BUY, BUY, BUY
The weekend of March 8 and 9, 2008 was one of the easiest calls to make in the history of the financial markets. But I do not think that more than 1 in 10 analysts will hit upon the right advice to give their clients.
That advice is to buy the heck out of the stock market and take a brief rest from the gold and silver markets.
At the One-handed Economist, this analysis is simple:
At 11,700, the DJI is at the long term support area of the Jan. 2000 top. This is a powerful support level and could, by itself, cause an important rally.
Sentiment among market players is black as night.
The ratio of public to NYSE specialist short sales hit a 5-year high at the January
bottom indicating that the public is very bearish.
Investor’s Intelligence advisory letters percent bearish is within a hair of its
The NYSE short interest ratio is again within a hair of its 5-year high.
The Fed is easing to beat the band. “To H___ with the dollar. To H___ with commodity prices.” The rule is clear: Don’t fight the Fed.
T-bonds traditionally lead stocks, and bonds have been rising for 8 months.
The early March dip below 12,000 DJI is obviously a secondary test of the Jan. 22 low, and such tests are clear buy opportunities.
Gold and silver have hit the price objectives given by their giant triangles (which broke out upside in September ’07). This is a signal for an intermediate reaction in the precious metals.
The dollar, as bad as it looks long term, is near the bottom of its down channel and could easily rally to 75.
But hardly anyone wants to see these economic facts, and the reason for this lies in the sphere of politics. The weekend of March 8-9, 2008 capped a 5 month period of intense propaganda coming from the media and screaming that a recession is coming.
The logic is simple. If a recession is coming, then it is time to sell the blazes out of the stock market. It is simple, and it is simply wrong. But very few will understand this because they do not understand the relationship between politics and economics.
It is an unfortunate fact that there are people in this world who want more wealth than they can produce on their own (and always have been). The obvious solution is for them to steal it. However, they are afraid of being caught and going to jail. So they have come up with a better solution. Get the government to do the stealing for them. Then those who resist their stealing will go to jail. The form of stealing which they chose was a variant of counterfeiting.
This “better” solution was implemented just 75 years ago on March 9, 1933 when newly elected President Franklin Delano Roosevelt (on the first day Congress was in session in his new term) rammed a bill through Congress abolishing the traditional American gold standard and giving to commercial bankers the privilege to create money. This bill, The Emergency Banking Relief Act of 1933, is must reading for everyone who wants to understand our modern age. But that did not include (most of) the U.S. Congress. The House voted for the bill by voice vote, which was ruled favorable from the chair. Requests for a role call were ignored. Members of the House did not even have written copies of the bill to look at before they voted. The Senate was a bit better, but the Senators still did not know what they were doing. What they were doing was giving the commercial bankers a privilege very close to legalized counterfeiting.
So the New Deal was not a movement to steal from the rich and give to the poor, and FDR was not a traitor to his class. He was in fact a Gordon Gekko type, and his first official act was to legalize stealing by the commercial bankers. His supporters were not motivated by an excess of love. They were motivated by a very old sentiment: the desire for unearned wealth.
The next step was for the bankers to recruit a number of crackpot economists to develop a theory that creating money out of nothing “stimulates the economy” and that the bankers and their associated vested interests were ‘the economy.” This theory was then infiltrated into our society by bribing the top colleges to hire these crackpots (John Kenneth Galbraith being a good example) as professors of economics.
This entire system is long in place. Bernanke is their man. Greenspan was their man. Volcker was their man, and Reaganomics was (the conservative version of) their plan. When they want the Fed to help them create money, they shout “recession,” and the whole system goes into operation. The Fed and the banks together create money, and the stock market goes up. The media today is operated by students who learned their economics from those crackpot professors.
We have just had a perfect example of this. The media have been screaming “recession” to beat the band. The Fed has been easing (a euphemism for printing money) since Sept. 18, 2007. This will make the stock market go up. It did in 1933, and it will do so again in 2008. The only question is the exact timing. Political considerations cannot answer that question; for that we need the economics.
The vast majority of the people vote for political candidates who uphold this system (called Keynesianism by the Democrats and Reaganomics by the Republicans). As the original thieves who set it up would undoubtedly say, “God must have intended them to be sheared. Otherwise, he would not have made them into sheep.” (The sheep are those who intend to vote Demopublican in the coming election.)
In Adam Smith’s day, there was no science of economics. The subject was called political economy because it was a mixture of politics and economics. The government of every country was involved in its economy for the purpose of stealing (or as they called it redistributing the wealth). In no country did the government steal from the rich to give to the poor (although all claimed to). In every case, it stole from the poor and gave to the rich. How this was done was the subject of political economy.
In a free market economy, one could separate economics from politics, and this was attempted in the late 19th century when the U.S. and Britain had a near free market. But today we do not have a free market. Neither political party will declare itself in favor of protecting property rights or reestablishing a gold standard. Both redistribute the wealth, and they disagree only about the details.
The “recession” propaganda of the weekend of March 8-9 was a classic case of the paper aristocracy (the bankers and their associated vested interests) flooding the media with “recession” propaganda. Perhaps they were celebrating the 75th anniversary of their original triumph. Perhaps they just wanted to steal more wealth. It doesn’t really matter to the serious financial analyst who wants to figure out the market. The vast majority of these people are failing because they intensely study the economics and completely neglect the politics.
At The One-handed Economist, I practice political economy. My analyses of the markets work because I am looking at the whole picture. You are invited to check out my web site, www.thegoldbug.net and to subscribe to my newsletter. The web site is mostly about politics and is available as a public service. The newsletter is mostly about economics and costs $300 per year. It gives recommendations in specific stocks/commodities and specific advice on timing. I keep a Model Conservative Portfolio to let readers know how I am doing, and a theoretical $100,000 invested on 9-17-99 is today $212,409. That is, a subscriber from that date has paid $2700 in subscription fees and has gained $112,409 in market profits (not counting dividends). So I think I earn my keep and that it is in your self interest to subscribe.
I would be delighted to have you check me out.
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