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Quote of the Day

Monday, February 13, 2012

THE MOST RECENT DOW THEORY LETTER HAS JUST BEEN POSTED TO OUR SITE

 

February 13, 2012 -- Amy Winehouse, dead of a drug overdose. Whitney Houston, dead of a drug overdose. In each case, these outstanding singers had turned to drugs to ease or erase their awful psychic pain. Only the gods knew how much pain they were in. But poor things, the pain must have been unbearable.

 

A few months ago I wrote a piece about avoiding pain in the economy. How do we do it? We do it by turning away from austerity and embracing inflation. And the question -- will the inflationary method of avoiding economic pain kill our economy just as the drug way of avoiding pain has killed so many talented musicians? I think the results will be the same.

 

Examples: courtesy of Bill Gary's great publication, "Price Perceptions."

 

Last week the Fed announced that they were extending the current near-zeo interest rates out to the end of 2014.

 

The European central bank gave in and finally reduced interest rates to 1%.

 

The Bank of England is meeting next week to decide on another round of QE. (money printing).

 

This week the Bank of Australia will decide on whether to reduce rates again.

 

The Swiss National Bank placed a currency floor of 1.2 francs per euro in September to prevent further strengthening of the franc.

 

Japan has been printing for years in an effort to keep the yen cheap and competitive against other currencies.

 

Every nation wants a cheap and export-friendly currency. The result is a blizzard of (fiat) paper money blowing across the face of the earth.

 

The world has drunk at the punch-bowl of good times and debt ever since World War II. The world has avoided the discipline of pay-as-you-go and austerity for decades. But sooner or later the piper must be paid. Up to now, the piper has been "paid" with vast amounts of fiat paper.

 

The politicians want to make the people happy. The Fed is beholden to the pols. The voters want it all, and they don't like pain. The Fed and the pols want to make the voting public fat and happy causing as little pain as possible.

 

Inflation is the central banks' method of avoiding the pain of austerity. Inflation is the current economic narcotic that is used by modern nations. It's the old "begger thy neighbor" system, and it will ultimately result either in all out hyper-inflation and a collapse of the fiat currency system or a corrective deflationary crash. Either way, the last currency standing will be gold.

 

Pain --- The only way to deal with it is to dive into it, take the pain and you can cure yourself. Narcotics are not the answer. Drugs only hide the symptoms.

 

I know because I have been dealing with psychic pain ever since my childhood. There's no easy way to escape pain. You must plunge into the pain and deal with its basic cause. You must have the will and the psychic strength to re-live the pain and come out the victor. To fully understand the cause of the pain is to cure it. Avoiding pain through inflation or drugs is the sure path to defeat and maybe to death.

 

TODAY'S MARKET ACTION:

 

My PTI was up 6 at 6375. The moving average at 6336, so my PTI is bullish by 39.

 

The Dow was up 72.81 to 12874.04.

 Transports were up 68.05 to 5322.19.

 

Utilities were down 1.04 to 449.41.

 

NASDAQ was up 27.51 to 2931.39.

 

S&P 500 was up 9.13 to 1351.77.

 

There were 2370 advances and 719 declines on the NYSE.

 

There were 165 new highs and 2 new lows.

March light crude was up 2.24 to 100.91.

 

Total Volume on the NYSE and associated exchanges was 3.4 bn.

 

Bonds: Yield on the 10 year T-note was 1.98. Yield on the long T-bond was 3.12 Yield of the 91 day T-bill was 0.10%.

 

Dollar Index was down 0.12 at 78.98. Euro was up 0.33 at 132.05. Yen was down 0.06 at 128.86. Currency Prices as of 1 PM Pacific Time.

April gold was down 0.40 to 1724.90. March silver was up 0.11 to 33.72.

 

My Most Active Stocks Index was up 11 at 299.

 

The Big Money Breadth Index was up 10 at 994.

 

GDX was down 0.19 at 54.30.

 

HUI was down 2.46 to 521.46.

 

CRB Commodity Index was up 1.92 at 314.06.

 

The VIX was down 1.75 to 19.04.

Permanent Portfolio Fund (PRPFX) was down 0.31 at 48.97 (previous day closing). YTD Return: 6.25%.

 

 

Late Notes -- With what might have been its last gasp, the Dow closed up 72 points, well off its high and again a less than great fire.

 

Gold is holding its own at about 1700. We wait and wonder.