The Dow/ Nikkei Time Shift
Purple is the Dow, Blue is the Nikkei. But thats not the graph he showed me. The graph he showed me was the Nikkei over full historical range, and the Dow Timeshifted back ... lookie..
It was a pretty impressive thing to see the lineup between the two. I don't really understand the reason for him showing me this, however, it was 2006 and I told all my friends to head into Gold. One actually took my advice, but he blew all his money on drugs. The rest kind of shrugged it all off and went to real estate.
Based on the 5 year timeshift the Dow has more downside potential. I told a friend of mine to liquidate the Mutual fund - if anything, with two kids going to college I felt it was a good call.
The reason I lined up the Nikkei to Dow today was to call out that even if the Asian markets will follow European markets - the government of Japan, after lowing the prime rate to effectively zero percent - lost their chance to tune and control the markets. In our case, the Federal Reserve Bank may still be able to manipulate and control certain aspects of financial sector volatility. The Greek 140 Billion Dollar bailout that supposedly will have the effect of stabilizing a major european country - has too many similiarities to American structured bailouts - and such packages are authored by lobbyists. When those who are responsible for financial sector trouble - see to it that the governments that are forced to withstand the force of their mistake - respond by simply giving them money - it communicates a serious disconnect in polity.
The key thing that I take away from the Nikkei is the fact that the Japanese lost their ability to leverage markets and control them - and they spiralled down and out of control. The Dow could still do this.
If the Nikkei Timeshift is any indicator, it could hit 6,700 again. But what is different from Japan - is an essential character of the American people. If they believe they're coming out of trouble - they'll work harder to make it happen. Japan tends to be very regimented... "It is your duty to get on the internet". That kind of thing. Americans tend to be more experimental. We may yet be able to work our way out of the coming downside. The main thing is to watch for a trigger event. The spikes of 2008 downward are completely unprecedented in the history of the markets... the Bush Republican Administration before us saw an immense, catastrophic crash in the world financial markets due largely to this disconnect - this sense that lobbyists are the better to control government. The consequences of getting this wrong were severe. The incoming Obama administration stabilized markets - but if there gains the perception that it was a band aid - and the essential controls to the markets are lost - American Markets will tailspin.
I am not making predictions, I am just working it out. And not getting paid for any of it. Don't worry, I'll make it all pay somehow.