Firstly I would like to apologise for the delay in producing this report, occasioned by a considerable amount of research being necessary to come to terms with the current situation which has all the hallmarks of a historic moment for the markets.

Over the centuries the overwhelming economic factor which destroys economies is the destruction of the value of money, irrespective of the form it may take. Whether it is gold, silver, tulips or pieces of paper known as currencies when these are produced injudiciously their value as a means of exchange collapses and is often destroyed.

Gold became abundant in Spain on the oversupply of Gold from the Americas, resulting in ruinous inflation from which the Spanish empire disintegrated never to regain its previous dominance. Tulips became the obsession of the Dutch with horrendous consequences. Currencies have become useless pieces of paper within surprisingly short periods on countless occasions as Governments and Banks destroy the value and trust in these pieces of promissory paper. There is a strong likelihood that such a currency collapse could be just around the corner as money is excessively printed in vast amounts in a desperate attempt to temporarily cover past absurd extravagance, greed and supreme incompetence by the population as a whole led by bankers and politicians.

THE ONLY EVENTUAL OUTCOME - HYPER INFLATION

Government-controlled fiat money is fraudulent money when it is created out of thin air without wealth producing activity to support the increase in money supply. The eventual outcome must be bankruptcies on a grand scale resulting in contraction and eventually leading to deflation. The alternative is inflation where opinion grows that this increase in money will never come to an end creating an explosion in prices. This eventually leads to a loss of faith in holding money as a means of exchange ending with the total loss of purchasing power.

In the past such inflationary events have been restricted to individual countries. In these extraordinary times such effects may be at work right now 'all over' the Western World. It could be reasonably considered that there is little doubt that the forces and instruments at present in play will pave the way to severe hyperinflation and are gaining strength by the day. The authorities consider themselves capable of controlling the inflationary effects of their recent abhorrent actions to create debt and print money in an attempt to offset their imprudent actions over the past few decades. If they were so smart why are we in the mess in the first place? These intellectual idiots are incapable of being anything other than intellectual in their ivory towers with commonsense not being within their compass.

History has shown us that the only way out of an inflationary dilemma is to return to sound money which would more than likely be gold backed. This naturally leads us to consider that a future important investment element is likely to be Gold. As always Gold Bullion and Gold Mines will therefore be a dominant feature of our analysis to counter the after effects of the massive bull market based upon government interference to maintain power and massive credit creation since the nineteen seventies. During the destruction phase an intimate knowledge of the foreign exchange markets will also be vital to neutralize 'home' currency destruction. We are therefore directing more attention to the currency markets.

The probability of hyper inflation could be intensified by recent events in the US where the outcome of a visit from a Chinese delegation could have future disastrous consequences for the Western World (See shortly an article currently being written- The Final Bullet)

Robert Prechter sums up the mess rather succinctly 'We have people trying to fix the problem that never even saw the problem coming and that are too ignorant to understand that they are part of the problem. They are why things have escalated to this point. Them trying to fix things is what got us this deep into this mess in the first place. What a joke this is'

WHERE DO THE MARKETS NOW STAND?

*** 3 stars indicate immediate attention
** 2 stars suggest future opportunities
* 1 star shows a current lack of interest at the moment

*** WORLD STOCK MARKETS

Over the past 30 years we have managed to anticipate and avoid stock market disasters by being prudent at times when others have been confident in the future just before the walls cave in on them. This approach has not placed us ahead in the popularity stakes. A Great Defence does have has its costs at times when a refusal to trade against the trend misses temporary high risk profits before the main trend is resurrected. Missing the recent rise against the main trend has had its cost but this should be correctly assessed by taking into account vast outperformance since 2007. We also have the added advantage of being able to move into other areas to grant stability over the medium term. Recently our endeavours have provided that stability by using the currency and commodity markets to maintain our Great Defence. Our interest in the Stock Markets is now being reinvigorated by downside potential…a circumstance where we are at our best. Everybody is presently bullish being an essential prerequisite to the commencement of a falling market.

A 'shorting' opportunity is evident today with the FTSE 100 following precisely the path of the Dow Jones Industrials in 1929 when it fell by 50% followed by a rise of 30% which was then corrected by a small fall before reverting to the upside to take the rise to 50% from the lows. The Dow then fell by 85% to its lows in 1932 (We will shortly be showing you how the Dow took a precise Gann path all the way down to its lows) Should it now be replicated by the FTSE, as has been the case to date, our techniques will provide you with a sure fire way to enhance your wealth when all about are losing theirs. We made a killing in 2000/2003 with our 'shorting' programme which could potentially prove to be Childs play to what is just around the corner.

It is historically interesting to note that the 2000 fall was approximately 8 years ago. Looking back to 1929 this was 8 years after the Dow collapse of 1921 giving yet a further mirroring of today with the 1920's.

The current danger is that the FTSE 100 is almost at 5200 being the 50% level from the March lows. This is the exact level the Dow found itself in April 1930 before it collapsed disastrously as the establishment optimists of the time were seeing green shoots all around them. Sounds vaguely familiar doesn't it?

However we cannot solely depend upon an historical repeat. As always we will follow our usual analysis techniques to guide us through the difficulties ahead. The analysis to date has highlighted far more potential share 'shorting' opportunities than buying opportunities. This falls in line with the danger presented by the current FTSE resistance at 5200 just as Gann observed in April 1930 prior to the massive profits he made of $3m by trading in just one share, US Steel, during 1930. (CLICK here to see the orignal statement)

The September World Market report is presently neutral as is it is providing possible buying opportunities for 6 world stock markets and 7 possible shorting opportunities. This would be expected if the markets are ready to turn over. An interesting feature is that September and October are months when markets often see significant movements against the current move.

Just in case you are tempted to give credence to the propaganda dished out through the media bear in mind similar claptrap which was forthcoming in 1930 which was followed the worst fall in stock market history.

January 13, 1930 "Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today." - News item.

January 21, 1930 "Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." - News dispatch from Washington.

January 24, 1930 "Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast." - New York Herald Tribune.

March 8, 1930 "President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch.

May 1, 1930 "While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover

June 29, 1930 "The worst is over without a doubt." - James J. Davis, Secretary of Labor.

August 29, 1930 "American labor may now look to the future with confidence." - James J. Davis, Secretary of Labor.

September 12, 1930 "We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor. .

November 1930 "I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co.

The conclusion must be that the equity markets are once again in a interesting situation to look for a continuance of the Bear market with its fast collapses and ponderous rallies.

*** THE CURRENCY MARKETS

With many markets being of especial interest over the past few years I have given little attention to the currency markets. This deficiency has now been corrected with currencies becoming a major consideration for future profits as well as compensation against any threat of inflation.

Over the rest of the year it is expected that profitable opportunities in the futures markets will evolve especially against the US Dollar.

The Currency markets could become a major profit area for us over the next few years.



















*** COMMODITY MARKETS

Over the years I have made no secret of my preference for commodity trading despite the hype being that it is a highly speculative area. The facts suggest otherwise with the equity market far more deadly than commodities.
As for our performance over the past 5 years we have been delivering profits of from 20% to 25%. So far this year we have delivered a profit on a £100,000 portfolio of just over 22% annualising at 29%. (Click here for full details) This consistency has been achieved by strict application of our disciplines and the ability to withdraw totally from the market when our analysis fails to deliver opportunities.

Investors who would wish for higher returns would have to accept higher risks and in consequence larger drawdowns, This type of portfolio can be accommodated subject to a minimum of £100,000 only when this high risk capital is part of a balanced portfolio.

The latest commodity analysis has disclosed a number of Metals near to possible interesting signals whilst the opportunities for Softs are overall less clear but still with a few being near to triggering. We are currently 100% in cash ready for the next round of opportunities. We have nine Metal contracts near to signalling and eight Softs close to being triggered.

The Commodity markets are of great interest



















* THE DEBT MARKETS

All the Debt markets have had rises of late and are now suffering weakness down from upside resistance all within their trading ranges. Consequently the trends are neutral leading to interest here being at a low ebb until break outs of these ranges. But the future is extremely interesting…read on.



















If we are to be convinced that the stock markets could suffer from a repeat of the 1929/32 crash then the Bond markets could also follow their demise during this period.

The following chart of the US Long Bond clearly shows that Bonds weakened before the '29 crash then rallied as investors ran into the perceived safety of the Debt markets pushing markets up for a short ride followed by a short correction with a second rally. Then Bonds crashed horribly so all that perceived safety was crushed. Investors who had just been flattened by the Wall Street crash were again subjected to falling prices of over 30%. Can you imagine how they felt?






















The financial markets took their toll for all those years of falsely rising prices in the Bull markets up to 1929 despite the 1920 bear market warning.

Today's pre-warning was the 2000 IT fall which later in the decade was ignored as the markets fell in 2007/9. It doesn't take long for investors to be drawn back into another disaster. Are investors now about to be bit again by a savage Bond crash similar to that in the 1930 fall to add to the recent heavy losses? Those of us who follow Gann's message that 'history repeats' have the opportunity to avoid preconceived ideas that Bonds are necessarily safe and let the markets tell us what to do. We will be preparing for a significant 'short' position if the Bond Markets line up for a major move. One thing we will do…that is the lies of the establishment will be totally disregarded. There was a recovery in 1930 followed by worries of illiquidity and massive government intervention. Have you heard that somewhere recently? Our crazy bankers and politicians who got us into this mess try to persuade us that they have a magic wand to get us out of it. How low can these people stoop to protect their self interest at the expense of generations of future tax payers?

** THE GOLD MARKETS

The Gold Price as can be seen from the following average yearly gold prices showed a modest improvement from 1930 until 1932 with a move from 20.63 to 20.69 but then had a sharp rise thereafter. However the price of gold shares, as illustrated by Homestake Mining had a steep rise from 1930 onwards. This suggests mining stocks should be the area to concentrate upon if it is perceived that gold could follow the path it followed in the 1930's.

HISTORICAL GOLD PRICES

HISTORICAL GOLD PRICES- 1833 to Present

THE POSITION NOW

The Gold Bullion price is still wallowing under the historic highs at 1030.7 and you may be finding this frustrating and perhaps even somewhat tedious. However I see things differently as I have observed over the years that a break out above a long standing resistance level is often followed by a sustained rise of some significance. Of course, those who do not have the patience to persevere, which embodies the majority of the human race in these times of instant gratification, will invariably miss the opportunity. In the event of such a break out 'squaring' of the bullion price would suggest a rise to $1361.

We are looking at no less than 13 gold mining shares which could signal buys in due course.

Recent volatility of late could trigger action so close attention could be the order of the day.

THE ENERGY MARKETS

Crude Oil is at a critical level with the direction it takes from here likely to determine its trend over the next month or two. The question to be answered is whether the price will break over the 74 level and be confirmed when a rise to 90 would be expected.

Strength in the crude oil price from here could trigger substantial further upward progress which will probably produce opportunities for Energy shares.



















Regards,

Fred Stafford