Fascinating thread. Well written and thanks to the participants. My feeling on the depression is that it began in 2008 and it's still fairly strong. There are a lot of differences between this one and the previous. The US is now a developed economy rather than an agricultural economy and my memory of previous century's depressions (as opposed to business downturns) is that while they are world-wide, they hit the developing world a lot harder. This apparently happens because it is in the developing world where over development is more likely to take place. The next huge change from the previous depression is that we're no longer on a gold standard and the Fed has been printing sufficient money to cancel the decrease in economic activity that would otherwise result from rich people not spending money. (The St. Louis Fed has some nice charts on the "velocity of money" that explain this really well. It appears to me that they're running the whole show rather competently.) The basic fact of this depression is that rich people suddenly prefer cash to other assets. That appears to be what's going on. This is in contrast to the usual old-fashioned business recession which were caused by slight excesses in inventory. When I look at leading stocks I do not see blow-off top prices. Instead I see 3% dividends (in an interest rate environment dang near close to zero) on what I would nearly classify as growth stocks. Accordingly, I've been buying "value" stocks on dips. My biggest mistakes have been not holding them long enough. I'm trying to keep them for a few days now. The 2008 collapse was partly due to hedge funds that had bought huge amounts of value stocks and sold short really high priced stocks. Their trades went against them and when they got stopped out, they had to exit their positions and this drove value stocks even lower while driving the puffs higher. This was described in detail in the book "The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed it". It seems to me that the market still hasn't recovered much from that. Value stocks are still ridiculously cheap. My liberal friends seem to be content to have a large percentage of their pay sent into mutual funds. They're convinced that there will be money in their accounts when it's time for them to retire. On this I have my doubts, it seems to me that if everybody is retired with good income, who is going to flip the burgers? The baby boom just seems too big a cohort to comfortably retire at the same time. Instead, I expect to see a lot of them working minimum wage jobs to stay afloat. My conservative friends, both highly educated and high school dropouts, are convinced that gold is going to zoom and that stocks are going to crash. But when I ask them about their reasoning, I can't help but conclude that they are seriously wrong. A book that pretty much expresses their reasoning is: "The Death of Money: The Coming Collapse of the International Monetary System". That book claims that the collapse will be due to deflation or inflation but they can't quite make up their mind. Hey, if the economy can't make up its mind about which type of collapse to pursue that means it didn't collapse. If a Republican gets elected president in 2016, I wonder if the sentiments will reverse...
I posted the chart on Velocity of Money here at ET but as usual it was akin to an airplane flying overhead because the timeframe was more than 1-minute http://www.elitetrader.com/et/index.php?threads/peter-schiff-qe-4-is-coming.287413/
If a Republican gets elected in 2016, on the day of the announcement, the entire P&R forum at ET will go off their period, which would be a time to rejoice for fellas like me because its not fun being so close to women on perennial rag of such intemperate disposition CONSTANTLY Just for this reason alone, let the Republicans win
You mean October 2007? or perhaps early 2006 when the HOUSING CRASH began? In any event you are right - Depression ongoing but only when the stock market stateside goes off the rails will the real stuff become widely visible. That's why timing the world stock Indexes and US indexes is what I'm doing a bad job of right here
HERD sentiment is off the charts: more extreme than even the 2007 top and 1987 pre-crash top BEAR requires that all or majority must be aboard for there to be maximum destruction There were already almost NO bears left before October 15 - with the rally from then if there was a hidden straggler, he is now firmly gone over to the bull side. Level of confidence and complacency in the fact that the market can only go UP UP UP is off the charts. The rally created a phenomenal event - the % of bullish advisors jumped by 12% = biggest one week jump in 34 years Bottomline: Trendline break on July 17th was the total exit LONG - that's a long run from 2009 - with sentiment off the charts the risk is up in Murphy's Law terms
Yes, depression began in 2007 to 2009 depending on exactly what you want to time it with. Maybe the leading indicators are best. And it's true that the Fed can't influence the velocity of money. What they can do is react to it and that they are doing very strongly. My guess is that as Obama gets reined in by a Republican Senate, the velocity might pick up a little. It's basically low now because rich people are still scared.
Dow Jones monthly: broadening top formation Uptrendline busted Hanging Man outside month bar for October 2014
NYSE World Leaders Index = Top 100 worldwide NYSE U.S. 100 + NYSE International 100 Indexes = 19 countries including USA Dow Theory principle invoked and applicable here: MY July called closing TOP was challenged on September 19 but move failed to close higher. Then the August 7th low was taken out = Dow Theory Primary Trend violation = Primary BEAR market underway as of October 7 with the July TOP confirmed as THE TOP
NYSE World Leaders Index performed perfectly as a TOP-CALL at the October 2007 TOP and at the BEAR market bottom in 2009