3 February 06
Weekly 30/75/75 and Daily 31/77/77 Fractal Completion....
Fractal growth of equity valuation progression has proceeded
in perfect and precise order. The last posting identified a 31/77/60
0f 62-77 day x/2.5x/2-2.5x pattern. 31 January 2006 will be day 75 of
the third 62-77 day fractal. Day 31 and day 62, x and 2x,
respectively were perfect apogee days of this third growth fractal.
Elegant - consistent - perfect in its natural growth pattern that
appears to characterize the money/debt/asset complex system.
Deutschland's DAX recently made a multi year exhaustion gap to a new
high. Will the Wilshire follow the pattern over the nest three days
and have a terminal exhaustion gap near 2.5x or the 77th day of its
third daily fractal or will it falter? Recent smaller scale 2.5x
fractal patterns have faltered, providing fractal information that day 77
(2.5X) of the third fractal will not best the apogee valuation of day 62(2x).
The lenders of the world have united in their greed and imprudence.
The interest rate lowering actions of the Fed in 2001-2003 can account
for only a portion of the current insanity that typifies the
indebtedness, the negative US saving rates, and pensionlessness of the
US citizen. The amount of money in the US and the world that has been
created through the circa early twenty-first century 'sub prime, LIBOR
based , interest only' lending practices makes .... the 10 percent
marginal buying of stocks in the late 1920's, John's Law's money
pyramid scheme creating the 1720-21 French debacle, and the
unregulated state banking practices and odd local and state currencies
of the early 1830's resulting in the sky high pre-panic 1837 real
estate valuations in Katrina's southeastern state areas...look small
and puny. The world is in trouble. Regarding the internet valuations
in the early 2000 the Chairman reflected that a bubble could only be
identified looking in retrospect. The same gentleman used the term
'froth' to prospectively characterize the real estate market in late
2005. A reckoning of the great proportions is in time's ante room.
Will this great reckoning occur in 2006 or will this year's crash be
followed by yet another higher lower-high recovery? Has the Fed,
through its interest rate increases, bought another cycle before the
baby boomers began to retire in the next few years? It is clear that
the fed cannot begin reducing short term interest rates before there
is evidence that inflation is under control. The CRB is at all time
high. Even Chinese goods made with cheap labor have a component of raw
material cost. And significant money that has been borrowed and
created via the housing bubble is now under ownership by the Eastern
world, who are energy poor, dollar rich, and share a commonality with
the Mideastern nations of the world in their intrinsic affinity to own
tangible wealth in terms of traditional precious metals.
Kuwait has recently confessed what the Saudis have not - that their
oil reserves are half of previously estimated. Perhaps the Saudis are
counting the pressure infused salt water in their oil caverns as
hydrocarbon equivalents. There are many many final barrels of oil in
Kuwait, Iraq, and Saudi Arabia. But their extraction will be pricier
in the near future and will occur in the face of an ever increasing
global demand created by both the foo foo service and speculative US
economy which can borrow, produce, circulate, recirculate, and spin
out dollars to its 'international business partners' via its fraggle
rock mirage economy and the real global players: the Asian and Asian
subcontinent growing giants whose translatable and transcontinental
service economies, real product economies, and engineering
intellectual property created by their educational systems are ever growing and
becoming earth dominant.
If the world economy continues to grow linearly and demand for oil
increases linearly, the growing mismatch between production and
consumption will suddenly result in unimaginable price increases.
Recently created dollars and world currencies through global housing
bubbles will compete for the remaining overestimated energy
commodities with a feedback collapse of the global economies. Add to
this the growing animosity of the fundamentalists' sentiment in Iran with
respect to their disposition of ample oil reserves. An independent
moderate Iraq no longer exits to balance the fundamentalism in Iran.
President Carter's Waterloo seems ready to reemerge.
What goes up inappropriately high, will compensatorily decrease in a
like manner. There are over 50 years of continuous economic growth
created by cyclical and rotating US governmental, corporate, and private
borrowing. Against the recent two years of Fed driven increasing short term
interest rates - in response to increasing money supply inflationary
pressures - the long end of the debt market, under global market
competitive forces, tells the real near term economic direction with
the greatest of clarity. Observe the ongoing inversion of short term
and long term interest rates. In one year, or maybe five years, who
will be the borrower of last resort? Expect the unexpected.