Friday, January 4, 2008

A tale of two bulls

Actually its a tale of one tired bull and one raging bull. Bull markets typically end with a bang. By bang I mean with high volume and high volatility. Take a look at the first chart and you'll see what I'm talking about. For all the wild swings back and forth the past year we have basically gone nowhere since last Feb. Also take a look at the big surge in volume since this summer. I believe that we started down into the 4 year cycle low back in July but the Fed put that move on hold by flooding the system with liquidity. However all that liquidity didn't really do anything for the markets as we can see. The market has simply gyrated back and forth as the liquidity leaked out of the paper markets and into the commodity markets.

In the bottom chart we can see one of the beneficiaries of this liquidity pump. This my friends will ultimately be the end result of trying to print our way out of trouble. Always has been always will be. Just keep the four rules on the home page firmly in mind for the next 10 years or so and you will have a successful game plan to invest with.