Commentary for the Week of March 8

Yesterday’s newsworthy satisfactions were marred only by the passage of a spending bill that unfortunately will allow the U.S. Government to avoid shutting down.  Putting aside this disappointment, which was not unexpected, all seemed right with the world: stocks got bitch-slapped for a change, bullion prices screamed, Charlie Sheen and Col. Qadaffy appeared headed for well-deserved oblivion (Sheen could conceivably fare better than his Libyan counterpart, since there will be no Kadhafi reruns), and winter temperatures here in Boulder, Colorado, hovered near the mid-60s. What more could one have asked?  Actually, our perfect day would have doubled or even tripled the Dow’s 168-point decline, since every significant selloff helps bring America closer to the day when investors and the world-at-large forsake the matrix of lies, delusions and hubris that have made true economic recovery all but impossible.  Alas, the spinmeisters and news media, if not the rest of us, continue to cling to the Bernanke narrative that the economy is returning to health, albeit very slowly. That’s despite deflation in the real estate sector so severe and prolonged that even optimists no longer regard it as cyclical; soaring food and energy prices; and budget crises at all levels of government that will ultimately push unemployment to heights not seen since the 1930s. Under the circumstances, you can hardly blame us for betting against every stock-market rally. We’ve been doing this reflexively for months: getting short at each minor Hidden Pivot rally target in expectations that one of them will prove to be The Top – the whimpering end of the Granddaddy of All Short Squeezes launched almost exactly two years ago.  Locking in Gains  Our strategy has benefited from consistent (although not necessarily repeatable) success at predicting tradable tops, even if none has proved particularly enduring. A week ago, for instance, Rick’s Picks

The U.S. could be hit with widespread food shortages as early as April, according to an article linked recently in the Rick’s Picks forum, “Food Supply and Affordability Are Seriously Threatened.” The author, Kellene Bishop, alluded to a perfect storm of factors likely to impact food supplies and prices. “It’s headed into our homes no longer than six months from now, and more likely to be obvious six weeks from now. Unless you’re enjoying an income that can take a 40-50% increase hit in your essential expenses, then I’m certain you will not be spared the impact of this snowball that’s rolling down hill, gaining in momentum and size; and it’s coming right to our front doors.” Evidently not one to panic, Bishop suggested that in anticipation of grocery-supply disruptions and explosive price increases, we start preparing now with a “methodical, peaceful and deliberate mindset” and no fears of an Armageddon-like event. “I believe firmly that a daily awareness and effort to create a more self-reliant world is critical in developing one’s ability to endure any other type of crisis.” Not all of those who commented on her essay shared the author’s Zen approach to getting ready, however. There was this response, for one, from a take-charge dad whose brood seems unlikely to starve even if America a few years from now comes to resemble the post-apocalyptic vision of hell-on-earth depicted in Cormac McCarthy’s The Road. “I Spent 11 years in the US Army,” he wrote, “three years in a Ranger battalion, two years as a weapons instructor, one year as a Pathfinder team leader, five years’ regular infantry, and one combat tour. Because of this I have no illusions of the evil that lurks in the hearts of men -- seen it first-hand. I am a single parent…my 14-year-old son and I have

[All hell broke loose in the Rick’s Picks forum yesterday after Mario Cavolo, an unapologetic optimist who tends to see the glass as three-quarters full, let fly with the rosiest pronouncements we’ve heard so far on a U.S. dollar that has been sinking in value for nearly ten years.  “So okay then,” wrote Mario. “We’ll devalue the dollar and a few years later, when U.S. assets are more and more attractively cheap, the money and investment and growth will start to flow back in.”  This was just too much for Robert Moore, an intrepid blogger and occasional guest essayist on this page. Mario’s entire post can be found by clicking here. Below is Robert’s response.  RA] And how exactly does a weakening currency result in more attractive domestic prices? Or, are you suggesting that as the currency weakens that it will mean stronger U.S. exports, and therefore greater domestic growth? if so, then how, exactly, will these miraculous exports be manufactured?  The cynic in me says that the U.S. will have to hit a very deep and rocky bottom before manufacturing and the ability to export the surplus ever returns to these shores. Our manufacturing infrastructure is decomposing, our labor rate to productivity ratios are the most God-awful on the entire planet (they are now even worse than the UK’s, and that is really saying something), and, as Wisconsin demonstrates, the people in this country still seem to feel that they are entitled to a six-figure gross income in exchange for doing manual labor that requires no more than 200 hours of vocational school training to qualify for.  We are a long way from Mario’s utopian renaissance. However, I do agree that at some point, the “genius” target of Mario’s man-crush will succeed in devaluing the dollar past a heretofore

Has the stock market made an important top? Are gold, silver and crude oil prices headed to the moon? We think the answer to these questions is “yes,” and that there will be exceptional opportunities for traders and investors ready to take advantage. Join Rick Friday morning at 11AM EST for a real-time demonstration of the Hidden Pivot Method and how it can be used to minimize risk while we attempt to profit from markets that are in steep rises or declines. Click here for registration.

I stuck my neck out here yesterday, calling the top of a bear rally that for two years has kept the nation from facing economic reality. Here is what I wrote: “Stocks fell not because of fears over the spread of violence in the Middle East, as the pundits asserted, but because it was time for the Mother of All Bear Rallies, now almost two years old, to keel over and die.”  Of course, one can never be absolutely certain about such things, and that’s why I struggled briefly with the temptation to rephrase that sentence as follows:  “Stocks fell not because of fears over the spread of violence in the Middle East, as the pundits asserted, but perhaps because it was time for the Mother of All Bear Rallies, now almost two years old, to keel over and die.”  I’ll let my bearish call ride for now, however, because the market’s recent highs came within inches of longstanding, major Hidden Pivot targets. But I’m not going to chisel the prediction in stone as I did a “hula prediction” that Goldman Sachs would ultimately trade below $30 during the bank-stock  collapse of 2007-08.  Goldman shares actually bottomed around $40, and that’s why I am making arrangements, finally, to deliver on a pledge to don a grass skirt and dance the hula in Times Square in the dead of winter. I will provide further details shortly for those of you who want to witness this sorry spectacle.  The irony is that Goldman probably will trade below $30 by the time the world’s $800 trillion derivatives bubble has completely deflated. I’ve also predicted – no hula dance riding on this one -- that a $10 million co-op on Central Park West will eventually change hands for $250,000; and that the damage will

The news media went zero-for-two yesterday trying to explain on the one hand why stocks fell, and on the other why oil prices rose.  Stocks fell not because of fears over the spread of violence in the Middle East, as the pundits asserted, but because it was time for the Mother of All Bear Rallies, now almost two years old, to keel over and die.  As for the surge in oil prices, although it was blamed on turmoil in Libya, the country exports only a paltry 1.6 million barrels a day. Moreover, our good friends the Saudis promised to make up for any Libyan shortfall by increasing their own output.  Our guess is that oil prices are headed toward $100 a barrel, and then higher, because Saudi Arabian output itself is perceived to be less than absolutely secure.   It’s hard to imagine that the anti-government protestors who have rocked the Arab world will not eventually descend on the House of Saud. If so, what would the monarchy do if peaceful demonstrators ask them to step aside? It would be difficult enough for King Abdullah to put down a violent revolt with superior violence. But to refuse the demands of placard-waving thousands, who eventually would grow into placard-waving hundreds of thousands?  That would pose quite a dilemma, since the country’s rulers could hardly tell the crowds to go home, get a good night’s sleep and see how they felt in the morning. If and when the demonstrators’ elected representatives wrest power from their desert princes, it seems unlikely that a nominally democratic Saudi Arabia would be so favorably disposed as King Abdullah on the matter of selling practically limitless quantities of oil to the benefit of Great Satan.  A Laughable Explanation  Concerning the stock market’s decline on Tuesday, the biggest drop of 2011,

Just when we were starting to adapt to living in these accursedly interesting times, the times have waxed positively exciting. Uh-oh. Who’d have believed that the full-tilt political battle going on in Wisconsin would get pushed below the fold by riots in…Tripoli? And yet, that’s how the news was played over a weekend stretched to three days by a Monday holiday. From a news perspective, one of the most interesting things about both of these watershed events is that their respective outcomes seem predictable.  In Wisconsin, as well as in every other state where the issue is put to a legislative vote, the public-employee unions seem likely to lose simply because the states are bankrupt -- or soon will be if existing salary and benefit agreements are not either voided or cut back drastically.   As for Tripoli and the rest of a caliphate yearning to be born, the would-be dictator-for-life will fall and Islam will triumph. There is reason to think this could occur, over the next several years, without much further violence. On this matter we cite the public statements of Yusuf al-Qaradawi, a charismatic Egyptian cleric recently returned from exile in Qatar whom some are calling Egypt’s Khomeini. While the 84-year-old Qaradawi presumably agrees wholeheartedly with the goal of bin Laden and al Qaeda to subjugate the world under Islamic law, he has argued that this objective and all others dear to fundamentalists can be achieved through the ballot box, since Islamists have been winning just about every election in which they’ve participated.  Peaceful Islamic Revolution?  It would be ironic if the Arab world embraced Islamic rule peacefully even as public-employee unions in the U.S., their backs to the wall, turned violent in a last-ditch battle for survival.  The possibility of this occurring is not so farfetched when one

Every time we read or hear about the supposed economic recovery, or about how the Fed has raised its “growth” target for the next quarter, we are reminded that the nation’s retail sector -- like its real estate sector -- remains an absolute, unmitigated, Katie-bar-the-door disaster. Yesterday it got even worse when Borders Group declared bankruptcy. This is bad news for those who love books, of course, since the firm’s megastores, which average about 25,000 square feet in size, are a great place to browse. But it is even worse news for mall operators who count Borders as a major tenant.  In the Boulder, Colorado, area where we live, there were three giant Borders stores until a few years ago, when one in the heart of the city’s shopping district closed. The space has remained vacant ever since, a drain on the owner -- but also a huge dead zone on a street where retailers are struggling to survive.  The bankruptcy will force the closing of a second megastore located at 29th Street Mall. That will be quite a blow to the developer, Maserich, since they’ve  been dealing with a few other large vacancies and the closure of several large restaurants. The Borders store there occupies two big floors on the mall’s most heavily trafficked corner, and we cannot imagine another tenant big enough to fill the space. Even if such a tenant existed, they would probably be able to find cheaper space at a soon-to-be-vacant building nearby that currently houses Ultimate Electronics, a big-box chain store that also declared bankruptcy this month. Post-Christmas Exodus The third Borders store in the immediate area is located in the Flatiron Mall in Broomfield, about a mile from our home and eight miles from Boulder. Although there has been no announcement yet concerning whether

Using the Hidden Pivot Method, we were able to avoid wasting a day watching the markets do absolutely nothing on Tuesday. Instead, we lunched with our friend Josh at the Ten-Ten, a favorite Boulder bistro, then enjoyed the rest of the afternoon on the Pearl Street mall, soaking up some of the mid-60s temperatures that have settled over Colorado this week like a canopy of rainbows and rose petals. Those who have never visited Colorado’s Front Range probably think of postcards with snow-capped Rockies and assume the winters here are blustery. In fact, although there are occasional stretches of sub-freezing weather, shirt-sleeve days in mid-February are not all that uncommon.  Imagine being able to enjoy them knowing that you’re not missing even a mote of genuine activity on Wall Street. And so you could. You see, a little-known capability of our proprietary forecasting system is that it doesn’t get all antsy when nothing is happening.  Indeed, the Hidden Pivot Method is as happy as a clam when it is forecasting those unendurable stretches of tedium that occupy the markets perhaps 90 percent of the time.  Technically speaking, these hum-drum hours, days and even weeks are signaled on the charts by “dueling impulse legs.” Dueling impulse legs are simply upthrusts and downthrusts that happen in succession, each negating the last. String a few of them together on charts of different time frames and you get a picture not only of tedium in real time, but of tedium to come.  A Spectator Sport  Yesterday morning, there were dueling impulse legs everywhere one looked: in the E-Mini S&Ps, in Gold and Silver -- even in some world-beating stocks like Apple and Google.  We’d come to our desk bright and early looking for possible excitement, since some bellwether stocks and index futures that we