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2006 and Beyond: Boom or Bust?

Posted on December 22, 2005
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Dear Friends and Thinkers,

This is your chance to put in your two cents on where the economy is headed for 2006. You can read two opposing views here:

http://www.bullnotbull.com/archive/market-12232005.html

Then feel free to let me and the rest of the world know your perspectives below. There is no need to register to post, so get to it!

Best regards,
M.A. Nystrom

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Comments

48 Comments so far
  1. Rabach December 23, 2005 12:38 am

    Well I hope I am dead wrong here…

    My forecast for 2006 is one of gloom and doom. I have been researching and researching trying to figure out how I am either going to spend or save my money and trying to determine how much money to invest into my businesses.

    I certainly believe we have a very large housing bubble to deal with. The difference is I do not look at it as a ‘bubble’ but rather bubble pop. There are bubbles all across the United States, some of them have already popped (AZ and CA) others are still growing and some are holding out for the meantime. So I see that sections of the country or even localized areas could experience a backlash from falling housing prices. At the same time other areas in the US could be flourishing with the wealth created from there local bubble. I have noticed one area where a bubble is just now coming into view and may have life for a few years depending on the overall condition of the country, economically speaking.

    Jobs is certainly another issue that we all have to deal with. Whether or not we are affected directly by corporate layoffs we are all affected indirectly. The domino effect will kick in and where those people who lose their job spend significantly less they promote cutbacks at other jobs which in effect cutbacks on their spending and so and so on.

    Another thing I would like to mention that is happening underneath the eyes of the American public is hidden inflation. The cost of that good you may buy at Walmart may be the same as it was or less than a year but I am willing to bet that the quality of that product is much lower than it once was. So in a sense you are paying more for less. (See my post, Low Prices = Low Quality, at WakeupWalmart.com)

    Speaking on inflation I also would like to mention that those numbers they give do not reflect the average American. The poorer one is the higher the rate of inflation for them. For instance it costs more for gas, food, etc. Now people who don’t make a lot of money to spend on non-necessities will see more of their money going to pay for those things they need. Of course their real wages are not going to go up fast enough to cover the difference.

    Also as a tip for everyone who frequents this excellent website I highly recommend purchasing I-bonds. Currently they yield nearly 7% with no-risk. You can purchase them at any bank, just make sure they give you the I-bond form, not the EE (Patriot) bond form.

    Going back to the original question that promoted a reply from me I would also like to say that I think the American people will wake-up to the reality of our economy and realize that it is in bad shape. You must know that some of those reports on the ‘economy’ played by newscasters are in fact public relation reports paid for by the government and corporate America. The fact is Americans savings are beyond an all time low (actually negative) and the average debt per American is at an all time high.

    I believe that the feds purposely created this housing boom to prolong a recession/depression that would have been caused from the tech. bust and/or 9/11. I am thinking that they will probably let inflation get somewhat out of check to help alleviate the actual value of the average American debt. So I think that somewhat high inflation is in store for us over the next year, though I would not go as far as calling for hyperinflation.

    Certainly I will be looking out for a long hard recession and even the possibility of a recession. My recommendation to everyone is to pay off your high interest debt, save at least $10,000 (perferably in a I-bond, inflation bond) and keep a close eye on the economy. If the day comes where you start reading a lot of negative economical news in your local newspaper and viewing some of that news on the television I would certainly start perparing for a major economical shift.

    As I stated in the start of this response I hope I am wrong. Personally I have a lot of plans for my life and a downward turn in the economy certainly doesn’t fit into my plans.

    Rabach

  2. Gavin December 23, 2005 4:12 am

    Rabach raises a good point. If you are a businessman and have an educated but pessimistic view of the economy for next year, how do you make business expansion plans? If you hold back and are wrong, you’ve lost time and opportunity but may not have mitigated your risk. You could be in the same dilemma next year. In reality, the future is unknowable (Dow 400 or Dow 40,000). I guess this is why many business people rely on their instincts when decisions are difficult.

    GMG in Nashville

  3. dan lobel December 23, 2005 6:54 am

    ironically, the one thing prechter got right is the concept that psycology is an intrical part of investing- as evidenced by the fact that he is still around and his assumptions are still given credence.nobody-absolutely nobody- is aware of his horrendous record as a prognosticator.did he suddenly predict a 400 dow,as if he rode the market up, and now sees its demise is at hand? how many can tell me when he 1st called for a 400 dow? last week? last year? how about when the dow, on its way up to 12000-was at 2900? he swore up and down that was the top, “with the very slight possibility of 3200- but definitely not higher than that, and then down to 400″.instead,it climbed to 12000 in a longterm multiyear bull market.if it ever does drop to 400, i guess he will claim he was right, and the gullible investing public will give accolades to the genious. then with gold approaching 300, he called for a crash to 100 or so-but would be reversed if it exceeded 330.well, it did-then he said something about 400 as a top,etc,etc. in other words, he incorrectly missed the greatest bull dow in history-in its infancy stage- and now was completely wrong about this huge gold bull occurring right now. i dont know the rest of his record, but please explain to me this:why in the world should i care what he thinks will happen in 2006? and how does the public not understand this guy knows nothing-a bum in the gutter can give better advise for a bottle of hootch- surely the emporer wears no clothes. ps.- i have no proffesional or personel negative issues with robert prechter- hes probably a good guy- but i am simply astonished at human behavior- as he is also- and this is just a factual objective example of it.

  4. John December 23, 2005 7:24 am

    I don’t see any technology boom coming. I work in test, a part of engineering that is always at the crest of coming booms. When there’s a downturn, we see it first. Same for an upturn, this is because you have to be able to test the next generation devices before they become available. Presently things are rather stagnant, and have been for a long time. Chips and software had a great run up in the 90’s, there’s simply no compelling technology waiting in the wings these days.

    This should make some sense. The 90’s technology was just an new enabler for human communication. The internet allows people to communicate in ways they couldn’t before, and wireless communications took off as well. So here was the meeting of a fundamental human need (communication), with enabling technologies, no wonder we saw a boom! So what’s next? Nothing I can see, and I spend a lot of time thinking about these things (trying to be the one who invents the next wave).

    I suspect, maybe in analogy to what I’m seeing in our business, right smack between these two extremes. Stagnation. A DOW that can’t lift above 11,000, and a somewhat propped up economy that staggers along. In some ways a repeat of the 70’s …

  5. KIRK CLEMENTS December 23, 2005 7:26 am

    I don’t know(or care)where the market is heading but then no one else does either. I do know that I can’t find securities that are available based on my value criteria. That leaves me with the choice of sitting out with a few current holdings and mostly cash or playing the themes of oil and gold. I will watch for events that may indicate that there is a good entry point. A good panic would do just fine!

  6. Doug December 23, 2005 7:27 am

    Folks - well, I’m not sure if I agree w/ Prechter or not, but just because he has been wrong in the past doesn’t mean he will be wrong in the future.

    To me, the major inputs to the equation are energy prices and interest rates, both of which are a relative historical lows. Yes, I know oil is high but factor in inflation and it is still quite low, and interest rates have definitely bottomed out. On the news recently I heard that Bernake was actually going to DROP interest rates, and it is feasible that we can squeeze the Saudis et al to increase oil production. Both of these scenarios would really be last-gasp/dead cat bounce scenarios, and would at the least postpone the inevitable, if not magnify it. Personally, that is what I think the current Admin will do in an effort to stick Hillary with such a mess she cannot overcome. Not that I like Hillary. Good luck to all…

  7. WL December 23, 2005 8:12 am

    I see metals rising, esp silver due to extreme positive
    fundamentals. Gold will rise because of the global inflationary processes and the inflating of the USD, the trillions possessed overseas will at some time be spent on these metals. The dumping of bonds and Tbills by over seas holders going into gold will be bought by govt new printed money therefore inflating inflation.If the DOW goes higher
    it will be because of govt intervention and then as now people will see this as false fake manipulation such as the PPT does now.

    If Iran starts their oil exchange in euros then there will be a war because the rich cats in the US will not tolerate devaluation of their wealth. All in all I am pessimistic on the US economy because the fed and the people of the US just will not take the pain to get their financial houses in order. I believe the future will be in metals and
    resources. The recent rise in commodities is but a drop in the bucket compared to where they are going.

    Sincerely, WL

  8. Steve December 23, 2005 8:13 am

    With a flattish yield curve it does not appear that Dr. Bond Market is forecasting continuing good times or higher inflation. Further, since the lagging indicators are rising (which is a late-in-the-game signal), I feel that both leading and coincident indicators will trace-out bearish messages for the economy in 2006. Also, with the trend exemplified by GM and Ford (amongst other major employers) of laying off massive numbers of high wage workers, there will come a time in this country - and sooner than later - when aggregate demand tanks big time.

    My forecast is stock market, oil, and gold down (due to decreasing aggregate demand). Dollar up (due to decreasing global liquidity). Real estate down with a lot of stickiness, or resistance to price decline. Increasing political pressures generated from the demise of the American middle class (not only is globalization a problem but a larger problem is automation - what will become of all the forever-surplussed people?). China up big-time long-term.

  9. GC December 23, 2005 8:14 am

    As a comment to the two economic forecasts presented, I believe the changed international situations must be considered. First is the increased international demand for commodities by China and India. Second is the increasing occurrence of natural disaters, hurricanes, famine, floods and earthquakes. Third is the increasing scaricty of cheaply
    available commodities including clean water, energy, metals and food. Fourth is the increasing occurrence of political tension, unrest and strife. The net result is increasing volatility in sentiment resulting in reversion from
    the norm I believe the current political structure will inflate to attempt to maintain their power base while trying to contain these challenges. In summary not pure inflation not pere deflation but rather a mix, i.e.stagflation. The price of gold will act as a barometer to these changes. Gold will go over $700 in 2006. 2007 will be different.

    Respectfully,
    GC

  10. PG December 23, 2005 8:15 am

    25 years of losing - DONT FIGHT THE FED - UNTIL THE $ INDEX TURNS DOWN TOWARDS 80, THAT’S WHAT YOU’RE DOING - Ben Bernanke will float you out of town - the chains of yesterdays shibboleths will tube you every time - a little TA will stand robust statistical analysis - see several books by Neiderhoffer (PhD Statistics)

    PG

  11. DH December 23, 2005 8:17 am

    I cannot see any chance of recovery from the debt and deficits we are still driving at record levels. In fact I think depression is very close. Why? Globalization and Flat Earth are nothing but new words for socialism. It
    just does not work. All the tricks, lies and mirrors cannot stop the globalized subsidized “free” trade from collapsing the global financial system from huge monetary imbalances. To think the socialist nations of the earth would stop pegging the dollar and give up protecting their own trade is being naive. These socialist and Muslim countries all hate America and will make a concerted effort to bring America down through trade imbalances and hope they can avoid their own currency crashing by reserving their currency with precious metals.

    Even if their was an effort to end trade subsidization the wage disparities and unemployment between America and China/India are so great it mandates a swift and hard landing for America from the continued outflow of jobs.
    Throw in global warming, peak oil, and bird flu and you get a massive die-off. Depression or hyperinflation is a given and precious metals are the only cure. Savings is negative and will remain so. High paying jobs are replaced with low paying jobs which reduces disposable income. So people have borrowed the equity from their homes. Unless wages go up faster than equity drops we have a massive depression. There is no way around it. Von Mises predicted this scenario and also the last depression. No country can try to borrow their way into prosperity without suffering a collapse at some point. Cascading derivative implosions will reign supreme and lock up the whole global financial system.

    We needed a von Mises proponent not another socialist like Bernanke. What’s clear now is the Federal Reserve must be dismantled immediately and needs to stop pushing socialism that von Mise debunked long ago. Socialism will only end in debt slavery and bloodshed. The fact that people in many
    states are now openly advocating secession is a sign that should not be taken lightly.

    DH
    Travelers Rest, South Carolina

  12. dale December 23, 2005 8:56 am

    I think both scenarios are right and wrong. I’m GUESSING a combination of the two, plus some crap we can’t imagine thrown in. I think it’s “inflate, then die” to modify Russell’s infamous quote. Talk about uncharted waters, deflation and inflation happening at once. Defaults, credit disappearing; money created and pumped into both growing and dieing assets; FRNs leaving vaults coming home to roost.

    Perhaps 2006 will produce a moon-shot in a hyperinflationary swan song? But not lasting for years because fundamentals and reality get in the way. Could the commodities boom, could it be long-on-tooth, but disguised due to resource misallocation? Then amplify that for gold and silver. Is the metals bull also long-on-tooth, but compressed for fireworks finale?

    What was the question?
    dale

  13. SG December 23, 2005 9:12 am

    *

  14. Al December 23, 2005 9:16 am

    I must say that your readers are very intelligent responders because they all have very valid comments.

    In the US I see a country that has flooded the entire world with paper, either in dollar notes or debt bonds. This borrowing has been recycled back to the US and caused inflation in everything except goods that are made by low cost contries that do not give their own citizens a chance at anything but slavery wages.

    The US is in a situation where it must keep issuing more debt to roll over the existing bonds as they come due and pay the interest on the outstanding debts. The downward spiral is feeding onto itself at an increasing rate.

    There are only 4 future actions available. 1/ tax the citizens to pay the interest and principle (this is not politically acceptable as the tax rate would need to be very high) 2/ borrow ever increasing amounts to roll the debt over and pay the interest (this is the current game)
    3/ cut expenditures to pay the interest and bonds (this is recessionary and requires hardship so no one wants to bite on this) 4/Print money to pay the interest and bonds (you would stop publishing M3 so the people wouldnt know this is happening(the bond holders will catch on to the money printing and sell the dollar debt and buy commodities such as gold and oil necessities) 5/default and devalue the currency thereby creating hyperinflation like Argentina or Germany.

    My opinion is that we are in #2 mode, going into #4 mode in spring 2006. This will keep the game going a little while longer but the gold guys are smelling blood. 2006 will be another commodity year with a poor year for any manufacturer and a good year for the finance firms playing the commodity game. Long dated bonds are very risky when the dollar starts falling again.

    At some point #1 and #3 must happen or #5 will be forced upon the US. At some point the Asian bond holders will find their own economies so strong that they will not need the US consumer, thats when they can liquidate their US dollars yet continue on their own.

    Anyway you slice it, at some point,the US will regret the debt spiral its in. You know where you are headed based on the choices described above.

  15. Groucho December 23, 2005 10:40 am

    Season’s Greetings to all!!! Great stuff, musing about the upcoming year. So what will it be? Boom, bust or muddle through? Where is Nostradamus when you need him?

    Clearly, we seem to be at a major inflection point in current world history. With the demise of communism and the “win” of capitalist countries, it’s quite ironic to find ourselves in such deep shit.
    It’s even more ironic that the largest communist country left in the world(china) and the muslim monarchy states have such incredible leverage over the future of the US and western world.

    The US does have a couple of things going for it.
    The technology we have is amazing. Of course, very few americans get to use much of it(unless you’re in the military). And of course, that’s where the US power has evolved. Thanks to the cold war technology, we can, if we choose, command the global economy “better” than the British empire.

    Will we do it? Do we have any choice? Will we let China take over as the dominant country as Britain ceded power to the US?

    I don’t know, but I don’t think we will allow that to happen. Britain and US are anglo; China is not. But they are most definitely communist!!

    Does this help us in our search for future evolution of US policy?
    I’m keeping an eye on March 2006. The Iranian oil bourse is suppose to start trading. Will they be allowed to get it up and running? This could be a key world event.
    I don’t think the US will allow this because it could set a “bad” precedent, with China closely watching this situation. At some point China is going to want to also have a commodity transaction currency.
    They are going to want to price the commodities they want and need in yuan. This should be watched very closely. The future direction of world events depends very much on the USD/commodity vs CYN/commodity development.

    Unfortunately, the US citizen has to bare the pain of US policies(except the elite!!). He must fight in Iraq or maybe Iran or Afganistan.(He does get the priveledge of getting to play with the wonderful american technology!!)
    Also he must bare the economic pain of “command capital” work creation/destruction placation by the “wonderful wizards of oz” at our truly “free market” capital control system. ie.. “the treasurefed”
    Has the FED lost control over the economy? In 2004 when Greenspan was yapping about home buyers switching over to ARM’s, I thought he was trying to help Bush get re-elected by pumping up the economy….which indeed happened. And of course we knew he would keep raising rates to give those new home buyers a good screwing???(It’s good to be king?) Or, was he honestly worried about the FED losing control over long term interest rates(think Asian central bankers) so “let’s get homebuyers switched to something we(the FED) can control”(and screw the new homebuyers as an incidental by-product..ie a “nice king”.)
    Well, who knows what his motivations were. Bush was re-elected and I think Greenspan was happy about that.

    AS the speculative housing bubble(in reality just a credit/debt ponzi pyramid) collapses over the coming year will the FED act to prop up the prices and should it?
    From what I’ve read about Bernanke, he will not allow “demand destruction” to take place. It is a crying shame that we have allowed such crazy economic policies to continue. If we’re going to have “speculative capitalism” in the US(or any country) to not allow a bust to commence after each and every pyramid scheme is in my view ECONOMIC TREASON.
    Think about it for a minute. The federal govt under the eyes of congress with the blessings of the Treasury and the manipulations of the FED encourage the citizens of it’s own country to do foolish things; that cause extreme pain to many members of society.
    It’s like screwing your own kids. What’s the point?

    I guess it all comes down to control. So I guess my prognosis for the coming year is more control over the world by the US govt and more ass scratching by the american citizen, wondering “what the hell is going on?”

  16. JWW3+ December 23, 2005 11:59 am

    Just for fun let me put some specific events that MIGHT occur in 2006:

    A. Israel may attack Iran to eliminate its nuclear capabilities.

    B. China may invade and conquer Taiwan - especially given the financial leverage it has on the US.

    C. The US may outlaw again the ownership of Gold as its printing presses try to stop the depending depression.

    D. The onslaught of mother nature may continue with one major earthquake on the West Coast and several more hurricanes in the South.

    E. The Housing market may collapse with Fannie Mae- Freddie Mac and numerous banks declaring insolvency.

    F. Major Corporate Pension funds will continue to declare insolvency and be taken over the underfunded Pension Guarantee Corp.

    I could go on, Happy New Year!
    It will be a year where America will pay the piper.

    JWW3+

  17. AK December 23, 2005 12:35 pm

    I’m very impressed with comments given on this website. I’ve also a negative view on the coming years. I’m not sure how the stock market will behave since it does not reflect the true economic conditions.
    Here are some thoughts:
    1. It is very important to recognize the biggest factor that is in play in the world economy for the last decade or so — China’s deflationary force mainly on manufacturing products and to some extent India’s deflationary effect on services and wages. These two great forces have pushed US and European companies to adjust in such a way that their whole structure is based on low-labor cost (Asian Countries) and high-value customers (Western countries). Thus, companies have benefitted greatly from this and that is why you have seen high-return stock markets (1994-2005).
    2. With low-interest rates and easy-loan schemes have pushed individuals and companies to depend on financial-assets such as housing, stocks, etc. If you noticed most of the companies that are successful in the last decade have been consumer-based–housing (TOL, KBH),semiconductors(QCOM,BRCM,MRVL), web-services (YHOO, GOOG, EBAY). All these companies are structured with no intensive capital, consumer-driven, low labor and design cost.
    3.Next I see only continuation but do not expect high returns since the whole system has adjusted itself based on the above structure and all those effects are discounted into the price of the above stocks.
    4. Also, I see the following industries to grow -
    a) Debt-based: Firms that collect revenue based on debt-servicing.
    b) Corporate-Services: Firms that provide services to bigger corporation with lot of cash (software, legal, financial).
    c) Biotech companies may succeed if they achieve in lowering their R&D cost by outsourcing and find rich-patients. Most of this should already discounted into stocks, however, there is little uncertainty still.
    d) Corporations becoming more and more multinationals by moving HQ in low-taxed countries. As US consumer-demand slows down (due to no more housing-price gains and fear of outsourcing) more and more companies will get attracted to consumers outside the US.
    d) Migration of population from western to asian countries as wages will start growing in non-western countries.

  18. Neil MacPhail December 23, 2005 3:42 pm

    DEBT AND DERIVATIVES. The United States and Canada are the two greatest wastrel economies on the planet. The expectatious consumption is a disgrace. To foist this lifestyle onto the rest of the planet insures the destruction of the planet’s capacity to carry mankind. Whatis to come is apocalyptic. The United States is going to be decimated by the financial storm to arrive in 2006 and deservedly so. Canada, with less debt and a much stronger currency, will do somewhat better, but is bound to be dragged down by the Excited States, the most gluttonous and avaricious nation the world has ever known. Absolutely no financial discipline. Greenspan and Bernanke should be tarred and feathered and run out of town. The bankers of the United Statesin Tokyo, Taipei, Hong Kong, Shanghai and Seoul will sorely regret their decision to not only hold, but back the used toilet tissue called the greenback.

    40,000 Dow. That clown has got to be joking. Richard Russell is more like it. Jim Sinclair and Jim Rogers make more sense.

    Enjoy your thoughts. Keep it up.

  19. dennis December 23, 2005 3:46 pm

    market higher? What is Google — the last shooting star we’ll see, or the first of many more innovative companies to come?
    How in the world can you rely on something not needed,a whole Corporation built on it half the Capitalization of MSFT. It just amazes me
    Everyone is quite pessimistic I see and for good reason, so even though I think that will drive up the markets to stupidity I must agree with most of the above anaylsis. because it makes since.
    During the fall of the markets in 1929 people were on 10% margin. Today people are on 50% margin which is stupid to me.If something is worth investing in no margin is required. But that is not the game.IS it.Not an exciting one anyway.
    Oh by the way, during the Depression there was winners in stocks on wall street. Just most players left the scene because there wasn’t any REAL money involved in most of it.Gold and silver was confiscated as money.Which is a really bad thing to do.Because what you got was a COMMUNIST MANIFESTO that still rules this country under the guise of socialism. Remember USSR Union of soviet socialist republic. Sound and feel familiar? We live in it and those who deny it are not true free market or free individuals.
    And you should know that.Because you speak along the outer borders of it in all your commentary. But you don’t denounce it up front.Because they like it and they are not listening.So we trade and hopefully we get by and some get by real well.
    Happy holidays and Merry Christmas
    You should not tax invested money which provides jobs if invested in viable companies. You should no that. That is why money is printed, because you vote for people who continue to tax your labors weather it is pounding nails or investing in your future.
    A simple consumption tax will take care of protection.You need little else.The military machine cannot survive for long on borrowed promises from the rest of the world. A free american is not interested in toasting his trading partners. Just defending his borders.But that is not what we have here. is it?

  20. Jim Martin December 23, 2005 8:44 pm

    Party is over folks. Remember stagflation, well it is alive and well in the USA. The SM and real estate look like they topping out here…. got gold?

  21. Joycey December 23, 2005 9:40 pm

    Dear M,
    I just wanted to wish you a merry christmas and a happy new year! Hope that your stock markets go up!

    Sincerly, Fredrick the Third

  22. Marty December 23, 2005 10:51 pm

    What I see through my tunnel of vision is an heroic attempt at keeping things afloat which will probably lead to a muddle through with a downward trend. The tech miracle that may pull us out of it some years down the road is alternative energy that works. This will require massive retooling and investment. Distributed energy retrofitted to existing buildings will provide a lot of local employment. Wind, solar, and hydrogen coupled with a breakthrough in storage batteries would make this all possible and I believe it is in the works. The only question is when.

  23. frank December 24, 2005 1:14 am

    The effects of the previous 13 Fed tightenings will be kicking in in 2006.
    Leveraged positions are most at risk. Leverage works both ways, and leverage to the downside can wipe out equity very quickly.
    This is especially true in a country like ours where the government encourages consumption rather than savings.

    I do not know how by much the economy will slow down in 2006. But a slowdown is probably a given since the Fed is making less credit available. For 2006 I plan to err to the safe side of the debate and stay out of debt.

  24. WILLIAM HUDGINS December 24, 2005 8:55 am

    I have followed R Prechter since around 1978 and think the world of him. I think, in response to your excellent article at the Eagle, that we will realize something in between the two excellent points of view. Debt will tend to curtail further economic and stock market parabolic moves; and Bernanke will prevent an all out deflationary collapse. These forces will tend to cancel each other out; or at least dampen things, so to speak. Also, China is a big factor. I think it is in China’s best interests to take care of it’s golden goose, at least for the forseeable future. Keep an eye on Taiwan, however. That could be the fuse.
    Has anyone factored derivatives into this mix? I would suggest that this issue could “blow moderation to the winds” and could be the one factor which could tie Bernanke’s “helicopter” to it’s launch pad.

    Bottom line; it is likely that we will plod along without earth shattering shifts. MERRY CHRISTMAS. Get a good tractor and a couple acres of farm land…just in case. Bill.

  25. Bill December 24, 2005 10:15 am

    Why must it be one or the other — deflation vs. inflation? Even in an inflationary environment, wherein Federal Reserve Tokens (FRT’s) are dropped from helicopters, is it not possible to have the effects of deflation (price drops and debt defaults) in, for example, the “non-necessity” or luxury sectors of the economy, while concurrently experiencing inflationary effects in the “necessity” sectors (e.g., food, oil, gas, etc.)?

    With the Fed’s efforts to avert deflation, it is likely to ease credit, even if it has to give it away, as well as to allow Bernanke to implement his infamous plan for helicopter-dropplings (pun intended). As such, paper-currency inflation is the more likely occurrence. Nonetheless, hyperinflation, as is deflation, is just another form of debt default, since the de-valued FRT’s are used to screw (re-pay) creditors.

    Accordingly, I do not trust any paper assets, as paper is only a PROMISE to pay and not payment itself. History shows that the government/Federal Reserve has always defaulted on its promises (repudiation of gold redemption domestically in 1933 and internationally in 1971; repudiation of silver redemption in 1968). The only asset class that I trust is the one that has historically been the most preferred form of MONEY — as both a medium of exchange and a store of wealth — GOLD and SILVER coin.

    I understand the amazing control and manipulation exerted by the powers-that-be to suppress the prices of gold and silver so that the masses never detect the monumental fraud of fiat currency and its continual erosion of purchasing power — that is, until the eventual decline curve goes parabolic and the paper reaches its intrinsic value — ZERO ! Nonetheless, the law of “gravity” — the laws of nature — cannot be defied forever.

    Yes, most days nothing happens; but then suddenly, one day something does happen. I believe that this something will one day be the collapse of the worldwide paper “money” systems. It may not happen in my lifetime, or it may happen tomorrow. I believe that the safest bet to store wealth, as well as to have something to use as an accepted medium of exchange, is GOLD and SILVER coin. I recommend that everyone get some along with the most precious metal of all — LEAD.

  26. Art Amon December 24, 2005 12:14 pm

    I’m a cynic. The US has painted itself into a corner with trying to get something for nothing by printing FRNs with increasing abandon. The level of political discourse is so low that even bringing up an issue causes cries of defeatism and anti-Americanism such as occurred recently with the Social Security reform (Whether or not you agree with the solution presented, most thinking people understand there is an issue to be discussed). Politicians are in the business of buying votes and it no longer just means those of the Democrat persuasion, but the Republicans are joining in to see which side can spend more. Where in this will restraint be found and leadership accepted to face the tough issues with intelligent debate?

    More and more debt is needed to stimulate an increasingly stubborn economy. When we had a domestic manufacturing sector, the debt created consumption worked to increase investment and increase domestic jobs. Now the retail sector is merely the distribution channel for foreign production. $1 of new debt only produces $0.25 of additional GDP where it once produced $0.75 and all the while creating additional drag due to the interest payment burden. We are in a pickle and so is the world.

    Let’s follow the money. First the deflation scenario. Most of you readers know the theory of how this unfolds, so I won’t cover it again, but who does it benefit and why would the Powers That Be allow it to occur? Debtors are crushed, credit lenders are crushed, savers are benefited in a deflation. The vast numbers of American voters are debt holders, the largest most profitable businesses today are financial in nature and the savers are foreigners. I don’t see the US political elite changing their ways of unbridled spending and debt creation so to put lots of voters on the street, destroying their biggest corporate contributors and benefiting foreigners. Therefore, the deflation scenario will be delayed as long as humanly possible. Deflation is delayed by careful but accelerating inflation.

    My inflation scenario goes like this. The Fed prints enough money to keep the stock, bond and housing markets on an even keel as possible. I expect little upward or downward movement for as long as possible. Money is continually injected into the economy to try to maintain this domestic equilibrium. Foreign credit lenders must continue to play their mercantilist game and not throw in the towel, that is keep hold of their USD or at least make a show at keeping them. Commodities continue to appreciate in all fiat currencies and most in USD. Imbalances continue to grow and grow much longer and larger than anyone can imagine.

    A tipping point arrives where either the debt burden results in a waterfall of default or when it becomes in the considered best interest of foreign creditors that taking more USD is less interesting than not taking them thereby causing world trade using USD to virtually cease. So my view is inflation continues as long as the US politicians can make it continue until the debt the US consumer has taken on crushes the entire economy for everyone or until foreign politicians decide its in their national interest to stop the game of taking IOUs and sending cars, TVs, and everything else to the US.

  27. Dennis December 24, 2005 5:38 pm

    I cannot envision a future in which the dollar buys MORE of anything. Having said that, I must say I can allow for other states to try to inflate their currencies faster than Bernanke will inflate the dollar. This “race to the bottom” would be uneven at best with one currency gaining , then losing value against the others in a sort of death spiral. The only prices sure to rise in such a world would be basic commodities and precious metals. If metals prices are capped shortages will develop. You want to invest in that which is in short supply, not something like paper (or electronically created) currencies, the quantity of which can be expanded at will and at no cost. Investors will soon discover the enormity of the naked short-selling scam in the stock markets and will come to view stocks as an inflating currency, too. There may be more inflation-induced “growth” in the economy but the spectre of an eventual derivatives debacle will keep real wealth largely out of paper assets

  28. Pravin December 25, 2005 10:19 am

    I respect Bob Prechter,but does anyone know how long he has been forecasting 400?.
    Wave analysts get the long trend right,but near term -they make stunning mistakes.

    Fundamentally the US is on a bad wicket,no doubt.The question is when rather than whether..that everyone agrees upon.

    Anyone knows Bob’s forecasting history?
    Please share if yes.

  29. Greg December 25, 2005 4:48 pm

    Helicopter Ben is inheriting Easy Al’s hornet nest and its not gonna be good for ol’ Ben…or for the USA.
    I hear the elk are running big in Big Sky country. Think I’ll trust my instincts and do some organic farming while Helicopter Ben reaps the whirlwind.

  30. hermanne December 25, 2005 7:45 pm

    pop POP POP HOUSING FIRST THEN THE REST OF THE HIGHLY INFLATED DOW ITS SO OUT OF BALANCE THAT IT IS UNREAL CROOKS STILL OPERATE IN PRESENT DAY SYSTEM
    JOBS GOING OVERSEAS DO MATTER IF YOU THINK NOT
    YOURS JUST MAY BE NEXT
    START TO BUY GOLD AND SILVER NOW ASAP
    DOW 400 is more believable that 40,000 who could be that ignorant!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  31. James December 25, 2005 7:50 pm

    Anyone who has ever had the opportunity to watch fish in a frenzy, would surely know where the economy is headed. When everyone jumped all over the dot coms, they eventually took a dive. Why should we not think the frenzy in home buying would be any different? Logic would have it that everything which goes up must come down. Only realtors and mortgage lenders believe things could just continue to rise.

    That alone should be enough to convince people, but, when fish are in a frenzy, there is no talking logic. Throw hooks in the middle of the fish with nothing on them and your liable to pull out quite a few hungry fish.

    But if that is not enough to convince you, take a look at other factors:
    1. When interest rates rise, buying power decreases. But, even without the rate hikes, it is likely that the buying will stop as prices reach levels of unaffordability.

    2. When the home next door becomes too expensive, because the taxes are out of site, its easy to stay where you are.

    3. When prices level, investors will lose money because they still have to pay taxes, insurance, home owners fees, etc. Some markets are 25% per cent investor owned. What happens to prices when all the investors pull out because they are no longer earning money on their investments?

    4. People who have used their equity to buy cars, planes and boats will become immobile. They won’t be able to move from their homes, which translates into fewer sales in homes.

    5. People will become incarcerated in their homes. If they lose jobs and cannot sell their homes, there will be a ton of foreclosures. There is a new generation of homebuyers that just look for foreclosures. People looking to sell their homes will have to compete with the lower priced foreclosures.

    Doom and gloom? Or just common sense? 2006 will be an interesting year.

  32. rne December 25, 2005 7:53 pm

    gold ten to one, silver 20 to 1
    these are my price projections
    before the markets get bac to reality
    fiat paper almost worthless
    walmart giving away leftover chinese christmas JUNQUE
    we are getting further behinfd with each shipload of crap from the orient and they are buying gold with our cheap dollars
    WAKE UPASAP

  33. Matt December 26, 2005 3:24 am

    I doubt we are going to see another boom that will take the Dow to 40K or even above 15K. Not unless Boeing or somebody else invents something like antigravity, in which event the production of such technology would likely be outsourced to China and/or India anyway.

    Sadly, I can only predict economic apocalypse for our now declining empire. Among the nails in our national coffin:

    1. Ever deepening national debt, now about 8.2 Trillion dollars. (Yes, that’s trillion with a capital “T”)

    2. Trade deficits that seem to set a new record every month.

    3. A current account deficit that frightens the hell out of our international trading partners and causes our own politicians to scratch their heads and go “huh?”.

    4. Consumer debt which is beyond belief.

    5. A personal savings rate that is now actually in negative territory, for the first time since the last depression.

    6. A terrifying derivatives market that even keeps Warren Buffett awake at night. He has referred to derivatives as “weapons of mass financial destruction”.

    7. A soon retiring baby-boom generation who are going to fall like an anvil upon our health care system, which already has to deal with 44 million other uninsured Americans.

    8. Forget about American industrial might pulling us out of this as it did in the last depression. Why? Because, other than Boeing, that industrial might is no longer here. Globalization has made the high school-educated, semi-skilled working class American too expensive and obsolete. Even many of the more educated, including high skilled engineers, are seeing their careers offshored. Gone are to be the jobs that pay a living wage. Gone will be the jobs that provide reasonable health care insurance. Gone will be the pensions that put the “gold” in our elders’ “golden years”. Gone will be the American middle class.

    10. And finally: A new fed chairman, whose only solution to all this is- “helicopter money”.

    It pains me to write all this as I was born not so long ago into a nation that had so much promise. A nation that went from being the greatest creditor that produced virtually everything to a nation now that is the greatest debtor and produces less and less every year.

    I wish things were such that I could feel compelled to sell my gold and silver. Instead, I can only feel compelled to buy as much as I can before time runs out.
    With a heavy heart, I can only advise others to do the same thing.

  34. Kam D December 26, 2005 9:38 am

    Mr. Nystrom,

    Great article. Mr Pretchter has been calling for 400 since 1987 and he follows the principles of idiot wave. He is always wrong, at least short term. Deflation will only occurr if interest rates rise substantially or someone pulls the plug on lending to the U.S which is likely. Harry is always right, we will get to 40,000 but not right now. We must see 1000-2000 first.

    Forecast: Gold at 430 by Oct, 2006, first we see $550??
    As Pretchter would say, the 3 year lows are just ahead of us.

    Watch for the Chinese to drop like a rocket. What you should be analyzing are the consumer debt and as volker says the amount of borrowing U.S G has to make everyday and lack of wills by the turkey at D.C since 1982..just borrow baby..do not worry, be happy..Market move up on a wall of worry. Housing has more leg up and then collpase. What people have not figured out is the housing& gold move up together.

    Bottom line : Both Harry and Pretchter are correct..Timinmg is the key. Watch the State of Isreal & D.C & Russia..that is where the ball game will roll.

    A good newsletter for reference Early Warning Report by the Texas Crazy Man ..I have been waiting for his forecasts..it getting close~ CRB at 2000, Gold at 2000 and Dow at 5000??? Oil at 200? Obviously, these are long term forecast but inevitable as the Crazies are getting for a War! With Helicopeter Ben, anything is possible.

  35. Michael Wiseman December 26, 2005 10:05 am

    Over the last twenty years I have come to believe in J.M Hurst’s view of things, Cycles. The odd thing is, so few in the last year have brought up the potential topping of the four year cycle, let alone larger ones.

    With few exceptions,(1987,1990)the equity markets have found a tradeable low every four years. I believe late 2006/early 2007 will prove yet another buying oppurtunity.

    The way we get there is anyones guess. I can easily see sub 1000 on the S&P 500 before the current four year cycle bottoms.

    Whether inflation or deflation will carry the day in the coming years, we, as traders, need to get it right or get off the train. In “the end”, there is no way out save default or worse.

    Best of luck to us all.

    TE

  36. greg December 26, 2005 10:13 am

    ummm…. what?

    Dennis says: “Investors will soon discover the enormity of the naked short-selling scam in the stock markets and will come to view stocks as an inflating currency, too.”

    So you’re saying there is massive amounts of naking shorting going on in the markets, which is supressing stock prices across the board? And when this “scam” is discovered stock prices will be able to “inflate” as they should?

    in other words Dow 40,000…. here we come?

  37. david December 26, 2005 6:11 pm

    Im wouldnt put too much trust in Prechters view on the
    doom and gloom future. Remember in October 2002 Elliot wave
    predicted that the rally wouldnt last and the S&P wouldnt go
    over 950.

    Remember that? There are good bearish arguments, but dont
    overlook the bulls either. If the market is to fall for the
    next several years then this would mean that since the early 1900’s the stock market never recovered after a 3 Year crash. The bottom happened in 1932 and never touched
    it again.

    Although there are clear excesses in the market place, ei. housing, I dont think Americans will turn over and die. For the Dow to get to 400 would be impossible unless a nuclear bomb hit america. The basic needs of the typical USA citizen
    should keep the economy, and the stock market from such a collapse.

  38. m s kelly December 27, 2005 7:31 am

    this response is directed to the article posted on gold eagle re dent and prechter.the answer to your conundrum can be found tucked within the kondratiff wave cycle.dent is correct that we passed through the fall/winter(disinflation/deflaion) boundary in 2000.thus,the business cycle ceased and begat a credit cycle that creates bubbles in its wake.this early period of deflation/winter is really indian summer,where people behave as if we are still in the disinlating/fall season.look from 1920 to 1929 or japan 1980 to 1989.yet subconsciously we know the the debt/credit cycle will devolve into full blown deflation.this debt/ credit cycle will end when the last asset class has been inflated-not stock prices but rather earnings fed of irrational consumption of boomers et al.

  39. Harland Hendrickson, PhD, CFP, CIM December 27, 2005 5:02 pm

    Here is my view: We will see a typical “secular” four-year bear market low in the fall of 2006, probably as low as the 2002-3 market lows. Real Estate will not collapse this cycle, the Fed will come to the rescue with 50-basis point drops back to 1% or maybe even 1/2% by the end the rescue period. The period from Oct 2006 to Oct 2007 will take us back to the same current highs we have today, faster than last time, I would guess. Then we will be headed back into another 4-year low about 2010, most likely more on the order of Prechter’s prediction than Dent’s by a long shot. It would be nice if all the debt is shaken out by 2010, but we’ll wait a couple years before going that far into the future.

    How can anything else happen when the pension/retirement liabilities in the US and around the world are so huge? “As GM goes, so goes the stock market.” And I’d guess that by this time next year GM will be in bankruptcy and that could be the catalyst to take the market to its lows next fall.

    Yours truly,

    Harland Hendrickson, PhD, CFP, CIM
    Portfolio Manager
    Hendrickson Financial Inc.
    Edmonton, AB Canada
    harland@hrhnet.com

  40. OB December 27, 2005 5:07 pm

    Dear Mr. Nystrom, I was born before the depression, in a house with no plumbing, no running water and no electricity. I read my first WSJ sitting in the ready room of an aircraft carrier waiting for the next strike in the Sea of Japan off the Korean coast. I made my first stock investment in 1952. I have been investing my money as well as OPM ever since. I retired in 1989 as SVP and Chief Investment Officer of a large bank. I have been involved in everything Prector and Dent are talking about. I don’t know which is right but I do know, as an avid history student of money, it all winds up the same. Fiat money always fails and goes to zero. To get there it can go either way. It seems to me the current popular investment idea is “We think-They sweat”.

    I say it should be the opposite. “We sweat” is very close to gaining the high road. Three billion people are closing in on obtaining houses, cars and everything else Americans hold dear. We (Americans) have used up most of the things you have to dig up to make the things that are desired. What we didn’t use, we caused the profits from digging to be so low that all the diggers are doing something else and the materials to make the things these 3 billion people want have disappeared. Mines have been closed as unprofitable or by well meaning but short-sited environmentalists and no capital have been committed to new ones.

    Americans have grown soft and greedy. The next 15 years belongs to China, India and hard assets. Base metals first and finally, gold and silver. The world will have to have a currency that has the same liability for all and that will be paper plus gold plus silver. “We sweat” beats “we think” just as “scissors beats paper and rocks beat scissors” (That’s how, in my squadron, we decided who would lead the next strike.)

    The diggers of this world will wipe out the Central Banks and Fiat money. Want to eat, better learn how to grow veggies. Whether the Dow is at 4000 or 40,000, gold will be able to buy one share. Everybody will not be able to own an ounce of gold but we all can own some silver coins.

    OB
    JD, CDR USNR

  41. BC December 27, 2005 5:25 pm

    I do not think it is important which of these scenarios are to prevail, even though I am inclined to think that the (D)eflation first scenario is more likely, even if it comes after some more (I)inflation, which will not bring DOW to 40,000. But again… it is not important. What is important is the asset allocation. The major asset still undervalued by all standards is gold. So, I suggest that we toy with the DI or ID or DD or II scenarios, but invest in gold with the
    ratio of 30% gold, 20% oil, 15% Bonds (total bond fund) 15% (total stock fund).

    One idea this is all based on is that. DOW/GOLD ratio needs to get to, at least, 3:1 if not 1:1, which could mean any of these combinations:

    DOW GOLD
    0400-1,200 400
    1,000-3,000 1,000
    2,000-6,000 2,000
    3,000-9,000 3,000
    5,000-15,000 5,000

    40,000-120,000 40,000

    So it goes. We should care less about what happens. We know from previous occurrences (1929/1966/2000) that once the
    DOW/GOLD ratio has made its high ( 40 in 2000 ) the decline in the ratio will happen within 18-20 years to 1-3:1, without this ratio making new high ( this is important ).

    Thanks for your attention.
    BC

  42. George December 27, 2005 5:28 pm

    Well, Sir, since you ask,

    “What kind of new technologies could possibly cause such a boom?”

    to which I (speaking for Ben) can only reply, “a printing press and the monopoly power to use it.”

    I hope you find this funny in at least some sense,

    George

  43. Dr. RR December 27, 2005 5:33 pm

    That was a good article.

    I feel that a lot of the prognosticaters are missing a major point.That is that the U.S. economy doesn’t stand alone as it used to.It is now a part of an intricate web of financial transactions and dependent on them. If Iran opens an oil bourse as intended in order to take Euros in payment rather than Dollars it will not be helpful to our economy.(remember Iraq started to take Euros just before we invaded them) Most of the countries holding Dollars in their reserves are not all that enamoured with us anymore and would be glad to substitute any other reasonable asset. I feel that the actions of the rest of the world will be a major factor in our lack of growth in the next few years. This is something completly out of our control.

    Dr. RR

  44. Andy Z December 27, 2005 5:48 pm

    Everything hinges on the amount of fiat money the FED creates. As long as the money supply raises sufficently there has to be inflation, the moment it slows down sufficently or retracts–deflation! As U know FED fiat money can only be created by DEBT or borrowing of some sort. The Achilles Heel of Fiat Money is that The FED does not take into consideration the interest
    that must be paid back on the debt when it creates money in the first place. There is never enough money in circulation to service the interest on the original debt so more and more money must be created just to service the interest on that debt.

    Let’s take the example of a one person economy and multiply it by 250 million people: If you borrowed one million dollars @ 6% interest for ten years. You would have to pay back $60,000 dollars to the bank every year for 10 years or $600,000. That would put one million in circulation the first year but only leave $400,000 dollars left in circulaion after 10 years. There would not be enough money to pay the original debt back. Where does the new money come from? It must be borrowed!! By you or by someone else. If there is not enough money left for repayment–U would have to default and that would create cross-currents of one default after another with a domino effect. To keep the economic party alive there must be inflation of the money supply simply to pay back the interest on fiat money (remember it must be borrowed to come into circulation).

    It’s like a Ponzi scheme–sure it works for a while but when it breaks down–Everyone goes to the shithouse! There just isn’t enough money left over for everyone.

    It’s like para-mutual horse race betting–ten percent gets deducted after each race and by the end of the tenth race–90% of the people who leave the track have considerably less money than what they started with. Their money is being taken to the bank by the Racetrack–Bank in an armored car. A considerable transference of wealth.

    Las Vegas is he same way–the longer you stay at the slots the more the vigorish will grind U down. That’s why big rollers are given lavish penthouses to stay oveernite for freebies. The longer they stick around the better for the House!

    The Fed MUST keep injecting more and more and more and more and more money to allow for the constant repayment of the interest on the debt back to the banks. Money growth is MANDITORY! And as long as consumers and companies borrow more fiat money than what is required for the repayment of interest to the banks–the economy will swing along and the banks will grow rich.

    BUT the moment the growth of fiat money stops and an economic downturn comes–and people and companies stop borrowing and expanding–O Lordy Me! That’s when the bankers start craping in their pants! When money supply starts shrinking even ever so little –there is always the possibility that the money supply will shrink beyond the ability of companies and people to HAVE ENOUGH MONEY AVAILABLE to service their interest and indebtness!

    This generally happens in a sudden economic event like a huge default where a house of cards just tumbles. Take GM and Ford for instance. Over half a trillion dollars in debt between the two–And paradoxically–this huge debt is sitting as an asset on the books of everyone that holds it. Consider the sunami wave effect of such a default–result–even more defaults–A GM or Ford bankruptcy would be an economic atomic bomb exploded over the country. Get out of all paper assets the moment U read the headlines that either company went into bankruptcy. It wouldn’t be pretty. A little bit of poison and a little bit of debt will both kill you! This is the nature of fiat money–it’s poison!

    The end line–Inflation is always the result of fiat or borrowed money. Hyperinflation is the result of trying to continually service the interest on borrowed money; and Deflation is the result of not enough fiat money being made available to service interest payments and repay the debt. Inflation is the debt balloon going up–deflation is the debt balloon coming down. They are like Siamese twin sisters, attached to one another. The balloon that goes up must come down! They are two distinct pieces of the same economic puzzle. Right now the balloon is still going up and the FED is doing a great job getting everyone into debt. That’s obvious. But they are painting themselves into a corner with the astronomical amounts of indebtedness being created. It’s insane–our addiction to debt!

    Inflating money has a naturally longer shelflife to it–it’s like blowing up a huge balloon–it takes time to create a monster. The job of the FED is to “moderately inflate.” It’s a must! They have to keep people borrowing to create enough money to pay back the interest on the loans they have out. Every dollar bill is techically a Federal Reserve Note or Loan. Another name for our Fed banking system is shylock! They must inflate to survive! They must–they must! It’s that or go out of business. The game ends when indebtness stops expanding enough to pay back principle and/or interest. When is enough, enough? The FED’s action itself will tell us. The exact pivot point could be tomorrow or 2-3 years away. A complete collapse is inevitable by 2012.

    As long as Fed interest rates are rising we are fine–we are in the twilight zone - enough fiat money is still being created or borrowed. Over 6% we are going to have hyper-inflation or too much borrowing. Get your affairs in order if the Fed starts lowering rates again–not enough money is being created and the FED fears this senario more than anything. Lower rates would be a signal from the FED saying to the masses: CHEAP MONEY FOR RENT! PLEASE BORROW SOME MONEY! Remember we have Helicopter Ben as our CFO!!! The FED has to inflate simply to buy some more time–The jig would end for the Fed when enough people stop borrowing or begin defaulting. The game of not enough borrowd money would end! And deflation would start.

    Deflation is the end of the game of inflation–Deflation itself is of a much shorter duration–especially if the balloon is pricked! Deflation is always a hard landing. It is like shit hitting a fan. You never know where its going to splatter. It generally affects everyone.

    Dent is probably right–but his numbers may be skewed. One way of getting the Dow to 40,000 is to replace GM with Google and Merck with Berkshire Hathaway. Don’t worry –The FED still has some tricks up its sleeve to prolong the inevitable. Like eliminating the M3 report. The less we know–the less we will know their gameplan!! The FED is inflating right now–that’s for sure! But the higher the Dow balloons the harder the fall is going to be.

    Is there a way out personally–yes, get out of debt; save and put your money in hard assets, get out of the city and buy a few acres in the country, plant a garden, raise chickens, and buy an armour-plated Hummer to protect yourself with all the money you’ll make from your gold and silver investments–its going to be brutal when all that shit called borrowing hits the fan!! Getting back to basics is what its all about!!!

    Have a merry Xmas! andyz

  45. VP December 27, 2005 5:52 pm

    I suggest that the next boom and accompanying “good deflation” will come with some radical innovation in nuclear power generation that will lower the cost of doing and making everything. I enjoyed your article.

    VP

  46. RJ December 27, 2005 5:54 pm

    I follow Elliott Wave theory using a proprietary price filtering system: hence it is “objective’ rather than subjective. The method states that using the large filters, we have one last move to a new all-time high for the DOW. Where that top will be, and when, is beyond the capabilities of the method. The filters operate independantly of time. Intermediate filters say that we have to correct (probably to around 9200-9500) before we can commence to put in that top.

    P.S. I too was a Stock Broker- in the eighties.

    RJ

  47. John Arnold January 10, 2006 9:53 pm

    At the end of the day who really cares? The ice caps are melting, the ozone layer depleted, our leaders are just greedy idiots who really don’t care. It’s all a bit of a joke really. There is no money, no economy, no ‘civilisation’ (if you can call bombing countries for oil civilised…) no jobs and absolutely no need for stock markets on a dead planet. And that is where we are heading in 2006…2007…

    I hope there is a giant crash in ‘06. At least it may stop some of the wilder excesses of 21st century America Inc.

  48. The mad doctor January 18, 2006 1:27 pm

    I have been expecting decline since 2002 a la Weiss. Pretcher missed the wonder years of the late nineties and we still have no got to his DD. The big boom ahead speakers are those who sell financial products incl. real estate and their sponsored media pundits.

    So many factors look awful. Real estate bubble and risky mortgages. Consumer spending, debt, lack of savings. And so on. All known to most reading this.

    Yet we have not fallen apart. Chaos/complexity make prediction and the effects of anything tough to predict. We appear to have weathered 9-11, Katrina, SARS, Dockworkers strike,…

    Fed rate cuts, tax cuts and incredible debt spending by the feds have propped up the whole thing. Cheap imported goods and overseas lending have helped too. Now the Fed is headed by a moron who promises to flood us with dollars.

    I see a tough year ahead. States and locals will cut services sharply and/or increase taxes. The feds may even cut back spending. At best the stock market and real estate will be flat and inflation will rise. The long-term trend is down for most Americans. In 2015 or even 2010, we will wonder what happened? Retirement will not be as good as the promises of pensions, Social Security, Medicare and even retirement accounts are not met. Wages will be lower and lifestyles will be less middle class for most. The middle class as we know it will be for professionals with education like doctors, lawyers and executives. They will live like HS grads with a union job do now.

    Of course a major event could accelerate the process. The rate of decline will cause greater social problems. After all you can boil a frog to death if you slowly raise the temperature, but it will jump fast out if you put it in water already boiling. Potehntial major disruptions are many. Bird flu or some other major epidemic. Biological agent terrorism. Small nuclear explosion or dirty bomb. China dumping our treasury debt. A real estate meltdown.

    I really don’t know what will happen. But it will be bad.

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