The reason is simple, the world economy has collapsed. It is all over but the pricing.
The long chain of stimulus bills will take us far deeper into depression than we would have otherwise traveled, as President Obama and congress work hard to stuff the bursting pockets of the super rich at the direct expense of the growing class of American homeless and destitute.
The official total unemployment rate (including those who have given up) stands at 14% and skyrocketing. Shadowstats places UE at 18%.
Amazingly, Elliott tells us that after our foray into the Dow 6000s, it will be time to take a short breather. Guidelines indicate that any respite will be shallow (though fairly lengthy), perhaps into the 9.5K range before starting the most violent leg down of this depression.
If we are lucky we will see a higher counter trend peak than 9.5K to set up another "twice in a lifetime" shorting opportunity. The problem with this one will be hanging on to your money as brokers likely crumble along with banks and perhaps another default of the Federal Government.
Once the first brief leg of our depression ends [Oct 2007 - March(est.) 2009], we will have no choice but to bet on the train wreck while on the careening train.
As forecast, the dark encircling gloom has us surrounded.
If gold goes to $475, then the DOW is going alot further down than to the 6000s IMO. I do think that gold is going to take a breather though.
ReplyDeleteI understand what you are saying about "things" being repriced due to dollars disappearing; however, this is only true with gold if it is being viewed as a commodity. If it takes on any kind of monetary role, dollars and gold can both strengthen relative to other currencies, or at minimum relative to other "things".
Good fundamental analysis all around.
Tony
This is a great site. Just a thought regarding Au:
ReplyDeleteThe reason to own it rather than dollars is a simple one: Unlike dollars, Au in your safe is not the Property of the Federal Reserve.
If it takes on any kind of monetary role, dollars and gold can both strengthen relative to other currencies, or at minimum relative to other "things".
ReplyDeleteCan you explain what you mean by that?
All assets are money if they can be traded.
"The reason to own it rather than dollars is a simple one: Unlike dollars, Au in your safe is not the Property of the Federal Reserve."
ReplyDeleteI assure you the Fed disagrees. Everything you own and everything your children ever earn is the property of the Federal Reserve and theirs alone, so says your $12T debt, owed to them.
When things really get bad, I believe FDR II will confiscate all gold, just like FDR I. Reference executive order 6102. Just a word of caution for the gold bugs.
ReplyDeleteTonyW
Thanks. Another great post. A few questions:
ReplyDelete1) $475 gold in 2010....would you be a buyer at that level, or do you think it will continue to drop from there? I know you were looking for the $500 - $600 range nearer term and $50 in a decade or so. So, are you revising your nearer term down or your longer term up?
2) "....any respite will be shallow (though fairly lengthy), perhaps into the 9.5K range..." By fairly lengthy, do you mean soomething like 6 to 9 months (a little longer than sideways periods during the late 2007 - early 2009 stair step down) or more like 5 years (kind of like 2002 - 2007). In other words, how nimble would one have to be?
3) In your opinion, what are the BEST sources from which to learn Elliott wave analysis?
1) No, I personally would not enter a long position unless it is a quick trade, and those opportunities will certainly present themselves. But fundamentals for all asset price plays are grim.
ReplyDeleteThis is a huge event, as I pointed out in 2007. If your outlook is only a few years there will be hit-and-run long opportunities to make money, but always with more to lose on the back side.
For a gauge on order of magnitude, one should equate this event with its antithesis, the 70ish year 5th wave bull run from 1932 to 2000. As a guideline, busts following 5th waves almost always return to (at least) the 2nd wave of one larger degree, which means we will ultimately retrace almost all of the 1932-2000 supercycle 5th wave.
Point being, long-range "sell and hold" will be every bit as profitable as "buy and hold" was over the last 77 years. Though busts generally happen faster, it will still take decades to bottom.
2) I mean 3 corrective waves in the opposite direction of the primary down trend, and of the same degree as the 5 wave down leg which started in Oct 2007. We'll be able to count it out as it unfolds, but as an initial estimate, it should take very roughly 3/5ths the amount of time of the complete 5 wave down which was from Oct 2007 to Mar(est.) 2009.
3) From Elliott himself. You can buy a compilation of his original works from Bob Prectcher's site:
http://www.elliottwave.com/books/rn_masterworks/default.aspx?code=oco
(I have no affiliation)
I do not recommend other interpretations, as Elliott was one of a handful of early 20th-century geniuses while others simply are not. Bob is a very bright man, but I recommend disregarding all modern spin on EW
analysis and take it for what it is: nothing more than an undeniably correct set of nature's principles.
Hi FDR-
ReplyDeleteYou told me gold would collapse about 1 year ago on marketwatch. I can't recall your exact prediction, but it was around 600 by the end of the year. What's going on now with gold in your opinion? Is this just people panicking and looking for some sort of safety valve?
"Can you explain what you mean by that?
ReplyDeleteAll assets are money if they can be traded."
It is true all assets are money, but not all money is a viable currency. Perhaps I should have said that if gold takes on any kind of currency role, either officially or speculative, ....
Tony
"It is true all assets are money, but not all money is a viable currency. Perhaps I should have said that if gold takes on any kind of currency role, either officially or speculative, ...."
ReplyDeleteOk. Would you agree that for that to happen, dollar prices would first have to collapse to zero?
Since, if dollar prices ballooned back to 2006 levels, there would no longer be a crises, as debt levels would once again be backed by the price of underlying collateral.
My point is that any elevation in the value (not to be confused with price) of gold must be accompanied or preceded by a drop in the gold price, not an increase in price.
If you disagree with me, congratulations, you are in the vast majority. Then again, boats containing the vast majority litter the ocean floor.
If gold goes to 50 dollars an ounce I still don't feel that I can sell what I have, because I doubt that I will ever have an opportunity to buy MORE. As we get farther into this thing, those who possess metals will be increasingly reluctant to part with them.
ReplyDelete