PIVOTAL EVENTS - JULY 12, 2017 - BOB HOYE Signs of The Times

PIVOTAL EVENTS - JULY 12, 2017 - BOB HOYE
Signs of The Times - Snippet from the July 12th Pivotal Events

“’Crane Counting’ Has Become a Thing in Seattle as Construction Booms” --Wolf Street, June 30.
“A Growing Commercial Real Estate Disaster” --Wolf Street, July 2.
“Car Buyers Stretch Loan Payments to Record Lengths to Get Pricier Vehicles” --Market Watch, July 3.
“Bankrupt Billionaire Lists $12.5 Million Dallas Mansion” --Mansion Global, July 3.
“Manhattan Apartment Price Hit Record, Averaging $2.19 Million” --CNBC, July 6.
“Treasury Department Asked To Investigate Reports That Russia Funneled millions To US Environmental Groups” --The Daily Caller, July 7.
“A flight to safety will ensure that long-term rates will plunge to levels that we have not yet seen.” --John Mauldin, July 9.

Perspective

What a harvest of headlines!
On the smaller-size, car buyers are getting even more aggressive. On the higher-end of the scale, a former billionaire is forced to sell a grand house.

At the culmination of the 1980 residential boom in Toronto a stock promoter got in trouble. The trust company seized his high-end house. As reported by the Financial Post, it was finally sold some three years later—at 1/3 (no typo) of the price at the top of the market.

Upscale houses in Vancouver fell to one-third as well. Ordinary homes in a nice area only fell in half.

The average apartment price in Manhattan continues to rise, which is not the case with the upscale units. About all the “cranes” in Seattle. In the oil boom that peaked in the early 1980s, the governor of Texas drolly observed that the state’s official bird should be the building crane. With the inevitable oil bust, someone suggested that the state bird should be the turkey.

The one about Russia providing funds so that American anarchists can lobby against fracking and pipelines is a classic. The former Soviet Union still depends upon resource exports for dollars. High oil prices, please. Europe do as we say, or we will turn off the natural gas pipeline.
*****

Stock Markets

Our objective for a peak “around June” remains valid. After the subsequent correction, we have been looking for stock and commodity markets to be positive into August. The likelihood of a financial crisis in the fall depended upon further developments in the yield curve and credit spreads.

The timing target has been based upon history. Great financial bubbles as they have occurred in Europe and London have peaked in May-June. On the bubbles since the 1873 example, New York has peaked in September. The 2007 NYSE Bubble peaked in October.

To have targeted a high for June is only part of the forecast. It should occur with enough speculation to conclude the action is climaxing. This was, indeed, accomplished in the FANGS was well as with other High-Flyers.

The June 6th ChartWorks on Microsoft noted in 30 years there had been only six Monthly Upside Exhaustion signals. Declines were in the order of 25 to 35 percent. The same signals registered on some 133 other stocks. Clearly, speculation engulfed enough stocks to conclude that the market is topping.
With timing, momentum and sentiment accomplished, traditionally the next step is credit markets turning to adversity. Credit spreads have turned to widening, with a breakout similar to the one in July 2007. The yield curve is no longer supportive to the boom, but has yet to technically “breakout”.
As noted a couple of weeks ago, the initial turn to curve steepening would be helpful to the banks. It has been.

Of course, one should wonder about what the Fed can do to keep the boom going. Well, there have been plenty of theories about that. But after six great bubbles, the score has been:  Mother Nature: 6. -  Senior Central Bank: 0.

One of the indications that a financial mania is fading is that US T-bill rates turn down. That was the case in June 1929. In the 2007 Classic Bubble, the T-bill rate technically broke down in July. This time around, the 6-month bill reached a yield of 1.15% two weeks ago. Now at 1.13%, it needs some technical work to reverse the rising trend. Our view has been that the credit contraction could be severe enough to embarrass the community of interventionist central bankers. After all, the boast has been that they could prevent bad things from happening. The failure could force the Fed to change from expert
intrusion to maintaining the gold reserve backing the currency. Barbarous Keynesianism will be 

Our September 12, 2007 Pivot observed “Like civilizations, bull markets are born stoic and die epicurean.” That was with noting the Confirmed Hindenburg.
This bull market arose from forced austerity in 2009 and now too many governments are spending trillions on the luxury of fine-tuning the climate.

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