DJIA

open 10,860.03

close 10,812.04 down 48.22

day high 10,873.20

day low10,809.62

today's volume 143,908,331

3mo avg. daily volume 191,853,961

DJTA

open 4,515.63

close 4,508.71 down 6.30

day high 4,538.50

day low 4,506.36

today's volume 22,273,034

3mo avg. daily volume 17,112,784

Two unique instances today, I don't think I've seen volume on the industrial's this low all summer, nor the transport's beat their highs, let alone on the same day.  My studies of Dow Theory tell me that this means absolutely nothing, so I will dwell on in no longer than the instant it took to notice, and the moment it took me to notate here.

The name of the game is competitive currency devaluation.  We get away with it because everyone else depends on us purchasing their cheaply made goods and services to keep their populations fed just enough not to riot.  Therefor we can do what we want, as long as it's measured.  Perhaps one day it will no longer be measured increases in money supply (as if currently about $30 billion stated each month is "measured") but we'll worry about that when it happens.

I steal this thought from David Burgess, analyst from McAlvany Wealth Management, but it's worth sharing.

 

To give us some clue as to the future, I have provided two graphs. One charts the Nikkei 125, Japan’s stock index, and the other charts Gold in Japanese Yen terms. I’m not trying to pick on Japan here, but its fiscal and economic situation is one that closely resembles our own.

Following the breakup of the Japanese mania in 1989, the Japanese Central bank panicked and lowered its benchmark interest rate to 0% by roughly 1995 and kept it at that level ever since. The result, as shown in the charts, has been perpetual deterioration in the value of the Japanese stock market while gold, in yen terms, gained substantially (from January 1995: Nikkei down 55.26%, Gold in yen up 192%).

In our case, the Fed reached near-0% rates at the end of 2008, and since then both gold and the Dow have risen, with gold up 68% and the Dow up 33%. We suspect the reason we haven’t entered into a polarized situation like Japan’s has more to do with the strength in the bond (Treasury) market than anything else. But, given the Fed’s obvious contempt for the dollar, it’s only a matter of time till the bond market buckles under the pressure. That will usher in a near mirror image of Japan’s experience – right here in the U.S. In a nutshell, we have gone past the point of no return here; inflation is now an inevitable conclusion, and in a big way. Stay tuned…

Living in a world of rising gold along side rising equities (on diminishing volume) and dramatic increase in debt purchasing at these interest rates spells endgame to me.  Perhaps he's right, and all we have to see in our future is dramatic inflation, devaluation of currency on a global scale, and a decrease in the "hopes and dreams" standard of living we'd grown so accustomed to.  One thing we cannot argue is that a mild step backwards for US is a couple huge leaps forward for most everyone else, and as this world becomes less US/Euro centric, we will see more and more devaluation battles between currencies.  I'm often asked when someone's going to tell the emperor to put some clothes on, but I doubt that would do anything at this point, anyone who matters is already placing their bets (or already has, and just incrementally adding to them) and the rest are fodder.