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November 22, 2007


Muddy Farmer

O ye of little faith.
Keep buying them dips, old boy (equities, that is). This bull ain't dead yet.

Wait for a clear capitulation (reversal) day like Aug 16, and then buy like the clackers.

What was that famous quote from a broker on Aug 16? "The marked looked into the pit of hell today, got the fright of its life and bolted the other way." Somefink like that.

Here's a Xmas pressie for you: We'll bottom out by Dec 11 (mid December the latest) and mega-rally from there. Maybe sooner. But we need a capitulation panic day first that could take out the low of Aug 16.

Why equities? Still low historic p/e's, global economy sound still with more room to the upside, do I need to say China again?, who cares if Merrill's bonuses are cut to $100K from $200K per employee this year?, US consumers will keep consuming (they've got no choice, the credit addicts they are), low US dollar, and election year in '08 and "the boys" will do everything to prop thing up, and we're only frigging 10 per cent from ATHighs (which was nowhere near a bubble). The money that would be otherwise invested in real estate in the US will come back to equities. Just like the last time they switched asset classes that fueled the dot.com boom.

Don't forget the liquidity from Bernanke's 0.75 per cent rate cut - and for sure another 50bps on December 11. That's gun powder for a rally that will soon ignite. The Fed's working the backrooms calling in favors to turn this baby around and shrug off the sub-slime mess. Lot's of instos waiting to buy at lower levels. And let's not forget the super money in Australia still looking for a home.

It's the perfect storm forming to unleash the mother of all rallies that will astonish everyone. XJO rallied 1000 points in six weeks after Aug 16. Watch that speed record get smashed.


I'm bullish over the swing trade period too. Value needs to stabilise first, I wouldn't be surprised to see some sideways movement for the next 2 weeks.

But lets face it, volumes dropping, and we keep seeing intraday rebounds. If someone put a gun to my head and forced me to go someway, it'd be long.

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