Timing & trends
A Tale of Two Charts: 2007 America or 2006 Zimbabwe?
The US equity markets are back in record territory, at least in nominal terms.
The last two times they spiked this way, the following year was pretty brutal. See the next chart, which tracks the S&P 500 and margin debt, the amount of money investors are borrowing against their shares of stock to buy more stock. The chart seems to show that when investors are optimistic enough to use leverage to invest in already-risky stocks, then the good times have pretty much run their course and something nasty is imminent. If recent history is our guide, it is now time to either take some money off the table or short the hell out of the big indexes – or whatever else you like to do when the market looks overbought.
….read more HERE
Former Federal Reserve Chairman Alan Greenspan said the stock market has room to rise from record levels.
“In a sense, we are actually at relatively low stock prices,” Greenspan, who guided the central bank for more than 18 years, said in an interview with Sara Eisen on Bloomberg Television today. “So-called equity premiums are still at a very high level, and that means that the momentum of the market is still ultimately up.”
Greenspan said the stock market is “just barely above 2007” and the average annual increase in stock prices “throughout the postwar period” is 7 percent, which leaves room for a rise.
“Price-earnings ratios are not hugely up,” he said. The market has “gone up a huge amount, but it’s not bubbly,” according to Greenspan.
Ed Note: Mike Shedlock has put together a thorough analysis of Alan Greenspans forcasting record. Here is a short summary:
Succinct Historical Synopsis
- In 1973 Greenspan said “There is no reason to be anything but bullish now” – The market topped that month, then crashed
- In 1996 Greenspan warned of “Irrational exuberance” – The market, fueled by Greenspan’s incompetent actions roared for four years
- In 1999 Greenspan was extremely worried about Y2K – The programming rollout on January 1, 2000 was exceptionally smooth
- In 2000 Greenspan fully embraced the internet productivity miracle – The dotcom bust soon began
- In 2001 Fed minutes show Greenspan was worried about inflation – A month later the Fed was fighting deflation
- In 2006 Greenspan said “Housing Prices Won’t Fall Nationally” – Prices peaked summer of 2005, then crashed over the next seven years
Today Greenspan Says
- “In a sense, we are actually at relatively low stock prices”
- “The momentum of the market is still ultimately up.”
- “The market has gone up a huge amount, but it’s not bubbly.”
The full analysis can be read HERE
Unlike Anything We Have Ever Seen Before
As I have discussed, we are about to witness a major change in the development of international oil, gas, and power generation.
This will involve a massive expansion of unconventional shale gas and tight (usually also called shale) oil production worldwide, along with substantial moves in infrastructure, electrical production and grid networking.
For all of this, cross-border movements quite unlike anything we have ever witnessed will be required.
As such, I recommended six interrelated elements that will be essential in the development of a game-changing approach to energy production and dissemination.
This shift will require:
(1) The identification, prioritization, and availability of technical innovation;
(2) An overall approach to predicting and containing costs;
(3) Attention to the adverse impacts on everyday life from the increasing exploitation of unconventional oil and gas – environmental, local/regional, and economic, market and labor dislocation problems;
(4) Planning flexibility to allow a wider selection of service providers, expertise, equipment, and technique applied to projects internationally, with an emphasis on developing in-country sources of technology, equipment and training worldwide;
(5) Development and application of new models for project finance; and
(6) Comprehensive regulatory and risk management approaches to merge government, private sector and social needs and objectives.
I also spent some time during the briefing and in the private discussions over dinner outlining how all of this could be done. The key is developing a seamless way to integrate the many factors within the six elements above.
This will require early attention to what is needed in countries around the world and identifying who is likely to provide the solutions.
And it is here that we are going to obtain an early indication of the companies, approaches, and breakthroughs that are likely to provide major profits for investors. In fact, what I intend to do here is expand the stage on which individual investors normally operate.
In the future, we will be going global.
To make this happen, there will have to be a primary venue for the planning, identification, coordination and application in the energy sector as needed.
It just so happens that I’m involved in that as well.
In May, as many of you may recall, I was appointed Executive Chair of the Global Energy Symposium (GES).
This ground breaking new effort will bring noted international energy figures together to conduct ongoing analysis and priority identification, along with providing policy recommendations to governments, international agencies, corporations, environmentalists, and social groups.
This effort is so critical that I will be leaving my university appointments to head up this international group. But don’t worry, the way average individuals will profit from this will still continue on right here in OEI and in my specialized investment subscriptions through Money Map.
As we get closer to its first major international conclave in April of next year, you are going to hear a lot more about the GES. But one thing is certain: You are about to get an inside view on some of the most important energy changes in a generation.
Already, the London session has had an immediate impact on wider circles of interest. So over the next several weeks, you are coming along as Marina and I talk to other high-powered groups in Rio de Janeiro, Moscow, and a series of very private meetings at our second home in the Bahamas.
The international energy picture is changing fast and we are going to be right in the center of it.