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        Updated: Saturday, Oct. 30, 2004

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Bush's Last Minute Problems

If you were running as a republican incumbent, two items in the news headlines from Friday would make you get quite worried about your chances of pulling out a victory on Tuesday.  The first of these is that Osama Bin Ladin, a/k/a/ Osama bin Hidin, has come out of his backwoods wherever to lay another tape out.  The specific problem for Bush is that his arch enemy is no longer addressing threats against him, rather, taking his message to the American voters: http://apnews.myway.com/article/20041030/D861PAS80.html I don't recall anything like this ever happening before.  It could be cast by republicans as akin to Hitler telling Americans in WW II how to vote (Down with that DR fellow), or if you're a democract, it could be taken as evidence that Bush's war on terrorism has not been an overwhelming success.  While Osama is still at large, we continue to hear horror stories of little old ladies - and I mean in their 80's) being hassled at airport.  The mass has given up huge chunks of their Freedom under the misnamed Patriot Act, yet Osama lives and looks pretty darn healthy, for a fellow who's wanted by so many. Understandably, both Kerry and Bush forces are denouncing bin Laden's video: http://news.bbc.co.uk/1/hi/world/middle_east/3967139.stm

The other big problem Bush has is that the market failed to hit the rally objective of 10,084 - and while there's a chance of this coming Monday, it may be too little, too late, to make a difference among likely voters. Gold's pop back to the $428 range means there's fear that Bush will lose.  Regardless of the economics and intervention, both candidates are giving it their all this weekend: http://news.bbc.co.uk/1/hi/world/americas/3966761.stm

Meantime we're wondering if our Texas absentee ballot will get here in time, not that it will make a difference in the overall picture.

Russia's Terror Tools

We've held that the terrorist attack on the U.S. was almost too perfect - in that the fact that we're still wondering where any plane parts are from the alleged airline going into the Pentagon, but that's not the point here.  What we're more concerned about is how quickly the Patriot Act came up all ready for rubber stamping by a Congress that was rushed into action.  It's against this background that I want you to read how the same tools of political control are being used in Russia.

First, we have Russian officials telling their countrymen how many more dangerous terrorists might be ready to strike them again:  http://www.mosnews.com/news/2004/10/29/patrushev.shtml

Next, we read that russia's top prosecutor wants to take hostages - in a role reversal kind of ploy: http://www.mosnews.com/news/2004/10/29/hostages.shtml

And last but not least - how Vlad Putin is consolidating power and may actually get his wish to appoint regional leaders instead of having to go through that messy election process: http://www.mosnews.com/news/2004/10/29/hostages.shtml

All sort of rhymes, don't it?  Except that  Vlad is doing consolidation of governors while Bush has done consolidation of federal agencies...

$4.00 Gas In November

I don't know if you have seen the raps running around the 'net, but it sure looks like the price of gas is set to take one hell of a jump right after the election, although it may hold off until the almost inevitable lawsuits challenging the outcome are disposed of.  That means $4 gas might not get here until December.  Inside Report this weekend look at some of what we can look forward to after next week.  Subscription Info

Somalia's New War

The idea of clan-based militias running a country doesn't work - as Somalia's latest fighting shows: http://english.aljazeera.net/NR/exeres/9BD710BC-103C-4237-9139-0BD5F8C32CFF.htm

Friday

How Growth Really Looks

The report out this morning is that growth was popping along at a 3.7% annual rate in the third quarter - a little weaker than some pundits were predicting, but a little better than what we feared.  the overview is at http://biz.yahoo.com/ap/041029/economy_4.html, but there's a little more to it than you might gather from just reading the headline number.  Let me explain: 

If you make 4% more goods and services at work, and your boss rewards you in keeping with output and you get a 4% increase in wages, are you getting ahead or behind?  The answer from the people's economist is that you don't know.  You need to know what is happening to the money supply - and whether it's being watered down by a printing press.  If the money supply is going up faster than the 4%, you are actually getting behind because things like a loaf of bread, or a six pack of sweat rewards will go up faster than your income.

Now, click over to the Federal Reserve's confessional about how the money supply has been pumped - and not to throw too much water on your pipe dreams of a strong recovery, but you'll find at http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt that from September of last year to September of this year, M-1, the narrowest measure of money in circulation was up a whopping 4.95% and that means we need to put in our pile of research projects reading up on how the GDP figures looked on a constant dollar basis.  That's where the real story lies if you'll pardon my insinuation.

All of while will be interesting to watch in the market action today which we expect to be...

One Last Pump!

The Bush administration can be expected to insure one last run in the market today.  The reason is simple: The better the market does today, the better Bush's chance of being re-elected next week. 

Remember 10,082 and 10,192.  The first number is where the market opened on the first trading day of October and the latter is where the market closed on October 1st. 

Although the aforementioned GDP numbers may cause a lower open, we expect the money to flow freely from the Fed today in an effort to get one last shot at hitting the 10,082 number.  The Bush crowd has been reading their market histories and believes, as best we can tell, that if they put together a winner for October (e.g. a big rally today or Monday) that they will somehow have a chance of winning the election.  On the other hand, if the market is a turkey for October, the thinking is that the market will be messaging a Kerry win next week and that will will set up a month (or more) of footsie in the courts over who will be the next Commander in Chief.

New EU Constitution

Not that it matters to you and me much, except that the EU is planning to be around for a while, but the new constitution for Europe has been signed: http://news.bbc.co.uk/1/hi/world/europe/3963701.stm

Missing Explosives Redux

If you've not followed the missing explosives story, it goes something like this.  There was an earlier report that 380 tons of explosives, some of which could have been used to jumpstart a nuclear weapons program, and all of which could be used against the U.S. forces in the region, were reported to have been stolen by enemy forces after the start of the Inraq war.  This was followed by Kinbg George's boyz saying no, the explosives were gone before the Americans showed up.  Then there was an assertion that Russia had something to do with the disappearance.  But then Russia said "B.S!" and that was the end of that rap.

Today, we find the latest is that a television station has film, taken after the U.S. forces arrived showing the missing explosives: NY Times Story.  This story is obviously not going to play well for the Bush supporters, who are all likely now trying to set the clock ahead so Tuesday gets here faster.

Daylight Savings Time

Don't forget this weekend you will need to set your clock back an hour (Spring - ahead, Fall-back is the adage.) as Daylight Savings Time goes away till next Spring.  The standard joke in the Ure family is to call family members at 3 AM and remind them to set their clocks back.  My head always hurts trying to figure out what time it is in Arizona which doesn't play the game.

O'Reilly Settles

There's a report that alleged TV personality Bill O'Reilly has settled the claims made against him by a female former associate: http://www.foxnews.com/story/0,2933,136997,00.html Although ratings are claimed to have increased 30%, it hasn't changed our thoughts about rude and interruptive interview techniques which hype the interviewer's opinion at the expense of more learned guests. But then again, who cares?

More on Little People

Dr. Pete Markiewicz of Indiespace.com says there's a lot more to the "little people" story of yesterday than might meet the eye - his email:

Hi George:

As a former biologist with a PhD in biology, I can tell you that the "tiny humans" story is profound, even earth-shaking. The 1-meter skeletons are not of little Homo sapiens - they are of Homo erectus, the human form 1 million years ago. The skeletons found are only 12,000 years old, meaning that there were TWO human species until very recently. In addition, "incredibly detailed" legends about these little humanoids indicate that they may have survived until 100 years ago.

In my mind, this is the kind of story comparable to finding out that the Earth is not the center of the universe, but instead orbits the Sun. We have long thought that humanity evolved due to a particular set of evolutionary pressures leading to our modern brain. But these mini-Homo erectus stayed primitive with simple stone tools for 1 million years, even surviving and co-existing with Homo sapiens. It means that humans are more like other animals than we thought - there were multiple species evolving at all times. It also means that an ever-larger brain was not fore-ordained - some accident causes us to double our brain size while the little people stayed at a level intermediate between us and apes.

I'd say that there will be a frenzied search through old legends of little people, particularly in harsh, isolated environments which favor the development of dwarf species. More bones will be found, midgets, and possibly giants. The discovery has made all the "bigfoot" stories more likely. And there is a ghost of a chance that we will find living Human species that are Not Us.

And there will be another, hush-hush search. If these bones are truely this recent, there is a small chance that some Homo erectus are living in the 21st century, deep in an Indonesian jungle. Nobody will want what is likely a tiny relic population to be destroyed - people are probably deployed now, looking for signs of "little people" of this kind. If they are found, it will be the greatest discovery of human anthropology - ever.

How would we react if they were found? Unlike racial differences, we would be in the presence of true "sub-humans" - too smart to put in a zoo but not able to co-exist with Homo sapiens. The implications are astounding - this truly changes everything...

All of which underscores a long held belief of mine that peer-reviewed archeology has led to a status quo which would deny curvature of the earth, given how it clings to the "don't rock the boat" approach.

Best Papers So Far

In response to our call for papers of yesterday, here are two real standouts:

I am a retired market strategist, technical analyst and developer of trading systems. Kindly do not identify me and I will be happy to share my experience.

 

Long term market analysis shows that one-third of the time a market (regardless if the instrument is stocks, bonds, currencies or softs) will trend, one-third of the time the market will be affected by cycles, and one-third of the time is undecipherable (what geeks call noise or perhaps the market is undergoing a transitional phase) when the wise will not trade.

 

The most common failing of market trading systems is that they take a run of some data usually without much regard if the period is truly representative and attempt to fit some signals (like oscillators) which may make some profits on their model, say for instance a 60% ratio of wins to losses and hopefully that the net loss amounts do not exceed the net profits. When market characteristics change these systems fail. For about ten years there have been adaptive models available. These systems continually analyze the markets and the trading signals continually adapt to changing market conditions. This is based on the simple fact that the most recent inputs are the most valuable, not for instance a cycle or trend that happened a long time ago.

 

An analogy would be a missile defense system that spots a missile tracking in a straight line for a period, and then the missile starts to turn. The most recent data is clearly the most valuable info for predicting the intended target or for that matter the trajectory of a stock, bond, gold, currency, etc. John Ehlers developed MESA or Maximum Entropy Spectral Analysis which has been tested as giving the best long term results as a trading model and which is based on algorithms similar to those used in complex systems such missile defense and seismographic analysis. T

 

he best results have been in bonds and currencies, though other instruments do well. There is a similar system for very short term traders. A few words of advice: Moving averages define the trend and oscillators such as stochastic, RSI, and MACD as signals work best when used with the trend. On other words if the trend is up, sell signals based on oscillators do not work well, and buy signals work well. In a market that is affected by cycles and the m/a's are flat both buy and sell signals work.

 

Needless to say if after some trending and an overbought or oversold condition has developed and if the m/a's flatten and oscillators diverge with price, look for a change in trend. The market usually sends signals that the unwary ignore. A perfect oscillator trading signal can be defined as a half cycle. If for instance the 18 trading day cycle (nine days up and nine days down) in stocks is the most prevalent cycle, a 9 day oscillator is perfect for timing buys and sells.

 

However any attempt to stay in tune with the market helps. If your analysis is off by as much as 20% as to cycle length the trading signals will still be efficient. If this has not already confused you, there are cycles overlaid on each other within a trend that are visible in the charts to the naked eye with a little practice. For instance within an 18 day cycle there can be 4 to 5 day cycles that you can trade if you are shorter term oriented, best done with the trend. Pattern recognition such as Japanese Candlesticks used in conjunction with the above gives good results.

A different reader questions my sanity asking about second-guessing a manipulated market:

[Market look ahead...] No less than six months?

NO LESS THAN SIX MONTHS?

George, PUT DOWN THE CRACK PIPE!!!!

The Stock market LOOKS BACK about 15 seconds. It's no longer a collection of savvy buyers shopping dividends and long-term holds. It's a cheap collection of two-bit whores, ill informed day-traders, and floor members darting around with pupils constricted, blood pressure in the stratosphere, and garish wardrobes straight off the discount rack of Ross or Marshall's. It's a herd of lemmings, a pack of swine, a school of sharks that goes into a feeding frenzy the minute there's blood in the water, but scrambles for cover at the slightest sign of danger. It senses...it acts...it decides....it's a living organism that instantly disseminates and reacts to whatever news of the day comes rolling down the pipe. It's an organization built on a facade of servicing people that buy-and-hold, but is ruled by specialists and floor traders whose vision for the future starts at the end of their nose, and goes no farther than the days closing bell. But crazy as it seems, it's probably the best example of a free-market, no-holds-barred capitalism that can be observed on terra firma. Greed fuels buying. Fear causes selling. The news of the day produces the mood of the moment.

Want to predict the market? Learn to predict the news. If you can predict the news, you can predict emotions. Until you can do that, all the weekly fractals, credit cycles, and devaluation days from here to kingdom come won't tell you sh*t....

My two cents...

On that, time to roll up my sleeves and go add some real value to the economy... more Saturday morning about 10 AM Pacific.  Inside Report should be up by Sunday evening 6 PM'ish Sunday evening.

One More thing: Guide for the Confused:

From an email:

I'm just a novice, but you seem to be contradicting yourself. If my memory serves me correctly, earlier this week you made a beer bet with someone that the market was going to tank 1,000 pts by election day. This morning you're claiming rally by the Bush party without any mention given to your earlier bet. Obviously, we now can see which is correct. What did you see that caused you to believe the 1,000 pt loss was a real possibility in the first place? Also, you said you were on crash alert until election day. You have totally reversed your stance within the period of less than 1-week! What was your basis for the crash alert?

Let me explain as follows:

1. I have lost the beer bet in the event the market doesn't dump 1,000 points Monday. I believe this is a manipulated market which is why I'm no longer day trading.

2. Short Term the GOP really needs 10,084 or better by today's close - looking somewhat doubtful, though.

3. The crash alert is usually a two week thing - which will place us past election day - and some work says crashes happen 7-8 weeks after eclipses, so it could be dicey through year end.

4. The Fed meets on Nov 10th and a lot will depend on Wrong Way Al and his Knights of the Fed Table.

The basis for the crash alert is our declining trend in the Aggregate Index (see bottom of page) which has failed to break out to new highs, which leads us to expect the old lows to be taken out in the near future.  Hope this helps?

Thursday

Shades of Saigon

In the Arab press we are seeing more and more reports (along with the media literate rest of the world) showing how the U.S. forces around Baghdad are being supplemented in every possible way with additional forces from America's Allies.  Most recently, British troops pulling out of the South of the country and heading to defend the "green zone" http://english.aljazeera.net/NR/exeres/9BFFDC51-685A-4219-8AB8-673A0B0BEFE3.htm

The US forces around Baghdad are being pushed West and North for major offensives - as the efforts to keep the war moving forward - instead of back - are running on tough times. 

We do have to admire the Bush administration's ability to manage the attack on gold and oil prices and keep a pretty good lid on a number of items, such as the changing character of the war.

Blaming US forces: Meantime, interim prime minister Iyad Allawai is blaming the US  - in part - for the attack that killed something like 50 Iraqi National Guardsmen: http://english.aljazeera.net/NR/exeres/9300417E-5EB8-4A68-BD3F-AFCCBA408E64.htm

Explosive Remarks

this battle over explosives in Iraq has been really interesting.  First reports said the US troops going into the country lost them, then we have the US press being spin fed the idea that the explosives were gone before the U.S. got there - and suggesting that Russia had a hand in the explosives disappearing.

So now comes Russia saying "Hold on a minute, Bush....not us"... and demanding weapons inspectors go back and find the missing bomb making materiel.  http://www.mosnews.com/news/2004/10/27/iraqscandal.shtml

The more conspiratorially minded would point as this and yell "Wag the Dog!  This is why we are bogged down in a Wag the Dog war  - to keep people accepting of a government taking a fascist turn"  But of course, being polite, we would never utter such obvious connecting of the dots.  Especially when the Emperor's return is less than a week away.  All Hail!

Election Foreplay

The scene is Florida - and already we're watching what is likely to be foreplay to the challenges to this election yet to come.  58,000 ballots which were to have been sent out to voters have somehow not been delivered yet (only about 2,000 have). http://news.bbc.co.uk/1/hi/world/americas/3960679.stm Police and Postal Inspectors are on the case, but more than anything we look at this not even the "h" of this election's "hanky panky."

Poll-ish

After our little expose' yesterday on the potentially huge October surprise coming to the major national polling organizations - that they ignore the growing number of us young urban folks who no longer have a telephone line - and thus aren't polled - we thought we'd pass along this update on the last days of silliness... http://www.realclearpolitics.com/polls.html If you think it matters.

More Hollow Threats?

We certainly hope the latest "We're gonna get America" tape from Islamic extremists is more hype than fact.  ABC News is asking the government to look into whether it is real or not: http://www.reuters.co.uk/printerFriendlyPopup.jhtml?type=worldNews&storyID=610615

Arafat's Exit

We note the ill health of Palestinian leader Yassir Arafat.  Story But we also remember that he is a cold blooded terrorist who wrapped himself in the mantle of a "diplomat" to avoid what should have been his fate for masterminding the PLF attack on the cruise ship Achille Lauro. http://en.wikipedia.org/wiki/Achille_Lauro And then there was Black September 1972 and another terrorist event at the Munich Games - with you-know-who lurking suspiciously close to the surface of that event, too. While we don't usually second-guess the Nobel Committee, we not that Arafat shared a Peace Prize, something we're still struggling to reconcile with the facts. But we remember that the devil you know is sometimes better than the one you don't know.

Mirroring America

Have you noticed how much the Russians are operating like the United States lately?  For example (I mean beyond the parallels of the 9/11 incident and the Beslan school disaster).  We have the head of Russia's court system saying the country is not following its own laws: http://www.mosnews.com/news/2004/10/27/courtcorruption.shtml Gee, let me see: seizing an oil company because it is not under control of the Western cartel of oil execs?  Yah think that's corruption?  Aw, come on guys....I gotta wonder if this guy is the Russian version of Elliott Spitzer -

Market Hype Arises

Still more froth yesterday as the Dow headed back to the 10,000 level.  When I look at the Aggregate chart, it looks like there could still be a bullish outcome, but you won't see me being the first to buy because of all the lawyers waiting in the wings to take whatever the outcome of the election is into the courts and I am starting to place a few selected bets that a) the election won't be decided till Turkey Day (which might fit). 

When I look at the longer picture, this "kissing the bottom of 10,000" a second time seems to be a set up for more downside, but I haven't taken my meds tonight (just kidding...)  Seriously: Strong hands to weak and just in time for another downdraft unless the declining trend line is broken in a convincing way.

Bad Hobbits?

The remains of a small - almost dwarfish - human have been found:  Story  At that size, we wonder if the discoverers checked around for a pot of gold in the area...

Call for Papers

I'm inviting all readers to weigh in on a particularly vexing problem of the markets, which is driving me nuts (and has been for a long time). I've been trying to build a rule-based trading system for myself for the longest time, but I'm stymied by the slippery definition of how the market really operates. The problem may be stated this way:

"The stock market is a "perfect market" in that it looks at all presently known information and projects the market's value well into the future, perhaps as much as 18-months, but certainly no less than six months."

Here's the problem with this definition:  If the market is really looking out 6-18 months, then the almost trivial news about musical chairs among insurance company executives should not have caused any appreciable market movement, yet this week it did precisely that.  With minutia moving things up 300 points, we have to ask "Can the market have it both ways?"  That is to say on the one hand, pretending to be a predictor of  longer term performance, while on the other, appearing to be a "for the moment" market comprised of wildly greedy people playing all playing the game of "greater fool."

Submitting a paper means you approve whole or partial posting and you're the original author...

Click here to submit your thoughts.  Thoughts contained in the submitted papers may help us all design better rule-based trading plans.

My own thought is that the reason the market acts "both ways" is that the time horizons of the various players are different.  Yet the analytic approaches presently used don't specifically look at the market as multiple time domain agents acting discreetly (such as the three time domains represented by day traders, 5-week swing players - the monthly options crowd, and the buy now and hold till death long term investors, for example) and reported (and therefore analyzed) in the composite.  As a result, when we have rallies like this week's, the most profits would be made (in descending order) by the day traders, options players, and long term buy & hold players. This gives us some direction in design of a model but the specific dynamics of the time domain interests is quite obscured by the composite reporting mentality.

Wednesday

Why Polls Don't Matter: Kerry 68%

From the author of the web bot project and Vortex xStream reading software, an interesting perspective: Polls prior to the election no longer matter.  Here's the low down:

"Pollsters only poll landline linked people a 'la 1934 when the system was devised and at that time was 'cutting edge' ...but now, as they have no access to the numbers, the pollsters do not poll anyone/family who is cell phone only based. This accounts for a huge proportion of the registered voters as the demographics driving cell phones do point to younger, more urban/urbane, more centered in the constantly emerging fringe (actually the place to be, as my pappy used to say, 'boy, you don't want to be fishing in the middle of the river (eg. mainstream) as that is where *all the dead water and driftwood is, the only place to catch an exciting thought/fish/phish is out there at the far edge of the far bank") but I digress.

The demographics of the cell phone primes (primary phone lines in telco parlance) are heavily anti-Bush leaning, and is notably, within this generationally segmented demographic that both the Howard Dean Internet based campaign, and the phrases of the current milieu were born.

It would appear from all the evidence that the pollsters are actually reporting the most heavily polarized generation (m/l) cohort, as this is the group that they are primarily reaching, baby boomers (and their surviving parents) no one polls the current-kinder except at the edges of their generational contacts, such as college connections where larger groups are reached in a more cost effective manner.

So, that having been said, our research sucking out the huge amounts of verbiage from the net (yet another primary intellectual/communicatory habitat for the cell phone primes) shows us a gigantic gap, lexically speaking. That is the anti-bush words are out numbering the pro-bush words at 2.3 to 1. Further, the emotive values summations that led to the discussion of the cognitive dissonance suggest that Kerry will win with a popular vote margin near 68%. So, given the above, it would appear to be Kerry nearly two to one over Bush. We'll see, but linguistic analysis has been surprisingly predictive in the past.

Election All A Side Show?

Also from Cliff (Vortex xStream and Web Bot project designer):

"The strange things: Have you seen what is happening in Japan? with the continuing quakes? Large amounts are now/still flooded. and the landslides are continuing, millions affected, bullet train out of service, country sliced in to mostly non-communicating/able chunks

earth disintegration heading our way?

think pipelines and electricity. Now Japan has/is/continues to be shaken back to a previous age....their govt is generating a huge amount of activity and just getting no where as the infrastructure continues to deteriorate

Google yourself a few articles from like Asia daily or whoever... but be prepared to really get freaked

The headlines that a major storm will hit the Bible belt over election day http://www.nco.ncep.noaa.gov/pmb/nwprod/analysis/namer/gfs/18/fp1_150.shtml has prompted us to write to TV Weatherman Scott Stevens and ask him for comment - we'll keep you posted on his reply - but remember where you heard it first - extreme weather (very pro Republican) rather than good weather (which would help Kerry) over election day.

Bush Camp Censoring 'Net?

Check this out:  "Surfers outside the US have been unable to visit the official re- election site of President George W Bush.  The blocking of browsers sited outside the US began in the early hours of Monday morning.  Since then people living outside the US trying to look at the site simply got a message saying "access denied".  The blocking does not appear to be due to an attack by vandals or malicious hackers, but as a result of a policy decision by the Bush camp. "

More: http://news.bbc.co.uk/1/hi/technology/3958665.stm 

Heck, that puts us in the same "freedom of information" mode as...er....The People's Republic of China!

If you're a republican, remember, we predicted Bush would win the election (one way or the other) back in May of 2002 - when we were the first media to officially crown....no, make that name him the winner.

Lammert Weighs In

We'll know more in a day or two if this is "right on" - but here's his latest:

"George, Today was the last limit day in all of the four synchronized weekly credit cycles. Based on the characteristics of preceding fractals I had picked this past Monday and Tuesday as devaluation days to end precisely with the 2.5X time limit. But as noted in a previous piece, the peak day for the last 152 trading days was exactly at the 2.5 x limit, or 100 days, of a 40-day base. Perhaps this prior daily fractal information was foretelling in that the four different weekly bases would likewise go to their respective 2.5 x limit. I still hypothesize that a major devaluation will occur very shortly after this saturation limit and it can be expected to occur precipitously. I do not believe that the overall equity valuations are a random walk. The fractals especially in contracting cycles, and especially in well monetized high interest stocks and indices, are plainly too perfect- much, much too perfect, to be coincidental. Why are contracting credit cycles predictable while expanding credit cycles predictable, but to a lesser degree? Growth and decay fractals in contracting cycles are under the predominant forces of bad debt, which serves as an upper limit to the valuation growth of markets. This bad debt limit squeezes and forces the fractals into specific patterns. On the other hand, in expanding credit cycles where there is some, albeit range bound, variability in the rate of credit expansion, (which exceeds the effects of the integral of ongoing bad debt load), the fractal patterns of growth, saturation, and decay will have a small degree of variability reflecting the small variability in rate of credit growth expansion. Restated during overall expansion phases, e.g., 1932-1947, 1949-1972, and 1982-June/July 2000, the small variability in rate of credit expansion during these time periods would make the fractal analysis, to a small degree, less predictable. As well rotation of funds into various stock groups by fund managers will cause caricatures of individual equity fractal patterns.

In bad debt dominant contracting cycles, regardless of attempts by governments' federal banking systems to expand credit by adjusting interest rates to lower levels, the weight of this bad debt, that ultimately must be resolved via partial repayment or default, is a limiting factor on the total amount of expanding credit available for investment. Even in a contracting cycle, dependent on the investor interest and therefore credit availability to a particular market, e.g., the AMEX, individual markets may reach new highs. However, the summation, i.e., integral, of all credit available to all domestic and foreign, bond, commodity, and equity markets are ultimately limited by bad debt in contracting cycles. And a summation world index as previously discussed will ultimately show saturation, followed by rapid and predictable devaluation. I still believe that the devaluation fractal pattern will be readily identified retrospectively. I currently believe we are in a devaluation pattern and have another estimate, which is in an extremely short time frame, of a potential bottom.

Should all the major indices exceed their previous highs of 4-13 days ago, my hypothesis is incorrect, and because of the economic ramifications, there will be no one more pleased than myself.

I intuit that earlier in the year, US short term treasuries began to rise, not because of the Federal Reserve's intention to raise them during an election year (which politically is obtuse) even in the face of understated inflation caused by higher commodity prices - but rather because the overall bad debt load relative to the number of dollars available, forced prices higher. Because most of the US debt has been transformed to shorter term notes, the effects on 10 year notes and the 30 year bond with less active funding requirements have been subdued. As I stated in an earlier piece the market was the dog; the Fed, the tail. In my construct bad debt load serves as the limit for all markets and makes fractal analysis predictable in contracting cycles. G. Lammert

A couple of readers have dropped us notes saying they don't quite understand how Lammert is working out his fractals.  Here's a typical note:

"Hi George:

limit day ? weekly credit cycles? preceding fractals? devaluation days? 2.5X time limit? major devaluation? bad debt? fractals into specific patterns? integral of ongoing bad debt load?

This guy must have wood chips in his teeth from admiring the underbrush. Exactly what forest is he talking about here? Devaluation of what? Fractals?, used to be called waves by Elliot people? He seems to give no clues whatsoever about what he is talking about in laymen's terms.

I only have limited post graduate education."

Let me see if I can shed a little light here.  Lammert has been working on fractals that describe how the market can operate over time using multiples of hours from various points.  From this, he implies when a market will become saturated (e.g. when the buyers will disappear in an up move, or when sellers will disappear in a down move.)  It's a little different than Dynamic Gann Lines ( references ) but that should get you thinking.

Remember now, there are three ways analytics can look markets:  Yoiu can use a price target approach, a time and price integration (Elliott etc) or you can do time only - and in this regard, Lammert's work is 8unique because so many people have tended to dismiss time-based techniques.

Because this is October 27th, I can now reveal what the hourly counts were that he sent in two weeks ago and that I sent to three readers to hold until today.  Here's what the picture was like 2- weeks back - and remember this is hours of trading:

Lammert prediction October 12, 2004 1033 PM

Overall decaying hourly NASDAQ hourly sequence X - 2.5X - 2X

Starting Wednesday 6 October (Saturation Day) -starting the 2nd hour of trading: Overall hourly sequence to low: 21/53/42 (Count each hour on the chart)

Three hourly cycles down:

First cycle down :5/13/5 = 21 (double counting, see synchronization paper)

Second cycle down: 11/22/22 = 53 (hours)

Third cycle down: 12+/31 = 42 (hours)

Obviously, there is some error whenever you deal with markets on a strictly time basis - something recognized by Gann and it's why DGL adherents use price, not time.  But this approach is interesting and I'll be asking Lammert to explain it in a little simpler language in a paper which I'll post here (or possibly on its own page) as a new way of looking at markets.  Most market systems are either price or time and price driven (like Elliott and DGL's).

The futures are weighing in toward the downside, but yesterday's market action seemed hardly pure "market player expectations" working out and we have to wonder if that wouldn't screw up a well-reasoned attempt to using a time-based system of analysis.  To us, yesterday's trading looked to be...

[Pinch me, please!]  Manipulated to Extremes

I don't know if I have ever seen such a fine job of yanking the market's chain, and the public's in turn,  as what happened on Con Street yesterday, but here are the high points:

• Consumer Confidence has fallen on its ass - not a good thing, especially because Christmas is already looking about as reliable as a Yugo with 200,000 miles on it. http://biz.yahoo.com/ap/041026/economy_12.html This is the third month of declining confidence in a row.  Am I a lone voice of reason on this?

• The 10th biggest airline in the country, ATA, has filed for bankruptcy protection: http://biz.yahoo.com/ap/041026/ata_bankruptcy_9.html

• Oil prices are back over $55  http://www.stuff.co.nz/stuff/0,2106,3077781a13,00.html because of winter supply fears.

Now ask yourself, "Would anyone but a crack head buy equities in this kind of market?  Even if an insurance company got a new CEO (big whoopee). Sure, if the money to buy them with was free...and it might well be.  Check and see how much money the misnamed "Fed" and the plunge protection team will inject this week with just two goals in mind.  First, to insure the reelection of Frat Brother #2 (Bush) over the Frat Brother #1 (Kerry) who swore him in  at the Skull and Bones Club at Yale.  The second reason was to screw over any analyst worth $0.31 who can read that the market should be short.

On a more rational planet, gold would not be dropping,  the Dow would not have gained 139 points, and nothing but the XAU should have advanced under such weighty bummers.  If we were living 100 years ago, and someone tried manipulation like this, chairs would be pushed back about here and people would be reaching for the six guns.

Please, God, pinch me and tell me I'm asleep and the market is a bad dream.  This is prexactly (an Elaine word) why I swore off day trading after losing a Lexus' worth - because as the people's economist, here's the real simple formula that explains yesterday's action:

M_m = S_i -C_ash

Here in simple economics land this is read: "Market Manipulation leaves Small investor minus his cash

There's another formula in play, too:

If M_m> W_l and M_h>10,000 then M_m=P (SS_pL) = ~100%

If Market manipulation is greater than war losses,  and Market hype keeps the Dow over 10,000 on the Dow, then Market Manipulation equals odds of Passing (Social Security Privatization Lie) at about  100%.

In other words, we're witnessing a frenzy to sell the idea that the market are a good place to park money.  This feeds the cockamamie idea of privatizing Social Security which has has nothing to do with your money, but has everything to do with getting Chief Bankster Al Greenspan and his Knights of the Fed  Table off the hook for the theft of America's Social Security investments in the misnamed "Social Security Trust Fund."

If you believe Social Security is a "Trust Fund", can I suggest a pee test and counseling?

"Trusting" politicians around money is like sending a couple of ewes into a sexual offenders ward. Although as Elaine notes, while the outcome may be similar,  the ewes don't talk back like we do.

I have a statement (which you can request for your own account) about what Social Security will pay me when I retire. (They send it every 6-months or so.)  The reason I have been saving statements is that I view it as a contract - and I would suggest that you get your earnings history and promises in writing from these folks. It will be important down the road.  If the American economy really tanks, you'll something in writing from the government to argue when there's an attempt to cut benefits. They have in effect, given you a statement of account.

The reason why this aspect of the presidential contest is so important is that The Chairman told the Kings of the Fed Table earlier this year that:

"In 2008--just four years from now--the first cohort of the baby-boom generation will reach 62, the earliest age at which Social Security retirement benefits may be claimed and the age at which about half of prospective beneficiaries choose to retire; in 2011, these individuals will reach 65 and will thus be eligible for Medicare. At that time, under the intermediate assumptions of the OASDI trustees, there will still be more than three covered workers for each OASDI beneficiary; by 2025, this ratio is projected to be down to 2-1/4. This dramatic demographic change is certain to place enormous demands on our nation's resources--demands we almost surely will be unable to meet unless action is taken. For a variety of reasons, that action is better taken as soon as possible.

The budget scenarios considered by the CBO in its December (2003- g) assessment of the long-term budget outlook offer a vivid--and sobering--illustration of the challenges we face as we prepare for the retirement of the baby-boom generation. These scenarios suggest that, under a range of reasonably plausible assumptions about spending and taxes, we could be in a situation in the decades ahead in which rapid increases in the unified budget deficit set in motion a dynamic in which large deficits result in ever-growing interest payments that augment deficits in future years. The resulting rise in the federal debt could drain funds away from private capital formation and thus over time slow the growth of living standards." http://www.federalreserve.gov/boarddocs/testimony/2004/20040225/default.htm

This is the slow-motion politics behind how they are making plans now to steal your retirement from you.  The choices include a) enticing you to put it into a roulette spin (the stock market where they are the "house" which is why I'm out) or  b) steal it through inflation (my $1,800 a month doesn't mean a thing if bread is $6.00 a loaf and gas is $12 a gallon).

As usual, the election is not about the issues you hear about, but the ones you don't - and this is just the first of many.  Elaine thinks we ought to ask about the minimum wage which hasn't moved in how many years?  But I've got her chilled down - because I point out this is prexactly why the border with Mexico is now effectively 200 miles wide and why Bush and buddies are keeping their real estate crony contributors fat with slave labor from Mexico.  But that's another rap. Let's move on to nepotism:

Son of Powell

Daddy's boy - that's sort of how Howard Stern seems to be casting FCC Chair - and son of Secretary of State Colin Powell as the battle of the fines continues.  If you've been living under a rock, the FCC has cleared the channel for corporate American to centralize (in Soviet fashion) control of what you hear and see.  Stern tripped over the "standards" and has been punished.  The story picks up with Powell being interviewed on KGO and Stern calling in... LINK

"It is apparent to most of us in broadcasting that your father got you your job," said Stern, who called in while Powell was being interviewed on San Francisco's KGO-AM 810.

Powell shot back that his father, Secretary of State Colin Powell (news - web sites), had nothing to do with his appointment. The FCC (news - web sites) chief was nominated to the commission by then-President Bill Clinton (news - web sites) and elevated to chairman by President Bush (news - web sites). "

Damned if I could find Powell's resume. I've been fairly (and balanced) open-minded toward the FCC till the broadband over power line proposal got sucked into corporate cronyism over public and technical comment opposed. 

If you want a really good source of information of the corporate take over of the open public air, go check out some history in Broadcast Engineering, a publication I subscribed to back in the day when I was engineering in broadcast circles: http://broadcastengineering.com/news/broadcasting_ownership_critics_vow/

Oil Picture Really Worse

There's a very good article in the Wall St. Journal this morning by reporter Russell Gold that says what we told you to expect a number of weeks ago - that the underwater damage from Hurricane Ivan was a lot worse than reported.  Although rumors of huge oil spills around the gulf of Mexico did not prove out, Gold's enterprising piece today includes gems like this:

"The storm, which some oil traders and analysts have taken to calling "Ivan the Terrible," is shaping up as one of the worst disruptions ever in U.S. energy production. It has knocked a total of more than 25.1 million barrels of oil off world markets -- and continues to hold back more than 400,000 barrels a day. That is 25% of the gulf's normal daily production of 1.7 million barrels a day. It could be six months before all the production can be restored.

This sudden shortfall has helped drive crude-oil prices up, to $55 a barrel today from $43 a barrel before Ivan hit on the night of Sept. 15. The hurricane's body blow to the gulf came at one of the global oil industry's most vulnerable times in recent years. Surging demand for oil in China, supply outages in Iraq and other troubled nations, and years of underinvestment in oil production have left the world with its thinnest buffer of spare oil-pumping capacity in decades -- about one million barrels a day, or 1.2% of global oil demand. The prolonged loss of more than 400,000 barrels a day from the gulf left world energy markets perilously close to a shortage.

See our first pass at this on our weekly summary for the week ending September 18th at http://www.urbansurvival.com/nl09182004a.htm

Discriminating Weapons

There's a new report out from the British that raises the fears of biologically selective weapons - that is weapons that will hunt and kill based on DNA.  See the story at LINK.   Although we thought some of the "pipe dream" reports of this kind of technology were far out into the future when racial weapons were discussed 20-years ago, with the advent of AIDS disproportionate impacts of resource rich Africa and the recent advanced in DNA work, the problem is right here, right now.

Hot Border Rethink

President Musharraf of Pakistan has proposed that Pakistan and India jointly share responsibilities for ruling a demilitarized Kashmir region.  http://news.bbc.co.uk/1/hi/world/south_asia/3955341.stm While this seems like a good idea on the surface, both sides are likely to have trouble with the concept because it involves cooperation and power sharing.  Although it's a step down from asking Dick Cheney and Osama bin Laden to agree on demilitarizing oil zones, it's about as difficult a task.  Admirable and unlikely.

The Day After

This weekend, Inside Report, our less rabid and more academic premium content service looks at what to expect the day after the election - about a week from today:  The minds are about all made up now, and barring a last minute terrorist attack (which is unlikely because it would drive supporters to line up behind Bush -meaning if there is such an attack, it would likely be a false flag operation) the election has already been decided.  So now we need to focus on aftermath.  Subscription Info.

8:45 AM (Burbank Time)

Hold Everything!

A buddy of mine just sent me the link to the best dig at jobjacking in the computer industry I have ever seen on the net.  It's a Flash piece, "Tech Support has changed..." from Ill Will Press - and you will need audio up to hear the conversation.  And, if the occasional four-letter word offends you, better not click this.  But if you've been chewed up and spit out by the U.S. corporatist machine, you'll love this:  http://www.illwillpress.com/tech.html  I'm still laughing at the truths contained herein.

Islam's Other Front

Although 90+% of Muslims are quiet and peace-loving people, there's this continuing problem with Islamic militants which appears now in Southeast Asia. And overwhelming force is being used against them. In Thailand, for example, 78 people have reportedly died in under-reported clashes with government - and died under questionable circumstances: http://news.bbc.co.uk/1/hi/world/asia-pacific/3954587.stm  Thailand may not have the  oil resources, although it's got a drug trade, for sure. And in the "religious war" with narcodollars and petrodollars the prize, places like Thailand will keep popping up in the "war on terror."

Right on Target - Again

I'm almost a bit reticent about putting the extra effort and research into our Inside Report series (which pays for the electric bills and keeps the lights on at the server farm), but this is almost like I am scripting the future.  This week's Inside looks at the possibility of the return of a "new and improved cold war" based in part on our theory that a 30-40 years long Manufacturers Resource War is underway here as we are either a) before, b) at, or c) about to hit Peak Oil.  One of the things we spoke of on Inside was the possibility that the end of the Cold War could be the "fake out" - Trojan Horse move of all time.  And now, almost as if right on cue, comes this report out of England saying that Ruskie spying is back to Cold War levels:  http://news.independent.co.uk/uk/politics/story.jsp?story=576076

32 Russian diplomats trying to get sensitive or secret information about Tony's spy machine and top secret oil deals is more than a twiddle, I'd say, eh?  Sounds more and more like a well-orchestrated attempt to subvert the West - which when coupled with Russia's threat to accept Euros is even more bad news for the West.

"Wanna Buy a Nuke?"

Those long discussed Russian small man pack atomic weapons are back making headlines in Russia - where a businessman is claiming that he helped to foil a planned sale of a nuclear backpack.  But, as you'd expect, without a weapon being produced to prove the story, it could be real or it could just be a businessman's blustering: http://www.mosnews.com/news/2004/10/25/berezovskyplot.shtml We'll leave it to you to make your own mind up over what it is.

The Low Today

If our fractal expert is right, today should mark and intraday low that will go into the books.

Monday 25 October 2004 850 PM

George, thirteen (15 minutes) time periods left to bottom.

In addition to the three contracting credit cycles noted in the 14 September piece on the synchronization of contracting credit cycles since 1998, one additional contracting cycle has been identified as starting in September 2001. This cycle is 46 weeks in length and overlaps by 2 weeks the following cycle of 34 weeks which serves as the base of the current 85 week growth cycle. All of these four cycles, the first cycle starting in October 1998, are at their growth limit of 2.5 (x) with respect to their weekly bases (x). While it is possible that the devaluation will be contained in a small fraction -less than 0.5 percent- of the total second cycle immediately following the 2.5 (x) limit, there are several pieces of fractal data within the last 5 days and last 151 trading days implying that the decay will take place and a bottom will be made within the next 4 trading hours. G. Lammert

Later on this week, I will ask the readers who have been holding the G. Lammert predictions of the fractal hourly divisions for about 2-weeks to report in and attest to their authenticity - there are only two of them - but I reckon it's enough to establish that the low will be set today. 

All Fine - Except I had a dream overnight (with included a chart) and it had a bounce starting today or tomorrow lasting until around election time.  Now please appreciate that while I do think about the economy a lot, and the markets a bit less because I've sworn off day trading, my dreams don't usually include spreadsheets and dreams.  This was the first time in my life I have dreamed a chart - it was kinda weird.  Here's what it looked like:

I got the distinct impression that the blue arrow which was unmarked was where we are today (or will be sometime today.  This dream chart had a red line clearly showing a right shoulder formation and blue lettering on the chart that said "Do not buy longs here." As the red line continued to the right, it was down, down down...and I found my (dreaming) self saying, yeah, but could I buy shorts?  A rally here would tempt me sorely into the "catch falling knives practice" of calling tops.  Quick, pinch me.Am I awake yet?

Quake Imminent?

The one thing that I am holding back as a possibility that Lammert's work will be invalidated is that we still have a couple of things suggesting that we will have a 7.4 earthquake in Southern California over the next week or two, with the highlighted zone of potential coming up this weekend.   Not only has web bot (and Vortex xStream) inventor Cliff come up with a warning that several Japanese scientists are seeing the possibility:

they point to extraordinary tides.

say maybe worse than what already hit...

also say, they think it may hit ca this time instead of nippon as the tidal forces will be more easterly directed due to lunar eclipse..

But we also have a highly respected earthquake predictor who has been posting over at the http://www.syzygyjob.net/  site forecasting something big enough that he's sent a first-ever warning to the Governator's office here in Shakyfornia warning of the disaster.

Because E & I like to be on the leading edge of things, I passed out dust masks to the folks at the office on Friday of last week, we have some in the car, and we have a set here in the apartment where we're holed up in Burbank till the corporate dust settles a bit and we can move into more permanent digs out here. 

Write this down somewhere:  The next two weeks, and 7.0 and - as the now turned off web bot project predicted - a twin-quake which will leave 300-thousand people back in the "previous age" which we interpret to mean without power, and it's why the SSB ham radio will be on 14.215.

Request:  If you are a ham radio operator and you hear a report of a California quake in the next week or two, please dial up on 14.215 +/- qrm and listen for the not too weak AC7X/mobile because we will be trying to get a lot of telephone calls handled to friends and relatives, and besides it will be fun knowing what's going to happen in advance to get the word out to people that "yeah, it's all good," should something come of the predictions.

More thoughts: We had a lot of rain here in SoCal last weekend and I have always believed that rain turns the substrate into something more slippery and coupled with extreme tidal motion, it's good to be prepared.  Did I mention that I don't give investment advice, but if I were I would not be holding insurance stocks now, even though some are cheap follow the 'canes and the Spitzerizing?

The big storm due to hit the LA area today (and tonight) could bring as much as 4 inches of rain to the hills east of the city.  Even then, I won't get too worried about an imminent quake until I get really sleepy.  That's what happens to me before  a major quake, like the Seattle quake - I get extremely sleepy 1-2 days before - so I will let you know if I get that feeling again.  Remember spring fever when you were young and could barely keep your eyes open in 5th and 6th grade in the spring on a warm day?  That's the kind of tired I get.  And, I will be looking at lost animal reports, which go up before big quakes, for sure.

We're  holding our favorite LA Gold Trader out to public humiliation to get him (and his wife!)  to hurry up and get their ham licenses done.

Alternative Medicine: Move!

Our article (below) about the East Coast general surgeon who was facing the prospect of quitting his practice in the face of a $130,000 annual malpractice bill, we think the reply of a thoughtful dentist in rural Illinois might be useful:

"After reading your site about your advice to the physician who is considering leaving practice due to expensive professional liability insurance, my own situation came to mind. Thirteen years ago, I relocated my dental practice from the Chicago suburbs to a home based practice outside a small town in NW Illinois. My wife and I operate the practice with a 30% overhead and no employees out of our home about 2 miles out of town in the country.

Since the relocation, I spend much less money on malpractice insurance, gasoline and office rent. We are considering whether to purchase and install a diesel generator/inverter/battery bank system that can run on soy diesel, so we can have power if the grid becomes less reliable in the future.

I believe it was Thoreau that said, "Simplify". It works for us.

Love you site,    (Thanks!-G)

(name witheld), DDS

We bought our "fall-back" position on the ranch for exactly the same reason - because we recognize the importance of living within one's means. Boy, talk about the out-of-vogue concept, that's the capper, isn't it?

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