Tuesday, November 25, 2008

How the market can go up and make me wrong!

OK, so you all know I'm on record as calling DOW 4500 to start and potentially 2500 after that. I am beyond sure of the 4500 prediction, and think 2500 is possible. Having said that, I wanted to look at ways in which I could be wrong, potentially.

So, here goes;

1)The Fed continues printing money wantonly, thus rendering the value of the dollar 50 to 80% less than where it currently is. Bernanke is on record as saying that if he was faced with DEflation, which is where we currently are, he would start printing money. The theory being that printing money would basically "level" the deflation by doing something inflationary (printing money is most certainly inflationary). Germany, and others, have tried this in the past (does anyone remember one definate reason why Nazi Germany was born?) and it's never succeeded. Frankly, I don't think it can succeed, BUT what it can do is give the illusion of wealth. Unfortunately this is why I rage against the machine, because its pretty safe to say that while prices of homes, and even the stock market could "stabilize" its illusionary and in fact the opposite.

Today the Fed basically printed another $800 BIL. I've lost track, but I think we're basically around 2 TRILLION at this point. By the time all the banks have been saved, because don't you know that they ALL are "too big to fail" and look what happened when LEH failed!? I think we'll be north of 25 TRILLION. Yes, you read correctly, that's 25 TRILLION with a T!

If I am even 1/2 right the value of the US dollar could potentially fall 50% or more, and the US would probably be downgraded ratings wise, making it even harder to sell treasuries and setting up a potential default, which could, in worst case (or one worst case) make us for all intents and purposes - BANKRUPT.

Is that likely to happen? No, it's not, but it could.

So, for those that have asked how I think the market could prove me wrong, there you have it! If they devalue the dollar by 50% or more, then yeah, its possible (though I still think it sees south of 5000 no matter what) that the DOW would go UP. If the dollar was devalued by 50% and the DOW went up 15% then its net would be near the 4500 level if my math serves. Home prices same deal.

2)There is no #2, sorry. In my opinion the only way the US markets are not going below 5000 and potentially to 2500.

That's my happy little tail.

And, I want to reiterate, I am just a dude with an opinion,and you know what they say "opinions are like "A-holes" everybody has one!"

Mine just happens to be stated a bit strong at times. It's only cause I care deeply about the direction of the country and I'm very concerned about what is going on right now. I want to give Obama the benefit of the doubt, but I must say that I am very disappointed with his appointment of Tim Guitner. One of President Elect Obama's promise was CHANGE and a different direction, and yet possibly the most important appointment he will make early on (at least so far) he picks someone who is "old school" and who has presided over NY Fed since 2003. What good economically has happened from 2003 to now, besides one big huge BUBBLE?!

I'll leave it at that.

I'll also say something I kinda have said before (stay with me, I am slow on the uptake, so I repeat myself at times. I repeat myself at times. I...) The Fed is harping on consumers spending money as the way out of this mess. So, instead of having people FINALLY freakin' save money, they want banks to loan money at big interest rates and put more and more people into debt? Isn't that a large part of what's going on? Why are we not learning from our mistakes as a nation? It's infuriating and it's frustrating and sad. People are finally saving. OK, so we all suffer a little for a couple of years, maybe 3 or 4 even, but we come out STRONGER. What exactly is wrong with people solidifying their financial positions? Why the rush to get out of this immediately? We are a nation of fast food, and instant gratification, when we need to learn PATIENCE and all take a deep breath. I wish the Fed and our leaders would learn some spiritual principles and some economic sense. I believe that what they are doing is leading us on a path to disaster. I believe that there should be a 3 month moratorium on taking any kind of major action, other than to patch the damn dam if need be very short term. $800 BIL, $300 BIL, $700 BIL, $50 BIL, I just don't get where it stops. Do people realize that this is going to have to be paid for or YOUR net worth will be a lot less than it is now? So, while no one wants to raise taxes, let me ask you something, what's the difference? If they devalue the dollar by 50%, but lower taxes, does that feel good? Are we that dumb? I sure hope not, because thats what very well may and I believe will happen.

Perhaps someone will stand up and say JUST STOP! Guess ya never know, but I do know that hiring a NY Fed guy who is buddies with Hank Paulson is unlikely to yield very good results. Very sad indeed. DOW sees 4500 no matter what, you have it in writing, I hope I'm wrong!


Michael "WAXIE" Parness

*Oh, and to all of you - HAPPY THANKSGIVING! Please be safe and enjoy your families and loved ones! I am grateful to you all, and to all a good night!


Bill said...

WAXIE,I agree, it is sad, pathetic to say the least.You hit a nerve with me about home prices. The lie's that are being told to the average joe (me) are ridiculous! My(new)home price from the peak, In a good area mind you will not sell at 50% off and was taxed 75,000 more then what was originally paid a year ago. Tell me about the B.S.they are spewing to the country. I wake up everyday knowing I'm living in the land of Lie's. How can anyone have a once of hope with this all going on.I know most of these stocks are worthless, just on the mere fact that the country as a whole is devalued, Credibility is out the window and the news , ha ha , what a joke. I love the shows that tell you how to save money you don't have. The show after booyah head is worse then his. They all gather around and tell you how great everything is and will be! Nice to sit at the top with millions and tell the average Joe (me) it's all good. It's gonna be fine with cheaper gas, ha ha, gas will save the day. No, JOB'S will save the day and Reflation of people's VALUES.(mentally and physically) I'll tell you what has deflated the most though, Leadership! Happy holiday, hurry and eat your turkey before that Deflates and turns into a Cornish hen! God help us all! Good day!

MichaelAngelis said...

Happy Thanksgiving Waxie!

Looking forward to the worldseriesoftrading.com site after the signup page gets fixed.


Rich said...

Hi Waxie,

I watched the CNBC interview of Jim Rogers today. Funny how the goons responded to a person they proclaimed to be a "living legend" when he wasn't telling them what they wanted to hear. He answered all of their questions clearly and concisely, but because they weren't the answers the CNBC goons were looking for, they often re-worded their questions and fired them off again. They pressed and pressed him to tell them what they wanted to hear, and wouldn't hear anything else. Directly after the interview the goons had a discussion about their guest, among other things referring to him as "obtuse".

Here's a definition of obtuse: 2 a: lacking sharpness or quickness of sensibility or intellect : insensitive , stupid b: difficult to comprehend : not clear or precise in thought or expression.

I found Jim Rogers to be one of the least obtuse people I have EVER seen on CNBC, which is probably why the goonies couldn't comprehend what he was saying. They epitomize what it is to be obtuse. The man was as clear and certain about why the economy was in the mess it was in and what should have been done about it instead of the bailouts.

I've had CNBC on while trading for a few months now and I believe I can say with some certainty that whatever higher power there might be in existence out there has done you a great service by keeping you away from CNBC! I would certainly enjoy the mental slugfest you would put on while there, but with Dennis the Menace around it might turn physical. I feel better knowing that you're at home in your black ninja underoo's helping us make the cachingo's.

I will be putting extra gravy on my Thanksgiving dinner this year in honor of Trendfund.

Thank you and Happy Thanksgiving.