Financial Sense Blog

A breakdown of individual sector and industry performance for components of the S&P 500 along with forward guidance in terms of the business cycle and sector rotation.

During the ’80s and ’90s, ignorance was bliss. The global economy was growing nicely, and analyzing it (or even paying attention to market cycles) seemed like a waste of time, as the economy came in only three flavors: good, great and awesome.

The markets are so manipulated these days that it’s becoming increasingly difficult to gauge just what effect increasing interference is having, knowing in general all unnatural stimuli have decreasing impact the longer and more they are applied. Perhaps the best example of this at present comes from the bond market, where in spite of QE2 and a generous POMO schedule (every day now) that looks set to run in perpetuity, bond prices are falling.

What’s in your stocking? It’s four days to Christmas! Is it a selection of beautifully wrapped gold bars and gold stocks, or is it a toy US dollar photocopier wrapped in a pig’s tail?

George Orwell warned us about the use of “meaningless words” in politics, words that are endlessly repeated by sloganeering politicians until they have no meaning at all. Meaningless words certainly were on display during last week’s congressional debate over the latest tax bill.

Quick housekeeping note: IF I write an e-letter this week it will be earlier in the week. There will be no letter’s next week then we launch the first Saturday morning in January with my annual predictions letter. And just for fun, one of my readers said that the title of last week’s letter should have been “Kicking the Grenade Down the Road.” Better check that pin! Now, this week’s OTB.

A number of readers have commented on my most recent yearend commentary. In it, I argued that regardless of what additional policy moves may be made, next year’s economic performance is largely baked in the cake. Furthermore, because of the lags in policy, we would be well into next year and the start of election season before we can begin to assess the impacts of the passage of the tax bill and the Fed’s QE2. Consequently, public focus will be dominated by continuing uncertainties and by concerns about employment, neither of which can be materially affected by additional policy moves in the short run.

Some emails came in challenging us about last week’s “Herd” commentary. Writers asked for examples of the bargains we described as available in Muniland. “Were these non-rated bonds or junk bonds?” some suggested rhetorically.

The cycles are teaming up with the put /call ratio to put a lid on the metals. Lets look at when the next optimum time to add or put on a new position might be.

The following is an unbiased Elliott wave forecast for 2011 and beyond.