target of "890". BINGO! It hit 890 today. Where to next? UP tomorrow about 3% to 4% ????
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