Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Battle of the Titans, Stocks Bulls vs Bears, Inflation vs Deflation

Stock-Markets / Financial Markets 2010 Mar 08, 2010 - 11:05 AM GMT

By: Captain_Hook

Stock-Markets

Best Financial Markets Analysis ArticleIt’s a battle between the bull and the bear – fear and greed – inflation and deflation – in the stock market. Of course when it comes to this sentiment the same can be said about all markets, which is what makes them markets in the end, however stocks are close to people’s hearts because of widespread participation these days. Today however, because so much of the money in the market is being handled by ‘other people’, being brokers or hedge funds, the concepts of fear and greed are not what they were, with the public now largely oblivious or numbed to the awareness they should have when it comes to their financial futures. What’s more, because of this an unscrupulous financial services industry has become completely corrupted beyond repair, which will be their (and our) undoing in the end.


The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, February 23rd, 2010.

And although change may appear to be coming in this regard, with the public apparently waking up in all sorts of ways these days, the sad part of it is it won’t matter for most, because they are already over-indebted, with no way out. And it’s the debt people should be worried about, as it’s the usury that’s the core problem, that being the public’s willingness to allow the various levels of parasites to continue feeding on them. The masses are caught in their generally inflated lifestyles however, with far too many living over their heads on this credit, hoping to stave off the pain associated with bankruptcy – just like the government. Unlike the public however, the government has accelerated the rate at which it is taking on debt to counter the deflationary forces of a slowing consumer, increasing both the size and frequency of its Treasury auctions.

So, if you think that all of a sudden the government is miraculously going to become fiscally responsible with all this talk of fiscal restraint and deficit reduction being put forth by the administration, please, give your head a shake. And the same is true when you hear nonsense like this coming out of the Fed as well, where even though the M’s are contracting at the moment, one cannot forget this is after it just finished printing more money in two years than in its entire history prior to this, along with leaving free reserves in the banks at historic extremes that appear to even make Easy Al nervous based on some of his more recent comments. The problem here, which is why the bureaucracy is so worried, is if the banks were ever to begin lending these reserves, the resulting price inflation would spoil the party. This is because although the economy would benefit, interest rates would also likely rise despite efforts to the contrary, and a bloated credit based economy would collapse in spite the best laid plans.

In moving the focus to the brokers / bankers for a minute, here again, please don’t be fooled by ploys put forth like the Volcker Rule as well, as this is just another means of obfuscation attempting to quell the masses as the bureaucracy continues to debase the system, led by the currency, and followed with our hollowed out morality and economy. Because that’s the goal of the bureaucracy, the continued exploitation of the system / masses. The only problem is the bureaucracy is getting so big, and the masses have been exploited in just about every way imaginable already, very few options remain short of continued currency debasement, making recent comments by Antal Fekete particularly timely. Of course Fekete believes adding more debt (fiat currency) to the formula right now will not work for long, and that gold should be revalued to extinguish current debts. And he’s probably right, however we will never see this with Washington still in Wall Street’s pocket, so the gold market will likely need more time to get where it’s ultimately going, which is much higher.

Those pesky deficits just keep on rising, and like Greece, soon a debt-smothered American public sector will no longer be able to make the payments either. So it will either be cut spending or loosen monetary policy in a manner such that the masses, like big brother, are re-liquefied. If this were to occur by any means (sending out checks, etc.), the effects would be quite temporary, however this would not prevent prices from rising considerably, possibly in a hyperinflation like manner. Of course such policy would also usher in ultimate end game dynamics much quicker also, where in fact, in this regard, and in spite of official policy (think Fed), long-term rates, which are controlled by the market, are on the verge of breaking out higher. Thus, it’s important to understand the blowback from such ‘loose monetary policy’ would ultimately force the Fed to tighten, which in turn will attract speculators / hedgers to the dollar ($). (See Figure 1)

Figure 1


So you see, this is why the Fed is talking tough right now, because if the yield curve steepens anymore (it’s already at historic extremes) than it already has, either the equity complex will need to come in, deflating the asset bubbles, or, short-term rates will need to continue rising. This was the same dynamic that kept interest rates and gold rising in tandem during the late 70’s. Too much inflation was created to quickly in response to a deflation risk earlier (using a one to two year lag), where it ultimately took nearly 20% short-term rates to finally get the inflation genie back in the bottle. And while rates would not need to go that high this time, still they would likely rise to ‘max pain’ proportions before it was all over. Credit spreads would be the measure here, along with gold. So again, this is why the $ can just keep on trucking higher. (See Figure 2)

Figure 2


Further to this, and from a technical perspective, with the surge higher in the $ last week, you should know that although a correction is likely directly ahead, it’s now counting higher in five-wave affairs, which implies more bullish price action to come, which in turn is telegraphing continued rising rates. (i.e. and pressure in the inflation pipe.) Now you may be saying to yourself, yes, but that was then and this is now, meaning deflation is still the concern until all those free reserves on bank balance sheets starts making it into the economy, and you would be right. In fact, please don’t forget we are forecasting trouble in the equity complex starting sometime this spring (beginning in earnest as early as options expiry in March), where this time around, unlike the 70’s, and like a banana republic, interest rates in the States must rise in order to attract foreign fund flows, and rates must continue to rise because the $ keeps falling. (See Figure 3)

Figure 3


Remember, as per our long-term chart directly above in Figure 3, technically the $ is in position to fall to as low as 30 from a Fibonacci resonance related perspective in a panic involving foreigners dumping US assets. And this dumping would involve all asset bubbles (stocks and bonds in particular) in addition to the currency, with prices buffeted in local terms due to the currency depreciation, and gold (precious metals) the winner within the larger formula. This is when the Dow / Gold Ratio can be expected to be probing lower trajectories; meaning unity should be vexed at some point in coming years to match previous historical extremes.

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our continually improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover.

And if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

http://www.treasurechestsinfo.com/

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2010 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in