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Risky stuff part 2

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Super Contributor
I have been looking at the charts of most major indices world wide. Most markets are oversold on daily and weekly charts. Ergo, relief rallies likely (as we are enjoying at present for the last couple of days). However, monthly charts the world over are showing huge negative divergences on the rsi and sto. This is not the time to be investing.On our own alsi chart what worries me most is the eerie similarity to the chart in 2007-8 just before the big correction. In Oct 2007 there was a high,then a pullback until Jan 2008, then another new high in May 2008. However, there was a big negative divergence in the monthly rsi and sto between those two highs. After that the alsi fell off a cliff losing about 34% of its value in the space of 6 months. Getting back to the present: we had a high in July 2014, then a sharp pullback until Oct 2014, then a rally to a new high in April 2015. Once again (as in 2007-8) there is a big negative divergence in the rsi and sto between these two highs.Since the high of April our market has pulled back only about 5%. We are at the same stage in our chart as we were in about August 2008 when the market was gathering downward momentum. We might still have another 29% to go! The time frames and the patterns are remarkably similar.
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delta
Occasional Contributor
The big difference is the financial crisis. You might be right if there is a Grexit and if China markets continue to misbehave. i believe there is going to be a pull back but dont think its going to be as bad as 2008, maybe a 15% pull back from current levels.
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Frequent Contributor
and right on cue (drumroll....) 300 chinese stocks to begin trading tomorrow, 1000 within a week, and no deal on Greece. Doesn't look good...
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Super Contributor
Delta - the systemic risks are far greater now than in 2008/9. World Debt and leveraging is now nearly 3 times larger than back then.
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Highlighted
Valued Contributor
striker, source for that? an does that include QE debt, which I wouldn't include as that simple quietly expires away
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Super Contributor
Look up world debt levels on any website - Zero Hedge for starters.The world is addicted to debt and swimming in it. Can you explain how QE simply vanishes through expiring away. If that were the case we could solve all economic woes at the press of a printing press button. QE is the main factor contributing to the debt crisis.
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Valued Contributor
QE fades away as the Fed has bought thier own debt so when it expires they have to pay back the principle, and they pay it to themselves .. it just a way of getting rates really low and getting cash into the system, we can argue whether or not it worked, but when you owe the money to yourself it not an issue
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Not applicable
if QE is only "debt to themselves" then why are we having issues with Greece? They just wont pay themselves...?

Hedge funds, other countries, pension funds, and especially banks all these people are the owners of Government debt.
All the stock buybacks that have been happening is because of money coming from the Fed going through the banks to companies into the stock markets. Theres a flow of money, its not just money to themselves.

There is no ways anyone can say debt is fine it just disappears, nevermind the accounting principles behind it....Im just stunned at that response, its a gross misunderstanding of QE and the stock markets.
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Super Contributor
Agreed BC 01 - QE created money is directed into commercial banks and then into corporate and private hands. Whatever financial gymnastics are used , new debt has been created which has to be repaid.
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Super Contributor
Greece don't own a press with Euro plates. The US happens to own the fiat currency and the printing press for it. I do not however believe that QE debt will just go away. Somewhere a symptom of that debt will surface. Whether it's on bond liquidity, $ weakness, or a combination of the two, not sure, but somewhere it's going to hurt someone.
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Not applicable
There are 2 seperate concepts being discussed here (the value of the debt and who owns it).
The amount thats printed only affects the value of the currency and the worth of the debt.
The ownership of the debt is a different issue...you cant create a liability,
give it away to others and then still say you owe the money only to yourself.
How else does the cash get into the system?

If they just owed themselves why would they be in debt in the first place,
it would just net off? If I owe myself R100 then +100 -100 = 0
If I owe the bank R100 then my books has a liability of R100

There are only 2 ways to get out of this situation for all the countries,
1) Pay back the money (through getting taxes and budget cuts from a good economy and paying off the debt)
2) Inflate your currency that the debt becomes absolutely worthless (see Zimbabwe as example who
had debt of (eg) 100 zim dollars, after a couple of years they could pay 100 zim dollars back cause
it bought a loaf of bread

Problem with number 2 is that the economies are struggling so much they are going through deflation
so even printing more money didnt cause inflation....which astouned pretty much all economists.
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Valued Contributor
but go check the Fed balance sheet
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Valued Contributor
an I not saying the planet doesn't have a debt problem, that is nothing new and yes it caused 2008 (with all the add ons such as CDO's etc>) .. I am saying QE is not the problem so in my calcs I remove QE from the equation
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Valued Contributor
an for the record, my view on Greece is that it is meaningless .. has been for over 2000 years ..
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Super Contributor
Greece is the tip of the iceberg - now add Spain, Portugal, Italy, France, Ireland who are all headed the same way. So if Greece is no big deal then have a look at the Japanese government debt horror show. However you spin the numbers and causes, the world is awash in debt . Almost three times more than in 2008/9.
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Super Contributor
It is a slow day in a little Greek Village. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a 100Euro note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one room in which to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the 100Euro note and runs next door to pay his debt to the butcher. The butcher takes the 100Euro note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the 100Euro note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the 100Euro note and runs to pay his drinks bill at the taverna. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the 100Euro note. The hotel proprietor then places the 100Euro note back on the counter so the rich German will not suspect anything. At that moment the German comes down the stairs, picks up the 100Euro note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything - No one earned anything - However, the whole village is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the Greek government hopes to fix its economic problems.
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bela
New Contributor
Eeeiissh guys and here i am trying to become a roofie trader............. nou is ek so deurmekaar soos 'n verkleurmannetjie op 'n smartie box.
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Frequent Contributor
Let's say China starts to buy $3,4trillion dollars of gold. Will that end the reign of the dollar and send us into a recession?
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Not applicable
well, for one thing, you would expect our gold miners to be happy. If they can just match 1/10th of that supply, it will already be our total GDP. So who would care what happens to the dollar - we would be smiling -:)
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Valued Contributor
Spain, Portugal, Italy, France, Ireland are fundamentally different on a number of levels .. I am not saying the world isn't swamped in debt, but those five are not Greece ..
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