Daily Wire Stories

by Michael Nystrom
March 27, 2009

After recent events, it is harder than ever to take the "efficient market" hypothesis seriously, if you ever believed it at all. The serial inflation and subsequent busts of stock bubbles around the world and throughout history have shown us that markets are neither rational nor efficient. Market participants are driven by the emotional pendulum of fear and greed. Day after day the eternal battle is fought on the market floor between the bulls and bears, the optimists and the pessimists, the greedy and the fearful. Over time, trends form. When the optimists are in charge, it means a bull market, regardless of what rational analysis might dictate.

Remember the good old 1990's - Webvan, Kozmo, Pets.com and all the other spectacular IPOs that raised hundreds of millions in the dot.com boom? (Pets.com raised $82.5 million in an IPO in February 2000 before collapsing nine months later.)

It was not just investors; society at large was exuberant. The cold war had ended, and even though the US was bombing Iraq near daily, the perception that global peace prevailed was widespread. People were positively giddy with all of their new tech toys - cell phones, laptops, Windows 95 and of course, the Internet. "Hope" was not a slogan that required endless incantation; it was the expressed emotion of the prevailing social mood. Life was fun and exciting, the future was bright and the stock market reflected that optimism.

It was that optimism that induced people into taking on more debt to buy houses they couldn't afford and to fill them with things they didn't need.

Fast forward to today's darkening social mood. Fear and regret is so pervasive that you can practically smell it - from the halls of a panicked Congress to the private thoughts of millions of people living out quiet lives of desperation.

In 2009 we'll see the worst economic collapse ever, surpassing the Great Depression, says Gerald Celente, U.S. trend forecaster. Things will get violent in the U.S.,and we'll see tax revolts.

By Robert Prechter, CMT | February 6, 2009

Editor's note: This article is part of a syndicated series about deflation from market analyst Robert Prechter, the world's foremost expert on and proponent of the deflationary scenario. The following article was adapted from Robert Prechter's NEW Deflation Survival eBook, a free 60-page compilation of Prechter's most important teachings and warnings about deflation.

I am tired of hearing people insist that the Fed can expand credit all it wants. Sometimes an analogy clarifies a subject, so let's try one.

It may sound crazy, but suppose the government were to decide that the health of the nation depends upon producing Jaguar automobiles and providing them to as many people as possible. To facilitate that goal, it begins operating Jaguar plants all over the country, subsidizing production with tax money. To everyone's delight, it offers these luxury cars for sale at 50 percent off the old price. People flock to the showrooms and buy. Later, sales slow down, so the government cuts the price in half again. More people rush in and buy.

Sales again slow, so it lowers the price to $900 each. People return to the stores to buy two or three, or half a dozen. Why not? Look how cheap they are! Buyers give Jaguars to their kids and park an extra one on the lawn.

Finally, the country is awash in Jaguars. Alas, sales slow again, and the government panics. It must move more Jaguars, or, according to its theory — ironically now made fact — the economy will recede. People are working three days a week just to pay their taxes so the government can keep producing more Jaguars. If Jaguars stop moving, the economy will stop. So the government begins giving Jaguars away. A few more cars move out of the showrooms, but then it ends. Nobody wants any more Jaguars. They don't care if they're free. They can't find a use for them.

Production of Jaguars ceases. It takes years to work through the overhanging supply of Jaguars. Tax collections collapse, the factories close, and unemployment soars. The economy is wrecked. People can't afford to buy gasoline, so many of the Jaguars rust away to worthlessness. The number of Jaguars — at best — returns to the level it was before the program began.

The same thing can happen with credit.

By Michael Nystrom | July 25, 2008

Back on June 2nd, I suggested (for entertainment purposes only) that gamblers might want to take a crack at shorting Apple's stock. At the time, Apple was trading around 186, and some called me crazy for wanting to short a stock in an uptrend. This was, after all, Apple, seller of the most popular technology products on the planet. But I had my reasons, and as I said it was a gambler's play. Which is to say that it was a calculated risk with a tight stop - the only kind of play a responsible gambler should make.

Apple drifted down slowly for a month an a half until the day I was waiting for: earnings. The stock took a big dive down to 147, before recovering smartly. As noted in the previous article, our target was in the 145 - 150 range, so we made out with a tidy profit of close to 20% in about a month and a half.

Mission accomplished, but what's the story on the stock now? Should we go long, short or just leave it alone? First let's review Apple's "story" and then take a look at a super long-term chart and see what we see.

Video by the American News Project