# Market Going Up Because of the Government



## Toro

Not sure how much of this I believe of this.

Robert Reich's Blog: Why the Dow is Hitting 10,000 Even When Consumers Can't Buy And Business Cries "Socialism"


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## TTPANL

If Government regulates properly, the market will always go up.

Must monitor the crooks !


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## Oddball

Pffffft!

Just wait 'til the printing presses get a-hummin' and inflation wipes out all those paper gains.


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## DavidS

Dude said:


> Pffffft!
> 
> Just wait 'til the printing presses get a-hummin' and inflation wipes out all those paper gains.



Actually the market will be more impacted when the Feds raise interest rates next year.


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## CrusaderFrank

Taking advise from Robert Reich on the economy is like asking Martha Steward to rebuild your car engine


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## Annie

From what I can see the only jobs gained have been on the fed level. No movement on producers. We're screwed.


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## Zander

As I predicted here earlier in Sept, the bear market rally is running out of steam and forming a very nice top.  Next stop...STRAIGHT DOWN. We are entering a period of severe declines in all the markets compliments of Deflation.  Nothing will be safe; real estate,  commodities, bonds,  and stocks will all drop and drop precipitously. Oddly the only safe haven will be the US DOLLAR. The dollar is about to start a strong rally against the yen and euro.  Take my advice - move all of your assets to short term T-BILLS and do it NOW.


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## Toro

Zander

You may eventually be correct but so far, there is no evidence that we are topping out.  This sell-off appears to be nothing more than a mild pull-back on light volume in an uptrend.  We'll only know if we're topping out at least a few weeks from now.


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## Zander

Toro said:


> Zander
> 
> You may eventually be correct but so far, there is no evidence that we are topping out.  This sell-off appears to be nothing more than a mild pull-back on light volume in an uptrend.  We'll only know if we're topping out at least a few weeks from now.



Bear market rallies die on light volume. Right now, all the technical indicators call for a major reversal. Next week we have some financial numbers coming out, they will probably be bad. That could be the  start of the downturn.  Once it turns negative.........look out below!!!


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## mal

Zander said:


> Toro said:
> 
> 
> 
> Zander
> 
> You may eventually be correct but so far, there is no evidence that we are topping out.  This sell-off appears to be nothing more than a mild pull-back on light volume in an uptrend.  We'll only know if we're topping out at least a few weeks from now.
> 
> 
> 
> 
> Bear market rallies die on light volume. Right now, all the technical indicators call for a major reversal. Next week we have some financial numbers coming out, they will probably be bad. That could be the  start of the downturn.  Once it turns negative.........look out below!!!
Click to expand...


And?... Markets go up and down...

I'd like to see what some here were Saying when it was below 7,000...

I Know I Heard, just like Gas Prices Never going back Down, that the Market was Done...

Yet it's Pushing 10K again.

And it may Fall back some... It's Fall, after all... Would be Symbolic.

I can tell you this, there isn't enough Credit given to Fuel Prices for this Economic Problem we have Found ourselves in.

When Gas was over $4 a Gallon, it was Kicking EVERYBODY'S Ass...

Things have Seemed to Mellowed since the Price of Gas has.



peace...



peace...


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## Paulie

Zander said:


> Toro said:
> 
> 
> 
> Zander
> 
> You may eventually be correct but so far, there is no evidence that we are topping out.  This sell-off appears to be nothing more than a mild pull-back on light volume in an uptrend.  We'll only know if we're topping out at least a few weeks from now.
> 
> 
> 
> 
> Bear market rallies die on light volume. Right now, all the technical indicators call for a major reversal. Next week we have some financial numbers coming out, they will probably be bad. That could be the  start of the downturn.  Once it turns negative.........look out below!!!
Click to expand...


Investors have shrugged off bad numbers now for months. 

What makes you think this time will be any different?

As techs go, I do agree that a correction should be coming at some time, since there really hasn't been much of one since the March bottom.

I'm not sure about "look out below" though.  Businesses and people have been deleveraging and getting their balance sheets right.  At some point, the excess liquidity is going to enter the market in significance, and continue chasing assets.  There's really no reason to believe that the CURRENT liquidity trap we seem to be experiencing is going to continue in perpetuity.  

I'm not sure we'll see a notable drop in the market until the Fed raises rates.  And it looks as though they won't be doing that until banks start opening up and lending again.

Considering the Fed is usually always too late on that, and the fact that the monetary base is at an historic level, what fundamental(s) do you see that points to deflation?


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## Toro

I don't know what is going to happen, but as I write this, the SP500 is up 19 and the Dow is up 140.  This has been the behavior of the market the past few months.  We go up sharply, we have a mild pullback, people get bearish suddenly and the market resumes its upward march.  At some point, this will end, but there is no evidence that it is ending now.

That is why that if we are topping, we have to wait a few weeks to know.  Topping is a process and have seen scant evidence of it yet.

Other assets may be topping.  Copper for instance and maybe oil.  They may be sending a signal that stocks are going to have trouble from here.


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## mal

Ain't that about a Bitch... It's up 150ish...

Yo, Zander!... 



peace...


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## Zander

tha malcontent said:


> Ain't that about a Bitch... It's up 150ish...
> 
> Yo, Zander!...
> 
> 
> 
> peace...



If you are bullish, buy stocks!!  

Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.


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## mal

Zander said:


> tha malcontent said:
> 
> 
> 
> Ain't that about a Bitch... It's up 150ish...
> 
> Yo, Zander!...
> 
> 
> 
> peace...
> 
> 
> 
> 
> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.
Click to expand...


I have been Buyin' Shares CHEAP for a while now...

Those who Pulled out, Paid Penalties and Taxes...

I am WAY Ahead of them, and I don't have to Buy back in.



peace...


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## Paulie

Zander said:


> tha malcontent said:
> 
> 
> 
> Ain't that about a Bitch... It's up 150ish...
> 
> Yo, Zander!...
> 
> 
> 
> peace...
> 
> 
> 
> 
> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.
Click to expand...


I haven't really seen you provide a comprehensive analysis on why you think we're looking at deflation.

Could you?  Because I'm really interested in hearing why you think so.

Forget about technicals, I'd like to see you use fundamentals in your assessment.


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## Oddball

Toro said:


> I don't know what is going to happen, but as I write this, the SP500 is up 19 and the Dow is up 140.  This has been the behavior of the market the past few months.  We go up sharply, we have a mild pullback, people get bearish suddenly and the market resumes its upward march.  At some point, this will end, but there is no evidence that it is ending now.
> 
> That is why that if we are topping, we have to wait a few weeks to know.  Topping is a process and have seen scant evidence of it yet.
> 
> Other assets may be topping.  Copper for instance and maybe oil.  They may be sending a signal that stocks are going to have trouble from here.


Then it's arguable as to whether gubmint's making the market go up (a dubious argument if there ever was one) is a band-aid at best and a complete mirage at worst.


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## KittenKoder

Let me guess, the government is also taking the credit for the sun coming up this morning, since it went down last night.


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## Toro

Dude said:


> Then it's arguable as to whether gubmint's making the market go up (a dubious argument if there ever was one) is a band-aid at best and a complete mirage at worst.



I don't know.

It is also arguable that government stepped in and bought the market when it was cheap when the rest of the so-called intelligent investment community was running for their lives like chickens with their heads cut off.

Of course, government is always wrong...



> Former Federal Reserve Chairman Alan Greenspan, who in 1998 criticized Hong Kong&#8217;s central bank for purchasing $15 billion in stocks during the Asian financial crisis, now calls it a savvy move.
> 
> &#8220;It turned out that his timing was exquisite,&#8221; Greenspan said, referring to Joseph Yam, who plans to retire Oct. 1 after 16 years as chief executive of the Hong Kong Monetary Authority.
> 
> &#8220;It was a risky action, but he pulled it off,&#8221; as share prices rose for several years, the former Fed chief said in a telephone interview today. &#8220;I wouldn&#8217;t recommend that as a general rule for central banks.&#8221;
> 
> Yam, 60, bought the shares 11 years ago in a successful effort to defend Hong Kong&#8217;s dollar. Greenspan told the House Banking Committee in September 1998 that the strategy would fail and erode &#8220;some of the extraordinary credibility&#8221; of the HKMA.



Greenspan Says Hong Kongâ&#8364;&#8482;s Yam Was Right to Buy Stocks in 1998 - Bloomberg.com

The Hong Kong Authority made a fortune when all the "wise" investors thought it was a good idea to sell stocks at generational lows.

I spent a week in New York at the beginning of February, meeting some of the smartest people on Wall Street, and they were *all* convinced that the world was falling apart.  Every single one of them.  Well, OK, that's an exaggeration.  *One* person thought stocks would be higher 10 years from now.


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## Toro

Zander said:


> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.



I've been selling stocks as they hit my price targets because I agree that it is probably a bear market rally.

The problem is that everyone I know thinks its a bear market rally.  Usually, when everyone I know agrees on something, it turns out to be false.


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## Zander

Toro said:


> Zander said:
> 
> 
> 
> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.
> 
> 
> 
> 
> I've been selling stocks as they hit my price targets because I agree that it is probably a bear market rally.
> 
> The problem is that everyone I know thinks its a bear market rally.  Usually, when everyone I know agrees on something, it turns out to be false.
Click to expand...


I would normally agree, but Investorintelligence.com has bullish sentiment over 90%.  The last time bullish sentiment was this "frothy" was last year, just before it crashed......


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## Zander

Paulie said:


> Zander said:
> 
> 
> 
> 
> 
> tha malcontent said:
> 
> 
> 
> Ain't that about a Bitch... It's up 150ish...
> 
> Yo, Zander!...
> 
> 
> 
> peace...
> 
> 
> 
> 
> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.
> 
> Click to expand...
> 
> 
> I haven't really seen you provide a comprehensive analysis on why you think we're looking at deflation.
> 
> Could you?  Because I'm really interested in hearing why you think so.
> 
> Forget about technicals, I'd like to see you use fundamentals in your assessment.
Click to expand...


I will post something later tonight...It's DINNER TIME!!!


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## Zander

Zander said:


> Paulie said:
> 
> 
> 
> 
> 
> Zander said:
> 
> 
> 
> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.
> 
> 
> 
> 
> I haven't really seen you provide a comprehensive analysis on why you think we're looking at deflation.
> 
> Could you?  Because I'm really interested in hearing why you think so.
> 
> Forget about technicals, I'd like to see you use fundamentals in your assessment.
> 
> Click to expand...
> 
> 
> I will post something later tonight...It's DINNER TIME!!!
Click to expand...

Read this
The Case for Deflation ~ Washington's Blog
and this
Pomp & Surkanstance: the case for deflation - why stimulus spending won't help
Then we can discus.....


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## Toro

Zander said:


> Toro said:
> 
> 
> 
> 
> 
> Zander said:
> 
> 
> 
> If you are bullish, buy stocks!!
> 
> Personally, I don't try to predict the daily gyrations of the stock market, I look at the long term trend. Right now the long term trend is down. This is a classic bear market rally that is running out of steam.  I will be content to sit on the sidelines in short term treasuries.
> 
> 
> 
> 
> I've been selling stocks as they hit my price targets because I agree that it is probably a bear market rally.
> 
> The problem is that everyone I know thinks its a bear market rally.  Usually, when everyone I know agrees on something, it turns out to be false.
> 
> Click to expand...
> 
> 
> I would normally agree, but Investorintelligence.com has bullish sentiment over 90%.  The last time bullish sentiment was this "frothy" was last year, just before it crashed......
Click to expand...


Can you link that?  I track the II poll and I haven't seen that.  A few weeks ago, it was in the mid-50s.  

Put/Call ratio was over 90% during the last three days of last week.  The market usually goes up when that happens.  Today, it did.

This is from RealMoney a few days ago.



> Helene Meisler
> Sentiment
> 9/24/2009 8:22 AM EDT
> Keeping in mind that the 'voting' for AAII's weekly survey closes on Tuesday, I find it fascinating that this week's report chimes in at only 39% bulls and 44% bears.
> 
> Just a few short weeks ago we had 51% bulls.
> 
> Position: Is this a wall of worry?



http://www.thestreet.com/p/_search/dps/cc/20090924/columnistconversation1.html#entryId10602788

So it appears that sentiment is still pretty bearish.


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## mal

KittenKoder said:


> Let me guess, the government is also taking the credit for the sun coming up this morning, since it went down last night.



Well, it did come up... How do you Explain that!

If Glorious Leader didn't Will it, like the Perfection he Created in Chicago as a Community and Political Leader, before Leaving the Utopia to Feed on itself, then who did?



peace...


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## midcan5

That piece was actually cautionary as it is unclear about next steps. Keynesian policy works, FDR, and even Reagan followed that path.  What I find interesting is the negative tone of so many on the right who seem to think the economy is run by magic and the fed only screws up in spite of contrary evidence. Jobs are certainly a concern as corporations compete in a global market where Americans are the consumers but not the producers.


The GD remains the most interesting time for study.

The Great Depression, to 1935
Timeline of the Great Depression


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## Oddball

If it's anyone who thinks the economy runs by magic, it's Keynesean David Copperfield wannabes.

And half-baked nutjob economic meddling during the depression is instructive, but not in the ways you thought it is: Great Myths of the Great Depression [Mackinac Center]


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## Paulie

midcan5 said:


> That piece was actually cautionary as it is unclear about next steps. Keynesian policy works, FDR, and even Reagan followed that path.  What I find interesting is the negative tone of so many on the right who seem to think the economy is run by magic and the fed only screws up in spite of contrary evidence. Jobs are certainly a concern as corporations compete in a global market where Americans are the consumers but not the producers.
> 
> 
> The GD remains the most interesting time for study.
> 
> The Great Depression, to 1935
> Timeline of the Great Depression



When you say '...the fed only screws up..." are you talking about the Federal Reserve, or just the gov. in general?

Because the Federal Reserve's primary goal is to keep prices stable through monetary policy.  How's that worked out for them so far in their almost 100 years of existence?


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## Oddball

Paulie said:


> Because the Federal Reserve's primary goal is to keep prices stable through monetary policy.  How's that worked out for them so far in their almost 100 years of existence?


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## Paulie

Zander said:


> Zander said:
> 
> 
> 
> 
> 
> Paulie said:
> 
> 
> 
> I haven't really seen you provide a comprehensive analysis on why you think we're looking at deflation.
> 
> Could you?  Because I'm really interested in hearing why you think so.
> 
> Forget about technicals, I'd like to see you use fundamentals in your assessment.
> 
> 
> 
> 
> I will post something later tonight...It's DINNER TIME!!!
> 
> Click to expand...
> 
> Read this
> The Case for Deflation ~ Washington's Blog
> and this
> Pomp & Surkanstance: the case for deflation - why stimulus spending won't help
> Then we can discus.....
Click to expand...


If your only reason for thinking this is based on some blogger or news article, then this conversation is already over.

If you have some economic knowledge with which you'd like to use in your analysis, then let's hear it.  I'm all ears.

All I'm asking you to do is pretend you're an economist and give a personal analysis.  That's what I do.  I take my knowledge, and I analyze.  I don't let a single other person anywhere influence my opinion when it comes to that.  Just what I know based on monetary policy moves, fiscal policy moves, private sector business fundamentals, etc.

I use chart analysis a little too when I trade, but I'm asking you to look past technicals and use the _fundamentals_ that you see with your own eyes.


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## Maple

Toro said:


> Not sure how much of this I believe of this.
> 
> Robert Reich's Blog: Why the Dow is Hitting 10,000 Even When Consumers Can't Buy And Business Cries "Socialism"



It just signals that the banks are no longer on a cliff, get ready for the double dip recession coming soon. When consumers are not spending because they have no money because they have no jobs, this will eventually send the market south again.


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## Toro

The market took an old fashioned beating today.  

It is clear the market has rolled over in the near-term.  The question is whether this is the beginning of a topping process if it is a pull back in the uptrend.

My guess is that it is a pull back in the uptrend, and that next year we will see the intermediate top in the market.  However, one can never rule out any scenario!


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## Annie

I've admitted my economic ignorance many a time. What I know, seems real estate hasn't bottomed out, in fact seems to be worsening. Saturn is toast, GM not far behind. The only job gains are on the federal government column, which doesn't bode well. Unemployment in all other sectors, UP, before Saturn news.


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## Zander

After a 2% drop in all the indexes today, tomorrow's jobs report could be the impetus for even more severe declines. Interestingly, stocks, bonds, and commodities all dropped - diversification amongst asset classes didn't do squat.     I remain bullish on the dollar and bearish on everything else.


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## Toro

I would say two things. 

First, the market was hammered before the last jobs report, then went higher.

Second, stocks sold off hard just before quarter two earnings were reported, and totally screamed higher when companies started reporting after looking like they were about to break down.

We may be topping out but we are entering the strongest time of year, lots of money managers are underperforming, there is a boatload of cash on the sidelines, and there are eerie parallels to prior sell-offs.


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## Zander

We'll see.  No jobs, no earnings, not much to be bullish about. Once sentiment turns negative...........




















LOOK OUT BELOW!!!!


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## Toro

Earnings are probably going to come in better than expected.


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## Zander

Toro said:


> Earnings are probably going to come in better than expected.



Permabull much??


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## Paulie

Zander I still haven't seen you post your own fundamental analysis on why you see deflation in the future.

No links to someone else's opinion, I'm interested in seeing how you came to your conclusion if you in fact utilized more than just the opinions of others.


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## Zander

Paulie said:


> Zander I still haven't seen you post your own fundamental analysis on why you see deflation in the future.
> 
> No links to someone else's opinion, I'm interested in seeing how you came to your conclusion if you in fact utilized more than just the opinions of others.



Sorry to disappoint you, but I do not use fundamental analysis. I prefer technical analysis. I use the Elliot Wave theory. We are just beginning a wave 3 downturn.  It is a remarkably accurate system. The timing is sometimes early, but the end results speak for themselves. 

In my experience, fundamental analysis is wrong so often that it is shocking. For instance, at the top of the market last July most "fundamental analysts" were calling for a continuation of the bull market citing all sorts of positive fundamentals. I am sure a few were bearish, bu I don't know of any that were calling for the massive downturn that took place last Sept-March. Yet almost every Elliot wave theorist out there had predicted the downturn. Most were early (Robert Prechter had his clients out and in short term treasuries a full six months earlier - that paid off rather handsomely as the flight to quality that ensued drove up the prices of treasuries) , but I'd rather be early than late when it comes to downturns.  Prechter had his clients get back into equities in early March, just before the run up. A few weeks ago he recommended going back to short term t-bills and cash.  Right now the market is in the midst of a "grand supercycle" in the downard direction. I am not a market trader, I go with the long term trend. I will remain in cash and t-bills until the markets technical signals change.  Best of luck to you in whatever you do.


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## Paulie

Zander said:


> Paulie said:
> 
> 
> 
> Zander I still haven't seen you post your own fundamental analysis on why you see deflation in the future.
> 
> No links to someone else's opinion, I'm interested in seeing how you came to your conclusion if you in fact utilized more than just the opinions of others.
> 
> 
> 
> 
> Sorry to disappoint you, but I do not use fundamental analysis. I prefer technical analysis. I use the Elliot Wave theory. We are just beginning a wave 3 downturn.  It is a remarkably accurate system. The timing is sometimes early, but the end results speak for themselves.
> 
> In my experience, fundamental analysis is wrong so often that it is shocking. For instance, at the top of the market last July most "fundamental analysts" were calling for a continuation of the bull market citing all sorts of positive fundamentals. I am sure a few were bearish, bu I don't know of any that were calling for the massive downturn that took place last Sept-March. Yet almost every Elliot wave theorist out there had predicted the downturn. Most were early (Robert Prechter had his clients out and in short term treasuries a full six months earlier - that paid off rather handsomely as the flight to quality that ensued drove up the prices of treasuries) , but I'd rather be early than late when it comes to downturns.  Prechter had his clients get back into equities in early March, just before the run up. A few weeks ago he recommended going back to short term t-bills and cash.  Right now the market is in the midst of a "grand supercycle" in the downard direction. I am not a market trader, I go with the long term trend. I will remain in cash and t-bills until the markets technical signals change.  Best of luck to you in whatever you do.
Click to expand...

First of all, I asked for a fundamental analysis for why you see deflation, not for what the markets are going to do.  I just want to know why you think there's deflation on the horizon in the face of the current monetary base.

But regardless, as far as the markets are concerned, you were looking at what OTHERS were saying.  Just because most of the mainstream economists are idiots doesn't mean you should distrust your OWN fundamental analysis.

Last July, there were almost ZERO bullish fundamental indicators.  The mainstream heads were saying there were because they know most sheep trust them, and it bought time for the insiders and other big boys to exit their positions first.

The fundamentals last July showed every indication to anyone above laymen status that it was time to get out.  Bank balance sheets were on the brink, the system was completely saturated with extreme amounts of debt, a recession had already begun 6 months prior to that, which most people knew without having to wait until the government finally admitted it AFTER the collapse.

The problem was trust.  Regular old ordinary people trust the government and media way too much and got burned.  The fundamentals of last July don't exist today in that form.  While they're certainly not great, they're better and continuing to GET better.  There's room for growth right now, the only thing that worries me is the extent of the government's involvement up to this point, and whether the Fed can somehow pull off a miracle and escape the inflation that seems imminent at this point.

Tell me why inflation is NOT imminent.  That's what I'm dying to hear from you.  I haven't heard that opinion from ANYONE, not even the media.  It's a unique opinion these days, and I'd love to hear how you're coming up with it.


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## FactFinder

Paulie said:


> Zander said:
> 
> 
> 
> 
> 
> Paulie said:
> 
> 
> 
> Zander I still haven't seen you post your own fundamental analysis on why you see deflation in the future.
> 
> No links to someone else's opinion, I'm interested in seeing how you came to your conclusion if you in fact utilized more than just the opinions of others.
> 
> 
> 
> 
> Sorry to disappoint you, but I do not use fundamental analysis. I prefer technical analysis. I use the Elliot Wave theory. We are just beginning a wave 3 downturn.  It is a remarkably accurate system. The timing is sometimes early, but the end results speak for themselves.
> 
> In my experience, fundamental analysis is wrong so often that it is shocking. For instance, at the top of the market last July most "fundamental analysts" were calling for a continuation of the bull market citing all sorts of positive fundamentals. I am sure a few were bearish, bu I don't know of any that were calling for the massive downturn that took place last Sept-March. Yet almost every Elliot wave theorist out there had predicted the downturn. Most were early (Robert Prechter had his clients out and in short term treasuries a full six months earlier - that paid off rather handsomely as the flight to quality that ensued drove up the prices of treasuries) , but I'd rather be early than late when it comes to downturns.  Prechter had his clients get back into equities in early March, just before the run up. A few weeks ago he recommended going back to short term t-bills and cash.  Right now the market is in the midst of a "grand supercycle" in the downard direction. I am not a market trader, I go with the long term trend. I will remain in cash and t-bills until the markets technical signals change.  Best of luck to you in whatever you do.
> 
> Click to expand...
> 
> First of all, I asked for a fundamental analysis for why you see deflation, not for what the markets are going to do.  I just want to know why you think there's deflation on the horizon in the face of the current monetary base.
> 
> But regardless, as far as the markets are concerned, you were looking at what OTHERS were saying.  Just because most of the mainstream economists are idiots doesn't mean you should distrust your OWN fundamental analysis.
> 
> Last July, there were almost ZERO bullish fundamental indicators.  The mainstream heads were saying there were because they know most sheep trust them, and it bought time for the insiders and other big boys to exit their positions first.
> 
> The fundamentals last July showed every indication to anyone above laymen status that it was time to get out.  Bank balance sheets were on the brink, the system was completely saturated with extreme amounts of debt, a recession had already begun 6 months prior to that, which most people knew without having to wait until the government finally admitted it AFTER the collapse.
> 
> The problem was trust.  Regular old ordinary people trust the government and media way too much and got burned.  The fundamentals of last July don't exist today in that form.  While they're certainly not great, they're better and continuing to GET better.  There's room for growth right now, the only thing that worries me is the extent of the government's involvement up to this point, and whether the Fed can somehow pull off a miracle and escape the inflation that seems imminent at this point.
> 
> Tell me why inflation is NOT imminent.  That's what I'm dying to hear from you.  I haven't heard that opinion from ANYONE, not even the media.  It's a unique opinion these days, and I'd love to hear how you're coming up with it.
Click to expand...


This is a bit simplistic but it works for me.

If the wave analysis is correct then the market is going down when consumer confidence is also shaky. 
Even less buying would ensue. The simple supply/demand theory kicks in and prices will have to go lower. 
Now when the wave hits the up cycle....Watch out. The fed is already acutely aware of that danger. We could even find ourselves wishing for the 'good ole days' of lower double digit inflation of the Carter days.


----------



## Zander

Here is why we are facing deflation. The Credit bubble exploded last year. Fed attempts to re-inflate credit by massive injection of liquidity. Banks take new funds but still say no to new loans. Credit continues to contract albeit more slowly. Result= Deflation. The amount of currency in the USA is less than 1/100th of the amount of "Credit".  The Fed can not print money fast enough to defeat the forces of deflation. It is inevitable.


----------



## Paulie

FactFinder said:


> Paulie said:
> 
> 
> 
> 
> 
> Zander said:
> 
> 
> 
> Sorry to disappoint you, but I do not use fundamental analysis. I prefer technical analysis. I use the Elliot Wave theory. We are just beginning a wave 3 downturn.  It is a remarkably accurate system. The timing is sometimes early, but the end results speak for themselves.
> 
> In my experience, fundamental analysis is wrong so often that it is shocking. For instance, at the top of the market last July most "fundamental analysts" were calling for a continuation of the bull market citing all sorts of positive fundamentals. I am sure a few were bearish, bu I don't know of any that were calling for the massive downturn that took place last Sept-March. Yet almost every Elliot wave theorist out there had predicted the downturn. Most were early (Robert Prechter had his clients out and in short term treasuries a full six months earlier - that paid off rather handsomely as the flight to quality that ensued drove up the prices of treasuries) , but I'd rather be early than late when it comes to downturns.  Prechter had his clients get back into equities in early March, just before the run up. A few weeks ago he recommended going back to short term t-bills and cash.  Right now the market is in the midst of a "grand supercycle" in the downard direction. I am not a market trader, I go with the long term trend. I will remain in cash and t-bills until the markets technical signals change.  Best of luck to you in whatever you do.
> 
> 
> 
> First of all, I asked for a fundamental analysis for why you see deflation, not for what the markets are going to do.  I just want to know why you think there's deflation on the horizon in the face of the current monetary base.
> 
> But regardless, as far as the markets are concerned, you were looking at what OTHERS were saying.  Just because most of the mainstream economists are idiots doesn't mean you should distrust your OWN fundamental analysis.
> 
> Last July, there were almost ZERO bullish fundamental indicators.  The mainstream heads were saying there were because they know most sheep trust them, and it bought time for the insiders and other big boys to exit their positions first.
> 
> The fundamentals last July showed every indication to anyone above laymen status that it was time to get out.  Bank balance sheets were on the brink, the system was completely saturated with extreme amounts of debt, a recession had already begun 6 months prior to that, which most people knew without having to wait until the government finally admitted it AFTER the collapse.
> 
> The problem was trust.  Regular old ordinary people trust the government and media way too much and got burned.  The fundamentals of last July don't exist today in that form.  While they're certainly not great, they're better and continuing to GET better.  There's room for growth right now, the only thing that worries me is the extent of the government's involvement up to this point, and whether the Fed can somehow pull off a miracle and escape the inflation that seems imminent at this point.
> 
> Tell me why inflation is NOT imminent.  That's what I'm dying to hear from you.  I haven't heard that opinion from ANYONE, not even the media.  It's a unique opinion these days, and I'd love to hear how you're coming up with it.
> 
> Click to expand...
> 
> 
> This is a bit simplistic but it works for me.
> 
> If the wave analysis is correct then the market is going down when consumer confidence is also shaky.
> Even less buying would ensue. The simple supply/demand theory kicks in and prices will have to go lower.
> Now when the wave hits the up cycle....Watch out. The fed is already acutely aware of that danger. We could even find ourselves wishing for the 'good ole days' of lower double digit inflation of the Carter days.
Click to expand...


We haven't seen that though.  We've seen CERTAIN goods come down in price, but certainly not commodities.  I haven't seen food prices change much since their highs in 07 and 08, and of course metals haven't changed much either, and continue to increase in price.  I think a lot of companies have realized prices that the market will bear, and they know inflation is on the way and prefer to leave prices at current levels, or even raise them.  We've seen many companies raising prices already.  I've seen several increases lately.

I look at commodities when I think of inflation and deflation.  I don't care if a pair of Nikes costs a little less today than it did in 07 or 08.  I care about how much my food costs, my fuel, my rent, etc.  When you look at societies necessities, prices haven't come down one bit.  Gasoline has come down from its high, but that high wasn't normal anyway.  We're still paying over $2 /gal on average, which is expensive considering.

Also, I define inflation and deflation as increases and decreases in the supply of money, respectively.  There was a massive decrease in the supply of money over the past 12 months, and the Fed has injected massive amounts of it to counter-act this.  While there may still be lingering deflationary effects in some sectors, the movements of the Fed signal inflation in the future.  

And Zander, thanks for the analysis.  I'd have hoped it would have been a little more comprehensive than a few broad sentences, but at least you made an effort.  I'll just simply respond by saying I disagree, and I've laid out my reasons why on numerous occasions on this board.


----------



## Toro

Zander said:


> Here is why we are facing deflation. The Credit bubble exploded last year. Fed attempts to re-inflate credit by massive injection of liquidity. Banks take new funds but still say no to new loans. Credit continues to contract albeit more slowly. Result= Deflation. The amount of currency in the USA is less than 1/100th of the amount of "Credit".  The Fed can not print money fast enough to defeat the forces of deflation. It is inevitable.



Credit contraction is certainly deflationary, and the forces of deflation currently are enormously powerful.

However, even though there may be another trillion dollars written down in the financial sector, most of the credit contraction is probably over.  Over a trillion dollars has been written off in the formal banking system, while the shadow banking system has imploded, taking a couple trillion dollars in credit with it.  

Despite this enormous collapse in credit, consumer prices have fallen a mere couple percent.

The response by the government has been to flood the system with liquidity and support various asset markets.  Loans to businesses have been declining but loans to the government have been skyrocketing.  The Fed will do whatever is necessary to ensure that there is not a deflationary collapse, even if that means expanding its balance sheet to $4-$5 trillion to absorb further losses in the capital markets.

The collapse of the financial system is predictably a deflationary event.  However, the government's response is unsurprisingly inflationary.  It is no accident that the guy considered perhaps the world's foremost expert alive on the Depression heads the Fed. Bernanke once famously said the Fed could drop dollar bills from helicopters.  I take him at his word, at least figuratively.

The markets are sniffing this out.  Gold is at $1005, near its all-time highs.  Gold - the ultimate store in value - is the only asset that is near its all-time high.

The forces in the economy are deflationary but the response is inflationary.  Ultimately, the government will win out.  Bet on the guys with the printing machines.


----------



## Zander

Toro said:


> Zander said:
> 
> 
> 
> Here is why we are facing deflation. The Credit bubble exploded last year. Fed attempts to re-inflate credit by massive injection of liquidity. Banks take new funds but still say no to new loans. Credit continues to contract albeit more slowly. Result= Deflation. The amount of currency in the USA is less than 1/100th of the amount of "Credit".  The Fed can not print money fast enough to defeat the forces of deflation. It is inevitable.
> 
> 
> 
> 
> Credit contraction is certainly deflationary, and the forces of deflation currently are enormously powerful.
> 
> However, even though there may be another trillion dollars written down in the financial sector, most of the credit contraction is probably over.  Over a trillion dollars has been written off in the formal banking system, while the shadow banking system has imploded, taking a couple trillion dollars in credit with it.
> 
> Despite this enormous collapse in credit, consumer prices have fallen a mere couple percent.
> 
> The response by the government has been to flood the system with liquidity and support various asset markets.  Loans to businesses have been declining but loans to the government have been skyrocketing.  The Fed will do whatever is necessary to ensure that there is not a deflationary collapse, even if that means expanding its balance sheet to $4-$5 trillion to absorb further losses in the capital markets.
> 
> The collapse of the financial system is predictably a deflationary event.  However, the government's response is unsurprisingly inflationary.  It is no accident that the guy considered perhaps the world's foremost expert alive on the Depression heads the Fed. Bernanke once famously said the Fed could drop dollar bills from helicopters.  I take him at his word, at least figuratively.
> 
> The markets are sniffing this out.  Gold is at $1005, near its all-time highs.  Gold - the ultimate store in value - is the only asset that is near its all-time high.
> 
> The forces in the economy are deflationary but the response is inflationary.  Ultimately, the government will win out.  Bet on the guys with the printing machines.
Click to expand...


We will have to agree to disagree. 

PS: a year ago gold was at $950/oz. now it is at $1000, a mere few percent increase over 1 year.


----------



## adeel_sami

Nearly a week ago I read an article on CNBC stating the US equity markets may shed around 7%-17% in October. In the meanwhile, the Dow registered -3.4% in the past two weeks so the Nasdaq and S&P 500 with -4% ..

Does anyone know about this, please tell us more ..


----------



## Toro

Zander said:


> We will have to agree to disagree.
> 
> PS: a year ago gold was at $950/oz. now it is at $1000, a mere few percent increase over 1 year.



Disagreeing is what creates opportunity in the market and makes things interesting!  If we all agreed, nobody would make money.

Gold not being down 40% like almost all other asset classes in the most powerful deflationary environment in 75 years is why I think that the inflation will eventually overwhelm deflation.

But you might be correct.  The forces of deflation are powerful and they may overwhelm the government.  

I don't think in absolutes when investing.  I've seen too many people get hammered in the market thinking in certainties.


----------



## Toro

adeel_sami said:


> Nearly a week ago I read an article on CNBC stating the US equity markets may shed around 7%-17% in October. In the meanwhile, the Dow registered -3.4% in the past two weeks so the Nasdaq and S&P 500 with -4% ..
> 
> Does anyone know about this, please tell us more ..



Yes.

Most pundits are wrong.  It is a perilous investment strategy to rely on what one person says.  Instead, form your opinions based on your own research and strategy.  You will do much better over the long run.


----------



## Terral

Hi Toro:



Toro said:


> Not sure how much of this I believe of this.
> 
> Robert Reich's Blog: Why the Dow is Hitting 10,000 Even When Consumers Can't Buy And Business Cries "Socialism"



Anyone in the markets now cuckoo are playing the tables in Las Vegas. The markets have been going up, because the value of the U.S. Dollar is going down. You need 'more' dollars to buy the same stocks. :0)

[ame="http://www.youtube.com/watch?v=jN8hiIE1Dm0"]Listen to Gerald Celente[/ame]

[ame=http://www.youtube.com/watch?v=wkBRmty7fKc]Listen to Peter Schiff[/ame]

The top ten reasons that the USA is worthy of destruction appear on my Topic here, but being DUPED by Bernanke and the Rothschild/Rockefeller-owned FED ranks right up there at #1 . . . 

GL,

Terral


----------



## Paulie

Zander said:


> Toro said:
> 
> 
> 
> 
> 
> Zander said:
> 
> 
> 
> Here is why we are facing deflation. The Credit bubble exploded last year. Fed attempts to re-inflate credit by massive injection of liquidity. Banks take new funds but still say no to new loans. Credit continues to contract albeit more slowly. Result= Deflation. The amount of currency in the USA is less than 1/100th of the amount of "Credit".  The Fed can not print money fast enough to defeat the forces of deflation. It is inevitable.
> 
> 
> 
> 
> Credit contraction is certainly deflationary, and the forces of deflation currently are enormously powerful.
> 
> However, even though there may be another trillion dollars written down in the financial sector, most of the credit contraction is probably over.  Over a trillion dollars has been written off in the formal banking system, while the shadow banking system has imploded, taking a couple trillion dollars in credit with it.
> 
> Despite this enormous collapse in credit, consumer prices have fallen a mere couple percent.
> 
> The response by the government has been to flood the system with liquidity and support various asset markets.  Loans to businesses have been declining but loans to the government have been skyrocketing.  The Fed will do whatever is necessary to ensure that there is not a deflationary collapse, even if that means expanding its balance sheet to $4-$5 trillion to absorb further losses in the capital markets.
> 
> The collapse of the financial system is predictably a deflationary event.  However, the government's response is unsurprisingly inflationary.  It is no accident that the guy considered perhaps the world's foremost expert alive on the Depression heads the Fed. Bernanke once famously said the Fed could drop dollar bills from helicopters.  I take him at his word, at least figuratively.
> 
> The markets are sniffing this out.  Gold is at $1005, near its all-time highs.  Gold - the ultimate store in value - is the only asset that is near its all-time high.
> 
> The forces in the economy are deflationary but the response is inflationary.  Ultimately, the government will win out.  Bet on the guys with the printing machines.
> 
> Click to expand...
> 
> 
> We will have to agree to disagree.
> 
> PS: a year ago gold was at $950/oz. now it is at $1000, a mere few percent increase over 1 year.
Click to expand...

You forget that gold came down to around $700 last November after the collapse, and is now back up near its all-time high with an increase of almost 50%.

That ~50% gain from the $700 is attributed to the inflationary response from the government.  Gold _always_ tells the real story.  It always has, and there's no reason to believe it ever won't.


----------



## KittenKoder

Gold is still going up for one major reason, a lot of it is used in technology.


----------



## Zander

Paulie said:


> Zander said:
> 
> 
> 
> 
> 
> Toro said:
> 
> 
> 
> Credit contraction is certainly deflationary, and the forces of deflation currently are enormously powerful.
> 
> However, even though there may be another trillion dollars written down in the financial sector, most of the credit contraction is probably over.  Over a trillion dollars has been written off in the formal banking system, while the shadow banking system has imploded, taking a couple trillion dollars in credit with it.
> 
> Despite this enormous collapse in credit, consumer prices have fallen a mere couple percent.
> 
> The response by the government has been to flood the system with liquidity and support various asset markets.  Loans to businesses have been declining but loans to the government have been skyrocketing.  The Fed will do whatever is necessary to ensure that there is not a deflationary collapse, even if that means expanding its balance sheet to $4-$5 trillion to absorb further losses in the capital markets.
> 
> The collapse of the financial system is predictably a deflationary event.  However, the government's response is unsurprisingly inflationary.  It is no accident that the guy considered perhaps the world's foremost expert alive on the Depression heads the Fed. Bernanke once famously said the Fed could drop dollar bills from helicopters.  I take him at his word, at least figuratively.
> 
> The markets are sniffing this out.  Gold is at $1005, near its all-time highs.  Gold - the ultimate store in value - is the only asset that is near its all-time high.
> 
> The forces in the economy are deflationary but the response is inflationary.  Ultimately, the government will win out.  Bet on the guys with the printing machines.
> 
> 
> 
> 
> We will have to agree to disagree.
> 
> PS: a year ago gold was at $950/oz. now it is at $1000, a mere few percent increase over 1 year.
> 
> Click to expand...
> 
> You forget that gold came down to around $700 last November after the collapse, and is now back up near its all-time high with an increase of almost 50%.
> 
> That ~50% gain from the $700 is attributed to the inflationary response from the government.  Gold _always_ tells the real story.  It always has, and there's no reason to believe it ever won't.
Click to expand...


That is true.   We had a nice deflationary drop in November, and continued government intervention has bounced it back up to $1000.  When every jack-off on TV is telling you to "BUY GOLD" I get very bearish. I see gold moving lower, possible much lower before inflationary concerns push it to new highs. Deflation may be short lived, but it must happen before any inflation can occur.  

The US Credit contraction problem is far worse that most people realize. The total Credit market Debt as percent of GDP in U.S. balooned to 373% at the end of the first quarter of 2009. The figure was at 352% at the end of the first quarter of 2008.  Lets put this in perspective -the total credit market debt as percentage of GDP in 1980 was 161%, in 1952 it was 128.  So in the last 29 years (the period of Greenspan and Bernanke), the Credit Market Debt has more then doubled from its levels in 1980!! Remind you of any other bubbles???   As the U.S. government leverages further in order to prevent deflation and sustained economic slowdown, the Credit market Debt is expected to increase further.   Like all other bubbles, this bubble has to go bust one day. The question is now "when" , not "if".  It will happen. It is unstoppable even if Helicopter Bernanke drops $1,000,000 bills from the sky. SOURCE


----------



## Paulie

Zander said:


> Paulie said:
> 
> 
> 
> 
> 
> Zander said:
> 
> 
> 
> We will have to agree to disagree.
> 
> PS: a year ago gold was at $950/oz. now it is at $1000, a mere few percent increase over 1 year.
> 
> 
> 
> You forget that gold came down to around $700 last November after the collapse, and is now back up near its all-time high with an increase of almost 50%.
> 
> That ~50% gain from the $700 is attributed to the inflationary response from the government.  Gold _always_ tells the real story.  It always has, and there's no reason to believe it ever won't.
> 
> Click to expand...
> 
> 
> That is true.   We had a nice deflationary drop in November, and continued government intervention has bounced it back up to $1000.  When every jack-off on TV is telling you to "BUY GOLD" I get very bearish. I see gold moving lower, possible much lower before inflationary concerns push it to new highs. Deflation may be short lived, but it must happen before any inflation can occur.
> 
> The US Credit contraction problem is far worse that most people realize. The total Credit market Debt as percent of GDP in U.S. balooned to 373% at the end of the first quarter of 2009. The figure was at 352% at the end of the first quarter of 2008.  Lets put this in perspective -the total credit market debt as percentage of GDP in 1980 was 161%, in 1952 it was 128.  So in the last 29 years (the period of Greenspan and Bernanke), the Credit Market Debt has more then doubled from its levels in 1980!! Remind you of any other bubbles???   As the U.S. government leverages further in order to prevent deflation and sustained economic slowdown, the Credit market Debt is expected to increase further.   Like all other bubbles, this bubble has to go bust one day. The question is now "when" , not "if".  It will happen. It is unstoppable even if Helicopter Bernanke drops $1,000,000 bills from the sky. SOURCE
Click to expand...


I understand where you're coming from, and I don't rule out the possibility.  I mention another bubble all the time around here.  But a new one has to inflate itself first, and that's where this excess liquidity comes into play.  Inflation will foster another bubble, and the result of the burst will be more deflation.  Significant deflation likely will not happen UNTIL that point.

When you control the printing press, and you have a goal of fighting deflation, you can fight it and eventually win, until the bubble you created bursts.

But it's also naive to think current gold prices are a product of people on TV talking crap.  The price of gold is realized by the actions of investors all around the WORLD, amongst a host of other market forces.  China is buying a lot of gold.  The smart money is in gold for a REASON.

If gold drops to the 800's and breaks 800, then we'll talk.  Otherwise, gold never lies.


----------



## Zander

Paulie said:


> Zander said:
> 
> 
> 
> 
> 
> Paulie said:
> 
> 
> 
> You forget that gold came down to around $700 last November after the collapse, and is now back up near its all-time high with an increase of almost 50%.
> 
> That ~50% gain from the $700 is attributed to the inflationary response from the government.  Gold _always_ tells the real story.  It always has, and there's no reason to believe it ever won't.
> 
> 
> 
> 
> That is true.   We had a nice deflationary drop in November, and continued government intervention has bounced it back up to $1000.  When every jack-off on TV is telling you to "BUY GOLD" I get very bearish. I see gold moving lower, possible much lower before inflationary concerns push it to new highs. Deflation may be short lived, but it must happen before any inflation can occur.
> 
> The US Credit contraction problem is far worse that most people realize. The total Credit market Debt as percent of GDP in U.S. balooned to 373% at the end of the first quarter of 2009. The figure was at 352% at the end of the first quarter of 2008.  Lets put this in perspective -the total credit market debt as percentage of GDP in 1980 was 161%, in 1952 it was 128.  So in the last 29 years (the period of Greenspan and Bernanke), the Credit Market Debt has more then doubled from its levels in 1980!! Remind you of any other bubbles???   As the U.S. government leverages further in order to prevent deflation and sustained economic slowdown, the Credit market Debt is expected to increase further.   Like all other bubbles, this bubble has to go bust one day. The question is now "when" , not "if".  It will happen. It is unstoppable even if Helicopter Bernanke drops $1,000,000 bills from the sky. SOURCE
> 
> Click to expand...
> 
> 
> I understand where you're coming from, and I don't rule out the possibility.  I mention another bubble all the time around here.  But a new one has to inflate itself first, and that's where this excess liquidity comes into play.  Inflation will foster another bubble, and the result of the burst will be more deflation.  Significant deflation likely will not happen UNTIL that point.
> 
> When you control the printing press, and you have a goal of fighting deflation, you can fight it and eventually win, until the bubble you created bursts.
> 
> But it's also naive to think current gold prices are a product of people on TV talking crap.  The price of gold is realized by the actions of investors all around the WORLD, amongst a host of other market forces.  China is buying a lot of gold.  The smart money is in gold for a REASON.
> 
> If gold drops to the 800's and breaks 800, then we'll talk.  Otherwise, gold never lies.
Click to expand...


Ok Paulie, Ask yourself, where can inflation come from? Wage and pricing power are non-existent; the U.S. Treasury can print all the cash it wants, and the Fed can create additional reserves ad nauseum out of thin air, but the banks are not lending against devalued assets, and nobody wants to borrow to expand or create a business in this environment! We have a "defensive" credit market. A defensive credit market can scuttle the Feds efforts to get lenders and borrowers to agree to transact at all, much less at some desired target rate. If people and corporations are unwilling to borrow or unable to finance debt, and if banks and investors are disinclined to lend, central banks cannot force them to do so. During deflation, they cannot even induce them to do so with a zero interest rate! Sound familiar? 

This is not an output gap or the topping of an inventory cycle -- this is deflation, deleveraging of credit, a psychological phenomenon. This is a deep recession with millions of Americans having lost their jobs, millions of homes for sale (at much reduced prices), millions of credit cards and mortgages in delinquency, tens of millions of square footage of commercial real estate standing empty, tens of millions of square footage of empty warehouses.  Trust me Paulie, this is a false recovery. Round two of deflation is heading this way, and another crisis is coming. Move your assets to T-Bills and cash......


----------



## Paulie

Zander said:


> Paulie said:
> 
> 
> 
> 
> 
> Zander said:
> 
> 
> 
> That is true.   We had a nice deflationary drop in November, and continued government intervention has bounced it back up to $1000.  When every jack-off on TV is telling you to "BUY GOLD" I get very bearish. I see gold moving lower, possible much lower before inflationary concerns push it to new highs. Deflation may be short lived, but it must happen before any inflation can occur.
> 
> The US Credit contraction problem is far worse that most people realize. The total Credit market Debt as percent of GDP in U.S. balooned to 373% at the end of the first quarter of 2009. The figure was at 352% at the end of the first quarter of 2008.  Lets put this in perspective -the total credit market debt as percentage of GDP in 1980 was 161%, in 1952 it was 128.  So in the last 29 years (the period of Greenspan and Bernanke), the Credit Market Debt has more then doubled from its levels in 1980!! Remind you of any other bubbles???   As the U.S. government leverages further in order to prevent deflation and sustained economic slowdown, the Credit market Debt is expected to increase further.   Like all other bubbles, this bubble has to go bust one day. The question is now "when" , not "if".  It will happen. It is unstoppable even if Helicopter Bernanke drops $1,000,000 bills from the sky. SOURCE
> 
> 
> 
> 
> I understand where you're coming from, and I don't rule out the possibility.  I mention another bubble all the time around here.  But a new one has to inflate itself first, and that's where this excess liquidity comes into play.  Inflation will foster another bubble, and the result of the burst will be more deflation.  Significant deflation likely will not happen UNTIL that point.
> 
> When you control the printing press, and you have a goal of fighting deflation, you can fight it and eventually win, until the bubble you created bursts.
> 
> But it's also naive to think current gold prices are a product of people on TV talking crap.  The price of gold is realized by the actions of investors all around the WORLD, amongst a host of other market forces.  China is buying a lot of gold.  The smart money is in gold for a REASON.
> 
> If gold drops to the 800's and breaks 800, then we'll talk.  Otherwise, gold never lies.
> 
> Click to expand...
> 
> 
> Ok Paulie, Ask yourself, where can inflation come from? Wage and pricing power are non-existent; the U.S. Treasury can print all the cash it wants, and the Fed can create additional reserves ad nauseum out of thin air, but the banks are not lending against devalued assets, and nobody wants to borrow to expand or create a business in this environment! We have a "defensive" credit market. A defensive credit market can scuttle the Feds efforts to get lenders and borrowers to agree to transact at all, much less at some desired target rate. If people and corporations are unwilling to borrow or unable to finance debt, and if banks and investors are disinclined to lend, central banks cannot force them to do so. During deflation, they cannot even induce them to do so with a zero interest rate! Sound familiar?
> 
> This is not an output gap or the topping of an inventory cycle -- this is deflation, deleveraging of credit, a psychological phenomenon. This is a deep recession with millions of Americans having lost their jobs, millions of homes for sale (at much reduced prices), millions of credit cards and mortgages in delinquency, tens of millions of square footage of commercial real estate standing empty, tens of millions of square footage of empty warehouses.  Trust me Paulie, this is a false recovery. Round two of deflation is heading this way, and another crisis is coming. Move your assets to T-Bills and cash......
Click to expand...


I understand your point, believe me.  We're in a liquidity trap right now.  The excess bank reserves that the Fed has created via security purchases over the past year or more are likely still sitting mostly in reserve. 

Until lending starts up in force again, that newly created money is not entering the economy.  I understand this, and this is something that a lot of anti-Fed people don't understand.  The Fed can not directly put money into circulation.  They have to rely on banks to lend.  If they're not lending at .20% interest, then there's not really much more they can do.

This is when you turn to fundamentals, and analyze the economic situation on the ground.  Is the economy ripe for recovery in some fashion, and thereby more lending and borrowing?  Not yet.  It is a slow process, and there may actually be some deflation in asset prices again while we wait on that.

I'm still not sure that you're right about how MUCH deflation we may see.  If inflation is inevitable, whenever it finally happens, then why would you want your cash out on the sidelines taking a chance on missing the boat?

This is why you diversify among asset classes, and always keep a portion of your portfolio in cash.  I think you're off base in suggesting that people liquidate EVERYTHING.  That would be irresponsible investing in my opinion.

Deflation may come, but it will not be as long lived as the inflation that will eventually be to follow.  I'd rather be in for the inflation, while my portfolio loses a little during a pullback, then try to time such a seemingly impossible change in the market and miss out on the ride up.  

At some point, cash is going to lose a lot of value.  If it somehow doesn't, that means the Fed must have been able to pull off a miracle that they've frankly never gotten right in HISTORY.


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## Toro

Paulie said:


> You forget that gold came down to around $700 last November after the collapse, and is now back up near its all-time high with an increase of almost 50%.
> 
> That ~50% gain from the $700 is attributed to the inflationary response from the government.  Gold _always_ tells the real story.  It always has, and there's no reason to believe it ever won't.



That's my thesis exactly.

In a deflationary environment, gold will fall.  The gold bugs who tell you that gold will do well in deflation are wrong, IMHO.  So when the credit markets were imploding, gold collapsed, as one would expect.

However, as the government began reflating the economy, gold rose, even as stock and bond markets continued to get hammered.  Again, if the government were to be successful at its attempt to reflate the economy, this is what one would expect to happen.


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## Zander

Paulie said:


> Zander said:
> 
> 
> 
> 
> 
> Paulie said:
> 
> 
> 
> I understand where you're coming from, and I don't rule out the possibility.  I mention another bubble all the time around here.  But a new one has to inflate itself first, and that's where this excess liquidity comes into play.  Inflation will foster another bubble, and the result of the burst will be more deflation.  Significant deflation likely will not happen UNTIL that point.
> 
> When you control the printing press, and you have a goal of fighting deflation, you can fight it and eventually win, until the bubble you created bursts.
> 
> But it's also naive to think current gold prices are a product of people on TV talking crap.  The price of gold is realized by the actions of investors all around the WORLD, amongst a host of other market forces.  China is buying a lot of gold.  The smart money is in gold for a REASON.
> 
> If gold drops to the 800's and breaks 800, then we'll talk.  Otherwise, gold never lies.
> 
> 
> 
> 
> Ok Paulie, Ask yourself, where can inflation come from? Wage and pricing power are non-existent; the U.S. Treasury can print all the cash it wants, and the Fed can create additional reserves ad nauseum out of thin air, but the banks are not lending against devalued assets, and nobody wants to borrow to expand or create a business in this environment! We have a "defensive" credit market. A defensive credit market can scuttle the Fed&#8217;s efforts to get lenders and borrowers to agree to transact at all, much less at some desired target rate. If people and corporations are unwilling to borrow or unable to finance debt, and if banks and investors are disinclined to lend, central banks cannot force them to do so. During deflation, they cannot even induce them to do so with a zero interest rate! Sound familiar?
> 
> This is not an output gap or the topping of an inventory cycle -- this is deflation, deleveraging of credit, a psychological phenomenon. This is a deep recession with millions of Americans having lost their jobs, millions of homes for sale (at much reduced prices), millions of credit cards and mortgages in delinquency, tens of millions of square footage of commercial real estate standing empty, tens of millions of square footage of empty warehouses.  Trust me Paulie, this is a false recovery. Round two of deflation is heading this way, and another crisis is coming. Move your assets to T-Bills and cash......
> 
> Click to expand...
> 
> 
> I understand your point, believe me.  We're in a liquidity trap right now.  The excess bank reserves that the Fed has created via security purchases over the past year or more are likely still sitting mostly in reserve.
> 
> Until lending starts up in force again, that newly created money is not entering the economy.  I understand this, and this is something that a lot of anti-Fed people don't understand.  The Fed can not directly put money into circulation.  They have to rely on banks to lend.  If they're not lending at .20% interest, then there's not really much more they can do.
> 
> This is when you turn to fundamentals, and analyze the economic situation on the ground.  Is the economy ripe for recovery in some fashion, and thereby more lending and borrowing?  Not yet.  It is a slow process, and there may actually be some deflation in asset prices again while we wait on that.
> 
> I'm still not sure that you're right about how MUCH deflation we may see.  If inflation is inevitable, whenever it finally happens, then why would you want your cash out on the sidelines taking a chance on missing the boat?
> 
> This is why you diversify among asset classes, and always keep a portion of your portfolio in cash.  I think you're off base in suggesting that people liquidate EVERYTHING.  That would be irresponsible investing in my opinion.
> 
> Deflation may come, but it will not be as long lived as the inflation that will eventually be to follow.  I'd rather be in for the inflation, while my portfolio loses a little during a pullback, then try to time such a seemingly impossible change in the market and miss out on the ride up.
> 
> At some point, cash is going to lose a lot of value.  If it somehow doesn't, that means the Fed must have been able to pull off a miracle that they've frankly never gotten right in HISTORY.
Click to expand...

 Excellent post.   I agree that if you have a LONG time perspective, going all cash is probably not a great idea.  Also, most investors lack the nerve and knowledge of when to jump back in!  Those investors would do well to just buy and hold while systematically adding to their investments.  Personally, that is the exact strategy I followed for 20 years.  The last 4-5 years I have been using Elliot Waves to time the market with much success.  I move in and out of asset classes as the trends dictate and right now the trend is for a serious decline in equities and commodities.  I will be ready to buy back in when the appropriate time comes. 

PS- I will be more than happy to share my prognostications here!


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## garyd

With all due respect to Mr. Reich all this stimulus has done is to paper over a lot of problems and defer the rest. By the way no one is paying down much in the way of debt or truly saving much of anything in fact a hell of alot of people I know are dipping into what savings they have just to survive.

Mr Reich can continue in his silly attempt to paint a rose on a pig's ass as much as he wishes but it still remains the end of the pig from which the crap descends and we are all about to get buried in it.


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## Chris

TTPANL said:


> If Government regulates properly, the market will always go up.
> 
> Must monitor the crooks !


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## Chris

garyd said:


> With all due respect to Mr. Reich all this stimulus has done is to paper over a lot of problems and defer the rest. By the way no one is paying down much in the way of debt or truly saving much of anything in fact a hell of alot of people I know are dipping into what savings they have just to survive.
> 
> Mr Reich can continue in his silly attempt to paint a rose on a pig's ass as much as he wishes but it still remains the end of the pig from which the crap descends and we are all about to get buried in it.



I am making money hand over fist.

But then I work seven days a week.


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## Yurt

last i checked markets were up in asia and pretty much the rest of the world....is our government responsible for that as well?


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## truthsaga

Yurt,

Asia is a creditor they produce and export.  New Zealand is a commodity currency they're currency is continually gaining.

The US is now the worlds largest debtor nation, our stock market is rising because of inflation.  Our stock market might be rising but our dollar is continuing to fall.  The rest of the world is leaving the US behind they don't need our consumption(we can't pay for it with a worthless currency) and it's just a matter of time before they stop lending us money.  

The government and the federal reserve are responsible.


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## Toro

Yurt said:


> last i checked markets were up in asia and pretty much the rest of the world....is our government responsible for that as well?



Partly, yes.  The government is flooding the financial system and economy with liquidity.  Because America is so big, it effects everyone.

Remember also that other governments have enacted the same policy, especially in China, where stimulus was jammed through the system such that banks were ordered to lend, and all the stimulus went out the door, unlike here where much of the aid to banks sits in the vaults to shore up their balance sheets.


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