Update for Nov 7, 2014 Premarket

Nov. 7 , 2014 Friday Premarket

The debt levels that we have in the developed economies are so high that it will create collapse in many economies.

Japan is already a basket case . Tax revenue in Japan is 43 Trillion Yen . Debt service plus social security payments are 120% of tax revenues. They have to borrow 50% of the budget just to survive day to day. The Yen is already down 35 % since 2012. It was 70 Yen to the dollar in 2012. In the last week  alone it has gone down by 10%. Today  it is 115 and it will keep on going down to 120 and then to 150 and eventually to 200 Yen to the Dollar

Japan’s recent moves are troublesome. It appears that Japan is moving its pension funds offshore as it prepares to default. Same thing happened in Zimbawe. Before they defaulted they kept on devaluing their currency and their stock market soared. Eventually their currency became worth less and stock market also collapsed.

Europe is slowly but surely becoming a basket case. Greece is still going to default  sooner or later.  Greece’s Debt/GDP keeps on going up and it will be  impossible for the Greeks to get out of the vicious cycle they are in .

Italy is the next country where debt level keeps on growing. They are already at 140 percent  Debt/Gdp.This is about 2 Trillion Euros. IMF or Germany cannot save them. 

 If China starts devaluing their currency like Japan, we will have a real currency war and everybody will  lose. No matter what the Eurozone  and Japan do their economies cannot be saved.

 People are looking around the world and seeing the United States as the refuge in terms of currencies.  But that is going to cause major problems for the Fed and the government because the stronger the dollar becomes, the more jobs will be exported outside of the country, and the higher the trade deficit.  So this will lead to a huge crisis for the United States. The U.S. government has been continuing its borrowing spree, as federal debt has increased from $9 trillion to $18 trillion in the last 6 years.  Government borrowing and spending doesn’t grow an economy.  

A default by Japan will be very harmful to stock markets around the world.

Specialists and market makers are selling  at the highs of the market while the retail investor is buying every time DJI  makes a new high. Soon the trend will change for the big decline. Russell 2000 and NYA  have not made new highs in the last 5 trading days. Volume is low and advanced decline line is weak. So a decline should start soon.

Earnings of all US  International companies will suffer. It is already happening to many US iconic companies . Two more recent examples: Salix Pharmaceuticals SLXP and Priceline

SLXP Down 50 points in one day

Priceline  Down 100 points in one day.

 Dji  No Sell signal yet but getting closer

SPY

IWM

TNA

TZA

GLD  No Buy signal yet

GDX

DUST  No Sell signal yet