Is Middle Class America Disappearing?

Excerpts from the Avid’s Live Chat Room…

In the recent documentary “Maxed Out”, Harvard law professor and author of several books on consumer debt, Elizabeth Warren, states that the middle class is near extinction not only because of a lack of financial information, but specifically because debt is, in her words, “obscenely profitable” for lenders. Panzner says little about this in the book, but he does say that “Ever-growing investment returns, an endless housing boom, and the Federal Reserve had conditioned Americans to believe that, inevitable good fortune would eventually bail them out – should it even prove necessary.” (4) The current debt nightmare, however, is not merely about “conditioning” but is, in my opinion, based on hard evidence, calculated and contrived. Both “Maxed Out” and “In Debt We Trust” make this exceedingly clear. Furthermore, in examining the history of the financial train wreck now in the making, one must grasp the history of America’s aristocracy, not only in the days of the Robber Barons, but within the past thirty years. Catherine Austin Fitts’ website subtitled, “The Aristocracy Of Stock Profits” provides an excellent historical account of this.

Nowhere in the book does Panzner mention the $1.3 trillion missing from the Pentagon or the $59 billion missing from the Department Of Housing And Urban Development and a plethora of other instances where money is “missing” as documented, again, by Catherine Austin Fitts. Nowhere does he address the issue of fraudulent inducement, also noted by Fitts in her audio CD on the housing bubble, which simply means, enticing people to borrow when it is obvious that it will be impossible or near impossible for them to repay.

It is crucial to understand that the current economic meltdown is a transfer of wealth from the middle and lower classes to the ruling elite. Wealth transfers do not just happen, nor are they the products of incompetency. They are intentional and well planned. Central to wealth transfer is corruption at the highest levels of the economic and political systems. In hindsight, we look back upon the Savings and Loan debacle of the 1980s, at that time, the largest theft in the history of the world, yet today, our minds cannot begin to wrap around the wealth that has been stolen from the American people, making the S&L scam look like piggy bank pilfering – and to my knowledge, Catherine Austin Fitts at her Solari and Dunwalke sites, is the only person to have documented this so impeccably.

SPX

Excerpts from the Avid’s Live Chat Room…

Friday’s drop satisfied the unfilled 1442.93 target from 8/6. The next lower targets are 1402.96, 1357.91 and 1330.11. There is more than one possible scenario for Monday; therefore there is no official call. However, there are two possibilities which are more likely than others. The first is that we made a double bottom and are going higher. Also, we recovered from a deep pit to close positive. The problem I have with this possibility is that the positive close is an illusion. Other indices besides SPX closed negative. After the close, futures tanked, not only going under fair value but going under cash as well. The second possibility involves a little fundamental analysis (which I rarely use) and Elliott wave theory (which I rarely use).

Friday the Fed poured cash into the system an unprecedented three times. (They bought illiquid mortgages; its cash finds its way into the market and props up prices temporarily.) With just minutes left to trade SPX was safely in the black, the market was rallying and usually no one wants to fade a strong move going into the weekend. Instead of biding its time, the market sold off sharply. In an environment where only professionals were left to trade, people wanted out at any price. The implication is that a huge in pouring of funds was insufficient to keep the market up. If Friday’s rally were due to the Fed pouring in funds, it should be rejected immediately with a strong gap down, ideally undercutting all of Friday’s recovery. In such an event, the market likely would not recover as it did Thursday and Friday; it would drop and keep dropping. And dropping.

Here is where I try my hand at Elliott wave theory on a 5 minute chart. If wave 1 down went from the 8/8 high to the 8/10 low, then wave 1(iii) goes from 1487.06 to 1431.32. Wave 1(i) is 50% of this wave and wave 1(v) just misses being 23.6%. Countertrend wave 2 up has a nice A=C pattern and wave 2 itself is 50% of wave 1(iii). It is easy to count 5 waves down from the top of wave 2; this would be wave 3(i). Countertrend wave 3(ii) has printed and we are about to start wave 3(iii), which can be vicious its rate of descent. If wave 3 is 161.8% of wave 1, then we hit 1371.83. Betting on a crash is a low percentage bet. Just because the conditions for a crash are present does not obligate a crash to occur. But every now and then conditions are right for a crash; and they are right for a crash on Monday. The patterns are projected forward not backward.

For example in the chart posted above I wanted to see what type of pattern we had for June. So the pattern recognition software took all SPX daily data prior to Monday May 28th going back years and crunches looking for pattern recognition. When it finds a pattern depending on how well it recognized it, it generates a probability for that pattern playing out given previous similar patterns and forecasts.In this case it picked up a pattern with 69%+ probability. You can see the projected forecast for June and July going into August was impressive. If you wanted to go back then I would pick say SPX data prior to January 2007 and see what projection for the months you mentioned. Problem is that previous forecasts have had low probabilities below 60%. It was the one I posted that had a more than usual probability well above the 60% that I thought was worth a post. THE ABOVE CHART IS JUST AN EXAMPLE. PLEASE DO NOT TRADE THIS!