TigerSoft News Service 10/6/2009
www.tigersoft.com Other Free Tiger Blogs - http://www.tigersoft.com/Tiger-Blogs/index.htm GOLD's HISTORIC BREAKOUT MAKES US REMEMBER THE 1970's by William Schmidt, Ph.D. 1976-1980: 550% Rise in 4 Years with Democrats in Power. Buy and Holding Is Dangerous See All The Peerless Real-Time Signals: 1981-2009 Tiger Software - Helping Investors since 1981 Make Your Retirement Grow Suggestions: Peerless Stock Market Timing: 1928-1966 Track Record of Major Peerless Signals Earlier Peerless-DJIA charts 7 Paths To Making 25+%/Yr. Using TigerSoft Index Options FOREX trading Investing Longer-Term Mutual Funds Speculative Stocks Swing Trading Day Trading Stock Options Commodity Trading Research on
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GOLD MADE AN ALL-TIME NEW HIGH TODAY. It has taken years to develop this pattern. It is very unlikely that this is a minor false breakout. A sharp rise in gold usually leads to a steep stock market decline in a matter of weeks or a few months. Gold traders can make some money now buying gold stocks. But, it is likely, that the US stock markets are coming much closer to the start of a serious downturn. So far, the decline has been avoided. And so far, our Peerless system has not given a Sell signal. But a sharp rise in Gold usually ends badly for the general stock market. Consider the case of how well gold producer Newmont's rise in 1987 predicted the Crash. The stock took off in July 1987. At the end of September, the stock showed serious big money distribution. The rally to 54 was accompanied by negative readings from the TigerSoft Accumulation Index. At the beginning of October 1987, Peerless gave a major Sell on the DJI. And just three weeks later, the DJI was 35% lower and NEM had given back all its gain. Between 1977 and 1980, when then Democrats were in power, gold rose more than 550%. It was a rough period of time for investors. Each and every produced either a bear market or a mini-crash. That was a time when Carter's appointment as Chairman of the Federal Reserve, Pail Volcker, raised interest rates to 20% to combat commodity speculation and prevent a downward spiral of the Dollar. Our current Fed Chairman, Ben Bernanke, has studied the 1930s closely and concluded that the Federal Reserve then could have headed off the Depression by dramatically lowering interest rates. "Easy money" is Bernanke's appraoch now. Under this policy, US Banks can borrow money from the Fed at rates close to 0%. They can then buy US Treasuries and pocket the difference. Yesterday, he reaffirmed this policy and said that interest rates will not go up any time soon. He undoubtedly realizes that if he raised rates, the interest on the 2 trillion Dollars of US indebtedness would quickly bury the US Treasury under even more massive debt. Bernanke's announcement that low interest rates will continue for some time coupled with the huge prospective budgets is very bullish for Gold. It vitrtually guarantees Gold speculators that they need not fear a sudden rise by the FED of iinterest rates to defend the weakening Dollar. Raising interest rates makes US Treasury securities more attractive to foreigners and is one of the major ways a country can make its currency more attractive internationally as it finances its debt. The period of time, the 1930s, that Bernanke studied did not have the Dollar playing the major role it does now as an international currency. It is not clear that Bernanke sufficently realizes that his "cheap money" approach, as appropriate as it might be if high unemployment and a slack economy were the only considerations and US banks actually lent the money they borrow out to small businesses. But the banks are mostly sitting on T-Bills or playing the stock market with the cheap money the Fed is giving them. They are actually cutting back on loans, by all reports. Clearly banks are not helping finance a recovery, unless it is assumed that rising stock prces will encourage stock traders to spend more money. This is "trickle down" economics. It does not address the severe inequalities of wealth and income in the US. It makes them worse. Most people have very little money, when 5% own 95% of all wealth. An economic recovery in this environment is very difficult or impossible. More and more economists realize that such maldistrubtion of wealth lay at the heart of the Depression (buying power was exhausted). It helps explain why FDR's New Deal ultimately failed to produce an economic recovery. It took the economic collapse of Europe and Japan in World War II to bring an American industrial recovery to millions and millions in the 1950s. In Russia in 1906, Tsar Nicholas tried a variation on this "trickle down" approach with his "wager on the strong" peasants. It failed and revolution followed. "in 1906, a new Tsarist minister, Stolypin, launched an all-out attack on the peasant commune, as the basis for the new policy known as the wager on the strong'. Stolypin aimed to resolve both Russia's economic problems and her social problems by fostering peasant differentiation and the destruction of the village community' ...(by encouraging) richer peasants to consolidate their landholdings and produce bigger commercial surpluses, fostering agricultural growth, whilst poorer peasants would be driven off the land and into the cities where they could be kept in check by repression more easily...Stolypin was assassinated by an anarchist (middle class) peasant organiser (Narodnik) in 1911, and there is no doubt that Stolypin's reform' of traditional agrarian structure ...made an important contribution to fueling the social revolutionary process which erupted five years later...(and led to the Soviet revolution.) " ( http://era.anthropology.ac.uk/Era_Resources/Era/Peasants/russia.html ) And, potentially making matters
much worse, foreigners are now vocally losing confidence in the US Dollar and
(3) MANY STOCK MARKET
AVERAGES DENOMINATED BY GOLD
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