Opportunity Before The Storm
Friday, 24 August 2012
“Many members [of the Federal Reserve rate-setting committee] judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery…”
Minutes from the Fed’s recent policy meeting, released 8/22/12
Rarely do the Fundamentals, Technicals, Interventionals and Actual Share Values line up so Favorably as now, but only for a very few select Sectors.
Why? Consider one of the Wise Old Timers of Market Forecasting – Richard Russell’s observation that these Markets are “as Difficult and Puzzling as any that I’ve ever had to wrestle with.”
Russell notes that while Key Fundamentals are Lousy, and Dow Theory is signaling we are in a Bear Market, (both True) the Equities Markets have nonetheless been bullishly approaching recent highs. Russell has recently expressed Puzzlement at that too. We do not.
There are 4 Main Reasons that certain Markets and especially Gold and Silver (as we earlier forecast) have been increasingly signaling “Bull.”
1) The Massive and Ongoing Liquidity Injections, plus the (repeated!) prospect of more QE (e.g. per above quote) into the Markets by Major Central Banks such as the Fed and ECB have temporarily lifted the Prices of certain Risk Assets, even though The Actual and Prospective Fundamentals do not Justify elevated price levels (except in the Commodities Arena – see below).
2) The President’s Working Group on Financial Markets has the Power to Boost, or suppress, various Markets. We are approaching the Election. Enough Said!
3) The Major Economies are still slowing and they are all (U.S., Eurozone and China) over-indebted, with (so far as the U.S. and Eurozone are concerned) debts that cannot be repaid given any Reasonably likely Economic Scenario Going Forward.
And that Debt is Compounding, thus Further Weakening Economies going Forward.
Russell’s Analysis has it right