|MMA Comments for the Week Beginning January 10, 2011|
|Written by Raymond Merriman|
Review and Preview
The “Asset Inflation Express” keeps rolling along. But now it has taken a side track decidedly in favor of equities. This is not so surprising, given the vote by the USA Congress to NOT raise taxes at the end of last year. Although by itself this is not a stimulus as many believe (only a lowering of taxes would accomplish that), it is a positive “animal spirit” added to the economy because it finally removes the uncertainty about raising taxes that has repressed economic growth and hiring since 2008. The business community can now act with more confidence about the future because they know they can now make a workable business plan (i.e. budget) for the next two years. In turn, that encourages investors to invest again in companies (stocks) that can grow due to an expanding economy, rather than in commodities that protect (and grow one’s investment) against a backdrop of political and economic uncertainty.
Furthermore, this confidence in the economy is consistent with the transit of Jupiter through the signs Pisces and Aries. As explained in detail in the Forecast 2010 and 2011 books, this is the time when stock prices soar. The stock market is a leading economic indicator, so when it goes up, it usually means that there is a strong conviction amongst investors that economic conditions are in the process of improving.
Last week, stock markets around the world did indeed go higher. Many soared to their highest level in over 2 years, including U.S., Argentina, and several European stock indices (i.e. German DAX, London FTSE, and Amsterdam’s AEX). At the same time, Gold, Silver, and Crude Oil fell rather sharply, which is understandable when investors see the prospect of tax stability combined with signs of economic growth, and the continuance of historically low interest rates. Stocks have more upside potential in this type of inflationary environment.
All in all, it is a good beginning to a new year. The question is: how long will it last? The very positive Jupiter-Uranus conjunction took place last Tuesday, January 4, along with a solar eclipse. Interestingly enough, the high in many of these stock indices was the day after, January 5. Jupiter-Uranus is one of the most consistent and powerful geocosmic correlates to primary cycles in stocks within an orb of 11 trading days. Of course, the closer to the exact date, the better. So we will watch and see if this is just a temporary correction, or the start of something more ominous, in both stocks and precious metals. My guess is that any decline is just temporary in regards to stocks, and if correct, we could see another powerful advance once it is over. After all, the “Asset Inflation Express” isn’t due to end as long as Jupiter remains in Pisces and Aries, along with Uranus doing the same. But longer-term, Uranus in Aries (2011-2018) may be an accident waiting to happen, due to carelessness, arrogance, miscalculation, and over-speculation.
We are still in the 11-day time band surrounding the 14-year Jupiter-Uranus conjunction of January 4, when stock markets tend to make important highs or lows, and then reverse substantially. It is obvious that if it is to work this time, it will be from a high.
On the other hand, Venus has just ingressed from Scorpio into Sagittarius on January 7, where it will remain until February 4. Since Venus rules net worth and assets like stocks, and since Sagittarius is expansive, this dynamic would lend itself to even higher equity prices. That doesn’t mean there won’t be corrective declines along the way, but it suggests the trend will be more up than down. That could be supported by Mars and the Sun forming a harmonious sextile to Jupiter on January 13 and 17 respectively.
“Mr. Geithner said that with the current debt level of $13.95 trillion, the U.S. could hit the $14.3 trillion limit (the current debt ceiling approved by Congress in February 2010) as soon as March 31, but more likely at some point before May 16. He called for lawmakers to raise the ceiling to an unspecified level by the end of March.” – Wall Street Journal, Friday, January 7, 2010.
The decision by Congress and the White House to not raise taxes is being greeted by many as equivalent to another economic stimulus. However, this is not true because it doesn’t really add any money into the hands of the populace. All it does is remove the specter of the government taking money out of the hands of some individuals (i.e. the wealthy) and using it to create and support programs that benefit those in need (well, that is the intention anyway, but the reality as to where most of that money goes is usually and unfortunately very different).
Nevertheless, the decision is greeted with relief because it now creates more certainty amongst businesses – especially small businesses – which now feel a little more secure about hiring without the fear of losing more monies through the myriad of tax increases that were being proposed over the past two years. More people being hired, and more people getting wage increases will stimulate consumer spending, which will lead to more hiring and even higher wages - at least for two years. But in what must be considered one of the most stupefying moves ever, Congress decided to make the tax vote valid only until the end of 2012. In other words, the very issue that polarized this nation so greatly, gave rise to the tea party rebellion, and was probably the most direct correlation to the stagnant economy of the world over the past two years, will come back for its sequel in 2012. It will be just in time for the election of 2012. What was the White House thinking by making this a 2012 campaign issue? How can you unify a country by resurrecting the very issue that nearly tore it apart in 2010? You can’t and you won’t, and now that will be one of the top stories of Uranus square Pluto, 2012-2015.
So let’s enjoy the temporary break and economic boost while it last. But be careful of falling into the delusional trap that the nation’s (and even the world’s) debt-related problems are over. After all, there are two steps to rebalancing the budget and resolving the debt crisis: you have to bring in more revenues, which the permanent (er, temporary) tax rates will do for the next two years, and you have to reduce spending so that the outlays are less than the receipts (the amount of money) you bring in. The first step has been done, and the markets exploded to the upside in response, which is good for collective confidence. But unfortunately, it will only be temporary.
And the second step – reducing spending - is far from being agreed upon. In fact, a huge showdown is coming up over the debt ceiling limit, with many Republicans demanding huge spending cuts before they will agree to raise this debt cap.
What happens if they don’t agree to raise the debt limit? According to the Wall Street Journal and Tim Geithner, “… even a short-term default could be ‘catastrophic.’ It would drive up interest rates and push down the stock market and housing prices….” There. They finally said it. Default. The very thing we have been addressing for over two years now, since Pluto went into Capricorn (2008-2023). The three D’s: deficit, debt, and then default. It’s coming to show near you very soon, in fact in March 2011, in Washington D.C. Right in time for the final Jupiter-Pluto square of February 25 and Jupiter-Saturn opposition of March 28.
Well, I do think they will get past it this time. After all, Jupiter and Uranus will be in Aries into early June, and although the “Asset Inflation Express” may need to stop for repairs and refueling, it will probably get back on the tracks and roll again with a full head of steam. But like everything else they have done over the past decade, Congress and the White House are just “kicking the can down the road,” to the Uranus-Pluto square of 2012-2015. That’s when the train may get derailed, unless 1) Congress and the White House makes these tax rates permanent so businesses can actually enact long-term plans that include full time (and not temporary) hiring, and 2) actually start to cut back spending, rebalance the budget, and make progress towards a sensible economic strategy that reduces the national debt. With transiting Pluto in Capricorn also in opposition to the USA Venus and Jupiter conjunction in Cancer (classical bankruptcy aspects, if not careful), their work on this matter will not be easy. It will be difficult to compensate for the last decade’s fiscal irresponsibility that saw the nation’s and world’s debt accelerate sharply. That is also why Gold prices are likely to remain in a bull market for several more years, even though there may be a 15-30% decline along the way. Even delusions have a way of affecting the perception of reality. The problem is that is it is happening too much now with Jupiter and Uranus conjunct in Pisces, the sign of unrealistic hopes, wishes, and fantasies. We need action, not misdirection. Maybe with so many planets entering cardinal (action) signs from late March through early June, we will get it. Well, that’s my Piscean wish.
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