muses of the moment

June 25, 2009

“Do Not Allow the Wish to Father the Thought”

The title is a quote from William Peter Hamilton. It is to be remembered during these times.

Tim Wood over at financialsense.com gives an excellent explanation of the counter trends happening right now. Do not be fooled, the fundamentals have not changed.

He also summerizes the K-Wave Winter Cycle, as I have done in other posts….most items happening now.

For Full article….Tim Wood’s Market Observation

Here are some highlights:

Based on the technical and statistical work that I do, the data is telling me that pretty much all of the moves we have been seeing over the last 2 to 6 months, depending on which market you are looking at, are counter-trend moves. As a result of these counter-trend affairs, the powers that be continue to think that they have the problem under control. The average person on the street sees that the markets are rising and they, too, begin to think that the worst is behind us and that maybe the bail-outs and various stimulus packages are working. It is my opinion that this false optimism and the lust for things to return to “normal” is going to cost the average investor dearly once this counter-trend move concludes.

Think for yourself. Words to invest by:

Sound unbiased technical methods are the only way I know to navigate the ongoing financial disaster that we are dealing with. The politicians, Republican or Democrat, nor the mainstream media warned you of the previous declines because they did not know they were coming, and even if they did they would not have told you. Do you really think they would tell you anything any different this time around?

Things to expect during the Kondratieff Winter Cycle:

Guys, we are in the midst of Kondratieff Winter, not the beginning of a new bull market.

“Global Stock Markets Enter Extended Bear Markets”
This should be obvious to all.

“Trends During Winter: Stocks Down, Bonds Up, Commodities Down”
These longer-term trends remain intact and the recent moves to the contrary are counter-trend.

“Interest Rates Spike In Early Winter Then Decline Throughout”
In June 2004 the Discount rate was at 2.00%. By June 2006 it was at 6.25% and since August 2007 the Fed has been forced to cut the Discount rate back to .50%. So this too, fits.

“Economic Growth Slow or Negative During Much of Winter”
I doubt that many will argue that growth is now slow and in many cases negative.

“Commercial and Residential Real Estate Prices Fall”
This obviously began back in 2006 and there is still much more to come.

“Bankruptcies Accelerate and High Debt Eliminated by Bankruptcy”
This has obviously begun and is no doubt related to the housing and credit bubbles.

“Social Upheaval and Society Becomes Negative”
We are only just beginning to see this.

“Banking System Shaken and New One Introduced”
The banking system is now only beginning to be shaken. There should be much more to come.

“Free Market System Blamed and Socialist Solutions Offered”
This has not yet happened, but just wait.

“National Fascist Political Tendencies”
Just wait, there is much more to come.

“Debt Level Very Low After Defaults and Bankruptcy”
This has not happened.

“Trade Conflict Worsen”
This basically has not happened.

“View of the Future at a Low Ebb”
This has not happened as everyone seems to be looking for the bottom.

“New Work Ethics Develop Since Jobs are Scarce”
If I can assure you of one thing it is that this has not happened.

“Greed is Pruged from the System”
I can absolutely assure you that this has not happened yet.

“Real Estate Prices Find Bottom”
This has not happened.

“There is a Clean Economic Slate to Build On”
Not happened yet.

“Investors are Very Conservative and Risk Averse
Again, this has absolutely not occurred.

“Interest Rates and Prices Bottom”
Not happened.

“A New Economy Begins to Emerge”
Has not happened

“Stock Markets Reach Bottom and Begin New Bull Markets”
Again, we aren’t there yet.

Make sure your investments are set for the “winter cycle”.

2 Comments »

  1. Do you think the 10X spike in the money supply will offset deflation? Thanks.

    Comment by C. D. — June 25, 2009 @ 4:12 pm

  2. It is my opinion that the process will be deflation in debt, then inflation in prices, and then hyperinflation in prices. We are currently seeing a deflation in debt only, not prices. The only thing that has gone down is oil and it’s on its way back up. Consumer and wholesale prices are steady or increasing, not decreasing (especially of you use the ungimmicked numbers). So, the currency crisis will create inflation in prices and deflation of debt. This is a deadly combo, very different from the 1930’s depression of deflation in debt and prices.

    If you are asking me about stock market prices, that is a different situation. The stock market had a bubble that popped. Too much leverage and debt built into the price. That is different from a currency crisis. At some point all the extra money running around the world will make its way into the stock market too. However, make sure that the stock market is going up at least as much as inflation or the value will be stripped away.

    This is a new day. The value of your investment will be determined not only by the value of the investment, company or commodity, but also by the purchasing power of the currency it is in. Pay attention to currencies and learn how they work and can effect the profit of your investment. Work it into the ROI as you would a tax advantage or disadvantage.

    Comment by totallygroovygirlfriday — June 26, 2009 @ 10:33 am


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