The Leaves Won't Be The Only Thing To Fall! (Market Crash Prediction)

321Gold ^ | Oct 17, 2005 | Enrico Orlandini

[Travis McGee]

The October Newsletter The Leaves Won't Be The Only Thing To Fall! Enrico Orlandini Lasco Report 17 Oct, 2005

We're heading into that time of year where the word "crash" tends to command a bit more respect among market specialists, i.e., the months of October and/or November. Maybe it's just a coincidence, but I see an ominous cloud on the horizon. Actually, I see a large mass of clouds and they're as black as night. Anyone who's invested in the stock market over the last three or four years has little or nothing to show for it and, if you're still invested, you can't be feeling too comfortable right now. In short, a simple saving account would have been a better investment. Then again, when you buy into a market that's selling at 20 times earnings and paying a miniscule 1.75% dividend, what can you expect? Two weeks ago I warned my clients about the "probability", not the possibility, of a crash. What did I see that made me so worried that I would crawl out on a limb all by myself? Frankly, there were and still are any number of warning signals, and I would like to delve into some of them in the space provided below.

The first such warning sign comes from the market itself. Focus your attention on the following daily chart of the cash DJIA and follow along:

Lots of charts and analysis follows, HERE

[wbill]

Three years ago, when I had to find another job......

I started looking about 1-1/2 years ago. Nothing. No one would even return my calls.

Someone hit a switch over the summer. I got about 6 or 8 interviews and 3 offers all within the same month. And, these were real offers, not 'Amway'. :-)

The rest of my team was roughly in the same boat that I was in - they've all found jobs (some locally, some not) within the past 3 months, as well.

The new place that I'm at is looking for some senior tech people - can't find any that are worth a flip. The good people are staying put, or commanding a premium salary.

Locally, the economy is fine. Gloom-and-doomers can get stuffed.

[#1CTYankee]

President "Bobby": Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?

[Long pause] Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.

President "Bobby": In the garden.

Chance the Gardener: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.

President "Bobby": Spring and summer.

Chance the Gardener: Yes.

President "Bobby": Then fall and winter.

Chance the Gardener: Yes.

Benjamin Rand: I think what our insightful young friend is saying is that we welcome the inevitable seasons of nature, but we're upset by the seasons of our economy.

Chance the Gardener: Yes! There will be growth in the spring!

Benjamin Rand: Hmm!

Chance the Gardener: Hmm!

President "Bobby": Hm. Well, Mr. Gardner, I must admit that is one of the most refreshing and optimistic statements I've heard in a very, very long time.

[Benjamin Rand applauds]

President "Bobby": I admire your good, solid sense. That's precisely what we lack on Capitol Hill.

[Cicero]

True, except that much of the upturn in commodities is probably due to huge and rising imports to China and India. They, in turn, rely on us to buy their products. American industry is doing reasonably well at the moment, at least what is left of it, but there are some ominous signs there, too.

[Toddsterpatriot]

The primary trend for the next 8-10 years is down, you and I and our wives and children each owe $40,000? to some foreigners we don't know

Sorry, my family doesn't owe anything to foreigners.

retail buying just fell off a cliff,

Is that the technical term?

interest rates are going to go up another 3/4% in the next three months

Wow!! So they'll be at Jimmy Carter levels?

they are DOUBLING the minimums payments due on all outstanding credit card balances

Wow! Sounds series!

and the guy I voted for wants to spend $200 BILLION to renovate a swamp.

Nobody is perfect :^)

I wish I was wrong. Every time gold goes up it means that the greeen pieces of paper in my wallet have LOST VALUE.

So those dollars have done pretty well since 1980 then.

[Travis McGee]

REITs? You think NOW is a good time to invest in REITs?!?!?!?!?!?!?

[texaslil]

Thanks for the reminder of my favorite movie, but I think the name is "Chauncy" Gardner. One of the funniest movies Peter Sellers ever made--"Being There."

[LurkingSince'98]

Travis,

good discussion but I've got to go.

everyone seems to think that because the article you cited came form 321gold it means its coming from a "goldbug".

Had it come from it's original source at Lasco it may not have thrown them off the topic so much.

Regards,
Lurking'

[litehaus]

Guns, Gold, Tools.....Things you don't let go of.....

[MineralMan]

Aha! The gold bugs have spoken!

Time to retreat to the bunker with my gold and guns, I see.

[aMorePerfectUnion]

"Anyone who's invested in the stock market over the last three or four years has little or nothing to show for it and, if you're still invested, you can't be feeling too comfortable right now."

 

...this is a stupid statement and needs no response.

 

If you hawk gold, you can only use fear to get someone to make the plunge.

 

After it has a huge run up, you can switch to greed.

 

At the time these arguments are used, they are both the wrong

choice for the investor to make.

 

best,

ampu

 

 

[Travis McGee]

Har, Har Har!:-) This is only found in dime store novels, not the real world. These folks will be caressing and kissing their gold collections, cowering in the shadows until the end of time when even gold won't be worth it's weight in pinto beans.

Time will tell.

[LurkingSince'98]

remind us to have a chat sometime. I'm in Northern Illinois maybe we can sitdown and talk economics.
Regards,
Lurking'

[simon says what]

Here are some performance charts for reference. All charts are from bigcharts.com.

Since 1971 minus dividends, the return on Gold and the S&P 500 is virtually equal.

Gold v S&P 500 since 1971: Gold=Green S&P 500=Blue

In the past 5 years minus dividends, Gold has outperformed the major market indices by approximately 70 to 110%.

| gold=light green | Dow=light blue | S&P 500=dark blue | Nasdaq=dark green|

And the Unhedged Gold Miners Index has outperformed the S&P 500 by almost 500% the past 5 years.

Unhedged Gold Miners Index(HUI) vs. S&P 500 (5 years): HUI=Green S&P 500=Blue

Gold stocks are highly leveraged to the gold price. The unhedged gold miners index (light green) has outperformed the retail (dark blue), small cap (light blue), oil (dark green), financial 100 (pink), biotechnology (purple), and utility (red) indexes by 400-450% the past 5 years.

[Travis McGee]

I posted this article in full knowledge that it, and I, would be slammed hard by the permabulls.

No problem.

I hope I can repost it next October for a laugh, with the Dow at 15,000, and everybody's house worth a million dollars.

I hope, but I don't expect.

[GadareneDemoniac]

I'm no financial savant either, and I am definitely NOT a gold bug, but...

Two weeks ago, I transferred my retirement plan from large-cap stocks to guaranteed interest portfolio. Here's why:

1. Both Vietnam and Iraq are wars with no clearly defined aims -- nobody can define "winning" -- compare to WWII (unconditional surrender by the Axis) and even Korea (stalemate at the 38th parallel is good enough for us).
Yes, I am wearing my asbestos suit for this comment!!

2. Like in the 1970's, our productive capacity continues to be transferred offshore; then to Japan, now to China and elsewhere. This does not bode well for the average high-school educated working man.
Thank heaven for that asbestos suit!!

3. The government cannot quit giving away money to anybody with a sob story. The only way to make this work while fighting a war is by inflating the hell out of the economy. As was learned in the 1970's and 1980's, if you do too much inflating, the bond market will impose its unique brand of discipline and interest rates will go up, up, up until the inflationary problem goes back into its cave. This will negatively impact housing starts.

4. In 1976 this country elected the most incompetent so-and-so ever to walk the earth as President. To say the least, and borne out by subsequent events, ol' jimmuh did not have the best interests of the U.S.A. on his priority list. What if we get rewarded with Shrillery in 2008? If so, who is the counterpart to Reagan who can come on the scene and fix the screw-ups?

Please note that I haven't used the word "crash" because the American economy has proved to be very resilient; however, I see some problems ahead.

[blam]

"Brass,Copper,Lead,Charcoal "

God, guns, gold.

[murdoog]

stopped out of Zack's Rank >2

Arrgh!! Should read :

stopped out or Zack's Rank >2

[krunkygirl]

save

[Eagles Talon IV]

"The new bankruptcy laws will definitely cut down on credit purchases and the Christmas season spending numbers will certainly be down for this reason, as well as the astronomically high gas and heating oil bills in Dec."

The new bankruptcy law has nothing whatever to do with a person buying on credit. If you are saying that it will stop those people who deliberately charge huge amounts on their credit cards knowing they won't be made to pay when the go into bankruptcy, you may be right but these people are a minuscule part of the population. As for the cost of gasoline and heating fuel. At least in September, the time of the highest gasoline prices, consumer spending did not even hiccup, much less slowdown. Gasoline prices are about 20% or better beneath their highs of that time and headed down further so they won't be a factor in spending. Heating oil may or may not, but my take is that Christmas is a once per year event and people will go ahead and bite the bullet and spend the money anyway. The average heating bill is projected to increase about $350.00 this year, not enough to kill Christmas spending.

The weather service last week is predicting a milder then average winter this year and if it happens look for Christmas to be a blockbuster, in line with the general trend of this expanding economy.

[GadareneDemoniac]

Oh Lordy, I forgot energy prices! That will continue to put the squeeze on the poor, long-suffering American consumer this winter, too!