Screaming Volatility This Fall

By Roger Wiegand    Jul 22 2009 9:46AM

As the calendar and charts move steadily toward Labor Day; cycles, time, and patterns come into sharper focus. Convergence of politics, economic news, and technicals are providing a better definition for 2009. Media, economists, New York Banksters and global market maker-traders are whistling through a graveyard of destruction hoping for the best while fearing the worst. These boys and girls are standing in an economic trading pool of gasoline with lit matches.

Watch the Ides of September, (14TH-15TH) 2009 and the following four weeks for potential flat-out mayhem. As we write this tome in the morning of Tuesday, July 21, another major turn-date arises this evening.  Some expect it might all tip-over tonight with a major gold rally, sinking shares and dollars. Instead, we expect choppy, intermediate trading summer-selling with the Super Bowl of Crashes this fall. Our colleague Arch Crawford told us on radio today that tonight’s solar eclipse is a one in 120 years’ event. Also, he said it is reflective of, or dominated by gold and China.

Chopper Ben Bernanke was in good form this morning doing his usual congressional reporting dance-saying lots and really saying nothing as our patronizing representatives fawned over his alleged remarkable work and experience. Why does this feel like something very ominous? Is this more deck-dancing on the Titanic?

Let’s call it like it is with a review of reality, while forecasting-anticipating the authorities’ response and a probable outcome. It is not going to be pretty nor will it be very nice at all.

Benny Peaks Into The US Dollar Abyss

Our Federal Reserve genius has only one way out. He trading gun is mostly out of idea bullets but he can devalue the US Dollar with Weimar printing of our currency. He is doing this now and will go much faster in this race until our beloved country and economy smashes into a wall of Asian-European dollar-bond rejection. Our benevolent foreign paper buyers don’t have to dump these markets with selling. All they need to do is quit buying and this has appeared on the fringes already.

When the buying stops a trickle of paper selling by smaller funds and nations will be the beginning. As currency and bond markets get a reality-whiff of this notion, dollar selling quickly turns into a panicky cascade of weakness. We can see these things on the charts and when these set-ups tell us to buy commodity currencies we expect to have a bull market field day. We are shopping as we speak. We already own gold and silver and will be going after a lot more.

Most of our analyst friends remain on the deflation side of expectations. We are camped over there too but see on the further horizon, the final hyper-inflative solution instigated and mandated as the only choice. Governments have been making this dumbo move for centuries. Why would we expect anything different this time?

Some are suggesting these events could become so dire the US Dollar is black toast and will be replaced with a new gold-backed currency. That would be nice but we doubt it.  There is too much governmental power, big bank power, and big corporate power to change the game. These dudes love the status quo and will fight to the very end to keep it. They could care less about others; even if it means smashing the US Dollar to near nothing and decimating the Sheeple. This is going to be dog-eat-dog so get used to it.

Everybody Loves A Dead Cat Bounce

As we’ve mentioned before, the 1930’s stock market had six failed rallies and we expect a rerun this time around with wider trading ranges, more volatility and laundry list of crazy reactions-most of them negative. The closer we get toward the grand finale this fall, the more we’ll hear strident, shrill panic among traditional stock-pushers in New York telling the fools to buy and hold forever “as we’ll come out of this for sure and you must be invested for the longer pull.” Yeh, right. These managers can’t make fat fees if your money is parked in cash or out of the game entirely on something else.  They don’t care if you make or lose money they just want their percentage cut.

Green Shoots Are Dead Moldy Shoots

We’re probably going to see so-called green shoots half a dozen times in forthcoming dead cat bounces before The Greater Depression II is over and done with. Here are a few important reasons why the stock markets have only begun to stink, er sink.

Technical patterns are among the worst we have seen since 1987.

Fundamentally, numerous things are very wrong. Foremost among them; broken consumers have no buying power, ability to get more credit, have any savings to speak of (although they are trying), are overloaded with debts, reside in homes with sinking values and are scared to death of losing employment if they haven’t already. All of us know of more than one friend or acquaintance without a job. Soon we’ll see one person with a job supporting four or more jobless adults in one house.

The USA GDP ratio to debt indicates we cannot come back to our glory days without a smasharoo crash in most markets to washout debt or in fact pay it off. Most cannot pay. Budgets are ruined.

In this earnings season, which some chortle is improving, good numbers are being posted by a handful of Big Boy companies with deep pockets who have been slashing jobs and expenses for the last how many years? Any company can make money briefly as they exist on old previously produced inventory and then fire half the organization. This can’t last long but it makes them look better for a few quarters.

Where is the stability in companies and the government? They are most all careening from one major disaster to another as the White House stays up nights trying to devise more new ways to tax and spend money from broken taxpayers. Corporations like the bigger banks are hoarding cash for many rainy days, not just a few. They are not investing in new people, training, inventory, or products as who will buy them? CEO’s are selling their shares into strength and preparing for early retirement on some island somewhere with a cash-paid for mega-yacht. Most would prefer to just disappear.

Before I left Michigan, yards, commercial lots, and other spots were littered with used boats, cars, trucks and junk that people were trying to auction, or sell-off just to pay bills. Does this sound like green shoots and growth?

We see a systemic collapse in shares except those related to “must have” products like oil, coal natural gas, water, and precious metals. Others would be food related and items you need to get through the day even if unemployed. Some of the best hedge fund returns last year were posted in big bear funds shorting banks, mortgage companies and the stock market. Betting on disaster was a huge winner. This year and through 2012 it gets even better for bear traders.

Luxury-type eating establishments watch business fade as patrons go down scale. This is why the McDonalds stores are improving and their $1 menu is so popular. Even big sports facilities are losing audience as more go to watch free sports in bars while drinking cheap beer to drown their sorrows. The larger sit-down food chains are shrinking and some are going bankrupt.

In the 1929 stock market crash the Dow slid -90% to the bottom. One of my top analyst friends shocked me by reporting there was potential for the stock markets to GO TO ZERO! AS IN WIPED OUT! Understand that with hot inflation or hyperinflation shares’ prices and the stock indexes could be much higher in unadjusted numbers. Yet, measured in inflation adjusted values they might be worth less than today’s market valuations. Watch this one fool the Sheeple when it arrives this fall or next year.

Years ago we made the forecast, I think in 2003, that one major trading platform would crash and burn and cease to exist. My guess is that if this true it could be the CBOE Chicago Board Options Exchange as they run and trade some pretty hot derivatives. What happens in a crash to this kind of trading?

Crude Oil Is The Big Momma Market Vulnerable To Wild Price Swings

We are always watching crude oil as it is the major commodity affecting many of the others. Further, oil is a signal leader for the whole commodity group including precious metals. Traders are driving oil higher in the face of over-supply and falling depression demand. Why is this? We think the beginnings of inflation have entered the picture and traders are long oil for potentially bad summer weather. Funds take big oil positions and are often long or short only. Our 4th quarter oil price forecast is $80. This is repeated by some of the largest traders. Keep in mind this forecast reflects normal inflation, demand, supply and no hurricanes or Middle East violence. That other stuff makes prices lots higher.

Here is a nasty, interesting idea: Would Israel, Iran, Russia and the USA manufacture a potential war incident to spike falling oil prices? I wonder? Some analysts are forecasting $20 oil due to the depression. This kind of maneuver would pop oil much higher. We believe anything is possible.

Retail Sales Are So Bad We Hesitate To Report

Starting with the malls and working our way lower we see General Growth Properties, Inc. one of  the largest mall developer-owners in the Western Hemisphere has filed bankruptcy for billions. They couldn’t make the loan payments or interest as tenants fled in droves with no sales. I have only once in my life seen a closed-up major mall. It was one of the first if not the first enclosed mall built in North America in Southfield Michigan built back in the 1950’s. Since Northland Mall closed and failed it’s been remodeled, re-opened and sold more than once and still remains a big failure.

There is something really creepy about seeing a mall that large all shut-down and boarded-up. Get used to it as many more are coming. Howard Davidowitz, a retail analyst and industry specialist has been warning of prolonged retail disaster for the past few years. Media formerly laughed at him but now no one is laughing as Howard was correct.

Next we see the Big Box chains who love to site their stores near the big malls to draw on mall sales traffic, but sit on cheaper nearby land. We cannot remember all of the chains that failed in the past year but we’ve seen Circuit City, chain furniture stores and others selling items in the up-scale markets all go down the drain. Some of them were surprises who were never expected to fail.

Below this group are those who often locate in sub-mall spaces. Those are the neighborhood strip malls. These have a collection of national chains like TJ Max and some no name smaller retailers. I have seen entire new strip malls 2-3 years old with NO TENANTS. Others are mostly vacant and obviously candidates for bankruptcy.

Next down the line is a huge variety of stand-alone small retailers selling everything you can imagine. Convenience stores can still make it as their products are in daily demand. Those C-stores that fail are run-over by competition or lack the things consumers need. Even in these stores there is a winnowing-weeding out process on-going.

One that really got my attention was a large shop garage for armored trucks. This was a national chain offering money delivery and pick-up services for retail. This garage I noticed in passing always had 30-40 trucks parked out front waiting for overnight service and truck washes. One day it was closed and they were empty and gone. Obviously if their retail customers were gone, they had no money pick-up business so they shut-down too. Scary! One guy told me Detroit looks like a Mad-Max movie. I haven’t been down there in years as I prefer to remain alive and keep doing my work.

When these facts are considered individually, they may not mean much. When you review them in a group along with many others I have not included in this report, it does not just give us pause, it makes your hair stand on end. Is the USA and the Western world in general turning to third world status? Some of these countries could in fact become third world. In the case of the US, we see Third World action in larger cities and an awful lot of fraying on the edges in other spots.

We think that with the exception of the super-rich, most of the rest of us will drop at least one full notch in the standard of living measurements. The most difficult is the lower class going jobless by the millions, losing unemployment insurance in the first wave this fall and having homes foreclosed. This is a multi-million person group that Washington had better pay attention too as they are going to fight back. When a father has crying babies demanding food and milk, that man is going out to get them anyway he can. Our authority dolts have no clue. We hope they can cover but they are too disorganized and stupid. Let them pay the price and maybe things can change for the better.

Gold And Silver Owners Covering Daily Needs With Savings And No Debts Are Winners.

We see too many friends and family members marching forward into oblivion not understanding the reality and severity of what we are saying. In the US, those recognizing the value of being prepared and invested in precious metals and other needs are probably only 5-8% of this entire nation. This   means the majority get hammered this fall, winter and on into the spring of 2010 when it really gets rough.

Personally I’m trading gold, silver, currencies and grains while finding lots of ideas for shorting in these down markets. Take care of you and your family first and then get busy on the other stuff. I finally got relocated after talking about it for two years. I am relieved. Next its time to find a rural hidey-hole that doubles as a country cabin for vacations and some fishing. I’m probably 3-6 months from being completed on my plan and should just about make it in time. Are you prepared?

First, and most important of all, purchase physical gold and silver before anything else. This is your benchmark support underpinning everything else you might trade in these markets. Physical metal has nobody else’s liability attached. Buy it. Hold it. And, keep it out of the hands of others.

With each forthcoming cycle we think gold and silver shares might sell less posting higher lows. This could be reflected on the shorter term by how low our S&P’s trade. We expect 800 to 850 with 800 being more probable. One of these days PM shares will disregard all broken markets and rocket rally. But not yet; perhaps this fall.

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.

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