Monday, September 28, 2015

Supermoon draws blood on Wall St.

(28 September 2015)  Sunday night's 'Supermoon' seems to have sparked a big sell-off across most European and US stock markets today.  The Blood Moon (or 'Supermoon') is a fairly rare celestial event that occurs when a lunar eclipse coincides with the lunar perigee when the Moon makes its closest approach to the Earth.  The result is a bigger than normal sized full moon that appears red in colour as the shadow of the eclipsed Earth passes over it.  It certainly makes an impressive and beautiful nighttime display.  And there is no shortage of symbolic angst and dread attached to it, including passages from the Bible.

Maybe all the cultural beliefs and media hype around it merely produced a self-fulfilling prophecy as investors looked for any reason to lighten their risk.  Or maybe it was another piece of empirical evidence that shows that astrology is true and there are real and measurable correspondences between the motions of the planets and life on Earth.   Alas, the paradoxes in proving astrology is a problem for another day.  The daily movements of markets provide better a proving ground for testing our ideas.

The Dow lost 2% on the day finishing near that crucial level of 16,000.  Indian stocks were infected only briefly with the lunar malaise as the Sensex lost 1% in the afternoon closing at 25,617.  The Monday declines followed a negative week last week.   In last week's stock forecast, I had noted the probability of declines last week, especially towards the end of the week and the Mars-Saturn square aspect.  This assessment proved to be largely true as US stocks fell throughout the week.  I also noted that Monday's lunar eclipse would likely correspond with increased uncertainty.  That definitely proved to be the case as European and US investors are becoming more unsure about the state of the Chinese economy as the world's economic engine is showing more signs of sputtering. 

Traditionally, eclipses may have been feared because they were associated with uncertainty and interruption of the status quo, just as the light of the Sun and Moon was suddenly lost or distorted.  But eclipses may also be seen as harbingers of change, either positive or negative.  Some observers have suggested that stocks are more likely to reverse their direction around eclipses.   One study of the effects of the perigee-apogee cycle indicated that stocks are more likely to make lows at the perigee (i.e. yesterday) and highs at the apogee.  It is unknown why this might be so, although if we extrapolate from conventional symbolism we can say that the closer the Moon to the Earth, the more likely people will act in an emotional and therefore irrational manner.  But this doesn't explain why collective sentiment should be negative (i.e. bearish) rather than irrationally positive, or following Alan Greenspan, irrationally exuberant. 

Whatever the case may be, I do think we could say the odds of a reversal higher are somewhat greater now then they were last week.  Much of this global stock market swoon over the past six weeks has been associated with Saturn's aspects.  Currently, the ringed planet is getting very close to its exact alignment with Ketu, the South Lunar Node.  As a general rule, the closer alignments of Saturn are more likely to mark a bottom in stock prices.  Of course, transiting Saturn (6 Scorpio) is still sitting exactly opposite the natal Sun of the NYSE chart so that could make it difficult for stocks to rally.  Therefore, it is a complex picture with many factors operating simultaneously.  Overall, I would think we are getting closer to some kind of bottom in stock prices here, at least for the time being.  As I noted last week, Saturn is due to form a close square with Neptune late November.  This is a very difficult pairing of energies that should coincide with some significant declines.  Whether it is a mere extension of the present decline or a separate move lower is a question which I discuss in my subscriber newsletter.

I would think that Wednesday's entry of Venus into sidereal Leo ought to bring some optimism so we could see a rebound into midweek.  On the other hand, the inferior conjunction of Mercury (Rx) and the Sun on Wednesday is often negative.  Its 150 degree alignment with Neptune isn't particularly inspiring either.  That could well offset some of the Venus optimism.  Friday's Mercury-Mars alignment also looks a bit tense.   So the short term aspects this week look both choppy and volatile. The longer term aspects continue to look bad, however.

Monday, September 21, 2015

Markets left dazed and confused by Fed as Mercury turns retrograde

(21 September 2015)  Is the Janet Yellen losing her touch?  Or more to the point, is the Fed losing control of financial markets?  Most global markets declined last week after the Fed Chair chose to leave interest rates unchanged at zero percent after citing concerns over the state of the Chinese economy and iffy US data.  The usually reassuring and dovish Fed Chair left investors puzzled and anxious as she painted a more sober picture of the economy than expected.  There also appears to be growing confusion over which criteria the Fed is using to time its eventual interest rate hike.  Besides US inflation and employment data, the Fed now seems to be including China into its calculus for when the "lift off" in interest rates will finally take place after six years of ZIRP.  This was a change in messaging and left many confused about just how or when the Fed will rate hikes, if they ever do. 

In last week's financial forecast, I thought the planetary influences argued somewhat for a hike given the strong Saturn influences here.  However, I noted a possible alternative view whereby the dominance of Saturn could restrain the Fed from making any move at all out of fear of damaging confidence and crashing the stock market..  This appears to have been the case as the mood darkened on Wall St and throughout most European markets.  Besides possibly signaling a desire to tighten money supply through an interest rate hike, Saturn is also correlated with pessimism and declining markets. 

I had also noted the possibility that markets could be confused in some way by the Fed statement since Mercury turned retrograde just 9 minutes after its release.   We definitely got that in spades in the US and Europe sold-off sharply after the puzzling and disappointing statement and continued to decline on Friday.  This late week decline was therefore in keeping with my bearish predictions in my subscriber newsletter. Asian and emerging markets rose, however, as the US Dollar weakened and enhanced the appeal of those riskier assets.

Stocks appear to be rebounding so far this week.  This makes sense given the close Venus-Uranus alignment that is exact on Tuesday and Wednesday.  I would think stocks are more likely remain fairly strong into midweek.  However, the Sun conjoins Rahu on Wednesday and this could activate its alignment with Saturn so any gains could be reversed quickly. 

And as I have noted previously, the Mars-Saturn square aspect (exact on Friday the 25th) looks tense and could coincide with more selling pressure by the end of the week.  And this comes at a time when Saturn is exactly aligning with Ketu (South Lunar Node) and both will also align with the natal Sun in the NYSE chart.  There is definitely some major downside risk in that pattern.  And as if to up the cosmic ante, there will be a lunar eclipse on Monday the 28th.  Eclipses are associated with times of uncertainty and interruption of the status quo.

As we move into October, markets will likely take a break from the often difficult influence of Saturn.  However, I would note that Saturn is due to form another important aspect at the end of November, this time with Neptune.  And with Venus, the planet of money, transiting through sidereal Virgo, its sign of debilitation, for much of November, there could be more rough waters ahead.  If stock markets remain as depressed as they are now, one would think the Fed will remain reluctant to raise interest rates in October, December and even beyond.  After all, one of the tenets of the Fed in this era of interventionist central banks is to prop up stocks through any means necessary.  Let's see what the money magicians at the Fed, ECB and PBOC will pull out of their hats next.

Monday, September 14, 2015

Will she or won't she: Yellen's difficult choice

(14 September 2015) All eyes are on the Fed this week (yet again!) as investors wonder: will she or won't she?  Fed Chair Janet Yellen has been leaving a trail of fairly strong hints in recent months that an interest rate hike is coming sometime this year and possibly as soon as Thursday.  The Fed's policy statement will be released on Thursday at 2 p.m. as it reveals if the unprecedented six-year long zero interest rate policy is finally over.  Analysts and commentators are sharply divided on this question, although it seems that the consensus position is that she will leave it unchanged for a bit longer and raise it either in October or December. 

It's unclear what the market's reaction to a hike might be, although most believe it could spark some sort of decline.  That said, enough traders have already discounted the possible 25 basis point hike (yes, that's just 0.25% at the low end of the range) that any decline will be fairly orderly and perhaps even modest. 

So what does astrology have to say about the probability of a rate hike on Thursday?  The alignments I'm seeing do not look clearly one way or the other although I tend to think they lean towards an interest rate hike.  That is due in part to the prominence of Saturn in the current celestial geometry.  As I have noted for the past several months, September stood out as having significant Saturnian potential due to the exact 120 degree aspect between Ketu (South Lunar Node) and Saturn.  This is exact in the final week of September but is already effectively in aspect within one degree.  Saturn, of course, is the planet of pessimism and caution and hence it is associated with stock market declines. Saturn is also the planet of restraint and restriction so it may have a more natural affinity with tighter money, i.e. raising rates.

As a historical analogue, Saturn was also prominent back in 2004 when then Fed Chair raised rates for the first time in three years following the dot-com bubble collapse and 9/11 attacks in 2001.  On June 30, 2004 Greenspan hiked rates in what would become a three year long interest rate increase from 1% in 2004 to 6% by 2007.  At the time, Saturn (21 Gemini) was conjunct both Mercury and the Sun within a few degrees and aspected Jupiter (19 Leo) within two degrees. Saturn was also aligned with Neptune (21 Capricorn) in a 150 degree quincunx aspect.   That was also a strong Saturn-influenced pattern that may have reflected the tighter money policy that Greenspan announced that day.

While Saturn may incline collective actors towards a more cautious and fearful approach to the future, it is important to recognize that this could manifest in the Fed leaving the rate unchanged.   That is because the Fed could fear what might happen if they raised rates too soon, either in terms of a stock market crash or more economic slowdown in the US and abroad.  In that sense, this Saturnian energy could manifest in either scenario.  Obviously, this fails Popperian standards of theory falsification but it is worth noting all the same. 

Saturn is also highlighted here because Mars is approaching its square aspect with Saturn this week and next (exact on 25th September) and those two malefic planets are usually difficult energies for investors.  So not only is Saturn connected with renunciatory Ketu, it is also linked with irascible Mars.  Those are difficult aspects to be sure.  As an added shot of Saturn, tropical Saturn enters Sagittarius on Friday just a day after the Fed statement.  The bottom line is I think that Saturn's correlation with declines is sufficiently well-established that a tightening and a subsequent sell-off is the most likely scenario although I would not be surprised if things play out differently because of that alternate interpretation. 

I should also note an intriguing third possibility here.  Mercury turns retrograde at 2.09 p.m. EDT, just nine minutes after the release of the statement.  Mercury retrograde is traditionally associated with situations of confusion and dysfunction so there could be something about this statement that causes the markets to flinch in some way.   Could the Fed raise rates while at the same time promising to launch another round of quantitative easing (QE)?  Or could the Fed announce a completely new policy instrument to boost the economy that the markets can't make quick sense of?  Or more simply: could the statement be delayed?  It's interesting to think about these sorts of scenarios given the Mercury retrograde proximity to the statement release.  Or it could be nothing much at all except perhaps the market reacting in a confused way to Yellen's usual panoply of reassuring platitudes that keep the game going a bit longer.  It will be an interesting week. 

I should think stocks are likely to remain a bit jittery before the statement since Mars enters sidereal Leo on Tuesday. 

Sunday, September 6, 2015

Predicting inflation: lessons from the German hyperinflation in the 1920s

(6 September 2015)  One of the financial paradoxes in recent years is why there has been no significant (official) inflation in most Western countries despite massive efforts to print money by the Fed, the ECB and various other central banks around the world.   Many observers were wary of the Fed's various QE programs to kickstart the economy after the 2008 meltdown since they believed it would cause inflation to rise to dangerous levels.  Indeed, the Fed's unprecedented QE bond-buying program was one the main reasons why gold rose to all time highs in 2011 as the traditional inflation hedge came to within a stone's throw of $2000.  As more investors realized that inflation was as tame as ever (below 2%, at least officially), gold prices began to fall back to earth.  Now gold trades close to $1100. 

There are many reasons why inflation never really got going in developed economies but perhaps the most important was that the economy was just so weak after the Great Recession, the expansion of the money supply was barely enough to even keep the economy afloat. Without it, we probably would have sunk into a much deeper depression like the 1930s.  And we may still eventually have to face the longer term consequences of all this Fed printing -- whether in the form of a disruptive round of inflation or another recession after the current bubble bursts.  Or both.

The debate over the post-meltdown recovery raises the question: is it possible to predict when periods of high inflation are more likely to occur?  For the answer, let's take a quick look at perhaps the most famous incident of inflation in modern times, the German hyperinflation in the early 1920s.  After its defeat in WW1, Weimar Germany suffered from massive debts, a depreciating currency and a dysfunctional economy.  The demand for war reparations by the Allied powers then made a bad situation worse.  Gradually, the increasingly hamstrung government began to print more and more money in order to pay its skyrocketing bills.  At its worst in 1923, inflation was running at 41% per day as the currency became worthless and all savings were wiped out.  By November, it took more than 4 trillion Marks to buy a single US Dollar.  The pre-war exchange rate had been 4 Marks to the Dollar.

As it happens, there were some strong hints of this inflationary crisis in the 1871 horoscope of Germany.   Germany's defeat in the war came during the Mars dasha period (of course!) and defeat was more predictable given the nasty Saturn square to Mars in the natal chart.  But the post-war inflation occurred during the Rahu (North Node) dasha period.  Rahu's major period began in 1919 just prices were beginning to rise sharply.   Why Rahu?  Vedic astrology holds that Rahu is acquisitive and insatiable.  Through its grasping nature, it seeks to break norms and boundaries as it relentlessly pursues narrow material gain.  This is a very apt description behind the inflationary impulse: prices begin an uncontrollable spiral as workers demand more wages to pay the ever-rising prices.  Once the vicious cycle begins, it is difficult to stop. 

What is amazing to note is that the Rahu in the Germany horoscope is in the 2nd house of money and wealth.  Moreover, it sits just two degrees from the 2nd equal house cusp (19 Gemini) thus focusing its energy even more directly on the economic situation.  Rahu isn't always bad, of course, but this Rahu is made more troublesome because of the opposition aspect from Saturn in the 8th house.  The Saturn influence raised the likelihood that Rahu's more difficult side would manifest during its dasha period.

The height of the hyperinflation occurred in 1922 and 1923 during the Rahu-Jupiter dasha period.  Since Jupiter symbolizes expansion and growth, we can understand how this combination of energies could have coincided with a damaging expansion of the money supply. To be sure, Jupiter is normally a benefic influence so one might think that its minor period could have brought more sustainable economic growth.  That's true, but here the transits afflictions were highly concentrated.  For its part, Jupiter was squared by unpredictable Uranus during 1923 at the height of the inflationary crisis.  Hard aspects of Uranus to Jupiter suggest growth or gains that are out of control.  Soft aspects (0, 60, 120) tend to be more constructive. 

But the more significant affliction was to 2nd house Rahu.  Transiting Pluto (19 Gemini) had been conjunct Rahu for several years in the early 1920.  Pluto to Rahu transits can be very difficult and reflect times of intense and painful assertions of power and coercion, and in this case, this applies to the economy of the country (2nd house).  Moreover, Saturn was transiting through the sign of Virgo from 1921 to 1923.  Thus, Saturn casts its malefic 10th house square aspect to that same 2nd house Rahu.  Saturn distorts and upsets most planets its aspects and tends to bring out more negative associations.  Under good transits, Germany's 2nd house Rahu could have delivered strong economic growth.  But with the double transit affliction from Pluto and Saturn made the economic crisis a more likely outcome. 

The moral of the story is that Germany had the potential for the inflation crisis given its 2nd house Rahu.  Both Rahu and Jupiter have symbolic connections to unrestrained growth. But it took the combination of the Rahu dasha period and several bad simultaneous transits for it to occur.   In my next post, I will examine the US and other horoscopes to assess the risk of inflation in coming years.  Many analysts still think a period of high inflation is possible, so it may only be a question of when.  If and when inflation comes again, it will be better to own gold instead of a depreciating US currency.

Weekly Market Forecast

Stocks fell again last week as more investors pondered the implications of a possible Fed rate hike later this month.  Friday's US jobs report was strong enough to keep this early hike scenario on the table.  Of course, higher rates are anathema to most stock investors these days who have reaped the rewards of the zero interest policy for the past six years.   The Dow lost 3% on the week closing at 16,102 while in Mumbai the Sensex tumbled 4% to 25,201. 

I was correct in thinking we would likely see some early week downside on the Venus-Mars conjunction.  While I thought we could see declines into Tuesday, I didn't expect the selling to be that strong.  We did see some recovery in the middle of the week on the Mercury-Neptune alignment although gains were quickly lost in Friday's sell-off. 

So it seems we are still very much in the grip of Saturn these days as it approaches its alignment with Ketu, the South Lunar Node.   I would think we will likely see stocks struggle more in the coming days and weeks, even if there are some rallies along the way. 

This week features a Mars-Uranus aspect on Tuesday which could be disruptive.   Wednesday's Moon-Venus conjunction looks more forgiving but the Moon then conjoins Mars on Thursday and this could signal more difficulty.  Friday's Moon-Jupiter-Neptune alignment could deliver a meaningful respite from the gloom.