Author: Tulloch

The dollar index may consolidate further this week, but a low has been formed that should lead to a multi-week rally. Bonds are still in a bear market.  Last week’s rally is probably over. The US 10-year should test the 3% level that we think is a soft limit for the move.  US equities should resume their downtrend, with the objective of breaking the February lows. Gold hit our buy target last week. It may base a while, but a large rally should follow.

To recap, our fundamental indicators show the economic cycle that began in 2009 approaching a peak. Economic tops are rarely abrupt—unless there is a catalyst, and this one has at least been dulled by the tax cuts. Dollar liquidity has been tightening for some time and the growth rate of Austrian money supply has been falling in a similar fashion to 2007. Unlike 2007, the financial system appears relatively robust. But this does not mean that financial markets will hold up. In fact, all asset classes will remain vulnerable. Continue reading “Markets to remain under pressure this week”

Another Great Depression ahead

We do not just live in a world of facts but also in a world of perceptions. Perceptions are sometimes aligned with reality but frequently, reality is misinterpreted partly due to cognitive deficits but mainly as an almost inevitable consequence of information shortfalls or even inadequate theoretical grounding. This gap between perception and reality grows, sometimes exponentially, because of positive feedback loops that are a classic symptom of bubbles.

Are we in an asset price bubble now? This is the key question of our era because if we are, it is one of the biggest in history and will have dramatic if not catastrophic consequences. Since the beginning of the modern nation state in the early 17^th Century, there were at least four significant depressions following asset price implosions.

Continue reading “The situation today: Two Meta Scenarios”