Neil Cavuto Interviews Robert Prechter

Excellent Interview...and I believe as timely as ever.

The College Tuition Bubble

Many wonder why college costs so much these days. Could it be the value an education adds? Could it be "Rising Inflation"? The answer to both of these questions is an emphatic NO. The real reason college tuition costs are up is because there has been an enormous amount of Inflation. No, not CPI inflation, but credit inflation courtesy of the government and the Federal Reserve Private Banking System. One of the first financial markets that this scheme showed itself in was the NASDAQ bubble. Then it crept into housing and that ended badly in 2006. Then it found its way into the stock market and commodities. We all know how those ended. Well, one market it is certainly present in is the education loan market. The government has decided that everybody should receive a college education, so it has extended massive amounts of credit to those in need. Ironically, it is this very act of lending that has bid up college tuition prices. This is very similar to the housing bubble and will end the same way. This lines up well with my forecast for a deflationary collapse. This will bring down education costs when people can no longer get credit to keep education costs artificially high. The same is true with the market for healthcare. But I'll save that discussion for another time. For now, please view this very informative interview with Robert Reich, Public Policy Professor at University of California Berkley.

A Comment on Current Market Sentiment

CNBC today Featured Nassim Taleb who said he has "no choice but to own stocks" to "preserve my financial situation." He is trying to hedge against hyperinflation. Funny, that this article comes out AFTER the markets have already risen 100% from their March 2009 lows. I will bet Mr. Taleb wasn't saying he has "no choice but to own stocks" after the market had fallen 58% from their October 2007 highs on March 6, 2009. But now that the market has risen substantially, he is bullish. Of course, March 2009 is exactly the time that everybody who is bullish now should have been bullish and "worried about hyperinflation", but instead they were worried about deflation and a depression. I agree with Mr. Taleb in his worry about the financial future and his support for Ron Paul, as he is one of the ONLY politicians that has the slightest understanding of what is really going on, however I believe Nassim is very wrong about his assessment of the financial assets to own. I see deflation is a much bigger threat than hyperinflation, but, naturally, hyperinflation is on everyone's minds now. By the time the market makes its final low for this bear market, everyone will see Deflation as the major threat. That of course will be the time to be worried about "hyperinflation", which may or may not occur. But that mindset will do investors much more good at the bottom than now, as financial assets will be severely undervalued by then, probably more undervalued than they were in 1932. Not to mention some famous bears have also capitulated as well. That includes Nouriel Roubini, Zero Hedge, and David Rosenberg. Many sentiment measures are at more extreme levels than the all-time high in 2007 yet the market is not at a new all-time high. With the U.S. Dollar set to commence a major bull market and deflation straight ahead, the sentiment picture now is the mirror opposite of March 2009, which makes the conditions ripe for a major top.

The 12-year stealth Bear Market

Whenever someone logs onto Yahoo Finance and looks at what the Stock Market did today, they are looking at the Nominal Dow. What most do not realize is that, in real terms, the stock market has collapsed in value since 2000. If instead of looking at the nominal Dow one were to look at the real Dow, priced in Gold, you would be seeing the Dow not at 12,000, but at a level below 200. No, that is not a typo. the Dow has made no net progress since 1926. In a recent interview, an excerpt of which can be found here,  Robert Prechter talked about the stark difference between the Nominal Dow and the Real Dow, or even the Dow divided by the Producer Price Index. In other words, if you were to price the Dow in anything else other than U.S. Dollars, it would be much lower than it is today. The fact that Nominal Prices have held up over the past decade is a reflection not of the value of the Dow staying relatively constant, but of the value of the U.S. Dollar going down. The Nominal Dow can be viewed as:

Value of the Dow/ Value of the U.S. Dollar

Using simple math, one can see that, if you decrease the denominator (in this case the value of the U.S. Dollar) , it makes it it appear that the value of the Dow is up, since the value of the entire fraction increases, however it is really just the value of the measuring unit decreasing. This devaluation of the U.S. Dollar has been courtesy of the Federal Reserve and our Debt-Money System. Therefore, when the Debt-money system collapses, and the U.S. Dollar starts rising in a highly deflationary environment, which has already begun in 2006-2008, and should accelerate in coming months and years, the whole house of cards will come down, and the Nominal Dow will collapse in value, as it should have in 2000. But, these genius central planners have managed to hold up this debt Ponzi Scheme and thus nominal prices, but as Issac Newton stated: "what goes up must come down", and the global credit bubble is no exception.

The Dow Most people see:

The REAL Bear market in stocks:

U.S. Dollar set for takeoff

The U.S. Dollar is set to move higher. Depending upon whether or not THE top of the bear market rally that started in March 2009 has been seen, this move will either be moderate or explosive to the upside. If we are indeed topping now, which is a very real possibility, then the U.S. Dollar index should take out its 2009 high of 89.62 in short order, and the SPX its 2009 low of 667. Regardless of whether or not this is THE top of the bear market rally or whether we have one more move up coming after a pullback, the top is getting close and when it is put in, these parameters for both the U.S. Dollar and the SPX will apply.

DOW hits 13,000, Transports not confirming....and a financial freight train heading this way

The DOW crossed the all-important psychological barrier of 13,000 today. This is sure to get people even more bullish than they are now, which is already at euphoric levels. This juncture reminds me of mid-to late 2007, when the S&P 500 made a new all-time high, exceeding the peak of 2000 at 1553 by a mere  1.48 percent. Except this time, the market has not yet made a new all-time high and yet Bloomberg TV this afternoon features the headline "Hedge Fund managers gaga for Google." If that is not a contrarian indicator, I don't know what is. Meanwhile, we have a very important non-confirmation going on, and that is between the Dow Jones Industrial Average and the Dow Jones Transportation Average. Those familiar with Dow Theory understand that these non-confirmation, until and unless cured, are NOT  to be taken lightly, and coupled with sentiment at optimistic extremes, and waning upside momentum, the top of the entire rally from March 2009 looks to be getting close. Also of note, Ralph Nelson Elliott, in his original writings, noted in "R.N. Elliott's Masterworks", projected the top of the Grand Supercycle Bull Market in 2012. Well, here we are in 2012 with the market still at extreme historical levels. This would allow the market to make another new all-time high before finally starting the big crash. But people should not be counting on that happening. When this market tops and turns down its going to catch a lot of people off guard. There is a freight train coming towards the financial system and it will stop for nothing. It is Imperative that people get out of the way before the train comes into town. And the more Ben and company meddle  in the markets, the worse it is going to be. They have already thrown everything but the kitchen sink at the problem, and it has not solved ANYTHING. It has, however, helped to inflate these markets to unimaginable heights and the fallout from that will be MUCH worse than 2008. When this market tops out, it is going to get ugly fast. I am warning, Do not try to time the top, get out of dodge now and move to maximum safety. This means the safest possible cash equivalents in the safest possible institutions. This market is running on fumes and when the gas runs out its not going to be pretty.

A blowoff top in AAPL

Back in the late 1990's and early 2000's, when Steve Jobs, CEO of Apple, was brought back to the company after having been removed some years earlier, nobody believed in the company, and everybody knew why AAPL stock was not the thing to own. Of course in retrospect, it was a great buy. Well, now after Jobs turned the company around, everybody knows why AAPL IS the stock to own. As usual, the fundamentals are going to fool people into doing the wrong thing (buying Apple stock). AAPL has simply gone parabolic, and is in a fifth wave up from its 1997 low. As you can see, each rise (wave) slope has gotten steeper and steeper. This is not sustainable and AAPL is topping out on a long-term basis. Once the bear market in AAPL begins, as per the guidelines of  Elliott Wave Principle that state that support after a 5 wave advance lies at the 4th wave low,  my ultimate downside target for AAPL is AT LEAST the 2008 low at 78.20, and likely lower than that due to deflationary forces about to hit the markets. It is quite possible AAPL will do a "throwover" of the upper trendline of the wedge in a final burst up in a 5th wave of Primary wave 5, before reversing hard and heading back towards the fourth wave low.