Merriman Market Analyst

Review and Preview

Note: Due to European lecture tour, this column may not be available until Sunday for the next two weeks.

It is the bane of all Financial Astrologers. Inevitably, when the market terrain becomes very uncertain as prices fall much lower or rise much further than almost anyone expected, the Financial Astrologer is flooded with the same question: “What should we do with our money now?” Never mind the advice given two, three, or even four years earlier when these very markets offered such exceptional investment opportunities. I am of course referring to the advice given in this column as far back as 2002-2004 when currency and precious metals prices were so low against the U.S. Dollar. At that time subscribers and readers were encouraged to start balancing their portfolio with investments in currencies other than the U.S. Dollar, as well as add 5-10% exposure to precious metals, and/or other commodities. Now that the Dollar is making historic lows, the Euro currency historic highs, Gold at its highest level in 27 years, Crude Oil and grains at historic highs, the long-term advice is still the same. I see this trend continuing well into the next decade (see “longer-term thoughts”). The only difference is that the requests for financial guidance are much more numerous now and the cost of these investments is much higher now than they were when the advice was first given. It is not like financial astrologers are always right, especially in the short-term trends. But when you see a major storm coming, and you alert others of it, the human nature of the herd is to wait until it hits before taking action. But of course it is too late to capitalize on it to the extent that would have been possible when the alert was first given. However, some people do heed the advice when it given early on. They take the opportunity when it is truly a “golden opportunity,” when no one else pays attention to what is developing. It is a mark that separates successful investors and traders (risk takers) from the herd. And for that reason – and for those remarkable individuals - financial astrology is a wonderful forecasting tool that has the potential to be of great value, when used correctly. As the famous banker J.P. Morgan once stated in the 1920’s: “Millionaires don’t use astrology. Billionaires do.”

Last week did indeed see many commodity and currency markets soaring to new highs, a long-term trend that could continue as long as Saturn and Pluto are in the 19-year waning phase (2001-2020). Gold indeed reached a 27-year high as the December contract closed at $750.00. Silver is once again approaching $14.00, up sharply from the 11.00 low mark of August 16. The Euro currency is nearing 1.4300 against the U.S. Dollar for the first time ever. Crude Oil was well above 83.00/barrel again during the day on Friday. Wheat made another new all-time high above $95.0/bu. On Friday, and the November Soybean contract traded in double digits last week, a new contract high. More on this in the “Longer-Term Thoughts” section.

Most stock indices rose last week too. In the Pacific Rim, the Hang Seng of Hong Kong, the NIFTY index of India, and the All Ordinaries of Australia all soared to new all-time highs on Friday. Japan’s Nikkei made a new high for this primary cycle too, as did the Dow Jones Industrial Average and the NASDAQ Composite in the United States. However in Europe, the equity markets were noticeably weaker. Only the DAX made a new multi-week high. And none of the indices we track were even close to their all-time highs of the summer.

Short-Term Geocosmics

We will now focus on the third and final passage of the Jupiter-Uranus square this year, which takes place on October 9. This should be an interesting one because it occurs just before the Mercury retrograde (October 11-November 1) and the third passage of Venus conjunct Saturn (October 13), thus making the whole period a critical reversal zone. Jupiter pertains to the principle of exaggeration and Uranus to the principle of sudden, unexpected events. Very sharp price swings can happen around this time. If the markets rise, you get a sense of irrational exuberance, or a “blow off” that is usually followed by sharp declines. We can see this setting up now in the currencies, grains, and possibly precious metals and some equity markets. If markets start falling in to this period, it can be with a sense of hysteria and financial panic. In the two prior cases of the Jupiter-Uranus square this year, crude oil made important lows. The first was the low of the year, when prices fell to 49.90 on January 18 (the square occurred two trading days later, on January 22). Jupiter, along with Neptune, are the co-rulers of Pisces, which rules crude oil. We also note that the major geocosmic indicator of last week Mars moving into Cancer, September 28. As noted in last week’s column, “This will conjunct the natal Pluto, oppose the natal Sun, of the Federal Reserve Board chart (created on December 23, 1913). We can anticipate reversals in interest-rate related markets at that time.” Treasuries made new multi week highs on Friday, and then sold off a bit into the close. Was that it? Could be!

Longer-Term Thoughts

As stated in the introduction, I am getting a ton of mail lately asking what to do: what to do about real estate, precious metals, stock portfolios, etc.

Let’s start out with the Saturn-Pluto cycle. It topped out with the opposition in 2001-2002. That was the astrological commencement of the new commodities cycle, which should be strong until these two planets form a conjunction in January 2020 (give an orb of 18 months). This downside of Saturn-Pluto’s cycle is typically when interest rates rise, taxes increase, and federal deficits expand. The economy becomes sluggish and it is not such a good “investment cycle.” The name of the game is to “protect your capital,” through savings or hedging into commodity or non-dollar based assets. This contrasts to the waxing phase of this Saturn-Pluto cycle (1982-2001), when the name of the game was “capital appreciation” through investments in things like equities.

So why are equity indices still rising? Because the 45-year Saturn-Uranus cycle is still heading towards its opposition (2008-2010). Once it peaks and starts to wane, I think you will see that bubble burst too, while commodities still soar. The center of this forthcoming “Cardinal Climax” is August 1, 2010. It doesn’t involve just Saturn and Uranus, but the T-square from Pluto, and all in the first degrees of cardinal signs, something we haven’t seen since 1930-31. Look for the world to substantially change its direction in regards to financial markets and economic trends within 18 months of that date.

There are so many things to discuss about this period that it will take a book to cover it all. In fact, that is the subject of the “Forecast for 2008” book. A special section will be written on Pluto in Capricorn: “The Good, Bad, Worse, and then Redemption.” Pluto will be in Capricorn 2008-2023. In the past 200+ years, equity markets have made all-time highs as Pluto entered cardinal signs (like Capricorn). But then they suffered huge losses while still in that sign, to their 72 and/or 90 year cycle troughs. Most of the time these indices have lost 80-90% of their value from the highs that preceded it.

You can see the pattern starting to set up now. The FED is lowering interest rates to protect the economy from recession. This is inflationary in almost all respects except… the housing market and wages of the middle class. The result could be a huge credit crunch. You have prices rising sharply in commodities and basic needs like food. So either interest rates rise to fight this, or liquidity dries up due to tightening of lending practices and higher taxes (local, state and federal governments need your money to get by). Small businesses fold up because they can’t afford rising taxes to businesses.

So where do you get money to pay for the rapidly rising costs of these goods? Not from the equity in your home anymore, because it’s going down in value. And as more and more people desperately try to sell their homes to get cash, the price goes down even further, even in the midst of an inflationary movement everywhere else. Yes, equities go up too – for awhile. That is, until people have to sell whatever assets they can to get cash to pay for these goods – and at a time when baby boomers are just starting their retirement, and starting to withdraw monies from their IRA’s and other retirement accounts. These are the same accounts that they had been heavily putting money into via mutual funds and stocks for the past 25 years. Now they will have to reverse that behavior, and take it out.

Sure, the economic reports show inflation is under control, and gives the FED reason to keep rates low for now. But that’s misleading. Basic needs like food and raw goods are rising sharply, while home values are falling and hourly wages are stagnating or jobs are disappearing altogether to overseas as companies seek to increaser their profits by “outsourcing.” And I haven’t even begun to get into the possibilities of Saturn now moving into Virgo for the next two years, a period typifying workers’ revolt against management and their excessive bonuses.

Pluto in Capricorn: it’s going to be a whole new world. For many, it may be like living through their worst nightmare - and then redemption. All this between 2008 and 2023. The peak, and then the valley, and then recovery. History does repeat itself. But fortunately, we can learn from history too, especially history that correlates with planetary cycles.