As the market enters the last quarter, it must first pass its toughest month. October's declining records include the 1929 Crash, the 1987 meltdown and many, many other stress moments. The pundits still shout that the market will reach its record highs before the year ends. They discount all the obstacles like a slowing global market, the debasing of currencies to maintain export market share, social unrest in Europe, the Middle East and elsewhere, energy disruptions due to political actions, food costs along with other aspects of inflation due to the debasing of currencies with fiat money, the weakness in national labor markets that has unemployment rising, tensions building in the face of poor leadership that only responds to the banking industry and governments that are cash poor and deficit rich. The length of that sentence alone tells you that they are skating on thin ice. Here is something else.
Dow Theory
says that the industrial index and the transport index must move in tandem to reflect true harmony within the market. If they both rise, all is well. If they both decline, a bottom will be reached at the same time. If they divert, something is afoot. This divergence is a sign that there is trouble ahead. Dear reader, the industrial average has been climbing all year, but the transport index has stayed in a consolidating range and has decoupled from the industrial average. It is saying that one of the above obstacles or some other new obstacle will appear and the market will correct to the downside.
Another Aspect
I just read a report that sheds a new idea to answer this divergence. If you look at the market, say in 1970 and you add the average GDP of the US for the last 42 years, you would have a market industrial average around 8400 to 9000. By the way the US average growth was about 3.3% per year. At present the average is 13,500. How can this big a discrepancy exist?
Fiat Money
is the answer. The Fed along with central banks throughout the world have flooded their markets with cheap dollars. They have debased currencies and the markets have adjusted this inflationary aspect. A hundred shares of xyz today goes for $50 per share, however that same company could have been purchased in 1970 at $5.00 per share. The 1970 dollar could buy ten times the present dollar and this is how the Fed and fiat money steals from all of us.
Bottom Line
There will be a correction in the US market. It should lower the market to the 8400-9000 range, however keep in mind that when this event unfolds the same market forces will oppose the correction. They will have meetings of G-20s, different government agencies, government itself and all the present status quo players to stop what they will call a deflationary danger. They only recognise inflation as growth and there in is the problem. As it happens, gold will be a great buy at a much lower price than today. As always, "End the Fed!"
Liars and Crooks: The two rivals for the presidency will meet in a nationally televised debate on Wednesday. Debate is what they call it, however it is more hooray for my guy and little substance. For example, they both will preach that they will if elected, provide more jobs and restore the "American dream." However, both will not provide a blueprint to achieve their promise. I'll tell you right here and now, if you what jobs, we need to place tariffs on imports to protect the producer as well as the worker and neither candidate will say that. Both political parties are liars and crooks and as patriots we need to establish a new political party that represents the people.
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