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Summer offers choppy trading at best with trend-less days being the norm. This kind of trading has no conviction leading to losses.
As we race toward events of this fall, 2009, chart patterns and cycles are firming-up a potential crash outcome for September 15 through October 15. Next we envision our situation after the 2010 “Sell In May and go away� period. Our older, many months’ ago forecast for the current rebound was 10,400 to 10,800 as a Dow peak. With the Dow on 9300 last Tuesday morning 9800 seems easily achieved and the higher numbers are beginning to fit the analysis.
Our other important forecasts were for the S&P 500 to land on 1050 as a peak and gold at 985-1007 before the fall rally begins during the third week of this month. Along with these predictions we are watching the bonds and US Dollar line-up for serious selling and failures. The September Dollar futures are stuck on 77.80 Tuesday with lower supports at 77.50, 75.00, 72.50 and 70.00.
Bond auctions were watched closely last week with great nervousness as the amount of proposed new supply was staggering. One of our favorites, Rick Santelli mentioned he was most worried about the seven year offering. It turned out this group appeared to do well as we think much of the offering was not in fact sold but “marked as sold� and put on bond purgatory shelves. Wouldn’t it be nice to know how much paper resides in this No-Wheresville location? I suspect it would scare the bloody hell out of all markets. This must obviously remain top secret stuff.
We reported last week in our letter, on Kitco and this week in The Trader Tracks Daily Tracker Q&A our reasons as to why we think the current global central bank policies are not working and cannot be successful. Most of our readers both in Trader Tracks and in other essays agree. We got some unusually nasty emails defending the administration this week, which to me screams of desperation and failure. Supporters of Obama policies are getting a strong whiff of current failures and are scrambling futilely to defend them.
“One clue also was Geitner’s high level meeting verbal explosion last Friday. This smacks of panic and rejection. He is flailing at the sky in frustration.�
From our perspective and for the America I love we hope this pack of fools can save the day, pull it off and prove us wrong. Based upon new updates discussed above, we say no chance. The coming crash is inevitable. Proponents of today’s wrong-headed US policies are beginning to understand they cannot buy their way out of a depression and for them it is absolutely terrifying. They are toast and now they know it. The larger problem is they took us down with them. And now do we do about it?
Simple Facts Lead To Correct Solutions
The argument over whether its deflation or inflation has raged in recent years. Since the tip-over in June, 2005, our situation has been primarily deflation. Some have suggested that’s it and that’s all we get for years. Unfortunately, things are often different than they appear to be on the surface.
We suggest however, that current deflative action migrates into hard-core inflation as the Treasury and Fed scramble ever faster to band-aid this fatally wounded economy. They cannot seem to understand repair of the consumers would save the day. Instead the TARP billions-trillions were tossed at failed banks and corporations that are going to fail anyway. The outcome has been no outcome.
Not only have they wasted all that money but they have actually thrown gas on the fire making it all the worse as consumers were left twisting in the wind. Barn-burning dollar inflation is next and could easily slip into hyperinflation. While Chopper Ben told us he was the El Supremo student of the 1930’s depression and no way would this repeat on his watch, the identical mistakes were made again. History repeats as current psychology always repeats in human beings. Nothing new-nothing changes.
Since our following solution is not politically acceptable, we will endure the pain of Greater Depression II.
Authorities did not identify the problem. The correct answer was to mark all debts both public and private down to truly extreme and accurate values. Instead of today’s current shenanigans, these problems might have been mitigated (not totally repaired) with massive tax cuts and mark-to-market policies healing markets and consumers.
We Do Not Expect A Repeat Of The Dark Ages But This Event Is A Game-Changer.
Obama told us no more taxes. We forecast the largest and worst tax of all will be approved by the Congress and immediately implemented.
That is the VAT or Value Added Tax on everything sold. VAT could Begin at 5% to 6% and migrate to higher takings as the Sheeple  pay little attention. The outcome is further economic stagnation.
“Value added tax (VAT), or goods and services tax (GST) is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade (downstream taxes levied on upstream taxes). A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.�
“Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling.
It has been criticized on the grounds that (like other consumption taxes) it is a regressive tax.� – Wikopedia
“So waiting in the wings is the biggest middle-class tax increase of them all: a European-style value added tax, or VAT. This tax would apply to every level of production or service, and its beloved by politicians in Europe because it raises so much money so easily without voters noticing.� -WSJ
We project the Cap N Trade energy tax and Obamamania Health Care Plans will fail. Some might suggest the new VAT tax implemented on all goods and services would be more costly than these two failures combined. The end result will a stupendous increase in pure barter and international economic failure.
Reasons Why We Crash
- The onset of new inflation has been creeping up within the past few weeks. Soon it goes faster.
- This drives certain commodity prices with speed; especially gold, silver, energy and food.
- This fall when events converge, stock markets crash, hard assets rally and the dollar and bonds crash.
- After the dust settles some markets in the first quarter appear repaired and begin to modestly rise.
- In June-July of 2010 AFTER THE SELL IN MAY AND GO AWAY, a bigger smash hits.
- Paper credit markets implode while central banks world-wide shun the US Dollar but fail to kill it off entirely. It’s just too big a market. The US Dollar sells from 77.50 to 46.00 over years.
- The financial industry as we know it will largely disappear or suffer major revisions.
- We have reported before that one or more of the exchanges could fail. In our view derivatives having no reality, might crash and burn taking down the CBOE derivative trading platform.
- Banks go on holidays. The Government might impose martial law and taxes will skyrocket. These are quite negative but temporary events. Taxes will stay intact. Look at Birmingham, Alabama today.
- All governments large and small will be grubbing and grabbing for cash in new and old taxes to retain the status quo. They will fail and bureaucratic layoffs will be legendary.
- The auto industry is extremely thinned out from later 2009 through 2011. Ford may finally have to get some government money to stay alive on lack of sales. Others might just fade away.
- U.S. and foreign politics as reflected by their Nanny-State ideas continue to hang-on for some time as smashed and broken consumers badly need help of all kinds. Further in time, these ideas are rejected and old American values as expressed by the US Constitution and Bill of Rights are revived. One positive could be the abundance of growing government will fade.
- Failures of Obamamania and similar government practices will not go away and die easily. When conditions become as bad as we predict, the Sheeple run to FDR “Please save me� policies.� Keep in mind our earlier discussion on history repeats.
- These bad economic periods are always resolved with a war. War takes people’s minds off their troubles and employs many folks to bolster the war effort. Let’s just hope after this next one there is something left of this old world.
- Timing for traders and investors will be more critical than ever. It’s one thing to position for profits and another to escape with them in swift volatility. Trading must be nimble.
- While hard assets such as farm land, gold, silver, and cash have great value, they also require elegant timing for entry and exit. We will do our very best to help our readers. Our retirement neck is on the line too.
Keep in mind, if you own paid for stuff it will most   likely remain in your hands; not in somebody else’s. That includes gold and silver.
Do not get tangled-up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction. Headwinds are building into an economic hurricane. Take care of business right now. My dire fall prediction might surprise us and arrive earlier. Time is short.
Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. – Traderrog
Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com
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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for an introductory 30-day trial subscription for only US$49.00. This is half the monthly rate our subscribers pay. Call us at 718-457-1426 Monday through Friday, 9:00am to 4:30pm (EST). You can also e-mail Claudio at cbassi@miningstocks.com for more information.
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