Sunday, December 20, 2009

We didn't start the fire

A new issue of the Elliott Wave Theorist was published late Friday, December 18, 2009.  The issue opens with Robert Prechter's, "Perspective on the Markets,"  In it, Prechter sets out his vision for stocks, gold and oil over the coming year.  It dovetails nicely with analysis of Glenn Neely, published earlier this weekend. 

It has been a long time since I featured these two market commentators here on AllAllan.  That they are making there re-appearance this weekend is by design, not coincidence.  We have waited almost a full year for the opportunity facing us in the markets today.  It is finally time to seize the moment and act. 

Follow my trend models into what will certainly be one of the most exciting and prosperous financial pricing era's of all time.  

Below a short summary of Prechter's current analysis as it applies to one sector, but also can be extrapolated across a broad spectrum of financial instruments.

Individual Investors Have Jumped Into Another Fire
December 18, 2009

By Robert Prechter, CMT

The following article is an excerpt from Robert Prechter's Elliott Wave Theorist.

First they bought into the “stocks for the long run” case and got killed. Then they jumped on the commodity bandwagon and got killed. Many investors are buying back into these very same markets, but others are running to what they perceive as safe “yields” in the municipal bond market. So far this year, individual investors have “poured a record $55 billion” (Bloomberg, 11/12) into muni bond funds, with the pace running $2b. per week in August and September; many other investors are buying munis outright. These must be the people who tell us that they can’t live without “yield” and also cannot imagine their city, county or state government going bust. But as Conquer the Crash warned and as The Elliott Wave Theorist has reiterated, the muni bond market is heading for disaster.

Municipalities have borrowed more than they can repay, they have pension liabilities that they cannot meet (up to a trillion dollars’ worth, according to Moody’s), and tax receipts are falling. The only reason that states haven’t failed yet is the so-called “stimulus package,” which took money from savers, investors and taxpayers—thereby impoverishing the people who live in the various states—and gave it to state governments to spend so they would not have to cease their profligate spending. But political pressures will eventually cut off this gravy train. In the 2010-2017 period, the muni bond market will become awash in defaults. The leap in optimism since March, which has shown up in every financial market, has fueled a retreat in muni bond yields to their lowest level since 1967 and narrowed the spread between muni bond yields and Treasuries.

This rush to buy municipal bonds is occurring right on the cusp of a dramatic decline in their values. While many individuals are loading up right at the peak so they can participate in the next major market disaster, smarter investors, such as insurance companies Allstate and Guardian Life, are getting out. Subscribers to our services, we trust, own not a single municipal IOU. Our recommendation for investors is 100 percent safety, and such a program does not include muni bonds. If you are a recent subscriber, please read the second half of Conquer the Crash as a manual on how to get your finances safe.

Get Your FREE 8-Lesson "Conquer the Crash Collection" Now! You'll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more. Learn more and get your free 8 lessons here.

Robert Prechter, Chartered Market Technician, is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

1 comment:

Anonymous said...

I was reading Russo this morning and his latest has a few pages on why he is sanguine about the future despite the obvious. New developments in quantum physics, zero-point energy, etc. ... a fruited fig tree spotted on yonder mountain.

Others with hitherto bearish concerns are likewise finding silver linings.

What is significant to me is that in 2008 just before the big collapse occurred in the SMkt, a lot of bear prophets were doing this same such thing.

Ergo, it might be some kind of an indication of just where we are at now in the SMkt. Now or March 2010 perhaps.

It is a fact that those that foresee are often not those that partake in the spoils. When all the signs finally arrive and their presaged vision alas manifests in actuality it is then that they suffer its doubt. Such doubt is truly an existential doubt--a personal crisis of courage to walk through the valley of death. In addition, many are just plainly addicted to foreseeing, to finding bottoms and tops, and as addicts lack the practicality to do trends.

When the whole world turns against me, and I'm all by myself, . . . I will go thru the valley if you want me to