Gold Beware 1152
The Monthly Bearish Reversal lies at 1152 and the drop previously was to 1151.40. A monthly closing beneath this 1152 area will open the door to a further decline. The technical support lines up also with the 1980 high area of $875. The first quarter here in 2014 looks choppy, but thereafter, get ready for the increase in volatility. Even the oscillators show this ain’t over yet until the fat lady sings – as they say. Yet they never get tired of painting every sharp break as just another manipulation. I really do not understand if that is support to suggest that they are not wrong even though the price keeps pressing lower? To these diehards, it seems that gold has become a hedge against making money. Gold will have its day in the sun, but it is just not yet ready for prime time. It is still an off-Broadway show.
Education becoming a Fraud?
I have reported that over 60% of students cannot find work in the field of their major upon graduation, I have been asked to teach at one of the most prestigious universities in the world. I was shocked in a private meeting they admitted what they were teaching in economics did not work. Nevertheless, they do not tell their students that. I find it more difficult to take someone with an MBA and finance degrees as an employee than simply those who are interested in the subject. The school trained comes with biases that have to be all undone – a huge waste of time and effort on my part. Someone keen to learn th subject is far better to hire than someone with prestigious degrees,
The same is true in law. Those graduating law school are really a dime a dozen. The big firms when they do hire them, treat them like illegal aliens. The pay is less than what they would have earned in another field. Now the Business Insider has published an interview of a 28 year graduate in law who says the same thing that I have been writing about. He feels the school committed fraud telling him he would easily find work based upon their training. A very eye-opening read.
Hedge Funds are now Too Big to Fail Qualifying them for Seizure if $100 billion+
The Federal Reserve began as a simple private sector clearing house/insurance fund, which is why the banks were the owners. Yes, the Fed was given the power to create money that was to be ELASTIC. They would create money during a bank panic to satisfy demand and then shrink it when depositors return to the banks. This was actually a good idea insofar as it could create cash when people were in a panic and that prevented the banks from closing and having to dump assets at pennies on the dollar such as mortgages, This was a fantastic idea to stabilize the economy in a panic. If people knew they would always get their cash, then there was no reason to panic.
The flaw in banking that makes it unstable and prone to panics is simple. For you see, the banking system was based upon borrowing from the public on demand paying short-term rates and lending long-term such as in mortgages and business loans. The entire model ASSUMED the yield-curve of long-term rates higher than short-term was standard. But in a panic, the yield-curve flips and becomes inverted were short-term rates rise above long-term.
The design of the Fed was correct, brilliant, and not some wild conspiracy. What happens is people, not knowing the history, always judge things but the current terms. In 1913, the Fed “stimulated” by purchasing corporate paperNOT GOVERNMENT. The entire thing was a private sector solution that worked. Now enters government. World War I starts and they need to issue debt so they INSTRUCTED the Fed to buy government bonds not corporate paper. Fine if this was temporary for the war. But the way government screws things up consistently, they never put anything back. The killed the real stimulus quality of the Fed that was its ability to restrain unemployment by supporting companies in time of need.
Add to this the idea that INFLATION = the rise in the QUANTITY of money, and suddenly the Fed is now seen as the inflation fighter and its job is now to sterilize the reckless spending of Congress. It was like Congress can go get anyone pregnant without any responsibility for the consequences.
The Fed always was set up with 12 branches BECAUSE it was discovered that there were regional capital flow problems. Therefore, proper to Franklin Roosevelt, each branch of the Fed was independent and it could lower the local interest rates when too much cash existed in its domain or raise it when there was a shortage. Corps come in and cash flows to the wheat belt. During planting, no cash is coming in, it all leaves. It was the NY Fed that tried to manipulate rates to influence international capital flows lowered US rates in hopes to deflecting the capital outflows from Europe. Pictured here were the four central bankers of NY, London, Paris, and Germany in their secret meeting to first try to manipulate international capital flows that backfired.
World War II enters and Roosevelt (1) usurps all power to Washington and imposes a single national interest rate abandoning the Fed design and purpose, and (2) instructs the Fed it was now required to support the government bond market at PAR using that ELASTIC authority to monetize debt to sterilized the cost of the war. The Fed was thus mandated to support the government bond market until 1951.
With the last 2007 Crisis, we created this idea of TOO BIG TO FAIL to support AIG and insurance company to prevent it from defaulting on Goldman Sachs. That scheme is now embedded within the system and nobody really understands that was ro save Goldman – not the economy. So the Fed, which was a private bank fund, is now guardian of the entire economy and can deem anything TOO BIG TO FAIL and take it over. It has now claimed that hedge funds in excess of $100 billion are the lucky candidates. They can deem anything now TOO BIG TO FAIL and have dictatorial powers over the private sector.
Now we are so far from its original purpose and design it is no longer a central bank. This was by no means a conspiracy hatched at Jekyll Island. This is a patch-work of government mismanagement as always. This is not some grand conspiracy that transcends generations. These people are not that smart and there is no collective consciousness in government. That is reserved for human kind – not government.Global Market Watch January 9th, 2014
The Global Market Watch has been posted for the close of January 9th, 2014.
What Are we Waiting for in Markets?
At some point we will experience a Cycle Inversion meaning the targets remain the same, but what we get is the opposite event. Why will this INVERT? At some point the THINKING process must flip whereas the FLIGHT to quality has been traditionally people sell private assets and run to government paper. But what happens when government is the problem? Capital will start to flee from government to the private sector assets. Although the USA did not default or even suspend its debt during the 1930s, the contagion affect from Europe still impacted the trends within the United States. Here we can see that the spread between AAA corporate paper and government paper began to narrow as people realized that government debt might be a problem. The City of Detroit defaulted back then as well,
The timing targets will not change – we just get the opposite event. I have demonstrated how the fixed cycle in gold produced highs going up and then the same cycle produce a low by 1985. We achieved a similar even on the ECM in 1987. The turning point came precisely to the day, but we achieved the LOW rather than the high. That enabled us to forecast that the low was in place and new highs would be seen by 1989.
What is possible currently is that if the share market backs off and moves into a February low, then a rally into late Summer is likely with the Fall correction. That could continue into a low for 2015.75 and this would suggest a possible cycle inversion meaning the flight to quality reverses post-2015.75 and instead of government debt, we see capital move into private assets. However, a high in Feb reverses the outcome.
The question that will need to be answered is what happens post-2015.75? We will go over this at the conferences. The traditional Flight-To-Quality being a rush to government paper may be the opposite so we see a rally as the flight unfolds with government paper. Even gold rallied with the downside of the ECM dramatically. It experiences a tough of the flight to quality.
These events are determined not by OPINION, but by the correlation of how all markets are responding. This produces a movement that is unified on a global scale. This is part of understanding who everything is connected. As long as the Dow does not exceed the December high, we cannot rule out a February low. That low may not be much to write home about. The depth is irrelevant unless we elect Weekly Bearish Reversals.