Deflation Must Occur

Yesterday was the death rattle. We saw up and downturn, and the struggle around key support and resistance lines. We were able to take entry to the put, and some day traded it, and our call remains an open signal. Study our Dow projections carefully again, as we are on a precipice. We'll climb out short term but the market is flat lining.

We think the market is about to trick us. After classic and massive oversold conditions, and over-extension, it is likely to have enough upside to help chartists and citizens believe the worst may be over.

We suspect, however, that whatever upside we see will be fleeting, and that we will all participate in a bear market rally.

What is happening is simple: we have experienced the greatest credit bubble of all time, and we have been driving Hummers and wiping our butts with ultrasoft Charmin toliet paper, bleached white, that is made from virgin forests. Some of us have three or four cars.

Deflation will NOT be beat by our government, by Bernanke, or by Obama dollars. In mid 2007 Paulson, the slimy trader that was our Treasury Secretary, said "the economy is the strongest I have ever seen it,"while Bush said " there is not a recession, or deflation, and our economy is stronger than it has ever been."

Oops.

Deflation must occur, and no amount of government intervention will change it. Any rally we see over the next few days/weeks/months.....be prepared that it may not be lasting.

Trader DS sent a video to our offices. George Soros, who he refers to below, is a brilliant and creative investor, one of the best of all time.

"I was digging around on the internet tonight and found this transcript and video of a 30 minute interview with George Soros on October 8th, 2008. It really reminded me of you and your teachings of the market. I thought I would shoot it to you to check out."

http://www.pbs.org/moyers/journal/10102008/watch.html


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