How Now Brown Cow

This missive is being written primarily for the great number of individuals who have written me emails and made phone calls over the last two weeks. The volume has been so large that I could not possibly respond to everyone individually, so I'm creating this letter instead in the hope that it will answer most of theirs and your questions.

To begin with, I am not a DOOM and GLOOMER, the world is not, I repeat ,NOT coming to an end. It's not coming to an end either Spiritually or Financially. Should I use the word CRASH, that only refers to a 15 % to 30% drop - not exactly the end of the world. Nor is it the end of the world's financial markets.

Trees do not grow to the sky and all good things must come to an end, regardless of the efforts we use in an attempt to perpetuate them. The longer we delay the inevitable, the more devastating its end will be.

Greenspan and the rest of the world's central bankers, especially the Japanese, have been flooding the world with money for 20 years. At the same time, their governments have been manipulating the CPI figures in an attempt to convince us that there is no inflation. They were only able to get away with it for so long because very few people even know what INFLATION is and because of the massive shift to Globalization that kept the prices of staples contained.. But all those balls games have come to an end and the Bankers know it. That's why we are now witnessing interest rates going up all over the world. We are also witnessing for the first time, the world's stock and bond markets all topping out at approximately same time as well.

The Tops are in. Should we get a DJII break-out to a new all time high above 11,750, you will also witness the biggest BULL TRAP in history. The World's Markets will all crash. It's not a question of if, but only when. My best guess is either it has already begun or because of the tremendous liquidity still floating around, there is still the possibility of one last suck-in rally beginning sometime in late October or early November and lasting not much longer than January 2007. It will be a huge suck-in rally and much too dangerous to play. It will, however, provide the absolute best shorting opportunity of your lives, should we get it.

GOLD and RISK

Up until now everyone and I mean everyone was willing to assume ever increasing amounts of risk. If you have any doubt just check the yield spreads between Treasury's and Junk bonds: They dropped to all time lows 2 months ago as the 10 year treasury's went above 5.5% and have been dropping ever since. There is now an inverted yield curve because suddenly the big money has developed an aversion to risk and is loading up on Treasury's. That will last as long as the US$ stays strong. As soon as they realize that the Emperor (US$) has no clothes there will be a massive shift to Gold.

Gold and Gold stocks have most frequently been counter trend plays to the overall market. This time around should be better than ever since every currency is inflated and all will shrink as people scramble to get into the only real money: GOLD.

Even during the great depression, Homestake Mining appreciated in value (Editor's Note: See Gold Stocks & The Great Crash of 1929 Revisited). https://www.gold-eagle.com/editorials/great_crash.html You can hold on to your gold and silver stocks and even accumulate more as we are now entering a very seasonally favorable time for precious metals. BUT if you are a Nervous Nelly, then by all means keep all your liquid assets in the only real money, GOLD. If the depression is so bad that even gold goes down in price, the price of every thing else will go down so much faster that the purchasing power of your gold will go up even more than your most optimistic scenario for gold. Besides Gold Bullion will outperform all but the very best Gold stocks and since I don't recommend individual stocks, stick with the Bullion, You will not be disappointed.

REAL ESTATE

NO, do Not sell the house that you live in, but you should try to sell out of all of your speculative real estate holdings if you have not already done so, as I have been urging you to do for over a year now. I hope for your sake it's not too late.

RECOMMENDATIONS

I do NOT ever make recommendations. I am just a RETIRED old man who has seen a lot of things and now devotes his time to writing his memoirs, a Book and to study. Once in a while, I share my thoughts but that's all they are, MY THOUGHTS and are not meant to be a recommendation to buy or sell anything. I am no longer a Financial Advisor: So please refrain from asking me either for specific recommendations or what you should be doing with your money. Anybody who would make those kinds of recommendations without first knowing and studying your particular situation and without delving into your hope fears and aspirations should definitely be taken out behind the wood shed and …

SUMMATION

I think that we are about to enter a severe STOCKS' BEAR MARKET, down maybe 20 to 50%. But it will not be the end of the world. Go back and read The Pendulum Swings. Or if you have the time, re-read all my previous articles where I try to educate you on how the economy, stock markets and interest rates work;, so that you will have the tools to think for yourselves. That is the best that I can do. Give a man a fish and you feed him for a day. "Teach him how to fish and you feed him and his family for a life time" It's too bad Bill Gates and Warren Buffet haven't learned that before they give away their Billions, and cause more harm than Good..

GOOD LUCK & GOD BLESS

Aubie Baltin CFA, CTA, CFP, Phd. (retired)
Palm Beach Gardens, FL
[email protected]
561-840-9767

August 26, 2006

DISCLAIMER
The above is my personal opinion, and in no way be deemed investment advice to buy or sell anything. It is submitted purely for informational purposes, based upon my understanding of the markets.