Most readers are aware that the Federal Reserve destroys our dollar through fiat monetary policy. However, for any who are new to this site or this argument, here is the summary: The paper notes you have in your pocket are backed by nothing. They used to have some backing in gold, but that began being removed in 1913 and then the gold window was closed in 1971. There were steps in between. I suggest you look this information up. Google it, read "The Creature from Jekyll Island" and "End The Fed".
The Fed basically prints money out of thin air. They don't even have to print it anymore. Setting artificially low interest rates, regulating bank reserve requirements, and computer entries are soem of the tools at their disposal for manipulating the money supply. The U.S. Dollar of 1913 (year the Fed took over monetary policy) is now worth about 5 cents. It has lost 95% of its value. The problem became even worse recently when the markets went soft. This is because all the bailouts had to come on the back of already overhanging government debt. So more debt and more dollars (this devalues the ones in your pocket, and makes the system unstable) were thrown at the problem. A proper course would be to let the malinvestments; the non self liquidating debts and the unprofitable business activities and equipment be liquidated via market forces. We did not take the proper course.
OK, like I said, the above is a very very brief summary for newcomers to this information. If you are a newcomer, please look it up, read about it, turn from apathy and complacency. Now for the update as to where things are as of a few days ago.
Ron Paul's bill for a full audit of the Federal Reserve did not make it on its own. This is no big surprise. Except for a few honest statesmen, like Dr. Paul, our country is run by crooks and presumed pragmatists void of consistent and principled, moral and ethical legislative track records. However, because so many individuals have been awakened by the bear market, pressure was applied to congress to audit the Fed. In fact, a seemingly significant segment of the population now wants to end it.
Now for the good news. The House Financial Services Committee has included Language from H.R. 1207 -Audit the Fed bill- in the upcoming regulatory reform bill -HR 3996. If HR 3996 passes, which is probably will, then the Fed will be under the microscope and a good portion of its secrecy will be removed.
Now for other bad news. HR 3996 is not a bill, advocates of sound money and true free markets can support. HR 3996 gives the Federal Reserve many new powers. This is bad news for the long-term health of our Dollar and for the economy. However, if HR 3996 passes, the language that is included from HR 1207 will remove the ability for the Fed to act in secrecy as it has in the past.
Please Read Congressman Ron Paul's comments about this in his weekly "Texas Straight Talk" letter.
11/24/09
11/23/09
Free 42-Page eBook: Find Trading Opportunities With Fibonacci
Elliott Wave International has just released a free 42-Page eBook, How You Can Identify Turning Points Using Fibonacci. Created from the $129 two-volume set of the same name, it’s available free until November 30, 2009. Learn more.
Greetings reader,
You may be missing trading opportunities staring you in the face. The charts you look at every day could reveal high-confidence trade setups and market turning points. You can learn how, today.
Elliott Wave International (EWI), the world’s largest market forecasting firm, has just released a free eBook, How You Can Identify Turning Points Using Fibonacci.
Elliott Wave International (EWI), the world’s largest market forecasting firm, has just released a free eBook, How You Can Identify Turning Points Using Fibonacci.
It features 42 chart-filled pages of actionable Fibonacci techniques that you can add to your trading arsenal right away. You’ll never look at charts the same way again!
Created from the $129 two-volume set of the same name, this valuable eBook is offered free until November 30, 2009
Don’t miss out on this rare opportunity to change the way you trade forever.
About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private around the world.11/20/09
The FDIC Anesthesia Is Wearing Off
By Robert Prechter
The following article is an excerpt from Robert Prechter's Elliott Wave Theorist. For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks.
Perhaps the single greatest reason for the unbridled expansion of credit over the past 50 years is the existence of the Federal Deposit Insurance Corporation, another government-sponsored enterprise created by Congress. The coming rush of bank failures is an outcome made inevitable the very day that Congress created the FDIC. The reason is that the creation of the FDIC allowed savers to believe that their deposits at banks are “insured” against loss.
But the FDIC is not really an insurance company. No enterprise, absent fraud, could possibly insure all the banking deposits in a nation. Nor does the FDIC do so, despite its claims. The FDIC is like AIG, the company that sold too many credit-default swaps. It contracted for more insurance than it could pay upon. Because depositors believe the sticker on the door of the bank, they have abdicated their responsibility to make sure that their banks’ officers handle their deposits prudently. This abdication allowed banks to lend with impunity for decades until they became saturated with unpayable debts.
But the FDIC is not really an insurance company. No enterprise, absent fraud, could possibly insure all the banking deposits in a nation. Nor does the FDIC do so, despite its claims. The FDIC is like AIG, the company that sold too many credit-default swaps. It contracted for more insurance than it could pay upon. Because depositors believe the sticker on the door of the bank, they have abdicated their responsibility to make sure that their banks’ officers handle their deposits prudently. This abdication allowed banks to lend with impunity for decades until they became saturated with unpayable debts.
Today, most banks are insolvent, and the FDIC is broke. This condition is deflationary for three reasons: (1) Banks are coming to realize that the FDIC cannot bail them out in a systemic crisis, so they have become highly conservative in their lending policies, as described above. (2) The main way that the FDIC gets its money is to dun marginally healthy banks for more “premiums” (meaning transfer payments) to bail out their disastrously run competitors. The more money the FDIC sucks out of marginally healthy banks, the less money those banks have on hand to lend, which is deflationary. (3) The banks that have to cough up all this money will become more impoverished at the margin, so banks that otherwise might have survived a credit crunch will be thrown even closer to the brink of failure. This is another deflationary risk.
A friend of mine whose family owns a bank told me that the FDIC recently raised its 6-month assessment from $17,000 to $600,000. In the FDIC’s latest announcement, it is considering requiring banks to pre-pay three years’ worth of “premiums,” i.e. triple the normal annual fee in a single year. It will be a miracle if the money lasts through 2010. When these funds are gone, the FDIC will have two more options: to issue its own bonds and pressure banks to buy them; and to tap its “credit line” of up to half a trillion dollars with the U.S. Treasury. It’s the same old solution: take on more new debt to back up failing old debt. More debt will not cure the debt crisis.
Meanwhile, the FDIC is contributing to the deflationary trend. It has “tightened rules on required capital levels,” which forces banks’ loan ratios to fall; and it has “extended its extra monitoring of new banks from the first three years of operation to seven years” (AJC, 11/19), meaning that banks will now have to wait four additional years before they can go crazy with loans.
For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks. You'll learn how to find a safe bank, the critical difference between lending and banking, tips on international banking, and more.
Meanwhile, the FDIC is contributing to the deflationary trend. It has “tightened rules on required capital levels,” which forces banks’ loan ratios to fall; and it has “extended its extra monitoring of new banks from the first three years of operation to seven years” (AJC, 11/19), meaning that banks will now have to wait four additional years before they can go crazy with loans.
For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks. You'll learn how to find a safe bank, the critical difference between lending and banking, tips on international banking, and more.
Robert Prechter, Chartered Market Technician, is the world's foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.
11/18/09
Is Your Bank Safe? This Complimentary 10-Page Report Can Help
Is Your Bank Safe? More than 130 banks will have failed by the end of 2009. What if your bank fails? Did you know you could be left in the lurch for days, weeks, even months before you get your money back from the FDIC? What happens if the FDIC can't cover your funds? How do you find a safe bank to protect your deposits right now? Find answers to these questions and more in the original "Safe Banks" report from Elliott Wave International. Learn more and download your free report now..
Greetings reader,
Please read the following Bloomberg news item carefully. It has a direct impact on the safety of your money.
Sept. 24 (Bloomberg) -- In May, the FDIC said it was projecting $70 billion of losses during the next five years due to bank failures. The agency said it expects most of those collapses to occur in 2009 and 2010.
The FDIC’s problem is that it didn’t collect enough revenue over the years to cover today’s losses. The blame lies partly with Congress. Until the law was changed in 2006, the FDIC was barred from charging premiums to banks that it classified as well-capitalized and well-managed. Consequently, the vast majority of banks weren’t paying anything for deposit insurance.
Of course, we now know it means nothing when the FDIC or any other regulator labels a bank “well-capitalized.” Most banks that failed during this crisis were considered well-capitalized just before their failure.
By the end of 2009, more than 130 banks will have failed. Most depositors will have little clue their bank was even at risk. Worse yet, the string-pullers in Washington are doing everything in their power to hide information about the safety of your bank from you.
So far, the FDIC has had enough money to cover insured depositors. But that money is quickly running out.
Just last week, the FDIC voted to mandate early payment of insurance premiums to help cover at-risk banks. Here's what the Associated Press reported on Thursday, Nov. 12:
WASHINGTON (AP) -- U.S. banks will prepay about $45 billion in premiums to replenish a federal deposit insurance fund now in the red, under a plan adopted Thursday by federal regulators.
The Federal Deposit Insurance Corp. board voted to mandate the early payments of premiums for 2010 through 2012. Amid the struggling economy and rising loan defaults, 120 banks have failed so far this year, costing the insurance fund more than $28 billion.
Worse yet, three more banks failed the very next day, Friday, Nov. 13.
This is a very real problem and a direct threat to your money. It's more important now than ever to personally ensure the safety of your bank. The free 10-page "Safe Banks" report from our friends at Elliott Wave International can help.
Inside EWI's revealing free report, you'll discover:
- The 100 Safest U.S. Banks (2 for each state)
- Where your money goes after you make a deposit
- How your fractional-reserve bank works
- What risks you might be taking by relying on the FDIC's guarantee
Please protect your money. Download the free 10-page "Safe Banks" report now.
About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private around the world.
11/15/09
11/13/09
If Stocks Tank, Shouldn't Gold Soar?
By Jeff Reckseit
The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s free 118-page Independent Investor eBook.
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Large banks and more recently pension funds have suddenly become infatuated with gold. They chant the mantras that gold bugs have known for years: gold is a store of value; owning gold is financial insurance; an ounce of gold will always buy a good suit. The idea is that if the economy continues to weaken and share prices decline, a strategic allocation of the precious metal will hedge and offset some of the losses in the financial sector.
On the surface it seems to make sense and it’s hard to argue with the logic. Even so, logic can sometimes get twisted, whereas facts cannot. The evidence is found in the chart we describe as “All the Same Market.” Gold, stocks, currencies (versus the dollar), oil, grains, meats, softs, all decline in a deflationary environment. As liquidity dries up and credit contracts, people, businesses, and institutions sell everything to get dollars. Cash is once again king. This is bearish for gold.
Looked at another way: as the dollar advances from its lows, things denominated in dollars lose value against the dollar. As long as the dollar remains the global senior currency, assets will depreciate: not just stocks and commodities but residential and commercial property, works of art, collectible cars, pretty much everything. Of course, this outlook presumes a deflationary environment and that’s been our view for quite some time. But that’s another conversation. The topic here is stocks down/gold up - or not.
The long-time editor of the Elliott Wave Financial Forecast Short Term Update, Steven Hochberg summed it up succinctly in a recent issue:
“The other important aspect to a dollar bottom is the implication to all the other markets that have been moving opposite to this senior currency. The start of a major dollar rally should roughly coincide with a turn down in stocks, commodities, oil and the precious metals. So there are likely to be important trend reversals across nearly all major markets.”
Don’t fall into the trap of group-think. If investing was that easy we’d all have (insert your own private fantasy).
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For more information, download Robert Prechter’s free Independent Investor eBook. The 118-page resource teaches investors to think independently by challenging conventional financial market assumptions.
11/10/09
Prechter on CNBC: 2008 Was a "Warm Up"
How to Prepare for the Coming Crash and Preserve Your Wealth
New Edition of Conquer the Crash Released
New Edition of Conquer the Crash Released
11/9/09
Finance's Euphoria: The Epilogue -- What Record High Dollar Volume of Trading Says About Confidence
The following article was adapted from the November 2009 Elliott Wave Financial Forecast and reprinted with permission here. Until Nov. 11, you can read the rest of this brand-new report for free, during Elliott Wave International's FreeWeek of U.S. forecasts. Learn more about FreeWeek, and download the rest of this report and others for free here.
By Steve Hochberg and Pete Kendall
When Wall Street’s total value of assets rose to a “mind-boggling 36.6 percent of GDP” in late 2006, The Elliott Wave Financial Forecast published a chart of U.S. financial assets literally rising off the page.
The Financial Forecast observed that financial engineers had “found a new object of investor affections—themselves” and asserted that “the financial industry’s position so close to the center of the mania can mean only one thing; it is only a matter of time” before a massive reversal grabbed hold. Financial indexes hit their all-time peak within a matter of weeks, in February. The major stock indexes joined the topping process in October 2007 and in December 2007 the economy followed. Subscribers will recall that one of the most important clues to the unfolding disaster was the level of financial exuberance relative to the fundamental economic performance.
This chart of the value of U.S. trading volume (courtesy of Alan Newman at www.cross-currents.net) reveals that the imbalance is far from corrected.
Incredibly, total dollar trading volume is even higher now than it was in 2007 when the economy was humming along. In June 2008, dollar trading volume also defied an initial thrust lower in stocks and the economy, eliciting this comment from the Financial Forecast:
The chart of dollar trading relative to GDP shows how much more willing investors are to trade shares in companies that operate in an economic environment that is anemic compared to that of the mid-1960s. A basic implication of the Wave Principle is that the public will always show up at the end of a rally, just in time to get clobbered. This chart shows that it is happening in a big, big way now because the market is at the precipice of the biggest decline in a long, long time.
Total dollar volume continues to rise despite further fundamental financial deterioration. Yes, GDP experienced a one-quarter, clunker-aided uptick of 3.5 percent in the third quarter. But the economy is in far worse shape than it was when we made the above statement. In fact, its recent performance on top of the decades-long economic underperformance (which is discussed extensively in Chapter 1 and Appendix E of the new edition of Robert Prechter's Conquer the Crash) means that industrial production just experienced its worst decade since 1930-1939. Total manufacturing employment slipped to 11.7 million people, its lowest level since May 1941 when it was 33 percent of all jobs. According to Bianco Research, manufacturing now accounts for only about 9 percent of the workforce. Finance anchors the economy now, which makes it far more susceptible to non-rational dynamics.
As Prechter and Parker explain in “The Financial/Economic Dichotomy” (May 2007, Journal of Behavioral Finance), a financial system is not bound by the laws of supply and demand in the same way that an industrial economy is. In finance, confidence and fear rule decisions. “In the financial context,” say Prechter and Parker, “knowing what you think is not enough; you have to try to guess what everyone else will think.”
We do know one thing: When everyone is thinking the same, the opposite will happen.
Right now, record high dollar volume of trading shows that confidence, at least on this basis, has reached a new historic extreme.
…
Read the rest of the 10-page November 2009 Elliott Wave Financial Forecast now, when you signup for Elliott Wave International's FreeWeek of U.S. forecasts. FreeWeek ends Nov. 11, so please act now to get an enormous wealth of current market analysis and forecasts -- for free. Learn more about FreeWeek, and download the rest of this report and others for free here.
Steve Hochberg and Pete Kendall are co-editors of the Elliott Wave Financial Forecast.
11/5/09
Tightening Stops on S&P 500
In the last S&P 500 post, stops for current trend following long positions in the S&P were moved from 991.96 to 1019.94. Stops now move up to 1029.37, after a close brush within 10 points of the previous exit stop level.
In this exercise, we are using simple measures to follow price trend for potential profit. We are not currently focused on picking tops and bottoms. Instead, we are trying to harness the middle section of major price moves. Because we believe there to be greater downside risk in the market right now, we are using exit stops that are placed at levels tighter than a reversal of the entry signal itself.
As noted on the chart above, a move below the new exit stop of 1029.36 would take us out of this trade. A move above the current trend high at 1101.36, would allow us to look for price support at higher levels, which we could move exit stops towards.
AGGRESSIVE SHORT SALE SET UP
A move below the stop of 1029.36 is a set up for anyone wanting to sell the market short against the 1101.36 as a stop loss level. Why is this considered aggressive? It is not considered aggressive because it is short sale set up. It is considered aggressive because we would not yet have confirmation of a major trend change via the weekly 13 & 40 moving averages that have followed the major trends in this market so well.
Why would we consider taking an aggressive stance here? We believe that this market has been in a counter trend rally. We believe that it is most likely the case that a massive secular bear market is still in its early stages. By reading previous S&P 500 posts, you will see that this stance has been a consistent one. When this market turns back down, it could do so with a vengeance. Such a downturn has the potential to be an extremely profitable trend.
P.S.
There will be those who say the market has crashed partially because of short sellers. Let it be known that we have been showing our hand before we even sell short. Let it be known that we are following the price trend up and down -that we are also buying the market. The large rallies you will see in the decline will be mostly because of short sellers covering positions. This recent rally has given you a final chance to get your affairs in order, and to create exit plans for your portfolio. If you fail to do so, and then desire to blame someone, go straight to the largest mirror in the house. That guy you are looking at that spent his time watching the news, football, and American Idol with his free time is the guy you need to blame. If the scenario of a major collapse is proven to be correct, the market will be collapsing because that is what markets do. They go up and down, your failure to recognize that is no one's fault but your own. If the scenario is proven incorrect for now, then that will simply mean the collapse has been postponed.
In this exercise, we are using simple measures to follow price trend for potential profit. We are not currently focused on picking tops and bottoms. Instead, we are trying to harness the middle section of major price moves. Because we believe there to be greater downside risk in the market right now, we are using exit stops that are placed at levels tighter than a reversal of the entry signal itself.
As noted on the chart above, a move below the new exit stop of 1029.36 would take us out of this trade. A move above the current trend high at 1101.36, would allow us to look for price support at higher levels, which we could move exit stops towards.AGGRESSIVE SHORT SALE SET UP
A move below the stop of 1029.36 is a set up for anyone wanting to sell the market short against the 1101.36 as a stop loss level. Why is this considered aggressive? It is not considered aggressive because it is short sale set up. It is considered aggressive because we would not yet have confirmation of a major trend change via the weekly 13 & 40 moving averages that have followed the major trends in this market so well.
Why would we consider taking an aggressive stance here? We believe that this market has been in a counter trend rally. We believe that it is most likely the case that a massive secular bear market is still in its early stages. By reading previous S&P 500 posts, you will see that this stance has been a consistent one. When this market turns back down, it could do so with a vengeance. Such a downturn has the potential to be an extremely profitable trend.
P.S.
There will be those who say the market has crashed partially because of short sellers. Let it be known that we have been showing our hand before we even sell short. Let it be known that we are following the price trend up and down -that we are also buying the market. The large rallies you will see in the decline will be mostly because of short sellers covering positions. This recent rally has given you a final chance to get your affairs in order, and to create exit plans for your portfolio. If you fail to do so, and then desire to blame someone, go straight to the largest mirror in the house. That guy you are looking at that spent his time watching the news, football, and American Idol with his free time is the guy you need to blame. If the scenario of a major collapse is proven to be correct, the market will be collapsing because that is what markets do. They go up and down, your failure to recognize that is no one's fault but your own. If the scenario is proven incorrect for now, then that will simply mean the collapse has been postponed.
11/4/09
See for Yourself: This S&P 500 Chart Tells the Two-Part Truth Have you seen or read ANYTHING like this in the past two weeks?
By Robert Folsom
The following text is courtesy of Elliott Wave International. Until Nov. 11, EWI is allowing non-subscribers to download their latest market analysis and forecasts for free, including Robert Prechter's latest Elliott Wave Theorist and Steve Hochberg's and Pete Kendall's latest Elliott Wave Financial Forecast. Learn more about FreeWeek, and download your free reports here.
…
…
By Robert Folsom, Senior Writer for Elliott Wave International
As you read and look at this page, please know that the chart is the star of the show. My description will add only a few details.
The chart published less than two weeks ago in Bob Prechter's Elliott Wave Theorist. The rectangular box is plain to see: It envelopes the huge S&P 500 rally that began last March -- a gain of 61.5% and 430 points, as of Oct. 18.
But there's a two-part truth to the rally -- and that is what the box really shows.
Part one shows the "wall of worry" -- basically March through August. That's when the media and experts were overwhelmingly negative about stocks. They were surprised by the rally. Remember?
Part two shows the more recent time of "euphoria" -- basically September and October. The media and experts turned positive. The market was all about "green shoots" and "recovery."
You see when most of the rally unfolded. Six months of serious worry produces a 373-point climb, whereas "two months of euphoria produces only 57 S&P points."
Now, the two-part truth about this rally is an easy story to tell. It's literally a few lines and notations on a price chart. Yet have you seen or read ANYTHING like this in the past two weeks? Has anyone else pointed out that over the past two months, the stock market "rally" has in fact slowed to a crawl?
As you looked at the chart, perhaps you noticed that the decline, which began in 2007, and in turn the recent rally, are both on a similarly large scale. The full version of this chart shows how important that "similarity of scale" really is (Elliott labels were excluded in consideration of Theorist subscribers).
Price action in the stock market this week has only strengthened the analysis in Bob Prechter's October Theorist issue.
What's more, you can read the very latest forecasts in the just-published November issue of the Elliott Wave Financial Forecast -- both publications (plus the tri-weekly Short Term Update) are yours for free -- only during FreeWeek (now through Nov. 11).
Learn more about FreeWeek, and download the November Theorist for more about the above chart. Robert Folsom is a financial writer and editor for Elliott Wave International. He has covered politics, popular culture, economics and the financial markets for two decades, via print, radio and the Internet. Robert earned his degree in political science from Columbia University in 1985.
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