April is A Time for Rebirth

"The problem with Socialism is that you eventually run out of other people's money." Margaret Thatcher.

Obama's whirlwind tour of town hall meetings that included photo ops with Schwarzenegger and culminated with his seemingly successful appearance on the Jay Leno show was surely taken positively by the Press. However, Wall Street and the majority of investors were not buying it. In fact, most believe that he should be sticking to his knitting of fixing the economy instead of cavorting around Hollywood. But he was definitely right about one thing, "It took years to get us into this MESS." He was, of course, referring to only the Bush years, but seeds to the current "Mess" as Obama is calling it, were initially sown as far back as 1913 when the FED came into being. It got rolling in earnest 20 years later when FDR started a lasting and ever increasing government meddling with the economy on a scale unheard of in American history. President JOHNSON then did his Bit with his "WAR ON POVERTY" which thus far has cost us over $12 trillion with nothing to show for it except massive increases in entitlements and debt. Each successive president, except perhaps Kennedy and Reagan, did their bit to bring us to where the Death of Capitalism is at hand. The FDR of the 21st Century has unrestricted, unchecked political power and only the Supreme Court now split 5 to 4, is left to perhaps provide some modicum of balance to stave off the complete destruction of the foundation and principles on which this nation was built. But they can do nothing until a case is brought before them. This may sound like a purely political statement, but its not: It's a statement of fact as this massive shift "left" takes place with the complete takeover of Congress in 2007 by far left Democrats without even one true Republican out there to act as any kind of meaningful check and balance on which our system of government was based. Should their be any doubt in your minds, the stock markets around the world are screaming loud and clear, but nobody seems to be listening?

Well my readers and I may not be able to do anything about the government but there is plenty we can do about managing our own finances; as most of us are up over 20% for both 2007 and 2008 as compared to being down 30 to 70% by some of the biggest and best professionally managed mutual funds. Have you checked your 401K's lately?

My first Bulletin gave us a nice 900 point, 5 day rally straight out of the box, which looked like it might be the beginning of that Wave {B} that I have been expecting. That is until Obama made another speech and the Congress went on a witch hunt destroying our America of Laws in the process. In less than 50 days, the government has managed to attack almost every wealth producer and job creator in this country.

BERNANKE is so steeped in Keynesian, Marxist, Socialist philosophy that he cannot recognize the truth when he sees it and he certainly cannot even think of the unintended consequences of his actions.

On March 18th, the FOMC voted unanimously to buy over $1.3 trillion dollars in U.S. Treasury Bills, corporate bonds, mortgages and consumer debt. The Chief Economist at Bank of New York Mellon Corp. said, "This is a very powerful and aggressive move…" and called it a Rambo Fed. Bonds immediately rallied, with the 10-year note putting in the biggest one-day gain since 1962. Stocks rallied and went from a 150 point loss to a 170 point gain in 2 hours. This was quite unusual, since bond and stock prices tend to move in opposite directions. When stocks appear risky, money goes into the safe haven of bonds and vice versa. But these are strange times, and with the Fed taking unprecedented steps to ward off deflation and get lending moving again, it's not that surprising that some old relationships are being tested. This was the most common interpretation of the FED'S move and the only one being heard on all the financial media. Yet my recommendation to short the TBT July 42 Put for $3.00, was still only trading at $1.90 even after the Rally following the announcement. Stay with this trade

WHAT HAPPENED TO COMMON SENSE?

What is really happening? Either nobody sees and/or is definitely not commenting on it. Bernanke, Geitner and Paulson before him, with the Government's collusion (or stupidity), are rebuilding the capital of the banks by lending them money at ½% interest while allowing them to GOUGE the poor and middle classes. They are allowing them to charge upwards of 35% on credit card balances and only issuing below 5% mortgages if the borrower has a credit score of over 800 or they can unload these mortgages on to Freddy and Fanny for the taxpayer to assume and get stuck with the risk.

BACK TO REALITY

The rally lasted less than one day. Obama made another couple of speeches and investors had one night to think over the FED'S moves and the Market promptly sold off nearly 150 points. As the day wore on, there were a few guests that appeared on CNBC such as Bill Seidman and Peter Schiff who know what they are talking about, but they were constantly interrupted and shouted down and not allowed to express their ideas by the likes of know nothing, self-proclaimed economists/journalists like Steve Leisman and prostitute economists like Larry Kudlow, both of whom are either devoid of common sense or more likely are so wedded to a Bull Market that they act as if they are one of the "three blind mice".

The truth of the matter is that this economy, stock market and especially Gold are behaving almost exactly as I have been writing about as long as two years ago. Printing and creating money "out of thin air" is by definition Inflation. At the rate Bernanke and the Government are going, there is every probability that we will be in HYPER INFLATION in the not to distant future. This should occur as soon as all of the delayed spending plans hit the economy and the American and world economies starts to feel the effects of the massive increase of money as it works its way into circulation. The simple common sense fact is that "out of thin air money" is not Wealth. Printing money by the trillions does not create even one apple or one pair of shoes; all it does is raise the cost of everything by destroying our currency, along with all domestic savings in the process. The only reason we are not seeing the inflation yet is because the major portion of the "STIMULUS" (pork) package does not take effect for 2 years. We are now witnessing what the usurping of our education system by the Marxists and Socialists has wrought. There are NO conservative economists out there of any stature that can even think of or come up with any real free market solutions to solve our problems..

Bernanke's intent is clear - he wants to make sure interest rates stay low. A little foresight should tell him that if the banks give out 30 year 4% mortgages, they are signing their own death warrant. The moment interest rates start to rise, watch out for the next S & L type crisis. Or is Bernanke assuming that we will be in recession/depression for the next 30 years? Overnight interest rates are already near zero. Any more easing and the Fed would be paying banks to accept Fed money. So buying debt is the only thing they can do to get more money into the banks: Who are becoming ever increasing government instruments of Social Policy: That and getting AIG to pass FED money through to the brokers and banks (including foreign banks). *****Analysts are already saying that this move will lower mortgage rates by up to 50 basis points immediately. The hope is clearly that lower real mortgage rates will boost home buying and start to pull the economy out of recession. Bank stocks loved the announcement and so did the homebuilder stocks. But that love fest too lasted less than one day. I guess the public is not as stupid as the Government thinks they are.

HOW IS IT POSSIBLE THAT DOING MORE OF THE SAME AS WHAT GOT YOU INTO TROUBLE IN THE FIRST PLACE CAN POSSIBLY BE A SOLUTION?

OH yes, I know this time the Government will pass new regulation and create even larger bureaucracies to enforce their new regulations. That should do it, right? Have you ever heard of even one instance where passing laws prevented crime?

Gold and Gold Shares also rallied on the announcement that "Helicopter" Ben is making good on his promise to flood the market with liquidity to avoid a depression like scenario. Only this rally lasted a lot longer than one day. Of course, the fear is that a massive increase in the money supply will spark inflation down the road. At some point, the Fed will have to act quickly to raise interest rates and sop up liquidity. Has everyone forgotten about the lag effect? The Fed is always behind the curve because of it we will see more Greenspan-esque asset bubbles and runaway inflation. The FED has never in its history been known to be so nimble- but maybe this time it will be different, AY ?

Warning: Even though the $50 rally in Gold lasted more than one day Gold is still in its consolidation phase: So don't despair if Gold pulls back from here. It will just present you all with a good buying point.

HOW NOW DOW

INSPITE of all the negativism you are getting from me, as I have pointed out to you time and again, it has very little to do with the stock market in the short or intermediate term.

As outlined in the last few missives and bulletins: The indices have come a long way over the past few weeks, and it's time for a little profit-taking. But that's all it will be. I still believe that "buy the dips" is the appropriate strategy for the time being Of course, I'm talking about taking short- term positions.

Here's what I see is happening: A 7000 point, 50% Sell-off is more than enough to discount all of the first quarters negative numbers. Our Special BULETTIN sent out Monday mourning March 6th caught the low on an intraday basis and was followed by a significant Rally on Friday, March 9th just as I was expecting. You all know how much I rely on CYCLES and the spring seasonal turn Cycle which has been among the most reliable, probably coincided with the price bottom for the first leg of the Bear Market from October 2007. Regardless what wave label you use, it is probably the mid-Bear Market, multi-month upside correction (similar to the 1930 Bear Market Rally). So far this rally, produced a 20% and over a thousand points in the DJII and our two Special Bulletins picked up most of the rally. I hope that sets to rest the question of why you should subscribe rather than wait 2 weeks to read it for free on the Gold-eagle.com web site, which by the way, do not get the special bulletins.

Although the market was overbought I did not send out a Bulletin because we are not attempting to be day traders. I believe this pull back maybe only be a mini correction of a multi-month rally phase. We should be looking to buy this pullback as I expect that there is as much as a 2000+ point rally coming over the next several months.

This coming corrective wave should be choppy and nerve racking but will launch the next up, which should produce a significant move higher. If my educated guess is correct, the coming decline will offer a terrific place to add stocks positioning for an explosive wave (3) up.

Buy the Dips using out of the money May options on the FAS, BGU and TNA with no stops but using only a limited amount of money because the market is still in a Major Bear Phase and therefore very dangerous: But the triple action feature of these ETF'S could make you significant money if we end up being right without risking too much. This rally should convince the majority that a new Obama BULL MARKET has begun so be careful not to get trapped by all the propaganda that will flood the media. This rally will be your last chance to build up your cash positions, if you haven't done so already, especially in your 401K's and plan on going short big time in preparation for a cataclysmic second down, Wave of this first stage of ythis Bear Market, which will likely give back all of the gains, and then some.

GOLD

Gold has entered a temporary irrational exuberance stage, but only among fans of gold (Gold Bugs). I have still never heard even one major portfolio or mutual fund manager say that he is buying Gold or Gold Stocks. Most of the ads for Gold are to purchase consumer's Gold jewelry: Which is tantamount to a sell recommendation. We are not close yet to the kind of media coverage that is associated with a top in Gold. However, temporarily we are in overbought territory, soon to be going through a consolidation.

LOOKING INTO THE PAST TO DEVINE THE FUTURE FOR GOLD

Before we can figure out where we are going, we must first figure out where we are and where we came from. In rounded terms, the rally started in 2001 and went up 400% or $780 in a perfect Elliot Wave 5 wave move to a high of $1030 in March of 2008. The minimum time frame to correct 7 years is 18 to 20 months giving us a time frame for the end of the consolidation phase that we are now in of Sep. to Nov. 2009. Using the rules of alternation, the most logical expected correction should be some form of a flat correction, either a double or triple flat ZIG ZAG correction or a horizontal triangle correction down to between $735 to $835. So far, based on the first year of the correction, we seem to be in a horizontal flat correction which should last another 6 months or so with Gold fluxuating between $735 and $9350 before we get a WAVE III Blast Off to a minimum target of $2050, which would be 1.62 % of $750,the Wave I rise, or $1,260

Going back to the 1971 - 1980 Bull Market, Wave V was the most explosive of the moves which was 3 X the entire move from 1971 to 1979. So what do we have to look forward to? Another $5,250 over the next 8 to 12 years and blastoff should begin sometime in the next 6 to 8 months. If you think or know of a better market to invest in over the next 8 years please let me know.

I have spent my entire career identifying major trends in the markets and helping others to profit from them. These are trends that will be happening in the near future; trends that most analysts and investors notice only after they have already been well established and we have made the majority of the easy money. In my newsletter, "UNCOMMON COMMON SENSE", once I uncover changes to the major trends, I then present specific, actionable recommendations that will help you profit even during the worst of times and before they become obvious to everyone else.

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UNCOMMON COMMON SENSE
Aubie Baltin CFA, CTA, CFP, PhD.
2078 Bonisle Circle
Palm Beach Gardens FL. 33418
[email protected]
561-840-9767