Thursday, December 4, 2014

An in-depth Elliott Wave Analysis

With the recent move to new all-time highs above the September 19 high, I thought it appropriate to examine the Elliott Wave Picture. First let me preface this by saying the rally from the March 2009 lows is a bear market rally, not a continuation of the old bull market that began at the 1974 low, and certainly not a new bull market. This is evidenced by the absence of a value low that appears both at the price low as well as the inflationary/deflationary cycle low of every secular bear market bottom, as well as the fact that the rally from 2009 has occurred not only on low volume, but on declining volume the entire time. True secular bull markets exhibit, from an Elliott Wave perspective, impulsive rallies, and from a traditional technical analysis perspective, expanding volume. Neither of these characteristics have been present since March 2009. Consequently, there are two strong indications that this is not a bull market: The absence of a value low in March 2009, as well as the rally from that low failing to exhibit bull market characteristics. If either one of these factors was not true, I would reconsider, but rather it appears they are complementing each other in pointing to the same conclusion: This has simply been the longest bear market rally in history. Below please find an in-depth look at two different Elliott Wave Count possibilities of the Dow Jones Industrial Average from the March 2009 low:


Favored Count: Double Zig-Zag from March 2009 low:

This count has all but disappeared from the radar of Elliott Wave Analysts, but I still think it is valid, for a very important, yet perhaps by this point in time, vastly overlooked factor by the Elliott Wave Community: The clear lack of a five wave impulse from March 2009-May 2011. Instead, the market traced out a Three-Wave advance from the March 2009 up into the February 2011 high, and a Three-Wave advance from the March 2011 low up into the May 2011 high. Simply put, if this were an A-B-C zigzag, the wave structure from March 2011-May 2011 should have been five waves, but instead consisted of only three, indicating the orthodox top of the first leg of the rally from March 2009 was February 2011, not May 2011. Rather, what this wave pattern indicates, is that the market traced out a simple 5-3-5- zigzag up into February 2011, and then traced out a 3-3-5 expanded flat correction, From February 2011- October 2011. Also supporting this conclusion is the clear 5 waves down from the May 2011 high to the October 2011 low. If it were wave B (Circle), it should have only been three waves, but instead was an impulsive five.This would fit in nicely with the three wave advance from March 2011-May 2011, as wave (B) of X (circle). Remaining objective, what is less than ideal about this count, is the disproportionately large wave (C) of Y (Circle) relative to wave (A) of Y (Circle). Assuming this is correct, and the advance from March 2011-May 2011 was in fact three waves and not five, the aforementioned evidence rules out a 5-3-5 zigzag from March 2009- December 2014.


Alternate Count: Zigzag from March 2009 low:

While the preponderance of the evidence clearly argues against a zigzag from March 2009, it cannot be ruled out completely. An option that would allow for this count is a fifth wave truncation, ending in July 2011. However, this particular count denotes wave (4) as a failed flat, meaning wave c of (4) did not move below wave a of (4). Normally, when a flat correction truncates, it indicates a position of strength for the market. It would not therefore make sense, given the position of strength, for the subsequent wave (5) to truncate as well and fail to move above the high of wave (3). While this count is not favored for the aforementioned reasons, it cannot be ruled out nonetheless and therefore must be considered as a possibility. 



Below please find a chart of the Dow Jones Industrial Average from 2011 that clearly illustrates the three wave advance from March-May, and the five wave decline from May until October.




In summary, there are two working counts I am considering at the moment, both of which are presented above. There are others, both long-term and very long term, but as alluded to above the preponderance of the evidence does not favor them at the moment. Nonetheless, they will be considered should the market so dictate.


Monday, September 22, 2014

One for the Record Books

This juncture is one for the record books. Extremes in stock market optimism with the largest IPO in history, record low volume advances, weakening technicals, commodities breaking down under deflationary pressures with Gold and Silver near multi-year low;. Interest rates set to explode higher as debtors default on the mountain of unpayable debts worldwide, and the extremely stretched nature of this rally that began in March 2009, all point to a truly horrific financial crash and resulting economic depression, the likes of which we have never seen. It is truly amazing to me how long this market has held up. But the fact that it has gone on so long, and gone so far, only portends an even bigger collapse once the market tops. This time there will be no second chance, no bailouts, as it will be the entities at the very core of this decades long credit expansion that will need to be rescued this time around. The central banks, the commercial banks, and governments themselves will find themselves in deep financial straits once social mood turns down in earnest. Nature is comprised of cycles, of ebbing and flowing, expansion and contraction. The stock market is a reflection of the ebb and flow of collective human psychology, as it swings from one extreme to the other. Nature's laws apply to financial markets, too, and once the top is confirmed, the natural forces of the market will indeed assert themselves once again, and the entire house of cards credit structure will come collapsing down, correcting the excesses of the past 82 years since the 1932 Supercycle Low. This rally has gone on for far longer than most anyone anticipated, and is the most stretched rally in stock market history. The leverage in the system has reached absolutely unprecedented levels. This all being the case however, nothing has changed with respect to bear market phasing. The Grand Supercycle Bull Market in stock valuations topped in 2000, as I have reiterated many times before, and the past two reflationary periods have been nothing but credit induced, bear market rallies. This one is no different, but only of higher degree than the reflation that lasted from October 2002 until October 2007. So, it is no surprise that given this degree labeling, the rally has lasted longer and advanced further in percentage terms.






The Supercycle Decline that began in January/March 2000 is not over, and while anyone saying this is still just a bear market rally is questioned for their sanity, I still firmly maintain, This entire rally from March 2009 has been a giant, bear market rally, and will result in a decline to new bear market lows as the Grand Supercycle Bear Market enters the next phase of decline.


Thursday, September 11, 2014

U.S. Dollar Bull Market Update

I have always maintained, ever since I started this blog in the Fall of 2009, that the U.S. Dollar has been in a long-term basing process (see "Dollar doomed? Not so fast"   and Very exciting Juncture in the U.S. Dollar posts) and all risk markets, including equities, commodities, bonds and even Gold and Silver, were all topping out on a long-term basis. While the topping process, most notably in equities, has taken a lot longer than I anticipated, it has still been a topping process nonetheless, and NOT a "new bull market" as many so-called "analysts" claim. While risk markets are set up to fall a long way down, with most well on their way already, there is one market that is setting up for a super bull market and that is the U.S. Dollar. The Dollar has been the most hated market for many years now, with calls for hyperinflation based on "money printing", which is in and of itself based on a misnomer. The central bank has not been printing money, it has been expanding the stock of reserves in the banking system, and thereby increasing liquidity in the financial system. The massive reflation in risk markets has been a direct result of banks leveraging up the available money in the system to speculate in asset markets, thereby bidding them up. Yet, even with all the unprecedented measures taken by central banks around the world, commodities in general have remained below their 2008 all-time highs, gold and silver topped in 2011, and bonds for the most part, with the exception of some corporate issues, topped in 2012. This has all been part of the Grand Supercycle topping process that has been underway since the 2000 Secular Bull Market Top. Even amidst the greatest FED balance sheet expansion in history, and verbal pummeling of the U.S. Dollar, it has still held above the March 2008 low of 70.70. Further, the two significant lows it has made since that time, in May 2011 and May 2014, have each been at a higher low, a bullish indication. Additionally, at the most recent low of 78.91 in May 2014, the monthly MACD found support at the zero level, and has now turned up and triggered a buy signal. Often times before starting long term uptrends, markets go through a basing process. It is my estimation that this basing process has just ended in the U.S. Dollar, and ended on May 8, 2014 at a level of 78.91 on the U.S. Dollar index. Since that time, The U.S. Dollar Index has staged a very strong rally and hit a recent high of 84.52. A pullback can occur at any time, but this rally should be just the very beginning of a long Bull Market in the U.S. Dollar that continues far higher, and far longer than anyone expects. While there are no definitive targets available, I would not be surprised to see the U.S. Dollar Index above 300 by the time the bull market in cash tops out. Bond prices across the board, including U.S. Government Bonds, should fall for many years, while the U.S. Dollar should rise strongly in value during this period, as debt is repudiated and defaulted upon, wiping out debtors and creditors alike in the midst of the most severe deflationary crash in centuries. 









Friday, August 1, 2014

Mathematical Relationship Observation and Other Technicals

In Elliott Wave Analysis, analysts look for what are called 'clusters'. These are price levels where one or more mathematical relationships exist, and add credence to a particular target for a move. Earlier in 2014, I noticed a price cluster that may have significance.

My thesis is that the stock market has been in a bear market since 2000. There have been two substantial bear market rallies in stocks and subsequent reflations in the system. The first was from October 2002- October 2007, and the second has been March 2009 to the present. I maintain that both of these rallies have been bear market rallies within an ongoing secular bear market. The fact that both rallies have taken nominal prices to a new all-time high does NOT negate the secular bear market thesis. Both, however, have indeed gone to new highs in nominal terms.

Now to my discovery. Using intraday prices the 2007 high at 14,198.10 moved 20.83% above the 2000 high of 11,750.28.  Often times, the market will exhibit symmetry, especially between waves A and C of a correction. In this case, however, the market has achieved symmetry between two B waves of differing degree: primary wave B, and cycle wave b, respectively. An addition of 20.83% to the 2007 high yields 17,155.85. This in and of itself makes for a very interesting juncture at the moment, given that the market recently registered an intraday high of 17,151.56 on July 17, 2014. But, this becomes even more interesting when considering the 138.2% retracement level (a common stopping point for b wave rallies) of the 2007-2009 decline comes in at 17,150.25. Concatenating these two price relationships yields a price cluster of between 17,150.25 and 17,155.85. The current top is within within 0.08% of the lower target, and within 0.03% of the upper target. Also of note, the day of the intraday high, July 17, was also the particular day the market topped in July of 2007, before downtrending into an August low and staging one more rally before the final top in October of 2007. Very interesting to say the least.





Now some other technicals that are worth noting

Monthly Shooting Star Candle (Bearish Reversal Pattern):


A shooting star pattern occurs in uptrends when price closes at the low of the particular time frame (i.e. day, week, month, quarter, year). This is a bearish reversal pattern and alerts the analyst to a potential trend change from up to down. 





5-period RSI negative divergence similar to 2007:


The relative strength index (RSI) simply measures price movement relative to itself (prior moves). A lagging RSI indicator is a cautionary sign of a trend reversal. Notice the similarity between 2007 and 2014. In both cases, there were three points of negative divergence.


Monthly Broadening Top Pattern:




Throw-Over complete:



This long-term broadening top pattern is one I have been showing for quite some time and one that I still think is valid. Although there have been minor spikes above the upper trendline in 2014, none have been more pronounced than the one which has just been confirmed complete with a move back below the trend line.


There are no guarantees in the market, but this combination of evidence warrants extreme caution, to say the least.

While pinpointing can be difficult, there is one thing I can say with near certainty. This rally from March 2009, when complete, will yield the largest stock price collapse in at least 80 years, and probably the largest since the founding of the republic. This market is a house of cards, and when the ultimate top is confirmed, whenever that is, we should witness a very swift collapse back to the 2009 lows, at a minimum.





Tuesday, July 22, 2014

Reflections on the past 5 years: The FED, Central Banks and Financial Markets

There are a vast number of analysts who proclaim that the Federal Reserve Bank, and other central banks around the world, are in control, and that had it not been for the FED's aggressive and unprecedented monetary policy in the fall of 2008, and for a period of time after, the financial system would have fallen apart and collapsed completely. Further, many bears (including myself) who were vehemently against not only FED policy, but were strongly opposed to the idea that it would even be successful in preventing a financial collapse, have now been all but discredited, and many think the risk of a financial collapse and depression has evaporated and the FED has saved the day. I want to dispel two myths in this regard:

Myth # 1: The FED saved the day and prevented the complete breakdown of the financial system:

If anything, the actions of the Federal Reserve and that of Central Banks around the world have done nothing but put off the collapse, and turned an already unprecedented condition of over leveraged "too big to fail" banks and an over-leveraged system into an even more over-leveraged system, that has set up the entire financial system for complete and utter chaos once the liquidity cycle tops out and the inevitable reversion to the mean comes and natural forces of social mood take markets down. In short, the cure for too much debt is not more debt. Trying to cure the system with more debt is like trying to cure a crack patient with heroin. Instead, these geniuses at the FED and other central planners around the world have decided to do more of the same that helped get us here in the first place, and as a result have ensured an even bigger liquidity and banking crisis down the road. What has eluded me, as well as many others who are highly knowledgeable about the situation, is time. The lesson here is that extremes in financial valuations, and over leveraged systems, can go on for a lot longer, and become even more stretched, than might seem possible from the outset. In this case, the outset was the period from 1974-1982, when the biggest credit expansion in history was in its early stages. But, I must emphasize, the fact that the system has held up as long as it has, does NOT change the ultimate outcome, and, as we will see in coming years, the added leverage and debt in an attempt to prop up an already over leveraged system will only make the ultimate outcome even worse than if nature was allowed to freely regulate the financial markets.


Myth # 2: The FED is in control and "changed" the wave count.

With respect to the Federal Reserve Bank and financial asset valuations, many so-called "analysts" believe the FED sets interest rates, and, even amongst those who practice Elliott Wave Analysis, that the FED "altered" the wave count.

First with interest rates. Contrary to popular belief, the FED does NOT control interest rates. Please see the below chart, courtesy of Elliott Wave International:


As is clearly evident, The FED's interest rate targeting follows the market for 3-month U.S. treasury bills, not leads. My point in illustrating this is to prove that the FED does not decide what interest rates will be, but the global debt market does instead. And, I assert that the fact that this stock market rally and so-called "recovery" has gone on so long, and stretched so far, is not ultimately due to the FED, but rather to fluctuations in human collective social mood. If the bond market decided not to put up with the FED's unprecedented balance sheet expansion, the majority of participants would sell their financial instruments. This would drive interest rates higher, driving the value of the underlying treasury securities down, and thus the FED's balance sheet down. At the very least, it would strip them of any remaining credibility they had left, and, also quite possibly, and I think probably, forcing FED "set" interest rates higher even amidst a fragile system and weakening economy as confidence erodes away. The rising rates for already unsustainable debt levels would make both public and private sector debt unserviceable and we would see debt defaults occur in droves. In a sense, the subprime mortgage crisis is a microcosm for the entire system. It is one giant subprime mortgage, and once interest rates spike upwards, the debt will no longer be serviceable. Except this time, we are not dealing with the subprime housing market, we are dealing with the entire debt-based monetary system, and the implications are very drastic. The point in explaining these principles is to illustrate that the only reason the system has held up as long as it has, and that financial valuations and the underlying credit structure have become as stretched as they have, is that investors, who are humans, have put up with it. This, I contend, is due purely to the natural ebb and flow of human social mood, and simply serves as evidence of how big of a peak in social mood we are truly facing. These directors, which again are human beings, cannot control social mood fluctuations, no more than any other human being or group of human beings can regulate or manipulate the growth patterns of a tree. Tree growth is a system in nature, and the natural upward progression of human consciousness and social progress is also a system in nature. Contrary to many exogenous cause belief systems inherent in human beings, I believe many if not all systems in nature are endogenously regulated, or in other words self-regulated. They do not depend, nor are affected by any outside force. Since all systems in nature are subject to vibration, frequency, and fluctuation, many of them also exhibit fractal behavior, with self-similar patterns showing up in these vibrations or fluctuations at varying scales (i.e. timeframes). If one accepts the notion that systems in nature are self-regulating, then, it also seems logical to accept that financial market valuations, a result of the relative position of human collective feeling, or social mood, move on their own accord as well. Therefore, I assert that this upward trend in financial asset prices, and accompanying reflation of the credit money supply over the past five years, while encouraged by the FED, could not have happened without the trend toward a positive extreme in human collective social mood supporting it. And, the followed logical conclusion to all this, is that when the human collective social mood reverses into a trend toward a negative extreme, financial asset valuations, economic activity, and social and political conflicts will all follow toward a negative extreme.

Additionally, the fact that we as a society, unlike the financial peak of 1929, value financial asset prices in terms of debt-money IOU's, rather than real money, necessarily creates a resulting divergence between real (inflation adjusted) asset prices and nominal (assets valued in terms of debt-money U.S. Dollars ) asset prices, as should be expected. Using logic, If A is associated with C, and B is associated with C, the relationship between A and C (or ratio numerically expressed), and B and C (or ratio numerically expressed) is going to be different for the simple reason that A is not B, and B is not A. In this case, A and B represent Real Money that doesn't fluctuate in value (Gold) and credit-money (U.S. Dollars and many other central bank monopolistic currencies around the world), respectively. Continuing with this example and its conclusion, the relationship between A and C, and B and C, represent real (inflation-adjusted) and nominal asset prices, respectively. Since we have just shown that A does not equal B, the conclusion drawn from that using deduction, is that the relationship (or ratio) between A and C and B and C, will be different. Therefore, it is logical to conclude that the addition of credit-money to the system necessarily mandates, by logic of deductive reasoning, a divergence between real and nominal prices, which we clearly see present in the financial system today.

Using endogenous cause reality, the fact that we have been on a credit money system standard for decades now, rather than being a cause of how stretched the overvaluation and optimistic extreme has become, is rather a result of a peak in optimism so large, that it is concluding an uptrend in human social progress that has lasted centuries, and, looking back in hindsight, we will be telling our grandchildren about it.

 In conclusion, endogenous cause reality suggests that the extremity present in the financial system, is NOT ultimately a result of central bank action, and, if one accepts that notion, then it is also reasonable to assume, that once the trend in human collective social mood truly turns down (it has been in a topping process the past 14 years, evident by a number of different measures I have illustrated before. See prior posts), there is nothing the central banks can do to stop it, and the resulting asset price declines across the board. 

Wednesday, July 2, 2014

A Long-Term Elliott Wave Analysis

There is much debate in the Elliott Wave Community over the long-term count. Did the Bull Market end in 2000? Did it end in 2007? Or, did it never end, and is still in force? Remaining objective, let's take an in-depth look at three possibilities:

Preferred Count: Bull Market topped in 2000




Logic and Reasoning: As I have illustrated before, the stock market, using the Dow Jones Industrial Average as the best long-term proxy of market progress, priced in almost everything except U.S. Dollars, topped in 2000 and stopped exhibiting any impulsive price structures at that point. All rallies since then, priced in terms of most assets, have been reflective and indicative of a counter-trend, bear market rally in stocks. In addition, the advance from 1974-2000 resembles quite closely the advance from 1921-1929, the last Cycle wave V high. The rally that began in 2009 is the most extended 4-year cycle advance in stock market history, now in month 64. If there is doubt over this count due to the duration and extent of the rally, one should keep in mind that under this particular count, the 2002-2007 rally is also a bear market rally, labeled Primary wave B (circle). It ran 60 months, matching the longest 4-year cycle advance of 60 months from 1982-1987. Therefore, if one is going to call that advance a bear market rally, which seems to be the case given the evidence stated above and in previous posts, then one should not have an issue with labeling another stretched 4-year cycle, a now 64 month advance, a bear market rally as well. This count has an expanded flat pattern from January 2000-March 2009 for cycle wave a, and the rally since March 2009, cycle wave b is serving to correct this decline, in a larger expanded flat pattern.  Given this count, it would not be unreasonable to expect a new high in inflation-adjusted measures of the market, since new highs in the b-wave are often characteristic of expanded flat patterns. Another supportive feature of this count would be the fact that the rally has occured not only on low volume, but decreasing volume the entire time. This is best illustrated on a yearly chart, below:


As is clearly evident from the chart, volume was increasing into the 2000 top, which is indicative of a true bull market. Volume tends to increase with each price bar in the direction of the prevailing trend, and decrease with each price bar counter-trend. As price declined into the 2002 low, volume increased year-over-year from 2000-2002. Then as the rally out of the 2002 low began, volume once again dropped off in 2003 and 2004. It picked up in 2005, but that was a slight down year for the Dow Jones Industrial Average. 2006 was the exception, as volume picked up on the rally. 2007 saw decreased volume on an up year, and volume spiked dramatically on the decline in 2008. Since the 2009 low, every year has been an up-year, and every year saw decreased volume from the prior year. This is NOT characteristic of a true bull market, but rather of a liquidity-driven bear market rally.

Further evidence that the bull market ended in 2000 is found in the true measure of market valuation, the Dow Jones Industrial Average priced in terms of Gold. If in fact the bull market ended in 2000, then the rally that began in March 2009 is of a higher degree, cycle degree than the rally from 2002-2007, primary degree. Commensurately, the market has rallied further in percentage terms, and for a longer period of time, than it did during Primary Wave B. Also to be expected, while the Dow priced in gold was actually falling during the 2002-2007 rally in nominal terms, this time, the ratio bottomed in association with the 2011 low, and has been rallying along with nominal stock prices since that low. As a result, the Dow priced in Gold has exhibited a larger rally during Cycle Wave b than it did during Primary Wave B. This is also indicative that the current rally is of a higher degree than the 2002-2007 rally.

On October 9, 2002, the day of the closing low in the Dow Jones Industrial Average, the Dow was trading for 23.74 ounces of gold. On October 9, 2007, the day of the closing high in the Dow Jones Industrial Average, the Dow was trading for 19.06 ounces of Gold. So, during the longest 4-year cycle advance in history at the time, in which the nominal Dow gained 94%, the real value of stocks actually lost -19.71%. This is certainly indicative of a bear market rally, and is further evidence supporting the fact that the 2002-2007 rally was NOT a bull market, but only a rally within the context of the larger bear market that began in 2000.

This time, the Dow priced in ounces of gold bottomed on August 10, 2011 at 5.96 ounces of gold, and reached a high of 13.76 ounces of gold on December 31, 2013. This represents a gain of 130.87% and is far stronger than the 2002-2007 rally in real terms on a relative basis. This again suggests that the March 2009 rally is of a higher degree than the 2002-2007 rally. 

Please also consider charts below of the Dow Jones Industrial Average adjusted for the M1, M2, and MZM money supply measures, respectively. All of these measures of market valuation rallied strongly in the 1990's, very similiar to the nominal averages. However, unlike the nominal averages, these measures adjusted for money supply topped in 2000, and are significantly below their all-time highs and further suggest both the 2002-2007, as well as the rally that began in 2009, have been bear market rallies in an ongoing secular bear market.


                          










 Alternate Count: Bull Market topped in 2007



Logic and Reasoning: One possible argument for the Bull Market having topped in 2007 is that the 2005-2008 period was the peak in public speculation, from real estate, to stocks, and then to commodities. Both real estate and commodities remain below their respective all-time highs. What followed the 2007 top was the largest market decline and financial crisis since the great depression, including significant contractions in the supply of money and credit. One could argue that the bull market topped in 2007, then, on the basis of the peak in public speculation, which clearly has not returned to it's prior levels of 2005-2008. On a technical note, should this count be correct, the resulting wave c down should be very swift, as a common trait of c waves in expanded flat pattern is that wave C is steeper than wave A. Given the swift nature of the decline from October 2007-March 2009, this is a particularly ominous count would portend an all-out collapse in investment prices across the board in a great panic that could very relatively short lived in time, but very destructive in price.


Second Alternate Count: Bull Market never ended, still ongoing



Logic and Reasoning: Many measures of investor sentiment have exceeded their prior all-time highs, tech IPO's are booming again, and the Stock market is trading at all time highs.

Issues with this count: The reason I have designated this count as second alternate, is due to the fact that the bear market and recession of 2007-2009 was the largest since the 1930's depression. That means it was larger than the entire cycle wave IV bear market between 1966-1974. To say that this is still part of an ongoing bull market, from the 1974 low, would be, in my estimation, omitting this data and it's logical followed conclusions. While I would favor this count over one that suggested the bear market ended in 2009, and this was a new bull market, it still has many logical and statistical issues with it, not the least of which include the fact that this rally has occurred on extremely weak technicals, as illustrated above, as well as the state of the general economy. Many pundits termed this the most jobless recovery ever. Well, I contend that the relatively weak job market throughout the entire rally, and more recently, GDP, which just contracted at an annual rate of -2.9% in the first quarter of 2014, as opposed to the consensus of -1.8% by economists, is hinting that this is not a recovery at all, but rather a reflationary period in an ongoing depression. Even economists, which have been calling this a "recovery" expected negative growth in the first quarter. These readings are not bull market material. I have said all along that this is NOT a recovery, but early in an ongoing depression that began in 2000.

Whichever of these three counts turns out to be correct, all the evidence points to the conclusion that once this rally terminates, the outcome will be nothing short of a financial disaster that takes the market below the lows of March 2009.


When all the evidence is concatenated, the most logical conclusion in my view is that the greatest bull market in history topped in 2000, and this rally since 2009 has been a massive, liquidity induced bear market rally, and the second since the bear market began in 2000, the first being 2002-2007. However, it is quite clear that the topping process is still ongoing, with investor optimism at extremely high levels, while the underlying economy is slowly slipping into depression. Although the bull market in stock valuations ended in 2000, and thus the bull market in stocks themselves, what didn't end, was the bull market in credit. It has been the reflation of the credit money supply that has allowed the nominal stock averages to register new all-time highs. And, just as the tech bubble, housing bubble, and commodity bubbles all ended in a collapse, so to will the credit bubble itself. Except this bubble represents the nature of the credit money system itself, that has simply been the medium through which we have seen an unprecedented number of consecutive bubbles in different asset classes in the past 30 years. I believe the evidence also points to the fact that when the reflation ends this time, it will not be simply one or two asset classes that collapse, but the entire debt-money system. Decades of credit expansion will reverse into credit contraction as people become more cautions and social mood really starts turning negative. We will see this manifest itself in lower prices for assets across the board, even in nominal terms, a severe contraction in economic activity, as well as social unrest. It's a Grand Supercycle Bear Market, and the ultimate downside resolution is going to be breathtaking.