Transcendental Market Truths:
Stagnation:
The growth rate in the economy is going to be much, much lower in coming years (not a surprise considering the debt-to-GDP ratio will more than double over this decade, reaching a Japanese-style 200% soon). Innovation is dying out as sources of investment capital are shut off from entrepreneurs. The new financial reform bill only exacerbates the problems innovators are currently having in raising capital for new companies. The government is "fighting the last war" in a very misguided effort which attempts to protect the perks given to the owners of the country. The large banks own the government. As the pie shrinks, the vested interests become more defensive and essentially "eat the seed corn" which should have been used to progress the society to new levels of prosperity. Thus, expect to see the small cap companies eventually wither and die while the large smokestack blue chips maintain themselves at the top of pyramid, but only maintaining themselves by firing workers and replacing them with robots, not creating new wealth.
The Market:
The market's decline last week is setting up a final trading low for a rally into the mid-May top, to be followed by a decline into June, then another rally to a late August (or early September) top, followed by a plunge into December. The dollar remains strong and is in "accumulate on dips" mode.
US Dollar Index:
Europe is going to follow Japan as the basket case of the world and the Euro makes up the majority weighting in the Dollar Index.
EUR/USD:
Smart money is fleeing from the Euro as the dominoes are lined up to fall. Public reassurances are designed to keep the public from withdrawing their money from Euro banks, giving the smart money in Euroland the opportunity to exit ahead of the mad rush for the exits that's coming.
Mining Stocks:
The rising price of gold is pulling up the mining stocks. This is somewhat bullish, but not as bullish as the situation where mining stock advances are pulling up the price of gold. The lack of accumulation reflects scepticism among insiders.
SemiConductor Index:
SOX is a great leading indicator. And, it's leading to the downside now. The market is in a topping zone for the semiconductor stocks and the smart money has bailed out
already.
Russell 2000:
The Russell 2000 Index should suffer the most in the coming bear leg. |
