Friday, May 29, 2009

En Echelon Faults, Dominoes, and The Fear Factor

An "en echelon" fault system is one where a succession of faults occur . The fault displacement process occurs sequentially versus simultaneously. Each fault displaces yet has impact on the next fault to form. In essence, it resembles tumbling dominoes. Each one falls individually, yet represents a continuous process of individual unique events.

In prior posts, I have discussed the change in mass social mood that occurs as the expansion cycle comes to closure and the contraction cycle begins. The mass social mood quickly changes from "happy and greedy" to "fearful and angry". In the fourth quarter of 2008 as the worldwide equity markets began to tumble, the "anger factor" kicked up another notch. Fear is running rampant across the world. It's an interesting exercise to look back to the inflection point in mid to late 1999 when the expansion cycle ended and align the major fear events with the DJIA/Gold ratio. Note the significant "fear events" that have occurred since the inflection point was crossed in mid to late 1999. Y2K was the appropriate kickoff to the contraction cycle. Everyone was fearful that the machines across the world were going to stop working and chaos would reign. The technical problem was real, but an aggressive approach was taken to minimize the impact. New Years Eve 2000 came and went without a peep with some real fearful events yet to come.

9/11 had significant impact on the U.S. and still does today. Xenophobia is now rampant and all Middle Eastern and/or Muslims are amazingly considered dangerous people. While no events have occurred in the U.S. since, we continue to have "orange" alerts announced by the Homeland Security office.

The imperialistic invasions of Afghanistan and Iraq engaged the U.S. military and temporarily aroused the patriotic spirit in America. I'm not quite clear why bombing other human beings makes us feel patriotic, but the America flags were flying high. Today, many question our continued presence, yet fear is alive and well.

Last fall, the financial fears kicked into high gear. The complexities of our modern day financial markets revealed the intertwined relationships existing across the world. This fear remains in full force today. I believe that the DJIA/Ratio is ultimately heading for the range of 1-2. This would mean that the Dow Jones Industrial Average will be worth one to two ounces of gold. Today gold is trading in the $950/ounce range. Time will tell. Think for yourself and turn your fears into concerns.

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