Decline From May 2 Top is Not Over Yet
We made a top on May 2 and we are in the process of making a Minor Wave
(1) of Large Wave 3 Circle Down . Minor Wave (1) itself has 5 steps in it.We completed Step one down in August. It was followed by a step 2 up
completed on Oct 28. We are going down in step 3 of Minor Wave (1).It will be followed by step 4 up and then step 5 down.This will complete only Minor Wave (1) of large Wave 3 Circle Down. Thus we are only at the start of a very big decline which will become more ferocious next year. S& P 500 SPX 2011-11-25_0500
We are at present oversold a bit and 200 to 300 point rally can start any time from lower levels.All rallies should be sold.
Notice how TZA (which is triple Bear of Russell 2000 RUT} is marching up while the market is going down in a stair step down fashion.TZA 2011-11-25_0543
TZA and FAZ are best tools for Dodge the Depression.These ETFs are your best friends right now for traders.
Death of Europe As we Know in 2012?
Nov. 23 (Bloomberg) — James Shugg, a senior economist at Westpac Banking Corp., talks about the outlook for the euro zone in 2012 and the role of the European Central Bank in backing indebted nations. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
Is Goldman Sachs to the Rescue?
No matter what they do now, the markets cannot be saved from the big coming decline. Read an interesting article below!!!
Goldman to the Rescue!
By
Bill Bonner
More pieces are coming together. Day by day, the puzzle takes shape. Not a pretty picture.
An epic battle is taking place. Between the forces of…
..inflation and deflation
..growth and depression
..credit expansion and credit destruction
..centralization and de-centralization
..politics and markets
..managed paper money and gold
..managed capitalism and the real thing
..control and wealth
..bull and bear
..greed and fear
..zombies and real working people.
Yes, dear reader, it’s quite a fight. Better than Frazier vs. Ali. And who’s gonna win?
Europe faces its “toughest hour since WWII,” says Angela Merkel. What does she propose? More centralization. Centralization got Europe into this mess — harmonizing interest rates so that the Greeks and Italians could borrow more. And now, more centralization, she believes, will get it out.
Europe is taking no chances. This debt problem is a slugger. What to do about it?
Who knows more about debt problems than anyone else? The people who cause them, of course. So, under great pressure from the centralized European authorities, Greece got rid of its Papandreou, after the man had the gall to suggest letting democracy work. He wanted the people to vote on further austerity measures. It replaced him with Papademos…a guy who won’t make the mistake of deferring to the masses. After all, he was vice-president of the European Central Bank for years. And he taught at the Kennedy School of Government at Harvard.
Meanwhile, Italy too has been forced to get rid of its popular, but difficult to control, elected leader — Silvio Berlusconi. It has put in a company man. Yes, a company man. What company? Goldman Sachs, of course. The new fellow, Mario Monti is an ex-Goldman guy. And so is the new fellow at the European Central Bank, Mario Draghi. Monti was also an EU commissioner. Draghi ran the Bank of Italy as the nation built up one of the world’s biggest piles of debt. Then, when Italy’s cost of borrowing shot over 7%, in came Monti and Draghi.
It is almost as if they planned it that way. Who’s the biggest seller of debt on the planet? We don’t know…but Goldman Sachs has to be up in the rankings somewhere. You’ll recall it was Goldman that helped Greece structure its debt so that it could abide by the letter of its treaty engagements with Europe but totally thumb its nose at the spirit of it.
And now the debt has blown up…and the Goldman boys are on the job, managing the mess they were so instrumental in creating.
What’s their solution? Oh come on…dear reader, you should know how this works by now. They propose more centralization, more management, more paper money, more debt, more inflation, more of everything you see on the right hand of our column above.
In other words, they believe that they know better than the people…or the market. They believe that their sanitized, homogenized, pasteurized Capitalism-in-a-Can works better than the real thing. Besides, they have a reason to believe it. This claptrap is the source of their power, status and money. Who knows, maybe their wives married them because of it.
Rather than renounce the program on which their reputations, careers and fortunes depend, they try to shore it up. They open up the can and see what they can use. They promise to reform the system, not reject it.
But every reform — unless it merely dismantles one of their previous reforms — is a manipulation…a price fix…and a scam. For example, they are proposing tax incentives to employers who hire youths and women. Good idea? Why not just drop some of the regulations and taxes that make it so expensive to hire youths and women in the first place? Nope. Then, they’d be giving up control. They’d be letting market forces decide who gets what.
Here’s another proposed reform, as reported in The Financial Times: “Wider social safety net to help those made redundant (laid off) and encourage labor mobility.” Typical rubbish. Spread a wider safety net and you discourage people from doing the hard work of finding new careers. But here’s one that will be popular with the managers: a “crackdown on tax evasion.” Are you kidding? Tax evasion is the only thing that keeps these economies going. People prevent their government from squandering their money. They spend it themselves. But the new Goldman guys won’t like it. They’ll want to get their hands on as much of that ‘black money’ as possible.
Meanwhile, what’s going on in the USA? Alas, the US economy is the hands of the same sort of people. The people who caused the mess…who did not see it coming…and who have not had a clue what to do about it. They’re still running US economic policy. These illustrious incompetents — such as Larry Summers of Obama’s National Economic Council and Tim Geithner, his Treasury Secretary — have proven that they wouldn’t know a Great Correction if it bit them on the behind…
So, they just keep adding more debt, more spending, more management, more ‘reform’ measures, and more centralization.
Ultimately, the elite managers of Europe and America all went to the same schools (Harvard, Yale, MIT…)…all read the same newspapers and magazines (The Financial Times and The Economist)…all worship the same gods (money and power)…all speak the same language (mid- Atlantic English)…and all want to control the world.
So far, they seem to be making great progress towards their objectives. They stuff the world with debt. It blows up. Then, they push out democratically-elected leaders…gain new power and authority…and take charge of the rescue.
Regards,
Bill Bonner
for The Daily Reckoning
The Big Decline Will Accelerate in Stocks Around The World
On May 2 , 2011 the US stock market made a high . It declined in first step down to 10400 in early October. From there we had a rally to 12284 which happened on Oct 28, 2011 in step 2 and the Step 3 down started from there.The step 3 itself has 5 steps down and each of
those steps also have 5 parts.( This is discussed more fully in our book.) First part of this 3rd leg down was completed on Nov. 1 at a value of 11634. We have had a rally from that level to end today at 12188 which is end of part 2. We have now started part 3 down which can take the DJI soon to 11000 to 11100. After usual short rallies we will go below 10400 which was the low in early October.
DJI 2011-11-08 Close
We already have started a big depression in Europe which will be followed by recession in USA in 2012. It cannot be stopped no matter what European Govts or US Federal Reserve or US Government does in the next 12 months.(There are some commentators
who call this decline as a recession in Europe.When unemployment is more than 20% this is Depression. Soon it will affect us all.)
Italy is the key and if you see the 10 year bond rate. It is already above 7.4%
Italian 10 year Bond2011-11-09_0424
Most Rallies Will Fail
It is interesting to see how so called bulls on the stock
market have no idea that earnings have nothing to do
with the stock markets going up.What matters is how
indebted all the developed countries are.
Italian 10 year bond Yield2011-11-02_0245 Take the case of Italy. There is a great pressure on poor Silvio Berlusconi.He
is trying to forget the Bunga-Bunga parties and the
underage prostitutes at these parties. Silvio’s
problem is in the bond market, where yields on the 10-year note rose to 6.3% yesterday.
Let us say you have a debt of 200% of GDP
and with an interest rate of 6%. Do
the math. You will be paying 12% of GDP just to keep
up with the interest payments on money you spent
many years ago In the US, that would be more than 30% of the
entire federal budget. It would be 2/3rds of all tax revenues.
It would be a disaster Bond investors aren’t stupid.
They would see immediately that they weren’t going to get
their money back. They would sell bonds...forcing up
interest rates even higher...and causing a meltdown of the whole system. That’s the thing about debt. Somebody always pays.
If not the debtor, as planned, then the creditor must pay.
Or the taxpayer. Debt never disappears. It represents resources that
have been borrowed from the future. And the future never forgets.
The future is a Shylock...always demanding its pound of flesh
at the most inconvenient moment.
If you are a trader what stock should you buy.
In a bear market ,
small capital stocks get crushed. One of the indexes that should be shorted is Russell 2000 (RUT) Corresponding to this is an ETF TZA.
When RUT goes down 10%, TZA goes up 30%. See the two charts here
for the last 3 days.RUT last 5 Days011-11-02_0256
and TZA last 5 days2011-11-02_0304
RUT went down 8% but TZA went up 24%.
Mind you it is for traders only.
We are in a very bearish phase of the market andno matter what happens in Eutozone, the markets are headed lower.
