Keep your eyes on the exits folks, cause there’s a lot of people who are gonna have to squeeze through some real small doors when the fire alarm goes off. So you’d better pay careful attention to what the BIG money is doing. Once their boy Klinton is toast, they’re gonna dump U.S. paper like there’s no tomorrow. How many U.S. stocks do you think old Rockeefeller is holding right now?
This enigmatic bull market has defied logic, gravity and all caution. unemployment rises-stocks go up, unemployment falls-stocks go up, interest rates fall-stocks go up, interest rates rise-stocks go up, the dollar falls-stocks go up, the dollar rises-stocks go up. What gives? Actually it’s quite simple. Bull markets are a MONETARY phenomenon rather than a financial phenomenon. In other words, its not good earnings that cause stocks to rise, its MONEY. Specifically, more buyers than sellers. It is irrelevant WHY people are buying, as long as they are buying. But as soon as they stop buying, for whatever reason, its time to head for the exits, and pronto.
Economists and market fundamentalists alike have been altogether perplexed by the way that inflation has refused to re-ignite, even under the Fed’s most recent rounds of easing and zooming of the money supply. They keep demanding: where’s the inflation? where’s the inflation? Well I’ll tell you where the inflation is, IT’S IN THE STOCK MARKET. In 1982 the Dow was at 800, now we’re around 4700. That’s nearly 600% inflation over a 13 year period!!!
Most bull markets end in what is called a blow-off top. This is where stocks rally furiously day after day, ascending to previously unthinkable heights, until there is no one left to buy. Then they drop like an airplane which has gone into a stall; it tried to climb too far, too fast, and now has turned straight down in a free fall. This is just what happened in Japan in January of 1990. The Nikkei had just touched 40,000, and then it dropped like a rock. It is now standing at 15,000 nearly 5 1/2 years later. Its going to happen here too, except we’re going to go down more like 90%. That’s about 500 on the Dow.
But back to Clinton. Did you see Bills 40 bills(read billions) sent down to Mexico. You probably don’t even remember anymore. Well, just to refresh your memory, here’s what happened. Bill and his buds managed to fast-track you down the river on NAFTA. And they got so greedy about it that they even started to believe their own lies. So they started buying up all these Mexi-bonds ’cause everything was gonna be okay down there south of the border. Well Zedillo and the rest of those crooks, started cashing their bills (read billions). (the only difference between us and them is that everybody knows their pols are on the take, while everybody BUT US knows that ours are) And when they started cashing out, it put a real squeeze on the Peso(sell pesos, buy deutchemarks or whatever). This sent both the bolsa and the Mexi-bonds reeling, rates skyrocketed.
Now when you and I buy a bond with a thirty percent yield, we call it a junk bond. That’s because the risk of default is so high that the issuer has to offer a ridiculously high rate to get any buyers. That’s why the rates on the Mexi-bonds were so high, everybody knew that Mexico was a bad risk, everybody except Wall Street that is. Those Wall Street bankers, and their buds in Japan and Europe thought they had a sure deal, and as it turns out, THEY DID! Cause they’ve got you to bail them out: American Taxpaying Dummy.
So when Zedillo and the rest of those crooks cashed out of their pesos, and interest rates skyrocketed down there, those bonds yeilding 30% didn’t look so hot compared to the new ones yeilding upwards of 50%. The Wall Street bankers and their buds had taken nearly a 50% hit in net asset value. But no need to worry: American Taxpaying Dummy to the rescue. Congress spun into high gear, fast-track mode to bail out their real bosses, and once again give you the shaft. But this time it backfired. That cursed talk radio started spewing out its hatred saying “why should we send 40 billion dollars down to Mexico to bail out these high rollers when we’re already trillions in debt”? And voices started echoing “yeah, why should we congressman, you tell me”?
Well, Congress couldn’t take the heat, even with the united leadership of Bob Dour and Newt Greedrich. But wait, Slick Willy to the rescue. We’ll just send them YOUR DOLLAR DEFENSE FUND. Yes, believe it or not, Wee Willy Winky, by executive order, took the cash that is supposed to be used to defend the dollar from “greedy speculators”, and sent it to Mexico. What did they do with it? Why they paid off Wall Street, the Japanese, and the Europeans; who are now getting a 30-50% risk free yield, all thanks to American Taxpaying Dummy. And you didn’t say a thing. You were to busy getting wasted and watching dirty movies. And what happened to your dollar? Well it promptly plunged from 100 to 80 yen. A 20 % DROP!!!!
Now I’ve said all of that to ask this: Did you notice what a panic they were in to quickly get that money of yours down to Mexico? They weren’t even subtle about it. That is because they knew that their financial house of cards was teetering on the brink of collapse. And they had not yet got all of their ducks in a row(Swiss bank accounts, and all that). But now it appears that they are about ready to pull the plug on the Slickster. Will he order another building blown up?
But never mind how they do it, their gonna do it. The powers that be(illuminati), have decided that Slick has gotten a little too sloppy(A few too many Arkancides). And they are going to bring Clinton down and America to her knees. Remember the bear market of ’73-74. Well that began with Watergate. And America was a lot stronger then than she is now. When the cat is out of the bag, you’re gonna see those worthless greenbacks flooding back home fast enough to make your head spin. Then you can say goodbye to bonds and stocks, and hello nightmare.
Why am I saying this now, and not three months ago or three months from now? Simple, Wall Street just voted today(7/18): No Confidence in Clinton. Watch the hearings and watch the market. The big boys will always tip their hand, and if Clinton is going to take a fall, they’ll be selling BIGTIME!! Remember, these boys would kill you for your gold teeth, they LOVE money, and their not gonna let Slick Willy take their money down with him when he goes.
As I intimated in part 1, the state of the markets is the most accurate forecast of what the elites think will come of the current investigations of government misconduct. We are currently rallying back to where the market was when the first plunge occurred (7/26/95). There is really no doubt in my mind that the initial plunge was related to the beginning of the hearings, and the uncertainty that they caused. With the current press blackout, and the success of the Jewell misinformation, it is an even bet whether or not the whole thing will be swept under the rug, hence the state of the markets. If we fail to rally into new highs, look for a significant correction and even perhaps the long awaited crash, and subsequent bear market leading to a wholesale economic collapse and depression.
In the last part I indicated that there will be a number of ways to profit from the coming financial meltdown. But before I introduce these, it would be helpful to review some history of the markets, and how we’ve gotten to the point where we are at today. In the 1920’s investors in the stock market were making great gains, but the average citizen was missing out. This problem was exacerbated by the fact that even in a tremendous bull market, an uninformed investor could pick the wrong stock and end up even losing money. This problem was alleviated by the formation of investment trusts. These trusts pooled the individual investor’s assets with those of other individual investors. With these combined funds, the individual would be able to own a small stake in the stocks of many large companies. Hence, the small investor could participate in the “roaring twenties”.
Naturally, what goes up must come down, and when the stock market came down, it took the “locust trusts” with it. They had by this time come to be known as locust trusts, because they had proliferated to such a point that they even overshadowed the market itself. After the initial crash of ’29 and the failed rally of ’30, the real liquidation began and the country began to wind down into full scale depression. Over 90%!! of all the investors in the locusts trusts lost 100%!! of their assets. This was not only due to spiraling stock prices, but also to mismanagement, fat salaries and the general profligacy of the trust managers.
Needless to say, the American public was not very receptive to the idea of investing in trusts for some years to come. But memories fade, people die, and eventually good times return. In the forties and fifties the trusts realized that they had a bad reputation, but there was so much savings out there to be had. So they came up with the name “mutual fund”, and it’s been with us ever since. Today’s mutual funds have once again become “locusts”, even to the point where there are more mutual funds in existence than there are stocks on the New York stock exchange.
With the abysmal savings rate that currently exists in the U.S., the mutual fund industry is booming. This is primarily due to the fact that most of the “savings” in the U.S. is in the form of 401k’s Keoghs, IRAS etc. And these of course, are heavily invested in stocks. So the majority of Americans are depending upon a long term bull market for the rest of their lives. Don’t forget that 90% of the 20’s trust investors lost 100% of their investment. This can certainly happen again, and probably will.
So, how can one protect oneself from the looming financial debacle? To begin with, we must dispel the notion that money is only to be made in bull markets. Any market, as long as it’s moving, can be profitable. It’s just a matter of finding out how to position yourself so as to be carried with the tide rather than be buried by it. As Rothschild once quipped, “the time to buy is when the blood is running in the streets”. A corollary to this would be the time to sell is when everybody is making more money than they can imagine. We are very near this point.
Add to this the fact that the collapse of the Clinton presidency, and possibly the U.S. government along with it, has become thinkable; the time is ripe to begin picking stocks to sell, so that you can be positioned to leverage yourself on the downside when the bear finally does come. Also positioning yourself to sell stocks is wise at this time, in light of the fact that unlike any other investment, short-stocks benefit from deflation as well as inflation, or hyperinflation. And uncertainty is also a death knell for stocks..
It is Tuesday, September 5, closing bell. The S & P 500 and NASDAQ Composite both staged powerful rallies today, setting record highs. The DOW Industrials remains 50 or so points below record highs, but the Transports closed with a record also. Seeing as how the previous high dates back to the first day of the whitewater hearings, we can safely say that the big money has decided that nothing will come of the hearings. It pains me to say so, but I think they are right. Bill Clinton will probably dodge this bullet also.
Apparently the same myopia which afflicts the American Public in regards to so many other things is also quite effective in shielding their eyes from the crimes of the present administration. Will this president be brought down? Yes, But not yet. Will this stock market ever come down? Yes, but not yet. Efficient market theories aside, one day we will have to pay the piper, and that day is likely to coincide with a major revelation, the magnitude of which will make Watergate look like a third rate scandal(indeed it was). But of that day and hour knoweth no man.
Market fundamentalists believe that it is possible to predict the direction of markets by knowing the “fundamentals”, i.e. earnings, interest rates, etc. Technicians however believe that the only true indicators of where a market is headed are price, volume and other indicators of current market activity. Technical analysis is not based upon the premise that fundamentals do not cause markets to move, but rather that if they can be known, they are already factored into price. Therefore by watching price and volume, one can know what those in the “know” already know. If this seems confusing, don’t worry, it is.
A common Wall Street maxim is “buy on the rumor, sell on the news”. The point here is that by the time the news is out it is usually too late to do anything about it. The truth of this fact can be proven by anyone who will bother to check a stock chart(http://www.ai.mit.edu/stocks/graphs.html). A cursory examination of Chase or Chemical bank stocks will show that the heavy buying began long before the merger was announced. This is true with almost all of the other recent or past mergers and buyouts. You say: “but I thought that insider trading was illegal”. No, that’s just if you’re an outsider, insiders do it all the time. “but the S.E.C.”, you cry. The first head of which was Joe Kennedy. ’nuff said?
So, the point is, when you see a stock take a big dive, wait for a day or two and you’ll hear the bad news. It will be the same way when this bull market comes to an end, an enormous drop will be followed by some scandal. The the bear will have arrived for good. Now here’s the scary part. We have got to be headed for the biggest scandal in U.S. history because we are headed for the biggest crash in world history. Let me give you the fundamentals. We are now “officially” 5 trillion dollars in debt. That does not include off-budget debt, state debt, municipal debt, corporate or consumer debt. We also have trillions in contingent liabilities which include bank bailouts, S & L bailouts, pension and insurance “insurance”. If any of these go under, we owe whatever they owe. And the time they will go under is when everything else does.
We also now have 21 trillion dollars in derivatives floating around in the U.S. alone(42 trillion worldwide). All of these debts added together are greater than the worth of ALL stocks and real estate in the U.S. In fact they are over twice the value of EVERYTHING in the U.S. Simply put, we are BANKRUPT. So we can see from examining the fundamental picture, that the news that breaks when this thing goes for good is going to be BIG news. And what could be bigger news than the fact that the U.S. is run by a murderous, fascist thug, who blazed a bloody trail to the Whitehouse through embezzlement, fraud, drugs, conspiracy and murder; That half of the congress has been taking bribes from foreign governments to sell out the sovereignty of the country; And that the “rulers” of the United States are about as honest as the governments of Mexico or Italy.
When these facts come out, the reaction of the markets will be, to say the least, severe. And for this reason, we should expect the people with the big money to be selling quite a while before the news hits. This is clearly not the case today, in fact, quite the opposite is true. For this reason I must repeat again, that today’s rally confirms that nothing of significance will occur as a result of the whitewater hearings, and we must sadly look to future revelations to bring the truth out.
It is Monday, October 9, 1995. A significant sell-off in the high-tech sector today precipitated a market rout which left the NASDAQ down 27 points and the DOW down 42. In part 3 I indicated that the whitewater hearings would not be successful in exposing the crimes of Clinton since the market had so successfully shrugged them off. Today however, we are beginning to see the situation that I alluded to in part 1, namely that the breaking of the parabolic rise in the market would lead to a free fall. This is very similar to what happens when an airplane enters into a stall. The angle of the upward slope begins to become so steep that the plane stalls-the engine cannot keep up with the desired incline. When this happens the plane immediately turns 180 degrees and falls straight down. We MAY be at this point. A good look at a 12 month chart of the NASDAQ seems to imply this. You can find one at both “http://www.secapl.com/secapl/quoteserver/nsdq12mnth.html” and “http://www.ai.mit.edu/stocks/graphs.html”.
I also recommend that you read this and other articles using Netscape, because if you do this you will be able to click upon any one of these addresses for the WWW, and instantly be there. Also, to get back, you simply have to hit the “back” button and it will take you back to the article you were reading. If you don’t have an IP account with PPP/SLIP access, I strongly suggest you get one. Mine has unlimited access for $25 a month through an independent internet access provider, and also I avoid the big brother-corporate whores(MSFT,AOL) as well.
If we are indeed at the beginning of a free-fall, then it is pretty important for you to have your financial house in order. As I said before, we still do not know whether the powers that be will navigate us through a hair curling depression or a skyrocketing hyper-inflation. But in either case, it behooves you to be out of stocks. If you have any mutual funds or stocks left SELL THEM NOW!! As to the issue of debt, it’s not quite as simple because as I have explained before, inflation benefits the borrower while deflation does the opposite. So if you’re in serious debt, inflation will help you out. But due to the uncertainty of which scenario we will face, or even if we will face both, one right after the other; it is advisable for all or us to get out of debt as soon as possible. Once you are out of debt and have some cash to play with, it’s time to look at ways you can profit from the coming crash.
Shorting stocks, or selling short is one way to make a profit on the decline in share prices. Essentially what you are doing is borrowing stock from your broker, who has it because someone else who owns it on margin, has agreed to let the broker loan it out. After you borrow it by putting up its current market value, or half of that in a margin account; you sell it on the open market and pocket the proceeds, hoping that the 100 shares you now owe to your broker will end up being cheaper in the future when the price of the stock falls, as you expect it to. When it does fall, you buy back the 100 shares you owe at the lower price, pay back your broker, and keep the difference between what you received when you first sold it, and the price you just paid to buy it back cheaper.
Short sellers have a horrible reputation on Wall Street. They are called un-American, pessimists, bear-raiders, etc. These are all myths propagated to prevent the public from being able to protect itself, and make profits during bear markets. Nevertheless, short selling provides needed liquidity, prevents stock-frauds, and performs a host of other valuable functions in the marketplace. Your goal should be to profit from being correct about the direction of stock prices and the economy, not some ridiculous notion of patriotism which says that you should turn up the radio to keep from hearing the engine knocking. If America is going down the tubes, your going to the poor house with everyone else will not stop it. You may feel noble, but feelings don’t feed your children.
But how can you find out which stock to short, and how do you know when to do so? Two very good questions. First of all, the best stock to short is one which is going down. This may sound too simple, but many brilliant stock operators have been caught in “bear traps” or “short squeezes”. Never try to pick a top in a rising stock because you will soon find out that it can go much higher. A basic rule to follow is the 200 day moving average rule. The 200 day moving average(30 week) generally follows the level of “support” for a stock. As long as a stock is rising and is above its 200 day moving average, it is a healthy stock and should never be shorted except by the most daring of bears. But when the stock “breaks” below its 200 day moving average and stays there, it is most likely to have begun its decline. I say most likely, because there are on occasion stocks which break below their 200 day MA and come back, but for the most part, they keep going down.
Remember that you should only short stocks in a bear market, as this is the safest way to be assured that your stock will continue to go down once it breaks below its 200 day MA. Once the overall monetary phenomenon of the bear market takes effect it will take most all stocks with it. As the greatest speculator of all time, Jesse Livermore, once quipped, “When they bring the paddy wagon, they take the good girls with the bad.” Remember, you want to wait until the odds are most skewed in your favor before you act. As Jimmy Rogers says “I just wait until there is a pile of money over there in the corner, and then go and pick it up. Until then I do absolutely nothing”. By the way, you can see Jimmy Rogers every week on Strictly Business which airs on CNBC at 9 AM Eastern, SAT/SUN. Jimmy Rogers built Quantum Fund into a multi-billion dollar fund starting with a few thousand dollars in the late 1960s with partner George Soros. And it wasn’t Soros who was the brains behind the operation, he was just the trader. LISTEN TO JIMMY!!
Now that you have an idea about how to sell stocks short, how do you decide which ones to sell? Well, I have found through much lost money and countless hours of analysis, that the stocks that fall the most are the ones that have risen the most. Let me give you an example. Newbridge Networks is a NASDAQ listed outfit which I think does computer networking(shush, I’m not really sure what they do). Anyway, their stock went from 3 or so in the 1990s to 73 in about 2-3 years. That’s about a 2500% profit if you would have owned it from the beginning. When I saw this stock fail at 73 a few years back, I got in an argument with a friend at the brokerage. He told me that he had just bought it and asked me what I thought of it. I told him that it was going to thirty, and needless to say he was flabbergasted. He told me how the earnings were fabulous, the analysts loved it etc.,etc., etc. All of this was irrelevant to me because I could see that the parabolic rise of this stock had been broken, and it was heading down towards its 200 day moving average, and certainly below it as well. Do you think that all those insiders and muckety mucks were going to watch their 2500% profits dribble away? Heck no! they were going to sell, and sell fast. To make a long story short, I tripled my money while he bought it all the way down, continuously protesting what a good buy it was. Today it’s around 28.
I did the same with IGT, 1-40 in 4 years, and many others. Now you might be asking, “you just said that I should wait until a stock breaks below its 200 day MA before selling it, yet you sold those stocks near their peaks?” That is correct, and not only that, I did that in a raging bull market. But I didn’t sell short, I bought puts. Puts are stock options. They give the owner the right to “put” 100 shares of stock to another person at a specified price within a certain time frame. In other words, they give the owner the right to sell 100 shares of stock at a given price within a given time. For example, with IGT, I saw it fail at 40 and then break below 37. I bought the 30 put which gives me the right to sell the stock at the price of 30 no matter how low the price goes. In this case I covered my position at 22 which is $800 per option “in the money”.
The problem with options is time decay. You see, every day that passes by, the options are worth less and less(all things being equal) because they are only good to a certain date. For example, let’s say I buy a December IBM 90 put for $200. That means that for me to break even, the price of IBM must be $88 by December. If it goes below $88, then I make $100 per option for every $1 the price of IBM declines below $88. But even if I know that IBM is going down, if it doesn’t do so by December, I’m out of luck and lose my $200. That is not a very good risk/reward scenario, certainly nothing like a pile of money sitting in the corner. That is precisely why I don’t buy options. What? I thought you said that’s what you did with IGT? No, I didn’t buy options, I bought LEAPS.
LEAPs are long term options which do not behave in any of the predictable ways(Black-scholes, etc.). For example, the LEAPS on IGT that I tripled my money on, do not even expire until this January. And by the way, If I wouldn’t have sold them so early, I would have made 5 times my money. IGT closed today around 12 and 1/2. So, let’s put this all together. To recreate Jimmy Roger’s scenario, where there is a big pile of money sitting in a corner, you need all of these factors to line up: 1) a bear market, 2) a break below the 200 day MA of the stock you are following, 3) a stock which has had a significant run up so that it has a lot of downside potential, and 4) The ability to short it, or even better, having LEAPs written on it. I will tell you right now that this eliminates about 99% of all stocks on the market, but who cares, you’re looking for a sure thing anyway, right? The pile of money sitting in the corner!
So, to repeat myself, it does appear from recent market action that we are entering the period where a free-fall could occur in the stock market and it’s time for the bears to make some money. Are you ready? Bill Clinton is surely going to take a fall, and if the market is right about these things it’s looking like sooner rather than later. I would like to share with you the LEAPs which I have isolated based upon my criteria, but unfortunately I do not have all my positions established yet, and therefore would not want to put the price up on myself. But I will be glad to once I have, after all, your buying can only make my LEAPs worth more. I will leave you with one pick. Micron Technology (MU). Check it out: Huge run-up, serious break-down, bear market?, LEAPs out to 1998!!!! Check it out!!! “A prudent man forseeth the evil, and hideth himself; but the simple pass on, and are punished”. Proverbs 27:12
“The simple believeth every word; but the prudent man looketh well to his going”. Proverbs 14:15
“Be thou diligent to know the state of thy flocks, and look well to thy herds”. Proverbs 27:23

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