José Luís Carneiro considerado o melhor líder para o PS

[Pata-Hari]

(obrigado a quem me enviou!)

O tipo foi buscar os quadros do sornette que aqui deixei no fim de semana heehhehehehehhe! lindoooooooo!

The Fed
by David Nichols

It's time for the Fed to once again weigh in with their opinion on the economy, and the market will be nervously pacing in the waiting room until the verdict is in, tomorrow at 2:15pm eastern time.

The Federal Reserve Board has created a major problem for itself. By overtly targeting the stock market as a tool to "manage" the economy, they are now held hostage to the demands of market participants. It's entirely likely that the Fed governors use the Fed Funds Futures rate as the most relevant input to their decision-making process on interest rates.

By the way, the Fed Funds Futures are predicting a 100% chance of a 25 basis point cut, and about a 60% chance of a 50 basis point cut.

So a .25% cut in interest rates is a done deal. The Fed can't afford to disappoint. How investors will respond to this cut is not knowable.

But I want to back up a second on the Fed. This has been bugging me for a while, and at the risk of stirring up controversy, I want to get it off my chest anyway. Many things about the Fed's current strategy are troublesome. But the worst part is the enormous trail of destruction they are leaving in their wake as they attempt to "do the un-do-able" and manage the economy. In the process, the Fed has been systematically destroying the long-term financial prospects of hundreds of millions of people in the U.S. and around the world.

Am I being too harsh? Maybe, but I don't think so. When the Fed decided to intervene overtly in the stock market in the 90s, they nurtured a great equity bubble that eventually exploded massive amounts of net worth. Then they proceeded to quickly and fully annihilate the value and earning power of cash. Your hard-saved dollars have been earning squat for years now. Worse yet, the dollar is now on a course to lose significant amounts of purchasing power, so savers and retirees are going to get hurt mightily on that score too. (Believe it or not, a working paper is also floating around the Fed about the benefits of taxing cash in savings accounts! I swear I'm not making this up....)

But the scariest thing of all is how the Fed is now also directly targeting your last great store of wealth -- your home and real estate holdings. They've wrecked stocks and cash. Can they now wreck real estate too? It's a distinct possibility. By encouraging an explosion of credit fueled by outsized mortgage borrowing, the Fed has blessed this as the way back to economic nirvana. Yet everything they touch turns into a bubble, and then into a disaster.

How does the Fed's great experiment end? I don't think even they know. All they know is they want this eventual end-game to play out later rather than sooner. Personally, my biggest worry is that this mortgage bonanza ends up with the Fed bailing out Fannie and Freddie and their huge derivative positions. That wouldn't be pretty.

But even without a debacle in mortgages and real estate, there are other lots of other ways this Fed gamble can go south. Stephen Roach, the erudite and bearish economist at Morgan Stanley, gives his take on the end-game in his recent essay titled Endless Bubbles :

"It's hard to know where and how this all ends. The Fed's strategy seems to be aimed mainly at buying time -- hoping for a gradual and benign endgame to the post-bubble workout. That's certainly possible. But there's also the distinct possibility that the Fed is hoping against hope. I would personally assign equal odds to the chance that there will be a more treacherous moment of reckoning. My concerns in this latter regard stem from the increasingly ominous current-account implications of a saving-short US economy. Courtesy of outsize Federal budget deficits and massive multi-year tax cuts just enacted by Washington, it is not that farfetched to envision a net national saving rate that falls from a record low of 1.3% in the second half of 2002 to "zero" over the next 12-18 months. If that were to occur, the current-account deficit could widen sharply further from its record 5.1% of GDP just reported for 1Q03 into the 6.5% to 7.0% range by the end of 2004. Such a massive and ever-widening US current-account deficit could well set the stage for the ultimate post-bubble endgame -- a full-blown dollar crisis that would deal a lethal blow to the global economy and world financial markets. "

The point of all this "scary Fed talk" is that I think the financial markets are now on the verge of an extremely volatile period, with the potential for massive de-stabilization in nearly every market. I think we are staring at a year or more of wild and careening asset markets of every kind.

The "herd" of equity investors is now on a full-fledged stampede, to use a term from the provocative academic work of Didier Sornette. Currently the stampede is pushing prices up. But the real takeaway here -- and one that not many are noticing -- is that the "market herd" is moving with an alarming degree of certainty in their chosen direction. This sets up another equally alarming move in the opposite direction, once the herd starts stampeding the other way.



The chart above is Prof. Sornette's updated model of the predicted path of the S&P 500, using some very advanced mathematical equations involving "log-periodic power laws". What's fascinating here is how this model is locating -- ahead of time, mind you -- the dips and spikes where the herd is charging headlong into a spike top or bottom. It's identifying the critical moments in the complex system that is the market. We're now approaching the critical moment for this uptrend, if we haven't already hit it.

Not many realize that the likeliest conclusion to a one-way spike up accompanied by massive bullish sentiment is an equal or greater cascade to the downside, as demonstrated in this projected path for the S&P 500.

So I think the next 12 to 18 months promises to be one of the most tumultuous investment cycles of our lifetime. This week's Fed meeting should kick off this period.

Sentiment Dashboard
by Adam Oliensis


SENTIMENT TANK: Drained to COMPLETELY EMPTY of negative sentiment. Market players are now more bullish than at any time in the past year. The bears have been driven, cowering, into their caves.

SHORT-TERM: In an advance phase despite Friday's weak action.

MID-TERM: Rose 12 points on Friday to 61% in its advance phase. Our Confidence Diffusion Index is at a meagerly bullish 1 (out of 7).

LONG-TERM: Weekly gauge remains unchanged at 95/5 ripe to roll over into a decline phase but with some room on it for a blowoff top. Our weekly CDI is at a bearish 1.

BOTTOM LINE: Friday's Quadruple Witching showed a bearish divergence with the tank emptying all the way to 0 while stock prices failed to make any notable advance. However we have to take that with a grain of salt because of the special tensions exerted by Expiration.

Short-term we have very low confidence levels on both gauges despite the extreme reading on the tank. The market is at a crossroads.

There are important long-term implications of the extreme flow of money into stocks. The market is making quite a good show of morphing into a bull phase. The breadth and volume of accumulation is serious, and is unlikely to reverse on a dime. This kind of swing in liquidity patterns exerts dynamic inertia on the market that should carry it to new highs. In the short-term, however, we would expect a pullback that would allow SOME level of fear to siphon back into the sentiment tank. Should that not occur, ...if the tank should sustain at 0%-full then we'd have to go with the flow and accept the reality of a blow-off top. In the short-term we would not want to fight a tidal wave of liquidity that could continue to drive the market despite a total absence of bearish