Stock Market

! ! D I G G I T ! !
September 29, 2008

The following story illustrates the root cause of our current financial crisis: the flawed and immoral banking system, headed by the private Federal Reserve Bank, which relies on ever expanding debt creation.

Not one in 1,000 understand it, but if you can grasp this, many once confusing aspects about the world we live in will become clear. While the majority of Americans have no understanding of what follows, you can be certain that the bankers at the Federal Reserve and the brokers on Wall Street understand it perfectly.

The story is adapted from the book The Future of Money (pp. 50 – 53) by Bernard Lietar. Your thoughts, comments and discussion are welcomed and appreciated below.

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The Eleventh Round

Once upon a time in a small village, the citizens used barter to conduct all of their transactions. Every day, people walked through the marketplace with chickens, eggs, hams and bread, and engaged in prolonged haggling and negotiations among themselves to exchange what they needed. However, at key periods of the year, such as harvests or if someone's barn needed repairs after a big storm, people recalled the old tradition of helping each other out with a sense of generosity and community spirit. They knew that if they had a problem down the road, others would help them in return.

One day, a stranger with shiny black shoes and an elegant black hat came to the village and observed the marketplace with a sardonic smile. When he saw one farmer running around trying to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing.

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.

I noted that last weekend, after a terrible week, the press hardly noticed the market's fall. This weekend however, was a different story. Bearish stories seemed to be everywhere - Barrons, the NY Times, not to mention Cramer practically wetting his pants in terror.

Take a look at the Dow's intraday chart there to the left, and compare it to yesterday's, which I posted here. Does anyone besides me notice that they are practically identical? For most of the day, stocks once again meandered around, unable to decide if they wanted to rise or fall, bounced off the flat line a few times, and then at 2:30 - right on cue - began their moonshot.

Remember February 27th? The market had a big drop on a nearly 10% correction of the Shanghai index. It looked like the bull market had finally run its course. It looked like the end was nigh.

In hindsight, it was just a little blip, a little speed bump on the road to 14,000 for the Dow. Key support was at 12,000, which held. China's market soon recovered and went on to set new highs. All was well.

After stocks lost almost 5% last week in some scary, mutiple triple-digit down days, I expected the weekend press to show a little more fear than I saw. My Barron's didn't show up on Saturday (drat!), but the Sunday NY Times had nothing about the stock market on the front page, nothing about it in the Week in Review, nothing about it on the front of the Business section, and only this little blurb, which I found on Page 10 or thereabouts, deep within the paper's folds. Maybe this is just a manifestation of denial.

If you can't quite make out the small type, it reads: