50% correction is impossible! really_ _ zero hedge


“Stock prices have reached what looks like a permanently high plateau. Usd to can I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as they have predicted. Market futures oil I expect to see the stock market a good deal higher within a few months.”

This Utopian belief of now infinite stability within the financial markets due to ongoing Central Bank interventions is a most dangerous concept. Equity meaning in hindi This is particularly the case given the structural and economic shifts in the economy due to the rise in debt which has derailed the efficient allocation of capital.

Call and put options examples As shown below the economy is currently mired at the lowest average annual growth rate since 1790. Eur usd chart live (Data courtesy of Measuring Worth)

Furthermore, a quick analysis of past history suggests the regularity of corrections which have run the gamut of devastating blows to investor capital. Gender theory (Monthly data courtesy of Dr. Call option vs put option Robert Shiller)

If you look at the chart above you will notice the longest economic expansions in history have also been followed by declines of 30% or more. 500 kroner to usd With the current economic expansion now the 3rd longest in history at 92-months, a subsequent correction of 30% or more should not be surprising.

Of course, what fuels corrections is not just a change in investor sentiment, but an ignition of the leverage that exists through the extension of debt. How to convert inr to usd Currently, leverage is near the highest levels on record which is the equivalent of a tank of gasoline waiting on a match.

And…corporate leverage. The chart below shows the total liabilities and equity of non-financial businesses in the U.S. Funny jokes and riddles divided by the Gross Value Added. Convert fraction to mixed number calculator I have overlaid the S&P 500 for relevance.

As can be clearly seen, leverage fuels both halves of the full market cycle. Aud usd chart On the way up, increases in leverage provide the capital necessary for accelerated share buybacks and increased speculation in the markets. Fundamentals of futures and options markets pdf free download Leverage, like gasoline, is inert until a catalyst is applied. Usa today crossword It is the unwinding of that leverage that accelerates the liquidation of assets in the markets causes prices to plunge faster and further than most can possibly imagine.

It has only happened twice already since the turn of the century. Oil meaning Yet, less than a decade from the last crash, investors have once again fallen prey to excessive exuberance and the belief that somehow this time will most assuredly be different. Cnn futures pre market Measuring The Size Of The Next Correction

As a portfolio strategist, there is little question the markets are still confined to a bullish uptrend. Future trends in marketing Currently, portfolio allocation models remain near fully invested. British pound to us dollar rate Therefore, what concerns me most is NOT what could cause the markets rise, as I am already invested, but what could lead to a sharp decline that would negatively impact investment capital.

“The Fibonacci retracement is the potential retracement of a financial asset’s original move in price. Dow jones stock futures live Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. Binary file editor These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.”

So, a 50% retracement from the 2400 level would push the markets back towards 1547. Eur usd live As identified in the chart, a 23.6% retracement from the 2009 lows would violate the bullish trend line. Stock outperform Such a violation would set up a change in trend, from bullish to bearish, thereby bringing more selling into the market.

If the next wave of selling starts to trigger “margin calls,” the next three levels of retracement become much more viable. Usd rmb conversion The market would initially seek out support at the 38.2% retracement level of 1748 which would be a decline of 27.16% and would push the markets into an “official” bear market. Texas baseball As margin calls accelerate, so does the forced liquidation which then bleeds over into psychological panic selling as investors reach the point of capitulation.

That can’t happen you say? As shown in the chart below, corrections of 50% to 61.8% of the previous advance are common with corrections even eclipsing 100% as well.

It is unlikely that a 50-61.8% correction would happen outside of the onset of a recession. Binary chart But considering we are already 91-months into the current cycle and extremely levered, there is a rising level of risk that should not be ignored.

However, while I show that the greater levels of a potential correction will likely be coincident with a recession, as they have historically been, it does NOT mean that a recession is required. Binary search algorithm A sharp rise in interest rates or inflation, a downturn in economic growth, deflationary pressures from the Eurozone, or a credit related issue in the “junk bond” market could all do the trick.

No one will know, until in hindsight, what the catalyst will be that ignites a “panic” in the market. Love quotes for him This is why we do analysis to understand the potential risks in the market as compared to expected reward. Convert usd to rupees What is abundantly clear is that the potential “upside” in the market is currently outweighed by the “downside” risk. Usd euro rate It is important to remember that our job as investors is to “sell high” and “buy low.”

There is one important truth that is indisputable, irrefutable, and absolutely undeniable: “mean reversions” are the only constant in the financial markets over time. Usd to The problem is that the next “mean reverting” event will remove most, if not all, of the gains investors have made over the last five years.

By 2025 all but the absolute youngest baby boomers will have entered retirement, most of the younger boomers are actually poorer than Gen X and have no holdings.

The only buyer will be the Fed and when the Fed owns all financial assets, the market is over. Oil futures market hours In fact the market IS over and the only buyer of any consequence is central banks.

That means there is no flow of capital to the true economy. Stock market futures quotes Also by 2025 White America becomes a minority. Exchange rate nzd to usd When that happens there will no longer be enough tax revenue to cover the EBT class, let alone the rest of .Gov.

It won;t matter if stocks correct 50% or go up 300%. Us stock market futures cnn Stocks and the Stock Market become meaningless. Joy newsome story Crashes also happen to go straight up, Like Wiemar, Zimbabwe, and Venezuela.