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Thread: The Dow's Phony New High

  1. #1

    Default The Dow's Phony New High

    THE DOW'S PHONY NEW HIGH

    By: Devvy Kidd
    October 6, 2006
    NewsWithViews.com

    "It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world." --Thomas Jefferson to A. L. C. Destutt de Tracy, 1820. FE 10:175

    The Dow's Phony New High is the caption of a very important column which appeared a few days ago. I consider this column by Michael Nystrom to be a must read because he does an excellent job in bringing this sometimes complicated issue to a level that even people like me can understand the deceit. I hope you can take the time to read this important information about how the American people are being manipulated into buying this grand "new high" on Wall Street, believing it to be an indicator of how good the economy is doing, when in fact, this economy is heading for a hellish dive. One only need look at the dead housing market to feel the massive sucking sound just over the horizon.

    Harvey Gordin, who owns El Dorado Gold, also sent me this link with the comment, "In my opinion, it is the single most important, story I have read this year. It explains the PPT, or Plunge Protection Team, and it's direct effect on the price movement of the gold and silver markets. It explains why 60% of all trading on the NYSE is controlled, and why we have a controlled stock market. Our government tells us how important free markets are to the U.S., while they are trying to micro-manage all of our equity markets. The system is broken! When the bubble pops, which is inevitable, investors that think they are investing in a "free market economy," will incur horrific stock market losses while the metals markets will rise in value to unthinkable heights." You can read this important information here which show how this incestuous relationship between bankers and the federal government is putting everything you've ever worked for at risk.

    ...continued here - http://www.newswithviews.com/Devvy/kidd218.htm

  2. #2

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    This high is certainly not phony to me as I am long the Dow.

  3. #3

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    Quote Originally Posted by SystemsTrader View Post
    This high is certainly not phony to me as I am long the Dow.
    Better take your phony profits in phony fiat and get out while you can because THE END IS NEAR!!
    --zen(in screaming freefall)grifter

  4. #4

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    Quote Originally Posted by zengrifter View Post
    Better take your phony profits in phony fiat and get out while you can because THE END IS NEAR!!
    --zen(in screaming freefall)grifter
    Don't worry I have a tight stop loss and will be out quick if the market turns. I now how to protect my profits!

  5. #5

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    DON’T BUY THE DOW’S NEW HIGH

    Monday, October 09, 2006
    Free Market News

    This week, the professional stock market boosters, who masquerade as wise market commentators, filled the airwaves with celebratory musings on the significance of a record high Dow. Many spoke of it as the milestone that will usher in a new bull market reminiscent of the one which roared during the 1990s. However, the Dow’s new high is merely an inflationary illusion. The fact that Wall Street universally ignores inflation adjustments with respect to the Dow, while consistently qualifying oil prices in inflation adjusted terms, reveals the bullish bias of an industry dependent on optimism.

    In the first place, adjusted for the CPI the Dow’s January, 2000 peak would equate to over 14,000 in today’s dollars. Of course, since the CPI understates the true inflation rate by at least 2-3 percentage points annually, the Dow Jones would likely have to be over 16,000 today to deliver the same purchasing power that it did then. Ignoring inflation and looking instead from a foreign exchange perspective the Dow is also far from a real high. Priced in British pounds, Canadian or Australian dollars, or euros, at 11,850 the Dow is still below its 2000 peak by approximately 25%, 26% and 32% respectively.

    In the second place, the Dow Jones consists of just thirty stocks. If you look at broader market averages, such as the S& P 500 or the NASDAQ Composite, the former is about 13% below its 2000 high, while the latter is 55% below. When those numbers are adjusted for rises in the CPI, in real terms the indexes are below their 2000 peaks by more than 27% and 63% respectively. Of course, those numbers would be far higher were we using a more accurate inflation measure.

    While the financial media is quick to proclaim a new bull market in stocks, they have simultaneously proclaimed an end to the current bull markets in gold and oil. Both calls are premature, unsupported by the facts, and more representative of wishful thinking than legitimate forecasting.

    Since hitting its nominal peak in January 2000, the Dow Jones has lost just over half of its value relative to gold, even after the recent surge in the Dow and the dip in gold. It should be clear, therefore, that the real bull market is in gold, not the Dow. The way I see it, nothing has happened during the last several months to reverse these trends. From my perspective, we are simply experiencing normal counter-trend moves that typify bull and bear markets alike.

    The most significant aspect of such counter-trend moves is their impact on market psychology. Bull market corrections produce fear, while bear market corrections produce hope. Among gold and oil investors, the fear is that the move is over. Those who got in early sell to preserve what remains of their gains, while recent entrants sell to mitigate their losses. Stock market investors buy more hoping to finally recover their losses.

    However, neither emotion is likely to be validated. In fact, secular market trends generally continue until both emotions are completely exhausted. Bull markets will persist until all fear is eliminated; producing euphoria, while bear markets will persist until all hope is lost, producing despair. The Dow’s new high, and the media hype surrounding it, should help create enough optimism for a major top to be established. Similarly, the recent sharp drops in the prices of gold and oil should unleash enough pessimism for significant bottoms to emerge.

    The decree of leverage in today’s markets tends to exaggerate the magnitude and speed of corrections. Hedge funds and other speculative players are generally trend-followers and are quick to exit when the winds appear to be shifting. It is important to remember that speculators do not create the underlying trends; they simply tag along for the ride. However, as their frequent entrances and exits add to short-term volatility, long-term investors should not follow their lead.

    The best strategy for investors is to take advantage of the opportunities short-term speculators create. In other words, buy gold and oil. For the best way to take advantage of the big drop in oil and gas prices, download my must-read, free research report “Energy & Double Digit Yields: Canadian Energy Trusts Explained” by clicking here. To learn about the best way to buy gold, visit www.goldyoucanfold.com

  6. #6

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    I am one of those trend followers. I couldn't care less about the fundamentals behind the market, I just follow whatever direction it is going and tag along for the ride!

  7. #7

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    Quote Originally Posted by SystemsTrader View Post
    I am one of those trend followers. I couldn't care less about the fundamentals behind the market, I just follow whatever direction it is going and tag along for the ride!
    Too bad that doesn't work for BJ... or does it? zg

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