MASSIVE DEFLATION AHEAD!!!!!

Last night I just finished reading Robert Prechter's book "Conquer the Crash" in which he makes a brilliant case for the fact that severe deflation is not only likely, but also long overdue. The phony wealth that the American economy has experienced over the last 3 decades has been generated by a record of amount of credit expansion. We really have't seen legitimate deflation since the 1930's when we were in the midst of the Great Depression. The policy makers at the central bank believe they can pull the right levers and steer this economy out of recession but they can't. What is looming is a massive amount of debt deflation. There are too many bad outstanding debts right now, and they are about to be liquidated.

If you thought 2008 was bad, you haven't seen anything yet. We are about to experience the biggest stock market crash in the history of the world. Don't believe me? No one believed similar warnings in 1929, and no one believed the dot-com bubble would come crashing down either, but it did. Social sentiment is exactly where it should be prior to an epic collapse. Most people listen to the state controlled main stream media. Unfortunately, most people still trust their government. The government is wrong. There is no recovery! We are going into a depression and it is going to be bigger than the 1930's! It is going to have the psychological effect of changing an entire generation's perception towards the concepts of debt and saving just like the Great depression did. The utterly corrupt U.S. financial system is about to be purged of all it's excessive greed and manipulation, and everyone is going got get a clear look at how fradulent our economic system has become.

My best advice to anyone who is still asleep to what's going on is to get your money into treasuries or cash equivalents as quickly as you can. Policians and people within the msm and financial news media make a living out of propogating lies, but the market does not lie. The capital markets are deteriorating right before our very eyes. All the major indeces have moved below their repspective 200-day moving averages. The economic indicators and underlying fundamenals are the weakest they have been in 30 years. If you want to profit from this collapse, I suggest shorting the market. Ticker symbols DOG, QQQQ, VXX, SEF, SKF, FAZ, are good places to start. If you are too risk averse to place downside bets, then hold cash or go long the dollar in the currency markets.

99% of people are about to suffer severe economic pain and you don't have to be one of them...

Until next time,

-Phil

HEAD AND SHOULDERS PATTERN; BREAKING THE NECKLINE

The above chart depicts the obvious head and shoulders pattern that has developed in the DJIA. The head of this pattern was put in place on April 26th at 11,258 and shortly there after we experienced the "flash crash" on May 7th in which the Dow lost 1,000 points in a matter of minutes and then rallied back to close the day only down 375 points. Over the past couple months since those events we have formed the right shoulder. We are now trending lower with a large amount of bearish potential ahead of us.

To the keen market obvserver, there is ABSOLUTELY no reason to go long stocks right now. The fundamentals are terrible and getting worse everyday. The vast majority of leading economic inidcators are flashing red. Today we had weekly jobless claims increase to 500,000 when economists had been looking for 478,000. Not only is this a bad # it reinforces my view that the employment situation in this country is getting worse, not better. Let me reiterate that employment is going to get MUCH WORSE than this before it gets any better.

Much of what kept the market afloat for essentially the entire month of July was 2nd quarter earnings season. Many companies reported earnings that beat the street by a few cents and the market was able to rally behind the blatantly manipulated earnings numbers. The reality is that top-line sales for nearly EVERY company that reported had dropped significantly from where they were a year ago, and were down even more signifcantly from where they were 3 years ago before the current depression began to take hold. To levitate their bottom line, companies reduced new investment, decreased payrolls, slashed inventories, and generally changed their spending habits one of a more risk averse nature. Companies are not likely to be able to repeat this stategy again when 3rd and 4th quarter earnings roll around. They have essentially sliced and diced their companies to the bone to make them as lean and profitable as they can be, and top line revenue is projected to shrink even more in the remaing quarters of 2010. So, in light of this information, one can confidently conclude that the next couple go-around of earnings reports are likely to have the opposite effect on the stock market that they did in July. Just as the autumn leaves will be turning color, social mood and the overall market sentiment are going to turn negative. This will manifest itself in a severe and sharp market downturn while the autumn leaves are falling simultaneously.

In the immediate future people are going to wake up to the fact that the entire stimulus monstrocity was a sham; a lie that as bought and paid for by the American taxpayer. It has done nothing to help solve our economic problems.It has produced nothing and we are $3.5 trillion dollars further in debt. Such insanity!

In addition to such poor fundamentals the technical picture if equally, if not even more, bleak. The head and shoulder's patter above pretty much says it all. If you do not know what a head and shoulders pattern is, you can learn about it here; http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:head_and_shoulders_t. You should also know that is arguably the most reliable trend reversal that chart technicians have at their disposal when interpreting market direction. We will hit 8,500 this year on the Dow at a minum, but there is further bearish potential after that as we head into 2011. If the March 2009 lows are broken at 6,450, this market is going to into critical condition and panic selling will likely encompass the landscape.

It should be obvious that we are going down, and going down hard. I have tried to layout some of the more basic reasons in this post so the common man might understand and get his money to safety. Cash is going to be king in the years ahead. Now is not a time to be thinking "return-on-capital" but rather the time to be thinking "return-'OF'-capital" Making sure you have substantial cash on hand so you can take part of the coming "generational buying opportunity" should be your be a #1 priority.

In regards to the dollar, in the foreign exchange market last week the EUR/USD pair hit $1.3333 and had a impulsive move down all the way to $1.2735. I am betting that $1.3333 will be a long term top in this pair as investors begin to scramble to accumulate dollars in what will be a wild flight to safety. I expect the banking and soverign debt problem in the eurozone to come full circlce and drive the EUR/USD pair down to below parity (<$1.00) with the greenback. I am long the dollar.

For the remainder of the year expect increased volatility, higher sell volume, and substantially lower equity prices.

Until next time,

-Phil

Rick Santelli Says "Stop Spending!"

Please watch the following video before reading any further: http://www.youtube.com/watch?v=Hy8wRbL_wQU&feature=player_embedded


Yet again, the only honest reporter on CNBC, Rick Santelli delivered a helpful serving of sanity to the openly communist Steve LIESman. For those of you who don't know who Steve LIESman is, he is the worst economist in the history of the world. Yes, he is worse than Paul Krugman, Larry summers, and even worse than Ben "Helicopter" Bernanke.

It seems every morning I turn I CNBC, there he is, defending the latest bank bailout or championing the newest stimulus initiative. By now it should be blatantly obious that all these govenment effort to levitate the economy have failed, and failed miserably. Yet, here is Steve LIESman again, telling us we need more stimulus, and more bailouts, and today he is unsurprisingly saying we need higher taxes! Now you know why I am constantly hoping someone will punch this guy in the face for me.

Exchanges like today between Rick Santelli and Steve LIESman are few and far between, so when they occur, we should celebrate them. Today, just for a moment, the truth rained in on LIESman's socialistic proganda parade over the national airwaves. I maintain the belief that LIESman needs to take his pathetic communist economic ideologies out of this country. They are not wanted here.

FINANCIAL CRISIS 2010 PART 2

The chart above is depicting the mother of all technical signals. If you can't interpret it, I'll just let you know that it is screaming to get all your money the hell out of the stock market ASAP!!! LOOK OUT BELOW!!! When used correctly, Fibonacci Analysis is one of the most accurate technical indicators a market observer can use to determine a markets direction.

If you have never studied the "Golden Ratio" or Fibonacci numbers and how they miraculously relate to the capital markets, I suggest you do some reading. http://www.amazon.com/Fibonacci-Analysis-Bloomberg-Professional-Constance/dp/1576602613/ref=sr_1_1?ie=UTF8&s=books&qid=1277433836&sr=8-1#noop (Yes, I own this book, and it has taught me some fascinating things.)

The fact that the DJIA completed an EXACT 61.8% retracement then proceeded to collapse is not a coincidence. When viewed from the perspective of fibonacci technical analysis and Elliot Wave Theory, the current 13% pullback from the April 26th highs is not surprising at all.

The renowned deflationist, Robert Prechter has essentially called every step of this crisis including the rebound rally that began in March of 2009. Personally, after reading his book "Conquer the Crash" I am 100% convinced that deflation (not inflation) lies directly ahead, and deflation on a massive scale. I am so sure of this, that I just sold all of my Gold today, as I believe gold will likely suffer a substantial pullback over the next year. I sold my gold at $1,243 per ounce (25 bucks off it's all-time high), I am hoping I will look back on today and smile, even though some people are saying Gold is headed to $10,000.

With the $8,000 homebuyer tax credit now expired, the housing market is going to suffer a double-dip that will shoot even bigger holes into banking balance sheets. You may be asking, is that even possible. Yes, it is, and you are about to witness the havoc it will release on all of Wall Street's self deluded optimism. I can't wait!

BTW: Can someone PLLEEEEAASSSE Punch Steve Liesman in the face for me. What a tool... now there is someone who should never be allowed to talk about the economy ever again.

Financial Armageddon

Well, I am finally getting around to writing about the capital markets. All I can say is, what a week on Wall Street! White House Press Secretary Robert Gibbs has been repeatedly quoted over the past year as explaining that the rising stock market is "validation and evidence" of a nascent recovery in the U.S. economy. This elementary and idiotic explanation by WHP (White House Pawn) Gibbs needs to be called what it is: nothing more than a wishful propagandized lie. It's not surprising that as the Dow fell 376 points on Thursday, we received this refreshing response on the subject from the most annoying man in our nation's capital: Silence.

Ah, bliss...if only Robert Gibbs would shut up forever.

Before today's 125 point retracement in the DOW, the index had declined for 5 out of the last 6 trading sessions to fall from 10,920 to close at 10,068 yesterday. This is the biggest sustained decline since the March lows of 2009. Could the current rebound rally in stocks finally be over?

For the last 14 months since march of 2009, the DJIA has risen almost every month. The only period where the index posted net declines were June of 2009 (6%), January 2010 (7%), and now May of 2010 (12% and counting).

Both selloffs in June and January proved to be temporary corrections for the market to catch it's breath before it headed to new year-to-date highs. So, the question that needs to be asked is, is the current selloff in equities just another retracement correction on our way to Dow 12,000? Or is this an ominous signal of things to come?

Leading up to the previous corrections just mentioned, the market had been on an absolute tear. After hitting its lows on March 9th 2009, it climbed more than 37% before it had it's 6%summer pullback in June. After the modest June decline ended in July, the market again went on an incredible 33% upward charge to hit 10,729 in mid January. After the January pullback was completed in February, the market again climbed 13% to reach a new high for the year at 11,258.

However, you may have noticed a pattern developing. The intensity of each sucessive advance has waned considerably before meeting resistance in the market. Additionally, each correction that has followed has grown from the previous one. Most analysts are calling the current retracement "A textbook correction" since many corrections do indeed pullback approximate 10% before moving higher. However, the market has been ignoring the underlying fundamentals for over a year now, and one can clearly observe that the upward momentum in this market has been losing steam for some time. From a technical perspective, it looks like the DJIA could be forming a head-and-shoulders pattern. If this is indeed what is occuring, that is a deadly bearish signal. I have pegged the neckline at 9,904. If we break this support level, watch out below! We would undoubtedly experience a preciptous drop of a couple thousand points or so. We came dangerous close to breaking that level this morning when the DOW futures opened down 150.

From the graph above, you can see that the volume over the past year for the rising stock market has been rather light compared to times when the stock market is falling. This not only implies that the big money is selling more than it is buying, but also that the prevailing directional trend is down.

In the midst of this economic darkness, the May 6th "Flash Crash" was like a bright and powerful lightning bolt that accurately illuminated what is on the horizon. Storm clouds are all around us now and it is time to batten down the hatches because hard rain is coming. Yet, most American's have their eyes closed and their head in the sand, so they missed the signal and will have little recourse to avoid the financial pain that is so clearly bearing down on us all. With the VIX at its highest point since early 2009, the yellow caution lights are almost blinding. I will be betting on severe economic volatility to the downside over the next 6-12 months.

To be continued...

2010 Election Primaries, things to watch.

This morning, I couldn't have been happier to read about Dr. Rand Paul winning the republican senate primary in Kentucky. This is a huge step for the tea-party movement that was founded by his father, the venerable congressman Ron Paul. If the Tea Party issued cards, then I would be a proud card-carrying-member.

Rand Paul is pretty much a clone of his father in terms of his political ideology. Both men have tirelessly waged a lonesome war against the fiscal insanity that is Washington D.C. It is truly heart warming to see that people are finally starting to join them. Not only has Rand Paul spoken very plainly about the debt challenges our nation faces, he has laid blame and criticism exactly where it belongs, with the Federal Reserve system. Yes, the utlimate enabler of Washington's irresponible profligacy for the last 5 decades is finally being called into question by someone with an I.Q. above room temperature. All I can say is, "It's about damn time!" I personally don't believe we have much time left before the Federal Reserve is done ruining the economy of our once great country. Ben Bernanke is already running the money printer's in overdrive to monetize the national debt, so we don't have much time left before our currency is rejected as the reserve currency of the world either. Hopefully, Rand Paul will win in November and offer a voice of fiscal restraint in the Senate that is sorely lacking.

There are alot more reason's why I support this man's candidacy, but because our nation's economic situation is so dire, I feel that the monetary and fiscal policies he brings to the table are the most relavant to public debate. Unfortunately, due to our pathetic & underachieving education system in this country (compared to what it used to be), most Americans are unable to recognize what type of economic policies are good for them. That is why the politcal discourse on this topic remains at such an elementary level. Nevertheless, if you have never heard of Austrian Economics, I suggest you take the time to educate yourself. You can gain a lot of knowledge at http://www.mises.org/. Or you can go to youtube and search "Ron Paul Fed", and you will gain some insight into why our economy is so jacked up. The clips where he is lecturing either Greenspan or Bernanke are most enjoyable for me.

Elsewhere in Politics, Arlen Specter was defeated in the Democrat primaries in Pennsylvania. This also made me extremely happy. This man should have been booted out of the political arena a long, long, time ago. In case you don't know about him, he is a career politician. Need I say more? Personally, I think he is a man who deserves to have his American citizenship revoked. He is someone who should be punched in the face and spit on by the constituents he represented.

Despite being a U.S. Senator for 30 years, he did not introduce or pass any meaningful piece of legislation. He is a spinless political coward who's inept leadershil ability was proven long before I was even born. Even with a crosswalk, he wouldn't be able to lead me across the street. He is the definition of poltical expediancy, a person who always cared more about playing the Washington power game than offering meaningful ideas. While it should come as no surprise that inside the Washington beltway he earned the title: "Lobbyist's best Friend" that title does offer an explanation as to why he listed in Time's 2006 as one of America's top 10 Senators. You know, TIME MAGAZINE, the same publication that named Ben Bernankee the person of the year in 2009? As a general rule, if you see anyone receiving accolades from TIME, you can normally rest assured the person in question is a giant douchebag. Anybody know who TIME's person of the year was in 2008? lol... Hint:(I was just in Israel and all the Israeli's think this person is a major douchebag)

But I digress, back to Arlen Specter, the man who managed to simultaneously change his views according to the prevailing poltical winds for three decades. In early 2009, seeking to gain favor with the Obama White House, Arlen unexpectedly (the mainstream media labeled it unexpected but only casual politcal observer's were surprised) switched to the Democratic party. He was one of only three republican senators to vote for Obama's already failed "American Recovery and Reinvestment Act." Shortly after becoming a democrat, Specter called for the repeal of the Defense of Marriage Act, which he "fervently" supported in 1996. I could go on on about all the issues Mr. Spector flip-flopped on over the course of his career, but the bottom line is that this man's presence in the halls of congress deserves nothing more than to be forgotten. And if his legacy of failure must somehow be remembered, let his legacy be remembered as an embarrassment and disgrace to our democracy. Good Riddance!

As good as it is to finally see this man taken down, the sad reality is that there is seemingly no one with noble or honest character readying themselves to take his place. The fact is that there will most likely be another Democratic Senator elected from Pennsylvania later this year. At best we can only hope for a marginal improvement. I would rather see a die hard liberal like the late Senator Paul Wellstone from Minnesota get elected in PA than the former Republican shape-shifter known as Arlen Specter. Yes, as dire and Pathetic as that sounds, it would be an improvement because a person who seemingly doesn't stand for anything is a dangerous cancer for a constitutional republic.

Finally, the Connecticut Primaries on both sides are very interesting as Christopher Dodd is not seeking re-election. If I lived in Connecticut, I would vote for Peter Schiff. Now there's a guy who could really ruffle some feathers in Washington... check him out if you don't know who this hard-core patriot is. It's too bad there is no longer a place for people like him in Washington...

Quote of the day:

"Foreigner's will not finance our excessive standard of living and our expensive war overseas indefinitely. It will end! What we do in the meantime to prepare for that day will make all the difference in the world for the future of freedom in this country. It's the future of freedom in this country that is truly the legitimate responsibility of us as Member's of Congress. Let it not be said that no one cared, that no one objected once it's realized that our liberties and wealth are in jeopardy. A few have, and others continue to do so, but too many -both in and out of government- close their eyes to the issue of personal liberty and ignore the fact that endless borrowing to finance endless demands cannot be sustained. True prosperity can only come from a healthy economy and sound money. That can only be acheived by a free society."
-RON PAUL 7/10/03

NBA Playoffs Predictions

Kobe Bryant is still the best basketball player in the world.

"Can anyone stop the Lakers?" This is the question that teams around the NBA have been asking themselves ever since the lakers laid claim to the Larry O'Brien trophy last June. So far, with the surprise elimination of LeBron James and the Cavaliers in the second round, LA looks destined to repeat as world champions.

Besides boasting the most talented front-court in the league in Pau Gasol and Andrew Bynum, the lakers are led by the deadliest cut-throat competitor in the game today. Kobe Bryant, AKA: the Black Mamba. At 31, Kobe Bryant is still hungering for greatness... i.e. the title of "Greatest Ever."

Both Kobe and LeBron led their teams to the top of their repspective confererences during the regular season. For the second consecutive year, LeBron has won the MVP award and led his team to the best regular season record, only to have his season end in utter disappointment and embarrassment. Kobe is still standing, chasing his 5th title, closing in on Michael.

As I type this, I just watched Kobe pour in 21 points in 3rd quarter in Game 1 of the Western Conference Finals against my favorite team the Phoenix Suns. It seems as if Kobe just said to himself, "Why wait to close this game out in the fourth quarter when I can do it in the third?" That type of reasoning is what makes Kobe Bryant the awesome player that he is. And until he honestly cannot ask himself questions like that anymore, he will likely remain regarded as the best player in the world, and possibly ever.

I'm going to say Lakers in 5 over the Suns.

Over in the Easter Conference we have the Star-studded Boston Celtics. With Ray Allen, Paul Pierce, Kevin Garnett, Rajon Rondo, and Rasheed Wallace, they legitimately have 5 all-stars on their roster. This is a team that won the title in 2008 and feel they could have won it again last year had KG been healthy. This is a team seeking vindication for last year's injury riddled season. With their age, expiring contracts for both players and coaches, and other longevity issues, Boston knows it was team constructed to win now and is fully aware of the fact that the championship window is closing fast. I think it will officially be closed after this season.

With the best record in the East, the Orlando Magic also have their eyes on a championship, but it is going to be hard for them to get past Boston. Despite the media love fest with center Dwight Howard, his offensive game remains rather one-dimensional. Getting most of his points from dunks and wide open layups or at the free-throw line. He has not shown the ability to creat for himself in the paint, has no back-to-the-basket game to speak of, and has failed to show he can hit the 10-15 footer with any type of consistency. Additionally, Vince Carter is not used to post-season success despite being a perrenial all-star for the last decade and probably the best dunk champ the league has ever seen.

Ultimately, Orlando is a jumpshooting team who live and die by the three ball. So far in the playoffs, the threes have been falling, but they have not faced a team that prides itself in defense the way Boston does. In the end, I have to say that the hall-of-fame caliber experience found in Boston's Big 3 will win out.

I'm going to say Boston in 6.