Your Economy (No Politics)

[Bullwinkle]

"MMA Weekly Comments and Recommendations on Financial Markets"


MMA Comments for the Week Beginning September 27, 2010
Written by Raymond Merriman

Please note that I am lecturing in Buenos Aries and Rio de Janeiro through next week. Thus there will be no report due next week (for the week of October 4). Our offices will be open during usual times while I am away.


Review and Preview

As expected, the Federal Reserve Board maintained its position that it will execute further “quantitative easing” measures to support the USA economy if it considers it necessary. That means the Fed will continue keeping Fed funds rates low, at 0-.25%, AND they will purchase long-term U.S. Treasury Bonds and Notes, if they deem it necessary to support the economy in the event that it starts to fall again. In other words, they will continue with their stimulative monetary policy because they are not yet convinced that the economy’s growth is on a secure and sustainable foundation. This is no surprise because Fed Chairman Ben Bernanke has stated on several occasions that the USA government must address its ballooning deficit before the economy will be on the proper path. There has been no sign yet that Congress and White House are willing to do that, so there is no reason for the Fed to change its position either. In fact, if it changed its position BEFORE the U.S. Government changed its spending policies, it would probably lead to another economic plunge immediately.

This announcement to maintain the Fed’s quantitative easing option came right on September 21, within hours of the full moon on the Vernal and Spring equinox, in conjunction with Jupiter and Uranus. In fact, Jupiter and Uranus reached their closest distance to the earth in decades around that time. It was a critical reversal date, and immediately after the announcement, equity markets in the USA soared to new multi-month highs. It lasted only a few moments, and then the Dow Jones Industrial Average fell about 100 points towards the close of that day. Equity prices continued falling over the next two days. But on Friday, they began to recover again and rallied to a new cycle high.

Gold soared to another new all-time high last week, and Silver continued to rise to its highest level since the 1980’s. And why not? After all, the exploding deficits and continuous spending policies of the USA government, and the zero-interest rate and quantitative easing monetary policies of the Federal Reserve Board, are extremely inflationary for most assets. They are not supportive for a strong U.S. dollar. Somewhere down the road the piper will have to be paid, and he won’t want payment in the form of paper fiat dollar currency. Accordingly, foreign currencies also rallied strongly against the U.S. Dollar last week. This was especially true with the Swiss Franc, which is rapidly resuming its historical role as the currency of “safe haven,” replacing that status previously held by the U.S. Dollar.

Short-Term Geocosmics

Although last week’s September 21 critical reversal date produced the expected reversal in several markets, it cannot yet be said that it created much of a shift in equity markets around the world. The orb of influence is still in force, however. But now our attention will begin to focus on Venus retrograde, taking place on October 8. This signature has a 78% historical correlation to primary or greater cycles within an orb of 12 trading days, as reported in “The Ultimate Book on Stock Market Timing, Volume 3: Geocosmic Correlation to Trading Cycles.” It has an 83% correlation to a 4% or greater reversal in stock indices within 4 trading days. Since the Jupiter-Uranus conjunction of September 18 and Sun-Jupiter opposition of September 21 also have a 75+% correlation to primary or greater cycles within 12 trading days, it is possible that all signatures could be fulfilled with a cycle crest during the period all these time bands overlap.

This week is important also because the Sun will square Pluto on September 25 and then conjunct Saturn on September 30. This means it “translates” the Saturn-Pluto square, which was exact August 21. You may remember that just a couple of days later (August 25 and 27), many stock markets of the world bottomed. Shortly after, this big 10+% rally began. That was also during the time that the Russians loaded the Iranian nuclear reactor rods. Hence we may see more news regarding Iran’s nuclear ambitions announced shortly.

The Sun-Saturn takes place in Libra, which is the sign of justice and fairness. Saturn with the Sun may pertain to new laws. Thus there may be a new initiative in some lands to enact laws that provide greater justice to its citizens. At its worst, it could instead indicate an effort to take greater control of the government and disguise the maneuver as an act of providing greater safety and security for its citizens, but in reality, it provides greater control only for the government itself. In terms of markets, Sun-Saturn conjunctions have been observed to coincide with trend changes in some markets. It does not have a high correlation by itself to trend changes in equity markets, but more often with some commodities, especially those that are affected by weather. There could be crop damage, or the end of a threat of crop damage. Economically, the Sun transiting the Saturn-Pluto square will keep the attention on deficits and debt.

Longer-Term Thoughts

It is not only the Sun translating the Saturn-Pluto square that will rivet attention on debt and deficits. It is also the combination of both Venus and Mars transiting through Scorpio that does the same. Scorpio is associated with Pluto, the principle in Financial Astrology related to debt. Venus, which rules money, is in Scorpio an unusually long time (September 8-November 7, and then again November 29-January 8) because it turns retrograde there on October 8. Mars will be in Scorpio September 14 through October 28. Even after that, the Moon’s North Node will be in conjunction to Pluto through much of November. With Pluto and Scorpio in such prominence, the three D’s (debt, deficit, and default) will be the major topics of discussion by world leaders and populations angered over their government’s fiscal mismanagement over the prior decade.

But Pluto also rules taxes, and governments everywhere are in conflict as to the role taxes should play in reducing their national deficits. Which brings up the question: Why is it that every new president or Congress of the United States (and probably every other country) feels compelled to change the tax laws once they come into power?

What is it about politicians – government leaders - that refuse to let businesses and individuals have the certainty of knowing what their taxes are – or will be - so that they can make plans for the future of their business or families? When the tax laws change, every business and many individuals have to make changes in their financial planning. It causes an interruption in their journey through life, a confusion that delays progress until one can figure out a new map to achieve their goals, especially when the changes being contemplated are for greater taxes. Businesses stop hiring and individuals stop spending until the picture clears and they can once again enact the ability to make plans, assuming they can afford the goals they have with less money than they had before.

Who really benefits from the tax tinkering that takes place every time a new party comes into power? Certainly not businesses, which are the driving force behind a growing economy. The only people who benefit - in almost all cases - are the politicians themselves and the government bureaucracy that they grow. Constantly changing the tax law is one of the greatest detriments to a sustainable growing economy because it constantly interrupts the ability to plan one’s financial future, whether as a business or tax-paying citizen of that country.

The problem is not that the tax laws need to be changed every 4 years or so in order to help the economy. This argument is bogus and disingenuous. The problems of the economy are not caused by taxes that are too low, or solved by raising taxes. The problem is that most governments do not intelligently manage the receipts it gets from taxes to run the country, state, or city. That is all it is. And this is the argument that will be debated over and over again into the mid-term election and even beyond, as Scorpio the sign and Pluto the planet will be highlighted.

With Venus soon to turn retrograde in Scorpio, it is likely that we will hear of bizarre proposals being offered about taxes. This may result in the change of a tax policy. Right now in the USA the discussion is about letting the “Bush tax cuts” from 2001 expire on January 1, 2011, which will result in a huge tax increase from everyone who pays taxes (in the USA, this about 50% of its citizens). But the White House has promised not to let them expire (i.e. taxes increase) for 95-97% of the population, or those whose households do not exceed $250,000 if married, or $200,000 if single. However some Democrats and all Republicans want to maintain the current tax code for everyone until the economy is on sound footing. According the Federal Reserve Board’s monetary policies, the economy is not on sound footing yet or else it wouldn’t continue its quantitative easing option.

With Venus retrograde during the election, it would not be a surprise if the expiring “Bush tax cuts” (i.e. new tax increases) alone became the dominant election theme. With Venus retrograde, it is not likely that a decision will be made, or if it is, it may not be very popular and will require another modification after Venus turns direct. With Venus retrograde in Scorpio, it may yet be another opportunity for politicians to exhibit their capacity for short-sighted fiscal mismanagement, versus longer-term effective fiscal management policies that the populace wishes from their elected representatives.

In the meantime, it is beginning to look like the massive rally in stocks and other assets (i.e. asset inflation) discussed in the Forecast 2010 Book is starting to manifest. The “pedal to the metal” behavior of the Federal Reserve Board, combined with the lack of spending control on the part of the Congress and White House, is starting its anticipated effect just as described therein.

http://www.mmacycles.com/weekly-preview/mma-comments-for-the-week/mma-comments-for-the-week-beginning-september-27,-2010/