Dollar Blues and the Bush Imperial Adventure

The Dollar is in a world of woe.  Canadian Dollar hit parity.  Euro at $1.40.  Drudge reports the Saudi's may go off the Dollar in the oil trade.  Since our Dollar is essentially backed by oil, not gold, this would hurt.  Is it time for a bounce?  The STU charts how the Dollar has been in a declining wedge, and has spike below the lower trendline.  Final little burst before a sudden reverse? 

It better.  The Bush Imperial Adventure in Iraq has cost America almost 40% of its net worth - the drop of the Dollar since 2001.  This dwarfs the cost of the war directly and also the possible cost of an impending recession.  In a vain effort to avoid a recession, Bernanke's rate cut may have sunk the Dollar.  Something has to be done fairly quickly.

In history Imperial powers have trashed their currencies to fund their fruitless efforts at Empire.  Rome in the 3rd century saw a 40x drop in their coinage value, and re-emerged as an autocratic theocracy in the 4th century; Spain in the 15th Century had a similar disaster and lost the poll position in the Age of Discovery to England.  The Brits did fairly well until after WWI, when they set their gold-to-pound ratio at the pre-war rate, and money left England for gold in the US and France.  The British Empire was broke by 1946 and had to let it all go,  The US since the Fed began in 1913 has *only* lost 25x its currency value, and since WWII has essentially been fielding a series of Imperial disasters (Korea, a draw; Vietnam; Lebanon in 1982; a good first Gulf War, and now this quagmire in Iraq).   

Think of the impact of Iraq: oil prices are much higher, Dollar is much lower, world feels less safe, recruiting for terror has gone up, the great Sunni counterweight to Iranian ambition is gone.  Forget the politics being debated in Washington - in terms of the US as a supreme commercial power and leader of the Free World, we are much worse off.  Was the effort to avoid a recession worth this? 

Bernanke has actually done better than Greenspan so far.  The Dollar may be on the edge of a cliff, but has been overall fairly flat since 2005.  Ben still has the time and tools to reverse the Dollar, and rapidly, by selling bonds to pull money out of the system.  I expect him to begin doing so.

It would help him a lot if Bush backed out of wayward nation building and pulled back excessive expenditures in Iraq.  Support the army, let the surge wend its way through, and pull back all the ancillary expenditures.  View this comment as not a political proposal but a practical recommendation to fix our financial house. 

Comments

[bob morley]

You ascribe the problems to the war in Iraq. Other than "first one occurred then the other", can you back that a bit more. I mean just because a rooster crows and then the sun rises does not mean that the rooster CAUSED the sun to rise.

Don't you think the problem is that we print our own money? If YOU print a few dollars, you will go to prison for life because you damage the value of the currency. But if government PRINTS billions, that is some sort of wonderful fiscal policy.

If the problem is the printing, it does not make a difference WHERE we spend it. If we spent it ALL, sooner or later it all devalues the dollar.

Just a thought.

[UnderABigW]

Yelnick,

Thanks again for posting updates more frequently. I continue to see more and more interest in your board.

I agree that the US must do something to rescue the dollar. Needless to say, we won't be able to finance our debt if they don't since most of it goes to international investors.

So far, Paulson has been trying to "talk" it back from the brink to no avail.

I have wanted to go long Precious Metals shares but I have held off due the fact that at some point the Central Bankers are going to have to launch an all out effort to rally the dollar which usually means selling large amounts of gold reserves.

The problem I have with our so called leaders is that I'm starting to see Paulson and Bernanke as nothing more than Wall Street shills. I can't believe anything either one of them says anymore.

Thanks again for keeping us up to date on things and providing your own valuable insights during these important times.

UBW

[Reformed Sucker]

My guess is that we will see extreme stagflation, where the line between need and want sharpens considerably. Energy and food will shoot higher and toys, electronics, cars, and even housing (as people settle for less space and move in with relatives) will tank.

All economies with any borrowing at all are part casino, part factory. We seem to be more casino than at other times in history. This has made us vulnerable.

[rc]

yelnick - excellent big picture post. It's sad to see the US in decline -- my heart will keep wanting things to turn around, but my head says we've passed the point of no return (I hope I'm wrong). Americans are naturally optimistic because we've been fortunate to live in a country that made the future appear bright. And, it's hard to fathom that the future, not only for the US, but the world, may not be so bright -- more BladeRunner than Jetsons.

I've been long against the war in Iraq, not for political reasons, but because it's diverting our attention to serious problems at home, hurting our economy, straining our military, while our adversaries -- China and Russia, grow bolder and stronger.

Spillover immigration from overpopulated countries into the US -- mass immigration -- in the 21st century, into a liberal, social welfare society, is insane (imho). I consider population the number one issue facing the US and the world. It baffles me how such an obvious "big picture" issue is rarely discussed. Even environmentalists don't mention human population numbers. The US should have the goal of a stable, optimal population density -- no growth, but sustainable equilibrium. If it weren't for opening the flood gates of immigration (legal and look-the-other way illegal), we'd have reached this.

Instead of advancing civilization, we've been unwinding it, through unfair and unbalanced trade. I'm also utterly baffled how "free traders" fail to recognize, that while trade is good, it must be fair and balanced w/ comparable playing fields. Good governments set the rules of competition for the common welfare. Yet these are being undermined in a global "tragedy of the commons".

China only out-competes us under the "free traders" rules, where it is the model of success. To follow that model is to become an impoverished, overpopulated, corrupt, authoritarian, environment harming country. To have cheap products, and get sick from pollution. It seems Bush is working hard to emulate that model.

I'm a rational person who seeks the truth (in other words, if I'm wrong, I _want_ to know where and why... so I won't then be wrong!).

1. I believe we've passed optimal population density in the US and the costs of any further increase outweighs the benefits -- with those costs accelerating. The economy will _eventually_ have to be based on equilibrium and improvement in quality, and not population growth.

2. Free Trade is a tragedy of the commons unwinding the progress of civilization.

3. Democracy as populism is flawed. We can't fix our problems as superficiality and mass media appeals to the lowest-common-denominator push aside reason and enlightenment.

[rc]

yelnick - excellent big picture post. It's sad to see the US in decline -- my heart will keep wanting things to turn around, but my head says we've passed the point of no return (I hope I'm wrong). Americans are naturally optimistic because we've been fortunate to live in a country that made the future appear bright. And, it's hard to fathom that the future, not only for the US, but the world, may not be so bright -- more BladeRunner than Jetsons.

I've been long against the war in Iraq, not for political reasons, but because it's diverting our attention to serious problems at home, hurting our economy, straining our military, while our adversaries -- China and Russia, grow bolder and stronger.

Spillover immigration from overpopulated countries into the US -- mass immigration -- in the 21st century, into a liberal, social welfare society, is insane (imho). I consider population the number one issue facing the US and the world. It baffles me how such an obvious "big picture" issue is rarely discussed. Even environmentalists don't mention human population numbers. The US should have the goal of a stable, optimal population density -- no growth, but sustainable equilibrium. If it weren't for opening the flood gates of immigration (legal and look-the-other way illegal), we'd have reached this.

Instead of advancing civilization, we've been unwinding it, through unfair and unbalanced trade. I'm also utterly baffled how "free traders" fail to recognize, that while trade is good, it must be fair and balanced w/ comparable playing fields. Good governments set the rules of competition for the common welfare. Yet these are being undermined in a global "tragedy of the commons".

China only out-competes us under the "free traders" rules, where it is the model of success. To follow that model is to become an impoverished, overpopulated, corrupt, authoritarian, environment harming country. To have cheap products, and get sick from pollution. It seems Bush is working hard to emulate that model.

I'm a rational person who seeks the truth (in other words, if I'm wrong, I _want_ to know where and why... so I won't then be wrong!).

1. I believe we've passed optimal population density in the US and the costs of any further increase outweighs the benefits -- with those costs accelerating. The economy will _eventually_ have to be based on equilibrium and improvement in quality, and not population growth.

2. Free Trade is a tragedy of the commons unwinding the progress of civilization.

3. Democracy as populism is flawed. We can't fix our problems as superficiality and mass media appeals to the lowest-common-denominator push aside reason and enlightenment.

[rc]

I apologize -- not only a very long winded (likely boorish) post, but TWICE! Sorry, Yelnick and everyone.

[Dick Diamond]

BERNANKE IN TROUBLE?
It seems to me that Helicopter Ben has set the stage for a multiweek decline beginning about now and ending in the latter part of October. We could hold together tomorrow and start a final spike up that catches the last suckers before the door is closed on them. Or, as the case may be, we could break down right now and continue from the modest selloff we started today. Actually it was modest in the Dow and more forceful in the S & P. Based on my technical indicators and the timeframe we are in, I believe the bulls are in deep trouble. Use any rally attempt to get yourself lightly short. Take profits when possible -- in other words, trade 'em. Have a great weekend.

[Dow Predator]

Bulls... bears?....who cares, as Dick Diamond says:

"Take profits when possible -- in other words, trade 'em."

Join Dick Diamond at his course ( www.marketmentor.com) He is having only 3 seminars per year. November 4-7 is the last one for this year.

He also has a free blog at http://indextraderblog.com/

Learn how to trade from a true living legend!

Dow Predator

[just askin']

Why would Dick Diamond give away his tricks? Doesn't he like making money? Or do his tricks not work well enough for him to use, himself?

Those who can't do teach.

[Ricardo Sanchez]

I am from Guatemala I meet Dick a year ago.

Dick is 71 years old. I was in his class last year and my trading became profitable.

I know he enjoys teaching 3 times a year. He is already a rich man and he is trying to help young students. I strongly reccomend anyone here that likes intraday trading to join Dick's course. Leave the Elliott Wave counts for the analysts. EW is pure theorical stuff and unless you are already rich, do not try to use it on your daily trading or you will lose money. Oscillators is the way to go and Dick method is based on disciplne and oscillators

[yelnick]

bob morley, good question as to why the war matters. the problem of cheapening the currency is endemic to fiat currencies in history, but even a gold standard is subject to government suspension or cheating - England had to suspend in 1914, borrow to finance the war, and then foolishly tried to go back to the pre-war gold/pound ratio in 1925 when the intervening inflation due to financing the war required a new ratio.

Looking at history, the cheapening usually is driven by Imperial adventure. Rome's first Emperor set a gold standard which essentially lasted over 200 years (with a slight cheapening by Nero) during a period considered the Golden Age of Man. Not a coincidence as the consistent standard helped preserve savings and drive growth. Then in order to finance various adventures the Emperors began to cheapen the currency. A critical threat from Persia caused 50 years of turmoil until the Empire could adjust, and to finance the army the currency was continuously cheapened.

Closer to home, President Johnson tried to push 'guns and butter' in the 1960s and led to the first really horrific inflation in American history since its founding. Similarly, Bush has pushed 'compassionate conservatism' with the highest increases in domestic spending since Johnson and the first new entitlement program in decades in conjunction with an expensive and controversial war. An Imperial Adventure coupled with trying to buy off political support at home.

To a great extent the world money supply needed to be increased in the past 20 years regardless of war, primarily to finance the integration of India and China into the world economy. How to know what level of increase is appropriate? The Fed was focused on money supply and domestic inflation and took its eye off a steady currency value. Dollar was 240 to the Yen in 1985 and has been down to 100 - a fairly massive drop. If the Fed had managed exchange rates across a basket of currencies they could have kept a much more stable currency.

The reason for the current drop is the massive injection of liquidity after the 2000 peak, compounded by another massive injection after 9/11, and then due to the war in 2003. The Fed is still watching domestic inflation and missing massive asset inflation instead( eg. home values). I think the Dollar could have withstood the 2000 and 9/11 injections, but the war has put this over the top.

[ed]

Yelnick,
Like you say in your post, the listed causes' (fiscal, foreign policy) cost to the value of the dollar are much smaller than the actual drop has been. This means that it is more a question of expectations and sentiment, rather than of actual damage. A lot of that 40% drop is to be expected in the face of the euro now competing for the finite reserve volumes.

Having the world's reserve currency has its advantages, as we saw in the 90's, but this status puts a premium on your exports and encourages other countries to seek trade surpluses with you. China learned this all too well. Flexible currency markets enable full-fledged substitution in the economic sense--the ability to find the cheapest source for a good or a service. It was hard to see the need for this when we were running surpluses, but now that we need the cash that exports generate, it should be in our interest to keep the dollar tethered only to the fundamentals. With the share of S&P500 revenues coming from abroad at something like 50% and growing, why would they want a return to the old days? Moreover there's no obvious political constituency that the dollar's gradual weakening hurts. That militates against any political solutions, hopefully.

[skierwaver]

Weak dollar policy is very dangerous. A point may come when both - domestic and foreign - dollar holders may conclude that the Dollar is beyond repair. If this occurs, we may witness a great move into "anything BUT dollars". This is what is called "inflationary expectations".

Such an event would trigger (selective) asset inflation - and higher rates and a worsening liquidity crunch. In many sectors - as prices go up due to an avalanche of demand - most domestic buyers would find themselves priced out. For many, this process - which nominally would represent inflation - would be in fact something different: it would represent a lowering of their standard of living, a.k.a. poverty.

Globalization makes sure that there is very little pressure on businesses to raise wages.

Could be that many companies with international exposure would do well - but is this worth the risk of causing great economic dislocations, millions of personal tradegies - and social disturbance?

One more thing - Prechter "invented" a DOW priced in gold. I think that this is a useful concept. My question is - What about real estate? Did it appreciate in value over the last few years if measured in gold - and oil? My guess is that it did not appreciate much - and that in many parts of the USA that did not experience a RE boom those prices, in fact, have significantly declined.

[bill stutz]

you are such a negative bear! nothing worse than betting against America! go ahead and try. IDIOT. sick of people like you hoping and wishing. try be positive for once! by the way, the pix of you on your boat is hysterical, you made you money investing in America now you bash it. screw you and your websight, you should be ashamed of yourself, but wont be!

[bill stutz]

try to be humble!

[Dow Predator]

bill stutz,

There is nothing wrong on being a bear when the market is bearish. Yelnick is doing a great job. Go to www.disney.com if you want to keep dreaming with the american dream. Seems to me that you are a disturbed mind that either: was abused when you were young or you have lost money in the stock market.
Grow up!

Dow Preadtor

BTW I like the boat picture.

[still putz]

And, by the way, those British citizens who bet against Britain back in the 1770s were IDIOTS, too. I'm sick of people saying how negative Britain was. How they taxed and taxed and didn't provide representation. Why couldn't George Washington and Thomas Jefferson and James Madison have been POSITIVE about their country instead of the revolutionary IDIOTS they were! by the way, the pix of George Washington crossing the Delaware is hysterical. He made his reputation and fortune thanks to Great Britain and then he went and bashed it! Screw the revolutionaries and their pessimism! They should have been ashamed of themselves but weren't!

[skierwaver]

That's pretty good if it is what I think it is, still bill, very funny... Maybe you shouldn't be ashamed of yourself, or maybe you should, but you aren't.... :)

[americaisaaccidnetwaiting tohappen]

America is in freefall --- only most of them do not realise what is happening to them, since they never set foot outside their stupid USA

fuck USA

[stu mann]

I prefer the conspiracy view of events: Vietnam wasn't about stopping Communism - it was about grabbing a foothold for a capitalist invasion of China (now in high gear), with a subplot of the herion trade run by the CIA/NSA/Black Ops.

four years into Iraq and it turns out (I'm not mentioning the BS about Saddam's WMDs) the invasion WAS NOT about 1) securing oil & breaking OPEC's power (the price rose 400%) or 2) defending the US$ (that "Iraq was switching to Euros" crap). Then why? (aside from the fact the same contractors Texan LBJ made rich during Vietnam are now being made rich by another Texan)

I figure its the same old Great Game stuff - Germany & Russia had been the biggest presence in Iraq before the invasion. BOTH World Wars had been engineered by Britian in order to keep those two countries weak and at odds, so again, history repeats itself. If Russia and Sadam were allowed to cooperate with Germany industry behind them - well, forget Opec and forget Londen and NY - the world would have changed completely.

also keep in mind that the weakness of the US$ (the flipside being, the stength of gold and commodities) probably has little to do with the war and more with the 1990s "ponzi produced" capital going global in search of better returns. anybody foolish enough to think the Comdol economies of Australia, New Zealand or Canada are a "safe havens" compared to America deserves to get burned. The Commonwealth countries will prove to be the same basket cases they were in the 70s once the global credit bubble bursts.

[GodSaveAmerica]

Good for George Washington et. al. They were smart to get rid of that stupid parasitic bitch, England. Morons like Canada kept hanging on to the retarded British Empire and look where they are now? A socialist trashhole where citizens are taxed to death and given nil in return, except for a free flag on Canada Day.

[Min Duong]

The good ol’ USA may well be all screwed up as a bunch of you yahoos have so unelegantly stated, but the rest of the world is even more so.

Do not underestimate the resolve of the American people once they do become aware that something is afoot. Sure there will be pain but nothing compared to the kind of pain to be felt elsewhere. Some people make the USA out to be a country that is old, corrupt and senile. At worst America may be approaching middle age, still fond of partying, and within a few "workouts" of being able to recapture optimum "battle condition".

China, India and other future great countries have another 100 years minimum before they can approach anything like what the USA will become. Why? Cultures change slowly. Upcoming nations have a very long history of oppression and subservience and this will take time to work out of their system for real changes to occur. When the going gets tough and craziness starts raging rampantly, that kind of population base is at a great disadvantage compared to a population of bad ass non-conformists that would not put up with the oppression in their native countries, that their relatives agreed to.

The American people are a tolerant people but they don’t keel over easily. The land of "...the wretched refuse yearning to be free", is uniquely designed to get it together when the going gets tough. Do not make the mistake of confusing some of their spineless, corrupt politicians for the vast majority of the populace. Right now America’s battle is to discover and boot out the brain dead politicians (of both parties) and the behind the scenes special interests that control most of them. America will need something drastic to wake up to the idea that something is terribly wrong, but once the majority is awake WATCH OUT! The changes and reforms will be dealt with swiftly and efficiently compared to anywhere else on this planet. While most of Europe and Asia were courting tyrants some three-score years ago, America fought off their equivalents, such is the mettle of this country. Like I said, there will be great pain, but not like other countries will experience.

Three hundred million freedom loving, bad ass non-conformists did not settle here because they were looking for a place to cave-in and give-up. For now “the giant” is admittedly punch drunk and partying too much, but once this is over and the deadwood is thrown over-board, he will bring order to his house. The “giant” may like to party but he is not an alcoholic.

[Mario]

October 2000 market rates start to fall, january 2001 the FED Follows to lower. 2000 till june 2003 was a period of lowered rates. This also was the not recognized bear market by many.

June 2003 market rates start to rise, june 2004 the FED follows.. This was a period of highering rates and the start of this ongoing bull.

February 2007 rates start to fall, september 2007 the FED follows. So lowering rates is not a guaranty for rising stocks. The past shows that stocks start a new bull when rates hit a bottom and start to rise, again and again...

[Mario]

Perhapse we are in the final stage of this bull that could go on for a while. Changes are now fifty/fifty for a retest of the august lows. What me makes so uncomfortable about a retest of the august lows, is the clear Head & Shoulders bottom wich pop-up in almost every indice, including those in Europe.

[LoneStarHog]

Uh!...Excuse me...but...why is EWI silent about Prechter's early-2007 call that EVERYONE would be surprised by the STRENGTH of the U.S. Peso in 2007?...NUMEROUS e-mails to that character's Message Board for a reply remain unanswered, like all other challenges over the MANY years to his CRAP calls...In fact, let's review his history in gold/silver - let's just start at the $400 level and ignore all his crap at $300, etc...:

1) Conquer the Crash states that IF gold goes over $400, he would have to RECONSIDER his stance on deflation
2) When gold blew through $400 to around $432 and corrected, he said that IF gold got back above $432 he would have to RECONSIDER his stance on deflation
3) When gold blew back through $432 to around $458 he said that IF gold got to the old contract high of around $472 that he would have to RECONSIDER his stance on deflation
4) When gold took out the old contract high and blew through $500 he stated that IF gold stayed about $500 that he would have to RECONSIDER his stance on deflation
5) When gold continued up and through $600 and corrected, he said that IF gold got back above $600 that he would have to RECONSIDER his stance on deflation
6) When gold went through $600 and eventually blew through $700 to around $732 and corrected - actually LBMA crushed gold to save copper shorts - and eventually had a large correction, he stated that IF gold got back above around $652 that he would have to RECONSIDER his stance on deflation and the existence of a Gold Bull Market
7) When gold got back above $652 and continued rising to its present level, he is SILENT!

There were several other steps that I omitted, but you get the idea.

Silver Example: I remember in 2003 when silver went through $5.00 to about $5.35, he and HACKberg said that it was a final wave UP before silver RESUMED its Bear Market and would head BELOW $3.00. Silver went to around $8.35 and corrected.

Prechter has made several appearances on the Financial Sense Newshour and it was about a year ago June when he said that IF gold got back above around $652 that he would return to the Newshour and ADMIT that he was WRONG. Instead he is SILENT!

Prechter! Hackberg! EWI! Give me a FRIGGIN' BREAK!

Oh yeah, a couple of years ago Prechter made a December call on the U.S. Peso for the following year. It was AGAIN for a STRONG DOLLAR. Instead the U.S. Peso TANKED!...Prechter the following year was SILENT!

[Min Duong]

LoneStarHog ain’t exaggerating! I remember it pretty much like that also.

[Rogbert Prechter]

The reason I am silent is that it does me no good to reply. I am not going to sign anyone up for a subscription by admitting failure. I am not going to reel in any new TrueBelievers by qualifying and hemming and hawing and moderating the Prediction of the Oracle. I deal in matters of Faith. I do not deal in reason. Reason will not buy me a new sppedboat or my wife a new car. Reason will not bring me a fresh supply of naive, insecure, neurotic subscribers.

Bring me your Scared, your Restless, your Downtrodden... I will convert them and turn their money into mine.

Apocalypse Soon! Repent Sinners! I Will Be Right Someday and Perhaps I Will Rule the World!

In the meantime, please read my fascinating, intellectual, controversial new article:

What Does the Fed Have In Common with Horror Films?

I remain the Consummate Iconoclast.

Love Me or Hate Me You Cannot Ignore Me.

I Will Eat Your Children's $168.18 fibonacci dollars,

Bobby

[skierwaver]

Min Duong, I think that your comments with respect to the US are correct. Too many people are running around proclaiming the "end" of America -- not so fast, I think. In order to understand this country one must spend some time in the "fly over" states, in the heart of the country. People are smart, solid and serious... they may not be experts in subtleties of international diplomacy, but they know how to work, how to play - and no one is going to mess with them.

When they get worried about their country, they don't bitch and cry - they volunteer to serve.

Moreover, even in the worst possible case, if we do have a collapse of the currency and various other economic earthquakes.... in the end, we will still have the people, the know-how - and the infrastructure.

Rome fell a long time ago, but Rome is still where it was all along.

[Dick Diamond]

HERE WE GO
The market took a mild sag today after an early rally attempt failed. This weakness should be the beginning of a period of down markets that should last well into October. Let me clarify my position. We are going down but, from time to time , there will be rallies and some of these rallies will be vigorous. But the major direction will be down until the bulls give up. At that point, we will start another rally phase. Right now use the short side for your trading. Speaking about trading, I bought the November 650 OEX put for $4.40 and if things go in the right direction for me, I plan to hold onto these puts for a while. You understand that I trade futures intraday and this is what I will continue to do. I only position options when I believe we are I see a trend forming. Let's continue to sell rallies and cover your position on the dips. Always use a protective stop on any postions taken.

[rc]

Not to belabor the issue, but the people, the know-how and the infrastructure are dramatically changing. Our immigration anarchy, the inability of gov't to make intelligent decisions for the common good or the people to elect wise representatives are unprecedented. If there's true hardship, an economic downturn, will the scenario be one of resolve, cooperativity and strength -- or that of Katrina and people looking to gov't to take care of them, on a large scale?

[Min Duong]

Skierwaver:

What you describe in the heartland is what I have seen and the founding premise of this country also bears this out. The small minority of spineless parasites, currently masquerading as politicians and the "special interests" behind the screen, have for now, managed to acquire an unhealthy amount of power.

Somewhere down the road, and sooner than later, the decay to our country, our constitution and our founding principles will become patently clear to the general population. The restrictions to our freedom, to our pursuit of happiness, to the well-being of our families and to our standard of living; resulting from their mostly selfish and treasonous actions, will so enrage so many that justice will be served swiftly and equitably. We need only have some event to light the fuse, and believe me, the powers that be know this and are probably running scared. Three hundred million bad ass, non-conformists enlightened and out-raged by the slow and dare I say deliberate and methodical selling out of America for far too long will not be an easy thing to deal with. Sweeping things under the rug of hyperinflation will only make an even bigger explosion down the line.

The strong and resilient population which IS AND ALWAYS HAS BEEN America’s one and only trump card, will not only in due course, successfully deal with and dispose of its parasitic elements, but will manage to come out on top and usher in a higher levels of excellence seen to date. Yes, there will be pain, but as they say, NO PAIN NO GAIN. Anyhow, the only ones to experience any true pain are the current parasites, traitors and leeches making it difficult for the majority of us who work hard for what we have. Will anyone be losing any sleep for their plight? Not me!

[Min Duong]

Bobby: Sadly, that's probably very close to how that sick little puppy is for real. Well maybe you could have show-cased his "compulsive desire (at the expense of any and all)to be right above anything else", a little more? Two thumbs-up anyway.

[Min Duong]

RC: Your points are valid, but I am confident there will come a time when enough people will have had enough of all this BS and heads will roll.

The incompetent officials who failed to do their jobs for "many good and justified reasons" will not be listened to and those that can set things right will be elected. This won't happen overnight but it will happen even if all the mess makes us lose a bit of status and prestige in the process. That probably would be very difficult to avoid, but couldn’t we then have a National agenda to re-capture this?

As for the people, yes although the color, culture and mix of people is changing, we still have mostly the non-conformists that came here to improve their lot. That's a commendable quality and is superior to an attitude of acceptance of one's situation and deciding not to do anything about it like the people that were left behind in their native countries. IT IS IN TIMES OF EMERGENCIES AND CRISIS THAT THIS QUALITY WILL SERVE THIS COUNTRY WELL.

I think you will find that the current population would readily embrace and rally behind a government that is bent on serving (not selling out) the country as well as the population mix of 100 years ago. The population in principle is very similar to yesteryears. It’s our government that has been selling out. Fortunately they can be replaced much easier than a population can be instilled with initiative, self-reliance and ingenuity.

[vimsin]

This discussion has certainly covered a lot of ground- from the dollar's woes to a debate about whether America is still a great nation. The Dollar index is flirting with multi year(30) lows. That suggests that there is something wrong and that it needs fixing. Even great nations can fall. As legendary football coach Vince Lombardi said - 'The greatest accomplishment is not in never falling, but in rising again after you fall'. Get on with it.

[rc]

Min - I hope you're right. But, needed change is already very late -- and another election cycle is only offering the status quo. There certainly are great new and earlier arrival people.

Before we _piss_ off Yelnick ;) back on blog topic... I'm surprised the market didn't head down sharply today w/ the accumulating bad news. I thought Target's sales numbers in particular would have had an effect. The, typically silly, rationale for today's action was that bad news is good news -- the fed will be more likely to lower rates further. I guess it's that or Halo3. I'm still bearish. The dollar got hurt again today. We may need another rally, or patience, before the bust.

[rc]

Where is everybody? Well, exciting news: I'm still bearish, short and intermediate term. ;) Today's rally didn't feel right. GM strike averted? Bear Stearns stuff? Grasping at straws. I don't know how deep and long a correction is coming, but one seems imminent. Tomorrow (again) looks ripe -- or the market will chop along till the Jobs report. We're at Dow double-top territory now. I don't see new highs till after a downturn.

[Min Duong]

RC: Needed change is indeed very late and I also don’t see much change for the better at the next election. I’m looking to the exceptional resiliency of the average American (when not blunted by inefficient government) to engender meaningful positive changes over a 15+ year time frame. Cultures seem to change as quickly as the size of the threats demand and at best is much slower than any one individual would like. Such is life?

I have been long since August 16 but will be looking to go short sometime early next week unless my stops are elected on the QQQQ and SPX before this. Agree with you that the rally is starting to look labored E-Waves and many TIs also support this. Imminiment correction (as you say)? Very high probability in my opinion as well.

[Mario]

Í'm also not bullish. As I see it we are still in a ongoing B wave. c of B started 10th of september and could break into 5 waves. So a last upmove can be expected today or tomorrow near +1540.

[vimsin]

Let me inject some bullish thoughts into the growing bearish consensus. Join the highs of the SPX on August 08 and September 04 and you get what looks like an inverted head and shoulder on the SPX with the low at 1370. The SPX broke out the inverted h&s on 18 September (coincidence or does the fed watch the charts?). The target for the breakout from the pattern is 1620. This is valid as long as we stay above 1489. Hallelujah

[Mario]

Vimsin your'r right about the possibile head & houlders bottom. But I've seen failmany. The probleme is that Dow could make a new high but the Transports are not confirming. There is also a ABC pattern in Transports, only it's going sideway's. For sure there will be correction. If you'r right, it will stop near the neckline of the inverted H&S.

[AJ]

Re Inverted H&S, this is highly likely to fail. Look at volume on the right shoulder - it should be stronger than left but I am not sure that it is. So it isn't a classical set up by any stretch

[Recovering Sucker]

The timeline continues...

1) Conquer the Crash states that IF gold goes over $400, he would have to RECONSIDER his stance on deflation
2) When gold blew through $400 to around $432 and corrected, he said that IF gold got back above $432 he would have to RECONSIDER his stance on deflation
3) When gold blew back through $432 to around $458 he said that IF gold got to the old contract high of around $472 that he would have to RECONSIDER his stance on deflation
4) When gold took out the old contract high and blew through $500 he stated that IF gold stayed about $500 that he would have to RECONSIDER his stance on deflation
5) When gold continued up and through $600 and corrected, he said that IF gold got back above $600 that he would have to RECONSIDER his stance on deflation
6) When gold went through $600 and eventually blew through $700 to around $732 and corrected - actually LBMA crushed gold to save copper shorts - and eventually had a large correction, he stated that IF gold got back above around $652 that he would have to RECONSIDER his stance on deflation and the existence of a Gold Bull Market
7) When gold got back above $652 and continued rising to its present level, he is SILENT!
8) Gold at $743.

[skierwaver]

Yes, the Transportation index is very weak... even assuming that INDU can make a new high, the transports are unlikely to confirm it in the near future. So, a Dow Theory buy signal is out for now.

The only major index which was able to make new highs is NDX - not confirmed so far by any others, including COMPX. By the time we start seeing a decline - and eventually we will - it will be important to see whether or not other indices will have reached new highs, especially SPX. A failure to do so would leave on the table... a lower high, with the door wide open for a lower low (if August and March lows get taken out).

If the above occurs, then the bulls will have to worry about a trend change on the larger time frame - as well as a possible H&S for those who like them... with the Left shoulder having ended at the February top.

Ergo, July top is something to watch.

[Mario]

Propabely NDX shall do the same trick as back in 1997:

08-07-'97 INDU top 8298-------08-07-'97 NDX 1151
09-11-'97 INDU leg A 7581-------08-18-'97 NDX 1060
10-08-'97 INDU Leg B 8184-------10-09-'97 NDX 1154
10-28-'97 INDU Leg C 6975-------10-28-'97 NDX 926

As you can see B leg of NDX was a fraction higher then the 1151 top as the INDU made then a lower top.

We shall see...