I have a colleague at work who is new the ways of the Force (technical analysis). Freshly graduated and with a few shekels in her savings, she wants to explore the wonderful world of investing. She is inundated with advice, all of it confusing and contradictory, and bless her good sense she wants to do her homework and work her way through it. I haven't yet had the heart to tell her it takes 10 years of dedication to begin to be a good investor, and even then the market will surprise more often than not.
Instead I suggested she start with the easiest and one of the most effective investing system: the seasonal pattern promoted by Sy Harding. His stats are on his blog, and he simply blows away the most common investing approach, buy and hold. His system is perfect for Yasi. She only has to make two decisions a year: when to buy in, in November; and when to get out, in May. Sy even helps with his service, giving fairly tight windows for those decisions. This year he called it right before the Nov21 bottom, and he hasn't given the 'go away in May' signal yet.
Yasi is young, and eager, and has a full wallet; she doesn't want to wait until next November. Instead she hungers for action, and is exploring what to do now. Oh boy. The best investment advice I ever heard was from Charlie Munger, partner to Warren Buffett. He would tell young, eager investors to take out a postcard and fill in 20 lines. Then he would explain that in their whole investment lifetime, they wouldn't fill out that postcard with good ideas worth investing in.
But youth is impatient, and Yasi is not to be denied. Now, as I have occasionally said about this blog, I do not give investment advice - especially not to a colleague at work, since she can find me when the advice goes wrong, as it usually will, or worse, her parents will find me. Instead, I use this site to provide a perspective based on what other pundits are saying, plus what I can piece together from broader trends in the investor community and economy.
Thus, let me offer Yasi a perspective on major areas of investment, right now. When you read this, Yasi, you should know that I have a number of very smart readers who have a deep and varied set of perspectives on the market. They will be able to give you all sorts of advice. I therefore would like to encourage readers to this blog to also give young Yasi their wisdom and perspective.
This is a long post, so you can read it all below, but for convenience I broke it up into sections, linked below. Or, just go down the page.
Stocks
In the short run, it is apparent we have some upside left. If you had been reading this blog, you would have seen a discussion of When To Go In right before the Nov21 bottom, and another discussion of getting ready for the Obama Rally right before the Mar6 bottom. After it ran up a bit, it broke out of its channel for the prior 20 months, signaling this was in a major rally. Technical analysis points to a rally that should retrace at least 38-50% of the whole drop, and might go as far as 62%. Right now two of the most bearish pundits both see a sharp rally. Glen Neely Monday morning said he expects a 100 pt jump in the S&P. Steve Hochberg of Bob Prechter's Short Term Update (STU) service Monday evening said he expects a strong rally to at least Dow9500 and SP1000.
So jump in, right? Well, we are already well off the bottom, and might only have a 12-15% upside ahead. it would have been better to have gone in back around Nov20 or early March. Of course, 20:20 hindsight is an awful thing (just like in golf, where that mulligan or second shot always seems to be so much better ...), yet it can teach you that to win in investing you have to take risk. When you go in with trepidation, when 'the herd' is staying out, you can make much better returns than if you join in with the herd after the trend becomes clear.
Now, if this runs up to 50% or more of a retracement, you still have good upside ahead. In that case your biggest enemy will be your growing confidence with immediate profits. As this market continues on, the sentiment will get very positive. Indeed, history shows that in the first big rally after a large drop, as in 1930, or 2004-07, the sentiment can often get more positive than at the prior bubble peak! It is as if the Echo bubble is more ridiculous than the original - the market participants feel that they were clever enough to catch the bottom, and it emboldens their risk-taking. You will thus see an increasing number of stories from respected pundits that the bottom is in! Don't be fooled. As the STU said:
Put differently, at some point this summer President Obama may get up and do what Hoover did in 1930: declare "Mission Accomplished!", that his stimulus worked, and the worst is behind us. THAT is when you get out! But of course at that time all those many people around you giving you unsolicited advice will be so over-confident they will convince you to stay in, and you will be inclined to believe them. Such is the comfort of running with the herd.
In the middle term, it is pretty clear that this is not a new bull market, but a counter-trend rally in a larger bear market. How do we know this? What if this really was the bottom, and the recession will be over pretty soon?
Major market bottoms in 1921, 1932, 1938, 1974 and 1982 had a very different look and feel to the recent low in March. P/E ratios for example get into the single digits at a real low (7 in 1932, 5 in 1982). You will see the press report P/E's at around 14, and even that number is suspect. E has dropped so much that the P/E was at 60 at year-end 2008, and over 100 at the end of Q1. John Mauldin likes to distinguish as-reported earnings, from which all the official ratios are taken, and EBBT or Earnings Before Bad Things, the real operating profits before adjustments dress them up. P/E from EBBT is a horrific 191 right now, and may go infinite since for the first time ever the overall E in the S&P is going negative.
Instead of seeing that in the financial press, you see numbers that often are based on manipulation by the reporting companies. If you doubt this manipulation of numbers, just look at how Goldman Sachs disguised a huge loss in December by changing its fiscal year; December magically disappeared! Similarly, Citi reported a big profit, much of which turned out to be a write-down of its own debt, driven by the terrible banking crisis! A crisis is a terrible thing to waste, especially with accounting statements.
Robert Shiller of Yale prefers a modified P/E called P/E10, which uses the 10 year smoothed E. The P/E10 has been running up from under 14 to over 16 in this rally. And if the rally continues, it should continue to climb even faster as E is expected to drop throughout the year. These are not levels found near bottoms - if we creep over 20, it is a level found near tops!
In the long run, where are we? In a recent post, I argued that once this rally fails, we fall again to new lows, with a bottom in the 2011 time frame. If we look to previous credit bubbles in 1929, 1873 and 1837, the subsequent market fell hard for four years, having a first bottom in 1842, 1877 and 1932. This also suggests a 2011 first bottom, four years after the 2007 peak.
2011 is unlikely to be the end of the bear market. Since the modern management of the economy began after WWII, we have run in broad 16-18 year cycles: up from 1949-1966, down to 1982, up to 2000, and now down towards an end that this pattern would suggest is around 2016 +/- 2 years. Don't be fooled by the peak in 2007 being higher than 2000; the S&P peaked in real terms (inflation adjusted) in 2000, and adjusted for the CPI is down 58% from the 2000 level. The bull market from 2003 to 2007 was merely a cyclical bull inside of a larger secular bear. Similarly, the market peaked in real terms in 1966, just as the Great Inflation got underway, and bottomed in real terms in 1982, just as it ended. It hit a nominal high in 1973 and a nominal low in 1974, but in real terms it was a 16 year bear market.
Modern management of the economy, or if you like meddling and intervention in the economy, has been massive even before Obama's stimulus. The current problems seem largely to have been caused by Greenspan trying to avoid deflation after 2000, and ironically to cure one bubble he created an even bigger one in 2007. The aftermath of 1873 and 1837, where we had no government intervention, were relatively brief (4 - 5 years), whereas the Great Depression, where we had massive intervention, lasted at least into 1942, or 13 years; this runs the eventual bottom of the current Great Recession out as far as 2020.
It seems the more the government tries to abate the problem, the more it extends the bear market. Japan had a similar experience after its credit bubble in 1989. The government jumped in to stimulate the economy, and eventually put in $6T (equivalent to the US having $14T of stimulus). When they no longer could afford to continue, having borrowed to the limit, the economy fell back. In other words, it had been on life support, and the patient went back to critical when the respirator was turned off. The intervention simply delayed the real bottom. Japan stimulated until 1997, or 8 years; and despite a revival during the recent credit bubble, are now in a moribund state, 20 years after their 1989 bubble peak, with a sizable national deficit, an aging workforce, and a plummeting industrial production. Many Japanese economists now believe the stimulus was a huge mistake.
You can play the market during its sickening slide to lower levels, or just stay out and focus investing elsewhere. In a secular bear market, traders ride the cyclical bulls up and down, while buy-and-hold investors just watch their investments whither away. From 1966 to 1982, we had three expansions and four recessions, and the market would rally 50% during those expansions. So you could play them; but had to avoid a buy-and-hold approach. Instead, consider shorting: if you had been so wise to short the S&P in the summer of 2007, you would have had an 800 pt drop in a mere 18 months, an unprecedented fall and a huge windfall to the shorts. Buy-and-hold would have lost over 50% in the same 18 months.
Bonds
Bonds have done very well since 1982. They always do after the sharp recession that ends an inflationary period. At some time in 20 to 30 years we will once again have a Great Inflation like we did from 1965 - 1982, and you should remember to buy bonds at the end of it and ride them for years. I will be long gone I suppose, but maybe this one piece of advice will stick and you can make a killing in middle age. Interest rates come down after inflation, and bonds go up and up. But has that now ended?
At a simple level, it is hard to see rates drop any farther. Short term rates are essentially at zero, and the long bond (30 yr Treasury) got to as low as 2.5% last December. At that time, the bullish sentiment for bonds was at 99%! Imagine that, at such a low interest rates. I suppose this is to be expected after the 25 year run up in bonds (with a fall in rates) from 1982, but at that very moment The Herd was stampeding off a cliff - the long band has since gone back up over 4%, an absolutely huge move (60%) in less than six months. That 1% bearish group would have made a killing if they had shorted.
Worse, the US has to fund an horrific deficit, and it stretches out for years. In less than 2 years Obama is likely to lap Bush: add more to the deficit than Bush did in 8 years. Worse, the CBO estimate is that the deficit will narrow a bit, then widen with no end in sight. How do we fund this? A lot of our former financiers (China, Japan, Europe) are on the ropes and suspicious of the US Dollar. If they are reluctant to lend, rates will have to go up to attract them in.
You have read how they have no choice but to fund us, but that was then and this is now. During the Greenspan Bubble, China among others ran huge trade surpluses with the US, and Dollars flooded in. Hence they had to place those holdings somewhere, and most went back into US government bonds. Also, the world trades oil in Dollars, and countries need a large lump of the greenback to manage the oil trade. When oil shot up from $10/bbl in 1999, and $16/bl in 2001, to $147/bbl in 2008, a lot of Dollars got sucked up to handle those trades. Now that oil is back around $50, a much smaller lump is required.
The problem these erstwhile Dollar buyers face is not how to get more, but how to dump what they have! They have reserves that are overfunded in Dollars. And they fear that the massive Stimulus, persistent deficits and astonishingly-large steps by the Federal Reserve to provide liquidity to the banks will cheapen the Dollar. Hence their massive holdings may drop in value. Better to lighten up. And they have been, big time - check out this chart.
Thus, Bernanke has a problem: how does the Fed fund the massive future deficits - $2T in the next nine months for example - and keep interest rates low? If interest rates rise, the huge and growing interest payments will widen a gap in the future budgets that is already estimated to be around 5 GDP points. It is almost unfathomable how the US can fund chronic deficits at 5+ GDP points without severe economic consequences.
Bernanke's solution is to replicate a failed approach from 1959: Operation Twist. Back then, we had 10-yr bond rates of around 2.5%, and the Fed feared they were about to rise towards 3%. We were still paying off a huge deficit from WWII, and were very sensitive about overall interest payments. We were then where we will likely find ourselves in the 2020s - having to pay off a horrific deficit. So the Fed decided to directly intervene in Treasury Auctions, paying above market for bonds (which has the effect of driving rates lower). They did so until around 1965, when interest rates had risen towards 6%. Their 2.5% target was a long lost memory! They gave up, but the damage was done: Operation Twist helped cause the Great Inflation from 1966-1982.
What happened? Direct purchasing is a way of flooding the economy with money. It is literally printing money. Normally the Fed buys Treasuries from the Treasury Dept, providing the US Government with cash; and then sells the bonds into the open market, sucking cash out of the market. The overall effect is to sterilize the creation of money, other than the small vig the Fed gets to keep. if the Fed fears inflation and wants to lower the money supply, it sells Treasuries into the open market, bringing money back home. (It has other levers as well to pull.) But when it buys Treasuries back, it literally puts cash into the bank accounts of the sellers. It is creating money.
On Mar18 this year, Bernanke announced with great fanfare a plan to buy Treasuries and other government bonds, to keep rates low. His commitment would be $1.2T, of which $300B were Treasuries. The 10-year Treasury rate dropped from 3% to 2.5% immediately. Wow! Would Bernanke be able to work financial alchemy? Well, no. Since then rates have gone back up to 3.17%, 66 bps higher, and higher than they were when he made the announcement. The 30-year bond dropped to 3.34% on the day of the announcement, but it too is back up, at 4.12%, and seems destined to rise higher, to at least 4.6%.
Bernanke may have felt he had no choice - he had to fill in for those foreign buyers who had left the market (indeed, they may be net sellers not buyers, compounding his dilemma).
Unlike Bernanke, you have a choice. Stay out of bonds except the short term ones as a place to park money.
But wait you will cry! What about muni's and corporate bonds? Well, if you had gone in during the crisis last Sept and Oct, you could have made a killing. Fear drove wide spreads between Treasuries at one end and corporates or munis at the other. As the spreads closed, the rates dropped for those others, and the bonds rose quite a bit in value. That is once again 20:20 hindsight; you can be a (virtual) millionaire if you play fantasy investing!
Since then, spreads for lower quality issues have NOT narrowed. Look at this chart - they are actually WORSE than they were during the Lehman fiasco last Sept. The difference between the top munis and the dreck is 92 basis points, the widest it has been for 26 years. Junk bond spreads vs. quality corporates are huge. The banking markets are not normalizing. Indeed, the more the administration runs stress tests and demonizes bankers, the longer this fiasco will continue. You can learn more from this great post at Zerohedge, from which I borrowed the last two charts.
Bottom line: where the Fed directly intervened to assume risk, spreads have narrowed (eg. LIBOR). Where it has stayed out, spreads have widened. Don't be fooled by manipulation. The Fed is creating a perception of normalcy where none exists. Risk to an investor is high, especially as the Fed keeps meddling in unpredictable ways.
Real Estate
You can buy a nice house in Detroit for $6,000. Yes, a mere $6k. You could buy a whole block in Detroit for the price of a normal house in California! Is it time to go in? Well, since the steel industry cratered in 1979, Pittsburgh has survived but as a much smaller city. Will Detroit come back at all, or shrink to fit the new reality?
The definitive index of housing is Case-Shiller, and it shows that we are still way above the long-term trendline and have more to fall. We are only about half way down. Housing has fluctuated around the trendline for 200 years, but in the Greenspan Bubble it run up 3x higher! In the areas which had the most egregious lending practices - new builds in California and Florida for example - the destruction of value is complete. Story in the WSJ Tuesday: banks bulldozing houses under. They do not expect them to be worth finishing. Same thing happened in the Great Depression. Time to buy into a vacant housing development? Doubtful the maintenance and security costs will be returned, let alone value.
News stories have rushed around, that the rate of decline is slowing, and even that housing was up between Jan and Feb! Time to go in? Well, the stats count foreclosures as sales, and the only reason for the positive blip is that 45% of sales in Feb were foreclosures. What has actually happened is that the banks had delayed foreclosing, and in some States laws forced them to delay foreclosing. As they begin to foreclose massively, the sales stats will go up! But the buyers are gone and the people are kicked out of their homes.
A NYT article Tuesday is telling. The headline is Signs of a Rebound, and it paints a picture that where housing fell the most, it is now recovering. Read the article, however, and it is clear the data does not support the headline. Sales in March are down 7% year over year, showing the fall is continuing down. The months-supply of unsold homes is still abnormally high, and has not changed for the past year. Then there is this factoid:
The bank stress test came out today, and one of the most colorful commentators on the crisis had a briliant rant about it. The government said a mere $10B would satisfy the stress in the top ten banks. A private analysis says BofA needs $60-100B all on its own, and Citi, Wells Fargo and JP Morgan add another $150B collectively. $200-250B, not $10B. But it gets worse. The banks own a massive amount of defaulted mortgages, and they are apparently sending out notices of default but NOT foreclosing yet. This enables them to hold the assets at par value. Unfortunately for them, events are about to undo their plans. Option ARMs are soon to reset to higher interest rates and negative amortization of principal. For many of them if the reset causes the principal to increase to more than 110% they transform from interest-only to full amortized repayment of principal, jacking up the monthly payments by 1.5 - 2x. After them come HELOC's, second loans on houses, which will likely be a 100% write-off since the equity value is so low in these puppies The tidal wave is estimated at $2.5T or more in losses that will overwhelm these bank balance sheets. $10B looks like a drop in a huge bucket.
What this means for real estate is the next leg down is about to hit.
Feel like buying a cheap condo in Vegas? What happens if the vast majority of units stay empty, and the few lonely owners have to cover the 'special assessments' to pay for the maintenance of the whole building?
Seems like the only two sensible options (besides staying out) are: buy in place which avoided the egregious loans, like Palo Alto; or buy apartment buildings near distressed areas to pick up all those folks who are about to be kicked out of their homes.
Currencies
With all this turmoil, maybe we buy gold? Oh boy. Gold is said to be a safe haven, and it is during inflation. It went from $35/oz in 1968 to $800/oz in 1980. But it is not at other times, and it is unlikely to be right to buy, yet.
In every past credit bubble, what followed was a deflationary depression. Deflation is the opposite of inflation. In deflation, fewer Dollars chase too many goods, and the value of the Dollar rises (prices fall, and the Dollar buys more). In inflation, too many Dollars chase too few goods, and the Dollar drops (prices rise, and the Dollar buys less). Despite all the efforts of first Greenspan and now Bernanke to reflate the currency and prevent deflation, it has arrived. A clear drop in prices has hit the UK, the US, and even China. (China reported a 6% growth rate in Q1, but much of that was due to deflation; nominal growth was only 3.5%. In inflation, you subtract the inflation rate to get to real growth rates; in deflation, you add the deflation rate to get to real growth.)
A depression is not just different in degree to a recession, it is different in kind. It comes after a credit bubble, where credit or debt was used to borrow from the future, and in effect "pull forward" future demand. In our case, we used houses as ATM machines, withdrew money and bought goodies like SUVs and HDTVs. The credit bubble fools the market. Too many houses get built; too many retail stores; too many auto plants; too many HDTV factories. The bigger the bubble, the farther out the demand has been pulled forward. When the bubble bursts, it is simply not possible to make up the future demand in one fell swoop with government stimulus or more credit. Those extra houses and stores and car plants should not have built until years forward in the future. They end up being bulldozed, abandoned and shuttered.
The size of this bubble is shocking. We added $24T in debt in 5 years for a meager $10T in cumulative GDP growth. Our total debt, private and public, is $52T, and is supported by around $2T of "money" for a 26:1 leverage ratio. That $52T will be heavily written off, and will be written off faster than Bernanke or Obama can replace. The collapse of that debt causes deflation.
A simple comparison.
- In a normal circumstance, people borrow against rising earnings. Much of the growth of an economy comes from 20somethings entering the workforce and buying their "firsts": first car, first house, first furniture, first appliances. They lack savings but anticipate growing wages, so they borrow against future earnings. When a recession hits, they cut back on discretionary spending but continue to cover their debt payments.
- In a credit bubble, people instead borrow against rising assets (stocks, houses). They buy more than their firsts; they buy second cars, new HDTVs, and so forth. When the credit bubble bursts, they are caught, since they borrowed ahead of their earnings. They have to liquidate assets (again, stocks and houses) to cover the debt. Often the assets drop below debt, and do not cover the debt. The delta has to be written off.
When debt is repaid out of earnings, money changes hands. When debt is written off due to assets dropping, it disappears. In 1929, people were able to buy stocks with 10% down and 90% margin. When the stock dropped more than 10%, the margin could be called. As the stock market collapsed, rather than pay down the margin people abandoned stocks. When they got sold at 50% lower, the 10% equity was lost and the margin of 40% was lost. It didn't change hands; it disappeared.
This is why a deflationary period follows a credit bubble, and why a depression is different in kind than a recession. In a depression, debt is written off, and money (in the form of credit) simply evaporates from the system. The destruction of credit money can dwarf the money supply; in our case, a writeoff of a mere $2T of the $52T debt is more than the whole extant supply of money in the form of currency and checking accounts.
The destruction of credit has already started - the so-called 'deleveraging' in the economy. It will accelerate as the real housing crisis hits - the potential $2.5T in the next wave of losses. It includes the huge losses GM and Chrysler bondholders are soon to suffer, and the even larger losses that will follow a major money center bank cratering.
The Fed will be proven unable to stop deflation. Bernanke has tried so many ways to push credit on the market, and to push money out there, but it is not moving. The credit markets remain largely frozen. All I can say is Bernanke is a fool and the people are smart. They know they have to cut back and save again; they can no longer live beyond their means. They won't take the credit. Hedge funds won't lever up. Companies will cut their debt levels. And so forth all across the food chain. The Fed is pushing on a wet noodle.
Bottom line: the bet to make right now is deflation, which will drive UP the value of the Dollar. As deflation ebbs, the excesses of Bernanke and Obama may come back to bite, especially if he continues his new Operation Twist and prints money, helicoptering it into the economy. There is a risk of a bout of hyper-inflation after deflation. That is the time to dump the US Peso and buy gold, as well as certain other currencies, especially those that do well when commodities do well (Australian Dollar, Canadian Dollar, NZ Dollar are examples).
Commodities
Commodities are a good play in three circumstances:
- during inflation,
- when they are in short supply, and
- during credit bubbles
Commodities are a terrible play in two circumstances:
- during disinflation, the period after inflation is killed (eg. 1982-2002)
- during deflation, the period after a credit bubble (now!)
The troubles for investors happen when they mistake which one of the circumstances they are in. The most common mistake is confusing the price signals from inflation or credit bubbles for shortages. Commodities were a fine investment during the Great Inflation of 1965-1982, but people mistook the rising prices from inflation for a more fundamental growing shortage. This is not that surprising, because commodities had also been rising (albeit at a slower pace) from 1949 to 1965, from rising demand due to increased post-war production. What is surprising is how whacko the mistakes were.
Rising inflation drove up commodities, particularly oil, and caused a loud set of pundits to claim the end of the world was coming. Literally. Read these pearls of wisdom from Earth Day 1970:
“Civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind.”
• George Wald, Harvard Biologist
• Barry Commoner, Washington University biologist
“By…[1975] some experts feel that food shortages will have
escalated the present level of world hunger and starvation into famines
of unbelievable proportions. Other experts, more optimistic, think the
ultimate food-population collision will not occur until the decade of
the 1980s.”
• Paul Ehrlich, Stanford University biologist
“It is already too late to avoid mass starvation.”
• Denis Hayes, chief organizer for Earth Day
“The world has been chilling sharply for about twenty years.
If present trends continue, the world will be about four degrees colder
for the global mean temperature in 1990, but eleven degrees colder in
the year 2000. This is about twice what it would take to put us into an
ice age.”
• Kenneth Watt, Ecologist
A group called the Club of Rome formed in 1974 and put out a series of dire predictions. Annoyed, a skeptic made a famous bet with the loudest voice of doom, Paul Ehrlich, who predicted that all commodities would rise in price due to shortages by 1990. He lost the bet; the skeptic cleaned his clock. A good contrarian, he is!
The first lesson for an investor is not to confuse inflation with demand shortages. And don't fall for all these eco-Cassandras and their ludicrous predictions. The eco-lunacy has gone on for 40 years. Investors have to shut the noise out and go to the core of the matter. Following the herd and listening to pied pipers is a sure way to go broke. A prophet of doom like Al Gore has pulled in $100M from his speaking and writing (as well as an Emmy, an Oscar, and a Nobel Prize), but don't follow his investment advice.
The second lesson is not to confuse a credit bubble with growing shortages. In about 2005 it became clear that something odd was going on. All asset classes were rising together. Modern Portfolio Theory was being proven wrong. There was no diversification. This is the signature of a credit bubble! And commodities began to run. Recall how in 2007, corn got so high Mexicans couldn't afford tortillas? Rice got so high that a quarter of the world was in danger of starving? And of course oil ran to $147/bbl.
Most investors got confused. They began to rationalize the price distortions of an historic credit bubble were actually the result of demand shortages. The primary villain was China and its voracious appetite for resources. Curiously, little such rise was seen before bubble, during China's fast rise in the '90s.
All these commodities rose together, and the curve was parabolic. Whenever you see a parabolic curve in an investment, watch out - they always fall sharply, and all the way back to where the curve started going nuts. The curve reflects momentum investors, not fundamentals. Oil fell from $147 all the way to under $31 in six months, and after the current bounce, it is likely to fall farther. The long-term trendline of oil would peg it between $10/bbl, the 1999 price, and $25/bbl, the 2004 price, just before the bubble began in earnest.
The third lesson is not to confuse currency machinations for shortages. A classic example is the oil price rise of the '70s. After Bretton Woods, we were on a hybrid gold standard backed by the Fed. The Fed cheated, first with Operation Twist and later to support political initiatives such as the war in Vietnam and the Great Society, at the same time. Guns & Butter. Later in the '70s, to support full employment. We ended up with neither guns, nor butter, nor full employment.
The cheating cheapened the Dollar, and it was assaulted for being too high priced at $35/oz. The US raised it to $42. Still the assault continued. In 1971, the US went off the gold standard. The Treasury Secretary at the time, Connolly, is reported to have told President Nixon that the Dollar would strengthen once off gold. What a fool he. The Dollar promptly fell from $42/oz to well over $100/oz - essentially a 4x drop from the prior $35/oz level in a few months. What a disaster. The oil countries, led by our so-called ally, the Shah of Iran, promptly raised the price of oil by 4x. They were simply marking it to market, but a huge furor ensued, and an inordinate fear of the OPEC cartel emerged.
Another currency disaster occurred in the mid-80s. After Reagan broke inflation, the Dollar rose sharply. Post gold, it is usually measured in the Dollar Index, against a basket of other currencies. The Dollar rose to 160 in the index, and the Treasury Secretary under Reagan II, Baker, panicked. The great bogeyman in the '80s was Japan, and the Yen was 240 to the Dollar, meaning it was worth about a farthing (a quarter penny). The Japanese were selling quality goods at ridiculously low prices! So Baker coordinated a cheapening of the Dollar, and in 1986 drove it down to 80 in the Dollar Index. The Yen rose from 240 to 120, doubling in one year. The Japanese found themselves rich overnight! Everything was worth more! So they promptly came to the US and began buying things like Pebble Beach and Rockefeller Center. The Crash of 1987 is linked to this fall in the Dollar, and so is the Japanese Bubble of 1987-89.
The fourth lesson for commodities is to do your homework. When you get past inflation, and credit bubbles, and faux demand shortages, what is left is whether we will face shortages when we come out of the current Great Recession. Sure, commodities will rise somewhat in the face of demand, but is there a more fundamental reason for commodities to shoot up? I do not have an answer, but I know where to look.
As oil ran up in 2008, there was a lot of chatter about Peak Oil. Peak oil is not the end of oil, but the peak in oil production. We have bumped around 85M bbl/day since 2004, and might be at peak. No major new oil field has been opened for over 40 years, and oil fields tend to increase to their peak production over 40 years, then fall off over the next 40 years. Mexico, North Sea, China, and many Middle Eastern fields are dropping. We don't quite know about the Saudi fields. We do know that Iraq has so mismanaged their fields that they have not yet gotten to peak. Nonetheless, all the large fields of cheap oil seem mature, and no new ones have been found. The large new ones are deep offshore, or deep underground, or in the Arctic - all expensive to get to.
We may be at "Peak Everything," and we may be given a momentary respite as demand slackens during the deflationary depression. Rather than being fooled by rising prices, we might be fooled the other way by falling prices. The argument for Peak Everything is that all the easy iron mines, or copper mines, or ocean fish stocks, or fresh water stocks, appear way past their peak. It is not that they are gone, it is that it takes more expense - and more energy - to extract the resources.
Optimists argue that technology will find a way. Yet our industrial age is largely based on cheap energy, and no one has found the replacement. Oil is a magic elixir. It is cheaper than bottled water, and can power your large SUV for miles of driving pleasure. All the other commodities depend on cheap energy. Copper is mined with machines, the ore is crushed and refined with machines; and all of those machines run on oil. And so for farms, fisheries, and about everything else.
Solar? One square meter - about the size of a bridge table - in direct sunlight absorbs about 400 watts from the sun, and the most efficient theoretical conversion gets 100 watts out. To use it at night requires batteries. Perhaps a bridge table can power a 25 watt bulb all day. Now scale that up. A recent Scientific American piece did that. It is very compelling science fiction. It requires 30,000 sq miles of solar cells, new superconducting transmission lines, and new compressed air storage in abandoned mines. Imagine an engineering project to build 30k sq miles of plant - approximately the whole area of California between SF to LA. (LA county itself is only 4,000 sq miles of land.) The largest solar facility in California is around 1 square mile, and two huge new projects gets to 12 sq miles. So we need 30,000 more of today's solar plant. This would be an extraordinarily large building project. And at best it gets us 35% of our energy needs.
Nuclear? If it weren't for the politics, an elegant solution. Where solar is a bridge table in size, an equivalent oil is a salt shaker, and nuclear is the power in a grain of sand (well, uranium actually, but the size of a grain of sand). It would take around 750 nukes to replace the energy of oil. We have 100 today, so that too is a huge project. They run around 20 sq miles in size, smaller than the huge solar farms, and producing more output at a lower cost. Waste is not a problem, since the industry would prefer to hold the waste on site and recycle it.
Suffice to say that if we are at Peak Oil, we may not have a politically acceptable and practical solution to cheap energy. Energy will go up in price, and with it the cost of about everything else. In that world commodities cost more.
This is not a today issue, but should be watched as the Great Recession crests and we start to really recover.
Closing Comments
Yasi, I hope this helps. The overall message is to understand the broader economic and political climate you are investing in, and make decisions that fit the bigger picture. Economies tend to go through four phases or seasons. Let's call them Spring, Summer, Fall and Winter for convenience.
In Spring, a new factor of production is driving strong fundamental growth. A rising tide lifts all boats. Almost any investment works. Think 1949-1966.
In Summer, things heat up, and inflation emerges. Usually the over-confidence of Spring has led to a foolish Imperial War, like Vietnam, or WWI. Think 1966-1982.
In Fall, the fever of inflation is broken, and the Ship of State righted. Disinflation comes (inflation abates and interest rates drop). Assets rise in value, and financial engineering reigns supreme. This period ends in a blow off credit bubble, as over-confidence leads to excessive risk. Think 1982-2007.
In Winter a Deflationary Depression sets in. Prices drop, interest rates go to absurdly low levels, governments intervene to stimulate. At the bottom we usually have a trough war, like WWII. Debt is written off, excess capacity shuttered, unemployment rises, markets fall. Think, 2008 - ??.
In a nutshell, the advice is:
- Spring: stocks and real estate do well
- Summer: commodities, real estate, gold and art do very well
- Fall: stocks and bonds do spectacularly; watch out for the bubble
- Winter: cash is king.
I hope this helps: http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=PRSF9WK7G751&preview=article&linkid=75d2c350-8286-4787-8451-2b77a825de8a&pdaffid=ZVFwBG5jk4Kvl9OaBJc5%2bg%3d%3d
Sincerely,
MediaMentions
Posted by: MediaMentions | Tuesday, May 05, 2009 at 09:50 PM
Tonight's EWF review : current SPX count
What 30-year Treasury bonds and $VIX have in common?
New 3x leveraged ETFs
http://forkoholic.spaces.live.com
Posted by: Forkoholic Serge of Elliott Wave Forkology | Tuesday, May 05, 2009 at 10:02 PM
We will continue going higher. The bullish triumvirate of Geithner/Obama/Bernanke will NOT allow this market to go down.
Bernanke will print money and use it to buy stocks if the market looks weak.
I will buy calls in the morning and get my next dose of free cash.
Bernanke wil protect me from losses.
This is the best cash anyone can ever make, so easily.
Posted by: anon | Tuesday, May 05, 2009 at 11:10 PM
7 handle on SPX will *never* be seen again
Posted by: anon | Wednesday, May 06, 2009 at 06:00 AM
Yasi,
Submit to the 'Forkoholic'. He is the supreme ruler!
(he..he..nic..nic)
Posted by: Mamma Boom Boom | Wednesday, May 06, 2009 at 06:50 AM
7 handle on SPX will *never* be seen again
Posted by: anon | Wednesday, May 06, 2009 at 06:00 AM
Yeah, it's gonna feel like that when we're down around 550, but don't give up hope. The bear market will hit a low end of 2009/2010.
Posted by: DG | Wednesday, May 06, 2009 at 08:00 AM
Yikes! The bear market evaporated quickly!
Posted by: Kit | Wednesday, May 06, 2009 at 09:37 AM
Why are people so surprised that the rally continues? Anecdotally, people are way too hestitate still. 1200 S&P here we come.
Posted by: cjmorris1201 | Wednesday, May 06, 2009 at 12:04 PM
DG: Would you be able to give me brief tutorial on today's Neowave trading report.
Neely's assessment is that Based on Fibonacci relationships, wave-E is likely to rally +40% off this year’s low. Do you know how this +40% was derived? I know that wave-E must be the largest in an expanding triangle, but can't figure out how he got +40%. Is it simply that this is an estimated number that gets wave-E to be larger than wave-D (the next largest wave)?
Also, I believe that wave-E in an expanding triangle must be the longest in time. I am not sure if this is a rule or a guideline. At any rate, wave-E is the same time length as wave-D (the next longest wave) on May 7 - ie tomorrow.
Posted by: Tartan | Wednesday, May 06, 2009 at 12:38 PM
Hi Tartan,
According to Neely, waves A and E in Expanding Triangles typically exhibit 1.618 to 1 ratios, so the 40% is the 1.618X the A wave length of 24.4%. But, as you note, you'd want E to be larger than D, so that 40% is probably too little, given that it wouldn't take us above the top of wave D.
Yes, you are right about the time aspect. It really is ripe and if this count is correct, she's gonna blow to the downside shortly.
I've still got my doubts about the absolute particulars of the count, but even so, from a trading perspective my count and Neely's count both have us topping here and putting in a price top that will last at least until the end of the year, although mine doesn't have us having the upside potential his does.
Posted by: DG | Wednesday, May 06, 2009 at 01:40 PM
Interesting formation on the Nasdaq Composite. Using intraday cash data, going from Monday (5/4) at 12:30 EST til close of trading today, it looks to be forming a mini-expanding triangle. Anyone else see that? You need to draw a trendline connecting the lows over the past three days to make it clear.
On the S&P and Dow, I am seeing lots of overlapping waves using intradata day the past day and a half even as the indices make higher highs. If it happens at the end of an exhausted trend, the move the other direction has the potential to be quite violent if we break here.
Posted by: Tom | Wednesday, May 06, 2009 at 02:06 PM
Rally will exceed last quarter's high (Jan.)
Posted by: Upstart | Wednesday, May 06, 2009 at 02:34 PM
Turning points Elliott Wave Forkology May 6th update
Everyone is looking for some sort of a top here. Have you notice how people become nervous around turning points?
It's probably because they already positioned themselves for a turn or not yet exited their previous positions. You can watch this phenomenon by increased number of posts/comments on many popular trading blogs - I guess you can even make sort of a turning days sentiment indicator out of it. lol :) Even Larry Pesavento is a bit nervous, today was saying if we not gonna top today or tomorrow the next turn is on May 19th. Today is actually a Puetz's TUCT cycle day as well. And as you may remember my calculator has May 9th as 123 calendar Lucas days from January 6th, 2009 top.
Reviewing today's action on SPX you can see we gapped up in the morning to 915 area, when set abc correction down to 906 and again started corrective wave A up to 914 with nice fork guiding advance of wave c of A, when we corrected down again in B to 908 and started 5 wave impulsive wave C up to 920ish area ending the day of corrective down note at 912 but not before rising in probably wave B of ABC down. Overnight we should correct down more to 908ish area or lower with tomorrow's opening is anybody's guess.
http://forkoholic.spaces.live.com
Posted by: Forkoholic Serge of Elliott Wave Forkology | Wednesday, May 06, 2009 at 04:04 PM
We just simply continue to go higher. Buy calls in the morning, sell them at the close.
The government is handing out free cash, only a fool wouldn't take it.
And any clowns who speak of "resistance" or "A-B-C waves" need to quit complicating things and just get LONG.
Prediction for tomorrow: green
wow that was difficult.
Posted by: anon | Wednesday, May 06, 2009 at 06:08 PM
We just simply continue to go lower. Buy puts in the morning, sell them at the close.
The government can't do anything to stop the market from going down, only a fool would think otherwise.
And any clowns who speak of "support" or "A-B-C waves" need to quit complicating things and just get SHORT.
Prediction for tomorrow: red
wow that was difficult.
Posted by: anon on March 9, 2009 | Wednesday, May 06, 2009 at 07:41 PM
hahahaha! you go ahead and follow that approach. by 4 PM, you will be feeling Bernanke's FIST full of DOLLARS in your REAR quarters. HAHAHAHAHA
Posted by: Anonymous | Wednesday, May 06, 2009 at 07:46 PM
Bernake can't force people to lend or borrow. Bernake is an agent with unique tools at his disposal but he is also subject to the influence of other forces, notably mass moods such as anger, frugality, complacency, confidence, and scaredshitlessness. There may come a day when they helicopter cash but the effect might be to scare people into socking it away under the mattress.
This is complicated stuff. There are generally no cause-and-effects here.
Posted by: Neo Guy | Wednesday, May 06, 2009 at 08:02 PM
DG Sir,
Every day u keep on calling for a top and the market rallies even more.How long dear ? Dont u think one should accept ones mistake if he/she has gone wrong in any analysis.Its not wrong becos market does wht it does and so u cant help it.Wht matters is acceptance that yes wave count has gone seriously wrong and its time to mend your ways and look for correct count.
Regards
In good Spirit
VB
Posted by: Account Deleted | Thursday, May 07, 2009 at 05:06 AM
VB,
We've barely broken over the top channel line on my chart, so I don't know how you're quantifying "seriously wrong", but unless we have a trend day up today, we're still within the limits of what I was thinking the count is. Two of the three short trades I've made over the past two weeks have worked and my long hedge trade has kept me basically flat from April 23rd, when I said a triangle was probably ending. Yes, I am looking for a top to go back to fully short, but, anyone applying NeoWave in real-time could have gotten the same "go long" signals that I got when moves up where followed by clearly corrective formations and hedged their shorts, regardless of what their count was at the time. Again, I keep telling you that you need to make a distinction between "forecasting" and "trading". If you don't, you won't understand how to make money in the short-term when you are wrong about the forecast. Also, see the end of "Mastering Elliott Wave", where Neely discusses "localized progress label changes" and how they impact a working wave count. I can't do your homework for you, though.
As you probably know, Neely was calling for a rally to 1000. How is that wrong? Neely might have the right count and I was wrong.
Also, it's easy to be in a position to criticize others when you don't put forward your own forecasts.
Posted by: DG | Thursday, May 07, 2009 at 06:40 AM
My forecast is that the SPX will stop around the 200 day MA sometime in May 2009. Let's see if I am correct based on this simple as pie trading system.
Posted by: EN | Thursday, May 07, 2009 at 09:02 AM
Dear DG sir !!
My Preferred count is tht Double Failure FLAT In S&P500 from 840-1007 from 10/10/2008 to 05/11/2008 was the X wave.Thereafter we are in a Neutral Triangle and we are currently in the D leg of tht Neutral Triangle from 672 onwards.This Leg will end slightly higher than 944 and thereafter we will have the E leg which will be shorter than D leg and then a breakout.The structure would look like a Inverted Head and Shoulders pattern.
Regards
VB
Posted by: Account Deleted | Thursday, May 07, 2009 at 09:13 AM
VB,
Good for you.
Posted by: DG | Thursday, May 07, 2009 at 09:51 AM
VB, so we are looking at the end of the great bear rally pretty soon as in a couple of months..
thats as bullish as one can get..!!!!!( ad infinitum)
Posted by: vipul garg | Thursday, May 07, 2009 at 10:07 AM
VB, so we are looking at the end of the great bear pretty soon as in a couple of months..
thats as bullish as one can get..!!!!!( ad infinitum)
Posted by: vipul garg | Thursday, May 07, 2009 at 10:17 AM
anon,
I hope you followed my advice. Man, I loves me some free money!!!
Posted by: anon on March 9, 2009 | Thursday, May 07, 2009 at 01:12 PM
--------DANGER----------
Like I said in my last report "THIS IS A VERY DANGEROUS PATTERN, as it ends in a CRASH" http://www.bushongbusiness.com/opinion.html
Now the bond market is starting to come unglued. Will it come to pass? Tune in next week for the next thrilling episode. Oooooooooooo!
Posted by: Mamma Boom Boom | Thursday, May 07, 2009 at 01:44 PM
DG, today's decline was 2.87 SPY points in less than 6 hours, so that triggers the end of your x-wave triangle from April 20-23rd, correct? Good call on your 900-930 target back then.
Do you have clarity on whether wave E of this expanding triangle MUST be longer than wave D, or is that just a typical relationship? Neely sent out an update after we crossed 875 saying that reaching 950-1000 is a possibility but not a requirement. However, going over Mastering Elliott Wave, at the bottom of page 11-30, he says that "ONLY wave b or d can fail to exceed the end of the previous wave." Today's decline looks to have traced out a possible leading diagonal, so depending upon how strong prices pull back tomorrow, I might short with a stop above yesterday's high.
Posted by: Tom | Thursday, May 07, 2009 at 06:11 PM
Also today's high makes wave E exactly 161.8% of wave A if you apply the percentage returns he labeled in Wednesday's trading update.
Posted by: Tom | Thursday, May 07, 2009 at 06:19 PM
anon: you must be kidding, i bought some calls at the first sign of red in the S&P, and take a look at the futures, its already way up !
like i said before, the markets are completely protected by the government, they will print money and buy stocks if necessary.
one day you will realize what i'm saying. in any case, tomorrow will be a huge up day, Geithner and Obama are my riskless hedge.
i am also long a few ESM9, i buy every time we dipped below 900 this week, which wasn't often. Candy from a baby.
Posted by: anon | Thursday, May 07, 2009 at 06:31 PM
Listen to EN! Shut the wave noise! EN, May and 2nd quarter also "count" well in the Fibonacci sense, yes?
Posted by: Upstart | Thursday, May 07, 2009 at 06:42 PM
Wow. This is a great read so far. Look forward to reading each segment over Saturday morning coffee.
KS
Posted by: Kevin Smith | Thursday, May 07, 2009 at 07:14 PM
Tom,
I was watching today's decline hoping it would be larger and faster than other declines and it did meet that standard. However, it could still be an x-wave (yet another), which would allow for new highs. As much as I want to discount that possibility, with this market it seems that most things are possible, as long as they mean higher prices.
We did come right back into that channel I have mentioned before, so it is also possible that today's high was an "overthrow" above the top channel line and that we are done to the upside. If one is shorting or short already, the stop should be at 91.93. No need to be a hero in here. A dip below 89.84 would be a much better sign of a top.
Posted by: DG | Thursday, May 07, 2009 at 10:11 PM
i needed some new shoes for the weekend, so i picked up some ESM9 on yesterday's little dip, because i have a government guarantee that i will make a profit.
this morning i just closed the contracts for a $1600 profit!
I know for a fact that next week, my profit would be more, but i wanna pick up these cool shoes, and probably a new camera as well.
next week, if i need cash for some clothes, or a new TV, i will just wait for a red day in the S&P and do this again.
they say money doesn't grow on trees but jeez, this is just as good!
Posted by: anon | Friday, May 08, 2009 at 05:39 AM
I don't know Elliott Waves intimately, but technically, what is the highest the S&P before the bear can be declared dead? I personally believe that the biggest drop since '29-'32 will be followed by the biggest 2nd wave bounce as well.
Up to 1200 S&P or around there?
Posted by: cjmorris1201 | Friday, May 08, 2009 at 11:21 AM
cjmorris - look at the chart here: http://yelnick.typepad.com/yelnick/2009/05/yves-on-the-flight-to-safety-in-the-dollar.html ... it has lines of resistance - the 61.8% line is about as high as the S&P is expected to get (SP1229)
Posted by: yelnick | Friday, May 08, 2009 at 11:36 AM
Unless we are headed directly to new highs, which might well happen. In that case there is no "high" the S&P is expected to top out at.
Posted by: Common Sense Dude | Friday, May 08, 2009 at 12:26 PM
cjmorris,
Technically, the first wave of a wave 2 can retrace 99% of wave 1, BUT the second wave of wave 2 has to then retrace most of wave 2 and then the third wave of wave 2 has to end before it retraces more than 61.8% of wave 1.
Posted by: DG | Friday, May 08, 2009 at 02:04 PM
Sell in May and go away works well in bear markets. I intend to go 3X short at the 200 day MA and go on vacation for the summer. Relax Mun . . . no waves . . . no cry!
I can't help but wonder: This Yasi sounds pretty hot . . . Well, is she Yelnick?
Posted by: EN | Friday, May 08, 2009 at 04:16 PM
EN,
You're crazy!! Everyone knows the 199 day MA is where it's at!
You are right about one thing, though. The first thing I was thinking when I read this post was, "Is Yasi hot?"
Posted by: 199 day MA Trader | Friday, May 08, 2009 at 05:16 PM
SPX & hint of $NASDAQ Elliott Wave Forkology May 8th Update
Today we review medium term Elliott Wave Count on $SPX 15 min chart. Since April 21st $SPX is in a corrective Wave C inside pink fork's channel. As you can see price action never seriously violated median line which confirms corrective nature of the wave. So what is this 123 stuff you ask? If you look inside blue fork it is still corrective but one glimpse on Elliott Oscillator at the bottom reminds somewhat of 12345 action so I'm stretching it to possibility wave C subdivides into something which resembles 5-waves-like structure. The only problem - there is no fork which contains all 5 waves inside plus none of the price action ever reaches upper fork channel which is corrective by EWF definition. It's all fractal anyway.
Looking at daily $NASDAQ composite we see it poking slightly out of the channel. It is not unusual for Wave 4 to poke a bit out of the channel as market participants become more and more bullish before final Wave 5 starts. Any significant breakout upwards from here will make a case for preferring ABC count vs. 12345 count we use now.
http://forkoholic.spaces.live.com
Posted by: Forkoholic Serge of Elliott Wave Forkology | Friday, May 08, 2009 at 06:19 PM
S&P 500 started Super Cycle wave 5 on March 6. The previous wave 4 flat correction spanned March 2000 to March 2009. The worst of the housing/credit crisis is history. The market is discounting the residual news and actively taking new positions to get a return on investment and eager to get in while the blood is in the streets. The chart is relentlessly quelling a current wave 4 scenario. The nail in the correction scenario coffin comes from a counter-clockwise lograthmic spiral starting and centered on the first intermediate 5 wave decline at October 2007 portraying the fourth ring at March 6 2009 and smack on it.
March 6 onward on a 60 minute chart reveals the intermediate and primary degree patterns and channels to label primary wave 1 and a running primary wave 2. This is a definitive chart. The trend is up. Primary wave 3 started April 23 and as per wave 3's it is powerful.
Posted by: Mike McQuaid | Friday, May 08, 2009 at 09:48 PM
Mike McQuaid
You could also point out that price is now approaching a previous ring of the spiral from below which should stop the advance in its tracks shortly. Your primary 3 also looks very weak (especially on a log scale) if primary 2 was indeed a running correction. Accept these 2 observations and it doesn't look quite so good for your count.
Posted by: G2 | Saturday, May 09, 2009 at 01:17 AM
the problem with us chartists is to us,as maximum of us are traders -intraday or swing, , things look good on smaller time frame charts -60 mn, 30 mn, 10mn, 3 mn or lower!!
but things should look good on weekly, monthly, quarterly or higher and which unfortunatley they dont.
Posted by: vipul garg | Saturday, May 09, 2009 at 04:47 AM
anyone who thinks this market is ever going down again needs some serious help
Posted by: anon | Saturday, May 09, 2009 at 04:48 AM
Lately I've been thinking the market will go down again at some point. What's my problem? Is it that I don't believe that governments can manipulate markets indefinitely?
Posted by: I need serious help | Saturday, May 09, 2009 at 06:43 AM
Regarding government manipulation, how does it exactly work? government let several trading desks to buy stocks and/or index?
If they purchased index, they must exit longs before the contracts expire. massive sell before June contract expire?
Posted by: government manipulation | Saturday, May 09, 2009 at 07:26 AM
Your primary 3 also looks very weak (especially on a log scale) if primary 2 was indeed a running correction. Accept these 2 observations and it doesn't look quite so good for your count.
Posted by: G2 | Saturday, May 09, 2009 at 01:17 AM
Exactly. In the first 12 trading days of "primary 3", the SPY has advanced 11.5%, whereas in the first 12 trading days of "primary 1", it advanced 21.6%. With a real "running correction" between them, those numbers would be reversed.
Posted by: DG | Saturday, May 09, 2009 at 08:19 AM
government manipulation,
the government probably sells their contracts once they have engineered the breakout by printing money and buying futures. they know poor shorts will be forced to cover and then the uptrend begins.
its free money for anyone who wants it, courtesy of the taxpayer and the shorts. they can also roll over the contract indefinitely if they wish.
you can either play along, or fight it and lose.
Posted by: anon | Saturday, May 09, 2009 at 09:20 AM
Since a 17-month decline is unlikely to be corrected in 2-3 months, this rally probably makes it to the .382 retracement or less, then we correct big-time for a few months, followed by the "c" rally leg, which could go as far as early 2010. Only then does it maybe get back above DOW 10K, don't you think?
Posted by: Upstart | Saturday, May 09, 2009 at 09:27 AM
the government probably sells their contracts once they have engineered the breakout by printing money and buying futures. they know poor shorts will be forced to cover and then the uptrend begins.
Why didn't I think of that?
Posted by: FDR | Saturday, May 09, 2009 at 11:07 AM