don't know and neither do they.
Drops Load, Shorts soiled, Taken to cleaners, Stool flushed
surprise attack, bulls stampede
Bears mauled, Injuries severe, many dead, wounded, MIA
N. Stool, PH &D
Stepan N. Stool, Chief of Stock Proctology at Capitalstool.com himself
mortally wounded, was seen hobbling through the clouds of smoke and
dust, ministering to the wounded and dying on the frontlines. The
plaintive pleas of the doughboys could be heard in the distance,
"Dr. Stool, Dr. Stool, help us." The families of the dead
cried out, "Dr. Stool, you let us down."
Dr. Stool replied, "I warned you boys this would happen, only I
too thought, not so soon, not so soon. I too have suffered the slings
and arrows of outrageous fortune, of a foolhardy abandonment of
caution and defensive emplacements.
I have nothing to offer but blood, toil, tears, and sweat.
have only just begun to fight.
only thing we have to fear, is fear itself.
shall neither fail nor falter; we shall not weaken or tire
shall draw from the heart of suffering itself the means of inspiration
give in, never give in, never, never, never, never--
in nothing, great
or small, large or petty--never give in except to convictions of honor
and good sense.
one should be surprised by the market's reaction to the Fed going into
crisis management mode. The only surprise was the timing. That
surprised the crap out of everybody. Here's what Dr. Stool's been
saying in the last few issues of Capitalstool about the likely
reaction to a Fed move:
will do some nervous, anticipatory bottom picking (ever been to the
zoo?) leading up to it. Ready, set, bang. Everybody buy! Dr. Stool
guesses the market will go up about 10% in two hours when the Fed
fires its blank. Then it'll churn and fail, leading to the next big wave
Like an asteroid
dropping in the middle of the Hudson River, this
move will upset the market's cyclicality. It'll be a few days before Dr. Stool can get a handle on
the longer term implications, but he believes that his original
scenario will play out. He suspects, however, that this could be a
precursor to the intermediate cycle up phase that he was forecasting
to begin around the 20th.
depends on the shape and behavior of the consolidation/pullback
that follows this explosion.
course the 20th is the day Shrub starts his new job, and Dr. Stool
continues to believe that he will have his hands full with this
still thinks that the market's going a lot lower for a lot
longer. But in the very short run, say the next one to three days, the market could churn
at these levels and a wee bit
higher. For his outlook on the three major averages, click the links
big question among the fundamentals types is whether the Fed is
pushing on a string. Dr. Stool is reprinting his thoughts on those
Stool has been thinking about the consumption bubble (not just
a tech bubble) we saw in 99-2000. Think about it. Did you shop till
you dropped? Do you have everything you could possibly want for a few
years? Do you have more debt than you'd like? Are you going to pay
some of that down for a while? Guess what? You're not alone. So the
corporate earnings slowdown is probably going to accelerate. This is a
classic picture of a downward spiral that will be hard to stop.
Dr. Stool has also been watching this California utilities situation with
mounting alarm. Today, the natural gas suppliers said no more for you,
Reddy Kilowatt. Can you believe it? This is scary stuff folks. Anybody
know how much of the US economy California is responsible for?
Now, Dr. Stool is not a Fed watcher per se, and is
certainly not a monetary analyst, but the proctoscope is showing some
bizarre things going on in the commodities and interest rate charts,
which may be connected to the California power grid. Dr. Stool is
also aware of a reversal in the dollar and wonders how unstable things
will get if the rest of the world decides they don't want to hold
dollar assets for the time being.
If the Fed is forced to act aggressively due to a destabilizing
financial system, that could set off inflation fears, which this time
would be justified. On the other hand, if they don't loosen enough,
the system could implode into deflation. Keep an eye on the charts of bond
yields, T-Bill rates, and commodities
for clues. The charts will tell the story before the economic impact
By then it will be too late.
you are interested in the precarious position of our financial
system, check out Credit
Bubble Bulletin over at Prudentbear.com.