Frustration ad inifinitum
And the Role of CPI and Tbills
Meanwhile, Political Theater: The Rants and Raves of the Righteous
Against the Stupid, Greedy, and Wealthy
Chart
Dow Jones Industrial Average vs Inflation and Interest Rates
5.5 years--August 31, 2007--February 28, 2013
which parallel
5.5 years--July 2, 1937--December 31, 1942
Weekly
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This chart's current data end with the week ofFebruary 6, 2009. Notice the extended years of flat-lining of interest rates that projectedly stretch ahead: no confirmed improvement appears until early 2012, rising CPI and two jumps up in Tbills' yield.
Notice that the current CPI, early 2009, is headed steeply downward into new deflation of unguessable magnitude or duration, having started a year later than the comparison CPI in 1937, and is declining now at a much steeper rate. And note that the 2009 Tbills interest rates plunged, courtesy the U.S. Fed, to two one-hundredths of one per cent (0.02%) eight weeks ago, the lowest ever in U.S. history.
Periodically, I will update this chart and print it in Systems letters from time to time. Meanwhile, what should one do?
That's where the frustration comes in. Remember though, all through the 1930s there were many 20 to 30% or more good swing trades lasting several months each. Those are what the systems on this site are designed to catch.
The epitome of frustration is the current standoff between the two ETFs systems on the website. Mostly USA ETFs has been on a 'buy' signal since January 2nd this year. Worldwide ETFs has been on a 'Sell' signal since August 1, 2008. Yet both have been making good money through year end and even up to the current week.
Nevertheless, its a grinding experience, waiting for the two systems to come into conformity. In the meantime, to those of you who may subscribe to both systems and have asked what I personally do about the difference in signal trends, my answer is that I am hedged--10% net short in most of my funds--fairly neutral with a bias toward the short side. The bias reflects my view of the 'big' context, as discussed in this article and during previous weeks, here, here, and here.
The economy, financial system, and the markets are in the early stages of normal and skip-generational cycles. It has precedents in the panics of 1837, 1865, 1907, and 1929.
POLITICAL THEATER
As I mentioned earlier, "Everyone wants the financial crises to end and economic failures to reverse course and recover. I am afraid these sequences will not be hastened by professional human activity, as well meaning and as well informed as it may be today."
I have saved the biggest headline above to discuss here at the end of the article.
There is no one in America who does not belong in one group or the other above if you exclude the 'Wealthy' from the second group. Many belong to both groups, including the wealthy. Perhaps 'stupid' is too harsh. 'Uninformed' would be kinder. At any rate, the mood of the public seems to oscillate from uncertainty to fear or anger and repeat.
In either case, and for either group, or any group, the intractable laws of cycles are at work without remorse or discrimination. The science of cycles, by definition, includes the study of repitition. My main bias, as you can tell by my many references to the matter on this website, is toward celestial mechanics, discovered by Copernicus, then Kepler and Newton followed by others. The mechanics act as major, repititive conditioners of life on Earth.
These cycles indeed appear to affect our local, terrestrial environment and its artifacts and inhabitants. For example, in its simplest form, ocean and other tides of the world are directly connected with and caused by the regularity of the movements of the Moon and the Sun and the Earth. The Earth's surface is 70% water. The human body's water content is 61.8% by weight. Do you not think that the same power that moves the earth's water also moves your body-mass liquids within your tissues, glands, and organs? All your thinking and emotions reside distributed among these sites of functionality. Thence they rise and subside to manifest themselves as individual opinions and actions.
And that's only one of the most rudimentary of examples of myriad others at work continuously imploding into the human organism. None is deterministic. But all are conditioners, strong and weak, too subtle to be detectable yet by any known instrumentation.
When members of Congressional hearings commitees rant personally against the top CEOs of the financial-services industries and the high-employment, durable-goods manufacturers in America, do you think that any of these people have had to power to shut off at will the invisible but virile effects of the cycle cited in the previous paragraph above--not to mention all those other cycles* continuously bombarding the environment and cells of every and all the inhabitants of the earth--workers, capitalists, voters, legislators, leaders, followers, victims, and perpetrators alike?
In the political theater, the play is underway and will be long running. The Commitees are producer, director, playwrite, principal actor, and guardian all rolled into one. The casting is continuous. Auditions are open ended. The play is, Who Struck John? When we find out, we'll fix 'em.
Quis custodiet ipsos custodes?
* Electromagnetism, radiation, cosmic rays, RF, and other types of impactors as yet unknown, whose effects on human emotion and thinking may as yet be unmeasured or unmeasurable.
Confidence and its lack is in the air we breathe, the radiation that penetrates our bodies, and the fluids that move within us. Panic and crises are emotional effects. Economics and finances are symptoms, not causes.
Perhaps some small fraction of the vasty trillions that the government is throwing at the oceanic tides of rolling economic devastation could be diverted to academic cross-disciplines to pre-measure successfully the actionable impact of physics and chemistry on economics (as well as on sociology and political science).
Notes. What has all this to do with what you do in the market Monday morning? Everything and nothing. Your weekly buy/sell/hold decisions for each Monday remain, as always, a 50-50-probability chance of 'success'.
Still, your awareness of probable context--what these pages, and others, have been about--long-term market biases--affects your psychological outlook and the emotional control you have for successful rational thinking, investing, and trading.
Fortunately, the time frames which were designed into the systems' algorithms, the results of which were originally published in the mid 1990s and on the website in the year 2000 have been able to ride the trading surf successfully so far, catching two to four intermediate-term swings per year. (And, it would seem, quite profitably, over time.)
From a public policy standpoint, as well as for private positioning, cycles studies, if validated with scientific precision, hold great value as an early warning system. Counter measures can be put into place before mass confidence evaporates instead of after the fact as in the current situation and all previous panics heretofore..
Caveat. The nature of the material in this and similar articles on the site is highly theoretical. Much, much research remains to be done. Since the theory espoused here has no immediate, mechanical bearing on the essential timing parameters of the systems, with limited resources to hand, it remains a lower priority than other matters--but quite useful to me, and perhaps to you, as reminders of what I think is happening.
Written
2/11//2009--2/18/2009
Posted
2/18/2009 5:35 p.m. EST
Amended
2/22/2009 2:08 p.m. EST
data through
2/13/2009
Latest update here
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