To: Mike M2 who wrote (208317 ) 12/7/2002 3:28:37 PM From: Secret_Agent_Man Respond to Recently, the stock market has had a quick spectacular burst to the upside; we do not expect that to continue. Now that 1% of Americans hold 40% of the wealth we’d expect that concentration to become a detriment. In the sense that this is not money to feed the economy. These people don’t go to the mall everyday; in fact most tend to be thrifty. This kind of wealth breeds arrogance. Incidentally, the concentration of wealth in 1929 was only 36%. These are the same elitists who were part of JP Morgan Chase, Citicorp, Goldman Sachs, Enron, WorldCom and Tyco, etc. What they are doing is disgracing themselves through greed and the public has lost confidence in them. Yes Americans are patriotic but they have grave reservations about their leadership. That is in both parties and in the bloated bureaucracy. It’s difficult for the public to be positive regarding government when they have seen taxes for the poor and middle class double over the past 20 years and taxes for the rich cut 50%. Worse yet, wage growth has not kept up with productivity growth for eight years. They are now coming back into equilibrium, yet at the end of this period the public is left with a colossal debt, which is essentially unpayable. Which by the way is deflationary. The rich elitists are crony capitalists and they have almost all the politicians in bed with them. We have a purchased congress. This great wealth accumulation has been expedited by Alan Greenspan, who simply increased the money supply by $3.1 trillion or a 90% increase. Over the last two years he has kept up the creation of aggregates but he was also forced to cut interest rates due to falling demand caused by less buying power. Consumption was kept up by increasing debt and through home refinancing. Debt supported profits so the market won’t fully correct until debt creation ends and that is in the process of happening currently. Supply is still coming and coming very cheaply from China and demand is barely increasing, that is in spite of the FED wildly printing money. M-3 has now jumped to $8.3 trillion. These are all signs the FED is headed toward impotency. As we explained four years ago, the FED was six months to a year behind the curve and they did not increase the money supply quick enough nor did they lower interest rates quickly enough. They made the same timing mistakes they made in 1929. Plus, can you imagine what it would have been like if foreigners hadn’t been pouring money into the country. The total recovery since March 1994 was debt borne. Our savings are short $500 to $600 billion a year. Either foreigners pour in more money or consumers save $600 billion. We don’t think the foreigners have another $100 billion a year they want to part with; they are investing $1.5 billion a day now. We don’t believe consumers will spend more, in fact we believe they’ll reduce debt and consume less. We also still believe that any inflationary implications will be neutralized by an even strong deflationary pull. As we mentioned early on, consumer confidence has been slipping for 16 months and that is why we have lower interest rates, massive home refinancing and zero, zero, zero rates on cars and furniture. Each day Americans mortgage more of their future. Eventually this leads to a falling GDP, falling earnings and bankruptcies. We still believe that 2003 will be a very difficult year and that the stock market will fall below 7200 and that gold will break about $350.00 an ounce. There can be no lasting recovery until the system has been purged and there can be no recovery unless we abandon free trade and globalism. We don’t produce wealth anymore. Someone should tell Alan Greenspan that dropping $100 dollar bills from the sky doesn’t work.
