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Economist David Levy recently wrote an article "Ready For The Next Big Recession?" David sees global economic pressures adding to a global recession that will be much worse than 2008-09. US employers are not too worried about a possible global slowdown. Employers are creating jobs at the fastest rate since the 1990's. However, they should be concerned. Brazil, Russia, India, China (BRIC) nations, along with Japan and European nations growth has either been muted for several years or on a decline.

There's been an adage that many have followed over the years, "when the US economy sneezed, the rest of the world caught a cold". This is not the case this time. The rest of the world economies have matured, developed and grown up. If you take a look at the CIA World Factbook, other than the US 14-15 Trillion Gross World Product, the rest world sits at roughly 62 Trillion or 76% of Gross World Product. Looking deeper into the numbers, worlds GDP real growth rates peaked in 2011 at 3.8%, followed by lower numbers in 2012 at 3.1% and in 2013 at 2.9%. The slowing growth is evident.

Signs are out there already, suggesting that David Levy, might be correct. European Banks are still stuck with trillions of dollars with bad loans from the financial crisis in 2008. To rid banking problem, European Central Bank recently went negative interest. This will encourage European Banks to swap or write off bad debt, while loaning new loans and earning a reward visa via the ECB. However, the burden of debt from the 2008 financial crisis is enormous. It will take a lager intervention, such as the ECB purchasing each euro-zone's members major banks bad debt. No one sees this happening, since the ECB has been reactionary since 08, waiting to catch the falling porridge before the mess heaps over and causes a bad spill. However, Eurozone problem is only the beginning of problems.

Another situation that is concerning is BRIC nations, Brazil, Russia, India, China. These countries have been highly dependent on consumer spending in developed countries such as US, Europe, and Japan. With US as the only growing developed country, we are seeing a slack in demand and an overabundance in supplies from the BRICs. Over supplying is a big problem for the BRICs. These nations have seen vast increases in standard of living. Without a growing demand from developed economies, none of these nations will survive too long. What's really scary is the means at which these businesses are spending there capital. We have skyline cranes building skyscrapers everywhere. Al-Waleed, chairman of Kingdom Holding Company ( KHC             ), is building the largest building in the world, along with a Kingdom City marked at $20 Billion US. In Miami, Fl             , foreigners are buying up condos like kids in a candy store, 1,2, 3 is not enough. From anyone who studies financial history, it is a know fact that every major recession has been proceeded by a Florida housing boom. It also known that in the US, colleges are spending money like there's no tomorrow. There is a crane, or 8, at every major institution in the US. Perhaps the education bubble will also set this recession on fire. I too agree we are only a year or two away from another major melt down.

Chart above shows how US markets are running up a mountain while the rest of the world has yet to break above the 2008 financial bubble highs.
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Here is the chart comparison
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hehe
2 years ago
....Europe this is one great Enron.
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Probably true. Every nations major banks has it's own rules, not like that here in United States. Easy to create Enron shells, upon shells making many tax haven accounts in Saychelles.
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d.vezeris
2 years ago
I believe that after the Bank of Japans' QEs & Abenomics and after the US' & UK' QEs is the time for ECB to bring its own QEs, because the austerity programs bring more economy decline and the sovereign debt of EU is increasing day by day. If we have QEs from ECB I hope that we will not have a new World Markets Recession but a new uptrend for Commodities And Stocks. If the ECB do not provide QEs I think that the World new big Recession will be a fact.
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QuantitativeExhaustion PRO d.vezeris
2 years ago
Good point. Although, Germany is reluctant to absorb the cost of QE. As it stands, Germany is primarily the ECB piggy bank.
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d.vezeris QuantitativeExhaustion
2 years ago
Exactly. Don't you think that German's banks and ECB make earning from procurements, selling Euro as a safe heaven against the dollars, pounds and yens that their Banks have QEs. I think that they make a lot of money and have the rest of Europe in austerity programs in order to keep Euro strength and make easy companies acquisitions. But the other countries does not have much time left. That's we I believe on ECB QE because of the other EU countries' bubble of debt.
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waleedkhan
2 years ago
I agree completely...

Prechter has been ridiculed recently a lot for inaccurately calling the tops of the markets; but he still also insists that a crash is coming. Elliott waves are based on market behavior; and this prolonged rise is only due to the monetary easing/aid that has been continuing over the years and it is because of that reason alone elliott wave predictions for the long term have been inaccurate.

Even Poloz, in his last hearing sounded as if "low interest" rates will be the norm for a long time to come...

Thanks for sharing!
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ChartArt waleedkhan
2 years ago
The more I'm analyzing charts (and I only publish like 0.1% of the stuff I experiment with) the more I find that maybe for example Prechter's forecast might be actually right. But since most market participants don't have the same information and or don't share the same viewpoint, the market keeps on rallying on thinner and thinner support underneath - until the market ultimately crashes - much later than expected or thought possible. It's like when you see a little kid on a bicycle and you know the kid will fall and hurt itself very soon the way it swerves about - but somehow the little kid manages to avoid one or two more bicycle crashes - more than you expected. But then the kid finally tumbles down with the bicycle and cries out loud with tears in the eyes.
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2use ChartArt
2 years ago
I would not let it completely pass me by, but from here, its an easier road down - i already accept the fact that the amount of "crash" "correction" and other words from all over the place is "too damn high"...enough to create fear. I wonder how much of the impossible is actually possible.
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waleedkhan ChartArt
2 years ago
Indeed... that's a good analogy.

The post QE world is heavily dependent on central bankers... The market now is completely taking cues from them; and this is where elliottwaves are missing targets for the long term projections...
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waleedkhan ChartArt
2 years ago
Indeed... that's a good analogy.

The post QE world is heavily dependent on central bankers... The market now is completely taking cues from them; and this is where elliottwaves are missing targets for the long term projections...
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2use waleedkhan
2 years ago
Don't forget that it may be even a smarter head fake from money makers to rake in money from those who think they are missing on a bull run. First one out wins the most - and we know who goes out first.
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waleedkhan 2use
2 years ago
ahh... the infamous "distribution" phase; smart money all set to take away what really belonged to them in the first place...
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QuantitativeExhaustion PRO ChartArt
2 years ago
The markets are moved by animal spirits, and not by reason.
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hehe
2 years ago
http://www.bloomberg.com/news/2014-07-06/gowex-to-file-for-insolvency-as-ceo-resigns-after-gotham-report.html
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ChartArt
2 years ago
I recently looked at many tech stocks and I came to the same conclusion. The RSI of almost all tech stocks shows that while the price seems to keep going up, the underlying strength of the price growth is in most cases already declining since 2013.

Take for example IBM
snapshot
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2use ChartArt
2 years ago
Seen it on MU. shouldn't it show on an aggregate index?
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So what's the date we are picking for the drop .. month/year

I'd say July 2015
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QuantitativeExhaustion PRO QuantitativeExhaustion
2 years ago
OR better yet...

exactly 9 months after Federal Reserve purchases last bond and remains steady with funds target at .25%
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QuantitativeExhaustion PRO ChartArt
2 years ago
Markets can remain irrational a lot longer than you and I can remain solvent. RSI 1400 ???.. interesting/ Although, I still see divergence with a 1400 RSI I'd Wait for double divergence signal and an even deeper RSI slope
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ChartArt QuantitativeExhaustion
2 years ago
"Markets can remain irrational a lot longer than you and I can remain solvent.." Yes, that quote from John Maynard Keynes nails it.
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2use ChartArt
2 years ago
Yes, i was looking for it - did not remember word to word.
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UK theguardian

Federal Reserve likely to end QE stimulus program in October
Minutes from June policy meeting reveal likely October end date even as officials say US economy is not out of the woods. "If the economy progresses about as the expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting," the Fed said in minutes released Wednesday from its June policy meeting.

Launched in 2009 in the heat of the financial crisis, QE and its successors are the largest financial aid scheme in history. In three rounds, the Fed has bought about $4tn of Treasury bonds and mortgage-backed assets. It held about $750bn of those assets before the recession bit.

Wrapping up the latest, and last, round of economic stimulus, known as QE3, the Fed is now buying $35bn per month in assets, down from a peak of $85bn. It plans to reduce the purchases in increments at its next three policy meetings, ending it in October.

Controversial from the outset, QE was designed to keep long-term interest rates down and encourage investors to back stocks or corporate debt in order to stimulate the economy. Stock markets have hit record highs under QE yet the unemployment rate remains high and there are continuing signs of weakness in the wider economy.

Senator Rand Paul, a long-time critic of QE and a potential Republican presidential candidate, has worried that the US’s economic recovery is “illusory”.

Last year, Andrew Huszar, a senior fellow at Rutgers business school and a former manager of the Fed’s mortgage-backed security purchase programme, called for an end to QE in an article for the Wall Street Journal. He said it had helped Wall Street far more than Main Street. Critics in Congress and elsewhere have also worried that QE will create another financial bubble or excessive inflation.

Fed chair Janet Yellen has long made clear, like her predecessor, Ben Bernanke, that she intends to wind down the program as and when the economy is strong enough to go it alone. An unusually harsh winter knocked the recovery off course, but there have since been signs, including strong job growth, that the effects of the bitter cold have dissipated.

In the minutes, Fed officials pointed out that “both long- and short-term unemployment and measures that include marginally attached workers had declined".

"Most participants projected the improvement in labor market conditions to continue, with the unemployment rate moving down gradually over the medium term," the minutes concluded.

However, the minutes show some Fed officials are worried about risks in the financial markets, and whether “recent trends in financial markets might suggest that investors were not appropriately taking account of risks in their investment decisions."

US stock markets largely shrugged off the end of a program that some argue has driven stock prices to unsustainable highs. Gus Faucher, senior economist at PNC Financial Services Group, said investors were looking to the future. “There’s not a whole lot in the minutes that is surprising. Expectations for the short term are in line. It looks like the first quarter slowdown was a one-off and the second will be much stronger.”
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snapshot


Use the Kansas City Stress Index to predict next market drop
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waleedkhan QuantitativeExhaustion
2 years ago
i think its the slack in the housing market which is still worrying the fed... Perhaps they want housing to pick up to 2005 levels minus the easy housing credit policies...

Also just a while back on bloomberg...Greenspan was on and he is still very concerned.
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QuantitativeExhaustion PRO waleedkhan
2 years ago
Foreigners are buying up houses with cash at an alarming rate. We are seeing a flood of foreign investment in our housing. I'd not worry too much considering nationally housing prices are above what they were at the peak in 06/07.
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snapshot


QE ending will be the cause. However, the effect (trigger or trip wire) will come from overseas.
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QuantitativeExhaustion PRO QuantitativeExhaustion
2 years ago
Harmonized Unemployment; Total for all persons in Euro Area is at 11.5%
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