-- Posted Thursday, 30 October 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, October 30, 2008
“Phenomenally accurate forecasts”
Lunatic Power goosed the Dow Industrials a third of the way to a 9955 target we’d projected in Wednesday’s forecasts before reality bludgeoned the revelers comatose. The blitzkrieg-style, 470-point selloff that followed yesterday’s rate cut by the Fed left the Indoos bloodied but still standing, down just 70 points. This added to our suspicion that yet another epic short-squeeze could push the blue chip average to within inches of 10,000 before stocks resume their descent into Hell. Yesterday’s violence was not exactly routine, since most of it occurred in the space of just 15 minutes after the Fed announced a 50-basis-point easing. This sent the usual idiots into gratuitous spasms that produced both an intraday high, and low, in the final minutes of the day.
No one could possibly have believed that the rate cut will affect the economy one bit, but that hardly mattered to traders. As we’ve pointed out here before, “news”-driven short-squeezes such as yesterday’s are caused not by bullish buying, but by traders who understand that he who panics first, panics best. When the dust had settled, for a rare change, the Fed seemed reticent to spin the rate cut as meaningful. Instead, the official announcement spoke of an economy that has “slowed markedly,” and industrial output that has “weakened.” It was further noted that the "intensification of the financial market turmoil" will exert "additional restraint on spending" by consumers and businesses by withholding credit to even well-qualified borrowers. Also, for the first time that we can recall, there was no mention of an inflationary threat -- perhaps because debt deflation around the world has caused tens of trillions of dollars worth of assets to vanish from the financial system.
Ka-Poom This!
We await further word on this from our colleague Eric Janszen at iTulip, whose “Ka-Poom Theory” (if memory serves) had predicted a relatively benign period of stagflation/inflation. The inflationists seem to have crawled back into their bomb shelters for the time being, as prices of many things have either receded or collapsed. But there’s a bright side: Parents of college-bound kids should keep in mind our prediction that campus costs, too, are about to recede, lest tens of thousands of dorm rooms go empty next fall. There’s no reason colleges should be immune to the price pressures of deflation, especially now that it’s impossible to put a kid through college with money borrowed against one’s home.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 30 October 2008 | Digg This Article | Source: GoldSeek.com
