The cycle goes on - emailed to subscribers - Thu, 13 Jul 2006

After a month off to watch the world cup, it's back to business. First, a correction to a past email 'debt levels' sent May 23 06, where I said: "The UK, 60 years on, has just completed, or will shortly, its loan repayments to the US for the credit extended by the US to fight the good fight against the Germans. $90 billion and counting so far in credit extended by the good will of the bond buyers to fund America's excursion into Iraq."

The Economist April 8 reported spending on the Iraq war by the US had already cost the US $250 billion, another $250 billion seemed likely.

Remember, this is just credit created out of thin air. A book could be written about the consequences of this process. The Fed, a US dollar that is fiat (not backed by anything except the goodwill of the govt having decreed it so) and spending on war - it is all related. War could not be financed without a compliant Fed and a fiat currency. Credit creation is unlimited when this is so. Anyway, back to the point: history shows that such credit creation MUST 1) in the end force up interest rates and 2) be either repaid of wiped off by recession / depression. This is inevitable. Only the timing remains in doubt.

Late May, further unrest / riots in Paris, "reminiscent of the unrest in November" reported the IHT June 1. 180 degrees counted in days.

In Somalia, Islamic militants in June declared victory in their battle against local warlords who ruled Mogadeshu for the past - almost exactly - 15 years. 180 degrees counted in months. Time for a change in trend. (The warlords were being financed by US CIA led interests.)

[Just out of interest, Saddam was captured December 13, 2003. Zarqawi was killed June 7 2006. 30 months between these 2 highly emotional dates. 907 days]

The US invasion of Iraq began March 20 or so, 2003. But historians now seem to think that the pivotal turn in the war took place a week later when some in the war bunker realized that despite the fact the US was heading unimpeded into Baghdad, an extended guerrilla war seemed likely since the opposition army was disappearing amongst the people and would likely regroup to fight later. Those stating such were silenced. Anyway, this took place 1260 days - 180 weeks - prior to the 5th anniversary of the Sept 11 attack. So there is another example of time frames linking in the emotion, but not always obvious at the time. A count from Sept 11 2006 plus 180 weeks says around 22nd Feb 2010 should be watched for market violence. That is 84 months from March 2003, but one would also watch the 90 month time frame too from March 2003, which is of course September 2010, itself a 9 year anniversary, 108 months, from Sept 01. (All important numbers as Gann went round his circle of 360 degrees.) Very definitely, 2009 and 2010 are going to be volatile for the US and the world. Absolutely certain. Remember, it is as Gann showed, future highs and lows will be determined by past highs and lows, determined always in set time frames. Future patterns will repeat the past if one's thought patterns do not change. I see no evidence that the US power brokers are about to change behaviour. So the future highs and lows are set. It is really that simple.

Gold prices have retraced from the May 12 high. (My puts went well) Now here is an interesting thing. The spike on May 12 was driven by emotion, as anyone who was in that market will tell you. Gann shows you to count from this date, both forward and backward, in hours, days, weeks, months and years. The run up was a clear 180 days. As I said in a previous email, that allowed one to forecast an easing of geo-political tensions for a month or two (but remember the monthly and weekly trend on gold is still up), which did happen. A mid point retracement for gold back to the high $500's was in order, which also happened.

To the interesting thing: May 12 plus 180 weeks takes us to October 23, 2009. 30 years from Gold's all time high, December 1979 / January 1980, the time of the Iranian hostage crisis that lasted 444 days. (Just over 60 weeks.) The markets are telling you the time. Note the volatility in all stock markets over the past two months. Dow intra-day high of 11670 May 10, double top with all time high January 14, 2000. Then the retracement. May 10-12 is itself a count off September 11. (Recent India bombings, July 12) This is NOT co-incidental.

Singapore is about to start on its Marina Bay Sands, "the most expensive casino resort ever to be built" headlined the Straits Times, May 27. Opening set for 2009. India is to build a $250 million ski resort in the state of Himachal Pradesh, being built by a great-grandson of Henry Ford. "The largest single foreign investment in tourism in India."

Just as Mr Donald Trump announced he had completed buying property in Ramat Gan, Israel, and would now go ahead and build his 70 story luxury-housing tower set to become the tallest building in Israel. These things can only ever develop on easy credit. A real estate top is approaching.

[Something else, again just out of interest: The Empire State building turned 75 in May this year. The building was opened May 1931, it was in November 1929 that the existing hotel on the site was demolished, and on March 17, 1930, that the foundations were complete and the journey upwards to build it actually started. The building's most emotional moment though occurred 15 years (180 months) later, July 28, 1945, when a B52 bomber, lost in fog, struck the building killing those in the plane and 11 others around the 73rd floor.]

But as a colleague of mine once said: "they don't ring a bell at the top of the market." One example of why this is so is as follows: president Bush has systematically fired over the years any person who voiced a contrary opinion to his administration. Now there weren't that many of course that might do so, since he got to appoint them all in the first place and you didn't get appointed unless you had contributed substantial amounts of money to the campaign for his election. In addition, those at the top cannot abide competition, so anyone remotely interested in stealing the top job is also sacrificed. Which is why Cheney will last, since he has openly declared he is not interested in the top job. So at the top of the market, do not expect to hear anyone in the Bush administration speak out or break the party line. And I remind you, conservative bankers will rush to reassure all and sundry that their economies are strong enough to withstand any real estate downturn. (So there is a possible cue to do the opposite.)

Remember, there is actually no one at the top to ring the damn bell.

Historically though, one thing we can certainly watch for, a warning that the bell might possibly be about to ring, is when the world's biggest, largest, most outstanding get constructed. In the past, such things have - every time - marked the top. So I note with interest, HSBC bank in the UK has just announced a complete U-turn in the way it does business and will open mega-branches in that nation's largest cities, pioneering a new concept it has called the 'mega-bank'. Only toward the top if you ask me.

And a quick comment on those all-guns-blazing salute by George to Johnnie in New York back in early June. Remember: monuments are only ever built to those dedicated to preserving the status quo, the value of those government granted licenses. And the world will never move forward to peace whilst this goes on.
sports/2006/07/13/1152637795927.html behaviour solely about increasing the value of their (government granted) license.

Said one US correspondent last month (Maureen Dowd): Before the war, America railed against the Iraqi leader for slaughtering innocent Iraqis. Now the Iraqi leader is railing against America for slaughtering innocent Iraqis.

The US is only there to collect 'their' rent. This will unfold in set, identifiable time frames for the trader who knows Gann.

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