FWIW:
Here below is a link to an article by Martin Armstrong on the 8.6 year
Business Cycle, otherwise known as "The Economic Confidence Model."
pei-intl.com
For more on this subject click here:
pei-intl.com
Last Friday the S&P December contract did close below 1292.50--electing
a key weekly bearish reversal. What this means in plain English is,
"Don't buy dips anymore!" Buying dips might have been a nifty
strategy in the past, but may prove very risky from here on out. Now
more than ever we believe stocks are vulnerable to a test of the 1998
October Lows.
So you're going to take your money out of stocks and put it into bonds,
right?!!!
Hold on there partner! Even though a flight-to-quality is possible,
bonds appear very risky.
The two day rally in gold is not to be pooh poohed. Oil is also
showing no signs of topping out.
Your traditional economist may say that "ex-food & energy" there is no
inflation, but I don't know too many people who live "ex-food & energy."
The problem with your garden-variety economist is, they refuse to
believe in longerterm cycles. (See Armstrong's 8.6 year business cycle
above). If you follow their logic, economists believe that since food
and energy are volatile, bouncing up and down, the best way to deal with
them, is to ignore them altogether. Economists talk about "core
inflation"--excluding food and energy!??? They would prefer to look at
hourly wages and other indicators of labor costs since they are more
orderly in their movements.
IGNORING "FOOD & ENERGY COSTS" WORKS SO LONG AS THERE IS NO SUCH THING
AS A LONG-TERM CYCLE!???
Once you acknowledge that commodities have been in a bear market for 20
years and that a new secular bull market in commodites is probably
coming soon (if it hasn't already begun), then you begin to see just how
foolish these economists are when they talk in terms of "core
inflation"--disregarding food and energy.
WATCH THE CRB index. If it closes tomorrow (9/30) above 206.73, it
indicates a move to 229 area according to our Reversal System. Granted
bonds could rally on a short-term basis due to a "flight-to-quality"
scenario--- if stocks begin to sell off viciously.....BUT.....the risk
is that your natty economist might some day soon wake up from his
domgatic slumber and issue warnings on inflation. The dim-witted
reporters of our day will be slow to pick up on the fact that
economists have stopped using the phrase "ex-food & energy." Your
natty economist will do a nice little two-step around this issue and
start issuing warnings of a "paradym shift in inflationary
expectations."
So where to keep your money? Cash is not the worst thing in the world.
Holding higher amounts of cash is also not such a bad idea as Y2K
approaches. Whether Y2K turns out to be a real event or not, is beside
the point.
BELIEVING CAN MAKE IT SO!
If enough people believe in it, then you got a problem. But just
remember if your neighbor has a metal detector, buying a bunch of gold
and silver coins and burying them in your backyard, might not be the
best strategy. It is also worth knowing that this rally in gold may
be premature. If gold continues to rally into next year's 8 year gold
cycle turning point, it could very well set up a further selloff into
2003. But whether gold's rally is premature in a longerterm sense
hardly matters to bondholders. If gold, oil, and ags continue higher
into next year, bonds are in trouble now!
And if bonds are in trouble, stocks are toast. |
