GML - Where to from Here? - 18th June 2009
TRUTH HURTS, LIES KILL
Over the decades I have endeavoured to present my thoughts on how the financial scene might develop, whether this be an optimistic or pessimistic scenario. These thoughts have always been accompanied by proposals on how the matters in question can be exploited or defended in a positive fashion.
Such openness is not welcomed by most when an optimistic outcome is not envisaged. The human race is basically prone to be optimistic prior to difficult periods and shies away from conclusions which do not fall within a positive framework. The financial services industry is fully aware of this human frailty and panders to it with perpetual bullish scenarios no matter where in the cycle the markets happen to be. At such times the truth hurts with the exposure to realities not the way to advance their commercial interests. In consequence optimistic overtures are pressed upon un unsuspected public in order to promote these self interests.
Today's economic scenario could well be a time when the truth is being distorted to favour a rosy future in order to further advance recent market strength despite a truly disastrous economic reality.
Our own current analysis of all the worlds' speculative markets provides a contrary conclusion to the overwhelming bullish attitude of the establishment foisted upon the public through its marketing might.
If we take the United Kingdom as an example by exposing a few 'facts' and not political smoke screens it can be clearly concluded that all is not well. Over the past decade of the British neo- communist/fascist government the economy is in the worst position in living memory, even worse than in the 1930's. Whilst I am not a believer that fundamentals are useful in predicting future market moves basic facts can provide a longer term general judgement. Here are a few UK facts that should not be ignored.
1 - The British people are controlled by fear and force. A typical example is the threatening nature of Government Advertising (now the biggest source of marketing revenue) where a driver is threatened with his car being crushed for not having taxed his car. Surely this minor offence could be treated in a more civilised fashion.
2 - Rights have been eroded by a mixture of statism, fascism, multiculturalism, political correctness and political self interest
3 - There are 266 laws allowing State thugs to enter your home. Britain has more CCTV cameras than anywhere else in the world. There is one for every 14 subjects.
4 - A study of failing empires discloses states over-burdened with Civil Servants. Britain has recently added 900, 000 with the state now employing over 24% of the entire work force with 7 million non jobs. 37% of the increase in employment is government created paying larger salaries than the private sector with magnificent guaranteed pensions, They have interrupted weekends, shorter hours, guaranteed lifetime employment notwithstanding how bad they are, a total lack of personal responsibility and immunity from the vagaries of the market. The state now employs more per head of population than Russia did in its communist hay days.
5 - All this social engineering has resulted in the government 'take' rising from 37% of GDP when Labour came into power to a staggering 45%. All this makes miserable reading but it is factual and has to be considered when attempting to assess the future
6 - The labour party has decided to deny university places to the children of graduates. This is blatant racism and can only have a severe detrimental effect on the future of Britain.
7 - Since Labour came to power the idle of Britain receiving incapacity benefit have multiplied by 20 times over the past five years! (See the essential read 'Gordon is a Moron, by Vernon Coleman)
The Economic Considerations will follow shortly
WORLD STOCK MARKETS ANALYSIS EXPOSES A DANGEROUS BUILD UP OF UPSIDE BARRIERS
For a number of weeks our World Market analysis has been unable to produce interesting bullish scenarios from the World Markets. Despite continued progress and the 'green shouts' dreamed up by the establishment our analysis has seen a dangerous accumulation of many world markets simultaneously approaching or hitting heavy upside resistance. Of the leading markets the UK, US, China, Europe & Japan show upside ceilings on further progress as seen on the following charts with dozens of the smaller markets finding themselves in similar circumstances.
Whilst the levels shown are decisions levels and not necessarily sell signals as yet the medium term trends are still down. In fact the current position of many markets closely resembles the Dow in 1930 after its first so called recovery phase as 'green shoots' emerged before disastrous events in Europe preceded the eventual collapse of 95%. Whilst the FTSE 100 has risen 30% the informed buyers index has risen by less than 1% and has recently fallen slightly whilst the FTSE continued to show strength. The odds are now heavily in favour of a fall from current levels but any unlikely break upwards would signal a shift from Bear to Bull and should be taken seriously. We have many 'Shorts' lined up and a number of Buys to cover any trend establishing itself around the decision levels detailed in our World Market survey.
This is one of those difficult physiological periods when control of emotions is vital in order to follow the direction of the markets rather than the postulations of the 'experts' who somehow manage to get just everything wrong. When listening to self interest City and media pronouncements ask yourself where were they at the top of the market in 2007? Did they protect their client's interests as Gann Mgt. did in the savage mauling that followed?
Being right is often a precarious stance to take when all others are advocating the easier and more seemingly convincing alternatives. This current top, if confirmed, could well be far more damaging than the losses over the last year or so with dire consequences for those who follow the herd. As per my May WTFH analysis a sharp fall from here could result in a collapse down to FTSE 100 1787!
THE COMMODITY MARKETS
This year commodities have meandered in a sideways move being a scenario where we more often than not struggle to produce profits and avoid losses. Despite this usual difficult period it is pleasing to note that we have managed to extract a 13% profit from our trades so far this year. However the recent break out to the upside could produce an even more pleasing environment ahead. We have dozens of opportunities lined up for both metals and softs as we wait for the market to establish new trends. Our target will be to maintain our usual 20%+ p.a. profit and are confident this can be achieved when the breakout trend is confirmed. This will keep us in step with the returns achieved by the great George Soros.
THE BOND MARKETS
All Debt markets have suffered this year with US Treasuries losing most with a 20% fall. However we now calculate that UK, US & German bonds are now on support.
The amount of demand from the worlds crazy governments castes doubt on whether the supply can be absorbed. Despite this there is one scenario which could produce good Bond profits. That would be when the world's stock markets come under pressure which could be accompanied by a flight to the safety of the longer term Gilt and Bond markets which are now showing sound returns of around 4.5%. This would not an insignificant return in the circumstances especially when combined with possible capital gains. All we now need is confirmation of buy signals. In the event of a US Treasury Bond buy profits could also be enhanced by a stronger US dollar against sterling which is on the cards.
THE GOLD MARKETS
Gold Bullion is in an interesting position being on a support level at 928. In the event of a rise from here and a subsequent break above 1030 all hell could break loose
The Amex Gold Bugs index and the UK Gold Mines index are also supporting this claim both being near strong support. There are also no less than sixteen possible Gold Mine Buy signals spread throughout the UK, US and Canadian Gold Markets.
The immediate future looks rosy with support for Bonds & Gold accompanied by world stock markets presenting 'Shorting' opportunities with our favoured commodity market looking set for further progress. Interesting times could be about to explode over the coming months.