Regrettable Retracement

In an eye opening editorial in The Wall Street Journal, Trend Macro's Chief Investment Officer Don Luskin writes of unfortunate similarities between The Great Depression and today. Luskin examines the current governmental policies which mirror those of Franklin Roosevelt and the technical analysis of the stock market, which if correct, signals a precipitous fall coming soon. Take a look at the chart below created by Trend Macrolytics:

The article was the central topic of discussion Monday evening on CNBC's The Kudlow Report with Larry Kudlow. Seemingly sane Democratic strategist Mark Walsh and outstanding former Federal Reserve Bank of Kansas City Chairman and talk show host Herman Cain joined Luskin to attempt to sound the alarm about the road our leaders have us traveling. Take a listen:

Luskin has it right in his article. The subject is one Amity Shlaes covered thoroughly in her outstanding book "The Forgotten Man", a read I highly encourage.

The recent action taken to potentially curb trading practices based upon how countries dictate currency levels, which as Luskin correctly points out is directed at China and their manipulation of the yuan, resembles the protectionary efforts made by Smoot Hawley, which were devastating.

Also, raising taxes in this environment can only be thought prudent by a Cloward-Piven follower, or a strong Progressive seeking government intervention and a retarding of the capitalist system. While many think the government is best equipped to assist the people, we are reminded of the words the great Ronald Reagan, "Government's first duty is to protect the people, not run their lives".

As discussed on The Kudlow Report, class warfare is being used as an economic vehicle to move the country closer to socialism. Regrettably, while the Obama administration is enacting similar policies to Roosevelt, we will likely see similar results as we are retracing the DOW before a monumental drop during The Great Depression.

This is an unnecessary risk that could have catastrophic implications. With respect to the stock market, Luskin is not a technical analyst. I am, and it looks to me that history is repeating itself all over the place. Look out!