Financial Sense Blog

We hear so much about democracy, about “people power” and “public opinion” that we forget how everything depends on the right leadership. We fool ourselves that “the people” rule, that the majority decides, that “the public” is something that has an existence independent of pollsters, opinion-makers, and media manipulation.

The clock is ticking on the U.S. dollar, and there is no time to waste. If we are as determined to destroy our currency as it appears, let’s at least build a productive infrastructure while we still can. We cannot afford to blow the stimulus money on political patronage and transfer payments. Those are the traditional political remedies to insure re-election. However, this time re-election may just mean taking the blame for a rapidly-declining empire.

Imagine you are on the Titanic, and the ship is sinking after sideswiping an iceberg. Does it matter if you need a haircut? Should you be worrying about your investments? Under life-and-death circumstances, only life seems to matter.

While the Dow Jones Industrial Average reached a new rally high in June the Dow Jones Transportation Average did not, with many technicians pointing out the non-confirmation (shown below). Today’s article looks at why the transports have been lagging and whether or not their recent weakness relative to the industrials will continue.

What are we barreling toward?” asks Peggy Noonan in her latest book. “A difficult time, I think,” she says. Has this famous Washington speech-writer become a pessimist? Is she referring to economic hard times? No. She is referring to a future attack on the United States. She therefore writes: “We know we live in an age of weapons of broad and immediate destruction, that they can be deployed against civilian populations by any group with the will, money, and mad focus to do it.”

In April, China announced that it purchased 454 metric tons of gold over the past six years.

Back in April a piece was penned that looked at how oversold the market was on a statistical basis (“Possible vs. Probable”). The basis for the article was to look at the percent deviation of the S&P 500 from its 200 day moving average (200d MA) and how many standard deviations it was below the mean, comparing the current experience to prior bear market sell offs.

The “less bad” economy that started on a technical bounce in March continues to find support from decelerating and up-ticking economic indicators such as consumer confidence, ISM manufacturing and non-manufacturing, new jobless claims, and durable goods. The most important of these is consumer confidence and the follow-through we need to see in retail sales (demand).

To understand who we are, historical references are useful. To know how a people will come through a crisis, look to those traits of character possessed by nations that have snatched victory from the jaws of defeat. How did they survive their ordeal? What lessons can we draw from their story? In August of 216 B.C. a catastrophe occurred in Italy.

We know already that market timing is a fractured and much tortured topic. Most traders and investors have at some time or other dedicated large chunks of their resources to the search for that almost mythical creature the markets’ clock.