I hope you enjoy the 6 minute interview with me on the Canadian news channel. I would appreciate your feed back.
Copy and paste in your browser, and turn the sound on.
http://watch.bnn.ca/#clip282146
Monday, March 29, 2010
Friday, March 26, 2010
Pensions: No Wonder States Are Broke
We know many state governments are financially hurting. But how much of that "hurt" is "self-inflicted"? Let's start by looking at one state. The governor of New Jersey is quoted in the March 15 issue of Forbes:
"One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 toward his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8 on a $120,000 investment.
"A retired teacher paid $62,000 toward her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime."
No wonder New Jersey is facing a budget crisis. Those are just two examples in the governor's quote. Imagine those examples multiplied. Institutional Investor Magazine reports that since 1999, California's ". . .pension outlays have ballooned by 2,000%, while state revenues have increased onlWord from the Center on Budget and Policy Priorities is that forty-one states are expecting a mid-2010 budget gap. A news item released March 5 reveals Alabama, Hawaii, and North Carolina plan to delay sending out tax refunds -- they don't have the money now. Other states are considering doing the same thing. How come they are finding themselves in this sad shape?
"For years, state governments have been spending every dime they could squeeze out of taxpayers plus all they could borrow. . .But now even states' borrowing ability has run into a brick wall, because the basis of their ability to pay interest -- namely, tax receipts -- is evaporating." --Robert Prechter, Elliott Wave Theorist, November 2009.
Tuition increases, trimming of government services and "secondary" tax hikes (like liquor taxes) have already occurred. But what if the world financial crisis is not over? Are states prepared for another round of deflation?
In the 2007-2009 stock market crash, you've already seen how devastating a deflation (a.k.a. "liquidity crunch," "credit crunch," etc.) can be for states' tax revenues. This chart from EWI's February 2010 Elliott Wave Financial Forecast (EWFF) makes it clear:
Eduard Hamamjian Managing Director
GeaSphere LLC
Thursday, March 25, 2010
How to Flee the Flock
At different times in our history, political operatives would plant applauders in the audience when their candidates made speeches. The rest of the audience would usually follow. The newspapers would then report the candidate was well-received.
The mother of a famous American comedian Milton Berle sat in the front row when her son performed. She would start to laugh hysterically when a joke fell flat. The "flock" usually followed.
George Evans once managed Frank Sinatra's career. Explaining Sinatra's meteoric rise in the early '40s, Evans said "...Sinatra's talents provided an 'initial impetus'. His [Evans'] own planting of 'organized and regimented moaning' in Sinatra's crowd accounted for some of the panic." ("Prechter's Perspective")
In a crowd, it's easy and comfortable to do what others are doing, especially when emotions are running high, like at a concert. Or when your money is at stake.
The absolute majority of investors are unsure whether to buy or sell -- they simply do as others do. Herding happens. It's a natural process: "...emotional impulses from the limbic system impel a desire among individuals to seek signals from others in matters of knowledge and behavior and therefore to align their feelings and convictions with those of the group. 'Wall Street' certainly shares aspects of a crowd, and there is abundant evidence that herding behavior exists among stock market participants." (Robert Prechter, Science is Revealing the Mechanism of the Wave Principle.)
We've all been there. Surely you can remember yourself unwittingly believing the last few people you heard who offered a market opinion: they have a fancy title under their names, and they are on TV, so they must know. But the 2007-2009 financial crisis revealed yet again that the Wall Street crowd is often wrong; the fact that they had to be bailed out with taxpayer money is a tacit admission of that.
In fact, crowd psychology in the financial arena is often used as a contrarian indicator. You probably remember how bullish CEOs and mainstream experts were in 2007, just before stocks tanked. Yet early in that year, here is what readers saw in the March issue of EWI's Elliott Wave Financial Forecast:
"The percentage of Investors Intelligence bulls has been equal to or greater than the percentage of bears for 228 straight weeks. The streak of bullish weeks is now 50% longer than the second longest streak, which took place through the all-time highs in 2000 and was followed by a devastating decline to the lows of 2002/2003."
Those in 2007 who realized the pendulum had swung too far in one direction got out in time. Those who remained with the flock were led to financial slaughter. Today, the same experts are bullish again. They use the same indicators they did in 2007 -- how do you know they will be right this time?
Eduard Hamamjian Managing Director
GeaSphere LLC
The mother of a famous American comedian Milton Berle sat in the front row when her son performed. She would start to laugh hysterically when a joke fell flat. The "flock" usually followed.
George Evans once managed Frank Sinatra's career. Explaining Sinatra's meteoric rise in the early '40s, Evans said "...Sinatra's talents provided an 'initial impetus'. His [Evans'] own planting of 'organized and regimented moaning' in Sinatra's crowd accounted for some of the panic." ("Prechter's Perspective")
In a crowd, it's easy and comfortable to do what others are doing, especially when emotions are running high, like at a concert. Or when your money is at stake.
The absolute majority of investors are unsure whether to buy or sell -- they simply do as others do. Herding happens. It's a natural process: "...emotional impulses from the limbic system impel a desire among individuals to seek signals from others in matters of knowledge and behavior and therefore to align their feelings and convictions with those of the group. 'Wall Street' certainly shares aspects of a crowd, and there is abundant evidence that herding behavior exists among stock market participants." (Robert Prechter, Science is Revealing the Mechanism of the Wave Principle.)
We've all been there. Surely you can remember yourself unwittingly believing the last few people you heard who offered a market opinion: they have a fancy title under their names, and they are on TV, so they must know. But the 2007-2009 financial crisis revealed yet again that the Wall Street crowd is often wrong; the fact that they had to be bailed out with taxpayer money is a tacit admission of that.
In fact, crowd psychology in the financial arena is often used as a contrarian indicator. You probably remember how bullish CEOs and mainstream experts were in 2007, just before stocks tanked. Yet early in that year, here is what readers saw in the March issue of EWI's Elliott Wave Financial Forecast:
"The percentage of Investors Intelligence bulls has been equal to or greater than the percentage of bears for 228 straight weeks. The streak of bullish weeks is now 50% longer than the second longest streak, which took place through the all-time highs in 2000 and was followed by a devastating decline to the lows of 2002/2003."
Those in 2007 who realized the pendulum had swung too far in one direction got out in time. Those who remained with the flock were led to financial slaughter. Today, the same experts are bullish again. They use the same indicators they did in 2007 -- how do you know they will be right this time?
Eduard Hamamjian Managing Director
GeaSphere LLC
Friday, March 19, 2010
2010 Academy Awards: Why Did Such Negative Characters Win?
This year's Academy Awards was a jarring mix of glam and glum, starting with the contrast between the ultra-elite posing on the red carpet and the array of down-and-dirty films that walked away with the coveted golden statues. On March 8, Brooks Barnes of The New York Times observed:
"The Oscars telecast exposed an Academy of Motion Picture Arts and Sciences in full-fledged identity crisis. Almost everything about the ceremony was big and commercial; almost everything about the winners was small and arty."
Barnes could just as easily been describing the Dow Jones and its own identity crisis. A quick look at the Dow price chart over the past few months reveals that it has moved largely sideways, with little jumps upward here and minor dips downward there. With the flatness of the market, it's hard to know if we are headed towards a fabulous recovery, or on the verge of another inglorious drop.
Socionomics, the science that looks at events through the lens of social mood, uses the stock market as a barometer to measure social mood and make social predictions.
A look at the 2010 Oscar winner's circle suggest that social mood may be in flux. While Jeff Bridges and Sandra Bullock walked away with the best actor nods for inspiring movies about country music and football, it was the supporting actor and actress winners that told the grimmer story: Christoph Waltz for his portrayal of a Machiavellian Nazi "Jew-hunter" in Inglorious Basterds and Mo'Nique for her role as a hateful, abusive mother in Precious.
Putting aside debates on the makeup of the Academy, the priorities of the movie-going public, and the significance of an Oscar statuette, the darkness of Waltz and Mo'Nique's characters illustrates a declining social mood. The larger mood of the populace has not yet become negative enough to award the "best actor" title to a character of such a dark nature. But let's remember how much more uplifting the Best Supporting Actor awards were in 2007 when the Dow was on its way to an all-time high. Alan Arkin won for his performance as Grandpa Edwin in the blunt-but-uplifting comedy, Little Miss Sunshine, and Jennifer Hudson was honored for her portrayal of a 1960s pop star in Dreamgirls.
Just as the Oscars were a mix of Hollywood glitz and glam pitted against relative unknowns, so too is the social mood -- the Dow in an upswing, but the backdrop of social mood of the masses turning darker and more negative. Socionomics is dedicated to social prediction, to predicting and preparing for the big shifts in politics and culture before they happen.
Eduard Hamamjian Managing Director
GeaSphere LLC
"The Oscars telecast exposed an Academy of Motion Picture Arts and Sciences in full-fledged identity crisis. Almost everything about the ceremony was big and commercial; almost everything about the winners was small and arty."
Barnes could just as easily been describing the Dow Jones and its own identity crisis. A quick look at the Dow price chart over the past few months reveals that it has moved largely sideways, with little jumps upward here and minor dips downward there. With the flatness of the market, it's hard to know if we are headed towards a fabulous recovery, or on the verge of another inglorious drop.
Socionomics, the science that looks at events through the lens of social mood, uses the stock market as a barometer to measure social mood and make social predictions.
A look at the 2010 Oscar winner's circle suggest that social mood may be in flux. While Jeff Bridges and Sandra Bullock walked away with the best actor nods for inspiring movies about country music and football, it was the supporting actor and actress winners that told the grimmer story: Christoph Waltz for his portrayal of a Machiavellian Nazi "Jew-hunter" in Inglorious Basterds and Mo'Nique for her role as a hateful, abusive mother in Precious.
Putting aside debates on the makeup of the Academy, the priorities of the movie-going public, and the significance of an Oscar statuette, the darkness of Waltz and Mo'Nique's characters illustrates a declining social mood. The larger mood of the populace has not yet become negative enough to award the "best actor" title to a character of such a dark nature. But let's remember how much more uplifting the Best Supporting Actor awards were in 2007 when the Dow was on its way to an all-time high. Alan Arkin won for his performance as Grandpa Edwin in the blunt-but-uplifting comedy, Little Miss Sunshine, and Jennifer Hudson was honored for her portrayal of a 1960s pop star in Dreamgirls.
Just as the Oscars were a mix of Hollywood glitz and glam pitted against relative unknowns, so too is the social mood -- the Dow in an upswing, but the backdrop of social mood of the masses turning darker and more negative. Socionomics is dedicated to social prediction, to predicting and preparing for the big shifts in politics and culture before they happen.
Eduard Hamamjian Managing Director
GeaSphere LLC
Tuesday, March 16, 2010
2010 Tea Parties and 1970s Anti-War Rallies: Polar Opposites but Same Mood
Anyone who was on a college campus in the 1970s might not imagine that demonstrators against the Vietnam War and the current anti-tax Tea Party attendees could be moved by the same force. In both cases, though, negative social mood has contributed to the kind of polarization that brings out the desire to protest and march.
We haven't yet seen the kind of massive rallies that were common in the 1970s, but as the bear-market rally peters out and the bear market re-appears, we may witness more people willing to march for their beliefs. As socionomics, the science of social prediction, describes it, bull markets reflect positive social moods and social harmony, while bear markets reflect negative social moods and social unrest. Bob Prechter explains the connection among the markets, social mood, polarization and conflict in his New York Times best-selling book, called Conquer the Crash, which came out in a second edition the end of 2009. Here's an excerpt from Chapter 26, which describes what to expect when markets turn bearish.
Polarization and Conflict
In essence, bull and bear markets are social mood trends. Social mood trends have consequences.
A positive social mood has positive social consequences. The great bull market of the past quarter-century created a wonderful world. Major antagonists in the areas of politics, religion and race kissed and made up. The Cold War ended. Communism collapsed. Markets became global and sophisticated. The world embraced, to one degree or another, capitalism and freedom. The Information Age was born. Even country music got raucous and happy. In the 1990s, people felt secure, and today wealth abounds.
Generally speaking, that environment has been safe, profitable and fun. However, social mood trends are a two-way street. When the positive trend ends, a negative one takes over for a while. Those trends have social consequences, too: destructive ones, which affect finance, the economy, politics and all kinds
of social relationships.
[Editor's note: The Dow is currently in a bear-market rally, according to Elliott Wave International's analysis, with the larger bear market due to re-assert itself. In this next section, Prechter outlines what happens during bear markets, some of which has already begun to crop up.]
…
The main social influence of a bear market is to cause society to polarize in countless ways. That polarity shows up in every imaginable context — social, religious, political, racial, corporate and by class. In a bear market, people in whatever way are impelled to identify themselves as belonging to a smaller social unit than they did before and to belong more passionately. It is probably a product of the anger that accompanies bear markets, because each social unit seems invariably to find reasons to be angry with and to attack its opposing unit. In the 1930s bear market, communists and fascists challenged political institutions. In the 1970s bear market, students challenged police, and blacks challenged whites. In both cases, labor challenged management and third parties challenged the status quo.
In bear markets, rallies, marches and protests become common events. Separatism becomes a force as territories polarize. Populism becomes a force as classes polarize. Third parties, fourth parties, and more, find constituents. Bear markets engender labor strikes, racial conflict, religious persecution, political unrest, trade protectionism, coups and wars. In the area of personal behavior, part of the population gets more conservative, and part gets more hedonistic, and each side describes the other as something that needs reform. One reason that conflicts gain such scope in depressions is that much of the middle class gets wiped out by the financial debacle, increasing the number of people with little or nothing to lose
and anger to spare.
Excerpted from Chapter 26 of Conquer the Crash, You Can Survive and Prosper in a Deflationary Depression, by Robert Prechter, 2nd edition published 2009
We haven't yet seen the kind of massive rallies that were common in the 1970s, but as the bear-market rally peters out and the bear market re-appears, we may witness more people willing to march for their beliefs. As socionomics, the science of social prediction, describes it, bull markets reflect positive social moods and social harmony, while bear markets reflect negative social moods and social unrest. Bob Prechter explains the connection among the markets, social mood, polarization and conflict in his New York Times best-selling book, called Conquer the Crash, which came out in a second edition the end of 2009. Here's an excerpt from Chapter 26, which describes what to expect when markets turn bearish.
Polarization and Conflict
In essence, bull and bear markets are social mood trends. Social mood trends have consequences.
A positive social mood has positive social consequences. The great bull market of the past quarter-century created a wonderful world. Major antagonists in the areas of politics, religion and race kissed and made up. The Cold War ended. Communism collapsed. Markets became global and sophisticated. The world embraced, to one degree or another, capitalism and freedom. The Information Age was born. Even country music got raucous and happy. In the 1990s, people felt secure, and today wealth abounds.
Generally speaking, that environment has been safe, profitable and fun. However, social mood trends are a two-way street. When the positive trend ends, a negative one takes over for a while. Those trends have social consequences, too: destructive ones, which affect finance, the economy, politics and all kinds
of social relationships.
[Editor's note: The Dow is currently in a bear-market rally, according to Elliott Wave International's analysis, with the larger bear market due to re-assert itself. In this next section, Prechter outlines what happens during bear markets, some of which has already begun to crop up.]
…
The main social influence of a bear market is to cause society to polarize in countless ways. That polarity shows up in every imaginable context — social, religious, political, racial, corporate and by class. In a bear market, people in whatever way are impelled to identify themselves as belonging to a smaller social unit than they did before and to belong more passionately. It is probably a product of the anger that accompanies bear markets, because each social unit seems invariably to find reasons to be angry with and to attack its opposing unit. In the 1930s bear market, communists and fascists challenged political institutions. In the 1970s bear market, students challenged police, and blacks challenged whites. In both cases, labor challenged management and third parties challenged the status quo.
In bear markets, rallies, marches and protests become common events. Separatism becomes a force as territories polarize. Populism becomes a force as classes polarize. Third parties, fourth parties, and more, find constituents. Bear markets engender labor strikes, racial conflict, religious persecution, political unrest, trade protectionism, coups and wars. In the area of personal behavior, part of the population gets more conservative, and part gets more hedonistic, and each side describes the other as something that needs reform. One reason that conflicts gain such scope in depressions is that much of the middle class gets wiped out by the financial debacle, increasing the number of people with little or nothing to lose
and anger to spare.
Excerpted from Chapter 26 of Conquer the Crash, You Can Survive and Prosper in a Deflationary Depression, by Robert Prechter, 2nd edition published 2009
Wednesday, March 3, 2010
Optimism has run amok.
There is an old saying that states the following, "The stock market climbs a wall of worry". There is a world of wisdom behind that statement. Every time during past periods of unrealistic optimism by the following suspects, economist, government, money managers, and pundits on television or print. We have had a problem.
Consider that over the past several months Mutual Fund Managers, Hedge Fund Managers and generally money managers of all type have become extremely optimistic with their funds. Managers vote their optimism with money invested in their funds. There are numerous studies that suggest when money managers vote by being fully invested, the action alone has signaled a market top.
Examples of past market tops were as follows. January 2000, October 2007, March 2010. These periods all have one thing in common, money managers have reduced their cash holdings to less than 4%. What followed the first two periods was significant stock market declines lasting for several years. We may be at the top of the next significant decline. Time will tell?
Consider the following observation. The markets are the collective wisdom of all its players, that are at any one time collectively optimistic or pessimistic. As we know from many studies about human nature, we tend to move in lockstep if there is extreme optimism or pessimism. Or described in another way when we have greed or fear. The pendulum always swings too far in one direction or the other.
Our so-called professionals are influenced by the collective so-called wisdom of the masses. Consider the following example. The Federal Reserve Bank has demonstrated throughout its existence the uncanny ability to raise interest rates right before major stock market declines. Examples would be 1929, 1987 and 2000 for instance. And of course the resent discount rate hike to .75%. The latter hike was of course not at the same magnitude as the other examples given, but nonetheless it was a hike during a period of very high unemployment, unprecedented government involvement in business and in social programs, and generally a period of extreme uncertainty.
Much of my recent observations are data dependent. And although I am not completely ready to call the top today. It is clear to me that we do not have a competent government in place to handle the current situation. The credit crisis that began in 2007 has not completed its devastation throughout our economy. There are too many countries, states and local governments spending beyond their means. None of this is sustainable, and the markets will anticipate future problems before it becomes obvious to the casual observers. Much more to come on this topic.
To our clients rest assured, we are prepared to take action in either direction of the market.
What do you think?
Consider that over the past several months Mutual Fund Managers, Hedge Fund Managers and generally money managers of all type have become extremely optimistic with their funds. Managers vote their optimism with money invested in their funds. There are numerous studies that suggest when money managers vote by being fully invested, the action alone has signaled a market top.
Examples of past market tops were as follows. January 2000, October 2007, March 2010. These periods all have one thing in common, money managers have reduced their cash holdings to less than 4%. What followed the first two periods was significant stock market declines lasting for several years. We may be at the top of the next significant decline. Time will tell?
Consider the following observation. The markets are the collective wisdom of all its players, that are at any one time collectively optimistic or pessimistic. As we know from many studies about human nature, we tend to move in lockstep if there is extreme optimism or pessimism. Or described in another way when we have greed or fear. The pendulum always swings too far in one direction or the other.
Our so-called professionals are influenced by the collective so-called wisdom of the masses. Consider the following example. The Federal Reserve Bank has demonstrated throughout its existence the uncanny ability to raise interest rates right before major stock market declines. Examples would be 1929, 1987 and 2000 for instance. And of course the resent discount rate hike to .75%. The latter hike was of course not at the same magnitude as the other examples given, but nonetheless it was a hike during a period of very high unemployment, unprecedented government involvement in business and in social programs, and generally a period of extreme uncertainty.
Much of my recent observations are data dependent. And although I am not completely ready to call the top today. It is clear to me that we do not have a competent government in place to handle the current situation. The credit crisis that began in 2007 has not completed its devastation throughout our economy. There are too many countries, states and local governments spending beyond their means. None of this is sustainable, and the markets will anticipate future problems before it becomes obvious to the casual observers. Much more to come on this topic.
To our clients rest assured, we are prepared to take action in either direction of the market.
What do you think?
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