This is why things are still so r:
Global debt has hit a record level in the first quarter of this year, mainly driven by emerging markets, raising questions of whether there will be another financial crisis in the near future.
Data from the Institute of International Finance showed that global debt reached $217 trillion in the first quarter of this year, or 327 percent of gross domestic product.
“The debt burden is not distributed evenly. Some countries/sectors have seen deleveraging while others have built up very high debt levels. For the latter, rising debt may create headwinds for long-term growth and eventually pose risks for financial stability,” the IIF said in its Global Debt Monitor report on Tuesday.
China has also surged over 300% of GDP. But the problem is more than the mechanical. That borrowing is all what fed the present r-strategy, making the problem also psychological. People are now addicted to that type of debt spending, and that type of debt spending will be required to keep them from turning K. It is very much like addiction, and running from withdrawal by taking ever higher doses of your drug, just to feel normal.
The mixture of the K-psychology and such high levels of debt could trigger the type of individual economic protectionism that would bring things down by itself. We need that reckless, threat-blind r-psychology to keep the debt spending going and keep everyone’s wealth in the system flowing around. Introduce a forward-thinking K-psychology, and people realize the banks no longer have their money, they aren’t worth what they think, and then the system collapses.
It is tough to tell where the first crack will happen, but when it hits, it is hard to believe the entire house of cards will not come down at once, as K-strategies spread like wildfire.
Others see coming difficulties in the US:
There’s a ‘supervolcano’ waiting to erupt beneath a seemingly ‘beautiful’ market, according to a portfolio manager
“We went back to 1994 and researched team data that said [that if we look at cyclically adjusted P/E, one out of two times] the market was down in the next 12 months, and about one out of three times it was down more than 10 percent,” he said.
James’ observations seem to mirror a note released more than a week ago by Goldman Sachs, which found that when valuations have been this high, 10-year returns on the S&P 500 have been either in the single digits or negative 99 percent of the time.
In other words, the market could be in oversold territory, which James does believe.
“It doesn’t mean that we’ll see a volcanic eruption in the immediate future, and these market peaks take a long time, but we’re definitely in the latter stages of this market advance,” he said. “We’re going to see the inevitable correction, I just wish I could say I knew when.”
ITZ coming, the only question is when.
Tell everyone about r/K Theory, because we won’t know when it is coming
[…] Global Debt Is Over 300% of GDP […]
Which will come first, DOW 100,000 or DOW 1,000?
It’s already happening: http://www.msn.com/en-us/money/markets/fannie-freddie-might-need-dollar100-billion-in-new-crisis-fhfa-says/ar-AApEaLh?OCID=ansmsnnews11
Markets are cyclical. They never go straight up. Short term bull markets tend to last about four years and we are in the latter part of year three.
http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:the_wyckoff_method
History proves beyond doubt that major stock averages lead all social relevant social change. This is the basis of Elliott Wave Theory and the resultant Socionomic Hypothesis. Humans are social creatures, sharing brain structures with herd animals. In areas of pervasive uncertainty (e.g., what will things be like in 2 hours, 2 days, 2 years, etc.) people adopt the beliefs of those around them, and those beliefs are like a fad or fashion–under no one’s control. They spontaneously arise, and are structured in a fractal pattern first elucidated by R.N. Elliott in the 1930’s. The point: One day (soon? who knows?) the pathological social trust elevating debt (and asset prices) to this level will spontaneously evaporate. When it happens, people will naturally look around and BLAME some outside events for it, but the evaporation of trust will HAPPEN regardless of events. Psychology experiments in control conditions PROVE these behavioral waves occur spontaneously, without outside cause. We’re simply wired this way. The problem is, the mania of the last 20 (or 50, or 300) years has pushed us into uncharted territory. When the mood finally rolls over for good, the distance between this altitude and where we’re likely to fall is simply larger than any point in history. It should look like a collapse in asset prices and in the money supply (as people’s willingness and ability to borrow should all but go Full-Stop.) Once asset prices (and the money supply) have fallen to levels unimaginable today, in all likelihood Authority will decide that what we suffer is a “shortage of money” and they’ll literally try to replace “credit-money” with banknotes. Zimbabwe-style hyperinflation seems certain after that. For the moment, the trend is higher. Contrary to legions of people willing to sell use their soothsaying, NO ONE knows when the top will arrive. We’re already miles above and decades beyond areas where the top COULD have occurred, but it simply didn’t. It’s not regulated by reason, or by accounting axioms or mathematics (at least, math we grasp today.) It is herding behavior, fueled by rationalizations, to the level of Cargo Cult insanity. Those of us who saw it literally decades ago are few, probably, and I remain awestruck by the process itself.