Financial Armageddon? Secular Moral Hazards

NYMEX:CL1!   Light Crude Oil Futures
In this chart we see that every bull market is shorter in length of time and every bear market becomes shorter in length of time as well. With higher highs and higher lows, the VIX continues to be more volatile with every secular bear market since the 1987 crash. Oil on the other hand has put in higher highs and higher lows since 9/11. With a limited and unsafe energy resource coming out of the most dangerous place on earth, the Middle East, Oil will continue to price higher highs. While the global economy slows any oil price spike higher will crumble fragile economies dependant on oil price stability.

Putting one, two and three together you can get the feel of an economic unraveling. We are nearing the last bull market high in US equties.

In the financial markets, analysts generally distinguish between secular and cyclical trends. The former refer to powerful, long-term directional moves, while the latter represent shorter-term swings around the primary trend.

Arguably, one of the reasons why some observers have remained upbeat in their outlooks for the U.S. economy is because they believe that even if things are headed south in the short run, we are only likely to experience a cyclical downturn, lasting for a year or less, similar to the recessions we have seen over the past few decades.

What they're failing to take account of, however, are the many extraordinary financial imbalances, including high personal debt loads and a near-record low savings rate, and the attitude changes that appear to be sweeping across the land as the current decline unfolds.


*I'm not active short until green line (March, 2013) However, if debt ceiling solution is worked out in Fedruary or short-term fixed I'll rethink this strategy. Initial thought last year was third quarter of 2013 Moody's and Fitch would downgrade U.S. debt, citing slower growth than expected with no real solutions to curb spending.

May 19 a showdown


Completing a major Republican retreat from another messy showdown with President Barack Obama, the U.S. Senate on Thursday passed legislation to allow the government to keep borrowing money at least through May 19.

The measure has already passed the Republican-controlled U.S. House of Representatives and its next stop is Obama, who is expected to sign it into law.

Consideration of the bill, which will permit the U.S. Treasury to borrow beyond its current $16.4 trillion debt limit, was unaccompanied by Republican attempts to extract spending cuts from Obama.

In the past two years, House Republicans have drawn the wrath of many voters and financial markets for pushing the government to the brink of a shutdown and an unprecedented default.

Stung by opinion polls blaming them more than Democrats for such consequences, Republicans have decided to try less disruptive tactics in their deficit reduction efforts.

The Democratic-led Senate passed the bill, 64-34, a week after the Republican-controlled House of Representatives approved it, 285-144. Both votes were bipartisan.

The legislation would put off until at least May 19 a showdown over the debt limit between Republicans, who demand more spending cuts to shrink deficits, and Democrats, who favor reducing deficits with a mix of spending cuts and tax hikes.

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Obama ‘will not oppose’ House GOP plan to suspend debt limit until May
Forget about raising the federal debt limit. House Republicans are proposing to ignore it altogether – at least until May 18.
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Bulls running out of time
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Ryan's short-term option would make Washington face the current debt-ceiling crisis in two months, when it also faces $85 billion in across-the-board cuts in defense and domestic spending, delayed until March 1 in a New Year's Day "fiscal cliff" compromise.

In addition, a temporary joint congressional resolution funding government agencies and programs expires March 27.

Read more: http://www.upi.com/Top_News/US/2013/01/18/WH-snubs-GOPs-short-term-debt-ceiling-fix/UPI-33721358494200/#ixzz2ILMUTTuS
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Imagine yourself floating down a river, only you don't know that you are. You do, however,
notice that when you move in one direction, with the flow of the river, you move rapidly.
When you move in another direction, against the river, you move slowly or not at all.
In fact, when you go in that direction, you seem to put out a lot more effort just to stay
in place. Your life becomes a struggle. It just seems to push you in another direction.
Feeling miserable, you fight against it. But it doesn't help. You still seem to move only
in one direction—with the flow of the river.

Most people prefer to struggle against the river. They try everything they can think of to
go upstream. All solutions like this—going against the flow—have the same result: frustration.
If you were in the river, what could you do to make your life easier? One solution would be
to get out of the river. But that would be giving up. There is only one easy solution—to
acknowledge or accept that the problem has nothing to do with the river. The river just is.
And it moves downstream and nothing you do can change that. When you realize that the problem
stems from you, then the solution becomes obvious—just relax and flow with the river.

Buy High, Sell Low?

One of the oldest adages in market psychology is "Don't be afraid to buy high and sell low.
" Let's analyze what that means. If the market price is high, then the market is moving up.
Those who are afraid to buy because the market is too high are fighting the flow of the river.
It is possible the river may change direction, but you cannot predict if it will by determining
how long it has been flowing in a particular direction. It may continue in the same direction
for an unspecified length of time. Then again, if the market price is down, it also indicates
the direction of the flow of the river. Those who are afraid to sell, once again, are fighting
the flow.

Why do traders resist the flow of the markets? They do so because they play psychological games
with the market. The most common game involves not being willing to give up what you perceive
to be control, the need to be right, although you have no control over the market flow.

When you are struggling with the market, the struggle becomes all consuming. You don't realize
that you are struggling with the market. Instead, you find yourself always looking for some
solution to overcome the struggle. The struggle obscures the obvious solution: Letting go.

For example, suppose you have a tendency to be in a perpetual market bear, always expecting
the market to go down. For you, every little turn in the market is evidence that the market
is turning. As a result, you always go short and consequently, take a beating. You repeat the
process, over and over, until the market actually turns down. With each transaction the struggle
against the flow of the market intensifies for you.

Even worse is the trader who refuses to accept the inevitability of eventual loss. The market
moves against each position the trader takes, but he refuses to go with the flow and refuses
to accept the loss, no matter how small. It is an affront to the trader's ego. As a result,
he refuses to accept it and the loss becomes larger. The bigger loss is even harder to take
and the trader again refuses to accept it. The struggle continues until the loss becomes so
overwhelmingly large that the trader has no choice but to take the loss.

The solution to the problem of resisting market flow is to realize that the problem has nothing
to do with the market. The problem stems from you, the trader. The market is not going against
you personally. The market is simply moving. Whether you go with the flow of the market or struggle
against it, the market will continue to flow, taking you with it one way or another. Market flow
is bigger than any individual trader. The question is whether you realize how you are creating your
struggle against the market. When you push against the market, the market seems to push back.
But the market is not the problem. The trader's struggle with the market is the problem.
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No one is fighting the river Wes or the Cyclical Bull. Secular bear market (since 2000) induced by Central Bank easy money lending which is creating a long term moral hazard. That is theme of this story.

You have to take note of the big picture when trading in any time-frame.

I think, therefore I am.
Wes QuantitativeExhaustion
when it gets bad just double down
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The President today outlined a plan to cut 4 Trillion in spending over 10 Years, while congress and the President want to spend an extra 6 trillion more collected in tax revenue over the next 4 years (assumed defict cost are fixed with tax revenue increases and treasury yeilds will stay near historical lows till 2085, which is incredibly cherry picked data)

This plan is supposed to have the United States in better financial standing with its creditors??

If we spend 6 Trillion more than we take in with tax revenue every four years. That means the U.S. will rack up 11 Trillion more in debt over 10 years even with the 4 Trillion in deficit cuts over 10 years. However, that is not going to happen. Either the debt ponzi scheme shuts down and the world tailspin into depression or developed nations such as Japan, U.S., G.B. and the E.U. will reach 1 Gazillion in debt. It's going to end folks and not so well. This is the moden dark age
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