Tide Receding (Definitely)

You could say I lost my belief in the politicians
They all seem like game show hosts to me
                        —Sting

It is six thirty-five of a weekday evening and Brian Williams, anchor man on NBC’s Evening News says to financial news analyst, Sue Herrera, “Sue, what does it mean to anyone who has money in the market that the market went up nearly 500 points today? Are things going to be better?” “Yes,” she says, “With the world’s central bankers agreeing to provide more money to the European banks, there are some glimmers of hope.”

It’s anybody’s guess what NBC must pay Ms. Herrera to deliver that vacuous statement. Viewers who are fully invested are fine with it because they desperately need that hope, however misguided. The broadcaster probably isn’t paying much attention, being primarily concerned with hawking remedies for gout,  irregularity and erectile dysfunction during the time slot.

Central bankers have been bailing out insolvent banks, scam-ridden companies and broke countries for several years now and the global financial situation continues to deteriorate because the entities that are being “saved” continue to behave like bailouts are their birthright. Instead of letting them go bust, central bankers shift the ever growing burden on tax payers and, until tax payers do more than Occupy public spaces, the madness will continue.

Central bankers have no capacity to fix an overborrowed economy. Extending more loans to countries that have no intention of undertaking real reform kicks the can down the road, setting up an ultimate outcome too horrific to even think about.

At Thanksgiving dinner, my mother-in-law said, “We’re in a mess, and it’s going to be a very long time before we get out of it.”

Amen, Grand- mere. Sue Herrera, listen up, dammit!

Observations

This is a global bear market. The function of this beast is to purge the global financial system of its excesses. The end game is bankruptcy for the profligates, and, unfortunately, for many bystanders. The longer central bankers tinker with reality, the worse the debacle will be.

Violent rallies such as we had this week are a part of the process. Short sellers are the main sellers in the early stages of a downtrend and they get spooked into covering from time to time, sending the market up in spectacular fashion with no benefit other than to give short term comfort to bag-holding investors.

Five hundred point rallies are meaningless. All manias are eventually fully retraced.  There may be some follow through in the very short term, but that is not likely to change the outlook in the big picture. Check the map below to see the target, due to be reached about mid decade:

This forecast comes from the work of Elliott Wave International
(http://www.elliottwave.com/ ), and I see no reason to ignore it.

Cheers,

Rod

The author makes no representation as to the accuracy of the quoted material, but believes the sources to be reliable. No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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