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

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