Another Prediction comes true – still more to come?

Long-Term readers and personal students know that I don’t subscribe to counting Elliott Waves, BUT, I do find their analysis on the markets very useful – hence why I promote Elliott Wave International.

I bought the book mentioned below a few years back and It’s striking as many of EWI’s predictions on the broader economic outlook keep being hit.

If you don’t own it, it would be a good purchase

Hope it helps

The Hovis Trader

World’s 15 Biggest Banks Get Downgraded — What This Means for “Safe Banks”
Another one of Robert Prechter’s Conquer the Crash forecasts comes true June 29, 2012

By Elliott Wave International

Today’s news that the losses suffered by the biggest U.S. bank, JP Morgan Chase & Co., may be as big as $9b instead of $2b, as previously announced, came on the heels of another noteworthy news report from the world of banking.

On June 21, Moody’s Investors Service downgraded 15 of the world’s largest banks, including the U.S. second-largest bank, Bank of America. Says Reuters: “…the downgrades reinforce a trend that has seen weaker banks punished for their risk-taking, while stronger banks are rewarded for conservative funding models, ensuring lower costs and higher margins.”

And, “The ratings…gave a competitive advantage to ‘safe-haven’ banks that fund themselves with stable, low-cost customer deposits…”

This seems like a good moment for those “safe-haven” banks to toot their horn a little, as it might just get them more business — just as this quote from Ch. 19 of Robert Prechter’s Conquer the Crash had predicted:

“…relatively safe banks, if they have the sense to inform the public of their safety advantage, are likely to become even safer during difficult times. Why? Because depositors in a developing financial crisis will move funds out of the weakest banks into the strongest ones, making the weak ones weaker and the strong ones stronger.”

This year marks the 10th anniversary of Prechter’s Conquer the Crash, and to mark the occasion, we have put together a special free report for you: an except with 8 key chapters from this forward-looking book.


Take advantage of this free report that can help youprepare your financial future. You get:

  • Chapter 23: What To Do With Your Pension Plan
  • Chapter 28: How to Identify a Safe Haven
  • Chapter 30: What You Should Do If You Run a Business
  • Chapter 33: A Short List of Imperative “Do’s” and Crucial “Don’ts”
  • Plus, 4 more chapters

Read Your FREE 8-Chapter “Conquer the Crash Collection” Now >>

This article was syndicated by Elliott Wave International and was originally published under the headline World’s 15 Biggest Banks Get Downgraded — What This Means for “Safe Banks”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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You turn, Me Turn, U Turn – Which way to Turn?

Even the government struggles with this one, clearly! which probably why they just go around in circles

This is not a political site, but I’m afraid economics, politics and financial markets all interact.

For visitors to this site from outside the UK, let me give you a brief explanation why I’m posting this content:

In the UK we were due for 3p to be added to the cost of 1 litre of fuel/gas/petrol etc – in addition to the tax we already pay on fuel, we currently pay approx (figs not verified) 57.95pence of the cost of litre of fuel as tax – the Raw material is very cheap, but when tax is added to it, the cost is driven up (pun intended).  Then out of the blue on 26th June 2012, the government scrapped the 3p rise due on 1st August 2012 – this is the nth U turn the current government has made in the past few weeks.

In my view the over-riding cause is the bear market we are living through, this is causing the government to make many mistakes, mis-statements and back tracking that is exposing them or rather exposing their lack of ability to sort this mess out – which If you understand how the markets work you already know that NO government can control what’s happening.

The video below details a number of key points I’ve referred to on this site:

  • Socionomics – governments REACTING to events etc
  • Government Ministers proving they don’t know what to say and how to do things – they require the help of “Briefing notes” from their party on what to say
  • The Governor of the Bank of England – confirming there’s no end in sight to the depressive state of the UK

Once again this is visual evidence – there will be more of this is future months and years as this crisis deepens, If you are so inclined It would prove useful to refer back to available footage of government action when this all started between 2007-09.  I will eventually upload on here at some stage when I have the time.

This depression will end, it’s not nice being part of it, but it will end and for those that have sat up and looked to the government and central banks to solve the problem, by the time this depression ends, they will understand that those people [government, political regime and central bankers] cannot control this beast.  you have a confession by the UK’s BoE gov saying so!

This is why I keep saying you have to learn how things work for yourself and not look to the government.  In all my years of studying the worlds markets to find out what makes them move and how to protect myself I have not found a better insight than that provided by the Elliott Wave International team and especially their Socionomics model to make sense of market behaviour>politics>media coverage>life

Many thanks for compiling this video and making it available (details on video)

Enjoy

The Hovis Trader

War & the Stock Market – Are they linked? Part 2

A Socionomic View of War, Stocks and Commodities

By Alan Hall, originally published in the October 2008 Global Market Perspective Download PDF (868 KB)

The principle of Occam’s Razor states that the explanation of any phenomenon is more likely to be correct if it makes as few assumptions as possible. Socionomics makes a single assumption: that endogenous social mood ultimately dictates the character of collective social action.

This hypothesis reverses the conventional direction of inquiry about what causes war. Instead of asking how war affects the economy, stocks or commodities, the socionomist asks, “How do fluctuations in social mood affect the prices of stocks and commodities, the strength of the economy and the likelihood of war?” This non-conventional approach to causality eliminates conflicting assumptions and rationalizations, and provides the simplest explanation of the available data.

Using socionomics’ single assumption, this report examines war’s relationship to the economy, real stock prices and commodity prices.

War and the Economy From 1776 to 2008, United States military forces have been deployed hundreds of times, both abroad and domestically. In this report, we will examine only the major wars that involve the United States.

For many years after World War II, most economists and historians assumed that war, man’s most destructive activity, was good for the economy. A recent quote from Nobel-winning economist Joseph Stiglitz illustrates the popular change of opinion: “It used to be thought that wars are good for the economy. No economist really believes that anymore.”

EWI has always disagreed with this idea and observed that the error arose from incorrect assumptions about what causes war. In 1999, The Wave Principle of Human Social Behavior addressed this:

Major mood retrenchment produces war, as humans finally express their collective negative mood extreme with representative collective action. As with economic output, the size of a war is almost always related to the size of the bear market that induces it.

An initial look at the steady ascent of the U.S. Real Gross Domestic Product — the upper line in Figure 1 — suggests that U.S. economic growth is largely unaffected by its wars, which have mostly been waged elsewhere. Looking more closely at the upper line, we can see downturns in real GDP near the end or shortly after each of the completed wars. In the lower line, the real GDP rate of change showed net slowing during all wars except World War I. Just after World War II, real GDP suffered its second lowest rate of change since at least 1870. The data shows that the economy has usually slowed during war and regressed afterward.

Figure 1 – Click Image to Expand

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Jimmy Carr (& hundreds others) Tax Loophole

David Cameron (British Prime Minister) on Jimmy Carr’s use of a HMRC GOVERNMENT AUTHORISED TAX AVOIDANCE SCHEME

Problem Is as I see it – The bloody government authorises and allows these schemes to exist!  Why allow them to exist if you don’t want people to use them?

Another example of government stupidity of the highest order.  Reactionary in nature and probably only because The Times newspaper has run the story all week – so It’s a “popular” feature for the PM to express his horror at!

Note to the government:  If you don’t want things like this to occur, close the blooming loopholes, simplify the tax system so it’s easy to pay, collect and work out taxation due.  If a UK PLC makes £20 million net profit and the tax rate for businesses is 25% – they pay 25% of £20 million = £5 Million in tax – no If’s, but’s or maybes – This way £5 million is put into the countries coffers and not a few hundred thousand due to some allowable tax avoidance scheme!  (Tax rates NOT to scale – just used as an example)

Note to Readers:  Most if not all major UK businesses and millionaires use similar AUTHORISED tax avoidance schemes to minimise the tax they pay – This is not good for the overall economy as it results in inefficiency of the highest order in running the country effectively – However, It’s legal and authorised by HMRC and it’s boss – The Government!  So can we really blame them in utilising them.

No we can’t, the ultimate blame lies with the ones that allow it to happen – The Government

There is a slight problem with this and that problem is politics or grand marketing as I call it.  As soon as politics enters into any area –  bureaucratic red tape appears, too many cooks in the kitchen and plain and simple inefficiency appears.  the reason is that the politics is all about winning votes in the mass competition to run countries – POWER – The truth disappears and the use of fancy words, sentences and paragraphs are splurted out in an attempt to convince voters new and old.

To make the point and this is a great one: In 1913 the US congress (politicians) passed a bill that resulted in the birth of The Federal Reserve – It’s remit?  To PREVENT Financial Crashes from EVER happening again – this was due to the 1907 financial crash/panic.   The crash of 1929 must of just been a blip, a teething problem, What about the crashes in the 1960’s and 70’s?  On nearly forgot the crash/panic of 1987 and the crash of 2007-09?  so far it’s FAILED, utterly and completely, all from the great insight of politicians and politics who thought they knew/know best!  I rest my case

Video with thanks to Medialab300 via YouTube

Spanish & Italian Bad Loans!!!!!

This Is an article published a couple of months ago – BUT for those subscribers to EWI  they’ve been watching the line on the graph grow since 2008!  this is why when countries go bust we don’t have the “shock” factor as we’ve been watching the build up over the years.

Those graphs (below) are also NOT a shock for the Spanish or Italian governments and central banks – they know the details before EWI publish those graphs – have they (governments) openly expressed the level of bad debts????  Have the governments highlighted the debt levels before now????  What actually have the governments of these countries done to warn their public of the risks????

The answer is – They’ve done nothing but try to hide the problem and hop/pray It will go away!  Just like Greece, just like Ireland and Just like Portugal – I amount this to lying to those that you govern and is shameful.

I make no apologies for promoting EWI – I spent years researching the markets, newsletter providers and the like and EWI are the only one I’m prepared to put my name to.

Enjoy

The Hovis Trader

European Debt Crisis: “Imagine the Worst and Double It” Just how will the sovereign debt crisis end? June 20, 2012

By Elliott Wave International

We’ve all heard the line: Let me give it to you straight.

And in speaking to his counterparts in Spain, an Irish economist did just that.

Ireland has this banking advice for Spain: imagine the worst and double it. [emphasis added]

Like Ireland, Spain sought a bank bailout after being felled by a real-estate crash. Now, just as the Irish did, the Spanish are awaiting the results of outside stress tests gauging the size of the hole in the banking system.

Bloomberg, June 14

Stress test or no, EWI’s Global Market Perspective has known that Spain’s banking system is frail. In May, the publication gave its subscribers this chart-supported insight:

A 17-year high in the percentage of non-performing Spanish loans is merely one illustration of the Continent’s illness. After falling to a four-decade low of less than 1% in 2007, delinquencies have spiked eightfold in the past five years. The percentage stands at its highest level since 1994.

Global Market Perspective, May 2012

By itself, a subsidiary of Spain’s largest bank, Banco Santander, absorbed Q1 bad loan losses of 475-million euros.

Italy is in the same sinking economic boat. The June Global Market Perspective showed how much the eurozone’s third largest economy is also drowning in bad debt.

The Italian and Spanish economies are in shambles as borrowing costs have skyrocketed for both countries.

But the recent spotlight has been on Greece. Now that the Greek election is over and voters appear ready to embrace austerity, should we be optimistic about the future of the euro zone?

You owe it to yourself and your investments to find out. Remember, even if you believe you’re not directly invested in Europe, there’s a very good chance that some of the companies in your portfolio are.


Get Ahead of What Is Still to Come in This FREE Report from Elliott Wave InternationalThe debt crisis in Europe continues to play out in the political, social and financial worlds. What will be next? With commentary and analysis from February 2010 through today, this timely report gives you an important perspective on the European debt crisis and what it could mean for your portfolio.Read Your Free Report Now: The European Debt Crisis and Your Investments >>

This article was syndicated by Elliott Wave International and was originally published under the headline European Debt Crisis: “Imagine the Worst and Double It”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Ben Bernanke – 60 Minutes Interview

Okay,

This video was recorded around 3 years ago It is the Federal Reserve Chairman – Ben Bernanke – being Interviewed by CBS news for their 60 minutes program.

It looks like the original recording has been “snipped” – It was 60 mins! and they’ve removed the Fed’s chairmans comments about Deflation being a threat – If anyone has the original 60 mins Interview in full and would like to share please get in touch (thehovistrader@gmail.com) or provide a link If you know where to locate on the web – thanks.

Watch the video and then ask the following questions to see what’s transpired since the Interview, remember, these people have a lot of power and think they know how to control the economy!

  1. Has the action of 2008 (QE) worked and averted a further recession – not here in the UK
  2. 2 mins in he says “It’s hard to forecast these things” – Yet they are happy enough to tell you things will get better and they know what they’re doing!  Contradiction I think
  3. Averted a Depression? – This bear market ain’t over, the only reason he’s given the Interview is due to the fact that the markets have risen (as expected) from March 2009
  4. Often he mentions recovery, he’s referring to the stock markets – so now he’s linking the stock markets to economic recovery!  What’s the point of GDP figures and the like that are months out of date when published, If all you have to do is look at the markets for their opinion! – It’s common knowledge amongst stock market traders and professional Investors that the stock market is a leading Indicator of the economy
  5. The Fed was CREATED in 1913, to AVERT financial panics – this was a REACTION to the 1907 PANIC – obviously the Fed stopped the 1929, 1966, 1987 & 2007 panics seen as it was created to stop such things from happening!
  6. Lehmans Bros – “We cannot put capital into, all we can do is make LOANS against collateral” – Basically ANY Central Bank when rescuing or Issuing QE need you to back the assets and the preferred option is via highly graded Triple (AAA) A treasuries which have very little chance of default – All they are doing is LOANING the money after creating it out of thing AIR.
  7. AIG was rescued because it’s assets included Top quality graded treasuries and gilts – not junk corporate bond debt
  8. He refers to congress passing a bill to put capital into the banks in October 2008 – the worst was over by then – so much for preventing it in the 1st place!
  9. To understand the Fed please refer to a previous blog post I’ve made on this which gives you the option to obtain a free report detailing The Fed – applies to any free Central Bank in existence too
  10. They’ve had to do more bailouts because they don’t KNOW how much exactly is needed to solve the problem, because they’re REACTING to events!  The exact same is happening to countries in the EU zone right now – Reactionary action
  11. I agree with his Fire scenario, but the preventative measures happen after the fact and fail to work = no point!
  12. Stress-Tests!   There NOT going to fail! He’s promised that
  13. right at the end of part 1 – What keeps you up at night? – Not one mention of Europe!
  14. They just don’t have a clue

I can only access Part 1 of the interview, If you want to see part 2 head to CBS website via this link

Part 2 – they’ve cut the part where the Fed chairman talks about Deflation being a major threat – not sure why?

Enjoy

The Hovis Trader

War & The Stock Market. Are they linked? Part 1

How Will the New Social Psychology Affect Military Action?

By Alan Hall, originally published in the February 2012 Socionomist Download the Complete Issue (1.65 MB)

History shows that negative social-mood trends, as indicated by bear markets in stocks, unfold in down-up-down Elliott wave patterns. But within such patterns, the first and second downtrends tend to produce qualitatively different types of social actions.

In large-degree bear markets, the second declines tend to produce major wars. That is not the case with first declines, when major wars are typically absent.

Elliott Wave International believes the stock market is currently in the first decline of a larger-degree negative pattern. If EWI’s outlook is correct, then, World War III is unlikely to commence until after the second decline begins, decades in the future.

Yet even first declines bring plenty of risks. The current Supercycle decline that began in 2000 has already hosted the 9/11 attacks, the wars in Afghanistan and Iraq, and multiple revolutions and protests. It is likely to spark more social conflict, but not global war.

Socionomics per se cannot predict the specifics, but if you understand what to look for, you can spot the risks.

This report sketches potential risks facing us during the rest of the first decline, which is wave (a) under the Elliott wave model.

Figure 1

Figure 1

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Think you understand Central Banks & QE?

I cannot tell you just how much useful and valuable free reports EWI have for you to rumage through, download and keep for FREE, all that is required is a free email sign-up and you can access knowledge and market experience that an economist could only dream of.

Below I have listed 3 free snippets of reports – there’s a lot more detail in the reports and If you study them you will have more knowledge of Central banks actions and capabilities than most economists.

They issue is knowledge – In todays world there is far too much crap in print and online when all you really want are cold hard facts.

Enjoy

Understanding the Fed EWI’s free eBook explains the common and misleading myths about the U.S. Federal Reserve Bank April 20, 2011

By Elliott Wave International

What exactly is the function of the Fed? If it’s to help the U.S. economy grow steadily, then how come in 2007-2009 we had the biggest stock market crash in decades followed by “the Great Recession” and a worldwide financial crisis?

For answers, let’s turn to someone who has spent a considerable amount of time studying the Fed and its functions: EWI’s president Robert Prechter.

This is an excerpt from a free Club EWI eBook, “Understanding the Fed.” Enjoy — and for details on how to read this important 32-page eBook in full, free, look below.


The Fed’s Presumed Inflation Since 2008 Is Mostly a Mirage
Excerpted from Prechter’s December 2009 Elliott Wave Theorist

… We all know that the Fed created $1.4 trillion new dollars in 2008. It has told the world that it will inflate to save the monetary system. So that is the news that most people hear.

But the Fed’s dramatic money creation in 2008 only seems to force inflation because people focus on only one side of the Fed’s action. Even though the Fed created a lot of new money, it did not affect the total amount of money-plus-credit one bit… When the Fed buys a Treasury bond, net inflation occurs, because it simply monetizes the government’s brand-new IOU. But in 2008, in order for the Fed to add $1.4 trillion new dollars to the monetary system, it removed exactly the same value of IOU-dollars from the market. It has since retired some of this money, leaving a net of about $1.3 trillion.

So investors, who previously held $1.3t. worth of IOUs for dollars, now hold $1.3t. worth of dollars. They are no longer debt investors but money holders. The net change in the money-plus-credit supply is zero. The Fed simply retired (temporarily, it hopes) a certain amount of debt and replaced it with money.

Evidence for this case is in Figure 4. Even though the Fed has swapped over a trillion dollars of new money for old debt, the banks aren’t lending it. The money multiplier is back in negative territory, which means that there is more debt being retired than there is new money being created. In other words, deflation is winning.

The Fed's new money is simply replacing old debt, not creating new debt

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Music & The Stock Market

The Auto-Tune Epidemic

By Jill Noble, originally published in the November 2011 Socionomist Download Complete Issue (1.48MB)

“Robo-Pop” Has Much in Common with Disco

When was the last time you listened to Top-40 music? If it was anytime in the past few years, we’re betting that almost every song you heard contained unnatural, robotic-sounding vocals. The air waves are saturated with this style of dance music today, including hits from Katy Perry, Maroon 5 and Lady Gaga.1

The culprit? Pitch correction software. When it is used heavily, it makes the human voice sound computerized. We term this digital-vocoder sound “Robo-Pop,” and arguably it has become its own genre. The New Yorker writes,

… pitch correction has also taken on a second life, as an effect.…Auto-Tune software detects pitch, and when a vocal is routed through Auto-Tune, and a setting called ‘retune speed’ is set to zero, warbling begins.… [W]hen sung pitches alternate too quickly the result sounds unnatural, a fluttering that is described by some engineers as ‘the gerbil’ and by others as ‘robotic.’2

The spark began with Cher’s 1998 hit song “Believe,” and it has fanned into an Auto-Tune wildfire,3 fueled substantially by robot-voiced rapper T-Pain’s 2007 album Epiphany. This year’s widely panned Super Bowl halftime show featured pop artists with multi-platinum albums whose performances relied on Auto-Tuned microphones.4 Last year, award-winning singer Taylor Swift was criticized for a lackluster, Auto-Tuned performance at the Grammys.5 Her album sales didn’t suffer, however—and this year’s nominees included other Robo-Pop artists.

Record producers rely on pitch correction software because it saves money by reducing the amount of time spent in the studio. Plus, according to Chicago engineer/producer Ken Sluiter, “when used creatively, it sounds really cool, and you can get great results.”6

Most music industry pros, however, claim that Auto-Tune software also has ushered in a decline in artistry. Andy Karp, vice president of A&R for Lava/Atlantic Records, says:

… it is something that is cropping up on the records of artists who can actually sing. You’re hearing Auto-Tune all over, and that’s a shame.6

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Are Crowds Wise or Mad?

Are Crowds Wise—or Mad?

By Alan Hall, originally published in the June 2011 Socionomist Download the Complete Issue (924 KB)

Study Confirms That Herding Undermines the Wisdom of Crowd Effect

Scottish journalist Charles MacKay1 got it right in 1841; crowds are mad. And now we have evidence from the laboratory.

A new study, “How social influence can undermine the wisdom of crowd effect,” by Jan Lorenz, Heiko Rauhut, Frank Schweitzer and Dirk Helbing, provides important support for socionomic theory. It confirms that social interaction and resulting herding severely undermine the utility of the wisdom of crowd effect (WCE). The experiments show that WCE is reliable only when it derives from the aggregated knowledge of independent individuals.

What is the Wisdom of Crowds Effect?

In other words, it is useful only when crowds are not acting like crowds at all.

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