China

Scuttlebutt that a worldwide economic slowdown will cause the the debt-induced China bubble to pop, like the Japanese bubble popped in 1989.  The tipping point for the central-bank induced euphoria in all the stock markets could come from China.

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Capitalism

Capitalism is the only economic system that produces any value, in the form of new products and new services and all the employment necessary to produce those products and services.

But you do need some government oversight.  Private companies are driven by their financial self-interest, not the public good.  A company will sell you arsenic if they can make a profit and think they can get away with it.  So that’s where government comes in — a watchdog to make capitalism benign instead of predatory.

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All That Glitters

I have an investment analyst who has the theory that a very long sideways move will have an exceedingly large and long breakout to the upside or down when the breakout finally does happen.  Gold has been in a sideways movement now for 7 years.  I think its time has come, especially as the Fed seems to be talking easy money again.  The government thinks nothing of trashing the currency if that is the way to keep the bull running.  I leave it to you whether that is wise.

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Bear Markets

All those young investors who have never tasted the bitter taste of a bear market are about to get a nasty surprise when they see their accounts at the end of this month.  The market fell through long-term support in the middle of last week and now could plummet to any level lower.  Eventually you can expect sharp, short covering rallies that, when they hit their peaks, will then collapse very sharply to new lows, as most of the buyers propelling such rallies were not longs but rather shorts just covering their positions.  You can trade bear market rallies but you don’t want to be long in them.  Bear markets are a lot more treacherous than bull markets.  You have to know what you are doing in bear markets.  If you don’t, stay in cash or CDs.  Not bonds this time, as bonds are in a bigger bubble than stocks.

Will be interesting to see if gold finally wakes up from its long hibernation.  Oil and commodities in general are dead in the water.

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