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November 17, 2008 Pivotal Events |
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The following is part of Pivotal Events that was published for our subscribers Thursday, November 13, 2008. SIGNS OF THE TIMES:
* * * * * Stock Markets: The test of the October low is on. As this is fitting the "model", we are preparing for a change in overall policy. From decidedly pessimistic last summer, and in looking at this week's ugliness, we are now cautiously pessimistic. Seriously, conditions are daunting, but in that it is happening within the "Fall Classic Crash" we have to assume that because it is down when it should be - it could go up when it should. We have mentioned that the test could happen around mid November and Ross has two different counts that the low could come in after November 14. There could be some technical indicators that will signal the turn and the ChartWorks will advise. In the meantime, one of the advantages of independent research is not having to endorse conventional wisdom. This affords the ability to be clinically critical of the wonders of policy making, in particular, central banking. Last year the advice was to ignore their boasts, then during the summer it was to ignore the promises that things had been fixed. In September the advice was that even the most desperate measures would not alter the fall crash pattern. It hasn't. This critical theme was developed with hopes that our subscribers would not repeat the mantra of central bank infallibility to their clients. There are at least two main failures. One is in the financial markets, the other is in central planning. The notion that that a speculative collapse could have been prevented by more regulation is absurd, and reminds of the old saying from the old and notorious Vancouver Stock Exchange: "So long as it is going up the public will believe the most preposterous story". The most preposterous story in financial history has been that a committee can "manage" the economy. Somewhere there should be a rule that those who did not anticipate the disaster should be prevented from vain attempts, with taxpayers' money, to end a financial disaster. This would be particularly applicable to those who claimed that with their skills a disaster was impossible. As the old saying goes: "Capitalism without failure is like Christianity without hell". We used this decades ago and Warren Buffet used it last May. When it comes to market forces, Mother Nature and Mister Margin have been and will continue to be in control. This will eventually be understood by the benighted policy crowd and while we won't have a technical measure on it - when central bankers eventually capitulate we will likely recognize it when we see it. Traders should continue to cover shorts and get prepared for a rally from the latter part of this month to around March. This would be within a cyclical bear, one of the symptoms of the next period of vulnerability will be Wall Street strategists again celebrating the "genius" of central planning. At the washout last January, we used this line and it was rewarded with:
It seems that the market is rushing to complete the test. There have been six consecutive trading days down. Either up or down, such impetuous moves usually run for 7 days; the one to Black Friday ran 8 days. Gold Sector: Gold and gold shares were expected to decline with the classic fall liquidity crisis. With this, most pundits expected gold to rally with a tanking dollar. Using the history of crashes the dollar was likely to rally and gold to decline, which has been the case. The other classic feature is silver plunging relative to gold, with silver experts unable to explain the action. Our advice since October 23 has been to cover silver shorts and that traders and investors should be getting long the sector. This now includes larger silver stocks - keeping in mind that they were created for trading. The test of all the beat up items has been accompanied by an increase in the gold/silver ratio. With the October pressures the ratio got out to a close of 84, then it came in to 71 a week ago Wednesday. Now with this week's disasters it increased to 78 today. In looking at the ratio as an indicator of crashes and rebounds any decline now in the ratio would confirm that this phase of the overall crisis is ending. Tales From The Crypt: Last week we ran some comments from November, 1873 that covered the transition from disaster to rebound. A few from the equivalent in 1929 follow:
It is worth recalling that policy makers spent the 1920s easing credit in order to keep basic prices from crashing as in 1921. The lolly went into the stock markets.
Link to the November 14, 2008 'Bob and Phil Show' on Howestreet.com: http://www.howestreet.com/index.php?pl=/goldradio/index.php/mediaplayer/1027
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Bob Hoye The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications. Copyright © 2003-2009 Bob Hoye Image rendition and html coding Copyright © 2000-2009 SafeHaven.com ADVERTISEMENTS
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