Fearless Rick Called The Bear Market; Contributing To A Fund? You Are A Bag-Holder

There are very few people who ascribe to the discipline of Dow Theory.

I, Fearless Rick, am one of them. I am also the only person I know who has read Adam Smith's "The Wealth of Nations," and I am currently re-reading sections of that lengthy tome because it's important to understand.

I'm making these statements not to blow my own horn, but to point something out that readers of this blog and the millions of non-readers should acknowledge.

When I wrote this post on April 9, I had complete confidence in what I was delivering. There were no caveats, what-ifs, or other murky scenarios by which I could hedge my declaration that the bull market in stocks was over and that the next 18 months to three or four years would be losers for stock holders.

It's nearly a month later - and three months since the Dow Jones Industrial Average topped out at 26,616.71 (sorry, that number has been hard-wired into my brain) on January 26 - and nothing has changed. Stocks are still hovering between their 50 and 200-day moving averages. In fact, since the Dow Transports confirmed the bear market, the Dow Industrials are up - as of today's close - a whopping 184 points, a gain of less than one percent over the past 15 trading days.

Thus, I am here to say that it sure looks like I nailed it, called it, that I'm absolutely right. This is a bear market, and it will be a bear market until the Dow Industrials find some bottom and the Dow Transports confirm the primary trend change back to the bullish side.

And I will tell you when that happens and not a moment sooner.

I'm pointing this out because I've grown a little bit weary of toiling in obscurity while outright frauds like Dennis Gartman get to bloviate on CNBC in stultified language how "we" erred on the bullish side, or how he's "long gold in yen terms," or other such nonsense. He is getting paid to tout garbage. I get nothing, not even faint praise, when I'm absolutely right, 100%.

OK, so maybe I'm having a little hissy fit here, but I'm not going to lower my voice, nor am I going to stop speaking my mind, making my calls and writing this daily blog. My reward is out there somewhere, I just hope I get some of it before I get to heaven.

As for today's action in the markets, it was the same old saw that I've been commenting upon in previous blogs: up at the open, then a long, slow decline into the red, a typical and obvious chart pattern that the mainstream media will not ever acknowledge because they and their Wall Street banker masters want you to continue contributing to their ponzi schemes, at your own peril.

Fund holders will be the eventual bag-holders of this bear market. They'll lose anywhere from 30 to 60% of their portfolio if they don't reallocate their investments out of growth stocks and ETFs and into something more sustainable, whatever that may be. Bonds are probably a good spot as yields are rising. Commodities may not be bad, depending on the asset mix. Cash is more than likely to be king. You can send me some by clicking here.

We are entering a period in which it is more important to preserve capital than risk it and hope for gains. Hope is not an investment strategy. Watching your magic fund sink month after month is not pleasant, and being a bag-holder while the smart money runs for the exits is not what any rational person would do.

As anyone can clearly see, after taking losses in February and March, the Dow Jones Industrial Average finished with a gain of 50.81 points. That's not a gain, that is a rounding error, a pimple, a dot. It didn't even beat inflation. You lost money over time.

Get out, reallocate, or die.

Dow Jones Industrial Average April Scorecard:

Date	Close	Gain/Loss	Cum. G/L
4/2/18	23,644.19	-458.92	-458.92
4/3/18	24,033.36	+389.17	-69.75
4/4/18	24,264.30	+230.94	+161.19
4/5/18	24,505.22	+240.92	+402.11
4/6/18	23,932.76	-572.46	-170.35
4/9/18	23,979.10	+46.34	-134.01
4/10/18	24,407.86	+428.76	+294.66
4/11/18	24,189.45	-218.55	+76.11
4/12/18	24,483.05	+293.60	+369.71
4/13/18	24,360.14	-122.91	+247.80
4/16/18	24,573.04	+212.90	+460.70
4/17/18	24,786.63	+213.59	+674.29
4/18/18	24,748.07	-38.56	+635.73
4/19/18	24,664.89	-83.18	+552.55
4/20/18	24,462.94	-201.95	+350.60
4/23/18	24,448.69	-14.25	+336.35
4/24/18	24,024.13	-424.56	-88.21
4/25/18	24,083.83	+59.70	-28.51
4/26/18	24,322.34	+238.51	+210.00
4/27/18	24,311.19	-11.15	+198.85
4/30/18	24,163.15	-148.04	+50.81

At the Close, Monday, April 30, 2018:
Dow Jones Industrial Average: 24,163.15, -148.04 (-0.61%)
NASDAQ: 7,066.27, -53.53 (-0.75%)
S&P 500: 2,648.05, -21.86 (-0.82%)
NYSE Composite: 12,515.39, -78.64 (-0.62%)

Adam Smith, Grains, Silver, the PPI, and Deflation

For months, if not years, Federal Reserve officials have been harping on the absence of inflation during their era of unrelenting quantitative easing (money printing). This phenomenon has baffled the pointed heads of the Fed, since it would be only natural for prices to rise with the advent of scads of fresh money hitting the market.

The problem for the Fed is simple. Their transmission lines have been blunted for the past eight years, with their easy money stopped at the bank level, never actually reaching commercial or consumer participants in the general economy. Thus, stocks, bonds and various currencies have experienced outsize gains - those assets experiencing above average appreciation, i.e., inflation - while the more mundane elements of the vast economic landscape have wallowed in a regime of low inflation, disinflation or outright deflation.

As the Fed prepares to sell off assets from its enormous ($4.4 trillion) balance sheet, the matter of price inflation has once again become a major concern. Fed officials disingenuously mutter on and about wage growth, seeking to convey the impression that they are somehow concerned for the welfare of workers (labor). Wage growth, which has stagnated since the year 1999 if not earlier, is a false argument for inflation. what the Fed wants is price inflation for everyday goods, commercial mid-production products, and base goods.

It's not happening.

In his magnificent tome, "The Wealth of Nations," author Adam Smith takes pains - and many pages - in discussion of nominal prices, concerning himself in his writings with the price of corn. Scholars rightfully insist that Smaith's intention was to show how prices in base goods are more important a measurement of economic health than pricing in currency.

With that knowledge, variations in currencies and base grains - wheat, corn, rice - can serve as an impressive measurement of real inflation, since the cost of producing marketable grain from hectares of farm land is somewhat non-variable, considering that the labor and fuel costs are relatively static.

In other words, since farmers are paying their hired hands roughly the same wage and the cost of operating the machinery to harvest the grains is also somewhat static, the price of finished grain in terms of currencies of choice - in his case, silver, can determine whether the environment is inflationary, deflationary, or neutral.

This morning's release of PPI data showed an increase of 0.4% month-over-month and a rate of 2.6% year-over-year. The increase puts the PPI at a level last seen in 2012. CPI (Consumer Price Index) remains mired in mediocrity, at a rate of 1.9% annually. That is the final inflation number, though it is hardly a reliable one.

Since the US economy is so vast and dynamic, it's difficult to get a grip on the overall flow of anything, though it's fairly certain that the inflation rate is higher than what the government is reporting.

On the other hand, taking into account Adam Smith's famous measurements, grains - the basis for much of what Americans and animals of husbandry eat - have crashed in recent weeks and months, along with silver, which has been rangebound for the past four years and is thus a benign measurement, useful in actual discussions of nominal prices.

On that basis, the Fed is likely to be disappointed in their inflation expectations. Since their data is so badly maligned, it cannot be trusted, while Adam Smith's has stood the tests of time.

It's deflation, as far as the eye can see, no matter what the Federal Reserve officials - who have proven, time and again, to be nothing more than dunces with degrees - try to squeeze out of the economy. The deflation is especially evident considering the levels of price suppression in silver. Were silver to rise to somewhat more realistic levels, the cost of buying a bushel or wheat or corn or rice would fall substantially.

Stocks made new all-time highs on Wednesday, but are pulling back in early trading Thursday morning.

A Message to Honest Ann

Ann, you already have the answers. I know that from previous posts of yours.

As I mentioned earlier, your own survival is paramount. Start there and move forward.

Be guided by history and the wisdom of those who have come before you.

The neocons and banksters are not your immediate concern, until you make them that.

I cannot make my point any more straightforward than to suggest you strengthen your own position and improve your immediate surroundings. You alone, nor even all of the ZH loyalists, do not have the power to dethrone the current power structure.

Aim for your own structure, your own economy. Others are doing so, though not many. Consider yourself the vanguard of a new age, because THAT will set freedom in motion.

I can only ask that you ignore the PTB. We are all ultimately responsible for our own actions.

Act responsibly.

As an aside, I have found great wisdom and guidance from reading the works of people such as John Stuart Mill, Aristotle, and recently Sun Tzu's Art of War. There are copies online of the latter. I'd suggest Adam Smith's The Wealth of Nations, but I'm stuck at page 624. Seriously, nobody should entertain to discuss anything economical unless they've read the whole thing, so there it is. I, like you, are inadequate. There's nothing stopping us, save our own human frailties, from becomeing whole.