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Financial Apocalypse

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The global financial crisis of 2008 was the worst crisis since the 1930’s. Wall Street honchos and Washington “leaders” tell the public that no one could have predicted it. That apparently is the excuse for not having taken steps to prevent it. But it’s a lie.

 


 

THE TRUTH BEHIND THE GLOBAL CREDIT CRISIS; REVEALED!

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There was one analyst, Bert Dohmen, who warned at the beginning of 2008, that starting in September, 08 the global financial markets would teeter on the brink. On 2007, he wrote a book, entitled: PRELUDE TO MELTDOWN, which predicted the current crisis. At the time, Washington regulators were oblivious to the problems which Bert Dohmen predicted would engulf the global financial system. 


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           BEWARE OF “WALL STREET WISDOM”

By Bert Dohmen- January 24, 2012

The U.S. is currently running unsustainable deficits, which are just a few years away from producing a crisis. However, they are still being considered more of a nuisance by politicians, like mosquitoes, rather than something that could cause an economic collapse. When the politicians finally awaken to the ominous facts, it will be too late. Currently, they consider global warming a greater threat.

For 2012, economists are very cheerful in the U.S. Forecasts of 2.5-3.5% GDP growth are heard. Therefore, they conclude that the stock market should do well. Beware!

The published GDP growth numbers are inflation-adjusted. The inflation number used is much too low. If actual inflation were deducted from nominal GDP growth, we would have a negative GDP growth number. Do these economists ever go grocery shopping to see what real consumer inflation is?

Anyone who listens to economists and acts on those forecasts risks extreme pain. There is not one crisis that the economic establishment has ever foreseen. Do you know any economist who in 2007 or even 2008 predicted the greatest global financial crisis since the 1930’s? We did!  But the economists at the Federal Reserve, including its chairman, continued to insist even in early 2008 that there would be no housing crisis and no “contagion” of the mortgage mess to the rest of the credit markets. Yes, those were the famous words of Ben Bernanke, who is considered the foremost expert on the causes of the Great Depression. Of course, economists didn’t predict that Depression either. More.


A NEW YEAR, but old CRISES will continue!

By Bert Dohmen- January 8, 2012

Is a meltdown of the European financial markets possible in 2012? Will China’s real estate plunge turn into an economic crisis? The bulls will say “no,” that the authorities wouldn’t let that happen. However, for me the current progression of the crises is very similar to the US in 2008.

In early 2008, I rang the alarm bells predicting a 1929 event for the fall of the year. (Please see my book, FINANCIAL APOCALYPSE). My conclusions were based on technical analysis of the major markets, including commodities, and the clues provided by the credit markets. When a credit crisis develops, looking at P/E ratios and other fundamentals is a waste of time. A credit crisis envelops all assets.

Wall Street economists disagreed with my view, citing the fact that the Federal Reserve started cutting interest rates in 2007, and that a loosening by the Fed “has always produced bull markets.”

Well, as we know now, that word “always” didn’t work in 2008. As it turned out, the forecasts in my book written in late 2007, PRELUDE TO MELTDOWN, came true.  More..


EUROPE: THE MERKEL-SARKOZY AGEND and YEAR-END PROGNOSIS

By Bert Dohmen- December 5, 2011

The meeting between the leaders of Germany and France last weekend apparently ended in agreement. The two leaders will try to convince heads of the EU member nations at the Dec. 8-9 European Union summit to agree to some kind of compulsory fiscal and economic cooperation.

The problem is that currently there is no mechanism for member nations to have fiscal discipline. If these countries had their own currencies instead of the Euro, the markets would take care of the “discipline” by selling those currencies. However, because they use the Euro, they can just relax and engage in unsustainable deficit spending to support their welfare states.

Last week the finance ministers of the Euro-zone agreed to a proposal to recycle central bank loans through the IMF. That would supply  as much as 200 billion euros ($270 billion) to fight the crisis. Germany wants to get the IMF involved in the crisis which the IMF so far has declined to do. The US is 27% of the IMF. That means the US taxpayers are not only on the hook for unsustainable US debt, but now also for the European mess. More..    


A European Crisis Followed by a China Crisis

by Bert Dohmen, Nov.26,2011. Editor of the Wellington Letter

The stock market was following a bullish script until five days ago. The S&P 500 and other major indices had formed a bullish “pennant,” which usually leads to an upside breakout. But this time it didn’t. On Nov. 17, the pennant was broken to the downside, a very unusual behavior. The reason: Europe’s crisis.

As analysts, we become even more alert than normal because when an important pattern breaks to the opposite direction, it’s usually meaningful. Remember the false downside breakouts in the indices on Oct. 4? That day we said a false breakout usually leads to a sharp move in the opposite direction. It happened!  But there is never certainty and therefore you must wait for the market to confirm that.

We had been looking for a good year-end rally. The question now, will the Euro-crisis kill that rally or is the recent decline just a short term fake-out?

The situation in Europe is going from bad to worst. On Wednesday, November 23, 2011, an auction of government bonds in Germany basically failed. About 35% of the 10-year bonds offered by the government were not bid for as yields soared. The German central bank had to buy the rest. This was a shock to the financial markets.

This has very serious implications for Europe and for the world. Germany is one of the strongest countries in the world and certainly the most financially responsible in Europe. If there is a shortage of buyers for those bonds, what will happen when the other European countries come to market? They have huge financing requirements over the next several years. More.. 

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Dohmen Capital Research group was founded in 1977 by Bert Dohmen as an economic and investment research firm. Our mission has been to provide serious investors and traders with the most profitable investment and economic advice, available anywhere, via subscription services. The advice will always be unbiased and will not have any conflicts of interest. We don’t hesitate to give sell advice, or to sell short, when our work calls for it.

The analysis is designed to help you make the right choices and decisions on how to invest your money and prosper over both the short and long-term. Serious investors will find a wealth of profit-making investment and economic guidance. Bert Dohmen's long time experience in the markets will be working for you.

The firm’s services have achieved the highest acclaim. Dohmen Capital Research offers the most highly respected and sought-after advisory services for investors worldwide. The first publication was THE WELLINGTON LETTER, which has achieved numerous awards of distinction. It quickly made its mark on Wall Street with often totally contrarian forecasts, such as the 20% prime rate in 1980, the roaring bull market in gold and silver, followed by the 20 year bear market, and a decline in U.S. T-bonds of over 40% in the late 1970’s among others.

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MORE ARTICLES OF INTEREST

 

THE EURO-CRISIS RESUMES

by Bert Dohmen, Sept. 30,-2011,Editor of the Wellington Letter

The three day rally early in the week got the bulls all excited again. But if you are well versed in technical analysis, you know that counter-trend moves usually last 2-3 days.

There always has to be a background “excuse” for a rally. This one was a convoluted plan to allegedly resolve the Euro-crisis. The plan was publicized on national TV.  We noticed that it was a rehashed proposal that was dead on arrival several months ago. We called it “ridiculous.”

The plan was so complicated that it looked like something designed by a major Wall Street firm. Eventually these instruments blow up.

Obviously, the Germans see through this and will reject it. German finance minister Schaeuble called it “Bloedsinn,” which means “non-sense, or stupidity.”

The brief attempt to revive this “stupidity” at least served to produce a stock market rally of three days, which may have been the purpose of the whole maneuver.

The approval of the German parliament for expanding the European emergency fund (EFSF) this week really doesn’t bring a resolution of the Greek crisis any closer. In fact, we believe that the major European countries have already given up on Greece.

A Greek default is now inevitable and will result in restructuring of the debt. This means that the holders of Greek bonds, primarily the large European banks will have to write down tens of billions of dollars of bonds. And that is the problem, not Greece. This is why the global stock markets are responding immediately to any news coming out of Europe.

You can be sure that the focus in Germany, France, and other Euro-zone countries now is to build a wall around their domestic banking system, protecting it from a Greek default.

We predict that Greece will eventually return to its former currency, the Drachma, perhaps by year end, and will then renegotiate its debt. More..

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Bert Dohmen says: “PREPARE FOR THE NEXT CRISIS"        

by Bert Dohmen, Sept. 8,-2011,Editor of the Wellington Letter

The president gave another talk accompanied by the top union leader who earlier this year said on national TV that the president better support the unions because they are the ones that put him in the White House. The president announced that the Transportation bill should be extended so that 4,000 people won’t lose their jobs. He urges the passage of a temporary extension.

In the meantime, the consulting firm of Challenger, Gray & Christmas Inc. says that the announced job cuts of large US companies are now 47% above those in August 2010. Yes, they amount to a hefty 51,114.

It’s evident that the next big stimulus will be massive infrastructure spending to keep the labor unions from going bankrupt. Keeping 4000 jobs when the economy needs 250,000 new jobs per month is not even a drop in the bucket; it’s a drop in the ocean. It has nothing to do with economic stimulation.

Economists are slowly realizing that the economy is in a recession, but they can’t make a sudden change in their forecasts. It’s all about “saving face,” not about making an accurate forecast. I have no axe to grind, no conflict of interest. Wall Street economists have already reduced their GDP growth forecasts by 70%. But they have not reduced profit forecasts. Amazing! More..

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“BEWARE OF THE AUTUMN”

by Bert Dohmen, Sept. 6,-2011

That was the headline of the August 28 issue of the acclaimed Bert Dohmen’s WELLINGTON LETTER. The economic numbers released since that time confirm that advice.

On Sept. 2, we got the employment number:  Zero jobs were added! It was the first time since 1925 according to one commentator. Expectations were for 80,000-100,000. Bert Dohmen advised his clients the prior day:  “…if our feeling of a bad surprise comes true, and only 20,000 new jobs, or even fewer, were generated, it would shock the markets.”

Bert Dohmen, author of the prescient book written in 2007, PRELUDE TO MELTDOWN, and FINANCIAL APOCALYPSE (2011) which he says is the road map for the next 1-2 years, has been writing since May that the economy is in recession. In fact, according to many numbers, we never even got out of the 2008-2009 recession.

As we go into autumn, Dohmen’s work shows that the 2008 crisis in the US will now be experienced by Europe, and then by all the emerging markets. Europe will be the trigger again in September. The politicians and policy makers in Europe aren’t any more pro-active than those in the US.

 


MORE PERFECT MARKET CALLS!        

by Bert Dohmen, Sept. 2,-2011,Editor of the Wellington Letter

Wall Street analysts say:  “No one can time the market.” However, one analyst, Bert Dohmen, editor of the acclaimed WELLINGTON LETTER, does it on a regular basis. On August 17, the exact day of the high of the bounce from the August 8 low, Dohmen advised in his SMARTE TRADER service to sell short again. The DOW plunged 419 points the next day.

Five days later, on August 22, he issued an advisory to clients:

1    STOCKS: “Close out all short positions…”

“Our indicators show that the major indices are just about back at the plunge lows of early August, but that selling pressure is substantially lower.

This market is set up for a rally. With sentiment so negative now, it’s obvious that the short side is “over-crowded.” And we never want to be on the over-crowded side of a trade.”

2.       GOLD:  “Gold hit $1900. This is a good time to take profits. Sell!”

What happened the next day?

1.       The DOW gained 313 at the high.

2.      GOLD plunged over $61 at the low, and the following day plunged almost $100.More..           


PHASE II OF THE GLOBAL CRISES 

by Bert Dohmen, August 8,-2011,Editor of the Wellington Letter

We have warned our clients since early May that a new global crisis was dead ahead. Here are the front page headlines of our WELLINGTON LETTER over the past three months:

The May 9 issue headline:  RETURN OF THE DOUBLE-DIP

The May 30 issue headline:  IMPORTANT TOPS!

The July 19 issue headline:   FINANCIAL CRISIS—PHASE II is

 BREWING

The July 30 issue headline:  THE NEXT “PERFECT FINANCIAL STORM”

If you are not a client, ask yourself if the above could have saved you a fortune. Our clients were short. Is this a “soft-patch, a buying opportunity, and all that non-sense?

Here is an EXCERPT from our August 6 SPECIAL BULLETIN:

On Friday, the market soared at the opening, with the DJI rising over 170 points within the first 15 minutes. The alleged reason: the Employment report was allegedly “better” than had been expected. That was ridiculous. The real reason: intervention by the Fed’s PPT to slap “lipstick on the pig.” More..   


“SLASHING” ECONOMIC FORECASTS

by Bert Dohmen, July 20,-2011,Editor of the Wellington Letter

The majority of analysts now say that the stock market just has a “soft patch,” which is temporary and provides another great opportunity for buying stocks. The “soft patch theory” was also used by these people in 2008 just before the meltdown, and we saw the “soft patch” theory used again the past five months to explain the renewed economic weakness.

But the stock market has been under “distribution” since mid-February. Distribution is when the big, smart money sells to the unsophisticated, myopic participants in the markets. The evidence is that every decline in the market since that time has occurred on rising volume, while the market rallies have occurred on declining volume. The financial sector has been declining since its peak in mid-February. You can’t have a bull market without the financial stocks participating.

The Washington debt ceiling scare is like a Kabuki theatre. All the participants on both sides get a lot of free TV time. That brings more financial contributions. A debt default is impossible. There is more than enough money coming into the government every day to pay interest on the debt, social security, benefits for veterans, etc. Furthermore, Congress has many alternatives to get out of this.

So don’t fall for the story that the stock market is weak because of the debt ceiling. There are much more serious problems, like European sovereign debt, China’s imploding credit bubble, etc. Of course, once they announce some type of agreement in Washington, the market will have that one last pop to the upside. But that may not last more than a day or so. It may be your last opportunity to find the exit.SUBSCRIBE


THE MARKETS AND THE ENDING QUANTITATIVE EASING (QE2) IN JUNE

 by Bert Dohmen, June 25,-2011

The $600 billion dollar QE2 program of the Federal Reserve is ending in June. What will the consequences be for the markets? Let’s look at history.

Last year when the first QE program stopped, it was followed by the stock market plunge in May and June, along with commodity prices (except for the precious metals).  T-bonds soared as a flight to safety.

 The flash crash of May 6 last year was the beginning. Will we have another flash crash? Not likely. However, when the Fed takes the foot off of the accelerator, liquidity is withdrawn. And that’s bearish.

Look at what happened in early 1937 when the economy was recovering and the stock market had had a big upmove for several years. The Fed felt they could stop stimulating. When they did, the DJI plunged 50%.

Yes, when you are on drugs, it hurts to stop, so the experts say. That also applies to stocks.

A member of the FOMC, Richard Fisher, chairman of the Federal Reserve Bank of Dallas said this about current Fed policy. He is making sure he will not get the blame for the bad consequences of QE2 and potential QE3. He said in a speech:

“I do not, however, feel that further monetary accommodation will speed the process. It might well retard job creation, should it give rise to inflationary expectations, or worse, imply that, having, suffered the slings and arrows of popular and political contempt as we went about doing what we did to save the financial system, we have now been compromised and become a pliant accomplice to Congress’ and the executive branch’s fiscal malfeasance. I am wary of those risks. More...


PREDICTING THE FUTURE                      

by Bert Dohmen, June 22,-2011

Years ago, a wise person said, “predicting is very difficult, especially when it comes to the future.” Well, in our business, people expect us to predict. Let’s see what we predicted about six weeks ago, now that we have the benefit of hindsight. This is what we wrote in the WELLINGTON LETTER of May 9.

WHAT’S AHEAD:

We now see important trend reversals in all the markets:

1.  STOCK MARKET:  This got to be a very “crowded trade,” with hardly a bear to be found. We wrote that last time. We now have sell signals on the most popular sectors of the market. The pundits tell you that the “unemployment claims” on May 5 shocked the market and caused the decline. No way. This is big money selling ahead of the ending of QE2. The end of $7-8 billon daily injection of money into the financial system will cause a painful hangover.

WELLINGTON LETTER subscribers know that this “distribution” (the smart money sells to the naïve money) has been going on for about two months. The new highs in the major indices seen during that time were manipulated, as seen by the low volume on rallies and the higher volume on the days of declines.

2. THE U.S. DOLLAR:  Bearish sentiment on the dollar has gone to an extreme rarely seen. Everything but the funeral has occurred. Shorting the dollar seemed to be the low risk trade for every analyst appearing in the media. It became a very “overcrowded” trade. Now that will reverse.

Just a few days ago general expectations were that Europe (ECB) would raise interest rates. Now the head of the ECB denied that. He has obviously seen the specter of a potential “double-dip” recession. Together with the increasing sovereign debt problems in Greece, Portugal, and Spain, the Euro is once again a high risk currency. The first step is always to “reschedule” the debt, which means postponing the maturity. Thereafter, when more money is required, the only solution is to “restructure” the debt, which is basically a benign default. That means that the creditors will have to write off hundreds of billions owed them.

Portugal just got a $115 billion loan, which is huge for such a small country. They think it will tide them over for a few months. So Portugal will be next, then Spain. Bigger than the direct debt problem to those countries is the problem of debt “restructuring,” i.e. write-downs of tens of billions of dollars by the large European banks. The banks will have to replenish their capital. As a result, the Euro should now be shunned.

If we are right, once the dollar rally gets going, there will be billions of shorts in the dollar to be covered. More...


SIGNS OF A MARKET TOP

by Bert Dohmen, May-16-2011

Our work strongly suggests that the disguised “distribution” of stocks since mid-February is now becoming more visible. This is so reminiscent of the top in 2007 when the big, smart money was exiting while the public was being lured into the markets with false stories of eternal prosperity.

Last week we saw sharp “momentum” declines in some of the hottest market areas. The biggest loser was silver which plunged about 31%. Gold was down 7%, oil is down about 17%. Basic materials and agricultural commodities also plunged, along with many of the popular stocks. The only question, is just another “warning shot”, or the real thing?

Our last issue (April 18) we headlined:  WARNING FLAGS ARE FLYING”

We continued in that issue: 

The latest money manager survey shows that there is a huge change on their outlook for the emerging markets. In December, 71% were bullish; now on 51% are bullish on the emerging markets. The survey was made in the first two weeks of March. That was before the Japan catastrophe.

However, domestically there is a virtual capitulation of the bears. They have given up on the market ever going down again. Ever! That’s typical of market tops. Investors Intelligence, which monitors the sentiment of investment advisors, shows in their latest survey that the percent of bulls has increased to 57.3% from 51%. That’s a huge jump and now is at levels seen at important market tops. And the bears have plunged to 15.7% compared to 23.1%.  That gives you a difference of 41.6 between bulls and bears, which is well above 40, which is considered the “danger” zone.

It’s reminiscent of January 1977 when we started the WELLINGTON LETTER. At the time, Investors Intelligence showed only 3.8% bears, a record low. My indicators showed that an important top had formed. I wanted to put my prediction of a bear market in writing and started this publication. Because there were virtually no bears to be found, the Wall Street Journal couldn’t be choosy and put an item about my forecast in the “Heard on the Street” column. Thank you, Gene Marcial. And that’s what launched my business as the DJI started a 15 month bear market. It was painful for the bulls.  More...


THE MOST DESTRUCTIVE TAX:  INFLATION                           

by Bert Dohmen, April-28-2011

 “Real” wages (inflation adjusted) have been declining for 30 years or more. The labor unions tell us this while making the point that the rich have prospered at the same time. That the only thing we agree on with them. However, their insinuation is that the rich have taken the money from the laborers. The truth is that the inflationary policies of the Fed have made many people poorer, while the smarter people have learned to protect themselves and even profit from the inflation. Yes, inflation is the great, silent tax.

The Fed continues to shovel an unprecedented amount of liquidity into the financial system but that is doing little to fuel economic growth, except in the way of prices for consumer necessities. The Fed must hope that eventually some of that money will be used to grow businesses and jobs.

But apparently there are no inflation concerns at the Fed. Federal Reserve Vice Chairman Janet Yellen said the increase in food and fuel costs will only have a temporary impact on inflation and don’t require an adjustment in monetary policy. 

Bloomberg quotes Yellen:  “The surge in commodity prices over the past year appears to be largely attributable to a combination of rising global demand and disruptions in global supply. These developments seem unlikely to have persistent effects on consumer inflation or to derail the economic recovery and hence do not, in my view, warrant any substantial shift in the stance of monetary policy.” More...


BUBBLES!

by Bert Dohmen, Wellington Letter April-12-2011

The enthusiasm of money managers is extraordinary. One person known to many investors just predicted the S&P 500 to go to 2200 in the next 2-3 years. That would be almost a double from here. Others see no problem in the index going to 1550 this year. Perhaps they will all be correct. But isn’t that what we also heard at the bull market top in 2007, the same time we were predicting the global financial crisis in 2008?

Look at the new bubble mentality. It’s reminiscent of 1999, just a few months before the monumental internet bubble burst. Now we have Facebook valued at $60 billion (its just a website). The firm of CLSA (www.clsa.com) points out that Groupon is valued at $15 billion (it sells discount coupons online), ZYNGA is valued at $9 billion and sells “imaginary products for games on Facebook, which allow people to build imaginary worlds.”

How appropriate! Imaginary worlds! When AOL bought Time Warner, we wrote in these pages that this was the greatest sales job in history, a “website” buying the largest entertainment conglomerate in the world. That was also at a bubble top. More...


BUYING OPPORTUNITY or a RALLY TOP?

by Bert Dohmen, Wellington Letter March-14-2011

Enthusiasm for stocks is very high. Hedge funds now have the highest exposure to equities since 2006. In the media, the bears seem to have become an extinct species. Of course, over the shorter term, excessive liquidity injection by the Fed overcomes all of these “overbought” signals as new money is injected on a daily basis. However, that is destined to end in June. You can bet that the bulls will start ringing the cash register before that. Will their selling find any buyers? Or will it be like May of last year? 

Cyclical bull markets last about two years. They usually double a major index during that time. The current up-trend is now two years old. Some of the indices have doubled. Doesn’t that suggest that the upside is severely limited and that the risk is much higher than the potential reward?

The major market indices are now in the process of breaking down, forming potential intermediate term tops. It’s still a little early to conclude that the rally is all over. There is still money on the sidelines, waiting for better prices on which to buy. However, by May the bears should be in charge.

With the great manipulation of the HFT programs, the market no longer behaves as over the past 50 years. Now most of the big trading operations work on a 1-5 day holding period for many trades. They sell upside breakouts short and buy the downside breakouts, all just for very short term trades. In addition, when support levels are broken, as on Thursday, there is big selling by the overleveraged hedge funds, some of which use up to 10:1 leverage. Their “long term” is 5 days. More...


IS JAPAN’S RECORD EARTHQUAKE BULLISH OR BEARISH?

by Bert Dohmen   (March-11-2011)

The strongest earthquake in Japan’s 140 year history of recording quakes just hit Japan. Most of the damage is from the tsunami, not the quake itself. How will this affect your investments? Perhaps this is a good time to discuss some of the cause/effects in the markets.

The first instinct for an investor is to sell short the casualty & property insurance firms because of the upcoming multi-billion dollar claims. The fact is that after a catastrophe, these companies do very well. Insurance firms have reserves against claims, because that’s their business. After such an event, insurance firms see a surge in new business as firms increase their coverage. This might be a good time to buy the big reinsurance firms which plunged on March 11. More...


MARKET OUTLOOK

OUR CURRENT VIEW, by Bert Dohmen   (March-1-2011)

The weight of the evidence suggests that a rally top has been made for the near term. As active traders and investors, we would not go bargain hunting too early. If the 1295 level on the S&P 500 holds, there could be another bounce. If it’s penetrated on a closing basis, watch out below.

For a good bottom, you must see real concern amongst investors, followed by genuine fear. That will take some time to develop. We will keep our valued subscribers to the trading services (SMARTE TRADE for stocks, and the FEARLESS INDEX & ETF TRADER for ETFs) informed on virtually a daily basis. There will be excellent trading opportunities, both long and short.

THE SHORT TERM : Excerpt from the WELLINGTON LETTER Feb.28 issue

On Feb. 23, we wrote:  The character of the market has now changed to the bearish side: rallies on low volume, followed by declines on high volume. The consensus of analysts in the media is that this is a bargain hunting opportunity. Yes, we should have a bounce, but it may be brief and weak. That will be followed by a steeper decline. We don’t want to go looking for bargains.

Remember, in October last year we wrote about “a change in the character of the market.” We noted that stocks rallied even on the worst news. That gave a tipoff to the upcoming market rally. Now we are starting to see the first signs of a change to the opposite. But such transitions don’t occur from one day to the next. 

 More...


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World in Chaos

Bert Dohmen with

Jim Puvlava


 

China: Boom or Bust?


    

Bert Dohmen

 Double Dip Recession


     

   Bert Dohmen :    One-on-One with Dan Mangru


   

The Economy: with Dan Mangru


   

GOLD


     

Currency markets


   

Technical Analysis


   Jim Cramer on Bert Dohmen, Video

V


Deflation Today, Hyperinflation Tomorrow.

 


No Time to buy and Hold