"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra. Kip Herriage's newsletter is my financial Bible."

--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"

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Journal Archive
Twitter: @kherriage

Monday
Dec222008

$50 BILLION THAT WILL BE REMEMBERED

When the news broke about the $50 billion Ponzi Scheme that Bernie Madoff engineered over a twenty to thirty year period, I knew the story rang a bell. I went back through my records and found the original Barron’s article in 2001, and written by Erin Arvedlund. Included in her excellent research were quotes from several well known Wall Street veterans where they openly questioned Madoffs ability to consistently generate 15% plus returns, year after year, in good market or bad. All of the warning signs were there, and lots of bright people believed that this guy was running a huge scam. They were right, but no one seemed to care.

 

I contacted Erin a few days ago about the article and found her comments most interesting. “After I wrote the article, nothing happened. No one contacted me from the SEC or anything. I found that pretty strange….the story just died”.

 

As long time subscribers to the VRA know, I’ve been writing about the vast conflicts of interest on Wall Street for years. Having spent 15 years in that industry I witnessed similar things on a regular basis, yet its rare when anyone is really made to pay, or when real changes in the investment business actually take place. And we wonder why investors are pulling all of their money out of the stock market, many never to return,

 

Well folks, it looks like we’re finally going to get our first real perp walk. Too bad that it comes much too late and that it has nothing to do with what got our economy and markets into the mess they are in today.

We should be in the middle of the Obama Christmas bear market rally, but I believe that the news of Bernard Madoff's $50 billion fraud will hit us like nothing else -- not the fall of Lehman Brothers, not the death of Bear Stearns, and not the string of insolvency announcements of one household name after another.

Madoff will be the blow that reignites the worst economy and bear market since the Great Depression.

Madoff’s story… that he ran this gigantic fraud by himself… is 100% unbelievable. There’s simply no way that one man alone could not have done the work of inventing and cranking out thousands of statements every month, not to mention keeping track of the comings and goings of billions of dollars. Madoff has partners in crime and unless they have Inspector Clouseau running this investigation, we should know the full story soon.

So, the Wall Street Journal says to its readers, "Could your investment manager be another Bernard Madoff? If someone like Mr. Madoff can be accused of running a $50 billion Ponzi scheme, can investors anywhere sleep easy? Ordinarily, when you are picking an investment manager or financial planner, you're given some common-sense advice. Avoid managers who are unknown, or unregulated, or come without good referrals, or haven't been in the industry long. But none of this would have saved you from Mr. Madoff. 'This guy had oodles of referrals, at the highest levels,' notes Duane Thompson, a managing director at the Financial Planning Association in Washington. “He was former chairman of Nasdaq. He'd been in business since 1960.”

Fear, confusion, and mistrust have been increased by the absence of government supervision or regulation. The SEC admits “it did not do its job”. Really? Please tell us something that we don’t already know! And the media continues to call this “the biggest ponzi scheme of all time”, but we know that to be a lie as well. Social security (aka, social insecurity) is of course the biggest ponzi scheme ever. Madoff is not even in the same ballpark.

Still No Perp Walk

So far the government has thrown away approximately $10 trillion of taxpayer’s money to bail out Wall Street and the banking industry and we’ve yet to see a single perp walk. Think about this for a moment. Goldman Sachs and JP Morgan, along with several of Wall Streets most prestigious firms engineered the exact derivatives instruments that got us into this mess in the first place. Then, they pocketed hundreds of billions in profits along the way. I’ve been writing about derivatives for years, and these weapons of mass financial destruction finally succeeded in popping the bubble that was the US economy. The con was so great that it took the rest of the world with it.

The top executives from these failed companies (Bear Stearns, AIG, Lehman, etc) had NO skin in the game. Collectively they owned less than 1% of the outstanding shares in their firms… so they had absolutely nothing to lose. All they had to do was get legislation passed that would allow the investment and banking industries to use leverage of 40 to 1 (up from the already obscenely large norm of 10 to 1), and along with the creation of financial derivatives that had little to no backing they engineered record profits out of thin air…which in turn allowed them to be compensated with billions upon billions in obscene bonuses. All while Rome burned.

So, the real question is; how is it that none of these con artists are getting their perp walk?? Maybe that day will come but holding our breath will likely be an exercise in futility. Chalk it up as another “accident” under George Bush’s reign of fire.

Why This $50 Billion Matters

Following a 50% drop in the stock market, everything was in place for a big bear market rally. Obama got elected, the government bailout put a stop to the run on the banks, and they even managed to put off the bankruptcy of the Big 3 until sometime in 2009. With extreme levels of pessimism, over $3 trillion in money market funds, and t-bills paying a negative return to investors, we should be in the middle of a recovery to at least 10,000 on the Dow. That’s still a long way from 14,500, but it would also represent a 30% move from the lows of just one month ago.

Then…Bernie Madoff happened… and it’s most likely time to say goodbye to any possibility of an extended bear market rally. This ponzi scheme has big money investors all over the world aggressively pulling money from money managers and hedge funds, and the result will be massive pressure on US and global stock markets as we head into the New Year. No one trusts anyone, and the financial world will never be the same as a result. Before this bear market is all over I predict that 70% of all hedge funds will be out of business and with it, another $1 trillion pulled from equity investments. This money will continue its flight to safety which will keep interest rates on government bonds at record low yields…until this bubble bursts as well.

Unfortunately for the FED, this will increase the deflationary environment that we’re in, and prices on all types of assets will remain under great pressure. Oil and gas prices are being decimated, and along with it the 30-40% of the earnings of the S&P 500. Each year of this decade has seen the index rebalanced to favor energy companies, and the result will be devastating for corporate earnings and for the major indices. In 2009 I continue to look for earnings on the S&P 500 to come in under $40, which means that even at current prices, the S&P 500 is trading with a P/E of 22. The really bad news here is that this is the level where bear markets begin rather than where bull markets get underway, so my forecast for 2009 is only getting more pessimistic. With a more reasonable P/E of 15, the Dow would have to trade down to 6500, or a 23% drop from today’s close of 8519.

Assume that we reach a bottom in earnings at the end of 2009, and we see a 20% earnings recovery in 2010. This means that we could see a recovery to approximately 7500 on the Dow in 2010. Unfortunately, this is what I see as a best case scenario.

 

The problem with this bear market is that the worst of the economy is in front of us, rather than behind us. The bad news from unemployment will continue to hit us for at least a year, and I continue to believe it will reach 12% before it’s all over.

The next shoe to drop will be in commercial real estate, and it won’t be pretty. After the first of the year we’ll begin to get the news of major tenants leaving malls and commercial properties in droves, and on the order that we haven’t seen in our lifetimes. Along with this, massive consumer debt will result in insolvent credit card companies, insurance providers and of course, collateralized auto loans.

The big mystery for most economists is exactly how much the next big fiscal stimulus package from Obama will help the economy. We already know that it will exceed $1 trillion, and along with his economic infrastructure and rebuilding program, the so-called experts are divided on how much it will really benefit the overall economy. My guess is that it will disappoint greatly and be widely viewed as a failure, but hey, he’s got to try something…right?

I say “wrong”. We’ve become the bailout nation and look how it’s working so far…

Our system needs purging, and the balloon needs to be allowed to burst naturally. This will allow us to get this over with once and for all. Will it be painful? Yes, it absolutely will, at least for those that have made terrible decisions with their money for decades, if not an entire lifetime. This is how a free market system is supposed to work, and unless we allow the process to play itself out, we will repeat the same mistakes that Japan has made for the last two decades as they have attempted to prop up failed banks and a broken/corrupt corporate system.

So, how has their economy and stock market done over this time frame? It’s not pretty. Japan’s stock market is down 78% from its high of 38,000 to about 8000 today. They have also experienced massive deflation, as evidenced by a real estate market that has dropped every single year for close to two decades.

Yet, for some reason we’re determined to use the same playbook. As Albert Einstein said, “Insanity is doing the same thing over and over again expecting a different result”. Massive government bailouts, printing our currency into oblivion, and passing down $100 trillion in debt to our kids…and to their kids…now that’s the definition of insanity.

Do we really think that capitalism can be saved by socialism?

Kip Herriage

Wednesday
Dec172008

Huge Moves by the FED

The bear market rally continued today, this time thanks to never before seen moves by the US Federal Reserve. They not only dropped the Fed Funds rate by .50%, but also made it very clear in their forward looking comments that they would provide record amounts of liquidity to the markets going forward and that they would purchase "large quantities of agency debt and mortgage-backed securities," adding that "it stands ready to expand its purchases."

 

This is Fed speak for “get ready folks…you think we’ve thrown a lot of money at the problem so far? You ain’t seen nothing yet!”

 

The dollar sold off hard on the news and prompted another $20 move higher in gold and a similar move in silver. The message from the government is clear; they will do whatever we need to do to stop the economy from deflating, damn the long term consequences. This is especially true when it comes to interest rates on mortgages, and with this move today they are targeting an interest rate move to below 4% on 30 year mortgages. It will not happen overnight, but if they have their way, it will happen.

 

On the surface, this looks to be great news for the economy, and it certainly was for the stock market today as the Dow rose over 350 points. Investors should never fight the tape (primary direction of the stock market) or the FED, and with trillions of dollars being artificially inserted into the economy its clear that you will be in a bare-knuckled brawl with the governments balance sheet if you are betting on the stock market to go lower…at least for the next few weeks. As I’ve been writing, the Obama Christmas rally is here, and now we know for certain that the FED and Treasury are determined not to be remembered as Scrooge.

 

Yes, the fix is in! Absolutely no doubt about it. We’ve had bad news after bad news hit us right between the eyes yet the market continues to climb a wall of worry. This is one of the most important “tells” of investing. When the stock market continues to go higher in the face of the worst news possible, you know you’re playing in either a rigged game or you have one heck of a bull market. In this case its all about the game being rigged, but at the end of the day, does it really matter? The markets going higher….and that’s the bottom line…for now.

 

 

I look for the gains to continue from here…likely into the New Year and the inauguration. The move will not be straight up, but it should be good enough to continue with long positions for some time.

 

Over the next 2-6 weeks we’ll see:

· 4th quarter window dressing by money managers

· The January Effect will continue to kick in (end of year beaten up stocks rally…post tax selling)

· Second Tarp from Uncle Sam

· Artificial Housing Stimulus (mortgage rates dropping like a rock and the government buying mortgages directly)

· Auto Bailout

 

Also, there is over $3 trillion sitting in money market funds looking for a place to make money.

 

This move will likely not last past the inauguration, but it could potentially be an explosive move higher. In this market, you’ll take it however you can get it… before we go short again.

 

Kip Herriage

Editor, VRA

 

 

 

 

 

Wednesday
Dec102008

Snow!

It’s snowing here as I write this…actual flurries. We rarely get snow in Houston, so this is a fun time for us. The last time we had snow was Christmas eve, 2004. Prior to that it had been at least 10 years, so I’ll have to ask all of you that live in colder climates to bear with my reaction to the white stuff. We’ve been singing Bing Crosby’s “White Christmas” all evening around the Herriage household.

And hey, we had some fun on Wall Street today as well. Even though it was just a 70 point move higher, you’ve got to admit that it’s better than one of those down 500 days we’ve had so often over the last couple of months. And how about that move in gold today? I’ll take a $30 price increase here anytime.

The market rally should continue on the hopes and prayers that Obama’s $1 trillion infrastructure stimulus program will save the day. Don’t we all feel better?? All will once again be right with housing prices…employers will stop laying people off… and corporate profits, which are set to drop a whopping 50% year over year, will reverse course overnight and support stock prices at much higher levels. All we need are lots and lots of newly trained construction workers building roads and bridges that we all get to drive over. I don’t know the first thing about building a bridge, but I do know that it’s hard, tireless, mostly thankless work that NO ONE on Wall Street could ever do. I don’t think bridge builders get many $10 million Christmas bonuses, but after all, they haven’t taken their $100 billion investment firms into insolvency either.

The bottom line is that to understand investing is to understand psychology. Simply put, the stock market dropped by 50% and just got tired of going down…for now at least. We’re likely headed higher for a while, but it will be a very nervous rally for me. At any time the rug can be pulled out from under us, and when the next drop starts…likely in January…it will be fast and furious. This is no market for long term, buy and hold investors. Cheaper prices will be found in the future, but for now we’ll do our best to enjoy the break from all of the torrential selling.

On the first Friday of January we will get the December unemployment figures, and they will not be pretty. Januarys will be even worse, for obvious reasons. Unemployment rates will continue to rise as the recession gets more intense, which is what’s going to make this recovery such a very long ordeal.

I just read an interview in the Casey Report with a major commercial real estate player. His name is Andy Miller. Since he started his company, he's bought more than 30,000 apartment units, several million square feet of retail space, and large office projects all over the country. He also employs about 500 people.

Miller says, and this is very insightful for all of us, that many of his retail tenants are telling him that they're going to close their stores after Christmas. Christmas is the most profitable time of the year for retailers and if he’s right, they will sell everything they can by year end. Then, they will fire their staff and vacate their properties beginning January 1st.

It's not just retail properties closing down and firing employees. Miller says there's a crisis coming in all commercial real estate. He says it feels like a slow-motion car wreck. "Whether it's apartments, shopping centers, office buildings, industrial properties, hotels, senior housing – operating incomes are eroding.

This is the crisis in commercial real estate that I have been warning about, and with it will come millions of job cuts. First we will see the occupancy rate drop in offices, then malls cut jobs, then construction companies cut workers, and so on. Once this begins we should anticipate some of the worst unemployment numbers since the Great Depression.

This means that we will also have plenty of additional stimulus programs from the Federal government. As Miller says “This phenomenon will last until the public realizes how damaging the Fed's stimulus is...this train wreck is going to happen and the actions we are taking now with trillions and trillions of taxpayers money will only make our future that much more difficult.

This is the deleveraging process that I have been writing and warning about for so long. I wrote my first article on the dangers of our addiction to debt in 2003, and at the time I said that when the house of cards begins to crumble the deleveraging process would take anywhere from 3-5 years to unwind. I stand by this estimate, and assuming that we started the process in late 2007, we’ve got anywhere from 2-4 years to go.

In the meantime, enjoy the Obama Christmas rally…looks like this one has some legs.

Kip Herriage, Editor, VRA

www.kipherriage.com

 

Tuesday
Dec092008

Market and Precious Metals Update

As I forecast yesterday, the market had a fairly tough day today, ending down over 240 points. If the auto bailout does not take place…as the market is expecting…we could see a 500-1000 point drop in no time at all. I continue to believe that some type of emergency funding will get completed, but all bets are off for this bear market rally if it does not.

Look, I get the argument. The government (see taxpayers….you and me) has thrown away close to $9 trillion into insolvent banks, investment firms, credit card companies and other bankrupt financial institutions, so why not give another $100 billion or so to the Big Three? After all, this is chump change compared to what Wall Street has already received. In this light it’s actually hard to argue the point. We’ve become the bailout nation after all. And, with up to 10 million jobs that could be lost forever (directly and indirectly) if they were allowed to fail, our weakened economy simply could not stand the stress. No doubt about it, this would become the Great Depression II.

So, at this point we might as well give them the money…at least the Obama Christmas bear market rally would be allowed to continue.

At the end of the day, these chickens will come home to roost, and instinctively we all know where this is going to end. Going into 2009 we will have a combined national debt approaching $90 trillion, and the only way to pay the interest (forget about the principal) is to turn the printing presses on as fast as they will run. I read a study today that showed that in the history of all currencies, only 23% have avoided total collapse. In other words, they each wound up as toilet paper and completely worthless due to massive currency inflation….which was brought on by an overwhelming debt load. Sound familiar??

So, our first major bubble was the dot-com boom and bust of the 90’s. This was followed by our second major bubble in real estate, and we see how that’s ending. Now, the final bubble to pop will be in debt and currency. This is just a guess on my part, but I look for the US dollar, most foreign currencies, and all of this massive debt to begin leaking serious air in the first quarter of 2009. This will be the “tell”, for all you poker players, that the next big leg of the bear market is upon us. Once this starts, the FED will REALLY turn up the printing presses. Then, interest rates will begin to spike up sharply and the US dollar will resume its bear market.

Folks, if this scenario plays out, and I see very little chance that it will not, the bear market we’ve seen so far will pale by comparison. If someone has an alternate theory I’ve love to hear it…and I would love to be wrong.

In advance of this admittedly bleak scenario, I am completing research on 3 different investments that will enable us to make some truly extraordinary profits as the a) US dollar, b) US Government Issued Debt Instruments, and c) US commercial and residential real estate begin their multi-year bear markets.

The US dollar and government debt have been THE place to have your money during the recession so far, and when they reverse course, the gains that we will make will be seem almost obscene. The smart money is already beginning to circle like vultures, and once they start their descent, we will make our move as well.

Remember, there is always a way to make money, regardless of market conditions. Outside of the short term moves we’ve made using SDS and SSO, along with our core positions in precious metals, I know that many of you are getting tired of having your money sitting in cash. But the time will soon come to put it to serious work. And hey, in the meantime, you’ve been in the best investment possible, because cash truly has been king. You’ve profited not only from a huge move higher in the US dollar, but as deflation continues to make its way through the economy, your dollar now goes much further than it has in recent years as the prices on just about everything consumable drops by about 10% per month (outside of food prices maybe, but those have begun to drop quickly as well). You should consider yourself a very smart investor for these very reasons. Mensa club smart, no doubt about it…

 

Precious Metals Update

A recent quote from Citigroup says gold could rise above the $2,000 level as the world unravels according to an internal client note from the company.

In that note Citigroup said the following:

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of 2009 as central banks flood the world's monetary system with liquidity.


The bank said that the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble will likely end in one of two extreme ways: with either a resurgence of inflation, or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush to gold.

Remember, this came from Citigroup folks….as mainstream as they come. Make sure you have your precious metals positions in place…at least 20-40% of what you ultimately intend to own. I don’t know exactly when the explosive move will take place, but I have little doubt that it will happen.

Finally, I look for the bear market rally to resume this week, so use the buy list from yesterday. If the auto deal doesn’t get done, then the rally will become a stampede lower…somehow I don’t think the new Obama administration is going to let this happen.

Until next time,

Kip Herriage, Editor, VRA

www.vraletter.com

www.kipherriage.com

Sunday
Dec072008

The Big Picture

It's probably the last thing anyone wants to hear so soon after news of the 533,000 lost jobs lost month (announced on Friday) -- but if history is a guide, it's only going to get worse from here. Details to follow…

First, the market rallied 240 points on the much worse than forecast numbers Friday morning, and it appears that the Christmas season bear market rally may have a ways to go. Remember, bear market rallies can be incredibly powerful…much more so than even those in a bull market. Technically speaking, and that’s basically what this rally is, the Dow could go all the way back to 10,500 – 10,800 or so and we would still be in a bear market. I highly doubt this will happen, but the possibility remains. After the 1929 crash, the market had a rally so big that it convinced most people that the worse was behind us, only to ultimately see losses that wiped out 90% of the stock market from its 1929 pre-crash high. The point being, don’t let a bear market rally fool you…regardless of how high this short term move carries us, much lower prices are still to come. Again, more on this later…

President Elect Obama brings with him a great deal of optimism, but it must be at the chagrin of those that got him elected. He has abandoned his campaign pledge to raise taxes and his economic team and cabinet appointments have been on the ultra conservative side. Every time I see him giving a press conference on TV (which is about every day) I get a chuckle out of the sign on his podium….”Office of the President Elect”…it looks like something that Kinko’s did as a rush job. No doubt about it though, the markets like him. When he speaks, the market goes up…it’s been one of the most reliable trades since the election. The only trade that is more reliable is when Bush, Bernanke, or Paulson speak, which generates a nearly guaranteed 200 point drop in about an hour. For those that enjoy shorting the market (in other words, those that have enjoyed making lots and lots of money over the last 5-6 months) you almost pray for a day when all three of these pinheads speak on the same day. A 500 point drop is just around the corner. Knut Rockne they are not.

Why This is Only a Bear Market Rally

The job losses from November are just the beginning. But don’t take my word for it. Here are the facts from Portfolio Magazine: The majority of job losses in the 11 previous recessions came in the second half of the recession. We're 11 full months into the current one and most forecasters think the recession will last through the end of next year.

Let's assume that's somewhere near the truth. Out of all the jobs that were lost during the average recession since 1945, 26 percent of them came in the first half and 74 percent in the second half. There've been 1.9 million jobs lost thus far in the current downturn, so the historical average would mean we could lose another 5.7 million jobs, for a total of 7.6 million by the end. That would be the most jobs lost during a post-Great Depression recession. I continue to forecast that before this recession/depression is over that unemployment will easily reach 15%, not close to the 25% unemployment of the 1930’s but unfortunately not at all far enough from it.

The chart below shows why we are in for a long painful recovery, and why everyone reading this should prepare themselves, their family and their business for the reality that will be 2009-10.

 

 

In past recessions we have had a savings rate of 10% plus to buffer the economy and household balance sheets. Because we have now had a negative savings rate for well over a year, with household debt of 127% to disposable income, there is simply nowhere to turn for much needed cash. An important reason why the American economy has been so resilient and recessions so mild since 1982 is the energy of consumers. Their spending has been remarkably stable, not only because drops in employment and income have been less severe than of old, but also because they have been willing and able to borrow. The long rise in asset prices—first of stocks, then of houses—raised consumers’ net worth and made saving seem less necessary. And borrowing became easier, thanks to financial innovation and lenders’ relaxed underwriting, which was itself based on the supposedly reliable collateral of ever-more-valuable houses. This is what has the FED so concerned this time. No matter how much money they drop from helicopters, the money is not making it to the end-user…the consumer. The banks getting all of theses obscene amounts heaped on them are simply not lending, and as I’ve been reporting, credit card co’s are now reducing and even cancelling outstanding lines of credit. Credit card debt was the last thing supporting the average consumer, and this too is about to pass.

 

Remember folks, this very scary process is just getting underway…this is the deleveraging process that must follow the credit bubble we’ve just now saying adios to, and I expect it to last a minimum of 12-18 months longer. In a consumer based economy (which is 70- 80% of our domestic growth), rather than a manufacturing based one, our economy MUST continue to shrink until the consumer returns to support it.

 

The Stock Market -Bottom Line

 

Anyone that feels there is a long term bottom in place is either one of the 30% taking anti-depressants of one kind or another, or is spending too much time watching the talking heads on CNBC. At least 80% of the so-called gurus they have on as guests continue to look for every opportunity to call a market bottom…don’t believe them. As I wrote over a month ago, I continue to look for a class action lawsuit against CNBC and their efforts to pump the market higher artificially. Seriously, their attorneys must be telling them the same thing is on the way. Anyone that’s listening to these gurus’s does so at great risk to their financial health. If you’re looking for some proof, just take a look at the losses these same experts have the full year…almost all of these “portfolio managers” have losses of greater than 50% for 2008. That’s some kind of portfolio management, huh. With friends like this…

 

Having said all of this, there is still a fairly good probability of an Obama/Christmas bear market rally continuing our way. Only those with a strong heart may want to attempt to trade this kind of rally, but at the same time a 1000 point move higher in the Dow is possible. Hey, whenever a stock market can rally a total of over 500 points on the kind of unemployment numbers we got on Friday, anything is possible.

Very Favorable Seasonal Period

Yale Hirsch, who I had the great pleasure of dining with at New York’s Tavern on the Green some 15 years ago, is the founder of Smart Money and the Stock Traders Almanac. He noticed many years ago that virtually all the stock gains since 1950 came in the November 1st to April 30th period of the year. Starting with $10,000 in 1950, the November 1st to April 30th period produced a profit of $489,933 in the 55 year period starting November 1st 1950 and ending April 30th 2004. In comparison, the period from May 1st to October 31st produced a LOSS of $502 over the same 55 year period. This seasonality of the market is very hard to ignore. It’s also no accident that the majority of these gains came at a time when Congress was primarily NOT in session.

Commodities: Energy - Gold – Silver Update

 

Finally, all commodities continue to forecast deflation rather than inflation. Merrill

Lynch (MER) is now looking for oil to hit $25/barrel before it’s all over and they may well be right, however I think a $40 floor is more likely. I have a new oil recommendation on the way, but it’s a bit early to make it public. Stay tuned however, because once the US dollar resumes its bear market, energy prices will reverse course quickly….even in the slowest of economies (remember, oil is priced in US dollars, so it must move higher as the dollar goes lower).

 

The same strategy applies to gold and silver, but for now it appears that the trend will continue lower. Robert Prechter, of the famed Elliott Wave Theory, has been forecasting a long-term deflationary environment for some time, and to date has been far more right than wrong. Of course, he’s also looking for the Dow to drop to 400 before this is all over. And some of you have called me too bearish….

 

Kip Herriage

Editor, VRA

 

www.vraletter.com

www.kipherriage