Thursday, October 8, 2009

Dow 9,918 Was It

Lots of confirmation (3M-T, currencies, metals, stocks, real estate, extremely euphoric sentiment) indicates that my real time Dow call was within a few hours of the perfect short entry. Even as stocks fall, big picture, they'll never be this expensive again--not in most of our lifetimes, so short away.

Yes, gold has risen a paltry 2% since then under an intense media sales advertising blitz, but it too remains poised to topple as liquidity dries up entirely in the coming years. Look for stocks, metals, and real estate to fall very sharply in a well sustained down draft that spans, mostly uninterrupted, to approximately 2012.

Don't get me wrong, there will be lots of volatility and sharp bumps (+5% days) along the way to shake out shorts, but nothing sustained like the Wave 2 that spanned from 6,500 to 9,900. Even the large scale Wave 4 correction should be predominantly sideways, but also highly volatile.

2012 target: Dow 3,800

Fall still in progress. Acceleration is imminent.

13 comments:

  1. It appears that you are disregarding or unaware of the 'Gold Supression Schemes' which our central banks are implimenting.

    This ofcourse is to ensure that the balance of global wealth remains in paper rather that real commodities.

    http://investment-blog.net/the-scheme-to-suppress-the-price-of-gold-is-increasingly-a-matter-of-ordinary-public-record/

    ReplyDelete
  2. "It appears that you are disregarding or unaware of the 'Gold Supression Schemes' which our central banks are implimenting."

    I've traded gold for many years, I've heard it all. :)

    ReplyDelete
  3. What's your take on Bernanke dropping hints of a quarter point rate hike?

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  4. "What's your take on Bernanke dropping hints of a quarter point rate hike?"

    Ask him...

    (on the 1931 rate hikes)

    "Long-established central banking practice required that the Fed respond both to the speculative attack on the dollar and to the domestic banking panics. However, the Fed decided to ignore the plight of the banking system and to focus only on stopping the loss of gold reserves to protect the dollar. To stabilize the dollar, the Fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them. The Fed's strategy worked, in that the attack on the dollar subsided and the U.S. commitment to the gold standard was successfully defended, at least for the moment. However, once again the Fed had chosen to tighten monetary policy despite the fact that macroeconomic conditions--including an accelerating decline in output, prices, and the money supply--seemed to demand policy ease."

    http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm

    Ben seems to believe the 1931 dollar was in over-supply from "liquidation," during the greatest deflation of all time! Deflation formally defined in all economic corners as: dollar supply shrinking.

    Does "our leading scholar" on the GD not understand the difference between inflation and deflation?

    I think Ben is a very confused man.

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  5. FDR,

    Are you implying that a rate hike is coming?

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  6. Yes, I've actually said that for a long time.

    They appear to be laying the groundwork in a well coordinated symphony of Fed talking points.

    The timing is stacking up about right to match their proven "How to Create a Depression, Fed Playbook: 1929 Edition."

    The Fed's 1931 hike shocked the stocked market and sent stock and real estate prices to the graveyard.

    Hiking this Fall would equate 1:1.

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  7. I agree FDR. ALso, no one is focusing on oil right now, your short call notwithstanding. Oil gets ant higher and it will destroy unemployed joe six pack. we cant go to war with Iran unless dollar strengthens dramatically. otherwise oil = $100 plus. Iran just announced they were selling oil in Euros. Remember the last time that happended? Well this time we are broke (or more broke).

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  8. FDR wrote: "Ben seems to believe the 1931 dollar was in over-supply from "liquidation," during the greatest deflation of all time! Deflation formally defined in all economic corners as: dollar supply shrinking."

    Um, what? I think you're misreading what he said. He said this: "However, once again the Fed had chosen to tighten monetary policy despite the fact that macroeconomic conditions--including an accelerating decline in output, prices, and the money supply--seemed to demand policy ease."

    He said the accelerating decline *in the money supply* "seemed to demand policy ease", which I take to mean, at a minimum, *not* increasing the interest rate as the Fed had done back then. In other words, he's saying that the fact that the Fed increased interest rates in the face of deflation was a bad idea -- that they should not have done so.

    Additionally, note that Ben is talking about the "liquidation of the dollar" specifically with respect to the gold that backed it at the time -- people were trading their dollars in for gold, and that was one of the ways in which the supply of dollars declined. Clearly the supply of gold-backed dollars has to rise and fall with the amount of gold backing it for it to truly be considered "backed by gold".

    That trade of dollars for the reserve supply of gold is a source of deflation that I hadn't heard about before, and is certainly one that doesn't exist today.

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  9. "Clearly the supply of gold-backed dollars has to rise and fall with the amount of gold backing it for it to truly be considered "backed by gold"."

    Yes, he is grasping for the exact incorrect words.

    He is saying the Fed never backed the dollar with gold. We get that two ways:

    (1) He claims that easing would've expand the dollar supply because there was only a very small gold reserve left in vaults relative to the number of dollars the Fed had sold.

    (2) If the dollar was truly backed, redemption of dollars to gold would not have constituted a run against the Fed. Demand for gold deposits could have easily been met with reserves.

    Ben is saying this:

    Since the Federal Reserve had ALREADY pilfered most US gold deposits and exported them to their private foreign shareholders, there was insufficient gold left in their vaults to back a promised gold standard. The BoE had already failed, the Fed knew they were next.

    Speculators knew it too, so they attacked NOT the dollar, but the private Federal Reserve. The Fed had no recourse, if you promise money you already stole, you can't pay. Ben is admitting the way the 1930 Fed would've created more dollars was to lower rates so as to devalue by printing, if everything he has ever stood for is to be believed.

    He is in a jam. Ben either admits his helicopter is a fraud when no one wants to borrow, but instead come a knockin', or he admits the Federal Reserve Banks are and always have been a purposeful Den of Vipers and Thieves.

    The Fed's actual recourse was to steal America's wealth for a second time. Via the Gold Confiscation Act, the private Federal Reserve Banks went door to door pillaging every American household, prying up floorboards and commandeering citizen gold at gunpoint. Those who didn't give up their gold were imprisoned. When finished, they repriced the loot 70% higher to complete a clean theft.

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  10. FDR - You and I have posted back and forth on MarketWatch since 2007. I have always appreciated your posts and opinions. Your judgement has always been sound and I know a lot of people don't know how prescient you were about the current crisis.

    I hope you don't mind, I have added a link to your blog on my blog. If you are interested in my blog leave me a message at MW. (Didn't think it appropriate to post info here.) Be well and good luck.

    ReplyDelete
  11. "Didn't think it appropriate to post info here."

    Please do...

    ReplyDelete
  12. FDR you say :"Via the Gold Confiscation Act, the private Federal Reserve Banks went door to door pillaging every American household, prying up floorboards and commandeering citizen gold at gunpoint. Those who didn't give up their gold were imprisoned. When finished, they repriced the loot 70% higher to complete a clean theft." But do you really expect the same thing to happen again? and now in this internet era? Earlier the world was not networked in the way it is now so it is impossible for the FED to repeat the same.

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  13. "But do you really expect the same thing to happen again?"

    Oh heck no, they couldn't fill a shoebox, today.

    We're all about paper now, and paper is a burnin'.

    ReplyDelete

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