Wednesday, July 13, 2016

Elazar: Millennial Versus Boomers; Stock Market Down To Late 2017

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*The economic spending driver from Boomers is fading.
*Gen Y and Z have building debt issues, which adds to future problems.
*We are sticking with a call for a stock market low by the end of 2017.
*We have a long-term sell rating on SPY.

We had written that the 50-year-old is shrinking as a percent of the population. We think the 50-year-old is a peak earner and spender. As the economy has gained and lost this powerful human in the economy, so goes the market, typically. We think generations X, Y (Millennials) and Z have their own challenges, primarily debt. We don't expect them to carry the Boomer load.
(This report is based on the novel and incredibly complex Elazar theorem that, get this, People Drive The Economy. Amazing Elazar! If you don't buy that idea, you may not agree with this report.)
Let's review
50-year-olds are the key drivers of the economy.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS


  1. The Bull & Bear Morphing Sequence
    3 items need to be considered in trying to predict when an economy will move from consumption driven to investment driven and back again over a 35.2 year cycle...
    1. Interest Rates... as interest rates move from real negative (favouring consumption) towards real positive (favouring investment) we come to the end our current commodity boom, signalling the start of the next bull market. Current timing may be difficult to predict under our current ZIRP environment, but my analysis of booms and busts since 1900 suggest the final bottom of the current bear market (since 2000) will be in 2017/18 with the next long term secular bull market starting in 2018. My analysis and counter cyclical piecing theory between commodities and financial markets suggest gold will peak around this time and go into a secular bear market.
    2. Central Bank Reserves – in a related but somewhat counter intuitive stance the statistics show that declining CB (Fed) reserves may even be a better indicator of stock market lows as they lead to increased bank lending and increased consumption over investment with an eventual disjoint in commodity supply and demand due to the capital cycle, but the jury is still out as to whether recent irrational moves by the FED, the ECB and the BOE can actually be used to predict anything, seemly counter intuitive.
    3. Demographics... Elazar has done some great work here to suggest a dip in the birth rate causes a dip in stock markets some 50 years later, as 50 year olds are the main earners and spenders. Looking at the fall in birth rates between 1956 and 1966 suggests a double whammy of less 50 year olds and retiring baby boomers, leading to a major dip in the stock markets towards the end of 2017.
    So there you have it, a perfect storm of triple indicators including falling interest rates in real terms, peaking of central bank reserves through global QE and demographics. All point to a 2017/2018 commodity peak and stock market bottom. It will happen like this:
    1. Increasingly -ve interest rates eventually trigger consumption as money velocity picks up;
    2. Inflation takes off as commodity prices rise;
    3. Interest rates are eventually hiked to combat inflation in an overheating economy;
    4. This will lead to a commodity price peak and a stock low;
    5. A new investment cycle begins to rebalance supply and demand and;
    6. A new cycle begins
    Buy selling most of my equities and holding my portfolio mostly in cash, gold and commodities I for one am betting my retirement (now 60) on this sequence.

  2. falcon, great comment. i agree w/ ure agreeing and adding a few more. thanks for the comment.


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