435 Neros fiddle while the economy smolders, about to burst into flame

In a long (long) career in the markets in which we have experienced many crashes and dramatic market moves we have just lived through a week to remember. This week an almost 800 point drop followed by an almost 500 point recovery. And you know what? No new lessons. There is nothing here for the technician or experienced investor that has not happened many times before. The old worn lessons of the past are reinforced, and the old worn principles of technical analysis are shown to work once again. Magee method investors have been short the Dow all year. So they watch with interest as the “others” (“they”) run frantically around like characters in a Breughel painting. (Garden of Earthly Delights) And, as Rome smolders threatening to catch fire, 435 Neros in the House of Representatives fiddle and pout and stand on their ideological principals. If it were a comedy we would laugh our heads off. But it’s not. It’s a tragi-comedy. Amazingly the half of the traders in the world (or one tenth) who are not being bashed to pieces are lusting to catch the bottom and go long the market. Speaking of the Bonfire of the Vanities. Dear readers do not panic, either way. Technicians WAIT for the bottom to clearly manifest itself. (Remember Enron?) There is no sign of a bottom. Capitualtion is a dish best eaten cold.

There is a Wyckoff model which is relevant here.  Wyckoff observes that after a panic there is an automatic bounce (dead cat bounce) and then a test of the panic low.  This has not occurred yet so readers are advised not to rush into anything here.

If you are going to rush into anything it would best be, dare we say it, GLD.

Gold came down low enough to discourage investors, then cast off buy signals  as seen here.  This is a common habit of the gold market.  We have readers who ignore these downtrends, and they keep being proven right.  Silver, SLV is another market like gold.

If you are angry at the banks, Wall Street, Congress, the SEC, Bush, Paulson and all the other clowns in this farce join the club.  We do believe that something should be done to restore confidence.  But buying assets of unknown value is akin to what got us into this mess in the first place.  At this point what we have is a bunch of banks and institutions which look like New Orleans after Katrina (another Bush Administration triumph).  Tear downs.  Why should we invest $700 B (big ones) in these losers?  A 700 pound gorilla can sit whereever he wants, and do whatever he wants.  So instead of these tear downs build a new bank, the American People’s Bank (APB), owned by the people (remember, you, Joe Taxpayer) which could attack this problem at its roots:  the mortgage in trouble.  Let the bank with the problem mortgage bring it to APB  and if  the bank is willing to eat its losses (and tear up those golden parachutes and golden pay packages) we’ll buy it, and write a new revised mortgage to the poor schnook mortgagee in trouble.  50 year mortgage?  No problem if you can make the payments on the new lowered value.  Use some of the capital to ease business conditions so that the unemployment situation can be eased.  It’s unemployed people who can’t pay their mortgages.  There is of course a monster lurking under the surface here.  One of the main reasons mortgages go unpaid and people go bankrupt is –guess what — medical bills.  The forces of rapacious free markets have been on the prowl since Ronald (the Communicator) Reagan.  Time to cage them.  What would Ronnie say now that the Government IS the solution –“Government is not the solution.  Government is the problem…..”

Call your congressman.  Tell him that the present bail out plan is the biggest theft since no bid contracts Iraq.

 

Next PostRead more articles

Leave a Reply