Only leaves, or the first snowflakes?

The winds are blowing colder:

The share of foreign buyers (“indirect bidders”) plummeted to 5.8pc, from an average 25pc over the last eight weeks. On the Richter Scale of unfolding dramas, this matches the death of Bear Stearns. Rightly or wrongly, a view has taken hold that Washington is cynically debasing the coinage, hoping to export its day of reckoning through beggar-thy-neighbour policies.

It is not my view. I believe the forces of debt deflation now engulfing America – and soon half the world – are so powerful that nobody will be worrying about inflation a year hence.

This is precisely what Prechter was talking about in the 2004 interview. While the Fed and Wall Street would love to inflate their way out – and that’s all the 2003 – 2007 “recovery” of the stock market has been, pure price inflation – they simply can’t do it. The sneak Sunday rate cut, combined with Tuesday’s probable shock super-sized cut, are only intended as temporary measures intended to hold up the markets long enough for the banks to exit their problematic long holdings and position for a period of decline.

If these heroic measures manage to push the Dow up to its 200-day moving average, that would probably be a very good time to exit your equity positions and move into BEARX. That’s probably the best run bear fund and I don’t recommend options because of the time-decay.