Juggling Dynamite

Filmmaker Davis Guggenheim reminds us that education “statistics” have names: Anthony, Francisco, Bianca, Daisy, and Emily, whose stories make up the engrossing foundation of WAITING FOR SUPERMAN. As he follows a handful of promising kids through a system that inhibits, rather than encourages, academic growth, Guggenheim undertakes an exhaustive review of public education, surveying “drop-out factories” and “academic sinkholes,” methodically dissecting the system and its seemingly intractable problems.Here is a direct video link.

Waiting for Superman from langster58 on Vimeo.

Also see: Why are Finland’s Schools Successful?

No one indicator is the holy grail of timing cycles– market moves are complex. But the ingredients of every cyclical bear are consistent through time and all are present today in the form of record leverage, valuations and complacency, together with misplaced faith in central bankers and formula traders running wild. 13 years since the last secular bull ended in 2000, we continue to work our way through this secular bear, due every day now for the next big cyclical decline.

Ron William, founder & principal market strategist at RW Market Advisory, explains classic patterns of distribution (strong hands to weak) evident in the stock market today which are flashing warning signs for those who wish to see them.
Here is a direct video link.

Assets are being sold across the globe today in liquidation-style typical of participants who have been rolling the dice on record high leverage. As prices drop they must increase selling to cover margin calls, which forces more selling and more price drops…and so it goes.

In a related theme, China sold over $20 billion in US treasuries in the month of June. Some have suggested this was out of concern for US debt levels. This sounds very savvy, except more likely, I think, is that China is repatriating cash (selling investments) to raise liquidity needed in their domestic banks and economy.

See this clip on growing stress in China’s banks–some of the biggest in the world, aggravated by a surging shadow banking sector that has taken on a momentum of its own. Here is a direct video link.

It should not be forgotten that China has seen a large reduction in its trade surplus and thus income over the past few years (always worse because “unexpected” of course), and this trend has been accelerating in recent months as the global economy turns down again.

As with individuals and companies facing high overhead and falling income, China needs to sell assets and raise cash. The same thing is happening in Japan (they sold about $20 billion of Treasuries in June as well) where rates have been virtually nil for years, exports have been falling and an aging population is increasingly selling financial assets to pay for living expenses.

In the end, the net effect of all of this is that financial assets are being sold and yields are moving higher. (Just one example: REITS are now off more than 17% from recent highs). Bonds are also being sold and rates are moving higher–precisely what the confidence men in central banks assured they would not allow to happen.

Over time the mean reversion of market prices will bring better opportunities for true investors. At the same time it will no doubt crush many speculators and harm those holding over-pried assets today–not least of which are the central banks themselves, who have swapped trillions in longer dated and lower quality bonds onto their balance sheets over the past 3 years.