10 November 2005
Goodbye General Motors
The current best decay solution to a primary low is 19/17-48/21-22 of 47-48. This leaves only 26 trading days left to a final primary low. The recent equity rally is so very right from both a contrary sentiment perspective and terminal monet flow perspective. There are very few to any of the tradtional pessimists left contemplating such a near term drop. This psychology dynamic, even among the most pessimistic economic realists, is as it exactly should be at this point in the second 147 year Grand Fractal. All eyes and linear thought are focused on possible valuation growth targets for the traditional December rally. Recent multimonthly partial liquidation of bond mutual funds has provided the final money fuel along with the last few dollars left in the historically low cash reserved equity mutual fund industry to cause today yet another minutely exhaustion gap to a multiweekly high, lower than the 3 August 2005 Wilshire Maginot Line valuation high.
The current best solution for the final subfractal containing the 26 days is 3 of 5/13/13. For the long term debt instruments the dominant subfractal count if 15/35 of 37-38 meaning that the next two-three trading days should, just as today, have an influx of money driving TNX and TYX lower consistent with lower interest rates. Today, the smart money which was made by selling equities, near their top price secondary to 3 August 2005, was invested in long term debt instruments driving interest rates lower. The Wilshire is softly whispering: beware of the technical implications of minutely exhaustion gaps to lower highs involving me for I am the near sum of US equity valuation activity.
GM, which soon will likely follow the way of Delta, United, Northwestern, MG Rover, and Delphi collapsed to a 13 year low two trading days ago. Because GM's pension solvency is coupled to its stock market valuation and the overall equity market is in a 6 week (using the best current solution) to 9-10 week(using a secondary solution) decay process, GM will likely face bankruptcy, changing the face of US corporate smokestack and labor union economic dynamics. These dynamics have provided 75 years of substantive US manufacturing might and real American made goods to the world markets. They have provided real living wages for blue collar workers. How will these displaced blue collar workers send their children to college, pay health care bills, and pay inflated real estate taxes. Who will be able to afford the entry level homes that have been and are being built?
The over investment, overproduction, over consumption, and saturation point of the 2000 tech market has been replaced by like elements constituting the housing bubble. This crested catastrophe has been fueled by far more powerful easy lending practices and transient lower interest rates than the ten percent marginal buying practices and nadir fed fund rates of the late 1920's.
Saturation macroeconomics at the American consumer level will determine the course of valuation trading for the next 8-12 months. The degree of positive sentiment that exists in the market today will be replaced by its antipodal like image at the end of decay process.