Loading ...It’s good to hear your thinking the past couple of days; good posts. I don’t like to be on the opposite side of your trades; been there, done that before. Glad to be in such good company of technical, out-of-the-box, big picture thinkers like you, Rambus, Aurum and Sabre. I hope to see Sabre come back soon. Better watch out with all that deflation talk though…Sambuca will come for you soon. <g>
I deleted your picture because it was too big. If you could post using thumbnail, that woudl work better…thanks
Why would they want to give GM, FORD and CHRYSLER the money? Because it is an election year and both parties will fall all over themselves trying to show everyone who works in the automotive business that they “feel their pain” and will help maintain jobs of the American auto companies. I think they call it bribery or vote buying!
Scroll down to the weekly Dow Industrials chart. There we can see a possible H&S Top forming over the past two years. Neckline near 10500, and with a downside break of that a price objective of under 7000.
jessescrossroadscafe.blogspot.com/
The other charts are instructive too.
Quite a good analysis of why the US dollar rallied, and more.
globaleconomicanalysis.blogspot.com/2008/08/implications-of-slowing-global-economy.html
snip:
‘With a weakening global economy, default risk is rising everywhere. Unsurprisingly, the cost of raising capital is also rising. One implication is that junk bond yields and yields on preferred stock of even the highest grades are going to soar. And soaring corporate bond spreads are never good for the equity markets in general, at least over the long haul. A second implication is that treasury yields are poised to fall, not only in a flight to safety scenario, but also because the savings rate in the US can be expected to rise, and with that, internal demand for treasuries in the US will rise.
‘This is of course exactly what one should expect in deflation, with deflation being properly defined as a net contraction in credit and money. Credit, especially credit marked to market (and the latter has a long, long way to go), is contracting rapidly.
‘Those focused on prices and the rear view mirror of the CPI are simply focused on the wrong things when it comes to treasury yields. The important things to focus on are the deflationary forces of sinking asset prices, the effect that bank writeoffs will have on future bank lending, and the lagging effects of the CPI itself.’
This is it? lol where we heard that before…..
See the first 10 charts for why this chart is important, might take a good look to see why, and I am all about hearing a debate about why it is not!
ps: where did your gold stock leverage end. Read the McKewen quote………
Why would anyone want to do such a thing ?.For the last 50 years everytime the Union went on strike they called in Federal mediators who’s advice always ended in give the Union what they want and Raise your prices.That was the Federal advice always…The U.S. public had to pay about $2000 in health care cost for every car they bought in addition to very generous Pension promises and Pay guarantees to get paid even when they didn’t operate the assembly plants .They got paid for not working.Prior to going on strike these thugs would kick in the doors as cars rolled by on the assembly plant ,it was give us what we want or else !I have visited GM plants in Linden N.J.,and Ford plants in Mahwah N.J. years ago and this is what occured there.The public who 50 % of them never earned as much as an auto worker and 50 % of whom never had health care in their lives at all were forced to subsidize these thugs everytime they bought a car.I’m old enough to remember these things ,and thats how GM and Ford got in the situation there in.I have owned Toyotas for the last 30 years and NEVER had to take one back to the shop for anything AND my current COROLLA gets 40 mpg !,in addition the Japanese buy our Bonds and have built plants in the U.S.!Why would I ever consider keeping GM or Ford in business?
Inflation will abate due to loss of momentum. The price rises that we see today in food and other things do represent inflation; however, it is the inflation due to the past. The rise in oil since 1999 is now showing us that higher oil prices mean higher food and other costs.
I think that we are at a crossover point; it could last months or even a few years. During this time the forces that put inflation into play are weakening, and so the power of these forces to promote inflation is also weakening. These forces include the use of bubbles to create a wealth effect. We have seen the dot.com bubble, and the housing bubble, and even a general stock markets rise over the past few years.
I used to wonder where all the money came from to create the volume in the indexes. Now we know that it was from the derivatives. That dog now won’t hunt. So I think that we will see less upside volume and more downside volume generally. This is reflected in the falling weekly MACD that I mentioned to Fully a few minutes ago. It has been trending down in the $SPX for over a year, and for a few months in $GOLD. I interpret this to mean that momentum is now down.
This down momentum in price of gold, stocks as represented by the S&P500, the $SPX, house prices and other goods that had earlier created a wealth effect, will not be available for some time, to create a wealth effect. Instead, they will create a poverty effect, and limit borrowing and spending, imo. This momentum will argue against inflation’s power over the coming months, and will lessen its power over time. At some point, perhaps in a year or two we could see that downward momentum will turn the past hundred years of inflation into a deflation.
It would be helpful to revisit some of the Long Wave sites to develop an understanding of what the Long Wave people are thinking. Here is one at the link below.
www.thelongwaveanalyst.ca/news/2008/08_01_15_Economy.htm
snip:
‘Inflation vs. deflation
‘The size and scale of the approaching recession is impossible to forecast. The real estate and stock markets will undoubtedly see trillions of dollars in losses, but what about the estimated $300 trillion dollars of derivatives, credit default swaps and other abstruse counterparty options? Will the global economy freeze up when that ocean of cyber-capital suddenly evaporates? Will that virtual wealth simply vanish into the ether when the underlying assets (CDOs, MBSes, ABCP) are downgraded to pennies on the dollar, or when the number of home foreclosures catapults into the millions, or when the dollar slips to a fraction of its current value? No one really knows.
‘But Atlanta Fed President Dennis Lockhart summarized what we can expect in a speech he gave last week, titled “The Economy in 2008.” He said, “A sober assessment of risks must take account of the possibility of protracted financial market instability together with weakening housing prices, volatile and high energy prices, continued dollar depreciation, and elevated inflation.”
‘Amen.
‘What the upcoming recession “will look like” has been the topic of a fierce debate on the Internet. Everyone seems to agree that this is not a typical economic downturn resulting from overproduction, under-consumption or malinvestment. Rather, it is the crashing of humongous equity bubbles that were generated by the Fed’s abusive expansion of credit and the unprecedented proliferation of opaque structured-debt instruments. Many believe that the unwinding of these bubbles will trigger a round of hyperinflation, which is already evident in soaring food, energy and health care costs. These prices are bound to increase substantially as the Fed continues to cut rates and further undermine the dollar.
‘But the real issue (it seems to me) is the unfathomable loss of market capitalization, the growing insolvency of maxed-out consumers, and the inability of the banks to freely extend credit to responsible loan applicants. These three things are likely to drag down all asset-classes, slow business activity to a crawl, and compel consumers to hoard rather than spend. The dollar will strengthen in a deflationary environment. (if that is any consolation?)
‘Paul L. Kasriel, Sr. V.P. and Director of Economic Research at The Northern Trust Company, answers some typical questions about deflation in a recent interview with economic guru Mike Shedlock (Mish).
‘Mish: Would you say that consumer debt in the US as opposed to the lack of consumer debt in Japan increases the deflationary pressures on the US economy?
‘Kasriel: Yes, absolutely. The latest figures that I have show that banks’ exposure to the mortgage market is at 62 percent of their total earnings assets, an all time high. If a prolonged housing bust ensues, banks could be in big trouble.
‘Mish: What if Bernanke cuts interest rates to 1 percent?
‘Kasriel: In a sustained housing bust that causes banks to take a big hit to their capital it simply will not matter. This is essentially what happened recently in Japan and also in the US during the Great Depression.
‘Mish: Can you elaborate?
‘Kasriel: Most people are not aware of actions the Fed took during the Great Depression. Bernanke claims that the Fed did not act strong enough during the Great Depression. This is simply not true. The Fed slashed interest rates and injected huge sums of base money but it did no good. More recently, Japan did the same thing. It also did no good. If default rates get high enough, banks will simply be unwilling to lend which will severely limit money and credit creation.
‘Mish: How does inflation start and end?
‘Kasriel: Inflation starts with expansion of money and credit. Inflation ends when the central bank is no longer able or willing to extend credit and/or when consumers and businesses are no longer willing to borrow because further expansion and/or speculation no longer makes any economic sense.
‘Mish: So when does it all end?
‘Kasriel: That is extremely difficult to project. If the current housing recession were to turn into a housing depression, leading to massive mortgage defaults, it could end. Alternatively, if there were a run on the dollar in the foreign exchange market, price inflation could spike up and the Fed would have no choice but to raise interest rates aggressively. Given the record leverage in the U.S. economy, the rise in interest rates would prompt large-scale bankruptcies. These are the two “checkmate” scenarios that come to mind. (Read the whole interview.)
‘Summary: When banks don’t lend and consumers don’t borrow; the economy crashes. End of story. The whole system is predicated on the prudent use of credit. That system is now in terminal distress. Everyone to the bunkers. ‘
the U.S. dollar is strong. I wonder why? Is it because someone declared that THE U.S. DOLLAR IS STRONG ? This seems to have an influence on the price of gold and silver. For now [G], but I think these circumstances will change sometime in the future, but I havent a clue when. Cheers. Equiz.
But the volume on the monthly with the fan line support etc seems to suggest a obamawhammer rally., maybe 12225 close basis neckline and fib?
I dont know but the all time high dow volume on that monthly wick is compelling.
That will add to the bearish signals.
