The Surge

In the short run, we have a bounce within the turn window.  It might be a short-lived counter-trend rally, as the STU believes; or it might be the start of a final runup into the 2008 elections.  Tech stocks led the weakness in the first few days of January, and despite predictions of record earnings in 2008, the market is waiting to see how their earnings results come out for the last quarter of 2007, when weakness due to real estate, credit crunch and Xmas disappointment will come through. 

In the long run, however this bounce turns out, I expect stocks to make a final run to new highs.  If I am right, it will be driven by tech stocks.  Call it The Surge.  The leader of the last bubble drives the final run of this one.  The Surge should last well into 2009.  Tech IPOs will come back, and the venture industry will get a needed reprieve after suffering the worst five-year stretch in its history.  For the first time since the Bush Administration, capital will flow back into innovation and growth, away from real estate, takeovers and Old Time Industries like oil and food.   The case for The Surge is below the fold.      

The prime driver of the Surge is the Global Scramble for Yield.  I have commented on it occasionally, including here and here.  The Credit Crunch has sent us back into a low interest environment, and we should expect to stay in it for quite a while.  Where do you go to get yield?  Real estate is over.  High-yield bonds/takeovers is over.  (Blackstone took its PE firm public at the peak!)  Stretching for a few points in CDOs and SIVs is over.  Emerging markets still hold promise, but the parabolic rise of the last 8 months in many markets (China, India, Dubai) should give us pause, as it will end badly.  Commodities may be over.  Copper in particular is a leading indicator of industrial demand for commodities, and it has backed off the recent peaks.  Oil is volatile, and although it has come back to $100/bbl due to the Pakistan crisis, it may drop just as fast.  Sure, Chinese demand may keep the commodity boom going a bit longer - through the Olympics - but like all markets these have run up faster than demand, and will need to correct to get back to real demand.  If the market begins to discount the Chinese Olympics effect, the correction will happen well before the event. 

The stocks that have driven the past five years are down, especially financial stocks.  Cyclicals will also be out of favor due to the expected slowdown next year.  Pundits even expect a recession.  I am doubtful, given that the global economy is still humming at 5% growth, but an economic slowdown of some sort is expected, due to real estate falls, high oil prices, and so on.  In any event, stay out of cyclicals.  What is left are the Warren Buffet sort of stocks - value stocks, low PE, high dividend.  Boring but safe.  They may protect, but won't provide Yield. 

(I expect the recession to come in 2009, partly driven by the new US President, who should take the hit in her first term so as to improve chances of re-election.  I also expect the current administration to find a way to pump the economy in 2008.  The proposed mortgage relief would help, but hasn't been passed.  They'll find something, maybe a tax rebate.)

That leaves Tech Stocks.  They have been surging a bit of late, even during the credit crisis.  Why?  High cash flow, and a pick up of business spending.  Microsoft has broken out of a five-year trading range.  Oracle is doing well.  PCs are selling again.  HP has solidified under new leadership.  Even Sun is showing a comeback.  Overseas, Nokia has shifted its strategy brilliantly and seems poised to benefit hugely from the Mobile Internet.  (Nokia has gone from phones into apps, and also from selling gear to carriers to operating the gear for carriers.)   Apple has made the shift to digital consumer electronics with an élan that is almost beyond belief.  Sector by sector, the story is compelling:

• Google is a cash machine, due to the huge shift of advertising out of traditional spending towards online.  That shift will send around $50B from one set of pockets to another - traditional media to online - in less than 10 years.  This is a huge shift of almost unparalleled nature.  Already online has grown to over $20B a year, and even the dourest prediction has it at $45-50B within five years.  In a recession, online is expected to do better than traditional, since it provides demonstratable ROI whereas traditional ads are harder to justify in a cash-starved environment.  (For those who haven't gotten giddy over Google, you buy adwords, customers see your ad when they search on those words, click on the ad, and you can count the clicks that come to your website from search click-thru.  Very easy to measure.)
• JP Morgan just published "Nothing But Net", a 312 page report on why Internet stocks will grow strongly in 2008.  In 2007, they returned 14% vs. 5% for the S&P, and in 2008 should see 34% earnings growth vs. 8% for the S&P.  Free cash flow at the Big 5 (GOOG, YHOO, AMZN, EBAY, EXPE) will grow over 40% from 2007, and spur furious m&a of smaller companies.  The competition among those 5 plus MSN and AOL creates the type of bubblet that leads to 'irrational' returns. 
• Cleantech is a new venture sector with huge promise.  Unlike the alternate energy surge of the early '80s, which fizzled when oil dropped, this one has legs.  It is driven by business rather than government - being Green is good for marketing.  It is driven by technology improvements in batteries, photovoltaic cells, and biodiesel.  It is also spurred by high oil prices, which could drop; but we may be at or near Peak Oil, which will mean sustainable high oil prices; and also we seem stuck in Iraq, which is also keeping oil prices high.  Most of all, it will be driven by China and India, who need to clean up their air and water to avoid destroying their workers' health and well-being. 
• Cisco is on the comeback.  The Nuclear Winter of Telecom ended in March 2006.  The overhang of excess fiber was filled up, and carriers began buying equipment again.  You can see it in the performance of telco stocks since then.
• Business networking is surging.  You can see this in the IPOs of 3Q06, which were either photovoltaic cells, or business networking.  We had a dearth of Billion Dollar Exits in Tech from 2001 to 2005; suddenly by the end of 2006 we had doubled the number of Billion Dollar Exits. 
• HDTVs are surging.  They will pull with them a variety of new gear to take advantage of the new sets.  Consumer Electronics as a category left the US almost 40 years ago, and now is back.  The HD surge bodes well for Japan, China, Korea and Taiwan as well.
  
• The next new new thing looks to be the Mobile Internet.  The carriers have kept a walled garden around their services for two decades, but the walls are falling, and relatively fast.  In most countries, the #3 carrier has already opened up (eg. 3 in UK).  The #2 will follow.  In the US, AT&T (fka Cingular) granted an unprecedented level of freedom to Apple and the iPhone.  Apple controls what goes over the iPhone, not AT&T.  Vodafone and Verizon had been expected to be the last to fall, but Verizon got iPhone envy and announced that it will let in devices based on Google's new operating system for mobile, Android.  The potential size and importance of the Mobile Internet could dwarf the wired Internet in ten years: there are more mobile devices than PCs, and they are with us always.  As 3G networks get built out, the capability to access the Internet via the cellphone will surge.

Why now? And won't the recession dampen the enthusiasm? 

Tech stocks follow their own rhythm.  About every 10 years, Moore's Law has improved chip performance by 100x, which translates into systems that work 10x better.  A 10x advantage is enough to spur a new range of innovation.  It should be no surprise then that tech bubbles come about every 10 years.  Minicomputers, early '70s.  PCs, early '80s.  Internet, mid-'90s.  And now we have Broadband, which has spurred digital video (YouTube), VoIP (Skype, Vonage, CBeyond), Web 2.0, and shortly the Mobile Internet.  The underlying improvements in digital media, display, compression and radio technology have given a 10x advance over the bubble in the '90s.

(I use "bubble' with a lower-case B to distinguish from the recent Credit Bubble.   New technologies tend to come in with a bubble fever.  It takes the boom-time mentality to overcome the normal inertia and resistance of businesses to adopt a new technology.  In US history, all major technologies came in this way: canals (1820s), railroads (1870s-80s), cars (1910s),  electricity/radio (1920s), TV (1950s), the jet age (1960s) and so forth.  There is an enthusiasm for a New Economy when this happens, until it ends!)

Tech bubbles also can come in times of bad overall economics, even recessions.  The minicomputer craze in the early '70s and the PC bubble in the '80s both came amidst economic turmoil and recession.  I remember the PC bubble. Oil got to levels in constant Dollars well above the current $98/bbl.  Interest rates were double-digit.  Fears were high of a nuclear exchange with the Soviets.  We had two sharp recessions in 1980 and 1982.  And yet Apple went IPO in 1980, and a myriad of PC stocks went IPO in 1982-3.  The party ended in July 1983 - I had a company that got out in June and another that had to pull the IPO in July.  The IPO window slammed shut after an IPO aptly named Fortune Systems proved to be too much, especially as it quickly failed to perform in the real world of sell-through its dealer network.   

This Surge is not coming out of thin air. The tech IPO market began to come back in Sep 2006, although for the first six months it was fairly narrowly based (business networking and photovoltaic companies).  Since then it has broadened.   In the fourth quarter just ended, 31 tech stocks went public, the most since Q3 2000.  For the year, 86 went out, 50% higher than in 2006.  60 were venture-capital backed tech stocks, and they raised $10B, the most since 2004, a year which included the Google offering.  On average they priced 6% above the midpoint of their expected range and rose 32% in the after-market.  The most dramatic IPOs were VMWare in August, which did very well despite the sharp market fall from the credit crunch; and Netsuite in December, which also did well despite the recent market tumble.  Both popped on their first day - an echo of 1999 - and have sustained above their IPO price in the aftermarket. 

A whole passel of companies are now lining up for IPO in the first half of 2008. Many were advised to wait until 2008 for various reasons, largely bogus; the bankers themselves had no chance for a decent bonus in 2007 due to the credit crisis, and so delayed into the next bonus year. Such is how the world really works.

The Surge should draw the broader market with it, particularly the S&P.  I expect the Surge to last at least until April 2009, which is a turn window of some substance.  Even if the market takes the Hillary Fall then (or the Obama Bomb), don't lose heart.  Usually these tech surges follow a double bubble pattern.  In the PC craze, there were two IPO windows: 1980-1 and 1982-3.  In the Internet surge, there were also two surges: the Netscape-driven first wave in 1995-7, and the eBay final craziness from Oct98 to Mar00.   We might see an '08-9 Surge, then a pause, and a final Surge into the 2012 election. 

What could screw the pooch?  The biggest worry we have in Silicon Valley is the dreadful damage of the "reforms" after 2000, including the accounting of options as a hit against earnings even before they are exercised, the attempt to criminalize the successful (Bill Gates, Steve Jobs), and that four-letter word of the accounting world, S-Ox.  Sarbanes-Oxley has dramatically increased the cost of an IPO, and the time to prepare for one.  It used to cost $500k for the accountants and $500k for the lawyers to go public, and the overhead to ran around $500k per year.  Now the accountants can shake-down a company for around $2M, and even force them to hire a 2d set of accountants to ensure S-Ox compliance.  Lawyers have caught the scent and also now charge in the range of $2M.  Plus the annual cost runs around $2M.  Worse, the time to prepare can be unpredictable, as the accountants may hold up their audited financials for the smallest nits to avoid any chance of S-Ox liabilty - to them!   Thus, to go out, the raise has to be larger, by 2x or more, than in the '90s; the company has to be farther along, to cover the annual cost; and they had better already be in the prep stage to have any chance of getting out during the first wave of the Surge. 

Instead of being like 1999, the Surge will be more sedate, and the successful IPOs will be fewer.  The IPO activity should also spur more m&a of private companies.  Simplest rule: the winners get stronger.  Market value will accrete to the leaders, so put your money there. 

There it is.  We should have a good view of the Surge by the end of January.  The initial IPOs will be on the road, and we will see how they are received.  In any event, watch the Net Leaders continue to gain market value and strengthen.   Most of all, enjoy it while we can!

Comments

[Roger]

I hope your right .Why expect a 5th as the weakest wave following a 3rd only then to correct from 1974 or 1982.It doesn't fly my friend with lending at a standstill and "change"
in the wind .This market has topped count on it.Elliott is dead put a fork in it the futures markets fixed that in 1987.

Go long if you must but prepared to lose money.

[george]

in the 4th year of a presidents term if the president or the vice president does not plan to run for election in november the market does not perform well in the 4th year. there have only been a few times that this pattern of the pres. election cycle has occured. none were good years.

if the president or vice pres. are running for office in the next term there is an effort on his part to help stimulate the economy, jobs etc... to help himself or the v.p. during the 4th year to get future votes.

as with all seasonal and presidental election cycles there are exceptions to the usual pattern. patterns within patterns ....
george

[george]

good call by cstradingman on future rate cuts.
bernanke has annouced he plans on fighting by cutting rates.
there is an article on the drudgereport.com in regards to this fact.
george

[Cornelius Cornholio]

The serge wont begin until Precter offers a "free week".

Every serge since 1996 has had a free week as the perdictor.

[r]

Perhaps we should all keep an eye on the Baltic index to see where we might be going.
http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
r

[stocksbysammy]

I am not buying this surge, do any of you actually live in the real world? Business is slowing and slowing fast, how do I know, I own two businesses and talk to my suppliers. So if you buy this surge theory go ahead and load up. I'm on EWI's side on this one.

[Mark Lytle]

If the market fails to rise past yesterdays high, I believe I spot a wedge forming in the $SPX that looks similar to the one that formed in the October-November time frame...

Mark Lytle
Houston, Texas

[cstradingman]

Surprise 50bp rate cut coming next week! Lets see if we can get properly positioned for it.

[Cornelius Cornholio]

I'm serious, the serge wont start until Precter offers a free week.

Keep an eye on Precters site, as soon as he offers the free week, that will be the bottom.

[cstradingman]

Intermediate term bottom coming next week on fed panick.

[cstradingman]

Rate cuts will eventually make the economy worse.

[Roger]

Yelnick with the SOX CRASHING in a 3rd wave your tech rally is
DOA.

[Mike Laird]

Technology is not only rising, but its rising so strongly it will lift the rest of the boats? Lets look at the evidence. Over the past 3 months, BioTech stocks are 5% below a similar investment in 3 month T bills. Computers are 16.5% below. Electronics are 24.7% below T bills. Software is 7% below. Telecom is 20% below. Wireless is 20.5% below. Other Tech is 19% below a similar investment in 3 month T bills. T Bills, mind you. Then there's the Presidential cycle. The 4th year stinks. Also, SOXX has finished a multi-year triangle 4 wave, and has broken below the line to start the 5 wave down. Oh and housing is into a multi-year decline and despite people feeling poorer (how's California doing?), they will buy up the latest tech gadgets. Right.

I can get better odds at a roulette table.

[yelnick]

Patience, guys. The Surge will not be visible until the end of January at the earliest. Tech stocks have led the debacle of the past two weeks. SOX has sucked for a while and is no longer the leading indicator of tech - semiconductor innovation has migrated overseas. Still not clear if the Little Big One is on, or just more ratcheting of a wave 4. I am watching for a triple bottom off this drop and plateau since late Dec. Dow12.5k +/- is the support/bottom level. If broken significantly, the Little Big One is on.

[george]

the dow industrials is below it's 50 day moving average and the 50 day moving average is below the 200 day moving average. this is usually a confirmation by trend followers of a change of trend. like all things it
is not always correct. but, it would take a considerable rally or considerable time or a combination of both to move the 50 day back above the 200 day and the indexes daily closing price above both of those averages.
i would say this is another confirming factor in regard to the dow theory sell signal that occured in november 2007.
george

[george]

http://www.ft.com/cms/s/0/fcc631cc-bfe6-11dc-8052-0000779fd2ac.html?nclick_check=1
here is a link to an article about the u.s.a. is in danger of losing its
AAA credit rating on its government debt.
george

[rc]

The R2K is correcting the run-up since 2000. A 50% decline puts it at 590. The 2000 high is 614. So the next support band is at abt. 600 (+-)... that's another hundred points down from here. Beyond the current short-term bounce (which if not over, should be next week), there will likely be a more significant countertrend some weeks away, before hitting that support (don't think we'll hit it in a straight line). I think March/early Spring is a better time frame for a turn.

cstradingman - you do know I'm short... don't go spoiling things w/ your emergency fed cuts! I agree: the fed cuts will eventually make the economy worse; as will the bailouts and stimulus packages being proposed. Recessions are healthy. And, I don't get why the politicians think it's such a good idea to prop up overpriced housing keeping it unaffordable to others.

yelnick - I agree that the mobile internet and the convergence of hdtv/pc's/internet are the next big things. I'm a techie and love this stuff. But, I'm being surprised by how many people are becoming tech weary. And, from anectodal evidence, many really are struggling... I know someone retired who may have to go back to work as their health insurance has skyrocketed to 14K per year.

I watch Kudrow on TV... and while I agree w/ much of his and his guests beliefs, I don't think they grasp that the middle class really is under stress. I won't go off-topic into the free trade/fair and balanced trade stuff again, but I think the republicans are coming across as same-old and clueless. Jack Kemp was on the other day, and I thought to myself, how '90's and out of touch.

Alright, I'll go a little off-topic ;) ... free-trade and outsourcing and mass immigration and all the other '90's republican policies haven't benefitted the middle class -- they just haven't. The dems are tapping into populism, but will compound the problems. The republicans are clueless and old-think. Maybe we'll get a surge of some degree, but I think it'll be short-lived, shallow and last gasp.

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[Sean]

Yelnick, I hold a graduate degree in Electrical eng, and I am currently an IT worker.

In brief, your tech surge will not materialize. Why? Because there has not been any real breakthrough in technology for a while.

What we currently have, is just an ENHANCEMENT to the existing technology. Apple is selling an enhancement lifestyle, Oracle is same old, VM is selling enhancement to Disk management by virtualizing the bigger disk, wireless is enhancement to the ethernet cable, etc. Google? Well, it is an enhancement to search technology. RIMM? Enhancement to existing phone to make it more multi-functional.

80s PC is real, since it is the first machine that achieve the breakthrough in computing and save a lot of work, enhancement science simulation, and progress the society at much faster rate.

90s Internet save a lot of money for many consumers, and making business much more efficient.

The next breakthrough for sure, will be in NanoTech. That essentially create many more "new" material that we have not imagine before. It will be HUGE.

Don't take me wrong. Enhancement tech makes money esp in focusing on lifestyle, but never comprable to the Breathrough stuff like 80s PC and 90s Internet, and the coming NanoTech revolution which I am not sure when it will start. Today, actually many so called new tech in software/hardware are still based on the TCP/IP protocol created decades ago.

Green Tech like solar panel is a breakthrough (much more efficient and easy to make and put on), and is truly refected in the price swing last year. Nothing new for the software/hardware tech company.

Last year I gave tips to buy solar companies. This year, my tips is CREE. LED will change the lighting of the world. Read more here www.LLFINC.com

[rc]

Sean - thanks for the tip... it makes excellent sense! I typically ignore tips, but you've been on this blog and have credibility. Is LLFINC a publicly traded company? I'll do more research, but, being lazy, why do you favor CREE... is it the leader?

I'm sure yelnick doesn't want this to be a stock pickers blog... but what do you think of the solar stocks now? They've backed off... do you expect another run? And what about nano -- is it too soon or is there an emerging leader(s)?

I bought a bunch of biotechs when they dropped a few years ago, but instead of getting a bargain, they've continued to languish. I know biotech will be revolutionary, but that hasn't translated into making money... yet. So, that experience has made me wary.

[yelnick]

Sean, there is a huge amount of innovation going on, but it is happening at a higher level of the stack. "It's the data, stupid." Google and the online ad rush, Facebook and the social networking phenom, Skype and the VoIP volley, and soon the mobile Internet. A similar surge happened in the late '80s, but most of the value was captured by the PC leaders, just as this time most of the value is being captured by the top 7 web companies. Yet the late '80s saw Cisco, AOL and other networking companies emerge.

[Sean]

Yes, Data! I love it. I am actually in Data Warehousing, where the data amount Double almost every year.

If there is any safe Tech industry to be in during recession, it got to be something like Business Intelligence industry. Most of them have been bought up recently, and the last one standing is MSTR. I love its product, but it has run up too much already to take a position now, though I am sure it will win market shares in years to come.

The other value play of Data Warehousing is TDC, which I think has a superior database compared to Oracle. I used both on system with Terabytes, and both DB were run by industry experts, but I got to tell you TDC win hands down. So, there goes my tip of TDC.

Business intelligence offer values, but Yelnick, make no mistake, BI does not offer Technology breakthrough. The things you are talking about data in Facebook etc, they are just data, not Technology breakthrough.

RC, I am not good in biotech, and that FDA approval thing is like Lottery. My other tips for weathering recession ... Bio Contract Research company, like PDGI which I hold from teens. Yes, that is one of the SAFEST and Double digit growing industry. Congress has passed laws to enforce large bio companies to contract out their medical pill studies to ensure no one is internally manipulating the data. Remember last year a few major medicine recalls?

The company www.LLFINC.com product is really impressive, and I learned from msg board that the CEOs are previously from CREE and their new product are all using CREE.

[Sean]

Just some correction.

Data Warehousing = Data Mining = Business Intelligence

Bio Contract Research -> drug development services , like PDGI or CVD. They are contractors for Bio Drug development companies to test the new drugs

I like CREE because it's the only pure play LED company listed in USA. LED industry really started to achive the tremandous light output efficiency 2 years ago, and is truly a contender to replace all incandescent and compact fluorescent bulbs. More importantly, it is soooo long lasting (see www.LLFINC.com advertisement -- never replace the bulb for 20 years in residentials, and imagine commercial embrace it like mad), and much more color vibrants.

Please do your own diligence.

[Sean]

Yelnick sorry to highjack your blog for hopefully my last comment on stocks.

CREE may have a bad last 4th quarter 2007. But I suspect management will give glowing future. If there is any hint, here is a builder Robert posted on yahoo. Again, please do your own diligence.

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=te&bn=4346&tid=174825&mid=174825&tof=35&frt=2#174825

[TObject]

Mark Lytle> Surprise 50bp rate cut coming next week! Lets see if we can get properly positioned for it.

The implied chances for the Fed to cut benchmark lending rates by 50bps hit 90%.
SURPRISED? This market needs at least 75(upside) and 25(downside) to be surprised

[President D Szvaselinovic]

USA Market is ready allmost avoid a Vaseline Move.
Nearby, glorious revolution! Up, capitalist pig!

[yelnick]

Sean, hijack away. I view my post as a setup for comment and wave counts by readers. Some really good chartists in my readers. And occasionally a great stock picker.

Zoran used to see a thrust & plateau ending with a triple touch of the support level. This Jan thrust down and plateau has only touched twice, and the second one hasn't finished. So I wouldn't be surprised with a down start on Monday to Dow12.5k again, then the Fed rushes in with a rate cut or prmise of one, market rallies, then fades one more time to touch 12.5K. Then we will see if it breaks through or bounces. If it bounces, the trend has likely changed, and the new thrust will go above 13K.

[stu mann]

OUT OF LEFT FIELD!

I see tech going from the frying pan into the fire.

- within the next few years, mobile phone towers will be recognized as the hazards to human health they are. but it won't be like cigarettes. the industry will collapse.

- it is just as easy to say Microsoft, Yahoo & Google are laundering fronts for US Black Govt. money. High growth is an indication of war profitering now. Profits will probably drop as the US withdraws from Iraq now that all the low lying "tax payer" fruit has been stripped.

- having survived a Seattle tech startup back in 99', I know firsthand how little "tech" there really is in "tech". It was mostly smoke and mirrors then, it's will be mostly smoke and mirrors this time round. The 2000 Dotcom Bust was only made possible by a DOW up 1000%. The DOW has gone nowhere since, plus the Boomers are 10 years older and not as stupid this time round. The $ just isn't there for a 2nd crackup boom.

[Roger]

Awaiting rally monday thru early wednesday collapsing below 12,000 by friday.The market bulls are cows now.Easy to see 1150
S&P by April 2008.

[President D Szvaselinovic]

Many bears! More than Russia!
Come glorious revolution!
UP!

[Mark Lytle]

The futures indications suggest that the wedge I described is real and functioning... I have a preliminary target for the bottom of this move of 1354 on the $SPX..

[realinflation]

Sorry for some fundamental commenté

DISASTER in PPI

Shock, Annualized

Now, the really shocking stuff is doesn't show up until you look at the "Seasonally adjust annual rate for the 3-months ended December 2007." This is where you find why Gold is going through the roof and the dollar collapsing to within a few pennies of its all time lows. Remember, these are 3-month annualize rates:

Finished Goods: +13.3%

Finished consumer foods +9.4%

Finished energy goods: +51.9%

---

Intermediate materials supplies & components: +15.0%

Intermediate food & feeds: +19.2%

Intermediate energy goods: +55.3%

Materials for non-durables: +20.3%

---

Think those are scary? Look at the head of the supply chain!

Crude materials for further processing: +59.6%

Foodstuffs and feedstuffs +19.2%

Crude energy materials +129.5%

THE US is fu... D O O M E D and western Europe also

[Mark Lytle]

Realinflation,
I couldn't agree more...The U.S. citizens will be hit with a Hyperinflationary depression, where their money buys less and less, even as they lose higher paying jobs for lower paying jobs, and/or unemployment..

We will be amost third world in 10 years or less..

[Yogi]

We finally got $900 gold, time for a big Homer Simpson Whooo Hoooo! Precious metals are looking dangerously extended here, but 5th wave tops are notoriously difficult to call (if this is indeed a 5th wave for gold). The Euro may be finishing an ending diagonal, with a slight chance of a through-over to about $1.53. Inflation fear is getting pretty extreme here, IMHO. Oil is acting heavy, and may be finishing an initial impulsive decline off its record high.

[WTF]

Duncan,

ARE YOU SNIFFING GLUE? YOU ARE A REAL CRACK-HEAD. LOOK UP KONDRATIEFF WINTER IN YOUR SPARE TIME. ENJOY. HOPE YOU LOSE EVERYTHING INCLUDING YOUR YACHT.

[yelnick]

WTF, whoa! Careful, anger leads to the Dark Side. Read this prior post:

http://yelnick.typepad.com/yelnick/2005/07/kondratieff_win.html

The K-Winter is ahead. 2014 bottom not 2004.

PS - not my yacht. Friend's yacht. Picture is tongue in cheek. I work for a living.

[CC]

Keep eye on Precter free week.

When he offers free week, thats when vazeline move begins

[yves]

We have entered " The Zone".We show a graph on my show that goes up an average of 18 years then goes sideways 18 years plus or minus 2 years.I believe we have entered this sideways trading band .P/E will contract rapidly and come as a surprise.The majority of people will not make money.In fact minus inflation and taxes they will have negative returns for a long time.There are many good traders on this board and both camps will win some battles both from the long and short side of it.I will write soon an article.Sorry about getting caught between TV,radio & internet show.
Yves Lamoureux

[President D Szvaselinovic]

You mean, you WORK?
Anger lead to dark side.
NYET!
Vazeline lead to DOWN side.
GLORIOUS REVOLUTION COMINK!

[cstradingman]

Fed easing tommorrow morning if futures gap down. Time for the Fed to seriously panick. After the first banking failure. Fed will loosen its collateral standards at the discount window at first. After a few banks go under the fed will tighten its collateral standards. Expect a fed ease of 50 bp before the Jan meeting and at least 25 more at the Jan meeting. Good chance for a trade or to sell if your an investor. Fed funds should be at 0% my March next year.

[george]

donald trump on t.v. said fed needs to cut rates at least 1 point.
he said anything less won't help.
he said we are already in a recession.
george

[george]

100's of money funds currently have all of the banks and brokerage firms that have been in trouble as assests in their funds. if anyone of these companies does go under a 1930's style run could occur on dozens and dozens of those money funds. 100's of billions of dollars would be lost in a heartbeat.
the money funds are not fdic insured.
many mutual fund companies, banks and brokers have quietly pumped in billions of dollars since june 2007 to keep the share price at a dollar a share because of bad investments. they have done this to prevent such a run on the funds. at some point the losses will be too great to replace as they have been doing.
george

[I. Sosceles]

Duncan,

Yours is the minority position. Let us fine tune it: 12,100.
Then there is the small issue of Gold. It ain't reachin' $1000 on this mission.

Lastly...one more time: a-b-c-x-a-b-c.

[realinflation]

Hi cstradingman

Maybe fedfunds will be at Zero % in a year or so, definitly they are already below inflation in my opinion.
But it will not help the average Joe - if he will want to get a loan for house it will be 50 down and 10 % interest.

America is fu... D O O M E D

[rc]

2000 highs: DJIA = 11,908; R2K = 614

From the lows in 2002 to the highs in 2007 -

38% retrace: DJIA = 11,962; R2K = 654
50% retrace: DJIA = 11,230; R2K = 591

These are the simplest TA support targets. This down-move does appear to be at least correcting the bull from 2002 (if not beginning a larger degree bear). So, 38% is a minimal target. I think we'll break 12K on the Dow. And, since the R2K has been weaker than the internationals in the Dow, the R2K will hit the low 600's.

For a time-frame, I'm guessing this down-wave will end around March or so. This is the map of the market I'm following now... subject to change of course. If the Dow breaks 12K and other technicals are turning up, I'd be tempted to go long for a fierce upswing (and perhaps yelnick's surge).

For now though, sell rallies. I'm no EW'er (I just look for 3's and 2's)... so you can shake your heads... but I think we're right now in the middle of this move (yes, the 3 of 3 thing ;)). This isn't the parabolic end-stage, but the steadily grinding lower stage.

[rc]

cs - 10 year yields still going lower on all time-frames... getting oversold (yields) but no turn-around or ta divergences yet. I again agree w/ your comment that the fed easing isn't helping the economy. Year over year wholesale inflation is way high. I think SSA receipients got a little over a 2% COLA... I googled to a senior site and they're p*ssed. The Fed is between the rock and the hard-place.

[rc]

cs - just read your remark about the fed easing tomorrow. It would be a ripe moment and I'm considering exiting and re-entering my short position (I'll put in a windfall limit). One thing... what happens if the fed eases 1/2 and it has no substantial effect. Like in the wizard of oz, the fed's power could be shown to be illusory and their emergency action create more fear than calm.

[da bear]

the stock market is getting interesting. i thought that gold would have held up with stocks down big but it did not. I wonder how the primary season will effect stocks over the next few months.

check out my new website at http://www.wal-streetweak.com/. i have some free articles on it and my latest report in my Da Bear Report section. and be to vote in my poll!

da bear

Fahrenheit 1929: The Temperature at which liquidity burns.

[Upstart]

The McClellan Oscillator shows a significant bullish divergence.

[Cornelius]

No free weak = No up serge!

Investors must wait to buy once free week calls the bottom! It works everytime