5-26-09

Sell in May and Go Away

            So goes the saying that relates to the tougher 6 months of the year for the stock market.

            Long time readers know I believe this recent rally is a bear in bull's clothes, but I am surprised at how soon it appears to be fading; I had expected it to push up past 10,000 before the next leg down. Maybe this is all part of the bear's plan; too many people had started yakking about "green shoots of recovery."

            Several weeks back I wrote an article entitled "Half Empty to Half Full" explaining that the fundamentals for the financial crisis hadn't changed much but what had changed was peoples' perceptions had turned positive. As the rally faded this last week, people were reminded of the fact that nothing has really changed. In fact, governments, with all their monetary meddling, are only making matters worse.

            But let's see what the market itself has to say on the matter by looking at some numbers...

            For this rally to continue up significantly further, the Dow Jones needs to surpass the level of 8574 AND the Dow Jones transports must surpass 3404. It's not looking good for this right now as we head into what's considered the weaker Summer months. The very least one might want to do now is sell if things deteriorate much more.

            Something else to keep an eye on (but almost nobody does) is what's happening with the Dollar and the bond market. The bond market is much larger and much more sophisticated than the stock market and can often be a good 'canary in the coalmine'. Well, this canary is looking a lot sicker these days. Long time readers will remember me saying how you could profit by the inevitable pull out by investors from US Treasuries (government bonds) several issues back by buying 'TBT'. Since then it has risen from about $42 a share to $52.

            Bonds affect interest rates! You currently have a once in a lifetime opportunity to lock in ridiculously low rates- this is probably your last chance.

            The Dollar is looking pretty sick too and could be due a fall very soon. The obvious beneficiary of this is GOLD. Expect to see Dollar tumbling and Gold surging any day now. Gold miners are still relatively unloved and will benefit more than the metal itself.

            Way back in January when the whole world was acting like nobody would ever need oil again and were pricing it somewhere in the thirties, I continually banged my fist on the table saying the opposite, much to the sneering faces of the herd. Oil is now well above $60 a barrel. You would have profited mightily from this.

            The whole equation is very simple right now: while the world is optimistic, commodities like oil and copper will rise with stocks and the dollar will sink.

            What's been surprising here is the gold action and here's something I (and many others) couldn't see coming. Gold has been rising on uncertainty in the past, so as this rally progressed, gold "should" have eased back when in fact it's done the opposite. And that's in the face of demand for jewelry plummeting and the IMF selling tones of the stuff.

            This is a critical disconnect and is worthy of attention. Either the market has it all wrong about gold currently or something else has happened. That something else is people and governments are HANGING ON TO THEIR GOLD, thus selling has dropped.

            Remember, gold is the arch enemy of every central bank. Central banks (like the Fed) can spin a web of lies and propaganda by calling money-printing "quantitative easing" and inserting 'stealth tax' through insidious inflation, but gold is the ultimate lie detector. Gold is telling us that the central banks are lying.

            Note: America has been warned by S and P it may lose it's AAA credit rating at this rate of debt-building.

            Right now, there's a big sideshow going on: bankers are being hauled over the flames and used as a scapegoat when it was government laziness and ignorance that let the children in the sandbox do what they want.

            Governments can't let the population get too rowdy. Torches and pitchforks on Capitol Hill alarms governments and they have to throw them a carcus, you see.

            So the politicians vilify the rich hand in hand with the media.

            But let's get real for a second. The rich and powerful control the world. They always have and they always will.

            The rich and powerful OWN the media and wish to make a profit from doing so. FEAR SELLS so the media peddle fear. By tuning into fear mongering news channels and newspapers you are making the rich and powerful richer.

            The rich and powerful are buddies with the politicians. They put them in power through contributions. They know that if a government strangles them too much they will take their business elsewhere.

            Why am I telling you these sad facts?

            Because I don't want you to waste your life away trying to change this. The world is just the way it is and that's that. True, if enough people marched through the streets and demanded a specific change and stood by their conviction, things would change. Alas, that won't happen. All that will happen is what is happening now: a bunch of political rhetoric to calm down the angry mob until they forget about it and move on.

            I'm sure that you, like so many right now, would like to lynch the boss of AIG and torture him to death. Let's say that you COULD do that right now. Will your situation have changed?

            No.

            The government, corporations and the media are mere reflections of the masses. Each of these 3 entities gives the people want they want. The products they want, the hopes and dreams they want, the right they think they have to a job and free handouts, the fears they have.

            The whole thing works nicely as long as everyone shuts up, pays their taxes and lives a docile and compliant existence. People meet at Starbucks and bitch about stuff, get it out of their system and go back to their jobs on Monday.

            By meeting you here, I know you're at least starting to question this whole game and wondering if you should play anymore. Of course, you should always pay your taxes, but there is a path to a more fulfilled life where you are free of what is in effect slavery to corporations, media and government. Indeed, as an investor, corporations and governments can become slaves to you as they compete to borrow your money through the issuance of bonds (IOUs) and pay you handsome interest.

            When you derive your income this way, that's when you've turned the tables on the whole system. You've got off the merry-go-round. You've decided NOT TO PARTICIPATE in the whole nonsense.

            This is the world of the sophisticated individual; the life of a League of Power member. Members don't delude themselves about the reality of the world, they simply slip between the cracks and prosper legally. Freedom comes when you break the chains you've attached from yourself to media, government and corporations.

            Remember: government and country are 2 different things! You can love your country but dislike your government. That is how this country was founded.

            Once you dump the media, you stop being frightened. The media now work for you- the fear and chaos that they cause makes anomalies appear in markets that you can take advantage of.

            Once you dump corporations- as in stop working for them and succumbing to their lame marketing campaigns to buy stuff you don't need- you become free. Income? Start your OWN corporation. Sell stuff back to these corporations. Make them pay you interest on bonds.

            Once you dump the politicians... well, I don't know what you had to gain hanging around with those people anyway! Instead of bitching about them devaluing the currency or whatever, a League of Power member makes money from the fact! A League of Power member is neither a Republican or a Democrat; they know it's all a big dog and pony show and that in reality, both parties will reflect the mob at any given moment. And when you think about it, how many people are Republican or Democrat because their father and their father before them was one? Does anyone question anything anymore?

            Have a great Memorial Day. Take some time out to reflect and regroup. Life doesn't have to appear as the nightmare that the media and the politicians want you to see it as. Remember, it's all part of the big game- a game you don't have to play. 

Best regards,

Mark Patricks

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