Why I'm Afraid!

When I first came to Taiwan I started working with a guy named Mark. He talked to me about his economic theories and how the world market was going to crash. At first I blew it off as a bunch of hooey. But after three years of listening to his explanations and reading some of his stock books I have seen the light. The following letter is written by Mark. He wrote it in response to Mike Gallagher's overjoy at Bush's win in the election. The letter is a long read, but I feel it is definitely worth it.

"Why Mike Gallagher And His Colleagues At Newsmax Should Be Crying . . . Not Gloating"

From:
Mark Lawler


Hey Mike,

Sorry to be the one to bust your bubble...but if you thought that Bush's and the other Republicans' victories was something to gloat about, you'd better think again.

Here's why...

There is a man in Georgia who has found that there is one indicator that has
successfully predicted EVERY election since Washington was president. And what
is that indicator you may be wondering?

It's The Stock Market.

And why is that? Because the stock market reflects the changes in social mood or
confidence. That is, from pessimism to optimism and from optimism back to
pessimism.

That:

...these changes trend and reverse in recognizable patterns or waves (13 of them).

...the structures are clear and definite in form (not in time or amplitude).

...patterns of smaller degree link together to form similar patterns at a larger degree.

So What? What's The Big Deal?

The "big deal" is this. When the stock market is in a bull market trend -- or going up -- whoever is president will get the credit and be re-elected again. Examples are
Washington, Jefferson, Monroe, Jackson, Lincoln, Grant, T. Roosevelt, Coolidge,
F. Roosevelt, Eisenhower, Johnson, Nixon, Reagan, Clinton and Bush Jr.

Likewise, whoever is president when the stock market falls gets the blame and is
kicked out of office...like Van Buren, Hoover, Carter, Bush Sr. and the Democrats
in 2000.

And get this...the bigger the drop in the stock market, the bigger the blame for the
incumbent and his party. Now you can begin to see why Herbert Hoover and the
Republicans disappeared from the political scene for many years after the crash
in 1929.

Will The Same Thing Happen To Bush And The Republicans
Again This Time Around?

If you are like most people, the answer would be "No Way!" After all, the stock market went up right after Bush's re-election. Plus the latest figures from the Labor Department show that 337,000 workers were added to the payrolls in October. Therefore, all this is bullish for the economy. Right?

Maybe...maybe not.

You have to remember that Nixon enjoyed a similar market "celebration" too, for a bit
over two months into January 11, 1973, nine days before his second inauguration. Then the Dow and the S & P went into their biggest slide in 40 years.

Plus you should consider this Mike:

There is an eerie similarity of what happened in the 70's bear market and what has been happening since the peak of the Dow in January 2000.

In the 70's:

*...you had an increase in terrorism worldwide -- the 1972 Munich Olympic Games,
Iran hostages.... And after 2000, you've had 9/11, Bali Island, Spain....

*...you had The Texas Chainsaw Massacre, Carrie, Halloween, The Shining, Friday the 13th.... And after 2000, you've had Darkness Falls, Kill Bill (1 & 2), Alien vs. Predator, Dream Catcher....

*...you saw the popularity of depressed and angry rock -- Pink Floyd, Black Sabbath,
Blondie, The Sex Pistols, punk rock.... And after 2000, the popularity of hateful rap music that Bill O'Reilly over at Fox News is always complaining about.

*...you had people protesting the Vietnam War. And after 2000, you've had
people protesting American involvement in Afghanistan and Iraq.

I could go on and on Mike...but I think you get the picture. These are hardly
coincidences. If there had been a bull market going on -- like what you had from
1982 to 2000 -- then none of these trends or events would be dominating life today.

But since these trends are happening, the only conclusion that can be made is that...

We Are Still In A Bear Market!

And that Bush Jr. and the Republicans were the beneficiaries of a bear market rally
after 9/11.

Tell me, what do you think is going to happen once that bear market rally is over?

Of course you may disagree will all of this...but there is one important item that I forgot to mention about that man in Georgia.

It seems he has researched ALL investment manias -- like the tulip mania in Holland,
the South Sea Bubble in England, the US in 1929, Japan in 1989 (just to name a few) -- and do you know what he discovered?

That they all had ONE thing in common. And that was:

"A mania is always followed by a collapse so severe
that it brings values BELOW where they were
when the mania began."

That would explain why Japan has NOT had any new bull market since 1989, only
bear market rallies.

And that for the US, the Dow would still have to drop to below its 1982 level -- which would be below 1,000.

Pretty outrageous, don't you think Mike?

But what is even more outrageous are those people who believe that an 18-year bull
market in stocks that culminated in the biggest investment mania (and bubble) the
US has ever known, would be followed by a mere 2-year bear market only.

But hey, don't listen to what I say. I'm just an English teacher that has been living and working here in Taiwan for over the past 13 years. What do I know?

But maybe you should listen to what one of your colleagues over at CBS recently
reported about this man in Georgia.

************************************************************************************* See The Preceeding post for a transcript of the report
*************************************************************************************

Of course you may still be skeptical about Elliott Wave and Robert Prechter's
predictions, having done no research on them.

But there is one investment organization in Europe whose members are not skeptical
about Elliott Wave at all. In fact, they have been using it successfully for over 30 years. Back in 1973, this organization recommended their very rich clients (the super rich) to go to 80% of their total liquid assets into gold. They then issued their clients a sell everything recommendation on Jan. 22, 1980 and to buy US T-bills. Two years later on Sept. 14, 1982, they invested all their money into the 30 Dow stocks. In 1987, ALL their money was taken out before the crash in the fall. It was then invested in Swiss francs...and then back again into US dollars. Now they are making money in other currencies. All safely...and without any risk.

Nor Are They Skeptical About Prechter's Dark Predictions.

In fact, during the 90's the people in this organization have rated nearly all of the banks in every country in the world with their special own rating system to find out which banks have the highest liquidity ratios, highest net liquid ratios, along with the lowest derivative exposure.

And they've found only 2 banks in the world that meet these lofty standards. And if
you compared these banks with AAA-rated banks, these banks would be AAAAA-rated. Both banks are in Switzerland (of course) and for both of them you need a personal introduction along with a Boeing 747 full of cash.

This organization has also applied this same strict rating system to all Swiss
insurance companies. And they have found only one that matches this high
standard. This insurer has INTENTIONALLY eliminated any capital exposure to
real estate, mortgages, risky bank loans, and equities (whether Swiss or foreign).
Their only asset is market-liquid AAA-rated short-term government-issued treasury
paper in different government currencies. And only 100,000 Swiss francs will buy an
annuity certificate with this company.

Lastly, these insiders have set up their own "store" to purchase and to store precious metals outside the banking system in Zurich and Perth. But they are not yet
recommending their clients to buy...only 20%...and the other 80% in cash.

So Mike...

What does it say about the future of the world economy when the super rich -- the
ultimate insiders -- have been rushing to transfer most of their liquid assets to
Switzerland to the safest and most financially sound insurance company and banks
on the planet?

Shouldn't You And Your Friends Be Alarmed And Start Doing The Same?

Especially when Dr. Martin Weiss reported in his January 2003, Safe Money Report:

"...seven of the largest banks in the U.S. are more
vulnerable than ever to derivatives failure: J.P.Morgan

Chase has total derivative postions in excess of $26 trillion
or more than 2.5 times the entire gross domestic product
of the United States. Bank of America has $11.5 trillion;
Citibank, $7.8 trillion; Wachovia Bank, $2.3 trillion; and
Wells Fargo, $1.1 trillion. All told, 408 U.S. banks have
derivatives with a total "notional" or face value in excess
of $53 trillion!"

And that is just for US banks Mike. You can be sure that many banks all over the
world are in similar straits.

And since most of us aren't in the same class as the super rich, shouldn't we be
placing our assets in the highest Weiss-rated banks, insurance companies and
brokerage firms?

Is That Being Too Much Of A "Doomsayer?" Maybe...

But you have to remember Mike...insider buying by the super rich IS the ultimate
leading indicator. And if derivatives are that much of a worry to them, then it should be ours too. We should be following in their footsteps.

Don't you agree?

Heck...even Jimmy Rogers (aka the Investment Biker and Adventure Capitalist) said
the same thing during his talk here in Taipei this past summer. He was talking about
how smart his 2-year-old daughter is. She already has a savings account -- but not
in the US -- in Switzerland. And she is definitely not holding US dollars. However,
she is holding some gold, silver and platinum.

Smart little girl...don't you think Mike?! That should tell you how far behind the curve you and your colleagues are.

Because once the Dow starts joining the S & P 500 and Nasdaq in declining
significantly, you can be sure one or more of those derivative land mines will be
going off.

Sound farfetched -- then consider this:

"Legions of super bears have warned of impending
monetary collapse, imminent full-scale banking crises,
and so forth for years. Although they continue to warn
that such events occur "out of the blue," "at any time,"
and "without warning," history shows that a substantial
decline in the stock market has always provided an
early warning to such conditions...."
--Elliott Wave Theorist, December 1985

And Dr. Weiss already reported to his subscribers that it would only take about a 15%
loss on one of J.P. Morgan Chase's derivative positions...and Chase would be
bankrupt.

So It Is Not Farfetched At All...But Quite Realistic.

So tell me Mike...when this happens, which president and which party are going to
be left holding the bag?

I'll give you a hint...it sure won't be the Democrats. But they will definitely have a cake walk in 2008

Hey Mike...do you hear any music now? Because I sure do. It's saying:

"Hey Hey Hey . . . Goodbye!"

Sincerely,

Mark Lawler




P.S. Now please don't think I have gone overboard with this "doomsayer" talk...

It is just with an understanding of Elliott Wave, you begin to realize that human
progress does not happen in a linear step-by-step process. It follows nature's way --
that is, in a three-steps forward and two-steps back manner. And those two steps
back are necessary to put people's psychology and motivation in a condition to
support the next rise in material, social, cultural and intellectual progress.

And it is just as Michael Hutchinson described in Megabrain (1987) when talking
about Ilya Prigogine's ideas -- the 1977 Nobel Prize winner:

"Prigogine's vision of a universe of dissipative structures
replaces the mechanistic view of a cosmos of "things"
with a cosmos of "process"...[that is] unpredictable,
self-organizing and evolutionary...characterized by a
series of leaps and bounds, or discontinuities, rather
than a gradual, incremental progression.... Prigogine's
ideas...demonstrate that periods of instability,
perturbation, upheaval, collapse and chaos are not to
be seen as absolute evils but instead as absolute
necessities, as phases through which every structure
must pass in order to evolve to higher levels
of complexity...."

So you see Mike...Prechter is no more of a "doomsayer" than I, Weiss, Casey or
the super rich are.