The Dow Jones Industrial Average has been flat for three consecutive weeks while the 15-51 Indicator continues to build lower lows. You may recall that stock market strength flattened out three consecutive weeks in July of last year (see: Strength is Flattening). The 15-51i reached its peak two months later in September, and then swiftly began its current and steady decline. See below.
The Dow Average is sure to follow that trend.
Gold has been following along in its own way, and dropped more than 5% in just the last two weeks. This is for no good reason.
The global currency crisis continues to worsen and world financial institutions remain in severe distress. Just this week, five of the largest U.S. banks reported 19 billion dollars in mortgage write-downs. While this kind of loss is easy to incur when the Federal Reserve hands these banks 85 billion dollars of freshly printed new cash every month, this losing action can no way be considered a sign of financial strength or a recovery in housing.
The U.S. financial system remains under stress and gold should be rising. Investors must acknowledge that stocks are overvalued and gold is misleading. In fact, a recent Wall Street Journal article highlights how fund managers are forcing gold prices down with record breaking short activity – this at the same time they are puffing up the valuations of major stock market indexes by strategically deploying new cash provided by the Fed.
Never minimize the establishment’s ability to inflict mass-market manipulation to mislead investors so they can benefit from the deception.
Across the pond in Europe, banks repaid a much smaller than expected amount of emergency funding provided by their central bank (the European Central Bank) during their financial crisis in 2011. In a nutshell, European banks don’t have the money to repay those debts or they don’t want to part with the money to do so. Neither are signs of international financial strength.
To make matters worse, Europe’s financial stress is compounded by a disagreement in the valuation of the region’s currency (the Euro). Germany, the dominant economic engine in the Zone, believes the currency is fairly valued – while its second largest economy, France, believes the Euro should be weakened to boost growth and remain competitive. This debate prompted one road scholar to assess: "The euro is arguably undervalued for the North, and overvalued for the South."
This is further proof that monetary unions do not work among cultures that are so very different. In short, fiscal and monetary harmony in Europe is about as close to them as world peace is to everyone else.
Investors should take note.
The world's third largest economy, Japan, is currently anticipating that their new central bank chief will follow the western world and aggressively seek easy money policies that they hope will produce higher economic output, or in the worst case scenario, maintain subpar monetary performance led by modern American government.
Weak currencies and mass-market devaluation is not a pathway to success and prosperity. America and Europe are currently proving this. Japan is soon to follow.
Monetary problems and financial stresses persist amid greatly weakening Markets all across the world. Just this week, a 2013 recession was predicted by Europe’s Executive Commission – let’s believe them.
In America, recessionary proof was affirmed by mass-market participant Wal-Mart, who reported flat sales and pointed to the tax increases imposed by the American Taxpayer Relief Act of 2012 as a major threat to the future of its consumers’ spending patterns – a.k.a. Wal-Mart profits. — Remember, the most recent tax Act was advertised as more taxes on the rich and "relief" for everyone else.
But let me ask: How many rich people do you think shop at Wal-Mart?
My friends, tax "relief" means tax imposition to Government; and to them the definition of "rich" means you and me.
Once again, the establishment – namely the U.S. government and the Wall Street machine – has bamboozled the American populous into costly false pretenses – especially for Wal-Mart shoppers.
Higher taxes reduce Consumer spending and poor monetary policies depreciate the value of money. These conditions are good for gold and bad for stocks. Don’t be misled.
As an investor, patience and discipline are your greatest attributes right now.