Saturday, April 30, 2005

"Nervous INvestors Eye Bond MArket"


Charting the economy .com EXCELLENT source of charts and explanation of our current situation. Best I have seen next to

**One point bore out here, and I have been aware of is that the CASH OUTS were NOT used for DEBT consolidation



10 yr chart As the market rallied into end of 2004 I had posted this many times. I thought it correlated well with 2000, and had mentioned it had gone to new highs of excess.

One thing to keep in mind, an indicator reaching new highs or lows in and of itself is not enough (as bears found out with LOW VIX) but it is when the indicator TURNS DIRECTION bottoms or tops out we SHOULD take notice.

That is exactly what the SPX/VIX ratio has done, and it is a ways from any kind of serious bottom.

The 52 week looks ready to begin a downtrend, the 2o wekk already has.

It certainly looks like the UPTREND in this relationship has topped. BAD for stocks.

FED PUMPED IN OVER $50 B last week reported! BEYOND CRISIS LEVELS of liquidity. NO kidding? this surrounds a move to 10K???

Or that this occurs BEFORE the next FED meeting on rates?

"we're done for now, no rate increase" a PANIC? what things aren't peachy keen?

"another blah blah 25 basis point rise, measured blah blah" STOCKS DO NOT DO WELL in rising interest rate environment, YET has it held off the housing industry.

Hey, here's your starter home or fixer upper....800 SQ FT $300K !

The market is SICK, it moves from news blurp to data release..leadership is sunk



I was recently informed of this phenom, and found this article on the subject.



HOME HOME where the overpaid roam

In our paper there was land near my home. (MD)

2 acre lots, $299K to $399K

Finished 5 bedroom 5 bath colonial $1.1 M F ME its crazy!

Now me puts on my thunkin hat. ARE we better off if our house value rises, we sell and move replacing old with a stepper upper? We got more, but we paid more, end result is MORE DEBT.


Our house stagnated in value rising a little here, a little here, we SELL, we break even, we buy another house that also has stayed relative in value.

Difference? NO CASH OUTS to PULL value out of the home for….CONSUMPTION and INCREASE of DEBT! That is how we got to 305% total debt as % of GDP!

FED steped on gas again last week. Retailers WEAK WEAK WEAK, game being played with DOW. and could WEAK OIL be weak demand which equals weak economy which was born out with weak GDP and weak durable goods?


Friday, April 29, 2005




Background INFO

Sunday, 28 November 2004
The runaway dry cargo market broke all records last Thursday when the Baltic Dry Index, an average of its handysize, panamax and capesize indices, achieved at an all-time high and on Friday it increased a further 136 points, ending the week at 5,870. The previous high, back in early February had been 5,681.
Asked what was behind the exceptionally bullish market a Baltic Exchange insider said just one word, ‘China’.



Let the day to week to month do its thing, but this chart is telling, something longer term may be afoot.


NDX Bear Trend?

Only second 50 SMA crossover of the 200 SMA since cyclical bull beagn in 2003


from YHOO

Stocks Mixed As Technology Sector WeakensFri 11:18AM ET - APWeakness in the technology sector kept stocks mixed Friday despite strong earnings from Microsoft Corp. and a pair of economic reports that eased Wall Street's inflation fears.

@@*%^^ WHat was it that "eased inflation fears?" If earnings were strong from MSFT or that meant a damn, themarket WOULD respect it.

Wise guys are on guard and still we see weakness, 10K goes 9800 quickly IMHO and THEN might 10K be resistance! IF so BEAR should be considered BACK and act accordingly......I hope my readers have.

My hope is that I can help us identify the SAFE periods to be long, with the help of the wisdom of many GREAT market mavens, I read.....

A nation with NO savings is a poor nation, a nation at risk.



Final Mich numbers were BELOW expectations at 87.7

In perspective, in 2000 the reading was near 150 ! HOW important is any reading? It is more the DIRECTION the trend is going than the reading itself.

ENERGY prices, and the NON INFLATIONARY pressure we keep hearing are NOT HERE, eating into spendable income, as WAGES stagnate.

hey, I found a pay stub from 2000, I own my company, I've had NO raise in 5 years.

I need additional employees, nor can I afford them.



COSTS ARE RISING, Wages falling, spending outpacing any wage increase, savings FLAT LINING.SO....futures rise on "good inflation data" what a crocK! 10K PTT

Usually when they froth the futures like this it flag poles up and STAYS up. Market action is NOT healthy IMHO BUSH last night was extra lame.


Thursday, April 28, 2005

7 D'S Developing Disaster

*(Do you find my blog helpful? send me an email to also if you have any specific interests or questions you want addressed, let me know)

The Seven "D's" of the Developing Disaster

By: Alf Field
“The objective of investing is to increase the purchasing power of capital.”

- From the Foreword to “The Art of Asset Allocation” by David M Darst. (Published in 2003 by McGraw-Hill).

David Darst is Managing Director and Chief Investment Strategist for the individual investor business of Morgan Stanley. “The Art of Asset Allocation” is possibly the definitive work on the principles of asset allocation in investment portfolios.

David’s book deserves a plug firstly because it is good, but also because David has generously donated the entire royalties from this book through the Morgan Stanley Foundation to the families of the 13 Morgan Stanley employees who died in the World Trade Center on Sept 11, 2001.

It was David who planted the seeds of the idea for this article when he suggested that most of the major problems facing the USA (and thus the world) commenced with the letter “D”. I have refined his idea to produce the following list:


Most readers will be familiar with the first 6 but will be puzzled by the last one, DEVOLUTION. It is included because the first 6 problems, combined with the likely Government responses, will probably lead to a situation where one single investment criterion will become so important that it will transcend all other factors in investment decisions. That situation will lead to DEVOLUTION. We will return to this later.

The first 6 problems have received a great deal of coverage elsewhere and there is no need to regurgitate them in detail here. These problems generally involve huge mind-numbing, incomprehensible numbers of dollars. Those numbers continue to grow so rapidly that they tend to be out of date shortly after they are published. The following brief notes on the first 6 “D’s” deliberately ignore these gigantic numbers.

The US Current account and Federal Government DEFICITS have grown to chronic levels where each deficit now exceeds 6% of the country’s GDP. How will these continuing deficits be financed? The answer, by creating increasing quantities of electronic US Dollar credits.

The US DOLLAR will be under downward pressure while these deficits continue. The lower the US Dollar declines, the greater the pressure on those countries that export to the USA. These countries will protect their markets by invoking competitive DEVALUATIONS. This cannot happen in a freely floating exchange rate system, but is effectively done by foreign countries creating massive quantities of their own currencies. These new foreign currency electronic credits are then dumped on the foreign exchange markets, thus weakening their currencies. In this way the American problem is exported to the rest of the world.

DEBT of all kinds in the USA has been reaching record high levels for decades and continues to do so. This is the way the economy is stimulated in a fractional reserve banking system. DEBT must continue to grow. A contraction in DEBT will lead to those other unmentionable “D” words, DEFLATION and DEPRESSION. This will not be allowed to happen. New electronic US Dollar credits will be created to whatever quantity is required to avoid this outcome.

DEMOGRAPHICS refers to the imminent retirement of the Baby Boomers generation and the huge unfunded liabilities that exist in Social Security, Medicare, Pension Funds and other US programs that need to be funded. Several books have been written on this subject. One of which is “Running on Empty” by Peter Petersen. Those unfunded liabilities will be funded, probably once again by the creation of new electronic US Dollar credits to the extent necessary to meet the unfunded liabilities.

DERIVATIVES have been the fastest growing area in US finance over the past 15 years. The numbers involved are truly mind boggling. About 25% of the Derivative instruments in existence are Exchange traded items such as futures and options. The other 75% are Over-the-Counter instruments, privately created and traded between major financial institutions. These tend to be extremely complicated transactions that are often difficult to value. They rely heavily on their counter parties in these transactions actually meeting their obligations when they fall due.

There is a grave risk of counter party failure in the Over-the-Counter derivative area. If one major counter party goes bankrupt and fails to meet its commitments, it could trigger a domino like collapse of major institutions in the financial markets. The numbers involved are so vast that there is potential to bring down the entire financial system in the event of a major counter party default.

If this risk is readily discernible to outsiders, then bankers and others involved in the OTC derivatives must be acutely aware of the problem. Bankers are not stupid. They are extremely clever, cautious people. So how could they allow the OTC derivative situation to grow to such a massive extent with all the concomitant risks involved?

One suspects that they know something we don’t. Do the major players in the market have some assurance that there will be no counter party failure? Without that assurance, the gigantic build up of OTC derivatives over the past decade would surely have been unthinkable. Alternatively, they must have deliberately built up the derivative market without considering the size or risks involved on the assumption that, as with past similar cases, the Federal Reserve and Federal Government would combine and to come to the rescue of a failed major counter party.

The OTC derivative market looks like an accident waiting to happen. Already some lesser players are showing signs of strain. How do the authorities rescue a problem situation when it occurs? Again by creating electronic US Dollar credits to the extent necessary to prevent a catastrophe.

The common thread that runs through this brief summary is that when problems emerge in the US financial system, the authorities will solve them by throwing money at the problem, by creating new electronic US Dollar credits whenever necessary and to whatever extent necessary. This is not just a personal opinion. We have been told by no lesser personage than Dr Ben S Bernanke, who is a member of the Board of Governors of the Federal Reserve Board, that the authorities now have a new tool, the electronic printing press, which will be utilised when disasters threaten.

When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival.

When that point is reached, the headline to this article: “The objective of investing is to increase the purchasing power of capital,” will become ever more pertinent.

We can now return to the final factor, the 7th “D”, which is DEVOLUTION. Dictionary definitions of the word DEVOLUTION include the following:
A passing down or descent through successive stages of time or a process.
Transference, as of rights or qualities, to a successor.
Delegation of authority or duties to a subordinate or substitute.
A transfer of powers from a central government to local units.
It is the first definition that is applicable here. Imagine an inverted pyramid of various investment type assets where the least secure (and most prolific assets) are in the very wide top layers. The inverted pyramid then narrows down through layers of increasingly more secure asset classes to the small point at the base which consists of the most secure (and least prolific) assets. This is an idea propagated years ago by John Exter.

The theory is that in times of financial crisis investors will cause their investments to devolve downwards (hence DEVOLUTION) through the different asset class layers in the inverted pyramid as they search for greater security. DEVOLUTION is thus a movement by investors out of riskier, speculative asset classes into more secure ones. This is what can be expected in the months and years ahead as the creation of electronic US Dollar credits gathers momentum and faith is lost in the US Dollar.

The assets in the most secure category at the tip of the inverted pyramid are gold and silver bullion, assets that have performed the function of protecting wealth throughout the ages. In the layer above the precious metals lie the companies that mine and hold large deposits of gold and silver. The least secure assets in the envisioned environment, which form the broad layers at the top of the inverted investment pyramid, will be the electronic US Dollar credits and assets or loans that are repayable in US dollars.

The DEVOLUTION of assets into more secure investments is not just an esoteric theory. It is already happening and can be observed in the actions of thinking investors such as Warren Buffett, possibly the greatest investor of the past century. Buffett has been gradually moving the assets of his investment company, Berkshire Hathaway, into increasingly more secure asset classes. He made headlines last year when he moved over $20 billion out of US Dollar cash assets into foreign currencies.

Buffett already has a stash of silver bullion, so is clearly aware of the protective power of precious metals. It is only one short further step for Buffett to move out of foreign currencies (which will eventually follow the path of the US Dollar) into gold bullion and precious metal mining company shares, a move that seems logical and inevitable in the circumstances envisioned above.

A move into precious metals and their associated mining companies by a person like Buffett would instantly change the public perception of this asset class. If it is not Buffett, it will be someone else, as the logic of doing this will become increasingly apparent to investors. Then the devolution of investments down through the asset classes of the inverted pyramid will truly gather momentum. The quantity of precious metals and their associated mining company shares is very limited while the quantity of electronic US Dollar credits is infinite. It will be a question of “first come, first served”.


Help Wantes index declined from 41 back to 39, WEAK

Yet with INFLATIONARY PRESSURES, can the FED stop rasing? meeting next week




Inflation pressures RISE, ECONOMY SLOWS, NOT good for stocks IMHO


Wednesday, April 27, 2005





Same for Q's, declining short interest, not enough to cover even 2 full days of trading.



QUICK sand INvesting

The action in the markets should be of concern to anyone with one eye open.The market seemingly on the move from ONE NEWS story to then next..... NOW we are to believe that "falling oil" is the catalyst for improving prices......let us NOT be concerned with a SLUMP in durable goods and because maybe the FED won't keep wonderful.

Are we to think do not worry about inflation? When the VERY GOV report that states it is falsified? with BS from renters equivalent data?And the job market who can tell between people who begin looking again to those who have given up? and those taken away or ADDED by the net birth/death MODEL?

SOLID footing is nowhere to be found.Bonds soar as flight to safety even as gov need for debt becomes insatiable? when the rate is FAR below the inflation rate, even though we know a normalizing must occur.

We are in a time where a very aggresive DEFENSIVE posture should be had.....and maybe none taken, IMHO LOOK at prices vascilate around today, damn, almost every day forlast week....schizo market, and it needs prozac.

I understand ING is offering a 7% guranteed ANUUITY with a 5% BONUS, as IUnderstand IF you invest the money and the 7% is what is better to get it, you MUST annuitize it after 10 years, then you get the 7% and it is paid out to you over an equal but specifiied period, you no longer have access to the LUMO SUM, but it is rather safe!

I have 2 accounts with MANULIFE called GRIP doing the same thing for 6%,this is what I WANTED SAFE at the BOTTOM of my investment pyramid.



Stephen Roach (Tokyo)

In all my years in this business, never before have I seen a central bank attempt to spin the debate as America's Federal Reserve has over the past six or seven years. From the New Paradigm mantra of the late 1990s to today's new theories of the current-account adjustment, the US central bank has led the charge in attempting to rewrite conventional macroeconomics and in making an effort to convince market participants of the wisdom of its revisionist theories. The problem is that this recasting of macro is very self-serving. It is a concentrated effort on the part of the Fed to exonerate itself from the Original Sin of failing to address asset bubbles. The result is an ever-deepening moral hazard dilemma that poses grave threats to financial markets.
I am not a believer in conspiracy theories. But the Fed's behavior since the late 1990s is starting to change my mind. It all began with Alan Greenspan's worries over "irrational exuberance" on December 5, 1996, when a surging Dow Jones Industrial Average closed at 6437. The subsequent Fed tightening in March 1997 was aimed not only at the asset bubble itself, but at the impacts such excessive appreciation in equity markets were having on the real economy -- consumers and businesses alike. It was a classic example of the Fed playing the role of the tough guy -- the central bank that, to paraphrase the words of former Chairman William McChesney Martin, "takes away the punchbowl just when the party is getting good." Unfortunately, the tough guys weren't so tough after all. Predictably, there was a huge outcry on Capitol Hill as the Fed took aim on the US stock market. But rather than stay the course as an independent central bank should, the Fed ran for cover in the face of political criticism. Not only were its initial bubble-containment efforts put aside, but Alan Greenspan went on to champion the notion of a sea-change in the macro climate -- a once-in-a-century productivity miracle that would justify the stock market's exuberance as rational. That was the Original Sin that has since been compounded in the years that have followed.
Out of that pivotal moment in the late 1990s, a New Economy actually did come into being. But it was not the new economy of ever-accelerating productivity growth that infatuated the New Paradigm Crowd and legions of equity-market speculators. Instead, it was the Asset Economy that enabled consumers and businesses to draw on the pixie dust of a new source of purchasing power -- asset appreciation -- as a means to augment what has since turned into a stunning shortfall of organic domestic income generation.
Unfortunately, the asset-based spending model has given rise to many of the distortions and imbalances evident in the US today. That's especially true of low saving rates, the housing bubble, high debt loads, and a runaway current account deficit. When the equity bubble burst, asset-dependent American consumers barely skipped a beat. Courtesy of an extraordinary shift to monetary accommodation, the pendulum of asset depreciation quickly swung into property markets; US house-price inflation has since surged to a 25-year high. To the extent that equity extraction from ever-rising property appreciation was viewed as a substitute for organic sources of labor income generation, hard-pressed consumers went deeply into debt to monetize the windfall. As a result, household sector indebtedness surged to nearly 90% of US GDP -- an all-time record and up over 20 percentage points from levels in the mid-1990s when the Asset Economy was born. Secure in the asset-driven spending posture that resulted, consumers saw no need to save the old-fashioned way out of earned labor income. That's why the personal saving rate has collapsed and currently stands near zero. Asset-based consumption is also at the core of America's current-account problem. In an income-based accounting framework, the "missing saving" has to come from somewhere. In this case, that "somewhere" is the foreign saver -- giving rise to the current-account and trade deficits required to attract the foreign capital. As a result, the US current-account gap probably exceeded 6.5% of GDP in the first quarter of 2005 -- easily another record and well in excess of the 4% deficit prevailing in the mid-1990s.
This whole story, in my view, remains balanced on the head of a pin of absurdly low real interest rates. And the Fed has certainly been pivotal in nurturing this low-interest-rate regime. In an extraordinary display of policy accommodation, the real federal funds rate is only now moving above the zero threshold after having spent three years in negative territory. Of course, a central bank has little choice to do otherwise if it has made a conscious decision to underwrite the Asset Economy. After all, it takes low interest rates to provide valuation support to most financial assets -- initially stocks, then bonds, and now property. Furthermore, it takes low rates to make refi debt -- and the equity extraction it sponsors -- look attractive from a carrying cost perspective. Low rates also discourage income-based saving by underscoring the paltry returns available to savers in traditional asset classes. A migration to riskier assets -- such as property and "spread" products (i.e., high-yield and emerging market debt) -- is encouraged as a result. And low real rates make it easier to finance an ever-widening current-account deficit -- especially if the incremental flows come from foreign central banks, where there is reason to tolerate subpar returns in exchange for currency competitiveness. In short, without low real interest rates, the Asset Economy -- and all of its inherent imbalances and excesses -- is nothing.
The Fed is not only hard at work in the engine room in keeping the magic alive with a super-accommodative monetary policy but is has also become the intellectual architect of the New Macro. Time and again, since Alan Greenspan rolled out his New Paradigm theory in the late 1990s, senior Federal Reserve policy makers have taken the lead role as proselytizers of a new macro spin that condones the saving, debt, property bubble, and current-account excesses of the Asset Economy. The examples are far too numerous to mention, but consider the following highlights:
* Chairman Greenspan has made light of traditional measures of household indebtedness -- even going so far as to urge consumers to move from fixed to floating rate obligations (see his February 23, 2004, speech, Understanding Household Debt Obligations. Note: All references are to speeches available on the Fed's website at
* Fed governors have also borrowed a page from the Roaring 1990s in denying the possibility of a housing bubble (see Chairman Greenspan's October 19, 2004, speech, The Mortgage Market and Consumer Debt, and Governor Kohn's April 1, 2004, speech, Monetary Policy and Imbalances).
* More recently, an army of senior Fed officials -- namely, Chairman Greenspan, Vice Chairman Ferguson, and Governors Bernanke and Kohn -- have unleashed a veritable broadside against the time-honored notion of the current-account adjustment (see their various 2005 speeches, especially Governor Kohn's April 22 speech, Imbalances and the US Economy, Vice Chairman Ferguson's April 20 speech, U.S. Current Account Deficit: Causes and Consequences, and Chairman Greenspan's February 4 speech, Current Account).
* Governor Bernanke has also led the charge in coming up with a new theory of national saving -- that the United States is actually doing the world a favor by absorbing a so-called glut of global saving (see his April 14, 2005, speech, The Global Saving Glut and the U.S. Current Account Deficit); Vice Chairman Ferguson has been on a similar wavelength in dismissing concerns over subpar personal saving (see his October 6, 2004, speech, Questions and Reflections on the Personal Saving Rate).
Is this is an appropriate role for a central bank? In my view, absolutely not. The problem with an activist central bank is that decision makers in the real economy -- consumers and businesspeople alike -- mistake the Fed's point of view for strategic advice. And so do financial market participants. After hearing the Fed pound the table, consumers feel left out if they don't spend their housing equity. Business managers felt equally deprived in the late 1990s if their companies didn't achieve the dotcom-type valuations in the stock market that Chairman Greenspan insisted in the late 1990s and even early 2000 were well grounded in a once-in-a-century productivity miracle. The resulting overhang of excess IT spending was a direct outgrowth of this perceived deprivation. Needless to say, when investors and financial speculators saw the equity train leave the station and the Fed condone the high growth of a productivity-led economy by leaving interest rates low, they saw no reason to believe that a bubble was about to burst. When consumers hear from a Fed chairman that it makes little sense to take on fixed rate debt, they rush to floating rate instruments; not by coincidence, the adjustable rate portion of newly originated mortgage debt shot up in the immediate aftermath of Chairman Greenspan's comments on consumer indebtedness. And should asset-dependent, saving-short, overly indebted American consumers feel at risk if the Fed assures them that there is no housing bubble -- that the asset-based underpinnings of their decision making are well grounded? A record consumption share in the US economy -- 71% of GDP since 2002 versus a 67% norm over the 1975 to 2000 period -- speaks for itself.
The rhetorical flourishes of America's central bankers have dug the US economy -- and by definition, a US-centric global economy -- into a deep hole. To this very day, the Fed has never confessed to the Original Sin of condoning the equity bubble. On the contrary, Greenspan & Company have been on the defensive ever since by dismissing the increasingly dangerous repercussions of the original post-bubble shakeout. Far from playing the role of the tough guy that is required of independent central bankers, the Fed has become an advocate of the easy money of a powerful liquidity cycle. One bubble has since begotten another -- from equities to bonds to fixed income spread products (i.e., emerging market and high-yield debt) to property. And financial markets have gone along for the ride -- not just in the US but also around the world as global investors and foreign central banks have rushed with reckless abandon to finance America's record current-account deficit.
The day is close at hand when US monetary policy must get real. At a minimum, that will require a normalization of real interest rates. Given the excesses that now exist, it may even require a federal funds rate that needs to move into the restrictive zone -- possibly as high as 5.5%. Yes, this would cause an outcry -- perhaps similar to that which occurred in the spring of 1997 on the occasion of the Original Sin. But in the end, there may be no other choice. Fedspeak has taken us into the greatest moral hazard dilemma of all -- how to wean an asset-dependent system from unsustainably low real interest rates without bringing the entire House of Cards down. The longer the Fed waits, the more perilous the exit strategy.


Tuesday, April 26, 2005


"In a way, this week is kind of a wash, because everyone is going to be holding their breath for the Fed," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers in Boston. "But really, earnings are going in pretty strong and the economy is still growing and moving in the right direction, and stocks look pretty cheap right now."



WASHINGTON (AFX) - U.S. new home sales jumped by 12% in March to a record 1.431 million seasonally adjusted annual rate, the Commerce Department estimated Tuesday. March sales smashed the previous record of 1.304 million set last October. Economists expected a slightly pullback to 1.19 million. The inventory of unsold homes on the market fell by 0.9% to 433,000, representing a tight 3.6-month supply at the March sales pace.

The median price of a new sold home fell 9.3% in March to $212,300.
Median prices are up just 1.3% in the past year. This story was supplied by MarketWatch. For further information see


Consumer Confidence Dips, New Home Sales UpTue 10:20AM ET - Associated PressConsumer confidence declined in April for the third consecutive month, signaling Americans' concerns that economic growth is leveling off. But one area of the economy is still white hot: the government said sales of new homes shot up 12.2 percent last month to the highest level in history.

Again, I wonder if THAT was a parabolic SPIKE, and ending move. HOW LONG have "they" been trying to call the END of this BOOM? BUBBLE?

ALL have been wrong so far, it IS the economy


CHIP DIP Futures RED, but with last 1/2 hr manipulations, we'll see.


Monday, April 25, 2005


As did Friday, last 1/2 hour someone and came in and bought the market hard, REEKS of manipulation and PPT.

After up over 100 today it began falling toup only 40 points losing momo quickly, then POOF, 3:30 rolls around and up she goes.

LOOK at VOLUME, it was sickly vapid, absent today, and when volume is away, the rich can play. NO LOW is in IMHO NOT without HEAVY volume backing it up.



Office furniture sales by year

2000 $13.285B +8.5% (from previous)
2001 $10.975B - 17.4%
2002 $8.89B - 19%
2003 $8.505B - 4.3%
2004 $8.935B + 5.1%
2005 $9.605B +8.1% (projected)
2006 N/A

20 EMA$ndx,uu[w,a]daclyiay[de][pc20][vc60][iut!La12,26,9!Lj[$spx]]&pref=G

Keep it simple is MY MOTTO, follow the 20 EMA, and THAT keeps me out of longs at this point.



A Secular Bear MarketApril 21, 2005

Despite today’s strong rally it is likely that the 29-month cyclical bull market peaked at 1229 (S&P 500) on March 7. Since that time the index dropped 7.6% and gained back 2% today. At the close it still was at about the same level as last November 4, just two days after the U.S. presidential election. The recent March 7 top was still a whopping 21% below the all-time high of 1553 in March 2000, confirming our belief that we are currently in a secular bear market. Rallies in bear markets develop from oversold conditions and are often quite explosive, but generally peter out well below previous highs.

The bull market was based on an economic recovery spurred by two major tax cuts and massive ease by the Fed that used soaring asset values, primarily in residential real estate, to support consumer cash flow in the absence of normal growth in employment and wage income that usually provides the support for economic expansion. The result is record consumer debt, historically low consumer savings rates, a massive trade deficit and big federal budget deficits. The highly stimulative policy avoided the immediate negative consequences of a bursting financial and economic bubble, but only at the cost of exacerbating these structural imbalances that will prove difficult to resolve without a major crisis.

The stimulative effects have now faded, and instead we are faced with a tightening Fed monetary policy and soaring energy prices that are likely to work against economic growth in the period ahead. In last week’s comment we outlined how the economic softening has already begun to show up across a broad cross-section of indicators.

Make no mistake about it--pay attention to what the Fed does rather than what it says. In our view entirely too much attention is paid to examining the minutiae of the FOMC statements, which, under the guise of so-called transparency, are geared toward influencing markets and softening the harsher aspects of the real actions. For instance, in the most recent FOMC statement (March 22) you will see that the equality of upside and downside risk now depends on appropriate monetary policy (a new caveat). But obviously, since they can never say that their monetary policy is inappropriate, the risks must always be equal as long as this caveat remains in the statement.

In addition, after using the “measured” word they say that they will nevertheless respond to needed changes. Therefore they can increase the funds rate by 25 points, 50 points, or not at all and still be “measured”. Although the FOMC is correct in not wanting to restrict its future choices, what, then, is the purpose of the statement other than briefly stating their action on rates? It certainly doesn’t result in greater transparency, and the new policy of releasing the minutes three weeks later muddies the waters even more. Therefore ignore the shell game, and just be aware that we have undergone seven straight rate increases, and that, historically, a tightening monetary policy has preceded bear markets and recessions in the vast majority of cases. Combined with extremely high energy prices, the prospects this time become even more problematic.


Does it PAY to FOLLOW the simple direction of the 20 EMA? IS why I am sitting tight as the market corrects oversold


INteresting Site

Sunday, April 24, 2005

1360 Immediate Bearish objective

NDX P and F

KRB (MBNA) P anf F is $8. but some think it a good candidate for a it oversold? tough call


Saturday, April 23, 2005


40 year lows in wages as % of PERSONAL INCOME BUT at same time 40 year lows PLUS is CONSUMER SPENDING as % of WAGES

NO wonder....we have HISTORIC DEBT as % of GDP or almost anything.

NO, my friends, this cannot continue, indefinately.


Thursday, April 21, 2005

Today's Rally

Even if due to short covering was very strong, so 10K was supported, for now.

ANy break of that level would be seen as bearish, look for early follow thru tomorrow, schizo market, has broken MANY important support levels, has turned most 52 week moving averages DOWN to flat, broken thru most 50 and 200 SMA's.....was VERY OVERSOLD, HAD STUPID HEDGIES going from record long to short.

And it is VERY hard to tell where it goes one day to next. I will stay in CASH myself, maybe scalp some trades.... until bear market lows are in place.





Irregardless of lower than expected job losses this AM, players will FORCE the future UP.....reality has not changed....cyclical bull LONG in the tooth.



CNN "TECHS ON A TEAR" They say EBAY will incite a tech riot, futures are UP again but will it peter, or will 10K Dow be tested and fail


Wednesday, April 20, 2005


TRAN 10 YR 52 week signalled baby BULL in 2003 when it turned up, has NOT turned down yet.....maybe due to flow of Chinese goods. Someone told me today he heard that 30% of ALL LAGE CARGO ships are docked in China, the REAL problem? they cannot ship it fast enough.

DOW TELLS DIFFERENT STORY here we see declining 200 WEEK and the avg is BELOW a flattening 52 week, HOW can I construe this as bulish?


COMPQ Looking haggard here! GE 200 WK still declining

WMT I don't know what to make of this 5 years of nothing!



If the Congressman you had on this afternoon, Roscoe Bartlett, is our best hope for SS reform and understanding the situation, I am VERY afraid!

"well, I like this guys bill, I endorse it, SEE you have this pile of money, well we'll give it to you, see we just print it anyways, and then we have the SS trust fund pile earmarked with YOUR name on it, and UHHH,and when you retire at AGE 90... whatever PILE is bigger you KEEP, the other we keep....simple yes!" These idiots are massaging a 4 yr old BILL!

"One change, if you aren't around at retirement age, we KEEP BOTH PILES!" smiles ROscoe.

DO ANY of these yoyo's have a clue?

As you said Ron, they will end up raising the age you can get a dime, near your natural death timeline, and give you less, and maybe take more! PROBLEM SOLVED!

Also, that MR Bush is so, well he's a thinker for all ages. And well when he signed that TOUGHER bankruptcy law, well Ron, I was PROUD to be an American!

WHY shouldn't those loafers whom the companies this bill now protects fed them the line so easy to hang themselves made to pay it back!? HOW dare these avg citizens try and get over these money dealers? AND what timing, right at the fricken' ZENITH of household debt as % of anything!

Duratek comments and or let me know what you think of my writing email


VIX CHART NOT hysteria, but FEAR is creeping BACK into the market, that CAN spell trouble for stocks.

Many misinterpreted LOW LOW VIX as SOON BIG selloff would can you get selling with complacency?

BUT when FEAR creeps back in, when it looks like a new trend of rising VIX.....that is horse of another color.

STILL declines on more volume. A BOTTOM will come for sure, and question might be is it a short term bottom, or a TRADABLE one? like 2003.

Well, easy enough to look back and see what we see from then.

Longer term trend lines like the 52 week were turning UP.. now they are flattening to turning down.

Just one mans opinion. And a rather WEAK DAY considering the blather and HYPE about INTC and TXN.....I am sure at CNBC....Champagne was flowing..




EVEN CORE WAS ABOVE expectations, see when the FED or any GOV official says NO INFLATION, they are lying thru the teetH!!!

REMEMBER, HOUSING INFLATIOn IS NOT a PART OF CPI, only a BS 'renters equiv" and THAT is 25% of total!




STand up comedy? WHATGOV report can be trusted NOT to be manipulated?

GOLD rose yesterday on report. A HUGE .7% RISE BEFORE everything got stripped out! LOL

YEP, if we don't count this and take out energy, and forget about that.....NO inflation!

Last I looked OIL was still above $50. COSTS ARE getting into system, manufacturers are just NOW passing along FUEL SURCHARGES.

Manufacturers are raising their prices.

SO.....BONDS and STOCKS get bought....then good luck longs buying and holding expensive historically stocks.

I see this move as a counter trend move until proven otherwise. A MOVE many PRO'S see as a selling OPP!


Tuesday, April 19, 2005


But Alex Vallecillo, portfolio manager with National City Investment Management Co., which owns Intel, cautioned tech investors to not get too excited about Intel's news, saying that just as IBM's earnings miss may not have meant that tech spending was heading for a major slowdown, Intel's good news doesn't necessarily mean that happy days are here again for all tech stocks.
"In the past, we were in a cycle where a rising tide lifted all boats and when the tide receded every boat went down but we're past that," said Vallecillo. "Now you have to look at stocks on a company- by-company specific basis and can't draw conclusions from one report."
To that end, another leading chip company, Linear Technology (Research), issued sales guidance for its fiscal fourth quarter on Monday that was below analysts' expectations and its stock fell nearly 1.5 percent after hours on the news.
Another fund manager added that Intel's results, while undeniably good, could just turn out to be good news for it and a select few others in the chip sector.
"Intel is obviously a bellwether that has to be paid attention to. The numbers were quite good and more importantly the guidance was good. This should put a floor under Intel's stock," said Barry Randall, manager of the First American Technology fund, which owns shares of TI and Applied Materials. "But Intel's news doesn't change the larger picture for tech."


But here is guidance for next qtr.

Revenue in the second quarter is expected to be between $8.6 billion and $9.2 billion.
Gross margin percentage for the second quarter is expected to be approximately 56 percent, plus or minus a couple of points, as compared to 59.3 percent in the first quarter.

INTC always seems to pull it together.....if by stock bybacks or not reporting stock options as expenses......they FEED off any competition...and will outlast them.

BUT IMHO....this is NO growth story. IS Moore's law catching up?

2.7GHZ the std....avg Joe need more? Market still correcting, but greater trend is down, IMHO



Today's Data




MArket watch story



Sunday, April 17, 2005

To Bounce or not

To further my point, I am not suggesting PLAYING the bounce.......I feel strongly there is enough evidence to suggest the Bear MArket is back.

UPSIDE could be rather the earnings, see if they are good enough and the guidance to CHANGE the rising unsettledness.



OFF 2.5% overnight.

WILL INTC et al excite tech next week? FROM oversold, if rise possible.....crystal ball? If NOT ugly washout IMHO


Some Articles on week ahead and MORE

Clouds Gather

Earnings chips ahoy

TRIN 10 and 20 DAY TRIN do not reek of fear.

INDU fall below 200 SMA

WILL the 52 wk HOLD the TRAN?

Flattened 52 and 200 WK for DOW

Same for NDX


Too many bears? VIX shot up dramatically Friday, but still below 20 which USED to be thought of as complacent. When LOW VIX was around 11-12 for some time, 17 looks like fear but it is not.

BUT the put call ratio is soaring, and the markets are OBVIUOSLY oversold. Surely they will fall farther, but crashes are RARE, no straight shot.

I am guessing a rally could be brewing as early as Monday, but what I may look for is a DOWN day early, selling exhaustion, buyers come in and maybe even turn it green.

If we OPEN green, I will be more suspicious and figure more sellers at the door.

But the action we have seen, only about a month ago new highs were being put in, now new lows in the indexes.

191 point decline is rather fear laden, but sometimes I wonder how over bought conditions last for much longer periods. This recent SPAT of selling could be initial kick-off of the return of the Bear closely.


Friday, April 15, 2005

ECONOMIC HEALTH THROWN INTO QUESTION And most of industrial production gains were from utilities (colder than norm weather) other areas declined..

Those 8,000 or so hedge funds just wanna have fun, and I wonder if they aren't now or going to throw their weight to the short side, or at very least stop taking NEW LONG positions.

ANY trader good knows to FOLLOW the trend DON'T FIGHT IT, the negativity is levels being taken OUT!

IBM warns.......DATA SHOWS INFLATION IS REAL......FED NOW STUCK right in the middle.....IHMO as I have harped, the SWEET SPOT is gone in this longinthetooth cyclical bull, the EASY money has been made.



Collapsing IS the consumer exhausted...or resting?



Fuel and Fares set to rise

WHEN the HERD gets going in ONE direction.....HARD to turn around.

VIX VAULTED ABOVE 200 SMA yesterday.......if it continues to RISE....FEAR is building......the PRO'S are worried (options writers) the selling COULD intensify.

Greenspan's perfect little world isn't so



Mornings DATA

NY STATE INDEX.....A CLUNKER 3.0 !!! were looking for 18 a STEEP decline and reason for BOND strength this AM.

Remember when 10 yr was yielding 4.7% ? That was .786 FIB of previous decline.

INFLATION markers however appear HIGHER than expected, remember, the GOV manipulates the data. BUT GOLD is falling? IMHO DEFLATION is behind the curtain!

As per Richard Russell last night, both IND and TRAN broke below JAN lows....a DOw sell signal. (dowtheory


Thursday, April 14, 2005



Futures turning down....



My "lurkers" are staying safe and unscathed if following my calls for caution and following my blog on a somewhat regular basis....even if its a tired sing song.....da facts are da facts.

My wife asks me..."why be SO negative"...I am not negative per se', but I cannot disregard what I have come to believe. I earned my opinion, it is valid as ANY professional guru, and to ignore would invalidate all my so called knowledge of the situation.

3 BRUTAL days out of 4 for the TRANSPORTS.....BLASTING thru support and putting in a LOWER LOW

Nothing BULLISH HERE! at the DOW and personally, I don't see MUCH support down to 10K......where is the PPT some are asking.
P and F chart says 9800 good chance

NDX?? glad you asked...BRUTAL UGLY and if you also put in the 30 SMA you get the 30,60, and 90 Simple Moving Avg's all declining with 90 above the 60 above the 30! BEARISH PARALELL positioning.

DO you remember when REAL selling brought JPM down to $15???

That's why you must always have eyes open to VALUE, it is missing now.

EVERY BEAR MKT has returned the markets BACK to their norms and BELOW.....we are not even close.

COULD the entire BULL market be retraced? As is the case in most BEAR MKTS? I do not know, seems impossible, but a dollar or interest rate crisis....or worse? you NEVER far this history has not repeated...but over 100 years of market history tells me it most certainly might.

Just in time "good fella's" Bankruptcy legislation working its way thru Congress, should pass....STICKING it to little guy and protecting those Credit Institutions which fed the hanging rope.

APPL delights? and declines sharply. HAS the mood turned?

Damn good chance, for now, we just have HEAVY selling.....rally days weak on weak volume.

WHAT WAS that reversal on Tuesday after the pitiful FED minutes were released? Looking like scaredy short covering.

THIS decline will end, and a buying opp may appear, but I am not sure since 1164 SPX fell today and 10400 on DOW and NAZ support too......a washout may be needed or we get a few weak rallies.....but seen as another chance to unload.

EVIDENCE of smart money DISTRIBUTION has already occurred....NO money manager is worried....though a few I read have raised CASH levels.

IF a trend is FIRM, those LONG TERM MOVING AVERAGES act like a magnate and stem the declines as THEY keep rising.

THIS IS NOT 2002/2003.......some buys out there, but use of a dart board will bring bad results now. IMHO


Commentary BS

7:41aOil hesitance to fall below $50-a-barrel milestone could confuse markets at Thursday's open.

*THERE IS NO direct correlation to oil and the markets direction, yesterday OIL FELL and so did almost everythign else.

Could be significant, MORE volume on the down days, entire previous days gains retraced.

Look for 1164 on the SPX


Wednesday, April 13, 2005



I had heard discussed about how to keep it simple when investing. And the yearly trendline came to the forefront. *(will this work everytime? of course not, because individual stocks could be volatile with it)

When this 52 week chart turned up and you bought RIMM, how GOOD a buy would that have been?

At some point you take profits, but even now it has not broken that trend.

When the trendline starts to flatten, is when POTENTIAL TREND CHANGE IS IN THE WIND.

IMHO that is what is occuring to the Dow and NDX.

SPX is still clinging to 1170 support, I am watching that.



> THIS is the kind of action IMHO that is trying to warn of at least the
> potential of something very very wrong.
> What is a market where neither long nor short have feet on solid
> ground? Where markets turn on a few words, rather than action, the
> action being rising rates where NO end has been signaled where the
> official CPI rate of inflation doesn't even include the cost of
> Well....I'm watching 1170 on SPX, but then even if broken....a few
> words might come forth...After yesterday's reversal....the market is
> selling off on the reality (weak semi guidance etc) and not rallying
> on the wings of a few words



NEW LOW print of lower lows and lower highs. I consider this bearish and helps define down move.




MSFT Security patch AGAIN?? and WHAT BUBBLE?

9% growth....PE near 30 NO Longer a growth story hence the STAGNANT like pond scum stock price!

I am not sure where yesterdays inside out day turnaround will lead, or whether I will play the bounce if it looks like it has legs, but ANY rise based on "minutes" suggesting STEADY RATE INCREASES and INFLATION NOTgetting out of hand is pure BS!

The CPI does NOT even included the cost of rising housing! SO WHAT good is it?

GOLD PLUNGING....BONDS soaring....INFLATION? my hairy noggin!

The "CARRY TRADE" got the GREEN LIGHT again........its free ride to continue?

DEBASING your currency (AKA ARGENTINA) has never led to prosperity....trying as GREENASS is doing to INFLATE the debt away, the idiot has only ADDED to it! LIKE EPIC HISTORIC proportions!

Is why WHEN not IF the debt bubble bursts, disastrous consequences could ensue.

Is there any way out? I don;t see it. Recessions, periods of weakness are used to CORRECT abuses and imbalances, NOT ADD to them!


"Keep RAISING at a measured pace"

Not so fast bulls

KEY....they ARE raising and WILL continue raising. STocks don't do so well in rising rate money SELLS the rallies, IMHO


Tuesday, April 12, 2005

Black Boxes wiN!!! AHEAD of FED minutes!

STOCK OPTIONS STILL NOT EXPENSED! But......just follow the money....1170 SPX defended, I expect good chance of carry over now, but nothing dramatic....IMHO


WHat a few minutes can make

BS or not, black boxes pounced on it!



1170 MUST be broken for immediate Bearish case IMHO. That is what D will be watching.

The wheels on the cart are BROKEN, the SPOKES rusted, the ROOTS rotted, but liquidity floats the boat. $40 fricken' BILLION the FED pumped in last week, crisis amounts......stagflation best they can hope?

IS GOLD 50% below its 70's highs truely predicting runaway inflation? When you consider MASSIVE pumping the FED and BUSH stimulus.....makes a guy ponder...


2003 Getting it right then

LOOKING back on impact of rate hikes
Leuthold site, he accurately predcited the end of bear in 202.



INDEXES busting below support.....


Monday, April 11, 2005

APRIL RALLY to bring MAY.....

April IS normally stellar for stocks, so far it's been on a treadmill. Transports CRUSHING move FRI had NO giveback today. The SIZE of that move some 3.4% got my attention, so to dismiss it or not talk about it AKA CNBC style would be foolish.

Many SMART guys are talking correction and stay the course long. Saying the large speculators have gone net short, they are seldom right......not never but seldom.

We look at VIX declining again below its 200 SMA. CPC is elavated. These are conflicting.

OIL is falling and has NOT ignited an OIL IS FALLING rally. Russell's PTI is still slightly bullsih after coming down to neutral.

Market has worked off oversold, and if so desires can continued downward trend.

1170 on SPX to be watched. 10,400 on Dow.

NDX CHART is below both 50 and 200 SMA. I would be watching a break of OCT's levels.

Is it me or does it seem like it's VERY quiet from the Bush machine? The BEAR is in waiting and it ONLY a matter of time.

WHY has MSFT been WEAK? at near 30 PE why pay so for 9% or so growth? WMT? AIG? JPM (near 52 week low) FNM,


AS long as our ASIAN friends keep buying our will continue, but WE longer hold the cards in OUR deck. FOOLISH FED AND US POLICIES (yes BUSH!) have dealt us the dealiest the DEBT piles up.



Thursday, April 07, 2005


A respite my friends, a respite IMHO
MORE LOWER VOLUME lemming up days


When the JAN lows are finally broken this market is going to go plop





tHE spin

Jobless Claims Post Biggest Dip in 2 MonthsThu 8:44AM ET - Associated PressThe number of Americans applying for unemployment benefits dropped by 19,000 last week, the largest decline in two months, the government reported Thursday.

** the missed estimates, last month revised upward, and anyway are STILL TOO high for an economy IN RECOVERY! IMHO


Sunday, April 03, 2005



The end of the line reflation trade, just look at gold, something is sucking the liquidity down a dark black hole!


STRUCUTRAL DRAGS by Dr. Kurt Richebächer

by Dr. Kurt Richebächer

From the macro perspective, U.S. business profits received their main boost from two flows in recent years. One was the phenomenal decline of personal saving, and the other was the soaring budget deficit accruing from tax cuts and higher spending.

Saving is the unspent part of personal income. To this extent, wage earners reduce total business receipts in relation to total expenses incurred. The net result is a corresponding fall in profits. Conversely, when households run down their saving, business revenues rise in relation to expenses incurred. The net result is higher profits.

In this way, the phenomenal collapse of personal saving in the past few years has been Corporate America's main profit bonanza. This was far more important than the direct and indirect revenue flows from the soaring budget deficit.

But the trouble is that the soaring U.S. trade deficit in recent years has been diverting a rapidly growing share of such spending and its inherent profit creation to foreign producers. In essence, the trade deficit directly transfers spending and profits from domestic to foreign producers, leaving American producers with the wage expenses, which their employees spend on foreign goods. As we have stressed many times, the trade deficit is the greatest profit killer in the U.S. economy.

We come to the most important macroeconomic profit source in a healthy economy. Apparently unknown to most American economists, this is net capital investment. John M. Keynes expressed it with great simplicity and precision: There are two streams of money flowing to the entrepreneurs, namely, the part of their incomes that the public spends on consumption and the expenditures of businesses on net capital investment.

Economists, in general, are completely unaware of the crucial importance of business investment for business revenues and profits. This has a particular and peculiar reason. From the perspective of the business sector as a whole, investment spending creates business revenue without generating business expense.

What seems mysterious has, in reality, a simple explanation. Investing firms capitalize their investment expenditures. No expense is incurred until the first depreciation charge is recorded. For the producers of the capital goods, on the other hand, it involves a sale, producing immediate revenue.

Due to this particular treatment in accounting, net fixed investment is typically the business sector's most important profit source. But in the United States, this profit source has dramatically collapsed in the past few years, as rising depreciations have overtaken gross new investment.

In 2003, net fixed investment amounted to $154.5 billion, after $404.8 billion in 2000. This implies, first of all, a rapidly shrinking capital stock; and second, a disastrous drag on business profits, because depreciations are expensive.

Answering the question of aggregate profit prospects for the U.S. economy in 2005 requires a macro perspective focusing on changes in four aggregates: personal saving, budget deficit, trade deficit and net business investment.

Our crucial assumption is that negative profit influences will grossly outweigh positive influences, suggesting in their wake lower business investment. If the consumer starts to save out of current income, the U.S. economy will slump.

We have characterized the U.S. economy as a bubble economy in the sense that asset appreciation has become its main engine of growth. Courtesy of the prolonged sharp rise in house prices, the American consumer has been willing and able to maintain his spending despite a protracted recession in employment and wage incomes.

But we see a variety of influences tempering the bubble climate. For the time being, the whole set of asset bubbles finds strong support from still exceptionally low short-term rates, still extremely loose money and credit, and high-riding expectations about strong U.S. economic growth and low inflation rates in 2005. Much economic data warn of impending strong disappointment on both counts that will prick the bubbles. Not to ignore, moreover, the Fed's commitment to further rate hikes.

Yet the refusal of long-term rates to rise in response to the Fed's serial exertions to raise short-term rates further is perplexing. Mr. Greenspan himself spoke of a "conundrum." A reported inflation rate above 3% would, by past experience, imply a federal funds rate of at least 5%. But a rate of 3.5% would already be enough to wreck the bond bubble, and in its wake, the stock and housing bubbles.

For sure, the financial community is fully aware of this immense policy risk, strictly limiting the Fed's scope for further rate hikes. The amazing stability of long-term rates suggests the financial community has not only refused to unwind, but has even continued to add to existing carry-trade positions. They are still far too profitable to be abandoned before the Fed makes them unsustainable.

As no one is taking the Fed seriously, it may have to do more than it wants. The frightening point to see is that, given the U.S. economy's heavy dependence on consumer spending for the housing bubble, a mere leveling of house prices would be enough to slash consumer spending and economic growth. We expect worse than price stagnation.

It ought to be realized that a rise in long-term rates by only 1-2 percentage points would rapidly play havoc with all existing asset bubbles - bonds, stocks, housing - and in consequence, with economic growth. Within a matter of months, there would be deep recession.

A crucial question is the inherent impact on personal saving. Voluntarily or involuntarily, private households will sharply restrain their borrowing and return to old-fashioned saving out of their current income. That this will badly depress consumer spending needs no explanation. Unfortunately, when consumption declines, fragile business and housing investment will fall as well.

Most people inside and outside of America have yet to realize two things: First, that among industrial countries, the U.S. economy has by far the worst structural fundamentals; and second, that it is far more vulnerable today than in the first two years of the decade.

Of course, American policymakers and economists have been trumpeting the opposite for years. Having realized their complete disregard of macroeconomics, we are sure that they earnestly believe this fairy tale. With this in mind, we recently, with great interest, read a report from Morgan Stanley about a meeting with customers in late January.

About global economic prospects for 2005, it said: "There was little doubt as to who would take the baton in a post-U.S.-centric world - it would be another encore for America. There was deep conviction that no one comes close to having such an ideal system - especially in terms of technology, the work force and America's unique risk-taking culture. Market depth and flexibility - in both the financial and the nonfinancial realms - was depicted as the icing on the cake for yet another run of U.S.-centric global growth."

Later, it stated, "Europe, which has none of these qualities, is the last place where productivity could take off."

For us, this is typical Wall Street trash, bare of any serious macroeconomic thought. It used to be an elementary truism among economists that a healthy economy is rich in savings, rich in productive investment and rich in profits. The U.S. economy is extremely poor in all three. But it is extremely rich in financial speculation and corporate malfeasance.

To be sure, the enormous structural deficiencies are increasingly impairing U.S. economic growth. For the past three years, unprecedented monetary and fiscal profligacy has been able to overpower their depressant influence through the bubble-driven consumer borrowing-and-spending spree. Yet the "structural drags" are finally gaining the upper hand over the weakening bubble impetus. The U.S. economy's famous resilience had more to do with clever statistics and unprecedented monetary looseness than with true economic strength.


Kurt Richebächer
for The Daily Reckoning