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Sunday, October 18, 2009

A Special Post today from Eagle!!

This article was wrote by Eagle, and I am delighted to be able to share this with everybody-

Thought that I would share my chart and explanation with you. I have been tracking the dollar / market relationship for well over a year now. It has been my observation that we have been in a deflationary period for several years and although there have been some peeks of inflation, they have all been created by the Federal Reserve Currency Policy. I'm sure you remember 2004-2008 we had high fuel prices, high lumber prices, most commodities went thru the roof and the bubble broke. This bubble will break also.

We humans like to put up a hell of a fight to try to change the inevitable. It would be so much less painful to allow nature to cleanse the markets naturally, but no, we humans always know best and spend trillions of dollars and countless resources to make the inevitable worse! This is no different. We are still being (bankers) urged to give people credit and encourage lending to people who can't afford it! If you consider the problems that the US economy has, there has been very little progress made. The banks are in horrible shape. Housing is in the toilet and prices are on average 30% lower. Foreclosures are still surging. Unemployment is still increasing. The budget deficit has grown exponentially and the whole world is in debt to their eyeballs!

Back in February the Federal Reserve had to do something. What did uncle Ben do? He fired up the printing presses at a rate that has never been seen before. Why? Here is why, he had to stop the bleeding if only temporarily. He had to instill confidence in the new government and the USA. Here are basic things that every American believes we have to have to have a healthy economy. A rising market, we need a rising market! Low interest rates, oh my God, we need low interest rates! Oh well, don't we need commodity prices to rise so we have a healthy economy? Yes, I will have some of that too! Oh, oh my, I almost forgot about the GDP. Yes, that will help the GDP too! So, what do we do? We use the dollar as a sacrificial lamb to get these things... Because it is a quick fix and you might not have to work on the fundamental problems as much, maybe they will just go away! If debt and leverage got us into this mess, maybe it can get us out as well! WOW, typical thoughts of a politician! So, now we know what we have to do! Lets look at things from the idiots in Washington's view point. ( Didn't mean you, Col.) You see they care about votes, that's it, nothing more, nothing less. The democratic party who is now in charge is looking as stupid as the other jackass's who just left! To them things are looking up, we have revived the markets, all commodities are up. My GOD, we are smart, remember to vote for me, I did it! I'll remember that, thanks!

Which brings me to my point?

I think the only way the dollar rebounds soon is through the influences of the outside world, because if it is up to our government they will crash and burn the greenback. You see they have this backwards theory that says inflate the markets and you can stimulate a jobless recovery. What? What jackass came up with that? Oh, it was Larry Summers, OK enough said! Larry and Helicopter Ben have both said, we will not raise interest rates until unemployment starts dropping significantly. Hmmmm, I always thought unemployment was a lagging indicator...So that is a ways off and that means we could already have inflationary pressures building and ready to explode shortly after jobs start to be created. I don't ever recall of a financial recovery that happened on the basis of creating an inflationary environment without any demand. How does that work fella's? Sorry, I went on a rant!

Now it's up to the free markets to make the correction in dollar value, because the FED is not going to. You might say OK, tell me more. Despite all of the issues that I have spelled out above. The US economy WILL HAVE one of the SMALLEST economic contractions in 2009 of all other G-7 countries as only Canada is better. You see when you look at the big picture our economy is doing better than the majority of others and that is where I look for the natural market correction to take place. The Euro is as overvalued right now as the Dollar is undervalued. The markets will correct and the dollar will rise from the dead. What does this mean for the markets? Well, it's not good. The stock market will retreat gradually for months,possibly retracing back to the march lows and perhaps lower. Those beloved commodities will be hammered back into the ground they came from.Why,because this was a manufactured rally that was not based on anything solid,it was nothing more than a suckers play . I don't think you want to be long on the market now. I do look for a rapid advance in the market as there is still some air left to go into the bubble yet.

Then the bubble will break and all will fall, just like Humpty Dumpty who sat on that wall!

Hope you have a great day! I would love to know your thoughts!



  1. WOW, you out did yourself Eagle, thank-you so much for sharing that with us :)

  2. Eagle, thank you so much for sharing your thoughts and chart. I always enjoy reading your comments on the CIL.

    Col, as always, thank you for your charts, analysis & blog. I am learning so much from you guys.

  3. very interesting chart.

    where can i find more from him?

  4. Cementzak, you can find Eagle in the Goodvibe chat room on occasion. Eagle uses Neo-wave style counts.

  5. Thank you Eagle! I love your posts on the cil. Your charts are easy to understand and your thoughts are very insightful. I hope that you will continue to share your thoughts here in your very intelligent,but funny way. Fantastic article,everyone should read it.