A Continuing Bear Market
Unfortunately our Warnings Seem to be Unfolding
The evidence for a decline is well documented from an historical
perspective as Ian Gordon points out so well. Equally convincing is the
evidence of a gold price conspiracy as outlined in the gold price conspiracy law-suit waged by Reginald Howe. But as logical and convincing as the evidence is, virtually no one has cared to pay attention to it - until now.
Indeed the comparison with the last great market downturn, in the 1930's in
unavoidable now because this past week the Dow lost 14.26% of its value.
That is the fourth largest one week loss in history, the other three
occurring during the Kondratieff winter of the last cycle. The other
larger losses were: 1933 - 16.66%, 1940 - 15.48% and 1932 - 15.15%.
Why are the Masses Always so Wrong at Major Turning Points?
Why is it so hard for people to think outside the box and to believe what
history has so clearly taught us? Or perhaps a more fair question is this.
How can the masses of people so easily dismiss the lessons of history?
Aside from the fact that most people can relate only to what they
themselves have experienced, I think an observation by famed historian
Oswald Spengler in his book "The Decline of the West" is most relevant to
our current situation when he raises the age old question, "What is truth?"
He then answers his own question as follows: "For the multitude, that
which it continually reads and hears. A forlorn little drop may settle
somewhere and collect grounds on which to determine 'the truth' - but what
it obtains is just 'its' truth. The other, the public truth of the moment,
which alone matters for effects and success in the fact-world, is today a
product of the Press. What the Press wills, is true. Its commanders evoke,
transform, interchange truths. Three weeks of press-work, and the 'truth'
is acknowledged by everybody."
So it is with America today or I would argue even more so because now we
are bombarded by TV which did not exist in 1926 when Spengler wrote those
words. With TV, deliberate reasoning is even less common than when 'truth'
is conveyed via the written word so the ability to define "truth" as the
establishment may choose is even more powerful now, than in 1926 when
another master at mass deception, Adolph Hitler used the press to rally the
masses behind his 'truth.' The ability of TV to be used is especially
dangerous in my view since those who control it are in effect our corporate
elite. They now own and control the media. So, I would argue that we
Americans are now in a position to be molded like putty for the by the will
of the ruling class since technology now provides an even more efficient
means for molding 'truth.' Indeed, has this not been the case with respect
to Wall Street's buy and hold message thorough the 1990's? Given that
technically we are more capable than ever of forging a dictatorial regime,
we can only hope and pray that the Spirit of God, rather than that of our
ruling elite prevails in America. After all, it has been our ruling elite
who have manipulated the gold price as an underpinning of a very phony and
excessively strong dollar that has suckered millions of Americans into the
largest Ponzi scheme ever. And, we should have known we were in trouble
when even NASDAQ TV ads compared our stock market to a gambling casino!
Markets remain overvalued.
As for the markets now, they are in a shambles even after last weeks plunge
in value. Despite the Trillions upon Trillions of dollars of paper value
lost, I do not see an end to the down turn any time soon. Indeed, stocks
remain highly overvalued given plummeting earnings. This week the "earnings
yield for the S&P 500 - suspect as those earnings may be - stood at just
3.82% despite the plunge in stock prices. Moreover, the only 1.62% of
those earnings are paid out in dividends. By comparison, one can buy a
10-year Treasury and get a 4.70%. And, this income is exempt from state
and local taxes.
We are in a Primary Bear Market - Stay the Course
In this week's "Barron's", the headlines screamed "Its Time to Buy Stocks."
I do not believe that is true. I believe a more accurate perspective is
highly acclaimed newsletter and market analyst Richard Russell. He noted
that "the stock market in its collective wisdom knows more than Fed head
Greenspan, President Bush, the US Treasury, the Congress and the top
experts in government and private industry all taken together. Therefore,
"in breaking to new lows on record volume, in reconfirming the primary bear
trend, the stock market barometer is saying, 'the primary trend of the
stock market and US business is down.' I don't care what Greenspan or Abby Cohen or Robert Rubin or any other expert tells us, the stock market
barometer trumps them all.
"And the stock market barometer is saying, 'This is a continuing bear
market. Prepare for stormy weather ahead."
Richard then went to say that the bear market is in its second and longest
phase. The second phase is the trickiest, the most deceptive, the most
erratic. This is because during the second phase of the bear market there
continues to be mixed opinion as to what is happening, whether its really
is a bear market, whether we should hold our stocks or sell them, whether
the government will 'fix things' or whether it will fail."
Mr. Russell also noted that at the moment focus is on the Twin Tower
disaster. But Richard noted, "this has become the convenient excuse for all
those who have ignored the stock market barometer, for all those who have
been so wrong, for all those who have cost investors trillions of dollars."
He also noted that intelligent investing requires people to learn to ignore
all the talk of the experts and as he has been saying for a long time, the
only expert is the stock market itself. You must watch the primary trends.
The third phase of the bear market is more clearly seen. Investors have
become so demoralized that they finally call their brokers with orders to
"get me out, I don't care what the cost is, just get me out." This is when
true capitulation will have occurred. This is the point when people like
David Tice and other contrarian investors will seek to quietly get back
into the market. Now what we have to do is preserve our capital so we have
some resources left when that much talked about but still far away event
known as capitulation takes place. If the Barron's headline had said
something like "Get out of Stocks", we might be inclined to think the bear
market is over. Unfortunately in our view we are still fairly early on in
the decline of American wealth and also the decline of a gigantic American
Ponzi scheme fueled by printing press money in turn made possible by 1)
detaching gold form paper money and 2) rigging the gold price from mid 1994
through the present time.
THE FED HAS NO BULLETS LEFT
The Fed has cut rates eight times for 350 basis points, plus fiscal
stimulus to boot. All this was done while the economy was still growing and
unemployment under 5%, and around 4% for most of the cuts. Now that a real crisis has hit the economy the Fed is left without any bullets. Plus, if
anyone has noticed the rate cuts have not done a whole lot to shore up the
sagging economy. The slowdown has come because expectations were set way
too high and companies added capacity accordingly, not because money was
too expensive to borrow. Demand has dried up and there are simply few
capital investments that make sense, regardless of cost of capital. The
overcapacity is widespread and will take years to work off.
There is a lot of talk about the overcapacity in the tech sector. However,
the overcapacity problem is prevalent throughout the economy. In an address to the OECD, Tom Usher, chairman of USX, the largest U.S. steelmaker, said that global excess capacity is about 250 million tons a year, almost one-third of global production. Ian Christmas, secretary general of theInternational Iron and Steel Institute, said the industry's short-term
outlook is "disastrous" and is "bad and getting worse."
September 25, 2001
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
http://www.miningstocks.com
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