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Replaying 1929! |
This page was posted onApril 2, 2001
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The Mazurok-Ure Correlation: A 4% Market Advance Due Next Week:
[Editors Note: The Dow dutifully advfanced 3.6% and then reversed down, right in line with this forecast. -G Ure]
Let's pretend there's a
Turn down the lights, draw the shades over the windows, friends, let's put a wild conspiracy out on the table, focus on what it means to the "little guys" (like you and me) and see how we can make a buck on the notion. But first, the two longest standing of the charts. First, there's the weekly update to how the Dow Jones Average is doing relative to the market peak in 1929. Remember, this chart shows how the market ran up from 1921 to 1929, and then down again, and compares it with how the market has fared since the 1987 mini-crash event, which I think is equivalent to the 1921 break:
{Chart outdated, see present week's charts at www.urbansurvival.com/week.htm .}
Now consider the Aggregate Index, which is an equally weighted summation of the Dow, SPX and IXIC (Nasdaq composite) index. If you're trying to figure out how I did the math, please click on http://urbansurvival.com/aggre.xls and you'll see the weighting used when I started the index. Although it could be changed, and updated to make the charts look even more close, the idea here is to nail it once, and then see if the correlation holds up over time. I think you'll agree, it has.
If you remember last week's report, I said the Mazurok-Ure Correlation suggested a 3% market advance was imminent. Well, this week, the market is even further away from the historical replay scenario, and the work suggests that the increase that I expect next week will be (ideally) 4.1% to return to trend. Of course, I don't make suggestions about how you should play the market. I will tell you that in my personal account (that has more than doubled since December 15, 2000), I sold my "long term" Boeing August 50 puts (BA-TJ's) and waded into Cisco April 20 calls for about $125/contract. Why? Well, the techs are by my reckoning well oversold - for now. This past week, I think it was Larry Carter of Cisco who got up in front of financial professionals down here and said something to the effect that last fall, when Cisco missed its earnings forecast by one penny the market cap of the company got whacked by two hundred billion" At least, that's the report as best I remember it from one of the Sand Hill Road VC veterans who was there. But, that didn't motivate me. What motivated me is that Cisco is a good company, and whacked or not, a Fibonnaci bounce could take them to 30+ and if a rally materializes, 25 could be a slam dunk by April 15, which would put my $125 calls at $450+ which would be OK for a short trade. Anything over 7 days on a trade and I feel lethargic, bored, and wonder if I'm sufficiently bright to play with real money. We'll see, huh? If it works out north of $400/contract, my portfolio would be up...hmmmm...lemme se....312% since December - and that's what I'd like to see by April first.
[Editors Note: As of 4/9/01, george was still in his April 20 CYQ-DD calls and losing his butt on the trade...]
This will be a very interesting spekulation, too, because of what "the numbers" say happens more often than not. The idea is that markets tend to decline a week or two after option expiration, and then rally into option expirations. What makes this so interesting is that I'm banking on a rally coming early - and in a market segment and company that have been pretty well bruised and bloodied by the ficklenessinvestors.
Now for the week's rant:
Is there a "unified theory" behind today's markets?
A Central Banker's Conspiracy?
I was working on this week's chart of how the Global Market is doing - and tinkering around with various scenarios when an interesting line of inquiry came along. Here's the chart. See if the obvious question comes to mind. Ready?
OK, nothing new, except that in the wake of the Greenspan/US led 1/2% drop, the Global Index this week rose .586%....which is a pretty interesting correlation all by itself. But what's the question you might logically ask looking at this curve and where the 5th order polynomial takes us?
Aha!
The question is: "What's the U.S. portion of the Global Index like - over time???" To answer this question, I simply divided the U.S, Dow Jones portion of the average by the Global Index itself. The result?
At this point, I said to myself, "Self? You know what? Somethingodd about this line. If we look at the U.S. portion of the Global Index, it looks like it was down around 5% in the middle of 1990 - and has since risen to more than 25% of the Global Index value. What does this mean?
Then a second idea hit me:
Aha #2
What would things have looked like to the world's Central Bankers when they were meeting in 1990? What would things have looked like when Japan started to crater in 1990 from their astronomically high stock market? Well, I took the handy-dandy Global Index and said "Which country would have had the lion's share of the Global Index in the spring of 1990?" The answer is...see for yourself... Japan!
So this got me to thinking more about what I could remember from the period. I seem to remember that the 10 largest banks on the planet were all located in Japan. I remember that they were beginning to seriously kick the U.S.'s collective butt in the auto business - not to mention home electronics. I recall that companies like Sony were accumulating cash and while Japanese nationals were buying up real estate in Hawaii like crazy, and adopting golf as an obsession, they were eyeing U.S., entertainment and other assets as part of a long-term strategy to be the biggest financial empire every. However, I hazily recall that global economics was starting to emerge as a topic and that led to regular meetings among the heads of the worlds major Central Banks.
"Suppose", I said to myself, "that all these heavyweights looked at this same kind of a chart in their 1990 meetings. What would they say? How about something like "Here's the plan. We are each a big country - and we have our national interests. Why don't we come up with a long-term plan to cut up the world into managable pieces. The start of doing this would be to invoke a 10 year plan to divide the world evenly amongst the insiders in this club. Perhaps the way to do it would be to do a worldwide "leveling" of the stock markets."
What do you think such a hypothetical group decision would result in by March of 2001? Behold...
Clearly, there's been a leveling of the world markets among these key players..
But is this really a conspiracy or is it simply a benign interesting way things work out - a big coincidence?
Here's where it gets down to a personal judgement on your part, because between us, we probably don't have enough hard information from which to draw a firm conclusion. But we do know from their behaviors, that politicians are a pretty slimy lot - and Central Bankers, being either servants or puppetmasters to that reeking bunch - can be expected to have pretty much the same traits, right?
Let me give you a link to explore when you get some time because it deals with the social consequences of the Mazurok-Ure Correlation that says debt builds up over time until it all blows up and is repudiated in the end game: http://www.jubilee2000uk.org/
Recall that in the Book of Leviticus, the Jubilee year came each 50 years and at that time, all debts were forgiven. It's (according to Cohen, et al) evidence that the Kondratieff long wave of economics (that this site focusses on) can be traced back over 2000 years.
Among other things, they note that not only is the worldwide debt crisis real, but it has a staggering human cost:
7 Million children die each year as a result of the debt crisis 8,544,469 children have died since the start of the year 2000.
It's also not comforting to know that only about 40 cents of each dollar of debt relief gets to the people intended. The rest? It ends up in the pockets of guess who?
Belly of the Beast Report:
Is Politics Dirty, or What?
On Saturday of this week, Elaine and I had occasion to go up to Alemeda, where as it turns out, our boat was NOT launched on Thursday as had been planned. Something about tides, and they don't do commissionings (mast installations) on Fridays or Mondays. So we got to look at the boat sitting on land. Well, Elaine spied the sign that said "USS HORNET MUSEUM --->". Cool, I thought. If I can't get any work done on my boat, maybe I can checkout the organization operation of the best of the Essex Class Carriers, now retired from the fleet. So, $24 later, Elaine & I spent about 5-hours wandering around the ship. It's impressive, but let me tell you the highlight: a story from one of the docents (museum guide) who conducted the bridge tour, and who served on the HORNET back in about 1956. When you hear his story (as best I can recall it) it's put the sleaziness of the poltical leadership of this great land in crystal clear perspective. Here's his account given on the bridge of the Hornet on a blustery gray Saturday in 2001:
"Now one thing you may not know is that President Nixon personally selected the Hornet to be the recovery ship for the returning Apollo 11 and Apollo 12 astronauts when they came back from the moon. He was on board for the Apollo 11 recovery. But what you may not know, is why Nixon selected this ship. Anyone have any guesses why?" There was a pause and no one answered.
"Well, John Kennedy had set out the national goal about 12 years earlier of going to the moon. And the Kennedy's were big Navy men - and sailors too. Well, Nixon wanted the recovery to be done by a ship that no Kennedy had ever set foot on. Now, do any of you know who Bill Clinton's biggest hero was? I'll tell you: John F. Kennedy. And so when this ship, the HORNET was up to be a national landmark, do you know who signed the order to cut her up? Yup. Bill Clinton. It was only by action of the guardian angel of this ship that it was saved from being cut up."
That's the same guardian angel that had kept her from being bombed or seriously damaged by enemy fire in WWII. You can learn more about this fine ship by visiting http://www.uss-hornet.org .
Letters of the week
Some great letters in the mail this week...mostly about how to do the Aggregate Index calculations. One writer asking:
Did you study the Nostradamus stuff ? Wasn't there some kind of prediction about terror from the sky ? Do you know what that prediction was about and what was associated with it ?
Yes. Erica Cheatham's work and a bunch of others. Too, obsure for me. I prefer numbers. No, MIR was not the terror from the sky. Look for a solar flare or something like that. More likely: simulanteous war in Taiwan and over Israel. But not for a few years yet. I'm not packed.
Next letter?
To GEORGE URE ESQ
Greetings. Thank heavens for your very informative w-site
May I ask how the sum of the 3 indices in your aggregate index add up to 8000. Am hoping for a learned view as well in your World Index. Because my own work of 26 years as an Analyst may have been wasted or at risk when confronted by having discovered yours! Therefore am forwarding 3 of my recent postings which would put the East Asian S-markets at variance with your World Index.. Appreciate your kind RSVP.
He sent along his work - and it's great! Next letter?
George,
Thank you for the continuing comments. If possible during your updates please
throw in your current gold and siler comments. One or two sentences would
probable suffice. I am not currently buying any more mining stocks, but am
long term holding what I have. I am buying 1 ounce sunshine rounds though.
The premium on them is about the same as a 100 oz bar (per ounce) and I would
assume much more liquid if the need arose. As you advise my debts are not
gone but have a mortgage that is about 25% of the current value. Hope to pay
it off with a rise in bullion or stocks in the next couple of years. Good
Luck with the traffic. Thank you once again for your responses and your web
page.
The subject of gold is an interesting one - but I am not trying to time it. I am just buying a coin every month or so. And I look at the public debt figures from the Treasury Department and keep track of that. If you really want to get a handle on it, the thing to do would be watch the swings in M3 and MZM - but that's a whole life enterprise in itself. As long as the car dealers are doing 0 or 3% interest on car loans, I am not getting anxious on gold. But when they start upping rates, or when mortgage rates go up, then I will get more interested in some trading. But, in terms of what I can maybe make a quick buck at, I need volatility - because I'm a wild-eyed trader at heart. Gold is something I buy as ballast now & again. I've told you before, my idea of a long term trade is 3 weeks - and I usually make as much in 5 days as in a year. You know, I finally exited my Seattle biotech - when it dropped. One of the few trades I lost on - and it was what? An e-q-u-i-t-y. I'll stay with options. With the drop of the NDX, are you gonna tell me equities are any safer than options? You think I'm gonna believe you?
Another reader writes...
Hi George, firstly i have been meaning to thankyou for youe excellent site for a while. i only found it a month ago unfortunately, but am now an addict!!! excellent article on the internet, so true, it is quite amazing how so few people realise it, yet such a simple principle. As for the aggregate index, genius bit of work, love it!! [Blush...-GU] quite amazing how close we are following, mass psychology i suppose and the similarity between then and now economically and socially . however i am having problems working it out from the formula you gave a few days ago. you said to do the following [(ndx x 3.88)+(spx x 5.82)+djia] /3 but if you take figures for the close on monday: dow 9959, ndx 1739, spx 1170, the figure one gets is 7838, yet you said in your recent article on close monday the aggregate index was 8117?? have i got the formula wrong, if not what am i doing wrong!!
Answer: Whew! What a compliment...thanks!
Answer to the question: I use the IXIC, not the NDX - and yeah, I am guilty of a lack of precision sometimes when discussing them. Sorry. All the quotes I use are from Yahoo's fine site at http://quote.yahoo.com which is also the home page I set on all my computers (2 at work, 2 on the boat).
As to the math? Add: The Dow, + the IXIC times 3.88 and thre SPC times 5.82. Now, divide the whole kit & kaboodle by 3. Like so:
Aggregate Index |
^DJI |
^SPC *3.88 |
^IXIC |
NASDAQ ^IXIC |
Date |
Variance % |
SPC |
7876.01 |
9504.78 |
6633.11 |
7490.13 |
1928.68 |
03/23/01 |
51.1% |
1139.83 |
And Elaine's brother wrote from Las Vegas about the "Power Crisis" here in California:
I visited the Hoover Dam (a week ago-GU) Monday and they had I believe it was, six turbines off-line just because they didn't need to produce the additional power, so I asked, does California get some of its power from Hoover Dam? Of course I realize there is not shortage of electricity in the sense that it is unable to be produced in the amount needed, like the wood pile getting low on wood, but must be related directly to financial management, that is someone is not paying the bills so of course the consumer will bail out the company that originally agreed to pay for the electrical service. Apparently California agencies signed an agreement for electrical service and then defaulted payments for several years, so the supplier is cutting back on the production and allocation of electricity to those guys who owe money. Is that basically what has happened?
Sadly, yeah. Remember the link up above to the Jubilee 2000 Organization? Here's how the game works: As long as people are debt slaves, they will be busy working and won't rock the apple cart. So, like gas lines in 1975, why not make a crisis and blame all kinds of evil on that? Political leaders of every ilk, including Hitler, have used scapegoats for their purposes. So if rolling blackouts get the blame for causing the economy to sour, remember where you read it first: It's just one more way to keep us in debt and working "for the system". When you read how credit card companies are trying to tighten up bankruptcy rules, its more of the same. Amnesty International would have a beef with debtor prisons being set up today, but the functional difference between a debtors prison and sitting for 3-hours in traffic on Interstate 880 in San Jose rush hours (from 6 Am to 11A, from 11:30-2PM and from 3PM to 7PM) is pretty obscure to me. Where's Amnesty International when I'm in my four wheeled prison? Where's the outcry against the torture of the "boom, boom,boom, boom" rap-crap from the car next door and the one three lanes over?
Jeez, I can hardly wait to get the boat in the water and spend a day outside the Golden Gate. California is clearly a rat race and power's the cheese.
Pray for my Cisco calls. I'm still planning on an Urban Survival BBQ when we get settled in. I'll put the invitation up here when we firm up the date. I'm still planning on a big fat steak, seared properly, health scares notwithstanding. Everyone knows Foot 'n Mouth disease has been rampant for some time in Washington D.C.
Write when you get rich.
George 's Background
A number of readers have asked "Say, what is your background? How did you get this odd assortment of perspectives that you put up on your site each week?" Well, in answer to that, I put a summary of my background up that's available on the main page for the site, or you can read it by clicking here.
William Gann's trading rules
The page is a day late this week because I wanted to dig out and write down for you (paraphrased) William Gann's 24 rules for trading from his 1930 classic "The Wall Street Stock Selector". Run (don't just walk) to Amazon or Barnes & Noble and buy this book if you don't have it!
- Never risk more than 1/10th of your capital in one speculation. (*)
- Use Stop Loss orders
- Don't overtrade.(*)
- Never let a profit run to a loss.
- Don't buck the trend.
- When in doubt, get out.
- Trade only in active stocks. (*)
- Spread risk among 4-5 issues - not just one.
- Never fix your price, trade at market. (*)
- Don't close positions without a good reason.
- Build an emergency fund.
- Never buy to get a dividend.
- Never average a loss.
- Never get out because you've lost patience with a position.
- Avoid taking small profits and big losses.
- Never cancel a stop order once you make a trade.
- Avoid getting in and out too often.
- Be just as willing to go short as long.
- Never buy because a price is low, or sell because a price is high.
- Be careful about pyramiding at the wrong time.
- Select stocks with a small volume of shares outstanding to pyramid on the buying side, and the ones with the largest volume of stock outstanding to sell short.
- Never Hedge. Get out instead.
- Never change a position without a good reason.
- Avoid increasing your trading after a period of good trades.
(*) These are areas where I have violated Gann's rules and
have lost money as a result.
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All contents (c) 1998-2001 by George A. Ure, MBA, except authors as linked or noted