This Stock Uptrend Will Eventually Give Way To A Substantial Decline

We are all finding it tough to trade the equity market at this point in time. Despite rising share prices, earnings reports are coming in one after another that shows the harsh reality of today’s economy. The majority of them affirm that revenues, cash flow, earnings, and even dividends are down. Unable to raise the required revenues from corporate, personal and property taxes, local, state and national governments are breaking contracts, unable to remedy massive budget deficits.

In yesterday’s Daily Report, I did not shirk my responsibility to tell the truth.

We believe this uptrend will eventually give way to a substantial decline, one that will be aided by a bevy of Black Swans, ultimately unnerving even the most ardent of Bulls. But that moment has not yet arrived, and until then, all we can do is try to pick up a bit of performance here and there, keeping our risk to a minimum.

I understand that Eric Sprott, who is one of the top investors/traders I know, agrees. Only Eric goes further in opining the United States is in the midst of a depression. The case, which he argues in his monthly “Markets At A Glance” article, is impressive.

http://www.sprott.com/Docs/MarketsataGlance/July_2009.pdf

I have always had a high regard for Eric Sprott as one who thinks and speaks his mind outside the box. If the Toronto Stock Exchange or Ontario Securities Commission gets in the way of his beliefs, so be it. He’ll tell them, and you.

Heck, if Bill Cara gets in the way of Eric’s beliefs, he’ll say so. Better still; he’ll direct his subordinates to threaten a law suit against me if I didn’t immediately retract one or two of my blogs on what I perceived to be Eric’s control of uranium prices. All I stated at the time was what Wall Street and Bay Street believed, which was there was no market - nothing in fact except a price listed by Eric, or more to the point by the many junior uranium producers that Eric’s corporate finance team had funded.

So did UBS, Morgan Stanley and Merrill Lynch threaten to sue me. I thought, what’s new? Powerful people don’t like guerilla traders like me picking away at their reputational credibility. However, when confronted with crisis, there comes a time for all of us to choose what road to take. In every case with these particular threats, I decided it was me who hadn’t taken the high road, and I backed off. There is a lesson there for the younger people in our midst. Don’t let your ego stop you from moving forward in life.

Shortly after dealing with the Sprott ultimatum, I happened to meet Eric at a gathering of hedge fund managers and potential clients. Eric and I were introduced by a person who was unaware of the background. “Bill and I are acquainted,” he replied with a smile. “Yes, of course, how are you?” I said.

http://www.sprottfoundation.com/eric.htm

http://en.wikipedia.org/wiki/Sprott_School_of_Business

Like me, Eric has strong beliefs that the price of gold will rise substantially in the future. It does not matter whether the cause is deflation or inflation. It’s just that the governments of the world are printing more money than real wealth is being created in the economy. Prices that are driven higher or lower because of debt rather than economic demand and supply will cause the price of gold to lift.

http://www.youtube.com/watch?v=3V-_0qAjRzQ

I feel we are on the verge of higher volatility.

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