I just received an e-mail from a colleague that I feel is worth sharing. It reads in part, "How 'bout that inaugural speech by Bush? Ho, ho, GEO here we go! [GEO is an acronym for Global Economic Order] If he hasn't flat out told everybody how it's gonna be then those who missed it must not know the finer points of the American English dialect."

Yes friends, the Global Economic Order is here and according to the details of President Bush's inaugural address on Thursday, he fully intends to expand America's role in bringing American-style democracy to the far reaches of the globe and at the same time integrating one and all into the global economy. Indeed, GEO here we go!

Bush fired the first salvo of warning when he said, "The best hope for peace in our world is the expansion of freedom in all the world. So it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny [read separatism] in all the world."

There you have it, in so many words Bush has pledged to spend the remainder of his term of office expanding globalism and using military force, money, or whatever other "force" is needed to expand the global economy and to stamp out the resistance movements of those who oppose GEO.

Of course this speech was also bad news for the perma-bears as it signals that the globalization process isn't complete yet. As I have stated many times in the past, until the global economy is fully integrated (which is to say, until Bush completes his task of "expanding freedom in all the world") then the global financial markets, including the U.S., will remain afloat and the super bears can forgot about their hoped for mega-crash and Great Depression happening anytime soon. There is still much work to be done in the globalization process -- that Elitist hope of a truly unified economic and, eventually, governmental system -- and until it is complete the central banks will be more than accommodating in the task ahead when it comes to keeping thing afloat.

Elsewhere in the inaugural address Bush pointed a finger at critics of GEO when he said, "Some, I know, have questioned the global appeal of liberty -- though this time in history, four decades defined by the swiftest advance of freedom ever seen, is an odd time for doubt. Americans, of all people, should never be surprised by the power of our ideals." Notice his reference to "our" ideals. By his use of "our" he of course means the chosen Elite that are spearheading the movement toward a fully integrated global economy. Bush completed this section of his speech by stating, "Liberty will come to those who love it," which has chilling, if not sinister, undertones to say the least.

Bush added later in his speech, "In a world moving toward liberty [read GEO], we are determined to show the meaning and promise of liberty." Hmm, that should be interesting to see what he meant by the "meaning and promise" of liberty. For now suffice it to say that Bush has signaled his full commitment to completing the long-term task of globalization that was speeded up considerably after that fateful day of Sept. 11, 2001, earlier in his presidential term.

Turning our attention to the immediate-term market outlook, the latest financial news headlines continue to reflect excess bullishness, no doubt a spillover from the November-December rally peak. One such headline read, "Global equity markets get ready for the bulls" while another read "U.S. draws foreign investment boom." According to this article in the Financial Times, "Foreign investment in U.S. assets hit its highest for nine months in November as investors signalled relief at the clear-cut result of the presidential election."

The article went on to describe inflows into the U.S. of $81 billion, up sharply from $48.3 billion in October (when everyone was bearish and no one wanted to touch the stock market in true contrarian fashion). Foreigners bought $14.5 billion in U.S. stocks, up sharply from $3.5 billion the previous month and the highest inflow since May 2001, according to the Times. I believe this new-found optimism for U.S. stocks will be corrected some more before the latest market correction bottoms.

Many of the old reliable market indicators and inter-market correlations that used to hold true before the 30-year cycle peaked in 1999/2000 no longer hold true. We've discussed this shift in recent years since then, and with the 20-year cycle peaking last fall it's conceivable that even more of the old reliable market "truisms" will no longer be as reliable in coming years. One such instance of this is the put/call ratio, which in recent weeks hasn't been very reliable. I believe that in order to keep a close pulse on the market from here on out it will be important to sift through the indicators that work and toss out those that don't. My stable of indicators still includes the daily and weekly totals of Federal Reserve securities lending volume, which has still proven its validity even with the peaks in the longer-term cycles. And of course, the dominant short-term and longer-term moving averages will continue to be of valuable service.

According to another recent Financial Times article, returns at hedge funds drop below 10% for 2004, underperforming their conventional competitors such as mutual funds. The article went on to state that "dedicated short bias was the worst performer, falling nearly 8 percent." After reviewing the individual stock trades we made last year as recommended in MSR, I found that while most of our long positions were profitable, we only sold short about four or five times and we usually either broke even or came out with a slight loss. In other words, 2004 was clearly not a time to sell short, as the hedge funds found out much to their chagrin!

I do believe, however, that will change in 2005. Based on the position of the cycles in coming months there should be at least two more good short selling opportunities this year. Volatility will likely increase (unlike in 2004, which was a year of exceptionally low volatility as measured by the CBOE VIX index) and this will aid the short seller this year (assuming that short positions are taken at the right time).