Through A Looking Glass Darkly

The Obvious Is Obviously Wrong

Have you noticed the mad frenzy that goes on preceding any of the so called IMPORTANT numbers that are scheduled to be released every week, month or quarter? Who is kidding who? Do you know anyone who has ever made a decision based on the Government's employment or any other published numbers? Moreover, since they are all subject to revision, does anybody believe those numbers? And even if those numbers were 100% factual, they would reflect what was happening in the economy three to six months ago. There is always a LAG effect to everything, especially accumulated reported data.

The main point that I am trying to convey to you is: Look to the future, not to the past if you ever expect to be able to make educated and intelligent estimates of what will be happening in the future (or subscribe to my up new Letter beginning in February LOL)

RECESSION 2008

The best example that I can point out to you now is the constant flow of estimates on the probability of a recession occurring in 2008, which are now ranging anywhere from 10% to 50%. All of them are based on yesterday's numbers when in reality, history will show that we are already in recession now, which started some time during the forth quarter of 2007 (exactly as forecast in my letter of March 2007 called "DENIAL is not a river in Africa", in which I had warned about the bursting real estate bubble and the sub-prime debacle, while most of the experts were still calling for an extension of the booming real estate market). I don't have a crystal ball, I just use the basic Natural Laws of Economics (as outlined in the Bible and elementary Economic Text Books) that tells us that if this is happening now, then that will be forthcoming later. BUSTS ALWAYS follow Booms. It is never a matter of "IF" it is always only a matter of "WHEN". The longer the recession is forestalled, the worse it will eventually become.

"TO CUT OR NOT TO CUT", that is the question!

I have already explained how interest work at least five times over the past two years. As any economist or analyst or even Media maven will tell you, the seeds of the current crisis were sown by Greenspan lowering interest rates to 1% and keeping them too low for too long. If they are right (and they are), how will continuing to do what got you into trouble in the first place (excessively low interest rates) solve the problem?

It is not as if this problem has never happened before. I have often mentioned studying Japan, with its zero interest rates and 17 year recession, to try and learn some valuable lessons so has to avoid making the exact same mistakes ourselves. But alas to no avail. Perhaps the powers that be think Japan falls under different Economic Laws than we do. Therefore, let us examine instead the almost exact same situation that occurred right here in the USA back in the 80's with the Savings and Loans crisis. Then like now, we faced a massive oversupply of not only homes but commercial, office and industrial buildings as well. Did we try to prop up the failing institutions and homeowners? NO we did not! We hired Bill Sideman instead and gave him Carte Balanche as well as a blank check and free reign to fix the problem.

THE SOLUTION

Bill promptly liquidated the institutions that were beyond saving, merged the weak ones that could be saved into bigger and larger solvent institutions and took all the then defaulted properties and auctioned them off to the highest bidder without reserve, as quickly as possible. He made no attempt to nickel and dime the properties in a useless effort to squeeze out a few extra dollars (which always results in losing a lot more money).

THE RESULT was a $157 Billion loss instead of the $1 Trillion+ loss that was expected and at the same time he cleared the massive supply overhang which then allowed for both the real estate market and the economy to get back on track after only a mild two year recession. That, my friends, is how a FREE market is supposed to work.

But this time we have a "RHINO" (socialist, populist) in the White House and a Congress dominated by Socialists and Populists as well. They are all trying to come up with an "everyone wins" strategy while completely disregarding our Constitution. In their meddling, make themselves feel good, damn Economics way, they will turn what could be a normal and necessary 2 year recession that would correct most of the economy's imbalances, into one that turns into a 16 to 20 year DEPRESSION. It will be an exact replay of the 30's, especially since the New Deal economic policies of the 30's have already been sloshing around in Congress for over a year now, only being kept at bay by the threat of a Presidential Veto.

I APOLIGIZE

To all the supporters of both parties, I am not trying to be political or influence your votes in any way. I am trying to make you aware of the economic facts of life so that you can get on the phone and call you own favorite politician and try to get him to do what is right and must be done, regardless of the Party. It is time America came first or by 2009, you will find out what kind of America your Grandparents lived through!

THE STOCK MARKET

It is still possible that the market can still make one last ditch effort at reaching a new high, perhaps in conjunction with a 50 or even a 100 basis point cut between now and the end of January. Although improbable, if we were to happen, it will only be a sharp, fast bounce with very little individual stock participation and on lower than normal volume. It will, if it occurs at all, be that last gasp, giant suck-in rally before the market plunges. Unless you're a professional trader, don't even attempt to play this last rally. Keep your powder dry and wait for the good shorting opportunities which I will be supplying in my subscription letter beginning in February. Like it or not, THE BULL MARKET IS FINNISHED.

SHORT SELLING

To begin with, look to go short into this coming rally the weakest of the Financials such as MER and RSC etc I think I will be buying puts on GS as well. I would also put on some short on the Big Banks like Citi, BAM and J. P Morgan. They are all in BIG trouble. You can also safely short the home builders and their suppliers on any short term bounces. The real estate market still has a long ways to go down, both as to time and price. If your not ready to go short then don't, but at least lighten up drastically and at a minimum get rid of all debt especially Margin Debt. Once again, let me say "I TOLD YOU SO" only to remind you to check out the track record of anybody that you are considering following. Since before the October highs, I warned you that after testing the lows, the Market would attempt to make a new all time high but that it would be too dangerous to attempt to trade that rally. Use it instead to liquidate all your long positions except of course your Gold and Silver and prepare for a BEAR MARKET. Then, after the DJII hit a new all time high, I thought ar the time that it was not enough and that the market required a retest of the Lows with one more attempt at another new high by the end of December/ early January. So far, we are right on schedule. However, you must NEVER rely on one and only one letter no matter how good you think that letter is. After all, the Rogues are always the most lovable as well as the biggest liars. That is why I spend so much time trying to educate you; so that you can make your own decisions. YOUR BEST COURSE OF ACTION IS TO THINK FOR YOURSELF!

GOLD

So far we are right on track. As a matter of fact, I would need a crystal ball to have done any better and as I told you before, I do not have one. So far Gold has gone up $75 since my last letter and it is probably due for a $15 to $25 breather (consolidation) before resuming its path to my $900+ target. Based on the information at hand, $1,000 Gold seems in the bag for this year. Do I really have to tell you what to do? BUY GOLD. If it bothers you to chase anything, you are in luck. As I told you before: When the BULL Market in Gold resumed, it would be led by the majors, most of which have broken out to new all time highs. But the juniors, especially the quality ones, have barely moved and they will eventually give much bigger percentage moves than the majors before this Bull Market is over. So what are you waiting for? Start accumulating the juniors and since they are cheap, remember to diversify.

 

GOOD LUCK AND GOOD BLESS

 

 

Aubie Baltin CFA, CTA, CFP, Phd. (retired)
Palm Beach Gardens, FL
aubiebat@yahoo.com
561-840-9767

 

8 January 2008

The above information has been gleaned from information that I believe to be reliable but is not guaranteed by me. The information provided is strictly for educational purposes and is not meant to be used as investment recommendations.

A BI-WEEKLY MARKET LETTER, "UNCOMMON COMMON SENSE" I have resisted starting my own subscription letter in the face of many consistent requests because I thought, who needs another market letter? But now, given the type of economy and markets we will shortly be in, I have allowed myself to be convinced that maybe, just maybe, some investors could use my type of independent analysis. Since I'm not on anyone pay role I can say what I really believe and not have to put any patrons spin on my findings,

It will be published bi-weekly at a cost of $199.00/yr. Along with the type of letter that you are all used to, I will be including my own actual trades as well as what to look for in instituting your own future trades, whose opportunities may present themselves between letters. I will also be including regular detailed Elliott Wave Charts on Gold, the DJII or any other charts of interest. Starting date will probably be February 1st, 2008, depending upon the level of interest and will be emailed to subscribers at least one week before appearing on any websites.

For those of you who are interested and wish to subscribe, please forward your check for $199.00 to:

Aubie Baltin
2078 Bonisle Circle
Palm Beach Gardens FL. 33418-6503

In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.

Gold Eagle twitter                Like Gold Eagle on Facebook