-- Posted Monday, 17 September 2012 | | Disqus

We recently raised our forecast for the Dow Industrials to 14969, a target derived from Hidden Pivot Analysis that lies 10% above Friday’s close. We note that it would take but a 4.2% leap from current levels to eclipse October 2007’s all-time high of 14198. Make no mistake, we are not bullish on the economy. Far from it. Because the recently announced QE3 stimulus will do little or nothing to create jobs or strengthen America’s competitive position in the global economy, it can only end badly for investors. For better or worse, few of them actually remain, since the markets these days are too volatile to accommodate investing the old-fashioned way, with buy-and-hold strategies. As a result, the action has come to be dominated almost entirely by technical traders whose edge lies in exploiting fleeting price discrepancies for instantaneous gain rather than in harnessing value for the long-term. They control vast sums of money, with leverage that is absolutely certain to lurch violently into reverse someday, causing the global financial system to implode.

In the meantime, with last week’s announcement that the Fed will attempt yet another round of monetary stimulus via open-ended purchases of mortgage debt and Treasury paper, traders had little choice but to shift still more money from yield-less bonds into soaring shares. We’ve characterized the stock market’s steep rise of late as a bull trap. By this, we mean to imply that the profits traders are currently reaping by staying in stocks are destined to vanish in a trice. Some would argue that it is impossible for stocks to collapse at a time when monetary easing has never been more promiscuous. While this may be true for the moment, at least in theory, in practice the good times on Wall Street could end overnight. Recall that it took just a single, assassin’s bullet to trigger World War I and, arguably, all of the horrors that followed in the 20^th Century. Is it inconceivable, then, that a single shoulder-fired missile could have a similar, destabilizing effect on the world if it were to sink an oil tanker in the Strait of Hormuz?

A hundred other horrific possibilities exist that lie beyond imagining. The point is, the relatively good times for shareholders are fated to end with a thunderclap. Until then, we should recognize that it is hubris alone that sustains the global financial system. Those who actually believe we are enjoying a “wealth effect” from the transparent, unmitigated fraud being perpetrated by Ben Bernanke, and who have positioned themselves aggressively in shares to take advantage of this belief, richly deserve what is coming.

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-- Posted Monday, 17 September 2012 | Digg This Article | Source: GoldSeek.com

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