UrbanSurvival is not a site about fear-mongering – it’s a site about trying to use the lessons of the last Depression (contrasted with the emerging one we’re now in) to steer a smarter course through the present financial crap storm. The site doesn’t offer investment advice, but I do my best to provide a better-than-average outlook on the general economic condition. That’s something that I’m pleased to report has been accomplished; we’ve gotten thing much more ‘right’ than conventional financial media.
To get to the point this morning: I had a call on Thursday afternoon from a very, very worried Robin Landry, who was returning my call from earlier.
“George, you were asking about the short-term outlook? It’s bad…really bad. Things that should not be happening in the market have been happening the past couple of sessions.
For instance, the Dow has been coming down, but at the same time, treasuries have been dropping, too, gold has been going up, and oil has been climbing.
So there’s a possibility…and it’s only a possibility that the market could go straight down from here…”
This was particularly worrisome to me, because as you know from reading this column, since last December I have been expecting a major spring rally which according to the HalfPastHuman.com linguistics work would end around May 14 (+/- a week) and that gold would soar (doubling three times is in there) along with silver and that the full-on derivatives meltdown would start around July 15th and would be emergent into a state of ‘undeniability’ around August 16th.
Landry’s wave counts had – up until the Thursday afternoon call – offered me some hope that the predictive linguistics work would be wrong and that we’d somehow muddle through the present delevering of financial markets.
Now, Landry’s worried that based on his market modeling that he’s been using for nearly 30 years – and which has been good enough that as a one-man money manager he’s driving 9-digits around the markets from his office up in Shawnee, Oklahoma – because of the way various wave counts are stacking up along with technical indicators.
“Robin, the way I’ve been hoping this would work out is that we’d still work up to the Dow 9,600 level, such that the decline from the October 2007 high (14,198 and change) would be the all-time high, which would make last year’s 6,626 low the larger Wave 1 down, and that we’d last until mid-August of this year before we crash to your long term Dow 770 target in the 2010-2011 timeframe….”
“Well, that’s been Bob Prechter’s count too. My work says we’re in a five wave decline and this week we finished four. As you know, crashed happen in the 5th waves down so if we take out 7,800 on the Dow in the next week, or so, then Katy bar the door….”
We then played with numbers for a few minutes.
Ultimate downside risk? Dow 770 (Landry) or 1,020 (mine). But, Landry’s got interim targets in the Dow 4,400 area first which we’ll get to in a minute.
Back on the Thursday call, Landry was continuing his explanation of how various socioeconomic cycles were working out:
“George, every few years, 3 or 4, you get a recession. Then, every 13 years, you get a pretty big recession. And every 72-years, or so, you get a depression.
But what scares the daylights out of me is that every 200- 250-years or so, you get a revolution cycle and that is when governments fall…”
My mind was spinning. The damn ‘revolution’ meme has been showing up all over the place and that’s not good because of the emotional power behind the level of people’s figuring out – by late summer language-wise – that most of the country will end up getting gyyped out of a lifetime of work as The Second Depression shows up – which if the linguistics are right, will end up with mass demonstrations in Washington this fall calling for a change of government and punishment to those who put the country at risk through policies which have put ‘making money’ into the rare position of being more profitable than ‘making things’.
What’s the old saying? “When money becomes the master, everyone’s a slave…”? We’ve been in that world since the 1960′s and now the money slaves are about to figure out that happily ever after ain’t gonna be so happy finance-wise.
“So Robin, where do people put money?”
“For my clients, I’ll be moving them into treasuries…but only the short term ones, since there will be less damage there probably…and we’re still on the short side of the market.”
The conversation ended with Landry promising me a copy of his ‘colleague letter’ that he sends out to a few investment professionals in the business. And sure enough, an hour later, this is what popped into the inbox:
“The action of the last two days makes me believe that the rally from the lows in march has finally reached the point at which a substantial correction can begin. The rally reached the minimum required to call it complete for a wave 4 from the low in March 09 which I have labeled as Wave 3 of 1 from the Oct 2007 high. Others have labeled the march 09 bottom as Wave 1 from the high, and this rally is part of wave 2. That count doesn’t fit with my indicators but is certainly possible given the momentum and volatility of the Sept-Dec period, and the rapid up and down moves making the count very difficult.
My count says this top is at least wave a of 4 and we are entering wave b of 4 that should decline to at least the 7800 area before turning up in wave c of 4 to the 9700 area completing wave 4 later this fall in the late August early September time period. The next decline would be wave 5 to new lows to complete wave 1.
The target for wave 5 down is the 2000-4400 area in the Dow. Short term it really doesn’t make much difference whether this is a wave 2 or wave 4. Both counts mean that once complete, the market is headed for substantially lower prices.
The main difference is that if the rally off the March 09 low is wave 2 rather than wave 4, the rally could go higher than my 9700 target before ending. I will address that as the count develops. I want to bring up an observation that I made a number of years ago.
Ever since Robert Prechter www.elliottwave.com popularized EW in the early 70′s with his book and writings on the Elliott Wave theory, the 5th wave has, on several occasions, been the largest and most violent leg of the wave count. I believe this is because many rookie wave followers have mistaken wave 1-2-3 patterns as being a-b-c patterns and once the wave 4 low or high, depending on the direction of the larger degree, is broken all head for the exit in a down wave and buy like crazy in an up wave. In commodities this is a common occurrence. It gives the idea that the markets have become commoditized credence in my opinion.
The action of the long treasuries the last 2 days raises the possibility that since they are falling along with the market, the recent high could be all of the rally and we are heading down to new lows now. The action over the next few days hopefully will clear this up. If the decline to new lows has begun, it has large implications for the dollar, interest rates, gold and oil. I will explain if the pattern continues.
As always comments and questions are welcome. I will answer them as time allows.
Robin rlandry@allegiance.tv
Bank Failures and Dead Cats
After dropping more than 100 points on Thursday, the market is set for a little ‘dead cat bounce’ at the open today. NORMALLY we’d expect to see a bit of a bounce in the markets today, because of something called “the holiday effect’. But normal hasn’t been so normal lately, and I wouldn’t be surprised to see the market rally early and fade late, because of some of the news that’s been hitting overnight.
“BankUnited, a newly chartered federal savings bank, acquired the banking operations, including all of the nonbrokered deposits, of BankUnited, FSB, Coral Gables, Florida, in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC). As a result of this transaction, BankUnited, FSB, offices and branches will be operated as BankUnited offices and branches.
BankUnited’s 86 offices will be open tomorrow during normal business hours. BankUnited, the successor institution, will be the largest independent bank in Florida, as was its predecessor (BankUnited, FSB). The management team is headed by John Kanas, a veteran of the banking industry and former head of North Fork Bank. Deposits will be insured by the FDIC. Customers can continue to use BankUnited, FSB’s checks, ATM cards and debit cards.
Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. Bank United, FSB had assets of $12.80 billion and deposits of $8.6 billion as of May 2, 2009. The new BankUnited will assume $12.7 billion in assets and $8.3 billion in nonbrokered deposits.
The FDIC and BankUnited entered into a loss-share transaction and will share in the losses on approximately $10.7 billion in assets covered under the agreement. The loss-sharing arrangement is projected to maximize returns on the covered assets by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers as they will maintain a banking relationship.
BankUnited will recapitalize the institution with $900 million in new capital. BankUnited will not assume the approximately $348 million in brokered deposits. The FDIC will pay the brokers directly. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.
This is something of a rarity – usually FDIC waits until after the close of markets on Friday before making such announcements and all I can say is yes, I’ll be looking for more closures after the market close today.
Yep. Not advice – just a water-cooler bet: Rally at the open, fade at the close and hell to pay next week.
Whence Comes Depression
“Fed’s Plosser says inflation to increase, warns of complacency” headlines a Bloomberg story this morning.
Remember, when these boys talk about ‘inflation’ what they’re not detailing out is how the mix of inflation and deflation will work out. Let me be a little more clear about it because it’s a rehash of an old statistics joke: Statistician has one foot in ice and the other in a fire and says “On average, you’re comfortable.”
Same thing coming: Homes and car prices catering and food prices going moonward. On average, folks like Plosser are hinting at 2.5% overall. Might not be comfortable, though.
Government Motors
And this week, GM is having it’s last cigarette (metaphorically speaking) before being marched to the wall next week to face bankruptcy.
Damn – here’s an old saying that I could probably do without passing on – but I won’t. Remember the old saying “As goes GM, so goes the market”?
Dollar Disaster Redux
Oh, and not to sound overly gloomy (which comes from fighting with Expression Web which I may be able to fix for another $100 to get version 2 – since version 1 has been more of a paid beta test, but let’s not go there…) but did you see where the USA (land of the brave, etc) is about to lose its AAA rating? Tim Geithner and crew are doing what they can, but the bubble’s over having been damaged by many pricks already…er…so to speak.
Europe 2020
Think I’m a gloomster, do you? Go read the now free Global Europe Anticipation Bulletin #35 (I got my subscri8ber report a couple of weeks ago) and tell me who’s gloomy, eh?
Fluage Treatment
WHO boss says the world should prepare for severe flu.
Why, what a shock.
Flu cases up over 11,168 and 86 dead so far.
Reader notes like this popping in…
Hey George,
Love your site. It’s the 1 and only site I make sure to read everyday. That’s about the best compliment i can give for a web page. Found this in my local news paper, The Lowell Sunhttp://www.lowellsun.com/local/ci_12418665
The Massachusetts Department of Public Health yesterday confirmed 22 additional H1N1 influenza cases in Massachusetts, raising the state’s total to 193. Of those confirmed cases, 110 are in Middlesex County.
—
…The state has since recommended testing only severe cases and people at high risk for complications.
“So the numbers of confirmed cases do not reflect what is occurring in the community,” Singleton said. “It’s like an extended flu season. What we normally have in February, we’re having in May.”
Oh fine…little more sand over here to bury some more heads in, please.
The Days Really Big Story
“Wednesday Ratings: American Idol finale draws 40 million for last 7 minutes.“
Go figure.
—
Rebecca Price cartoon on Saturday this week….