The False Move
Just as they say there is the calm before the storm, there is always the false move before the breakout. As we approach the midpoint on the Economic Confidence Model August 7th, which is curiously 31.4 days from the low, we should keep in mind that this is the midpoint and not the climax peak. Resistance still stands at the 16000 level. The Dow has been crawling sideways buying time.
The timing arrays are also now lining up with August 7th. This is independent of the ECM and is the collection of 72 models. Thus, as we move close to this target, we also see a Panic Cycle and volatility rising the week after.
Capital will begin to shift and start to make its decision. If we see a high on the 7th in the Dow, we may see the classic False Move to the downside for the typical time period of 1 to three units. This is what we may see. A brief correction with all the bears yelling I told you so, then followed by a rally that wipes them out. This market has not peaked yet and it is destined for much higher prices ahead going into 2015.75.
Fed Double Talk or Cryptic Reality
QUESTION: “…the best way to get interest rates up is to have low interest rates” —Fed Chairman Bernanke responding to a Congressional testimony question (not today)
And today:
FED SAYS IT IS PREPARED TO INCREASE OR REDUCE THE PACE OF PURCHASES.
So what about this double talk?
What are they trying to do?
Where do they want to go?
Regards.
And today:
FED SAYS IT IS PREPARED TO INCREASE OR REDUCE THE PACE OF PURCHASES.
So what about this double talk?
What are they trying to do?
Where do they want to go?
Regards.
ANSWER: Bernanke is actually speaking the truth. The best way to get interest rates to go up, is to have pushed them lower. The Fed bought back the long-term and shifted the debt short-term. This increases the potential volatility. Then we have the insolvency of pension funds and others who cannot deal with the earning nothing on money offered by the bankers – 0.5% for 3 years. This forces capital to shift and invest which is why the Dow has done so well. That is why the best way to send interest rates high is to suppress them forcing the supply to shift. The Fed could not do that by itself.
By saying it remains nimble ready to increase or decrease interest purchases is a reflection of what he see in this shift in capital. We may see the Dow make a sharp brief correction, then swing to new highs in a phase transition. The classic false move before the breakout.
Tangible v Intangible Money – Why Times Have Changed
The mantra of Goldbugs has been that paper money is worthless and only gold is money. That is pretty much like saying the earth is still flat. Money has historically been many things and gold is only one of them. The issue is always the fact that money (regardless of what it is) rises and falls and everyone since the time of Hammurabi have been trying to create the perfect world where assets rise and you make money, yet at the same time money does not decline in purchasing power. This is just impossible and the problem is the fool who is too scared to invest so he wants to hold only cash and then complains where it buys less and says that is evil and not fair.
Gold is a commodity and resides on the asset side of the balance sheet. The Goldbugs tout the German Hyperinflation and somehow pretend that only gold survived when in fact it was all assets. Indeed, the replacement currency that stopped the hyperinflation was backed by real estate – not gold. Understanding what we face is the real key. Owning real estate, stocks, and gold is a diversified portfolio. They all rise against the decline in purchasing power of money regardless what it is. When gold was money, it then declined against real estate and stocks. WHATEVER is money moves opposite of assets.
Up to now, gold has been the WORST performing asset within that class. Just to match the 1980 high adjusted for inflation gold needs to be $2300. The Dow Jones was 1,000 and today we are approaching 16,000. If gold has performed in the same manner it should have reach $14,000. Gold will rally sharply as a hedge against government. We are not headed into hyperinflation – we are headed into a very dangerous black hole where government destroys the entire economy in pursuit of taxes.
In the USA there are 609.8 million credit cards that have been issued with about $800 billion in outstanding debt on average. A total of 78% of all American have a credit card and 80% have a debt card. But the real statistic is demonstrating the evolution of money that I have been writing about. We are approaching the 50% level where Americans have gone a full week without ever handling money in paper or coin form (latest number was 43%). The younger generations go into Starbucks and hand their phone to pay by Google Wallets. They prefer texting to phone calls. Things are a changing. It helps to stick you head out the window when you drive like a dog – it is a lot different out there than it use to be.
Money as we know it is becoming electronic. The good news is in doing so, this is really one giant step for society. Taxes were necessary when money was tangible. The king needed to get some back in order to pay his bills. Now that money is electronic, everything has changed and tangible forms of money are vanishing heading off into the same place vacuum tubes, 45 records, and 8-Track tapes went. I am an old 4-speed stick-driver. I like the control. You have to order stick in many cars today and they quickly ask – gee you know how to drive one? When I go to a parking garage, not everyone can take your car. It is amazing.
As we approach this shift in trends within the global economy, stop being so prejudice. Grasp the understanding between assets and money. Why should you care in what you make the most money. The object here is to survive. Open your mind and see the world for what it is – a giant melting pot of assets v money everywhere.
Tangible assets survive because they are revalued in terms of the coming new currency. Our problem is not WHAT IS MONEY, but it is the DEBT. Once upon a time, it was less inflationary to borrow than print because you could not use the bonds as collateral for loans. Thus, they did not expand the money supply. Once we allowed T-Bills and bonds to be collateral, then we entered the realm where bonds and bills became money that simply paid interest. Money began paying interest with the Civil War to entice people to accept it. We have come full circle. The dollar is the reserve currency because it pays interest to hold it and the supply is deep enough for the world to use unlike the yen or the euro.
We are in the middle of a collapse in the economic structure upon which society was formed post-war. Marxism has combined with debt and this has produced a lethal dose that has poisoned the well. All governments are collapsing. They are fighting as nasty as they can desperately trying to hold on to their fleeting power. But the economic system is unsustainable as communism. This is the world we face. Wake up and smell the roses before the coffin closes.