Juggling Dynamite

As unshorn sheep run blind with speculative shepherds, US treasuries are continuing to float quietly higher on a steady in-flow of investment capital focused on preservation now and coming opportunities ahead…Today back flirting with a 2.50% yield, the 2.30 to 2.50 band is critical support marked below. If yields manage to break below 2.30 once more, the bond market will have called the QE bluff and made the next decisive statement in favor of slowing growth and price deflation for risk assets. Let the big dog eat.

As Portugese credit markets jolt the world from the Fed’s “we got this all under our control” meme this morning, the charts in this clip and below offer a glimpse of where we are in terms of investor speculator psychology today.

Scarlet Fu examines Brean Capital Markets Peter Tchir’s hierarchy of a credit bubble. Here is a direct video link.

In the same clip Nuveen Asset Management Chief Equity Strategist Robert Doll counters with his usual perma-bullish slant for a little comic relief on this sunny July day.

What short-sighted humans always forget every 5 years or so, is that the market cycle is a cycle!! Prices go up on leverage and then come crashing down on leverage. The precise turning point is illusive and impossible to determine in advance, but the fact that it does turn down is never debatable. Unless of course, one is oblivious or works for the long-always financial industry who make their living trying to convince us that we are climbing a mountain of riches to infinity and beyond. Who’s riches is that again?

Here is a simple, practical question that each person can and should ask themselves: how much of your savings would you feel comfortable taking to Las Vegas this weekend and plopping down at the craps table? Seriously.  What is your number?  Give it some thought and define it. $100? $1000? 10,000? $100,000? more? Whatever your number is, now you have defined your tolerance for capital loss.

Now you know how much money you are comfortable holding in QE-juiced global stock markets today. It’s that simple. All the other banter is sales puff nonsense. If your two numbers don’t currently match, you have some soul-searching to do. Hopefully for your own sake, sooner than later.

Is the S&P about to take 30 percent dive? Marc Faber, the editor and publisher of the Gloom, Boom & Doom Report, says the global economy does not support current valuations and the market may bypass a meaningful correction and go straight to a crash. Here is a direct video link.