*Rule of 20 comment, see attached*
Due to the fact the our rule of 20 measures only the industrial sector
of our market, we will have to look at some other valuation models,
given that the current market price is being driven by the resources
sector for the first time perhaps since the Poseidon episode of the late
1960's, which one would expect to continue for a while yet. Further
charts to follow soon
*Yield curve comment, June 05: see attached*
The yield curve has inverted; this is about to occur in the US as well.
The yield curve has inverted because the yield on the ten-year bond has
dropped, (which monetary authorities have no control over), not because
the yield on the 90-day bills, (which the Reserve Bank can control),
rose. Conventional economists are going to have a hard time explaining
this one, and you may hear them say, "this has never happened before".
But it has, it is just that we weren't around last time to see it. In
our lifetime, the yield inversions have only ever happened at interest
rate levels that were much higher than today, in a trend that we can
remember that was only ever in one direction - up.
History repeats. But have you ever noticed how it manages to do so in a
way that effectively disguises the fact to practically everyone. This is
because no one watches land value. What I mean by this is that the real
estate cycle has always run at least 18 years. It has to - read Fred's
new book if you want to know why. So, economic events will occur to
allow it to take place. Economists will tell you this is nonsense, since
they are taught that history does not repeat. (Thanks to Karl Popper and
his tomb /The Poverty of Historicism/.)
The next interest rate manipulation by the Reserve Bank in Australia
cannot be up, since they do not want the curve to invert anymore than it
has already, driven by factors presently that are beyond its control.
(If the Reserve Banks lifted interest rates higher, it would invert the
curve even more) This is confusing to them, since they would have argued
that the very high oil prices - and going higher into 2009 but with the
usual retracements along the way - should really be creating inflation,
and hence a rising ten year bond yield as the market players
progressively price the inflation into the long bond. And a rising
inflation would require the authorities to lift rates a bit to 'manage'
the problem. Standard text book stuff and a great reason for their
See the problem this gives the moneyed men ?
I believe that this conundrum of the long bond having declined in yield
in the US will also put an end to Greenspan lifting rates much further.
So I believe the next move in rates in Australia will be a slight
downward revision, or nothing at all. (A position I was repeating in all
classes this year.) Which of course will allow land price to go higher,
as is required into the final year or two of the 18-year land price cycle.
(Higher oil prices will (must) drive real estate prices all around the
world to higher levels, since the windfall gains to the Arabs and the
Texans will ultimately accrue to land price, (what else can they do with
it) especially in the world's capital cities like London, and the
The real estate cycle (i.e. land price) must run its course. Things will
happen to cause this to be so. And at the land price peak, something
will occur to give us all reason to blame the downturn upon it - upon
anything but the real culprit, land price simply having risen too high
in the first place.
speaking of which, tax cuts, infrastructure spending...
all adds to land price at the top end of a boom. The pollies do
everything to keep that boom going...
If you need further proof that markets are telling you there is plenty
of life left in the boom yet, have a look at the stocks making new highs
this month - all the advertising stocks and the employment and office
service stocks, eg srv, sgn, cnd, gcn to name a few. Now what's that
telling us ? (Conventional economists have no idea how to interpret
stock markets, and what an indicator like the 'new highs' means for
example. Yet another reason why you should only ever keep your own
council about stock markets, or the council of another only if you are
pretty damn sure he/she knows more than you do.)
Even SPT got into the new highs list this month - things have to be
note the raging movers at present - gold and oil stocks, amongst
others. This is where the long term analysis using Gann techiniques, 30
60 90 years etc, really will help you work out which years will prove
interesting for which sectors, something you can do in advance if you
have the history of the relevant commodity over that time span. (Then
all you do is trade the breaks into new highs, as that tells you which
stocks are the strongest in the sector: let the market tell you, instead
of being opinionated eh...) Gann gives you the history you need - or at
least how to do the work - in his commodities books. Have you read
them ??? This method clearly indicates gold and oil most emotional
year coming up is 2009, for coffee, 2007. (As shown in classes for some
years now) Most probably highs, though we trade the trend as always.
(btw, coffee often lows in August.)
rel, one to look at, a nice gann accumulation break there. Though you
do your own work on it as taught in class - including a look at the
fundamentals - to help you decide if the break can be carried through
to much higher highs amidst a lot of selling that took place in earlier
years, (I call that overhead resistance) . But a move to at least 26
(the prior low) before heavy selling is encountered looks likely
Finally, a leaked UK report and video footage shows that that poor
Brazilian shot in the head by the State wasn't wearing a flak jacket
after all, as described by the police report, was dressed merely like
you and i would have, and was showing no agitated moves as the police
report also listed. Lies to protect vested interests see. (State
sanctioned murders are by far the biggest killer anywhere in the
world.) Pay attention to the lies. When the real estate cycle turns,
bank presidents will come out and say their lending book is sound, their
earnings solid, their mortgages well secured. Will they be lying ? The
Reserve Bank will reassure us that it will be a 'soft' landing. The
pollies will tell you the economy is sound. Lies or not ? Only the
chart will tell you, so make sure you refer to it if one is available.
If the trend is down, you can then know it's a lie, since the insiders
will know and it will be them selling the bank stock, or whichever.
This is exactly as Gann pointed out. A chart never lies.