November 2010

William Greider, writing in The Nation, sees a global economy on the brink of a potentially catastrophic trade war. "We have reached the endpoint of globalization as we have known it," writes Greider.  "It cannot continue as before, because the United States is essentially tapped out. Goliath has fallen and cannot get up. Who will lend a hand? Not China, obviously, but also not Japan and the Asian Tigers, or the European nations." Because Greider has tailored his article for a far-left publication, it glosses over the fact that America's standard of living would have to take a huge hit before we could even hope to compete with Asian manufacturers. Union wages in the manufacturing sector in particular would have to fall by perhaps half, with commensurate cuts in health care and pension benefits.  Of course, much higher levels of capital investment could make us competitive over time. However, drastic changes in this area are inconceivable, since Americans are 50 years removed from knowing how to save and invest. Had we done so with the zeal of Asians, we'd have state-of-the-art factories today that could overcome Asia's wage advantage while leveraging the much lower shipping costs associated with serving a domestic market. Click here for the complete article.

(Today’s commentary, on the pernicious influence of the mainstream media, is from Wayne Razzi --  aka “Red Will” in the Rick’s Picks forum. We only think we are changing this world for the better when we throw the rascals out on election day, says Wayne.  In reality…well, there may be no reality for those who see the world through the eyes of TV news, pop magazines and newspapers.  If we are to escape from the illusion that has imprisoned us like a maze, says Wayne, we’re going to simply have to free our minds from the illusion itself and walk away from it.  RA) *** Before the season of the witch recedes from memory, let’s have a little fun. You’re having a dream.  You dream that you’re a family man who’s awakened on the Saturday morning before Halloween.  You find yourself at the breakfast table and it isn’t long before your wife, whispering to you of course so as to not tip off the kids, suggests that you fit some “agri-tainment” into your plans.  You immediately take to the idea with visions of your wife suddenly bearing a strong resemblance to one of the gals from Petticoat Junction.  Your wife, knowing you only too well, quickly reminds you that what she actually meant was for you to take the family to the local farm for some pumpkin-picking, hay rides and of course some time spent in the Corn Maze.  The visions of Billie Jo, Bobbie Jo and Ellie May, while we’re on the genre, all quickly dissipate. Now you’re at the farm having a good old time.  You save the best for last and thus you all enter the corn maze in the afternoon.  It’s much larger and more sophisticated in its design than you expected and it’s not simply

(We're always delighted to hear from our globe-trotting friend, Auerbach & Grayson's Jonathan Auerbach, who visits the most exotic places on earth in search of lucrative investment opportunities. From the sounds of it, Zimbabwe has come a long way since his last visit.  RA) Today I shall not challenge you with numbers or intense points of view and just relate a few anecdotes of travelling on the 'Frontier' over the past couple of days. Dinner in Harare on Tuesday night at Victoria 22... just over 2 years ago I regaled you and sent an attachment of the bill for dinner at this palace of gustatory delights; it was Z$ 1.7 billion which I paid with a stack of bills 6 inches high. This time the bill for 7 of us including the post-prandial cigars and exotic quaffs was $470 with tips and no problem sending a bill. In the new world when many more of you will travel to Zim, plan ahead and book a table here; it was packed. Yesterday morning we left Bulawayo by car at 0600 for the 500 KM trip North to Victoria Falls and the Zambian border. Our lovely Garmin guide on GPS once we left town announced 'continue straight for 480 KM'...so much for getting lost in Africa. Diesel, however, proved to be a problem en route as every station we stopped at for the first several hundred KM had nasty signs which read...'no petrol, no diesel'. Well,just as our further progress looked problematic we found a station with diesel, but the attendant said he couldn't pump since electric power was out in their area. Your intrepid brokers solved this with a small donation and we suddenly heard the sweet sounds of a generator firing up and providing satisfaction for our thirsty vehicle. So on to

December Gold is aiming for 1367.9 so long as it remains below 1410.0.  The futures have active patterns pointing both up and down, with 1367.9 as a buyable dowside target (with a stop at 1366.9) so long as 1410.0 is not revisited.  If it is, we will be left with no confirmed bearish targets, and the major objectives will all be in record territory, 1431.6 coming first among them.  (Posted by Doug McLagan) _______ UPDATE (2:10 p.m. EST):  1410.0 was surpassed by a rally that peaked at 1417.6.  As the futures declined from there, a new version of the bearish pattern was confirmed and was noted in the chat room and in the webinar, albeit with some caution.  But the futures bounced at the exact midpoint of the new pattern and rallied more than eleven dollars.

Crude oil is approaching a longstanding target at 89.88.  December crude oil futures have traced out a very elegant pattern from a starting point at 75.10, visible on the weekly chart as a simple, classic form.  The "D" target at 89.88 is near enough to the round ninety-dollar number that it is probably not wise to trade the pivot with a tight stop entered ahead of time.  Traders should watch the market as it approaches $90 and use hidden pivot techniques to identify and short a downturn there.  A reversal near the pivot that does not quite touch 90.00 should be strongly preferred.  (Posted by Doug McLagan)

Gold and Silver are both trading moderately higher early Thursday morning even though index futures are down by a few points.  It should be interesting to see whether this unusual divergence survives the opening. _______ UPDATE (7:59 a.m.):  There was a time when the bad news from once-mighty Cisco would have knocked down the Dow by 150 or more points.  However, with stocks in the presumptive late stage of the Mother of All Bear Rallies, it seems DaBoyz are barely able to shake down the Dow for a measly 50 points on the news.

The rally off yesterday's low got past an "external" peak on the 30-minute chart, but it failed by a tick to exceed the second that we require to signal a bullish impulse leg.  Ordinarily I'd deliberately overlook this sign of weakness because I have come to forecast higher prices for this vehicle more or less habitually each day. (Does it ever go down??)  For a change, though, and to help break a bad habit that could eventually lull me into complacency at the wrong time, I'm going to focus on a bearish target at 1194.00.  Shown in the accompanying chart, it can be bottom-fished with an 1194.25 bid, stop 1193.50.

The futures overshot the 26.710 midpoint support shown in the chart, implying more downside at least to its 'd' sibling, 25.250.  The target, as well as the short-term-bearish outlook, would be negated by a print today exceeding 28.195, since that would create a promising impulse leg on the 30-minute chart.

(Today’s guest commentary is from our friend V.R., a management consultant who incidentally was a student of ours before the term “Hidden Pivot” was coined.  Some may find his essay heavy going at times, but the reward for bearing with it, as your editor has found, is that you will have a better understanding of why complex systems, most particularly political and economic, fail.  Not all of them do, for sure, and V. elucidates the factors that can make the difference.  RA) Process Management appeals to companies that recognize its value.  Essentially, it is a scientific approach to managing  because, like all science, it is based on empirical measurement.  As we have learned in life, there are many ways of measuring things, and the less concrete they are, the more we dither over them and risk bringing progress to a halt.  This is especially true of politics, where hyper-emotional debate very often obscures the underlying issues.  In the corporate world, the ability of a firm to sustain and grow its business is related to its ability to stay on course despite changes in personnel,  market conditions and on stormy seas.  Carnegie Mellon institute is a leader in defining the software development process.  They created something called the Capability Maturity Model, or CMM, which uses a 0-5 scale to determine how well software companies use best practices to ensure the sustainable quality of their product or service. This ties directly to the sustainable efficiency of their profit-making efforts.  For example, a company rated “zero” uses ad hoc, shoot-from-the-hip means to accomplish things more than a level-5 company, and uses more subjective means of ‘measuring.’  This leads to less concrete operating methods, poor perceptions and an inconsistency of approaches.  Level-zero companies also waste effort developing their capabilities because they oversimplify the demands of