Flashing Red: Fed Tapering, Gold and The Hindenburg Omen (A 1987 Redux?)

The stock market has experienced a fantastic run with the advent of quantitative easing (QE) policies by The Fed. Here is a chart of the S&P 500 index versus the Fed Funds Target rate.

But The Hindenburg Omen* oracles (like Mark Faber) are coming out with warnings of a 20% drop in the SPX. To be sure, the Hindenburg Omen is flashing red.

Will this be a redux of the 1987 stock market crash (as Mark Faber claims) when The Fed jumped in after the crash?

Of course, The Fed has been signalling possible tapering of monetary easing. And the bid to cover on 10 year and 30 year Treasuries at this week’s auction show a decline in investor interest in Treasuries.

In fact, the 30 year Treasury bid to cover is the 2nd worst read since February 2009.

So, the Hindenburg Omen is flashing red and Treasury auction bid to cover ratios are also flashing red. Let’s see what happens.

*The Hindenburg omen was developed to predict the potential for a financial market crash. It is created by monitoring the number of securities that form new 52-week highs relative to the number of securities that form new 52-week lows – the number of securities must be abnormally large. This criteria is deemed to be met when both numbers are greater than 2.2% of the total number of issues that trade on the NYSE (for that specific day).

“When the market is going to drop, only the extremely wealthy, privileged are going to know it and be able to protect themselves.”

This assumes that somebody can figure out what the market is going to do before it does it. Yet you can always find a reasoned “expert” rationales for the market going up, down, or neither. We believe the “experts” who confirm what we had already believed to begin with. I’ve found bearish arguments convincing for many years, and have lost quite a bit by betting on a market decline. I’m amazed that it not only hasn’t dropped, but has gone up. How can the balls all stay in the air when we see both private and public sector actors doing things that are against all sense? People tell me, “Don’t fight the Fed”, and so far they have been right, but I still can’t believe that any group of human beings can make such a complex system do what they want it to do.

Great comment.

The fact that smart people like you cannot get signals from the market shows the problem.

Everyone is gambling. Now most of the smarties know that “It’s got electrolytes!” Buying Powerball tickets is a legitimate job, right?

A long time ago I realized that if a company does not pay dividends regularly, that it is literally GAMBLING combined with CBS “Big Brother” (a social game) for anyone to buy “valuable” stocks that literally NEVER pay dividends. “The House” on the average is mandated by law to win.

Stock price fluctuations on companies that never pay dividends tied to their profits are mainly a matter of opinion and the mass consensus of an “Idiocracy” ... unless maybe you can buy or cobble influence over 51% of the stock and actually control the operation of the company.

And now that many have figured out that only true dividend-paying stocks are connected to market principles, “they” have raised capital gain taxes and are trying their best to block any developments that result in an actual free market.

My sympathies go to us all. A WAR is on, though few know it,. WE are the resistance, so like “the resistance” everywhere, we are going to have to sit in dark rooms blacked out every night and “conserve” on a war footing until we eject the guerrilla forces rampaging our countryside. My sympathies go to us all. So unfair, but nothing compared to what our AMERICAN founding fathers went through! Take courage and be tough!

(I never ping JR but tonight I am just pissed off and want to make sure he knows it too, so I am pinging!)

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