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I manage a small hedge fund utilizing market timing, pattern recognition and technical analysis. I also publish pebblewriter.com in order to keep my thoughts organized. It should not be construed as advice regarding any particular strategy or security. I hold undergrad degrees in Math and Econ,... More
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  • The Ides Of March Redux
    Two thousand and fifty-six years ago today, on March 15, 44 B.C., Julius Caesar was stabbed (a Fibonacci 23 times) to death, in fulfillment of a soothsayer's prophesy: "beware the ides of March." One notable ringleader, one Marcus Junius Brutus the Younger (of "et tu Brute?" fame) was a former enemy whom Caesar had forgiven and brought into Rome's inner circle. It is said that when Caesar saw Brutus among his attackers, he covered his face with his toga and resigned himself to his fate.

    Brutus' mother was one of Caesar's mistresses and some speculate that Caesar himself was Brutus' true father -- meaning, of course, that Brutus may have committed the unspeakable sin of killing the goose that might have laid many golden eggs for him. But, he was persuaded by his fellow conservative senators that Caesar had grown too powerful.

    Needless to say, it wasn't the smartest move the lad ever made. Although the Senate hastily granted amnesty to its most homicidal members, the people were less charitable. Brutus found himself haunted and hunted and, after losing a battle of epic proportions, took his own life. It marked the beginning of the end for the Republic. Coulda, shoulda, woulda.

    Ben Bernanke, arguably the most powerful man in the financial world, has found himself in the crosshairs more than a few times lately. Although hired by Bush as his chief economist and later Fed Chairman, Republicans have been even more critical than Democrats. In turns, the bearded one has been accused of being too conservative, too aggressive, too dovish, too accommodative, too political, too aloof, too stilted, too talkative and...of course, too hairy.

    Ron Paul proudly refers to himself as the thorn in Bernanke's side. Rick Perry warns that Bernanke will be "treated ugly" in Texas if he continues to print money so recklessly (not sure what that means, but I think it involves a pickup truck and 50 feet of chain.) On the other hand, Paul Krugman faults Bernanke for his "shameful passivity" and for "wimping out" and Maxine Waters wants him examined for signs of demonic possession. Even yours truly has, I must admit, disparaged the guy.

    What everyone seems to have forgotten is that Bernanke, for all is faults, is their golden goose. He and his spawn are the only people on Earth willing and able to perpetuate the ponzi scheme that's preventing them from being lynched. Bernanke's no great fan of the American body politic. In fact, he lays the blame for the financial crisis squarely at politicians' feet. But, he understands that failing to keep the music playing will reveal the fundamental flaw in the way the economy has been run for the past, oh, sixty years.

    In short, we industrialized nations have made too much money. In a world where billions work for less than a dollar a day, we've paid ourselves too handsomely. America, chief beneficiary of the world's reserve currency being the dollar, has particularly benefited. And, our financial system is outstanding at funneling excess liquidity into ventures in search of capital -- whether or not they make good economic sense.

    But, as we've seen from the South Sea Bubble, the Dutch Tulip Mania, the Dot Com debacle and the housing crisis, the system isn't so great at turning off the spigot. Our political leaders, whose continued employment is made possible through the largesse of those profiting the most from these ventures, aren't about to stop the music.

    And, so, we're left with bubbles -- both popped and in need of popping. The world can't afford cars, clothing or electronics made in the USA. So, those Americans whose employed in the making of things are, by and large, part of the bubble. Many of our services, crops and natural resources are, likewise, overpriced in a global economy. And, thanks to the wizards of Wall Street, assets in this country are burdened with debt in excess of their ability to service it.

    The only viable solution is the Big Red Reset Button -- only, no one's got the nerve to press it. Politicians? Forget it. The financial establishment? Only if suicide somehow became profitable. The Fed? Read Bernanke's treatise on the Japanese problem, or his famous helicopter speech and you'll see how deathly afraid of deflation he is. He's an self-acclaimed expert in all things Depression.

    And, so, on we go -- creating out of thin air the trillions needed to fool people into believing the economy is doing just fine. Bernanke knows how this ends. Because, whether it's $20 trillion, $30 trillion or $50 trillion, there will come a point of recognition when those we count on to finance our deficits will find other bubbles in which to invest. In other words, the music will stop. And, the man who let it happen will draw his toga across his face and await his fate.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: economy
    Mar 16 2:59 PM | Link | Comment!
  • Charts Worth Watching











    Thinking like a market maker...can you imagine a better setup to rake in boatloads of money from hopeful bulls?   What's really changed in Europe that would indicate they're finally getting their act together?  Another summit, another promise to take things more seriously.  Big whoop.

    And, with all the attention there, what about our own fiscal predicament?  It's not as though we have a clue (or the political will) to address our very deep-seated problems.  Washington is no doubt thrilled to have the attention focused elsewhere for a change.  But, do you think S&P has forgotten?




    Dec 10 5:36 PM | Link | Comment!
  • Day 150 and All's Well?
    Like the voice heard from outside the 60th floor conference room window, then the 59th, then the 58th, etc...  "so far, so good."

    Friday was day 150 since the May 2, 1370 top and Armaggeddon still hasn't arrived -- yet.  In fact, we rallied over 20 points this morning -- even broke the 200 SMA -- all with nary a horseman or swarm of locusts.  Does the 2008 v 2011 analog still mean anything?



    From last week's post on pebblewriter.blogspot.com:


    Tomorrow, of course, is the 150th day since the 1370 May 2 high.  In 2008, the 150th day was the beginning of the final 10-month, 50% plunge.  While the price comparisons have become less relevant over the past few weeks, the timing of several reversals has been in sync.  Here's a current look:


    BTW, the beginning of the end in the 2000 topping pattern occurred 157 days after the high.  The 2000 equivalent of our 1292 (day 125 in 2011) occurred on day 112.  There are other similarities, such as our July peaks (days 46 and 57), and some pretty major divergence in terms 2001's days 67 - 112.


    But, the inescapable similarity is that day 157 completed a back test of the trend line off the pattern lows (the solid yellow line coming up from day 15.)  We've done the same here in 2011, and I expect the results to be similar.  The 2000 market lost 25% over the next 4 1/2 months, 35% over the next 10 months and nearly 50% over the following 20 months.  Here's a better view of all three tops:

                                    2000 Top and Back Test 

                                    2007/8 Top and Back Test   

                                  2011 Top and Back Test

    Dec 05 1:58 PM | Link | Comment!
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