More and more I am convinced that Consumer Metrics is the most accurate and most leading of the so-called Leading Economic Indicators out there. Visit them on the web at http://www.consumerindexes.com.

Their data clearly shows that the economy has already re-entered the secular decline that began back in 2007. The bounce after the lows of March 2009 were cleary predicted by their data and the subsequent downturn late in 2009 clearly predicted the reemergence of the secular bear market that we are in. This is a depression, folks, and my prediction is that we are in for another 6 years (or more) of "the slope of hope" (credit to Robert Prechter) as we revisit the levels last seen in the stock market in the early 1980's.

This from "Casey's Daily Dispatch":

"Naturally, we want to think of America as America the beautiful. Taking off the rose-tinted glasses, however, presents a different image altogether… that of a bankrupt, highly militarized, and hair-triggered socialist empire that is daily finding new ways to tax its struggling citizenry and tramp all over the Constitution.

Not to be overly dramatic, but the real face of America is increasingly like that of an early-middle-aged woman I saw the other day. She was wheelchair bound, with only one leg, her overweight body covered in poorly rendered tattoos. With a cigarette hanging from the corner of her mouth, she rolled out of a liquor store, a telling brown paper bag in her lap. In other words, the very picture of a life dominated by bad decisions.

While America hasn’t yet been laid so low, it would be a mistake to think it can’t – and won’t – happen. If its leaders and a majority of the population persist in their ignorance of the causes and effects of economic failure, it is all but certain.

And it’s not just economics. Over the weekend I re-read both the Declaration of Independence and the Bill of Rights, and it struck me that if the Founding Fathers were alive today, they would be considered terrorists and rounded up. Furthermore, because the Bill of Rights has been all but voided at this point, they might be dropped into the equivalent of a dark hole with no right to a speedy trial, or any trial at all, for that matter.

Trading our freedoms for security is a bad decision because, in the end, the nation will be neither free nor secure. Much in the same way that, to paraphrase one sage, a government that habitually saves all fools from their bad decisions, ultimately creates a nation of fools."

I agree completely. I also believe that we can and will return to being a great country in the future, but I believe, based on research, that that day is about two decades off. Until then, take care of the people you love and prepare for the worst while hoping for the best.

I quote the following statement from an article on the CNBC website at http://www.cnbc.com/id/37573413, "Other analysts believe that even if the market does come back to bear status, investors can capitalize by finding bargains, perhaps in technology and elsewhere as valuations come down."

Such thinking is exactly what is needed to sustain a bear market like that of 1929-1932; the continual rebuilding of hope and enthusiasm in the belief that it can't happen again, that a depression can't happen now because things are different this time. This will continue until all hope is lost and men like Jim Cramer no longer have an audience to shill to. To read a first hand account of how this works I recommend the book, "The Great Depression: A Diary" by Benjamin Roth. This is an actual day-to-day record of one man's experience of The Great Depression. Nobody thought it could happen then, either, except for those few who were paying attention and had studied history and knew that a Price/Earnings ratio of 15 is normal to high and that as earnings drop and dividends are cut the price of stocks can come down to 1/10 or less of what they were at the height of the bull market.

Please view this video of Mark Fisher on CNBC's Fast Money.

The so-called Flash Crash has been quickly forgotten but it should not be. It was a sign of things to come and those who ignore the stock market "going away" for a few minutes on May 6, 2010, will regret it.

In this article from CNBC Abby Joseph Cohen says that all the bad news is priced in. It is amazing how wrong Goldman Sachs analysts are on a regular basis. I still can't forget the call for $200 and higher oil at the height of the oil boom in 2008. GS is mainly a trend follower and also tries to influence economic trends by infiltrating the government but in a Generational Crisis era things are not working out exactly how they expect them to.

In this article Cohen encourages investors to "look at the big picture", which is exactly what I always try to do and what I see is a depression coming as governments around the world take on trillions of dollars in additional debt each year and expect to grow their way out of trouble.

Anthony Fry, senior managing director at Evercore Partners had this to say to CNBC, Monday, June 7, 2010:

Fry believes many European banks have yet to fess up on losses and says governments across the world are between a rock and a hard place. Fry was quoted as saying, “Governments need to cut spending and raise money and if they do not do so credibly will be killed by the bond market demanding higher rates,”

See the full article here.

This post was removed due to inaccuracies.

A thought flittered through my brain the other day about how similar things are to the opening rounds of The Great Depression. Even the BP Oil Spill seems to be on a par with the Dustbowl of that era...but no, it couldn't be that obvious....

Until we look into why both came to be: Generational Dynamics explains this; people in charge were not forward-thinking enough and were not on top of their game and so did not do what was needed to stop these catastrophes.. BOTH COULD HAVE BEEN AVOIDED.

I'll leave it at that for now but I want to explore this and revist at a later date.

Dow under 10,000 as we head for the close on a Friday with angst building once again. I believe we likely have seen a very feeble 'pop' and will now head towards the 8,000 level over the next month or so with only minor bounces along the way.

As we roll forward the past becomes more clear, at least for those who choose to look carefully at it. For awhile now I have based much of my belief in what will happen going forward on the premise that we are repeating a generational pattern that was last played out starting in 1929 with the great stock market crash. But of course history never perfectly repeats but rather it repeats patterns (waves) with each wave being completely unique, based on all that has come before it.

As I looked at a long term stock market chart this morning a new and most obvious piece of evidence made itself aware to me; this piece of evidence is just one more that solidifies my belief that we are in the beginning phases of a long term secular bear market of a very similar nature to that of 1929 to 1932. What I saw was a secular bull market that went parabolic in 1995 from the level of 4,000 on the DJIA. History clearly shows that such moves upward always over correct to the downside. The stock market dropping to 42 on the Dow in July of 1932 is a prime example.

Using that bit of evidence along with historic valuations based on P/E ratios, dividends and book values, trend averages, reversion to the mean, Generational Dynamics and demographics, convinces me to an even greater extent than at any time in the past that the stock market is headed to at least a 2,500 level on the DJIA. On top of all that is the fact that the DJIA has always closed its gaps and there is a large and unfilled gap left open from the start of the great secular bull market that started in 1982. BTW, you may insist that the bull market started in 1974 but in fact that gap has been filled; it is the lift-off from the 1982 levels that have been left unfilled and the stock market never forgets.

I believe that the DJIA will drop slowly and steadily in a stair-step fashion over the next several years, perhaps as long as a decade, until it closes the gap left open since the start of the great bull market. Just for fun I will predict Dow 1200. Though perhaps that won't be so much fun....

Shorter term I believe we are about due for a rally lasting a week or so and after that I believe the Dow is headed to the 8,200 level. From there I expect to see the market bounce back to 10,000 before once again continuing on its longer term decline.

Jim Cramer tells us why the banks/markets are due for a "monster move" in this article on CNBC.

SELL, SELL, SELL!!!

I just recieved my Elliot Wave Theorist for May and they are suggesting that we are in for a decline that may last for 6 years. My simple "big picture" view basically agrees with that; it is based on a 1929-1932 type decline but over an extended period of time. I knew that I'd have to wait until the bear market rally topped out, which I believe it has, in order to determine the length of the final decline. Prior to reading the Elliot Wave Theorist today I had come up with a 6-7 year decline to a level of 1,500 and possibly all the way to 1,000, closing the gap with the top of the last consolidation period, the bear market of the 1970's. BTW, Robert Prechter's most likely scenerio would see the DJIA drop under the 1,000 level and possibly all the way to double-digits. And you thought I was gloomy.

IMO, Elliot Wave Theory, at least that practiced by Robert Prechter, is often wrong because patterns are so complex and can build on themselves and nobody has enough information to be correct all the time. But when it's right it's right and I think that it's right this time. It really appears that everything is coming together right now and one of those things is the almost universal belief of financial analysts that this is just a correction and the dips should be bought. My expectation is that we will continue to hear that again and again and again until hope is truly lost. Trading in the stock market will be slowed and bailouts will continue to be the solution of choice; nothing will work but that won't stop the powers-that-be from trying the same things over and over.

I do not believe the market will simply drop all at once; I believe that a long, slow slide into ever lower lows will destroy far more wealth and create the changes needed to direct us towards the First Turning, but time alone will tell the tale.

IMO, there are two things to consider above all else:

1. Historical valuations - expect values to be even greater than ever in the past and expect the gap from the 1966-1982 period to be closed
2. Generational Dynamics - The First Turning is not due until around 2030.

This will be a period of deflation. I have considered the arguments of those who believe hyper-inflation is just around the corner and I have now rejected them completely. I base this on what I actually see hapening at this time, the fact that trillions of dollars in wealth are being destroyed with each panic, and on the say so of people much more knowledgable than on the subject than I.

I believe that it will be possible to time the market down to a certain extent but predicting the bottom will be impossible. Only once social mood has changed along with the generational "turn" will it be safe to once again be back in the stock market. Speculators will be pummeled again and again as they try to time the market. I suggest staying out of the market for the most part and only shorting on a very limited basis when a period of hope has built up; look at the charts from April 1930 to July 1932 for an example of what to expect. Making money in such a market is only easy in hindsight.

Cash on hand is best along with gold and make sure you keep plenty of food and water on hand in case things get really bad. No, I'm not kidding. Expect a full-on depression in China just like we had during "The Great Depression". Despite all the doom and gloom I believe that we may be spared much of the pain because of the dollar's status as the world's reserve currency and because of the fact that the debt that will disappear is mostly owed BY US rather than TO US. Watch what is happening in Europe now; the last safe place in the world is the United States and that will become more and more true as nation after nation and region after region fall to this contagion of financial panic and social unrest.

Be smart; be brave; be patient. Take care of you and yours first and realize that while you may be able to watch history and even predict it to an extent, you can't change the course of it.

I'm actually shaking right now. Yes it's cold in my office as it often is this time of the morning so I've turned on the portable heater but that's not the only reason I'm shaking. You see I just saw a historic moment happen right before my eyes and I don't yet know exactly what happened. It's sort of like watching the second plane fly into the Twin Towers on 9-11; what? what was that? Uh oh, we're at war! Two is not an accident.

As I was keeping an eye on the stock market on the CNN website I noticed the market dropping faster and faster and then POOF! it was gone. No more quotes and no Schwab.com either. The next headline I read just seconds later says the stock market dropped 1,000 points and recovered 600...WHAT! WTF!!! The government is in control now. No, that doesn't mean they will come storming into your bedroom in the next few minutes or that you will even notice a change but I KNOW THIS. How I know it I'm not sure but it's like when I knew we were at war on 9-11...i just knew it....

The Charles Schwab website is STILL down almost an hour later...you tell me what's going on. And since when does the stock market crash in May. THINK ABOUT THAT.

Things will be different from now on, today at 2:45 pm, EST, the stock market went to zero and later Barack Obama will come out and tell us that everything is okay and that the government will take care of us and we will continue to believe it. Barack Obama is not the problem, we are. We'd better stop expecting something for nothing and giving over our lives to government. Stay tuned, the world is not ending, just the world as we know it.

This is to clarify my previous remarks about the gap left open from the July 2008 low. If you take a look at a chart of the DJIA you will see that the stock market has behaved similarly to only one period in history, that being the period from 1929 to 1932...at least so far.

I believe that we are in a similar bear market to that period based on the movement of the stock market, best seen by charting the DJIA. During the crash from the fall of 1929 to the summer of 1932 the stock market had an initial crash followed by a fairly long "dead cat bounce" followed by a long period of ever lower lows. The stock market did not simply drop to its low of 42, it fell and then rose and fell and then rose and fell and then rose, again and again. Now I believe that the bubble the world has blown this time is even bigger than in the 1920's but I doubt that the world will see quite the suffering we did during the Great Depression, or at least I hope we do not. Regardless, history tells me that even as the world sinks into a financial depression stocks don't simply drop to their lows all at once. And in this case, assuming that we are in a similar scenario, we seem to be on a slower path to the bottom. Our "stock market crash" took longer from the peak to develop and lasted longer, starting in late September of 2008 and not hitting bottom until March of 2009.

Yet the chart looks eerily similar to the chart from "the crash of 1929" - different but similar. After the stock market crash of 1929 the Dow bounced off the bottom for five months and the glorious leaders of the day claimed the crash of 1929 a mere blip on the chart of the stock market that went in only one direction; upwards. Our bounce off the bottom is similar but longer...again. About three times longer, if in fact I am correct about this. Instead of five months it took fourteen months this time.

If all of this pans out then the "dead cat bounce" had a technical need to close the gap left open by the low prior to the crash of 2008 and that would be in July of 2008 at about the 11,000 level on the DJIA. What's next? A long, steep decline into the abyss. Sorry but I don't just base that on a chart from the past but on my knowledge of Generational Dynamics and the current state of the world's finances.

The western world is neck-deep in debt while the eastern world is at our mercy because they are the ones owed that debt. Greece is now failing and next will be Portugal or Spain or...well, the dominoes have begun to fall and the only thing I don't know for sure is how fast they will fall. My guess is that our noble leaders will continue to ignore reality and will prop up a failing system, piling debt upon the American people until it becomes crystal clear that the world financial system has failed. By then China will likely be in a full-on depression much like ours in the 1930's, only expect full-on revolt to go along with it. War will break out around the world; I see no other choice as resources become scarce as governments try to fix things, only to crowd out those who would fix things. Crazy as it sounds Barack Obama may be our savior much as Stalin was looked upon as the Russian savior, even by those who he had imprisoned in work camps. Desperate people look to anyone to help; desperate people are willing to kill to feed themselves and their families.

For those of you, who like me have had a wonderful life filled mostly with peace and prosperity I recommend you not take it for granted and I recommend you prepare for a much different world.

All the signs are adding up and we've solidly closed the gap left open after the crash of 2008 - from the July 2008 low of 11,000 - so I am going short the market via SDS and while I believe it's possible we'll see slightly higher highs I doubt we'll see 11,000 on the Dow again for a very long time, perhaps a decade or more. Please do not take this as investment advice.

BTW, I was right about the highs in 2007 and I was late in accepting the rebound off the lows of March 2009 but by summer I saw what was happening and I believe that we now see the continuation of the secular bull market and I don't believe it ends until the "big daddy" of nations sees its fiat currency exposed for what it is, worthless! We'll be last after Europe, Japan and all the other debtor nations go under, one by one. BTW, expect a severe depression in China along the way and in the end...well, go to Generational Dynamics for the rest of the story.

The SEIU is despicable. This is a Video posted to YouTube showing an SEIU officer threatening the California legislature. Sure they have a right to wield their power but we should not let them because they only care about lining their own pockets.

Real reporting from CNBC? Sure, there are people there who try to bring us the truth and in this case it's Diana Olick who writes about former Credit Suise analyst, Ivy Zelman and her views on the state of our housing market. It's not good but anyone following the real numbers knows that. Mrs. Zelman talks about "shadow inventory" and other matters that make it likely that we face a canoe shaped economic recovery rather than the V or U most analysts are predicting. Read more.

As I have said here in prior postings I believe that the market will top out around 11,000 on the Dow. On Friday we got a severe shock to the markets and it wasn't the 125 point drop, it was the fact that the SEC is actually going to make these "too big to fail" financial companies pay for their crimes. That has stunned investors and frightened them, that, along with other evidence such as the gap from the lows of July 2008 being closed, the put-to-call-ratio moving to extreme bullish territory, and the Consumer Metrics Institute reading showing a drop in GDP of 1.5% for the second quarter of 2010, all suggest that the jig is up. But there's more...

This chart showing the relationship between the stock market and Mutual Fund cash levels suggests that we are due for a correction in the stock market. Before the secular bear market ends we should expect a secular change in thinking, which has simply not happened yet, in fact we're not even close, IMO.

Last but not least the easy money that the government has tossed around has bulged corporate profits about all it ever will and the reality of historically high price to earning ratios will drive stock prices down for years to come in order to balance out the past 2-3 decades. We've had extraordinary earnings on the high side for an extraordinary amount of time and now comes the payback. I believe that the stock market has done a masterful job of setting up the idiots like Jim Cramer and the other talking heads and mini-masters-of-the-universe who have yet to get the fact that they have been losing money for years now and still have much more to lose.

At this point I am willing to say that my theory will have fallen apart if the DJIA moves above 11,500. Yes, there is still the possibility that it will move higher this month but if it is to break to the downside the time is drawing near. If it does break to the downside we can then see if the secular bear market has resumed by watching the next move upward after a serious decline. I would expect a decline of around 15% or so and after that a move up that fails to establish a new secondary high. That is, if the Dow declines at least 15% in the next few months to under 9,500 and then fails to rise back above 11,145 within a month or so I will consider that a confirmation of the continuation of the secular bear market started in 2007. If that's the case then the 1929-1932 scenerio is verified and we can expect a low of under 3,000 on the Dow - I expect a low of 1,500 - sometime in the next ten years with a slow, grinding economic collapse that will lead to sovergn debt defaults culminating with America's default. I expect this to take 6-9 years to play out in full and one should expect global tensions to rise considerably during this time.

Please do not take this as investing advice. This is my prediction and is likely wrong. I simply base it on my limited knowledge of history and my understanding of patterns, waves and Generational Dynamics.

I've always liked Dylan Ratigan since I used to watch "Fast Money" on CNBC. He seems like one of the few people in the financial media capable of telling the truth. Here, Ratigan explains the "Great Con Game" that is being ran by our government and Wall Street. The sucker is the American People, have no doubt about that. The very people we have elected are in on it and seem incapable of choosing their duty to country over their greed. Please watch this video.

I have said since mid-2009 that I expect the DJIA to rise back to the 11,000 level to close the gap of the July 2008 lows. We are now there and it's do-or-die time for my theory. My best guess is that the market does its traditional "sell in May and go away" fade which will lull the fools of Wall Street into buying the dips. Look at the fade after April of 1930 to see what I expect. The difference is that this time will likely be more drawn out but just as destructive to the wealth of anyone buying the dips.

This is an old one but it is so nice to watch as Rep Marcy Kaptur exposes Hank Paulson as the crook he is and herself as one of the few, knowledgable and honest respresentatives of the American people.

Hank Paulson is exposed for the dishonest criminal he is. He and people like him have ruined our financial system and when the people get fed up enough I will will do my part to make sure nobody forgets who got us into this and then who got bailed out.

People like Hank Paulson make me hope there is a Hell so he has a place to rot for eternity.

Please read this article. It is spot on and full of financial common sense and wisdom, things we see too little of these days.

"History tells us that for a country to succeed and endure economically it must adhere to a simple set of principles. No matter the market’s complexity, these principles anchor both its financial system and overall economy. And the most fundamental of these principles..." Read more...

It appears that the seasonal correction often seen this time of year has begun in earnest and I expect the market to continue to fall into March, at least.

As I've stated before I expected the Dow to close the gap left open from July of 2008 and it has done that, to within about 3%. I do believe it is possible for the stock market to come roaring back after the seasonal low and head back up to and above 11,000 on the DJIA, but at this point it is looking less and less likely. The market is heading to new bear market lows (under 6500 on the Dow), IMO. It will be interesting to see how it will accomplish this as it attempts to correct past injustices. In other words, all those people who came to believe they were geniuses (Jim Cramer and Laszlo Birinyi Jr. come to mind, along with a few other people I know that you would not) because they made money in a decades-long secular bull market and now must give back what they gained, and then some.

The trend downward has the feeling of newness and is still being established. Given that the seasonal low is not expected until March or perhaps even April I would not be surprised to see a low of around 8,200 on the Dow before we see a pop back up of about 15% to perhaps 9,300 and taking perhaps two months. But that's all conjecture; let's let the market show us what's really in store.

At this time I am closely following the technical readings of Tim Wood as I feel that his brand of technical analysis will be most effective going forward.

From Watchdog: Bailouts created more risk in system by the Associated Press comes the following quote, "Officials from the Obama administration counter that massive federal intervention has helped the housing market stabilize and prevented more dire consequences.". Read the full article for greater context, but the key quotes are,

"The government's response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. "

"Barofsky renewed a call for Treasury to enact clearer walls so that such apparent conflicts are less likely. Treasury said it welcomed Barofsky's oversight but resisted the call to erect new barriers against conflicts of interest. The new rules "would be detrimental to the program," Treasury spokeswoman Meg Reilly said in a statement."

This is typical of what we hear from our leaders these days. They don't have a clue about history or the facts. They only care about "saving us", which is shorthand for buying votes and controlling our lives. IMO, our future looks very bleak until we fire all of these incompetents and start anew. It's also important to understand what is really going on here that is so dangerous and won't end until a real disaster happens and wakes up the American people: the very people who got us into this mess are asking for more and more power in order to save us. Does this make sense to you?

At this time President Obama has finally gotten religion on financial reform and is talking tough about cleaning up our banking system. It's about time. I felt that had John McCain taken a hard line stance on this issue it is the one thing that would have made him president.

But what is the response from Wall Street? It should come as no surprise that almost every comment on the subject at CNBC yesterday seemed to suggest that Barack Obama was a communist or was being unfair to banks. I got the distinct impression that these people really believe that the world will not exist without them. They are wrong, the world will be a better place without the greed-heads and speculators, at least most of them.

If President Obama is to save his presidency he must take on issues that are important to citizens such as banking reform, true healthcare reform, and corruption in government and throughout our society. So far this president has fallen in line with the corrupt old guard and is completely out-of-touch with the people. The question is: can he change?

While I have stated that I believe the stock market is close enough to closing the gap left open from July of 2008 I tend to believe that the current correction we are seeing is more of a consolidation that will serve the purpose of luring more people into the market once the rally resumes. I base this on the fact that many technical indicators from Lowry's and other sources suggest that the stock market rally is not yet out of steam. This appears to be a classic case of the market remaining irrational longer than we can stay solvent.

Yes, I'm as sure as can be that we will see great valuations in the not too distant future and I doubt we will get there all at once, but I wise man lets the stock market tell him what's going on and doesn't try to insist on what is going to happen.

Today I sold out of a short position (SDS and SRS) about mid-day. I had been building this over the past 2 weeks and it paid off well. I left a bit of the SDS as I want to take advantage of a further decline or I can use it to start building a new position as I still expect that 11,000 level to be the turning point in this bear market rally.

I'll keep an eye on the price of gold as I expect it to decline further and I will likely add to my position as it nears $1,000 an ounce.

According to this chart the P/E ratio of the DJIA is now at around 30 and that is after dropping many of the failing and bankrupt companies like GM, Citibank and AIG. The S&P 500's P/E ratio stands at around 80, according to Standard & Poor's data at http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS and the NASDAQ 100 P/E ratio is at 90 according to data found at http://www.bullandbearwise.com/NASDAQ100RealPE.asp.

As I looked at the NASDAQ 100 companies I could not find a single company that looked to be attractively valued, and we are supposed to be in a bear market. This tells me that we have much more to learn and much farther to fall. As Richard Russell likes to say, the time to buy is when great value abounds, P/E ratios should be well under 10, on average, and dividend yields may be high than P/E's.

Taking this data into account, the fact that a real economic recovery would force up interest rates and the likelhood we are at the tail end of a classic dead-cat-bounce, I predict that once the stock market averages close the gaps back to the levels prior to the crash of 2008/2009 we will see the continuation of the bear market decline.

One indicator that suggests to me we are not yet poised for a resumption of the bear market is the put-to-call ratio. Also, Lowry's suggests that this bull movement has legs and is likely to continue.

Yes, we might be close enough but there is much stimulus in the economy and the markets work at their own pace, so remember, patience is a virtue.

In this article by Mike Shedlock, otherwise known as "Mish", titled, Underwater, Securitized, and Screwed by the "Pass the Trash" Strategy we read how once again the power of greed is leading us to an end result that won't be pretty. The politicians, bankers and greedy people from all walks of life have yet to really get it but history has a way of dealing with such a situation. Stay tuned to the history channel, otherwise known as "real life".

In this article Mish points out how banks are unwilling to work with homeowners and also provides excellent data to show that the problems we are facing in the housing market are not simply sub-prime but were caused by lax lending standards in general.

I highly recommend "MISH'S Global Economic Trend Analysis ". I subscribe and really look forward to the daily email.

Laszlo Birinyi Jr. is one of the people I call a "Fool of Wall Street" because he takes what he has experienced during his life and refuses to believe that there are generational dynamics (20 year "turnings" with an approx. 80 year full cycle) that must be studied and taken into consideration. I see Laszlo Birinyi Jr. as one of the prime examples, along with Jim Cramer, of people who are playing into "the principle of maximum ruin". These types of people are unable to see the big picture and constantly shill the stock market. Here are some quotes and links to back up my assertion:

From Forbes...

01.17.08, 6:00 PM ET
"Want a good new idea for this year? Try American Express (nyse: AXP - news - people ) (43, AXP ), which like all financials has been beaten down by the subprime issue, even though the firm has zilch to do with housing. The card company took a further pasting in early January when it announced a hike in reserves for loan losses. Still, American Express has a high-end clientele that likely will keep spending no matter what happens to the economy."

American Express went no higher after this prediction and indeed was hurt as everyone was hurt by the economic downturn, which Mr. Birinyi did not see coming. AXP dropped from 43 at the time of the article to 10 in March of 2009.

03.27.08, 6:00 PM ET
"I think volatility is here to stay, a permanent change in the system. I've written in the past about how the advent of rapid-fire electronic trading has ratcheted up volatility ( see my Nov. 26, 2007 column). The computers that pick stocks are not being unplugged, and the hedge funds that use them are not going away."

This quote shows the inability of Mr. Birinyi to see that things happen in large cycles. He is clearly unable to see that once enough damage has been done to the economy, as in the 1930's, a period of conservative investing will once again take hold for many decades.

In the same article Mr. Birinyi is quoted as saying, "The basic economy is doing better than most reports, and pockets of the stock market are sensing that. We keep hearing that the consumer is under pressure. Meanwhile, stock in Wal-Mart (nyse: WMT - news - people ), where America shops, continues to hold firm in the $50 area. If we truly are mired in a recession, then why are Caterpillar (nyse: CAT - news - people ) (up 5% this year) and IBM (up 10%) doing so well?"

No need to comment on that, his own words clearly express his cluelessness. This man is the only one to wait longer than Jim Cramer in admitting there was a problem with the economy.

02.25.09, 06:00 PM EST

"Like many other advisers I was blindsided by the events of September..."

Actually, Laszlo, many of us saw this coming long before September of 2008. Many were pointing out the housing bubble years prior, it's just that some people chose to ignore them.

Jackie Ramos is a former employee of Bank of America. Her story exposes what is wrong with our society at this point in time: greedy people in massive bureaucracies justifying taking advantage of the young, the old and the ignorant to gain profit. Understand that Bank of America went after these people and knew that many of them should not have the credit they were given.

Watch the video of Jackie Ramos titled, "Why Bank Of America Fired Me"

Jackie Ramos herself is an example of what is right with out society: individuals who are unwilling to hurt other people even if it means losing a job.

Jackie Ramos, you are a good person; you are my hero.

The is a likely sign that we are at the top. In an article on CNBC, Jim Cramer is quoted as saying, "A New Bull Market Has Emerged".

Time to go short? You make the call.

In an interview on CNBC Laszlo Biryini made it clear that he is bullish on equities. I just wanted to get this on the record as Mr. Biryini also came out as very bullish in December of 2008 just before the stock market plunged to new bear market lows. What I want to know is this: does Laszlo Biryini ever call for corrections? My research indicates that he was bullish all the way down from the 2007 highs and IMO is just another Fool of Wall Street who makes money by shilling the market no matter what. But that's just my opinion.

I think this article titled, "Deere Reports Quarterly Net Loss, Revenue Falls", sums up where the economy is heading very well. I believe that after the shocks of 2008 we will continue to see the dmaage that was done exposed. It is typical that after a shock to the system like what we went through in 2008 that people feel relief as they see that the world has not come to an end, but as I said often in 2008, the world will not end but the world as we knew it has ended.

Notice this comment, "...anticipating a huge jump in pension costs next year", this, "...because of higher provision for credit losses..." and this, "...Deere warned first-quarter sales could be down 10 percent from 2009 levels." Down from 1st quarter 2009? That's just amazing considering that that period marked the low point of the economic collapse.

All one has to do is take a realistic looks at where profits are coming from these days to see that they are not sustainable. Firing employees and taking free money from the Federal Government isn't a road to long-term economic recovery. We are faced with the burden of a populace that expects to be supported by the government, aging baby boomers and consumers that are buried under more debt than they can possibly hope to deal with. The government "saved us" by taking on tons more debt and so now the future is certain: we either inflate our way out or default becaus ethere is no way we can hope to pay off the debt we have taken on.

Exciting times for the bulls...and for me. I see this as the perfect setup to lure even more into the trap while convincing the Cramers of the world that the secular bear market is over.

I was wrong intially about the rise out of the March 2009 low but in hindsight it all makes sense. Every crash is followed by a tremendous bounce and the bigger the crash the higher the bounce. Richard Russell points out that a 50% or larger bounce is to be expected and Richard Russell knows because he was around for the crash of '29, though just a wee boy at the time.

The question now is will we begin a decline into the expected November low or does the stock market close that gap now? I suggest that doing so later fits the MO of this market (like 1929-1932 but more spread out) and allows even more suckers to become true believers. The stock market is in a desctructive phase and it has just one tool at its disposal: GREED.

This is a very specific call. I am predicting that we see the stock market dip to a low in early to mid-November then begin to rise through most of December. The two questions are: 1) Will the DJIA close the gap by rising to at least 10,300 before dipping down to that November low or have we seen the top? 2) If the DJIA has not bettered 10,300 will it do so after rising out of the November low?

If 10,300 on the Dow is bettered within the next few weeks I believe that we will see the November low - probably just a 10% slide - and then after rising a bit, but unable to break out to new highs, the DJIA will begin a slow but consistent series of moves that will eventually take us to new lows within this bear market. Along the way it will give the bulls plenty of reason to buy the dips and only after breaking below 6,500 will they finally get the message.

I do not believe we have seen the lows of this bear market. I believe that we are following a course similar to 1929-1932 on the DJIA, only slower and possibly even deeper. I strongly believe that our future has been determined by our past actions of false wealth creation amid a positive demgraphic outlook and that now we have a negative demographic outlook and significant deleveraging to deal with.

Dow 1,200 within the next 3-5 years.

PS - I'll probably be wrong so please do not take my prediction as investing advice.

At this point I think we are perfectly setup to continue on with the stock market correction. Enough suckers have been enticed back into this market, though another couple of months to the upside would really bring in a lot more wealth to be destroyed.

I try to balance the two major means of predicting the market and those two have now come together in a way that is undeniable. On pure data it is easy to make a case for this market dropping to 25% of where it is now. Just a slight drop in earnings from the predicted $30-$40 (S&P) earnings would allow for a bottom of 100 on the S&P 500, given the historic pattern of P/E ratios bottoming around 6.

$10 x .6 = $60 on the S&P 500.
$20 x .6 = 120
$30 x .6 = 180
$40 x .6 = 240

On the other side of the coin is the psychology of investors and Americans in general. The psychology of the general public has obviously shifted from that of the last 3 decades towards frugality and caution while day traders and a small segment of the population still believe they can outwit the markets - there are no underlying reasons for stocks to be valued above historic norms but a small handful of greedy people have convinced themselves there are and have also convinced themselves that even though they lost over 50% in 2008 they are smart enough to keep that from happening again.

My guess is that the stock market will not crash and burn but will slowly turn south and continue to entice the greed-heads in with rallies of 20% and declines of 30%, slowly eating away at their wealth while playing on their egos.

All the elements are now in place. Everyone has been wrong at some point, including those who saw this calamity coming and so everyone has doubts. The VIX is low, though higher than historic norms; gold is up, just enough to make us wonder...; stocks are up 40-50%, though still 35% below the highs of 2007; the economy is recovering, though still very sluggish; Alt-A and Options ARMS are poised to wreak havoc on banks and homeowners; unemployment is still rising; the dollar is slowly losing its status as the world's reserve currency; the geniuses in the federal government believe they actually made things better and so will be unable to think outside that box; the demographic problem is slowly putting more pressure on the American economy; Americans will no longer allow their government to shovel money to their cronies in the private sector, thus putting the kibosh on any further bailouts; we have a HUGE public deficit that overshadows our future for decades to come; we have no policy to renew our industrial base and so drive the economy forward.

I could go on but my point is that this is where too many finally decide to stop fighting the trend and go with it...and get burned. Yes, the market might go to 11,000 and IMO, should, in order to close that gap left from a year ago, but the majority of the data and trends suggest this bear market is far from over.

There's an interesting story of a little guy fighting back against the system with the help of the judicial system at CNBC.

Recently the town of Medford, Oregon, where I live, purchased new, very expensive police cars that the police love to speed around in. I know because several times a day I see a police car speeding by my house; never in pursuit, just speeding...somewhere....

Now I'm a great believer in supporting law enforcement so I don't believe the cops are corrupt, at least no more so than the rest of us, but I have noticed a trend towards many more vagrants and drug abusers roaming the streets and taking over sections of my local park. Drug deals are carried out without a concern for anyone seeing, perhaps because the police are moving too fast to notice?

I'm a big picture guy and I see the big picture very clearly: we inflated our economy and all came to believe we were geniuses and deserved to have a bigger car, home, paycheck and along the way we created a monster, we created a society of people who are so enamored with our stuff that we no longer care that our kids are not safe and that we have lost all sense of perspective. We not only allow the ex-Goldman executives to outright steal from the treasury and give to their cronies but we also allow our kids to do whatever they wish, as long as we can drive a nice car and pretend we're a king inside of our huge McMansion.

We're now paying the piper and there is a big redistribution going on. Over time things will come back into balance and power will once again be distributed more evenly in this country. But I believe that will take decades and a lot of pain and suffering for those fools (most of us) who believe that people like Jim Cramer and Hank Paulson and Geroge W. Bush and Barack H. Obama give a rat's ass about any of us. Actually, we don't believe it, we want to believe it because we went along for the ride and if it's not true that means we might have to start working and saving and living within our means. The sooner we as individuals come to recognize reality the sooner we will once again gain power over our lives.

I'm a great believer in not telling the stock market what to do or when to do it. It is smarter to listen to the stock market and study its history and then come to a reasonable conclusion, based on facts, of where the stock market should be at any given time. It is also wise to always remember that the stock market is made up of people, people who are greedy and fearful and all too often do things that make little sense in the long term.

Given that, I believe that the stock market is doing what makes sense, it is having a big relief rally after the people that make it up have been made to believe that the worst of our financial problems have been solved. In truth that may be true. Our noble leaders have borrowed from the till (us) to keep the "too big to fail" financial companies in business and so things are allowed to go on pretty much as they used to. ...think about that for a second, though.

But there's a bit more to it than that, if one studies the movement of the stock market one finds that the market hates to leave gaps open, especially in secular bear markets. A study of the our current decline from the highs of 2007 or the decline from 1929 to 1932 clearly shows that the low of one leg down will match up with the high of the next. After the crash of 1929, for instance, the stock market climbed 50% to close that gap. Many stock analysts like to talk about 50 percent retracements and so on but what is really going on is that the stock market, for whatever reason, needs to decline in an orderly fashion and as history reports, it has plenty of time to do so, setting us up for maximum destruction of wealth along the way.

At this point almost everyone is expecting the stock market to take a breather. Bears are calling for the end of the bull rally while bulls are saying that we could see a 5, 10, or even 15 percent correction prior to the resumption of the ascent to ever higher levels in the stock market.

My prediction is that the stock market has had its breather and will push dramatically higher over the coming weeks, probably right through September and along the way the bulls will become absolutely giddy with joy as they rush in, as will anyone not too sure. Even many bears will finally acquiesce, fearful of missing the big rally and looking like fools. Another 10 percent move brings us to around 10,300 on the DJIA, a level which I believe will effectively close that gap I was talking about; at that point, given what I know about our economic future, valuation of stocks and my belief that we are in a secular bear market that has much farther to go based on historic patterns, I believe that we will see an incredible opportunity to sell the market short using ETF's such as SDS.

An alternate view is that the rally moves ahead much slower, with a seasonal decline but not to new lows, and then comes back to close the gap later this year or in the middle of 2010.

That's my view but keep in mind that the only times I have been succesful in predicting short term market moves was during the panic selling of 2008. Times like these are much harder to predict because the forces are less concentrated and the market is much more patient than most of us give it credit for.

I have seen very clearly for the past two years what was coming and what the cause was. As well, I have some very simple ideas that could have been implemented to help alleviate the financial crisis.

First of all the financial crisis is not anyone's fault it is our fault because most of us profited by it. We allowed oursleves to be bought off. Some allowed it because they liked the big screeen television they could afford on credit and some allowed it because they profited by being employed at a higher wage than normal and others allowed it because they were too busy playing video games or downloaded Internet pornography. Many came to believe they were investing geniuses who could beat the markets because they were so brilliant. BTW, if you were one of the many who didn't see the downturn coming in 2007 (or before) then you were just another follower of the trend and you deserve everything you got. Right now you are probably once again thinking you are a genius as the stock market rises once again but pay attention to how much you have lost since mid-2007 and be warned that there is much worse to come.

But I want to point out the difference between you and I and our noble leaders: when the extent of the problem became known in 2007 and 2008 and the decision was made to take action it was George W Bush, Barack Obama, Hank Paulson, Tim Geithner, Ben Bernanke, Chris Dodd and Barney Frank, among others, who made the decisions. The decision they made was to grab their shovels and start scooping money to their friends and supporters at the banks and other companies such as AIG and GM. What they should have done was to send our money to us and let us decide how to put it into the economy. After all, the only way it wouldn't have gotten back to a bank was if we stuffed it in our matresses.

Instead our noble leaders found all sorts of ways to pass our money on to failed institutions and we received no benefit. In fact, these same institutions often then went out of their way to cut our lines of credit or raise the fees they charge us after being bailed out with our money.

I could go on but this is what I and a small percentage of Americans have been saying for two years now so if you don't know the story you never will. The liars and shills and criminals have succeeded in propping up the system with more credit and have convinced many that things are now better and we will soon be growing our way out of this mess. I know better. Hopefully you do too and you are paying down debt and saving money and maybe even burying a bit of gold in your backyard because we have lived on excess for decades now and we will now pay the price, possibly for decades.

This is not over.

A fantastic article that gets to the heart of what went wrong and who is to blame.

"Neither can the state seem to resist the temptation to extend emergency credit to failing businesses. If their positions were sound, credit would be forthcoming from the private sector. If not, then they should go out of business, freeing up resources to be used by more capable stewards. Diverting resources from those who have successfully met consumer demands to those who have not serves only to weaken the economy and make recovery that much more difficult."

Woods looks into the cause of our current financial crisis and finds some obvious answers. Combine this with a study of history and an understanding of Generational Dynamics and you will have a pretty clear roadmap of how we got here and what the future holds.

I would add, however, that while the future holds a period of "penance" for our sins how we pay for them and how long it will take to pay for them is still up in the air. I would argue that the "The Greatest Generation" came about because of the hardships they faced, not in spite of them. The very story of the American Dream is of average people coming to America with nothing and creating empires along with jobs and wealth for many other people.

It is the will and desire to rise out of poverty that drives progress. By not allowing failure our government reduces the chances of success and wealth creation in the future. One only need look to Japan since 1990 to see what lies in our future.

This disturbing video of Rep. Alan Grayson grilling Federal Reserve Inspector General Elizabeth Coleman on where trillions of dollars went shows just how corrupt our nation has become. The real corruption, however, is that the vast majority of Americans don't have a clue about any of this and don't care, as long as they believe they will be taken care of by the government, either by being directly supported via assistance programs or by the government propping up the stock market.

I hate to say it but either things are going to get a lot worse and we will finally be forced to wake up or we are seeing the final days (decades) of our once great nation.

Birinyi Associates has a clear conflict of interest, they are a money management firm and yet they provide earnings data to the Wall Street Journal and ?

Back in January Birinyi Associates made it clear that they were bullish on the stock market and no doubt lost their backsides on that one. I looked into all of this because sometime in early 2009 I noticed that Bloomberg TV and The Wall Street Journal were reporting P/E ratios that were not accurate. To this day, despite the P/E of the Standard & Poors 500 being over 100, the Wall Street Journal is reporting it as 14...yes, 14! Guess who provides data to the Wall Street Journal? You guessed it, Birinyi Associates.

In this article, John J. Xenakis of Generational Dynamics exposes Birinyi Associates for the fraud they are. Laszlo Birinyi actually states, "There are technical measures you can use, but the problem is that people use technical measures for predicting things, instead of understanding things." What? Read that again...I supposed Mr. Birinyi sees EARNINGS as techinal measures that might be misused to predict something...perhaps something like falling stock prices?

It is clear to me that Birinyi Associates has a clear conflict of interest and should not be providing data to ANYONE. They are entitled to their opinion but why would anyone purchase data from a company that has a clear conflict of interest. The problem isn't so much that Birinyi Associates is corrupt, as I believe they are, it's that the Wall Street Journal and anyone using their bad data is corrupt or incompetent and their job is to provide information to the public.

Don't know what Quantitative Easing is? Karl Denninger explains it in simple terms and you won't like what you hear.

In this May 11, 2009 CNBC video interview with Maria Bartiromo, Meredith Whitney gives her opinions on the banks, consumer spending and how the government's actions are making it difficult if not impossible to know what the rules are.

Once again Meredith Whitney shows that she is a step ahead of most other Wall Street analysts as she prefers to speak the truth as she sees it rather than feeding us more of the same drivel spewed by the majority of stock market analysts. This woman is smart, honest and is one of the few Wall Street analysts I trust.

A must read article that I agree with almost 100%. In essence, we have weak leaders unwilling to admit our problems but perfectly willing to sacrifice our nation's future. The longer they throw money (debt) at the problem the longer the problem will last and the more likely we will never fully recover.

And did I mention that China's going to be really pissed when they find out they're only going to get pennies on the dollar on the money they've invested in us?

My problem is not so much with incompetent "Fools of Wall Street" like Matt McCall but that Fox News (where I discovered his incompetence) puts such people on when they have a track record of being wrong time after time. There are plenty of stock pickers who actually get things right about half the time; couldn't they use some of them now and again?

In my opinion, anyone who uses any of the major financial media without documenting the data they see is themselves a fool as I come across innaccurate financial information on all of these networks on a daily basis.

Quotes by Matt McCall:

Time To Wade Into Commodities - Oct 17, 2008
Just about everything Matt McCall says here is wrong but then why should this article be any different than the other ones? Matt is probably a nice guy who was taught to always think positively which is EXACTLY what you don't want in a financial advisor. The price of oil would drop by more than 50% in the coming months and would still be well below the level on Oct 17, 2008 when this article was written.

After stating that he owns both Oil ETF's and oil stocks he then makes this comment, "Obviously the global economic slowdown has weighed heavily on hard asset markets. We've seen a huge pullback, but I believe that has been fully priced in to commodities. We're in a bottoming process right now. But volatility remains, at least for the coming weeks if not coming months. So we're waiting for confirmation of a bottom. We've got to see some consolidation to confirm that the market can hold these lows and not fall further. It's hard to pick a bottom, though. For the individual investor, I think it's a good time now to start wading back into the market"

I'm really not sure what to make of what he said but I do know that oil continued its fall and fell by over 50% in the next few months. Why in the world would he tell people to wade into a market he himself doesn't seem to have a clue about?

Bullish on Stocks and Oil - May 17, 2008
"We are soaring to the end of the year. Keep throwing the bad news at me because all that that does is create the wall of worry that bull markets climb. People thought we were going to hit the bottom in the first quarter. They are going to doubt this rally all the way to new all-time highs. Nothing is going to stop this market right now!"

Matt McCall's Pick: Orbital Sciences (ORB)
Price at time of pick (May 16, 2008) was 26
Price on July 3, 2008 was 24
Price on Aug 15 2008 was 27.89 (highest stock price after Matt McCall's pick)
Price on Sept 17, 2008 was 22.85
Price on Oct 27, 2008 was 17.42
Price on Nov 20, 2008 was 15.36
Price on Dec 10, 2008 was 15.44
Price on April 6, 2008 (date of this article) is 12.90

Apparently Matt McCall is a Wall Street Rock Star, too bad he doesn't know how to say anything but "buy". Hey, isn't Jim Cramer a Wall Street Rock Star too?

This article was written by Matt McCall on October 9, 2007, just as the second worst bear market (so far) in modern history was getting rolling, yet Matt McCall doesn't appear to have a clue as he states, "...the handful of deals taking place should suggest the bottom of the credit crunch has been seen". I was out of the market, Matt, as were many people who were paying attention; what's your excuse?

KEYWORDS: fools of wall street, matt mccall, bullish, stocks, bad stock picks, bad investment advice, fool, fools,

Kenneth Fisher, Just Another Fool of Wall Street - The P/E Myth
Posted March 27, 2009 9:04am

Certain things just get me going and this is one of them. Read this line from the esteemed Kenneth L. Fisher, "There is no linkage of market P/Es to subsequent returns--no matter how you measure the ratio and no matter over how long (up to five years) you measure returns." WHAT!?! Read it again; you probably didn't even notice the "up to five years" line at first, did you. Read on and you'll see that he ignores many other possible uses for P/E ratios. As with any data source a wise investor will use it in context.

KEYWORDS: ken fisher, Kenneth L. Fisher, Kenneth L Fisher, pe ratio, p/e ratio, pe, price earnings ratio, fools of wall street

Tim Wood explains why he believes that in 2007 we finally exited a bull market that started in 1974. Here's an index of articles by Tim Woods.

KEYWORDS: tim wood, dow theory, bull market, 1974, 1982, 2007, 1929, 1932, the great depression, bear market

I am so grateful that for once I get to expose a great idea instead of a stupid one or a bad piece of data. In the above article John Mauldin comments on an idea suggested by Gary Shilling and Richard LeFrak in an op-ed in the Wall Street Journal. The idea is to give a green card to foreigners who will come to the US and buy a home. Read on for more details of a simple plan that would actually - GASP! - be effective.

KEYWORDS: housing, immigration, green card, buy a house get a green card, Wall Street Journal, Gary Shilling and Richard LeFrak, Gary Shilling, Richard LeFrak, John Mauldin, 2009, home buyers