Some recent observations / a link to some excellent listening and viewing
emailed to subscribers - Mon, 08 Nov 2010

Overheard at a recent Sarah Palin love-in...

...we're a little tea party,
short and stout,
here is our handle,
here's what we sprout...

Oh so history repeating, as per previous cycles:
conservative public rallies that have urged Americans to turn to God and to ''take back'' their country. Glenn Beck, Ms Palin, the tea party. Secret Life has the history from previous downturns. It's always the same, and yet not quite the same.

Page 140: talking about the 1857 crash and depression, leading to a good deal of soul-searching and marked religious revival.

The great depression also put people back into the church in droves. They file out again once the recovery takes hold. Then the hemlines go back up as well.

Funny people these active US conservatives and extreme right-wingers. Reagan came to power with explicit promises to wind back JFK's / Lyndon Johnson's Great Society. Low taxes, small government. Lower taxes the conservatives voted in, immediately, but then forgot the spending cuts. The US budget deficit skyrocketed. Republicans again took power and control of US government after 2002. The result: US government expansion and debt levels unseen in history, ever. Blame Obama of course. Probably his own worst enemy anyway.

And the recovery continues...

"The suppression of interest rates at close to zero for most of the last two years has also boosted banks’ income, enabling them to borrow money at almost no cost and lend at higher rates."
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a2kDMAOwVghA&pos=1#
"Bank Bailout Returns 8.2% Beating Treasury Yields"

as per previous cycle, 1991, illustrated on page 298 / 9 of Secret Life. Important history there. Bernanke simply cannot allow US land prices to go lower. If they do, they will continue to threaten the viability of even more banks, which have so many loans backed by house and land mortgages. So he must create inflation, or at the very least, stop the deflation. From page 270 of Secret Life, discussing the 1974 / 75 rescue operation mounted by US and UK bankers:

"After 1974 we saw government action on a hitherto unprecedented scale to try to stop economies going into recession. (It becomes an effort to support land price, but it is never marketed to us that way.)..."

I then go on to illustrate the UK bail-out

"A similar rescue operation was mounted in the US. Alan Rabinowitz noted that, at the bottom of the market in 1974, REITs had lost on average 80 per cent of their stock price, with over half of all mortgages in default. The Fed gave support to the REITs and encouraged other banks to do the same. This meant that the distressed property of the REITs did not have to be put on the market in a disorderly fashion but could instead, because of the additional bank support, be held back to await recovery and higher prices..."

Each downturn manifests differently, but the cause is always the same. With interest rates near zero, the only other option Bernanke has left is to print money. Secret Life tells the result, same every downturn; the only viable response from investors is to buy stocks or buy gold. Or both.

Many years ago, just travelling, I did a walk of San Francisco. A walk that changed my life. So I was astounded to hear this, just this month, on Radio National, Australia:

http://www.abc.net.au/rn/saturdayextra/stories/2010/3001505.htm

The why of economic boom and bust is so easy to understand, for those that have ears to listen.... (It's a fabulous 7 minutes or so.) It isn't rocket science, and there is a cause. A lot has happened since then. Dave Giesen's generosity helped inspire Secret Life. So if you can't listen, at least watch, here:

http://www.youtube.com/user/BusinessCycles

and you can see how much I have learnt since that fateful walk, at least in a forecasting sense. Me personally, I am not out to change the world, but I am interested in causes, just like what Gann himself was doing. Remember, time is simply the difference between cause, and effect. Know the cause, especially its birth-date, and many things open up to you. One of them being how to forecast the effect.