Schizophrenia still reigns at the Fed as policymakers attempt to head off an inflation that, statistically speaking, is almost nowhere to be found. In fact, inflation has fallen by more than half since 2007 if you measure it the way the Fed prefers, using a price index of personal consumption expenditures. What is the diligent monetarist supposed to do? While some of the Fed governors see the glass as half-empty and want to keep interest rates low, their delusionally sunny colleagues want to tighten because they evidently believe all of the twaddle we’ve been reading about how the economy is in the throes of a strong recovery. Consider the following headlines from Google’s business-news section yesterday afternoon: “Bets on Growth Buttress Stocks” (Wall Street Journal); “Oil Surges to 17-Month High on Signs of U.S. Economic Growth” (Bloomberg): and, “10-Year Yields Hits 4 Percent on Signs Economy Picking Up” (Reuters). To borrow a line from Goebbels, if the news media keep trying to mislead us with stories like these, eventually we will come to believe them. Or will we? It’s one thing for the Wall Street Journal et al. to get all stoked about the supposedly robust pace of the recovery. After all, the Journal’s owner, Rupert Murdoch, didn’t get rich telling readers the world was going to hell in a hand basket. But just because Murdoch has chosen to be a cheerleader rather than risk circulation and advertising revenues by giving it to us straight, that doesn’t necessarily mean that we readers have to believe such bilge. Why should we, when there is no hard evidence of a recovery in the economic lives and businesses that we see, and hear about, all around us? Behind the Headlines Could the newspapers simply be misinterpreting the signs? It would certainly seem that
Investing
For Gold Traders, a Fibonacci Road Map
– Posted in: Commentary for the Week of March 8 FreeWhat does Fibonacci analysis predict for Comex gold over the coming year? We recently heard from a skillful practitioner of the dark arts, “Mestre Socrates,” who sees $1490 an ounce by around next May. But there’s a chance the path will not be smooth, he cautions, since prices could first dip as low as $1012 – more than $100 beneath current levels. That would represent a great buying opportunity, however, according to Socrates – a place where bulls could back up the truck. How confident is he? Socrates notes that gold’s long-term price movements have been precisely foreseeable on the basis of Fibonacci sequences that have traced out cup-and-handle formations. “Gold appears to have a predictable trading pattern of a new high, a slam down to the previous Fib level, reworking back to the previous high, a dull six-month ‘handle formation’ period, and then a two or three-month rally to a new Fib level. This has given workable projections for the comex gold price years in advance.” Socrates studied Fib numbers a decade ago with Larry Pesavento, a well-known technical analyst. “One of Larry’s ‘big ideas,’ ” he notes, “was the particular significance of the 0.786 level, which marked the transition from a simple retracement to a primary bull trend. Furthermore, once breached, a price could take out the 1.00 level and go straight to 1.272. The last major hurdle was to break through the 1.618 level and then ‘the sky was the limit.’ This applied to any financial instrument.” No Mere Oscillation So how does it apply to gold? Socrates provided a detailed account of bullion’s ups and downs from 2003 forward, noting breakouts and cup-and-handle patterns that played out over periods as long as 18 months. To bring the forecast up to date, the recent move down from
