Friday, November 27, 2009


It appears the news that Dubai may default on its debt is going to be the catalyst for the intermediate correction we've been expecting. I have a feeling somewhere in here the solvency of Greece and maybe the Ukraine is also going to get thrown in the mix.

Intermediate corrections usually last about 1-3 months. I expect this one to be on the short side because of the way the daily cycles are lining up.

I can see it now, the bears are going to see the end of the cyclical bull market as the correction gets underway. But I can tell you that credit problems are not going to be the catalyst that brings this bull to an end. Let's face it we've already traveled that road. We aren't going to go down that path again.

Anyone who thinks that the credit markets are going to bring down this bull again are deluding themselves. Folks the central banks of the world have already proven they can defeat credit implosions with their printing presses. I guarantee as we work our way down into this temporary quagmire every central bank in the world is just going to crank up the presses and churn out another trillion or so of paper.

Lets face it, it really doesn't take much effort for a central bank to crank out a trillion dollar band aid. It's basically free money. Well at least that's what these idiots would like to believe.

This mini crisis is however going to sow the real seeds of our ultimate collapse. Once the blizzard of paper finally halts this panic, and it will,  it's going to start looking for another home. I have no doubt it will eventually find that home in the commodity markets.

The world is now setting the stage for what should turn out to be a historic run in commodity prices next year. All we need is a nice scary correction to freak out the Fed and start the presses running full blast again. Ironically it will be the threat of deflation that tips the world into an inflationary storm.

That, my friends, is what is going to bring down this cyclical bull and send the markets eventually spiraling down into the third leg of this secular bear market that began with the bursting of the tech bubble in 2000.

Inflation is the contagion that will destory this bull and the global economy, not credit contraction.

Oh, by the way, inflation can't be contained with a printing press!