As kids we worried more about nuclear extermination than about social security.

As kids we worried more about nuclear extermination than about social security.

As kids we saw many people who paid little or nothing into Social Security getting social security. We didn’t begrudge them that benefit. Many of them risked their lives for us in the two world wars. We worried instead that the world would end in a nuclear holocaust before we could retire. Young liberals today are such babies and they want to rob their parents. Old liberals are worse and they want to bankrupt their grandchildren with debts just so their lazy liberal children can get free health care and a house they cannot afford.


World Markets:
We believe the worst of the current decline is just about spent. Volume on this last decline was still quite low showing the decline is losing momentum fast.

Economic Calendar
Last week
Retail Sales
Industrial Production
Consumer Sentiment, Mich.

Market Outlook May 17, 2010
The markets dropped on low volume yesterday indicating that investors are becoming very cautious now and reluctant to buy or short the market. Risk is perceived now as very high. Most stock and index gaps were closed and Friday was perhaps the best buying opportunity we will see for at least six weeks. For example look at the gaps filled in these sectors which clearly have many gapped stocks involved. EDC, DZK, and TNA had their gaps closed. If you examine their price history you see that 90% of the time they close their gaps within 3 to 8 days, and that was the case on Friday (just four days. Why does that happen? In this particular case the gap is so large that in pulls down the averages so fast that the 50 day moving average is penetrated giving a computer driven sell-off.

With the gaps closed a gradual advance to near previous highs could take from 4 to 8 weeks. The average investor (who cannot use volume) thinks the bull market had successive highs and held above the necklines during the declines. They therefore expect the next market high can be higher than the last one. That is what the average investor thinks.

But then since the average investor will be told by GE/MSNBC/Pravda to expect a new high we expect the market will rise close to the previous highs (in 4 to 8 weeks when we want to sell everything). The average investor will expect a new high but we expect this time the raw price history as well as the volume corrected history will both fail to have a new high. Our volume adjusted NYSE price information will not likely even come close to its previous high. That advance should happen probably over 4 to 8 weeks. Then we expect a 1 to 2 week second downward market plunge. The average investor will expect that decline to be supported at the low price close of last Thursday. We however expect that resistance will be cut like butter by a hot knife perhaps with inter-day low averages as bad as last Thursday. We do not expect the individual stocks will duplicate last Thursday but the averages could. For instance the inverse silver prices actually declined during the day last Thursday but with communism being rewarded in Greece we expect Europeans to turn to gold, diamonds, art and other solid material goods. We expect precious metal ETFs to soar, but because they have no intrinsic value we expect they will then collapse dramatically. The Chinese and Indian industrial shakeout problems should become clearly visible by then as well. Those new market lows that are likely this summer will likely be the best buying opportunity of this year.


World Markets

Asian markets were down significantly last night; Shanghai down -0.5%, Hong Kong down -1.3%, India down -1.5%, and Japan down -1.6%.

European markets down sharply today in the range from -1.2% to -2.7% this morning about half way through their day.

US pre-market futures are down about 0.7% this morning.

John P. Hussman, Ph.D. this week reports:
"Greek Debt and Backward Induction
The bottom line is that 1) aid from other European nations is the only thing that may prevent the markets from provoking an immediate default through an unwillingness to roll-over existing debt; 2) the aid to Greece is likely to turn out to be a non-recourse subsidy, throwing good money after bad and inducing higher inflationary pressures several years out than are already likely; 3) Greece appears unlikely to remain among euro-zone countries over the long-term; and 4) the backward induction of investors about these concerns may provoke weakened confidence about sovereign debt in the euro-area more generally."

Street Smart this week reports
A Trillion Dollars Buys Only a One-Day Bounce?
Financial Reform Becomes Sillier As It Proceeds.
Evidence of Financial Wrong-Doing Piles Up.