The Great Depression Online

Great Depression Online Archive Issue:

Forces More Powerful than the Federal Reserve

Great Depression Online
Long Beach, CA
November 19, 2010

Inside This Issue You Will Discover…

*** Don’t Be a Fool
*** Credit Market Inflection Points
*** Forces More Powerful than the Federal Reserve
*** And More

Don’t Be a Fool

Anyone who has ever bought and sold stocks knows that markets are hardly predictable…they rarely do what you expect.  What’s more, they often do the exact opposite.  Still, to the perceptive observer, while stock markets don’t appear to be predictable…they do appear to be almost predictable.

Take a chart of a stock’s price movement over time, for example.  It looks so simple…buy low, sell high.  Any idiot should be able to understand this.  Nevertheless, while it may be simple, in practice, it’s not easy.

If you stare at a chart long enough while squinting your eyes, you’ll see what appear to be patterns.  Some call these wave patterns…and attempt to trade them.  Sometimes trading wave patterns works; other times it doesn’t.  Because for every wave pattern there’s an exception to the wave pattern.

~~~~~~The Heirloom Collection~~~~~~

In times past, wealth was something you possessed, held close, and passed from one generation to the next.  This wealth often took the form of jewelry or gems – treasured for their inherent value, and cherished equally as tangible connections to family, friends, and tradition.

Heirloom jewelry had another practical purpose as well.  It could be kept close to the heart and close to home, but travel the globe easily and discreetly.  A beautiful, wearable, and portable store of wealth.

The tradition lives on today 


You see.  Stocks go up and then they go down.  So, too, they go down and then then they go up.  But sometimes they go down and then they go down some more.  For what’s absolutely the right time to buy at one time is spectacularly the wrong time at another.  And what’s spectacularly the wrong time to buy at one time is absolutely the right time at another.

What we mean is, buy stocks if you will.  But don’t take credit for the profits you may garner.  Likewise, don’t kick yourself for the losses you give up.  

Most importantly, be patient.  Stocks have gone nowhere for the last decade.  By our estimation, the next big bull market run won’t begin for at least another six years – or perhaps longer.  In the meantime there’ll be plenty of bear traps and sucker’s rallies to separate a fool from their money.  Our advice?  Don’t be a fool.

Credit Market Inflection Points

While the stock market may get the most investor excitement, it’s the credit market that can really boom and bust an economy.  No doubt, credit markets are mostly boring most of the time.  But occasionally they reach an inflection point.  That’s when they explode.

Perhaps now an inflection point has been reached. Unfortunately, we won’t know for sure until after it has come and gone.

Interest rate cycles span long periods of time…often they last between 25 and 35 years.  U.S. Treasury yields reached a peak in 1920 and then slowly slid until the mid-1940s.  Then, they rose again – along with inflation – and Franz Pick famously declared that “bonds are certificates of guaranteed confiscation”.

What Mr. Pick didn’t realize at the time of his declaration is that an inflection point had been reached.  For in early 1982 yields again ventured over the mountain and slid down a soft slope to historic lows in December 2008.  Since then, yields have skidded along the bottom…and the Federal Reserve is determined to keep them there.

But can they?

Forces More Powerful than the Federal Reserve

On November 3rd, U.S. Treasuries may have reached an inflection point.  That’s the day Federal Reserve Chairman Ben Bernanke announced he would be using debt to buy $600 billion in debt.  On that day 10-Year Treasury yields hit a low of 2.56 percent.  Yesterday they reached a high of 2.96 percent.

The theory goes that buying treasuries will reduce interest rates, which will encourage borrowing and spending, and will thus stimulate the economy and reduce unemployment.  Yet since launching this new policy the cost of borrowing has gone up; not down.  In fact, it has gone up 15 percent in just a little over a week.

Perhaps the rising interest rate cycle has begun.  If that’s true, then the cost of money may not be this cheap for another 60-years.

Borrowers are counting on the Federal Reserve to keep interest rates down.  But could it be there are forces at work more powerful than the Federal Reserve?

We think market valuations of money and credit will ultimately overcome the central banks price fixing schemes.  We watch intently.  For a return to an economy that rewards capital formation, as opposed to consumption, is long overdue.

Hopefully the integrity of the currency is not first totally destroyed.


M.N. Gordon
Great Depression Online

P.S.  If you’d like to get your most important gift buying done now, well before the maddening rush of the holiday season is upon us, you need not look any further.  I’m referring to artistically crafted 24-karat gold necklaces and bracelets – in carefully assayed, uniform weights.  These beautiful pieces are available once again, and I encourage you to take a look at these gifts that are at once beautiful and a convenient way to give the gift of wealth.  You’ll find all of the details online at

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