DAILY REPORT

(03/25/09)

The Show Goes On

Ben Bernanke and Timmy “the tooth” Geithner are testifying before committees in an effort to defuse the AIG scandal. Good luck with that one! I will have to admit that the committee members are asking tougher questions, but it’s unfortunate that the government has wasted US $3 trillion just to get to the tough questions. Now I wonder how many more trillions will be wasted before they finally incorporate the tough solutions. The solutions proposed by the Department of Treasury with respect to “toxic assets” are just more of the same. The idea is for the tax payer to absorb all the risk, and cost, while a few individuals receive all the money. The money being poured into AIG is being used to pay off people who hold the other side of the derivatives they issued. In a sense it’s hush money that’s going to foreign institutions so they don’t accuse the US of fraud. Not one penny of this money will go to save one American taxpayer´s home from repossession. The same can be said for money going to Citicorp, Fannie Mae, Freddie Mac, and a host of others. No one’s house is going to be saved. That is an illusion.

The problems we face are all a result of too much government intervention. Governments are inefficient and the longer their reach grows, the more those inefficiencies are built into the system. Now in order to protect the taxpayers, we are being told that we need more regulation and government control.[Many keep forgetting that government control did not cause this mess as much as the regulators being circumvented and rendered toothless by lobbying efforts from the banksters….Can you honestly say that if the CFTC or the SEC had done their jobs, and that if the Glass Steagal Act had not been denied, that the US would be in its present mortal state? Ideological thinking sometimes denies objectivity and sometimes corruption is just plain corruption.] It’s the same thing with the credit crisis; we are told we need more credit. In both cases the approach is fatally flawed. The only solution is to eliminate debt and the only real way to do that is to write it off. There isn’t enough income, so they must combine a devalued dollar with write offs. Now the problem is that most of our “bankers” are foreigners and they will end up with the short end of that stick. Right now there is a call by Russia, China, and several other countries for the IMF to come up with an international currency, backed by something tangible, that will replace the dollar as the world’s reserve currency. What they are really saying is that they are at the end of their string and want to dump dollars, one way or the other.

We saw a coming attraction last week when the US Dollar Index posted a huge two day decline when the Fed announced they would be a buyer of last resort in the bond market. I was somewhat surprised by the June US Dollar Indexes inability to rally this week (today’s rally is equal to yesterday’s decline so far) and that tells me that things may be worse off

SUPPORT RESISTANCE

JUNE US DOLLAR 83.81 84.87

82.76 85.91

81.79 86.47

79.78 87.78

than I anticipated. The Fed statement coupled with the “more of the same” solutions all but guarantees that the greenback will bottom in the gutter. Right now the dollar seems to be trading in a range, probably distribution, in preparation for another leg down. When pushed for a de-

cent alternative to the US dollar, I recommended the Canadian dollar ten days ago and you can see that it has broken out to the upside. The truth is that there is no good fiat currency as everyone is turning more and more to the printing press, but some currencies will hold up longer than others. The Swiss Franc, Canadian dollar, and Australian dollar are good examples.

SUPPORT RESISTANCE

JUNE CAD DOLLAR .8140 .8190

.8090 .8300

.7990 .8401

Finally, I would like to end with a few comments on commodities. Every one is convinced that the Fed’s actions will bring about high inflation, hyperinflation, or stagflation depending on what article you read. They follow that with the premise that commodities have bottomed and we are on the verge of a big rally. I don’t see inflation and I certainly do not see hyperinflation so all that’s left is stagflation or deflation. [Ive read statements like this from many interpreters, but still wonder how a currency can collapse (which is assured for the USD) WITHOUT a hyperinflation.] We’ve been experiencing declining prices and a declining economy so that smacks of deflation. I would love nothing better than to see a rally in commodities but I just don’t find that in my crystal ball. One of the reasons I am steadfast in my opinion has to do with the inability of gold to really break out to the upside. That is due to deflationary pressures and those pressures seem to be increasing. Many people associate a declining dollar with inflation, but all currencies are declining in terms of gold. Almost all commodities seem to be declining in terms of gold as well. Gold has been the only decent investment over the last year. That’s deflation. So today I liquidated my long positions in corn, wheat, copper, and sugar and will sit on the sidelines for the time being. If I am wrong I can always get back in, and I hope I am wrong, but I don’t think so.

Dow Theory Analysis SAC

info@dtanalysis.com

March 24, 2009

Some one else’s opinion on gold: [The Aden Sisters are paper pushers. The longer pundits support a day-trading mentality out there, the longer miscreant institutions like the COMEX will be able to rig the price. I am, for one, tired of watching phoney markets and TA explanations for fundamentals when it is all one great Ponzi scheme that only benefits that microscopic segment of the population - those that would destroy everyone else in the country to protect their interests