Five Things You Need to Know: Our Microwaveable Depression
Our modern depression is obscured by microwaves and circuses.
But enough of all that. From a Socionomics perspective there is little to be gained by pointing out the obvious -- that social mood is trending negative to such a degree that we are destined to plunge head-first into austerity, ensuring the depression grows even worse and lingers for another decade.
This is Risk in 2011. Not only has a "decade of disaster" made risk apparent, we are no longer able to even quantify it, let alone control or manage it.
4. Risk, 2007
But my how quickly we forget. For this was Risk in 2007.
From May 14, 2007:
We're not even halfway through 2007, but already we have what is in all probability our Socionomic datapoint of the year: The "Upside" of Risk. Marsh Inc. this month launched an aggressive marketing campaign -- the posters are plastered all over subway cars here in New York City -- related exclusively to Risk.
The branding campaign includes a special website, aptly titled: http://www.findtheupside.com. According to the company's public relations release accompanying the branding campaign's debut, Marsh is "encouraging businesses to focus on another side of risk – the 'upside.'"
Only at this point and time... with stock market volatility at historical lows... could an insurance firm devoted to "risk management" decide to "question the 'risk is negative' belief and literally turn the concept of risk on its head." The advertising campaign uses phrases such as "When You Risk Upon a Star" and "To Risk Perchance to Dream." "The campaign, created by the New York office of Ogilvy, seeks to disrupt the traditional view of risk as a liability to be avoided by asking the reader to also consider finding opportunities in risk," according to the press release.
5. But What About the Stock Market?
But what about the stock market. It's important to distinguish between depression on Main Street and the machinations of risk aversion on Wall Street. Over the past three years companies have laid off workers, paid down debt, or rolled it over at interest rates few of us will ever have access to, while laying the groundwork for the next advance. Corporate balance sheet repair is nearly at an end, while household balance sheet repair must continue. That's why it feels so bad for most of us. Wall Street's depression was fierce and quick, as it has always been and always will be. Unfortunately, Main Street's depression has much longer to run.
What this means for stocks is a bifurcated market with some companies well-positioned for consumer balance sheet repair and slow growth, while others remain leveraged to higher rates of growth. Financials, though in some respects obvious beneficiaries of trillions of dollars in bailouts, will face decades of lawsuits, re-regulations and diminished operating capacity. Remember when large banks were almost like utilities? Those days will return. But this is not bearish, it's bullish... for individuals. Over the next decade the individual stock owner's class will see a leveling of the playing field. Yes, there will still be areas where Wall Street retains an edge, they are the house after all, but it will be far better to be an individual than an institution over the next decade.
Finally, what about stocks technically, for the short-term? A reader asks:
Kevin --Yes, a MONTHLY TD Combo 13 Sell Signal recorded in April 2011. Because sell signals have a window of 12 bars to produce a reaction, that give us a widow out to April 2012. However, we're currently down 13% since the sell signal recorded and from the April close to the recent low the market declined more than 19%, a pretty good correction.
You mentioned on Aug. 5 in the Buzz & Banter that we had a monthly TD Combo 13 Sell Signal for SPX and that the window of duration for that extended another eight months? Does that give you pause through the end of the window, April 2012? What has happened the last times the index gave a TD Combo 13 Sell Signal?
I do not believe we will re-test the 2009 lows. The last monthly TD Combo 13 Sell Signal recorded in September 2007. From the close of that month to the low the market declined 52%. The key difference technically is that after the sell signal recorded, in June 2008, we violated the TDST Down level at 1290.93 in a qualified manner. That warned that a definitive trend change had occurred. The TDST Down level is now at 1049.33. If that level is broken in a qualified manner then I would have to revise the probabilities that we re-test March 2009 lows. As it stands, however, I believe we are nearing the end of the window where sellers have control this month and by October should see a rally unfolding into year's end.
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