COMMENT: Hi Marty,
I must say your analysis of the dow for the last six months is simply mind blowing.
Everything you said has been accurate. You are right that most will not get what your saying because they are stuck in a linear world – not a dynamic world.
You did say markets would churn into May. You were SPOT on. I guess what throws most is when you say we could get a high in May/June or September. They can’t process the dynamism. They guys would be good candidates for government work where they can just try control everything.
Indeed I am looking forward to the biggest “mind twisting” trade of the century, as you say. It is looking at this stage like a May/June high – everything is truly connected. You have opened my eyes forever.
Please bring Socrates online soon – it is your piece de resistance. I think I may speak for many when I say that I’m happy to have it just talk to me for now!
REPLY: Many people have hard time understanding how everything is connected, and how to separate me from the computer. The vast majority who disagree always make this personal rather than focusing on the analysis. The churning of the Dow until May was connected to the dollar rise, and the collapse of the euro on just one level. If you normally see a decline, as everyone was calling for in the U.S. market, they missed the currency play which would provide steady support for the Dow.
This is the same connection of why I warned the White House in 1985 that forming the G5 to lower the validity of the dollar by 40% would set off a crash in two years. That came precisely to the day on October 19 on the Economic Confidence Model, 2.15 years from the bottom of the 51.6-year wave 1985.65.
Government is clueless when it comes to currency, reflected in mainstream analysis, which just ignores capital flows. Since the Japanese have bought nearly 40% of the U.S. debt and were buying property and stocks in the USA, G5 was telling them they were going to devalue those assets by 40%. A moron would sell if the government told him he would lose 40%.
The Brady Commission called me in, for we ended up with four clients on the commission investigating team who insisted that we be called in. My biggest accomplishment was to stop punitive sanctions against the market, and the Brady Commission reported just politely saying they thought foreign exchange had something to do with the crash.
I wrote to Rubin when he was Secretary of the Treasury and was starting the same jawboning against the Japanese yen. It was Geithner who had to respond.
The reply was short and sweet, but the policy changed and they stopped trying to talk the yen down again.
The euro is in trouble for the same reason. They did not understand currency – nobody in government, or for the most part mainstream media, seems to understand this subject matter. The EU Commission failed to consolidate the debts even after attending our 1997 London World Economic Conference taking the whole back row. Southern Europe converted their debts to euro and the currency rose from $0.80 cents to $1.60. They then owed TWICE as much as what they did before the euro, yet Brussels yells at Greece when they are the victim here who did nothing but get screwed out of this deal.
So the Dow has traded sideways and that was ONLY possible if the dollar rose and the euro crashed. So it is NOT my personal opinion, this is simply how the world functions for EVERYTHING is truly connected. We forecast the high in gold for 2011, and in 2011 we warned the Dow would run off to new highs, which was even reported by Barron’s. One forecast is connected to the other – this is not a matter of luck – this is a matter of global correlation and opening your eyes.