Michael Clark's  Instablog

(click to enlarge)

Words matter.

Let's first start by agreeing to call Inflation and Economic Growth the same thing.

Economic growth IS inflation.

Now this economic growth can be fueled by Visible Inflation (rising prices and rising salaries chasing prices higher) or Invisible Inflation (rising prices and flat salaries and rising debt chasing prices higher).

When I say the second is 'invisible' inflation, I say this because the way the CPI is structured currently, it ignores debt growth, which IS inflationary.

We can talk about why the government ignores debt growth when discussing inflation. My view on this is not very generous to the government. No one likes to be the bearer of bad news; no one likes to raise interest rates; no one likes to turn off the credit for the party; it can cost you your job in a democracy.

Ok; ALL Economic Growth is inflationary. There are two stage of Inflation or Economic Growth, two seasons. Inflation begins in the deepest part of Winter and is essentially results from the power of Deflation reaching an apex, and beginning to lose strength. This season, Winter, the first of two stages of Inflation, we will call REFLATION.

This is the season where the light of material evolution begins to grow ever so slowly, still buffeted by the harshness of deflation, but growth begins nonetheless. In this season interest rates are high, and start to come down. Interest rates have been raised because attempts to beat the inflation created by insane monetary policy have led to horrific inflation -- the silver lining is that high interest rates have helped to generate more safe investment income for the mass of Americans through savings accounts and other fixed income investments.

The REFLATION SEASON is akin to a PLANTING SEASON. The seeds of the next growth period are planted and endure the continuing darkness of the gestation season. Seeds do not become trees bearing fruit immediately. Historical periods of Reflation include, in this century, 1911-1920, 1947-1956; 1983-1992....one can take this ahead or backward with equal ease and accuracy.

The Second Stage of Inflation we will call INFLATION. This is the Spring Season, Spring to Summer, when the powers of Deflation are weak and getting weaker, and ultimately defeated. There is no shadow at Noon. The longest day of the year is June 21. This is when the force of Deflation -- the force of Anti-Matter -- is defeated. This is 2001, in our latest cycle.

During the INFLATION season the Dollar is strong and stock prices advance easily. As the first stage of REFLATION is largely fueled by savings, the second stage is often fueled by debt....as interest rates continue to come down. Historical Inflation Seasons: 1920-1929; 1956-1965; 1992-2001....

Here is where it gets tricky. The end of this Inflation Season, Summer, or High Noon, marks the end of the expansion. That is, the Death of the Economic Inflation. This last Inflation Season was marked by the symbolic horror of the destruction of the Twin Towers, the World Trade Center -- by Fire, through the Air. This is very similar to God's reaction to the tower of Babel, for which God punishes Man for his hubris ("Masters of the Universe") and divides the unified culture in half, into warring halves, to end evolution of the Tree of Life (Light or Matter), and begin evolution of the Tree of Knowledge (Darkness or Spirit).

The Third Season is Summer to Autumn; we call this the DISINFLATION SEASON. Disinflation means attempts to inflate fail; and monetary policy cannot resurrect the body of the dead Osiris, the diminished global economy. The Disinflation Season is the beginning of the decline into darkness. This is a picture of the Fall of Man from power, the Old King drowning in the Sea (of Matter).

Downsizing begins. Loss of possessions. Emptying out. This phenomena is ALWAYS THE SAME. Historical periods of this century's Disinflation Season correspond to: 1929-1938; 1965-1974; 2001-2010.

What should be done at the transition from Inflation to Disinflation is that interest rates should be slowly raised. Now a reader might cry: why raise interest rates if there is no inflation. THERE IS ALWAYS INFLATION THROUGH THE INFLATION SEASON, either visible or invisible inflation.

In 1929, the inflation was almost all debt (invisible); in and after 1965, the inflation was almost all salary inflation (visible); in and after 2001, the inflation was almost all debt (invisible). Inflation and growth are the same thing, remember. Greenspan began to raise interest rates in 2004-5, but lost his nerve and quit.

Bernanke does not realize that these seasons exist. He thinks it's all about the 'will to win', which it is not. So, in 2001, begin to raise interest rates, and continue to raise interest rates until 2019. Yes, this will be painful. But not as painful as trying to destroy a mountain of debt one builds by trying to rekindle Inflation during the Disinflation Season.

Inflation is a white hole that spews matter into the universe. Deflation is a black hole that sucks matter out of the universe and into the anti-universe, where it becomes anti-matter. The urge during the Disinflation Season is to preserve the world we build during the Inflation Season, the world we love, the world that is our security -- but which is now dead, which has no vitality, which has now vanished. Throwing good money into the black hole to try to preserve what used to be is a desperate act of denial.

The world has to die and be reborn. This happens every 36 years. And, while it is painful, it is also enriching spiritually, because the death experience also has an element of spiritual expansion of consciousness built into it. Think of America's death experience from 1965-1983. Tell me this was not a spiritual growth phase for America. We are in desperate need of another period of spiritual growth. The Inflation Season is governed by a worship of the Pagan gods, of pleasure, money and power. These are the gods that the Old and New Testament warn us against.

The Deflation Season is a return to the God of our cultural roots, in the root system of the Spiritual Heaven, which I have called the Anti-Universe. The Deflation Season is the Autumn to Winter Period. It is the period of essential destruction of debt and matter. Think of the other Deflation Seasons this century: 1938-1947 (remember World War II; the rise of fascism in the world; genocide); 1974-1983 (America lost a crooked vice president and president, lost its first war; genocide swept the earth again, in terms of America's war against primitive Asian societies, and primitive Asian societies resorting to communist genocide in Cambodia); 2010-2019:do we not understand that a new war is coming, born out of global depression, currency wars, and selfishness?

I have been accused by the governors of Seeking Alpha of being long-winded. I apologize for this. Ideas are very exciting to me. Once I start, it is hard to turn off.

Reflation Seasons should begin with high interest rates that come down; Disinflation Season should begin with low interest rates that begin to rise. Interest rates do not need to be micromanaged. Interest rates are long-term tools of balancing an economy -- as long as one follows the 36-year calendar, the world will become sustainable in its development and in its rest from development. Speculators have their day. But we do not want a world governed always by the greed and self-interest of speculation. Speculation and self-interest by Day; spiritual redemption by Night.

Michael J. Clark, CGTS

Hanoi

cgts@mindspring.com

(click to enlarge)

WEEKLY CHARTS SHOW APPLE, GOLD AND SILVER STOCKS STILL NEGATIVE; SHOW S&P 500 STOCKS STILL POSITIVE

Short article today, I think.

We are all interested in Apple Computer; I am also interested in Gold/Silver stocks. They can't really rise while the US Dollar is surging. In fact, if the Dollar continues to surge, asset prices will sink. This is what the Fed dreads most.

What can derail the stock rally? If the TBond bubble pops, and interest rates rise -- a rise in interest rates might disrupt Central Bank schemes for protection of the status quo. Higher interest rates are not going to benefit stock prices. But, for the moment, stocks are going up; anti-stocks are going down.

Apple Computer

(click to enlarge)

HUI - Gold Stock Index

(click to enlarge)

S&P 500 INDEX

(click to enlarge)

Hard to resist a man with trillions of American Dollars in his pocket to spend any way he wants, knowing he can print for ever if he needs to. Of course, the market is one thing (asset prices and inflation); and the economy is something else. Wall Street wants to preserve the status quo at all costs. That status quo includes exporting manufacturing jobs out of America to save money and boost stock prices and stock bonuses for the Ownership Class. Wall Street does not care about American workers. Wall Street would accept a new feudalism in America, the Masters of the Universe on top, and all the rest of us treading water or drowning below.

Bernanke works for the Masters of the Universe on top. Let's never forget that.

Is it true the Fed Charter expires this year?

The newest version of the American Dream (1983-2001) is toxic. It requires we all become debt slaves in order to sustain it. It is time to get new leadership. Wall Street leadership has failed us. We do not need 'more of the same' -- we need a whole new culture of leadership, one that relies on the true roots of Christianity and other ethical religious doctrines, not one that relies on the worship of money and greed. The worship of money and greed has led us to Hell.

Michael J. Clark, CGTS

Hanoi

cgts@mindspring.com

(click to enlarge)

IS APPLE EVER GOING TO BOTTOM?

In this report: Apple Computer; Gold Stocks; Corporate Buy-Backs Keep Stocks High; CDOs and CLOs are back. Wall Street Again Risks the Entire Financial Structure With Collateralized Weapons of Mass Destruction.

First Order of Business: Is Apple Computer ever going to bottom? The answer is yes. Is it bottoming now? I think not.Today I got a SHORTSELL SIGNAL on Apple. I got other SHORTSELL SIGNALS also.

What does Apple Computer look like? Here's the chart. When all the trend readings are negative for a stock and the top pane (CGTS 112 Pre-Basic Flow) breaks above Zero, we short. Multiple arrows in a trade box indicate points to add to a position.

(click to enlarge)

So, we continue to be negative Apple. We are also negative on gold stocks. But in truth, we are watching Apple and Gold and Gold Stocks to get in long when the signal arrives.I am very much a believer in the idea that the Fed (and central banks everywhere) are essentially pumping a dead patient full of adrenaline to make him appear to be alive -- remember the movie "Weekend At Bernie's". The real housing bottom will occur when interest rates are high and prices are much lower than they are today and no one is talking about housing, no taxi drivers, school teachers, investment bankers, or central bankers. I'll believe Ben Bernanke that housing has bottomed when he is not spending billions every week to try to make it look like housing has bottomed. What about Gold stocks? The HUI gold stock index is in a long bearish run and is giving a new shortsell signal.

(click to enlarge)

Second Order of Business. An interesting article on the Yahoo site. Why are stocks going up? There seems to be a simple answer. Stock buybacks. Why is Ben Bernanke keeping interest rates so low for so long? He wants more debt? He's trying to save the banks by saving housing? He's trying to encourage corporate borrowing to buy back their shares?

According to Holly Ellyatt, a dangerous credit boom is re-occurring, and corporate buybacks, surpassing $1 trillion for the first time since 2009 -- are what is pushing stocks prices higher.Ms. Ellyatt quotes Brian Reynolds, Chief Market Strategist at Rosenblatt Securities:

"Buyback announcements for the S&P have now topped the trillion dollar mark for this credit boom. And even though this boom is about to begin its fifth year, this past month has seen the fastest growth for buyback announcements, as if CEOs are making up for lost time," Reynolds said in a note.

"Buybacks have been the main driver of higher equity prices during the current credit boom, which began in 2009, as all other major stock market participants combined have been net sellers."

The last sentence seems especially striking. 'All other stock market participants combined (with the exception of corporate stock buybacks) have been net sellers since 2009.

The S&P 500 has risen, since March 2009, from its low of 676 to Wednesday's close of 1541, an increase of almost 104 percent.

Holly Ellyatt goes on to say:

The credit boom, especially the increased issuance of collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs) has sparked worries of a return to the heady days before the financial crisis.

CDOs, which are complex securities, collateralized against an asset pool comprising of a variety of bonds, were blamed for the 2008 financial crisis.

Brian Reynolds forecast a resurrection in issuance of CDOs (collatralized debt obligations), an asset-backed security that gained notoriety during the financial crisis in 2008.

"The big story this year has not been the record issuance of corporate bonds - that is a big story in and of itself - but because demand is outstripping supply, we have begun to shift to structured finance, At the end of last year we started to see a surge in CLO [collateralized loan obligation] issuance, and now we are going to start to see a surge in CDO issuance. These are the same instruments that were used in the last credit boom, which turned out to be one of the greatest credit booms in history, from 2003 to 2007."

CDOs, which are collateralized against an asset pool comprising of a variety of bonds and other fixed income securities, were blamed for the 2008 financial crisis. Investors purchase a "tranche" of the CDO comprising different types of debt withvarying degrees of credit risk The riskier the tranche, the more it pays.

We are in deep water, with too much debt still, and strange trading instruments sweepiing through Wall Street again. We don't learn. When we crash again, this time the deconstruction of Wall Street investment banks will be the only direction we will be able to proceed.

Death is a natural state. When an economy dies, one has to let it die and prepare for the next stage of organic growth that appears at the bottom of the decline; Life grows out of Death without skipping a beat. We do not need to sustain the world that died in 2001. We have leaders without vision who are spending all our money trying to keep the old world and the old guard alive, as if change were something we must avoid. This is foolish, if not criminal. My personal view is that it is probably both criminal and foolish.

Best,

Michael J. Clark

CGTS, Hanoi

cgts@mindspring.com