2013: Stock Market Crash!

By tothetick

They predicted it was going to happen long ago.

Are we talking about Nostradamus or even anything remotely as cheesy as him? We all know that was a load of baloney. Just hot air and wind! Right? The Mayans might have got it right after all. Remember, the end of the world for them didn’t necessarily mean the end of the world it just meant the end of a cycle. A new cycle might begin, just different, opening up a whole new world. So maybe that cycle did begin as the door closed on 2012. January came and went and we are still here.

But, there are people who are in-the-know and who are able to predict (or think they can) what’s going to happen even years ahead of when it actually does. Yet, we only look back and then it’s too late for the ‘if-only’ statements and weeping over the milk that got spilt. There’s no point looking back and regretting anything. Might as well listen to the people that have correlated the ups and downs in the financial markets. For once! What else have you got to lose?

If we are to believe what they said, then this is the year. 2013! It’s going to happen according to them. The stock-market is ready to crash yet again this year and this time it’s going to be a big one. Let’s take a look at what was said, when, why and by whom.

1.       2010

Charles Nenner claimed in December 2010 that the crash would occur sometime either in 2013 or just after. Although, we might ask if that is called hedging one’s bets. Nenner is a stock market analyst, right? But three years ago he developed a correlational theory that expressed the stock market moves as being influenced by sunspots. http://technorati.com/lifestyle/article/2013-catastrophic-economic-crisis-predicted/.

Anyone that wants to predict the downturn in the market will be able to consult the predictions of the sunspot cycle via http://solarscience.msfc.nasa.gov/predict.shtml. That means, in fact, that sunspot cycles are predictions that will enable us to make further predictions about the economic cycle of the world. Yeah!

2.       2012

Peter Shiff predicted that the bang would occur this year too. This is the guy, you will surely recall, that was poo-pooed because he said in 2007 that the stock market crash of 2008 would occur. We were told that the economy back then had never looked so good. Now, he’s predicting the crash of 2013. Can we afford to turn a blind eye to this one? There will be a huge US Dollar drop and Treasury bond crisis. He says that the banks won’t hold up this time. They have been shored up once before, and they have passed Federal-Reserve tests regarding their ability to cope in the event of a crisis. But, he adds that they are not ready to pass any stress test for viability over a Treasury bond crisis like the one that is lurking behind the Fed’s door this year. Shiff is one of the few that believes it’s 2013 and that things are nowhere near the happy-go-lucky mark that people are spouting on about.

http://ivn.us/2012/10/28/peter-schiff-who-predicted-the-financial-crisis-forecasts-the-worst-to-come-around-2013-2/.

3.       2013

Jeffrey Gundlach predicted the 2008 financial crisis too. Now, he is also one of the few telling us to prepare for the time-bomb that is about to explode. In January of this year, he said that the market was ready to implode. That’s all because we have been living on debt that has been piling up for thirty-odd years now. In the first decade we got hooked on debt. We must have been candy-flipping back then. We really jacked up, didn’t we? The second decade saw all of that go pear-shaped as we walked right into the sticky mess of the sovereign debt crises and the foreclosures. Our debt had become too big to be anything more than a big burden weighing us down. The third decade is just starting. It will involve rampant inflation that we’ll obviously try to control, but that we’ll make worse, debt defaulting on repayments as well as corruption galore. Lovely! Gundlach suggests that we should be moving elsewhere right now. Only problem is he doesn’t tell us where!  Does it all sound familiar, though?http://advisorperspectives.com/newsletters13/pdfs/2013-Market_Outlook.pdf.

4.       2013

Robert Weidemer tried to get his video interview banned, but you can see it at: http://w3.newsmax.com/a/aftershockb/video47b.cfm?.

Weidemer predicts that unemployment will hit 50% in the USA. 90% of the stock market will be wiped out and there will be inflation of 100%. Too over the top? Well, Weidemer predicted the failings of the housing market and the catastrophic result on the world’s economies. The unsinkable USA almost sank because of it. Probably best to jump ship now.

5.       2013

David Stockman predicted a few months ago that we were on the next train to stock-market hell and there were no tickets left for a return journey. That’s because, according to him, the Federal Reserve has been dishing out too much monopoly money. There are no real gains in the economy, just phony spoof-like patchwork. But that’s ready to pull apart. How can you not believe Stockman with a name like that?http://moneymorning.com/2013/04/01/is-david-stockmans-stock-market-crash-prediction-on-target/#.UbB_tvm9ByI.

The bursting of the dot com bubble cost us in the region of $5 trillion from 2000 to 2004 as it bust in our faces and brought the world down. That was even bigger in 2007, when it cost $7 trillion and perhaps we are still notching up the cost even today. How much is it going to cost this time?

Believe it or refute their claims as drunken beer-talk down the local pub. But, when (or if) it happens, no point telling anyone that you didn’t know. You can lay off the ‘what-ifs’ now. They won’t wash. I’ll just say “I told you so”. Maybe the Mayas got it right after all. The new cycle might begin this year. Just have to figure out what that new cycle will include, don’t we? The death of the dollar? The Death of our economies? A new cycle? But, hey, if the predictions were as worthy as all that, we wouldn’t be doing much all day, would we? I wouldn’t, at least. We would be acting on them, wouldn’t we? Or maybe we are just non-believers.

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China's Gold Holding Could Mean A Dollar Doom

By Michael Snyder

What in the world is China up to?  Why are the Chinese hoarding so much gold?  Does China plan to back the yuan with gold and turn it into a global reserve currency?  Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar as the primary reserve currency of the planet?  Most people in the western world assume that China just wants a "seat at the table" and is content to let the United States run the show.  But that isn't the case at all.  The truth is that China doesn't just want to compete with the United States.  Rather, China actually plans to replace the United States as the dominant economic power on the planet. 

In fact, China already accounts for more global trade than the United States does.  So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade?  It would cause a financial shift so cataclysmic that it is hard to even imagine.  Most of those that write about the "death of the U.S. dollar" usually fail to point out that China is holding a lot of the cards as far as the fate of the dollar is concerned.  China owns about a trillion dollars of our debt, China is the second largest economy on the planet, and nobody uses the dollar in international trade more than China does except for the United States.  Up until now, China has had to use the U.S. dollar in international trade because there has not been an attractive alternative.  But a gold-backed yuan would change all of that very rapidly.

And without a doubt, the Chinese government has already been very busy promoting the use of the yuan in international trade.  In a recent note, John McCormick of RBS Group stated the following...

Financial crises in the US and Europe mean the world needs a new, more stable global reserve currency, and trade in RMB is growing rapidly. In the FX market, for example, our figures show that volumes are now worth around USD 5-6 billion daily – double what they were a year ago.
A number of factors suggest that the Chinese authorities want to make RMB internationalisation happen by 2015.

For China, having a global reserve currency is not just about economics.  It is also about power.

McCormick ended his recent note this way...

China’s new leadership faces a number of problems. The country’s economy is slowing and, although we would expect the rate of GDP growth to pick up a little, it is unlikely to be a steep rebound.
But promoting RMB as a global reserve currency, with all the economic benefits that will bring in addition to exerting more political influence on the global stage, clearly remains high on their agenda.

Similar sentiments were echoed in a recent article in the Wall Street Journal...

Beijing is undertaking a long, gradual campaign to establish the yuan as a more market-oriented, international currency. China's State Council, or cabinet, said in a statement this month that the country would draft a plan to allow the yuan to become fully convertible. Meanwhile, the People's Bank of China is guiding the currency higher and set the median point of its permitted daily trading band last week at the strongest level ever.

We don't hear much about these sorts of things in the western media, but the convertibility of the Chinese yuan is a very big deal.  Up until recently, the yuan was only directly convertible into dollars and yen.  But now that is rapidly changing.  So far this year, the Chinese government has entered into currency convertibility agreements with Australia and New Zealand.

So instead of having to change yuan into U.S. dollars to trade with Australia and New Zealand, now China can cut U.S. dollars completely out of the process.

But right now there is nothing that really gives the Chinese yuan a significant competitive edge over the U.S. dollar.  If Chinese authorities truly want the yuan to end up replacing the U.S. dollar as the primary reserve currency of the planet, they need to do something that will make the rest of the world want to use it.

And they could do that by backing the yuan with gold.  In fact, there are persistent rumors that China has been busily preparing for that.

For example, the Economic Policy Journal recently pointed out that Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush, is claiming that China has plans to turn the yuan into "a hard, gold-backed currency" that will have a distinct competitive edge over the rapidly depreciating paper currencies that the rest of the globe is currently using...

The most interesting piece of the puzzle is that the Chinese have emerged as the biggest buyers of gold, mainly off-market. They want the yuan to emerge as a hard, gold-backed currency in a world where everyone else has chosen to inflate and devalue.
The recent bilateral currency deals with Australia, France, Russia and Singapore, and many others, reflect this desire to displace the USD as the world’s reserve currency.
It may be an interesting and long race between the Chinese reaching for convertibility and the Western central banks straining credibility.

Other analysts are also fully convinced that the goal of the Chinese is a gold-backed yuan.  The following is what money manager Stephen Leeb told King World News recently...

Countries have been battling each other in order to cheapen their currencies. The problem with a cheaper currency is that commodities cost more. So China has decided to opt for a higher currency.
The move in the yuan overnight was one of the most significant upticks I have seen. Like I said, the yuan moved to an all-time high. The yuan has advanced roughly 5% against the US dollar in just nine months. China also imported over 200 tons of gold for the most recent month. That is an extraordinary number. At that rate that’s over 2,400 tons of gold per year on an annualized basis.
This simply speeds up the point at which China will be the largest gold holder in the world. China saw gold come down and they didn’t just buy on the dip, instead they bought as much as the market would give them. And, again, you see the yuan going up so that is making the price of gold even cheaper for the Chinese.
It’s only a matter of time before the Chinese back the yuan with gold. This will push the yuan front and center as a key element in terms of being part of the world’s reserve currency basket. China gets the message. They are doing whatever it takes to establish their dominance in the world, particularly in the commodity arena. Their currency is flying and they are importing as much gold as they possibly can.

And without a doubt, China has been hoarding massive amounts of gold.  Everyone agrees on that.  But what nobody knows is exactly how much gold China currently has stockpiled, because China is not telling anybody.

One recent estimate put China's gold reserves at more than 7,000 tons of gold, but it could potentially be far higher than that.  When China does finally tell the rest of us how much gold they have, they will probably be just a move or two away from checkmate.

What we do know is that China is importing absolutely enormous amounts of gold right now even though China is also the number one gold producer on the planet.

According to Reuters, more than 223 tons of gold was imported into China from Hong Kong in March.  That smashed the previous record of 114 tons in December.

Overall, Chinese imports of gold from Hong Kong tripled in 2012, and the final number for 2013 is going to absolutely smash what we saw in 2012.

Obviously something is happening.

China is massively hoarding gold at the same time that it is trying to substantially raise the international influence of the yuan.

It doesn't take a genius to see where all of this is headed.

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy.  Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar.  At that point you could forget about cheap gasoline or cheap Chinese imports.  Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively.  If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living.  Today, most U.S. currency is actually used outside of the United States.  If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.

So keep an eye on China, and look out for any news about the yuan.

It won't happen next week or next month, but eventually we could see China back the yuan with gold.

When that happens, it is going to be a complete and utter financial disaster for the United States.

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13-year cycle about to turn the market around again?

by Chris Kimble

CLICK ON CHART TO ENLARGE

What does the 1974 low, 1987 crash and 2000 dot.com highs have in common?  They are some of the most important highs/lows in the past 40 years and they are 13-years apart!

13-years from the 2000 high is 2013! Will this 13-year cycle influence the markets with the Dow hitting dual resistance lines from 1987 and 2000 coming into play right now???

One of my favorite quotes is...."It's not the odds of something happening, its the impact if it does!"

Odds may be low that this 13-year cycle impacts the markets this year...if it does, the impact could be big since Margin debt levels are into the DANGER ZONE again! (See Margin debt)  First time margin debt levels were the highest in history? 13-years ago!!!

Stay tuned to see if the 13-year cycle has an influence this year!

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This pattern could really be bearish and stink for small caps!

by Chris Kimble

CLICK ON CHART TO ENLARGE

Shared the above chart on Stocktwits yesterday (see post here).

The Russell 2000 is up against a resistance line that has been important since the 2009 financial crisis and has formed a bearish rising wedge, which is breaking down.

This pattern could really end up stinking for small caps and could spill over into the broad markets!

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Will Market Swoon After The May Rally?

By George Leong

May was supposed to a dud, according to the Stock Trader’s Almanac. In 2012, the month of May was a disaster, with the Dow and the S&P 500 plummeting 6.21% and 6.23%, respectively. The technology and small-cap sectors fared even worse, with the NASDAQ and Russell 2000 giving up 7.19% and 6.74%, respectively, in May 2012.

Fast-forward a year, and this May has been blooming for the stock market. The key stock indices recorded excellent gains, with the NASDAQ staging its best month in over a year.

The reality is that in spite of several days of selling in mid-April, the current upward move in the stock market this year really hasn’t faced any hurdles, which is a surprise.

In fact, we have yet to see sustained selling or a down month this year, with the exception of the 0.42% decline posted by the Russell 2000 in April. Small-caps came back with a vengeance in May, advancing nearly five percent.

And there will likely be more highs and records in the stock market to come as long as the Federal Reserve and other global central banks continue offering easy money and driving down interest rates. And if 2012 is any indication, it’s looking like full steam ahead.

In 2012, the stock market staged a strong rally following the May meltdown, reporting gains in each month from June to September.

Now, I’m not totally convinced this pattern will happen again this year, but the investment climate as far as the economy and easy money is better than it was in 2012.

The only thing that concerns me is that I just don’t see the current rate of the stock market advance keeping pace. If this were to happen, the Dow would end up with a 41% gain, while the S&P 500 would have advanced 38%. Honestly, I don’t see this happening, which means we could likely see some hesitancy over the next several months—or at least a stock market correction of some meaningful magnitude.

I would view a stock market correction not as a red flag, but as a buying opportunity to jump in and accumulate additional positions. My belief is that this stock market is heading higher.

The only thing that could derail the bull market is the Fed, especially if it decides to pare down its bond buying, which would force longer-term yields higher.

In addition, I’m concerned about the bubble-like conditions in the Japanese stock market, where I feel stocks are extremely vulnerable to more selling. (Read “Why Nikkei Sell-Off May Foreshadow Things to Come.”)

Since trading at a high on May 22, the benchmark Nikkei index has faltered 10.7% and has breached its 50-day moving average, as shown in the chart below, based on my technical analysis.

Chart courtesy of www.StockCharts.com

What concerns me in Japan is the lack of solid buying following the 7.3% correction on May 23. Of course, Japan’s situation is vastly different from the U.S., since Japanese stocks were up 70% in just six months.

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Hog, cattle exports weak; trade anticipates demand data

By Rich Nelson

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Hogs: Though futures had a quiet day on Wednesday, we will note the April pork trade figures caused some discussions. The new figures released in the morning showed pork exports at 397 million lbs. Compared with last year, that was down 12%. We call that an improvement from the March numbers that were 18% lower. In addition, these numbers were made even with terrible exports to China and Russia (-39% and -99%, respectively). The trade will assume a slightly better-than-expected pace in April will also mean a slightly better-than-expected pace right now.

In shorter-term issues, we still have not seen that transition point yet where packers note cash hog prices have pushed too far compared with cash pork. That point certainly may come, but is not here yet. In beef, supply is a clear negative. In pork, it is the exact opposite. One thing both sides do share though is their hopes/concerns regarding consumer demand. Friday’s report on employment may shed a little more light on that subject…Rich Nelson

Cattle: Packers took a hard stance Wednesday with $121 bids posted in the morning. Compared with last week’s $124 trading, that would appear as though $1 lower trade this week is an easy assumption. That may have disappointed those looking for steady prices. Cattle feeders are asking $125. As there is generally a $2 drop from initial cattle feeder asking prices and actual trade, that would mean they are also ready to accept lower prices.

Wednesday morning’s release of April U.S. beef trade numbers may have been the reason. April U.S. beef exports, at 180 million lbs. were 13% lower than last year. That was down from the March numbers that were 3% under last year. Keep in mind these numbers were made with zero exports to Russia.

On the import side, we brought in 232 million lbs. in April. That was 9% over last year (March was 3% under). Sending out smaller amounts of exports and taking in more imports means more beef left in the U.S. for consumers.

On the wholesale beef end, we must also point out week to date action is $2.25 lower for choice and $2.57 lower for select. We should expect continued declines in cash cattle prices, from the $128 spring high, for at least another two to 12 weeks. We continue to suggest cash will reach down to $113 for the summer low and for August futures to hit $115. The factor that bulls are hoping for here is Friday’s employment report. If it shows another month of good numbers, the trade will adjust its consumer demand expectations a little higher. That could also encourage us to bring our downside targets higher (if it is bullish)…Rich Nelson

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