For those of us living in North America, tomorrow (November 26) is Thanksgiving Day. For many the day includes the time-honored tradition of going around the dinner table and asking each guest one simple question: “What are you grateful for?”
Well, for those “feasting” at the mainstream financial table, the answer to that question is three-fold, starting with:
ONE – We are thankful that the worst of the U.S. banking crisis is “behind us” and the pillars of finance are back on solid ground. Here, a November 25 Wall Street Journal op-ed piece writes: “The most important thing is that all economic indicators suggest the remedies [i.e. government stimulus bills] have worked…. ”
Not so. Despite $13-plus TRILLION in bailout money, the main benchmark index for the U.S. banking sector — the KBW Index — is still more than 60% BELOW its 2007 peak. Further more, on page seven of the November 2009 Elliott Wave Financial Forecast (EWFF, for short), our analysts present a labeled close-up of the KBW that shows a major, trend-changing event underway. In EWFF’s words:
“The Index violated a [key] trendline, confirming the start of a major leg… this is a strong signal” that the credit crisis is not yet over.
TWO — We’re thankful for an “across-the-board” recovery in the world’s leading stock market.
Last we checked, “across-the-board” implied a coordinated rally over the entire range of all asset classes. YET — as EWI president Robert Prechter reveals in his November 19 Elliott Wave Theorist, this is NOT the case.
On page one of this riveting case-study, Bob presents a chart of the Dow Jones Industrial Average versus the DJ Transportation Average, Small Caps, Utilities, REITs, and more since July 2009. Bottom line: while the DJIA is rising to yearly highs, other stock indexes are not — which creates a powerful “divergence” among the market “generals.” In Bob’s own words:
“This type of divergence is the most traditional of all technical conditions warning of distribution.”
THREE — We’re thankful that, even when all else is uncertain, at least we can sleep easy knowing that the money we put into our banks is backed by the federal government.
The last time this statement was true, Harry S. Truman was the U.S. President. Here, the November 19 Elliott Wave Theorist presents the following chart of Treasury Holdings as a percentage of US Chartered Bank Assets since 1952.
As Elliott Wave Theorist editor Bob Prechter himself writes: “Today, banks hold federal agency securities, backed mostly by mortgages, mortgage-backed securities, plain old mortgages they financed themselves, and a few business loan contracts.”
Meaning: the welfare of banks is intrinsically tied to the welfare of the U.S. housing sector.
Be Thankful: There’s still time to position yourself for the most memorable event in U.S. economic history. Get the complete story today.
