The Daily Bull: Why Has the Market Yet to Crash?

By: Joseph Russo | Fri, Sep 16, 2011
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An Old Type of Business-As-Usual

One could easily misperceive the 17-years of "entitlement" rally from 1982 through 1999 as normal and representative of the type of "certainty" necessary to carry out business as usual.

In my view, striving toward returning to another cycle of excess to compensate us for enduring more than a decade of uncertainty is akin to a junkie going on a bender simply because he has endured the pain of sobriety for a few weeks.

How soon we forget. Prior to the launch of our aptly coined 17-year entitlement rally, we experienced 16 turbulent years of incredible uncertainty from 1966 through 1982.

History clearly documents that our last period of prolonged uncertainty contained a host of very similar if not far more pronounced levels of existential questions surrounding the durability of our economic future.

Before one concludes that the Dow is destined for a total collapse, one should never rely upon the simple fact that stocks go up and down without factoring in an underlying fundamental truth, which is that stocks possess an inherent bullish bias. That is why markets have yet to crash.

Witness 1966-1982. It is simple to understand that after a prolonged bout of uncertainty that durable solutions (flawed as most of them were) will inevitably surface to unshackle the gridlock.

Witness 1982-1999. It is also simple to understand that after a prolonged period of too much "certainty" that complacency, imprudence, and greed begin to permeate and destroy the economic landscape.

This ignorant but quite human process is the very essence of the quintessential boom and bust cycle.

No matter how much sense it may make to learn from history rather than react to the present, as a collective, we cannot seem to grasp this simple essential wisdom. Although challenge and adversity is unavoidable, the way in which we cope with such episodes is a conscious choice of our collective leaders alongside those with the highest of influential powers.

The growing number of well respected voices who place direct blame on the fed, corrupt politics and the lobby power of transnational mega-corporations for the insanity and pain caused by these repetitive cycles are likely correct to a large extent.

Until we acquire the collective and political resolve to mandate an impartial foundation of, logic, reason, and historical wisdom to legislate stable and sustainable policies, it is likely that our economic DNA shall remain poisoned with the flawed boom and bust disease.

Successfully investing and trading in such environments can be extremely frustrating. To navigate effectively, one must re-adjust expectations accordingly; develop the tenacity, and the will to prevail.


Delivering Alpha

On Wednesday, as advertised, US treasury secretary Tim Geithner and the CNBC cast of guests delivered some much-welcomed alpha with decent follow through on Thursday for good measure.

In short, alpha is a technical risk ratio used in modern portfolio theory. Simply stated, alpha represents what a portfolio manager or investment strategy adds to or subtracts-from returns relative to that of a benchmark index such as the S&P 500.

In a future article, I will share with readers how my investment and trading strategies measure up in terms of alpha. Stay tuned.

Until then,

Trade Better/Invest Smarter

 


Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/