This does not feel like a stock rally. We keep hearing this is a rally. We're suspicious. It feels more like a failed rally. Ben Bernanke's appearance yesterday for questioning before Congress looked more like the tale of a defeated theory. Ben spent his entire academic life arguing that the Great Depression happened because of a failed monetary policy. Depressions aren't supposed to happen. One needs to merely flood the Flood with more money and all the deflationary pressures vanish.
Ben should have had a more balanced education. He read Keynes to death, and avoided the theory of the Austrians. Not smart. Any philosophy that has as its premise the possibility of perpetual growth is flawed. Only cancerous tissue grows perpetually -- untl it has consumed its host. Ben Bernanke's theoretical position is tantamount to the pro-cancer position. Grow and grow and grow until you either grow some more or you're dead.
Ben, it seems now, understands that his premise was wrong. Deflation is built in to the process to diminish the plant that has stopped growing and to prepare the soil and the plant for the next round of growth during the next Growing Season -- next as in after a period of rest and gestation. You can't have constant growth. You can't have perpetual expansion without consuming the host organism -- the currency and the political state is this instance. Want to see what a consumed political entity looks like? Look at the Greek Civil War, the Spanish Civil War, America in the 1960's and 1970s and in the 1860's.
Ben looks tired and defeated. He has a huge balance sheet to unwind. And he understands that his monetary expansion has done nothing for the economy, and has only given very cheap money to banks and other speculators to use for themselves and their own isolated designs and empires. Look at Greece today, Spain today, Italy today....
Europe is collapsing. China is reeling; India flailing. America is slipping back in to recession. The UK is receding from view. Japan is moribund. And Ben understands that America is currently trying to follow in the path Japan has led. Throwing helicopters full of newly unprinted money into the Black Hole of Deflation doesn't not fix the Deflation, it merely consumes more money.
Deflation exists to 1) lower prices that have escallated too much during the inflation (growth); 2) lessen the gap between the rich and the poor; 3) lead to a new period of gestation -- enhanced by less risky investment, higher interest rates, profit through savings -- and also enhanced by a government able to provide survival social services for its endangered citizenry. Higher taxes must be imposed on the rich and on all corporations doing business in America to do this.
Lower taxes and lower interest rates during the Growth Season. Higher taxes and higher interest rates during the Non-Growth Season. 18 years of growth, followed by 18 years of rest.
Deflaltion is the Night, the Winter. Modesty is required. Do not reward Ego and Speculation; do not reward 'The Masters of the Universe". They have had their day. They are the corrupt fruit clinging to the top of the tree as Autumn descends, the growth season gone. Reward the root-structure of your society. Without the root-structure your society vanishes when the wind begins to flow.
We're getting more shortsell signals than buy signals. Today we have very nice looking short-sell signals on some old standards, such as Caterpillar.
BBY, Bestbuy seems poised to go lower:
FMCN is giving a shortsale reading. Note the truly insignifican bullish trade preceding this signal. No movement higher. This suggests the rally is a non-rally.
COCO: the 'for profit' education stocks are getting ready to sink out of view. EDU yesterday. COCO also heading lower? The congress is beginning to express resistance by adding the word 'quality' to the phrase 'education for profit'.
EZCH, EZChip Semiconductor, heading south?
YNDX with a non-existent rally; now a short-sale signal.
AVL, Rare Metals: another non-rally, followed by a third shortsale signal in a row.
Our market internals show the bullish bias continues to deteriorate. Note: we had an error in our numbers yesterday which we have corrected today, ChartMeter ASP.
MJClark, Hanoi, Vietnam