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Sunday, August 9, 2009

The Fundamentals Behind the Waves

I don't often throw around fundamental statistics and such. There are much better sites that do that and do it very well. Besides I just have no time to do original research nor be a "hub" for daily market stuff. I do waves and I am comfortable with that.

Fundamentals are a confirming factor for wave analysis. In other words waves move first then the resulting fundamentals that are produced can help decide where you are at in the long term wave structure.

It might not seem like I pay attention to fundamentals or other such economic data when I am calling for a Greater Depression but indeed I do. I do all the time. You often hear me talk about debt (and government) and its problems. To me its a simple concept: the debt and debt promises are in the process of being destroyed. And that destruction will be calamitous to the stock market.

There is no helping or stopping this process. The government cannot decree nor change human socio-economic nature but they surely can compound things. The government doesn't "produce". They can only leach and help determine who the winners and losers will be. Basically humankind has decided to borrow (maybe steal is the word) without regard from the next few generations of earnings in order to satisfy us now. The bills are due. Day of reckoning is coming. Social mood is correcting. We are waking up from a long hangover and its no fun. Some vodka Bloody Marys in the morning may help us til noon, but by 1pm, we're gonna need some sleepy time.

The heart of Elliott Wave theory is that socio-economic mood (or activity) is governed by nature's laws (think Fibonacci) and that the long term wave structure cannot be altered by mankind even if they pump $7T more of debt. But this is what the mood at this time calls for, so we have done it and the waves reflect it. A great rally. The waves are supposed to be where they are. I accept it. We did, afterall, as a nation, largely approve or allow what is happening, yes? For now, we don't much care. But its not over by a long shot.

As far as actual numbers and such, I follow several sites on the web that either does original research or has daily links to all the best stuff. One of them is Zero Hedge. http://www.zerohedge.com/ Through his Sunday reading wrap up I found this article from Denniger http://market-ticker.denninger.net/archives/1313-Economic-Bottom-Calls-Willful-Ignorance.html It talks about the debt problems in detail.

Another great site is of course is http://globaleconomicanalysis.blogspot.com/ . He packages the details and presents it in a straightforward way that any layman can understand . Today he linked a nice article about the S&P500 and how it may of course already be way overpriced. http://globaleconomicanalysis.blogspot.com/2009/08/what-growth-is-s-500-pricing-in.html
I feel honored to be on his blogroll.

Another site I visit frequently is http://www.doctorhousingbubble.com/ . He has a great continuing "series" on The Great Depression and how it was similar to whats going on today. Some of the stuff he presents in that series you'd think they were talking today. At any rate, if you think housing is turning because CNN says so, I suggest you spend some time on his site because he breaks it all down, again in an easy to understand and always interesting perspective. I too am glad to be on his blogroll. I must be doing something right.

So those sites are a major source of how I track "fundamentals" and other such opinion articles and such. To me, the bloomberg.coms and marketwatch.coms or CNN.Moneys of the world are a great source of "media" type news that can be used for contrarian purposes and quick news tickers, but as far as getting things correct and getting a more honest opinion, you're better off seeking sources such as what I link to above.

I never watch TV for economic stuff. Its largely a waste of time. They are all just cheerleaders anyways. 30 minutes scanning just the 3 sites I linked is WAY more valuable than listening to the blabberheads on "Fast Money".

So you see there is a certain "synergy" between sites like mine and the sites I link. I realize its probably all from a bearish slant but hey, what can you do?

But really when it comes to fundamentals I look at basically two (and will touch on them in blog posts from time to time): The massive debt burden and its destruction (public, private, corporate and don't forget debt promises) , and all the world governments ever-increasing takeover of worldwide socio-economic activity. Together those two factors spell disaster. Together they will ensure the public social mood continues to spiral downward. The market will likely reflect it in the end.

Its not about "P/E ratios" although those type things can be useful. After all, where did we come up with these ratios in the first place? We came up with them from a Grand Supercycle wave III perspective (which is over!). The paradigm will shift. It takes time but it will shift. Apple at $165...a bargain? Who says its a bargain at $60? Its only a bargain if its due for a wave up and we can pawn it off to the next sucker! What if we are due for a really big wave down?

When you really think about it, the entire financial world is like a big Ponzi scheme. So is all the associated debt. Ponzis collapse because Nature's laws will not allow them to go on forever.Am I dramatizing the problems? Gosh I hope so in the end that I am! But oddly, the fundamentals back me up more than not.

Primary wave 3 is supposed to be more intense than P1. So if the market does turn back down eventually all the most downside extremes of P1 should be exceeded. Fear, A/D volume...etc etc. We'll know whats happening by the wave structures. The Government cannot alter the underlying social mood nor long term wave patterns. They will, in fact, exacerbate them both.

At any rate, I encourage you to seek out as much balanced info as you can. Believe it or not, I try to.
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