Interdum stultus opportuna loquitur...

Thursday, August 26, 2004

Rothschild's Paradigm...

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One of the Rothschilds once said "I will settle for the middle six-eighths of any move; let others fight over the first and last eighths". Someone else once said that the first and last tenths of any market move was the most expensive.

I have always been impressed by people who can make up a good aphorism; Winston Churchill seemed to have generated an aphorism a day for most of his adult life, which is amazing considering that he was a fat inbred git.

Anyhow, I sat down to do my nightly reading, fortified by a glass and a half of what most non-Krauts would consider a sickly-sweet white.

It's called "Fruitwood". Anybody who has had Dr Loosen's Wehlener Sonnenuhr Riesling Auslese would recognise the taste immediately, but this is a domestic number that gets ignored by wine-wankers who think whites have to be tart, and taste of wood.

But I digress - being slightly "elephant's" (aka slightly "scheisen") will make your mind wander.

I was thinking about aphorisms; Oscar Wilde was good at them... Keynes was pretty good at them. Livy, Ovid, and the rest of the ancient Grecians were not bad either.

But my pick of all the aphorisms I've ever read, is that uttered by the barbarian warlord Brennus as he stood outside the gates of Rome.

Vae Victus (pronounced "Way Wiktiss", I am assured by scholars). Woe Betide the Vanquished.

As I pored over my funny little charts with their interesting squiggles, it leapt out at me and struck me between the eyes.

I've been watching the succession of lower highs and lower lows in the Dow... the unconfirmed higher high in the Dow Transports which generated a bearish non-confirmation per Dow Theory... the various cycles which are timed to have peaked this week... the awful technical picture in the SOX and the Nasdaq. Elliott counts, too.

I don't usually include what I call "Liberace ratios" in my analysis (that is, Fibonacci ratios) but there's a bunch of them as well. And they all point to an absolute WALL in front of themarket just slightly above current levels.

If I am right (and that would mean that all the Fib ratio folks, the Elliott folks, the Dow Theory folks and the valuation folks are right too), then we are about to enter a real steep decline. Something really horrible.

And according to the Investment Company Institute, American 401(k) investors aged 40 and over have more than 55% of their assets in equities.

Although I am a gentle soul, Brennus' words are redolent for me right now; these folks have the chance to get out now and retain what little of their 401(k) they still have in cash. After all, a miniscule nominal yield is far better than what we appear set to generate in equities. If theirretirements are befouled as a result of their silly investment strategy, they have been warned.