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[TTHQ Staff]

Gene Inger's Daily Briefing . . .for Monday March 24, 2008:
Good weekend!

 Napoleon . . . is purported to have said: "never get in the wayof any enemy, who is destroying himself". In the 'great deleveraging battle,' of thispost-turn-of-the-Century 'reflation' fight; the antagonists came to greater loggerheadsthan monetarists thought likely. Partially, because rules changed midstream while the gamewas being played, it became a very challenging confrontation; with (as forecast) thehousing bubble bust just a microcosm of bigger issues; as we analyzed that to be over twoyears ago.

 Maybe, if Iomit humility for a moment; one of the least noticed of our calls (which few of thebankers or lenders seemed to notice) was the most important: that in 2006-'07, early-on,money would first slosh over to Wall Street from Main Street's housing bust, before thoseboys -buoyed by far fatter wallets- would feel a pinch. Later they would.

 It was thisconcept; of rotational money seeking a place to go, that restrained caution towards themarket during 2005-2006; because we thought bears seeking immediate follow-through ofhousing by stocks, were premature; ignoring the big money rotation. At the same time; ourtheory held it was inevitable this would eventually come home to roost everywhere; whichis why the 'end 2006' Outlook for 2007 (published in a few independent journals whoreview us too) called for a 'massive rotational distribution'.

 Because thatconcept was thus freely circulated; but hardly anybody gave credence; instead obfuscatingwith belligerent proclamations of 'permanent prosperity plateaus', in a new world order,and 'free market capitalism' (which it actually wasn't; as having no policy and oversightis neither free, market-oriented, nor fair; just complacent and detached, or flat-outignorant); I got fairly feisty about making our case; to be of help. (That can be attestedto by all who know I was already then doing mostly audio; very little video; and planningto diminish text; but ramped it all up all because of believing we were facing 'the mostchallenging forthcoming distribution' in my humble career.)

 And that wedid address. Unlike Napoleon, we tried to offer a 'force majeure' (well it is French, whyshould I say 'ceasefire or truce') to our adversary; to save their blood we were convincedwas going to be spilled. So spilled it was; far more than big Indexes.

 Quantitativeanalysts . . . replaced field marshals and generals; always a mistake in warfare; whichtrading is. The mind must control movement of troops (money), and in that regardmathematical algorithms had already (remember Long Term Capital Mgt.) beenpreviously-discredited; because they can't fully factor-in emotion; contagion and thatother aspect carefully being reassembled; which happens to be one word: 'trust'.  

 On the roadto 'Wall Street's Waterloo', the Gilded Age elite partied like no tomorrow. They had thatpart right. (I can prove that too; as Ferrari waiting lists are vanishing as fast as fastas Delta and Southwest jets from the active fleets; as well as new upscale 5^thAvenue shoppers, as the Dollar firms, and brokers and traders are shell-shocked.) Onceagain the 'quants' were running the show; while those actually running the firms tended tosilence, ignore, or fire (if they even piped-up with protest) 'risk' managers. It was aprescription for disaster (if not broad insolvencies; we saw and we analyzed it).

 In 1814 and1815 there were two sieges of Paris; in 2007 and 2008; two sieges now seen of New York(and now one in Chicago's commodity pits; which we also forecast by noting for a monththat commodities were in a 5^th wave -often final- upward cycle). Equities aremore stable as we identified several days ago; because the pieces of the puzzle forstabilization if not recovery itself (which, by definition, must come later), are at leastbeing implemented. It's been our consistent belief (unlike whiners or moaners you may seeon TV) through all this, that the Bernanke Fed was studiously studying the battlefield,not ignorant at all of the risk; and not complacent. But the Fed knew all the limits inthis gargantuan mess; so had to move decisively, but with deliberate care (I proved thattoo; via having identified the Reg W waiver discovery in Spring of '07. I said fromthat point that the Fed knew the magnitude of the temblor approaching us.)

 Bernankeis our Napoleon!   

And he won't berelegated to ignominious defeat (better hope not; or the Nation will). He let enemies ofthe proletariat (who think they are his constituents, craving beads tossed to the massesfrom time-to-time while the global elitists preach trickle-down, which can work only ifAmerica 1^st remains the priority; not allegiance for foreign and spuriousorganizations that do not have the actual best interests of our people, or in a sense thefree world paramount, as if it was a sort of permanent Mardi Gras parade), get to thegates of Paris (in this case Main Street driveways and then the Wall Street caverns, thatseems to have made Wall Street a lagging rather than leading indicator, but really isn'tso because internal market action deteriorated as projected long prior to the peaking ofthe Senior Averages)..let this happen; (mostly Greenspan did it, and Bernanke stayedstudious), before revealing his position when time to 'strike' came.

 Actuallybetter financial military strategy doesn't exist when preceding commanders (Greenspan andCongress) allowed skirmishes to proceed 'without' being engaged. They indeed turned theother cheek; probably as it was all great prosperity for them, even though brokers,bankers, speculators, realtors, and builders, knew it could not possibly be a permanentlysustainable state of affairs. Consumers: the house ATM.

 Evolution

 By the timethat extraordinary Napoleonic phase of European history wound-down; Europe's very backbonechanged; political frontiers were revised; Italy and Belgium suffered war, as baroqueVienna (where my family hails from) eyed an international Congress. Before the currentphase of the housing (core issue of which even SIV's are mercenaries fighting on behalf oflarge power-brokers) morass is escaped from (recovery); the face of not only real estate;but the enforcement of financial oversight hegemony will be seen. This type of governancewill last for years -decades actually- and that's just how it goes; it doesn't matter ifyou like it or not; or approve of what the astute Congressman Barney Franks proposes; evenif he's stonewalled by globalists or other radicals. Most normal Republicans andconservatives concur with him (that crowd that is so vocal are not normal politicians oreconomists; they are either slightly fascistic or mired in an agenda that favors globalcorporations who in the long run will only prosper if we the people actually do too.(Actually that's why we concur with not all, but most of his points; as do manyRepubicans). A vanquishing army determines its benevolence. And those who do not thinkgovernment will exact a toll; don't get it.

 Is this toocomplex an alliteration? Probably not. Let's make it simple; as there's too much news tocover on a pre-holiday report, let's say this: the fashion of the masses of the bygone era(bling and conspicuous consumption) is gone or winding-down for good reason. Thankfullyskirmishes of court jesters (candidates?) pale by comparison with a realization thatissues are skirted; the economy is what matters; and the world does return to our fold, asthe Dollar firms, and circumstances attempt to normalize.

 Dailyaction . . . has occasionally noted that mostof life is not black, nor white; but shades of gray. The perspective of investors is oftenlike brave captains and majors in the field of battle; not commanders. They see the trees,because they're groveling at the bark; but not checking the forest. That's understandable;everybody has a role.

 NapoleonBernanke has to look at the forest; to engage the enemy at an opportune if not certain,point, with the best chance to score a decisive victory. He has done that; and almost allhe can without other agencies (and he's commandeering them for the fight too) beingdrafted to the cause 'for the greater good'. Conditions were favorable, in this week justpast (and the prior one too), for our forecast irregular rebound shots.

 Cartoonistshave reacted to the battlefield conditions much as the accompanying little drawing in theJournal. Much like Danish cartoons depicting the modern barbarians, it doesn't tell youthe circumstances of the juxtapositioned forces, unless you've studied it. Having done soand clearly (for a year) forewarned (Gene 'Paul Revere' Inger as not recognized bythis Continental Congress, but that's o.k.; they can debate minutia)  American investors what was coming (at leastingerletter.com members), we humbly are pleased to have saved lots of money for folks fromthose Laundromats eagerly or aggressively trying to wring every nickel out of theirpockets during developing bears.

 However; thestruggle by America, Great Britain; and the French Republic; against an assortment ofinterlopers with moneybags filled by the largesse of faded empires; has not ended.Translation (if needed): we are at war; the battlelines are drawn; enemy is at or insidethe gates (those that are in our houses literally; the outcome remains fluid for theshort-term. However the building blocks of solution are increasingly visible and while thetimeframe for resolution is absolutely not going to be instantaneous, at least transparentevidence is coming together (coalescing) to suggest conceptual 'gelling'.

 Summary: that means there is more damage as outlined lastnight (brief summary is next; new members may visit the archives below for the fullversions and videos) to be seen (including bank balance sheets; much of which is stillsuspiciously perilous); but the banks, the hedgers (next shoe to drop?), and businessoverall, knows what is necessary to do. That most businesses were concerned (they saw thisbefore most of course; and this go-round were relatively cash-rich), is why we called forthis mostly as 'Chinese Water Torture' or deli 'Salami Decline' rather than a crash, overthe year. (Salami Decline: where they slice-off your portfolio one slice at a time, buteventually get the whole .. enchilada. All the while the bulls yak about buying and neverselling; or worse ascribe 'value' based on rearview mirror earnings, unrelated to thefuture. It may be so but they don't know so; as wouldn't be quick in a long & deeprecession.)  

 Reinforcingmy previous comments; the commodity markets have broken. Inflation as leads to deflation;as leads to a bottom; as leads to reform; political pendulum swings and recovery(irrespective of which Party wins; and McCain has a double-digit lead it should be notedby one of the latest polls); all of which allowed reflation's halt just a tad inside thegates (close call if we're lucky); with the hordes turned-back. As I note it's especiallyimportant in wartime. However, as in the French Revolution; or the U.S. one for thatmatter (and no, I don't consider myself Paul Revere; but yes, if my views had beenproperly aired by those who think avoiding candor somehow helps investor classes; well,there might have been a few more people able to avoid this debacle). I realize they're allcandid now (well mostly); but always so after the barn is emptied.

 We need torealize that the kind of 'wild oscillations' characterize a thrashing trying to determineif a bottom is being constructed. Odds remain (outlined at ingerletter.com). However(reserved) dimmed (fortunately) by virtue of the valiant strategic thinkers at the NY Fedand Washington (yes, when they finally got into it; even as predecessors developed it inthe first place; solving little to emphasize other than relating to reforms noted).Emphatically expected the past two week's roiling and rolling upside bias; and ensuingchurn, with crosscurrents alive and well in the final minutes Thursday, given Expiration;long weekend and S&P rebalancing. Many variables next week (more).

 If (reserved)there is a bearish counterattack soon; it will be crucial to study market behaviorassociated with that coming skirmish, to help ascertain what lurks ahead. I think at best,we can envision (forecast in fairness reserved for members) duration of the struggle, likeany ongoing battle, is subject to revision; as quick reaction 'surges' don't always set afuture pace. This flanking maneuver by the Fed (who may actually make money on some of thepaper they're absorbing incidentally) is like the surge in Iraq; it buys time to assessstrategy. That is what they Fed did since last Spring too.

 Having arguedfor the better part of a year, that the false bullish bravado by analysts, or pundits, orglobal fanatics; was aimed at buying time for industry deleveraging; it's our view thatthe easy money on the downside (it's never easy; but we mean majority in the race to'zero') is behind. By no means is the (reserved for members); for that reason combatduration assessments remain open-ended. If that means we argue that the recent two-weekspre-Expiration and Triple Witching upward affair, projected by ingerletter.com asirregular but occur, hasn't affirmed sustainable lows; then so be it.   

 And then there is the 'cluster bomb'possibilities of earnings and downgrades looming here in the U.S. during upcoming earningsperiods; sprinkle that in Goldie's porridge. 

 
Bottom line: macro signs as interpreted; including (updated slightly) the following bullet points:

Fed has power in'unusual & exigent circumstances' to expand emergency lending venues;

Primary issueremains not sharp 'lending issues' or even liquidity, but of financial solvency;

Deleveraging remains 'a b*tch', as unpleasant(secular) scenarios rotationally evolve;

  Further points: nearer-term issues tocontend with beyond above; some with macro aspects:

Pyramiding mountains of compounding debt havenot ended; facilitation assisted a bit;

Extreme volatilityoscillations are indicative of a market at great pains of instability & risk;

Possibility commodity rallies 'blowing-off'at least temporarily (5^th wave patterns) was call;

· (A dozen more 'bullet points' provided on full version toingerletter.com members).

MarketCast (intraday analysis & embedded DailyBriefing audio-video). . . remarks continue guidelines to catch short-termswings. Forecast a multi-hundred point rally in Tuesday's market; and shorted early upsideefforts on Wednesday. Thereafter long in another of sequential short-term longs or chop.Rally risks diminishing (as outlined to members); implosion may resume; stay tuned duringnext week's video remarks too.

Basically we thought they'd nuke the shorts; get a 500-1000point Dow rally last week and this week; then move-on to the next outlined stage. Mortgagebacked securities issues notwithstanding; bank balance sheets remain (as persistentlychallenged).  

We retain our macro (forward-roll adjusted) June S&P1599 short-sale; irrespective of interim short washouts & long-side plays; asprojected and outlined these 2 weeks.

Very unusual: having thoroughlyforewarned of the commodity break; of inflation very shortly moving towards Deflation (as always historically is how it works; simply put); a comment lastweek about a (hardly reported by media) Chinese market 'crash' that I forecast months ago; with the clear expectation that the newlongs (yesterday after a 400-point Dow rally that triggered absurd 'the bottom is in'comments by so many) in our view should be (tending to behave as suspected in the days andweeks ahead).

 Our psychological strategyin 2007 was to be off-margin; cash-rich; debt-free; and the opposite of what most on WallStreet actually did. We wanted to have our head clear I said then, for the eventualwashout, rather than be swimming crazily with masses of panicked hordes (worldwide; sincewe also argued 'decoupling was an impossibility').

 Bits &Bytes . . . provide investors ideas in a few stocks, often special-situations, butalso covers an assortment of technology issues (needed for assessment of general factorsin tech overall, or as compelling developments call for) that are key movers in the NDX,SOX or S&P, plus ideas ingerletter.com thinks might merit further reflection.(Individual stock comments generally are provided in the video overviews only; once inawhile I'll have some thoughts here, where something's particularly emphasized or oftechnical nature necessitating some discussion. Increasingly most all is via video.)

Should mention PURE Biosciences (PURE). No news yet;however, shares as we suspected, did a 'v bottom' the other day, hovered at consolidation(resistance) and in the late going broke-out. The near 42% gain on Thursday concludes awild reversal; and I believe made (eye-opening) PURE the largest percentage gainer of anytoday. It is relevant to see the pattern; higher volume washout below support, and thenthe disbelief (lower volume) of the recovery until it accelerated. Ideally (movesoutlined).

Long-range WiFi

One aspect that is technical is the growth of WiFi whileeveryone generally 'assumes' only the newer WiMax can do what Intel has achieved. That'swhy we want to share a bit we gleaned from MIT, where they reporting new Intel WiFi radiodevices stated to drastically increase the effective range of 'bridged' routers. (Commentsfollow.)

How do they get the range out of WiFi you ask? Most wirelessrouters routinely wait for acknowledgment from other nodes on the network before sendingadditional data, drastically reducing bandwidth and range. The new Intel routers (detailsexplored just a bit); we'd think American school systems in many states qualify for thisinexpensive high-speed wireless connectivity program. (All infrastructure should bestate-of-art as opposed to piling-onto antiquated systems in-place. Otherwise we're notworld-class.)

--

In summary . . events continue reminding us ofrisks Allied fighting forces face, given continued attacks on free peoples, by elementsincluding organized terrorist forces in various countries. A world addressing terrorthreats continues, as domestic issues absorb us more while as we also focus on MiddleEast and World War III avoidance.

 Our 2007 view had been that we're in anill-defined recession; finally recognized as it evolves. As to whether it descends intosomething akin to post-railroad debacles way back in the 1880's; all year what we thoughtthe Fed worries about; never talks about;   actionsaffirm they desperately engaged to stabilize fluidity of functionality. Hasten to add,whether depressing or realistic (per a 3 year forecast here of the housing break combinedwith 'junk debt' investment avoidance); stocks eventually do get interesting. Gilded Ageglobalists unflaggingly failed to see the era's transition, or detect growing public moodof increased populism; essential reform calls; and low taxes. Actually it's a conservativemantra; that the radicals are claiming is liberal. Being smart; engaging in fair freetrade; or having reasonable policies; is not isolationist; it's common sense.

 McClellan Oscillator finds NYSE 'Mac'fluctuating via intervening bull-bear shuffles on the NYSE & NASDAQ. Reflex ralliesallowed 'risk off-loading' tactics; as 'Street' debt holdings aren'tinvestment grade. Multi-month efforts evolving. (Reserved part.)

 Issues continue including oil, terror;China (includinglatest Pentagon hack spying; a type of action that if we were financially sober wouldprovoke warranted redressing), Pakistan; certainly allthe Middle East, Europe; funny money NY economics. Noted for ayear: includes international dependencies, as outcroppings of a radical extremistglobalism which is neither pro-American nor conservative; even as true conservativessupport fair trading; constrained spending, and not squandering our US crown jewels.

 Thirteen months ago I called this an 'accidentwaiting to happen'; commenting that it is affirmed historically that long-duration periodsof free money (Gilded Age mentality) do not create permanent liquidity; but givethat illusion while the opposite transpires. There will be various trading swings; through2008. We scalp these, while retaining our (adjusted) position short from June S&P 1599 (rolled), which continues clearly torepresent the belief (pattern forward discussion reserved for our members).

 Since early 2007 we noted economic conditions moresimilar to post the Gilded Age ending in 1929, the panic of 1907 (hence our call for thestart to be the 'panic of 2007' last year at the end of that Gilded Age, and it's NOTcoming back (party over whether they like it or not, as they didn't or only now 'start' to'concede' there's needed rehab). It is not a structure entirely resolved by rate cuts,stimulus, 'miracles', arrogance of a few who think they have influence; although all canhave short-run (more follows).

 Long-run: 'new' adults in charge will enable betterfiscal and public policy, than what passed for prudent economic or money management in thepast era. We played the upside so long as sensible (Oct. 2002 - early '07); look forwardto doing so yet-again, in a macro perspective. To the case of recent 'cobbling-out' of anevolving bottoming structure (sorry unfair to paying members to explore this further).Warned a stronger Dollar would ease the inflation insanity (the one they distort); that'sa clue to keep an eye on in the days immediately ahead. Finally kicking-in a bit.

 Enjoy the holiday!

 Gene

 Gene Inger,
Publisher

 

~Gene Inger’s DailyBriefing™ (The Inger Letter daily analysis on www.ingerletter.com)
~Gene Inger’s MarketCast™ (Intraday audio updates emphasizing S&Pfutures and market action)

Updatesabout 10 minutes after: the opening bell, 10 a.m. ET, noon, 3 p.m., with a nightly finalissued at approximately 8 p.m. In times of volatility, an additional interim report updateis frequently provided.

Rangeof Inger & Co. service details (current as of April, 2008):

GeneInger's Daily Briefing™. .postednightly by 9 pm on www.ingerletter.com.Analysis and chart forecast of short-term market conditions. Posted with text andstreaming video each evening. Focuses on events of significance, plus potential monetaryor psychological impacts & focus on next day action.

Gene'sDaily Briefing™. . availableat $159 quarterly, at our site or via the California office. AmericanExpress, Visa & MasterCard accepted; and are auto-renewed quarterly, unless otherwiseinstructed by the subscriber. 'Inger Seven' at $26 weekly provides access to thatweek's Dailies only (one-time trial, which is from Saturday-to-Saturday only). ASecure Server is used. If preferred, DB's may be ordered through our office byphone or via mail. Daily Briefing subscribers select user name / passwords at thesite; while 'Inger 7' is issued automatically. Subscriptions are licenses to reador view; not redistribute.

 (MarketCastmembers receive complimentary Daily Briefing access. Daily Briefing only members, mayupgrade to full MarketCast 'flash-based' video intraday service at any time. Tech supportstaff doesn't assist upgrading; please email ca.office@ingerletter.com or call Lynn orLaura at our California office. As of 2008 allcomments are digital video with charts; the era of audio-only comments is historical.)