Great Depression Online Archive Issue:

DOW 5000

Great Depression Online
Long Beach, CA
August 13, 2010

Inside This Issue You Will Discover…

*** Illegitimate Fiction
*** The Visible Hand of Government
*** DOW 5000
*** And More

“There are certain themes of which the interest is all-absorbing, but which are too entirely horrible for the purposes of legitimate fiction.” – Edgar Allan Poe, The Premature Burial

Illegitimate Fiction

Poe was referring to a most abhorrent calamity – being buried alive – when he penned the above quote.  Perhaps economics could have served his purpose of illegitimate fiction as well.  Alas, it’s Friday the 13th…the fitting close to an inauspicious week.  So let’s get to it…

The Federal Reserve revealed on Tuesday what we’ve known for some time…the economic recovery’s not all it was cracked up to be.  So, because of this, they’re going to do what they know how to do best – print money.

“As recently as two months ago, the Federal Reserve sounded optimistic about the economic recovery,” said AP.  “Now the central bank is clearly more worried, and economists say there’s not much more it can do to help.

“The Fed said Tuesday that it would spend a relatively small amount of money -- about $10 billion a month, economists estimate -- buying government debt.  The move is designed to drive interest rates on mortgages and corporate borrowing at least a little lower and help the economy grow faster.

~~~~~~Common Trading Mistakes~~~~~~

If you’d prefer to become an unsuccessful trader, you can start by making the following common trading mistakes, detailed by a professional who spent 25 years in portfolio management, trading and forecasting in the financial capital of the world, New York City.

In 2002, Wayne Gorman, long-time Elliott wave trader and current head of trader education at Elliott Wave International, left his 35th floor Manhattan apartment and moved to the quiet of North Georgia.  He's been sharing his knowledge and skills with aspiring traders ever since -- in both online seminars and before live audiences around the world.

Wayne graciously agreed to a Q&A about trading mistakes.  In his interview, Wayne reveals seven common mistakes traders make.

7 Common Trading Mistakes

~~~~~~~~~~~~~~~~~~~~~~~~~

“In a statement after a one-day meeting, the Fed said the pace of the recovery ‘has slowed in recent months.’”

It has?  We didn’t know the pace of the recovery had ever picked up to begin with.  Sure the GDP increased for several quarters, but it was a mirage, fabricated with stimulus.  Stimulus, remember is debt.  More specifically, stimulus is government debt.  You pay it.  We pay it.  And we’ll all pay it for years to come…just for a quickly diminishing boost in GDP. 

You’d hope the brain trust could’ve at least gotten a little more bang for our buck.  But, naturally, even the most basic of expectations are meant to go unsatisfied. 

The Visible Hand of Government

Not only is the central bank stinking things up on the monetary side of things, the federal government’s laying big fat goose eggs on the fiscal side of things too.  Here’s what we mean…

On the same day Federal Reserve Chairman Ben Bernanke pledged to print up $10 billion dollars a month, President Obama approved a $26 billion dollar bailout…$10 billion to teachers and $16 billion to help states meet their Medicaid payments for six months.

“We can’t stand by and do nothing while pink slips are given to the men and women who educate our children or keep our communities safe,” said a smug President Obama from the White House Rose Garden.

Do you see how it works?  The Federal Reserve prints money into existence and lends it to the government.  The government then uses their all knowing, visible hand, to sprinkle it about where they see fit…remaking the world in their image.

Yet the economy doesn’t buy their colluded mischief.  Rather it sputters and puts along like an old Buick Skylark with a dying engine, struggling to push its clunky frame around town.  Exhibit A: Yields on 10-year Treasuries have fallen below 2.7 percent.  Exhibit B: Home mortgage rates have dropped to 4.44 percent.  Something must be terribly awry.

DOW 5000

Stocks weren’t sure what to make of the Federal Reserve’s announcement on Tuesday.  They contorted a bit, finishing the day off with the DOW losing just 54 points.  But by Wednesday the stock market woke up with a knot in its stomach.

When the opening bell rang stocks looked around, took a big gasp, and puked all over themselves.  All day they hacked and heaved…with the DOW dropping 266 points.  Yesterday the DOW dropped another 58 points to close at 10,319.

Could this be the beginning of the next stock market liquidation? 

Don’t ask us…  We’ve been expecting a broad and protracted market selloff for over a year now.  Something that would bring the DOW down to the 5000 neighborhood.  If this isn’t the next market crash, we’re confident that its time is coming closer each and every day.

Lastly, did you hear that Ben Quayle, former Vice President Dan Quayle’s son, called President Obama “the worst president in history”?

We don’t know what this really has to do with anything…but thought it offered some levity or, at the very least, a good chuckle.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Even if the market crashes some traders will make a killing.  Those traders will have one thing in common: knowledge.  And if knowledge is what you need, why not obtain it from a professional who spend 25 years in portfolio management, trading, and forecasting in the Financial Capital of the World…

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