Wednesday, September 30, 2009

FINALLY.....A Congressmen Does His Job!!!


Risk Pyramid for Uncertain Times

In times of extreme uncertainty, which we will certainly be entering in the coming months and years, one needs to know what asset classes to diversify into. I don't see the U.S. being around, in it's current form, for very much longer. Saying this, check out the "risk pyramid" to figure out what you should own in a coming deflationary depression.

Notice the two most important assets:

1) Gold
2) Cash (physical dollars, not electronic credits in a bank account)

Tuesday, September 29, 2009

FDIC Discloses Deposit Insurance Fund Now Negative

Source: ZeroHedge

In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon.

Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive.

Additionally, the FDIC has now raised its expectation for bank failure costs from $70 billion $100 billion. Feel free to expect this number to continue growing.

Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates and statistical analyses of trends in CAMELS downgrades, failure rates and loss rates. Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010. Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009. Staff projects that most of these costs will occur in 2009 and 2010.

First Mary Schapiro has failed at her task of "regulating" anything on Wall Street, and now Sheila Bair presides over a newly insolvent institution. Chalk one up to Washington's success at "containing" the crisis. Zero Hedge wishes Ms. Bair all the luck in the world in returning the DIF to its statutory minimum requirement of 1.15% of all insured deposits (a shortfall of a mere hundred billion or so). Maybe she can convert the FDIC to a REIT and have Merrill Lynch do a concurrent IPO and follow-on offering (while Goldman raises it to a Conviction Buy which incorporates the firm's expectations for 10% GDP growth in 2010 coupled with projections for $1,000 per barrel of crude)?

FDIC's full memorandum outlining its failure can be found here.

Monday, September 28, 2009

Short thought....

I wrote a paper on the inefficient government action of Katrina's disaster in New Orleans and here is a short thought on the government:

"What I do understand, or think I understand, is that people relied on the federal government to help them. With all of the social safety nets and social programs they were justified to rely on the government and that is the problem. When people are justified to rely on the government it creates huge problems. Risks that shouldn’t be taken are taken, people act without thinking, lives are lost, and progress is halted. This crude example puts it into perspective. If you manage assets for a “too big to fail” company and you earn a commission on profits what incentive do you have to minimize risk? If you make big bets and you are right, you make millions. If you are wrong you normally would put the company at risk to going bankrupt but in our current environment you would just get a bailout for almost no interest and make your money back in a few years. You might get fired but you get unemployment/welfare until you get your next job. Without risk of failure we have risk of collapse. Risk is a good thing; without it we have people taking riskless risks at the expense of the system (which we all pay for unless you take the risk, then you’re rewarded). My point is to get rid of social safety nets because then innovation and progress will happen. Do you think that the people of New Orleans would have ignored the problem if they knew they were the only ones to fix it? More power needs to be in the state and city level then the federal level because the federal government and their programs are a joke."

Sunday, September 27, 2009

How you spell correlation:

First chart is the weekly NASDAQ from 1995 to present; Second chart is the weekly Dow Jones Composite from 1924-1939 and the one that has skinny bars is a daily chart of Dow Jones Composite in 1929 and 1930. I'm pretty sure without the labels no one could tell the difference.... Proof of socioeconomic relevance


Thursday, September 24, 2009

Market Wave Count Update and deflation update

S&P 500 Index

Are we turning Japanese? (MISH)

Bernake's Deflation Fighting Scorecard (MISH)

Here is Bernanke’s roadmap, and a “point-by-point” list from that speech.

1. Reduce nominal interest rate to zero. Check. That didn’t work...

2. Increase the number of dollars in circulation, or credibly threaten to do so. Check. That didn’t work...

3. Expand the scale of asset purchases or, possibly, expand the menu of assets it buys. Check & check. That didn’t work...

4. Make low-interest-rate loans to banks. Check. That didn’t work...

5. Cooperate with fiscal authorities to inject more money. Check. That didn’t work...

6. Lower rates further out along the Treasury term structure. Check. That didn’t work...

7. Commit to holding the overnight rate at zero for some specified period. Check. That didn’t work...

8. Begin announcing explicit ceilings for yields on longer-maturity Treasury debt (bonds maturing within the next two years); enforce interest-rate ceilings by committing to make unlimited purchases of securities at prices consistent with the targeted yields. Check, and check. That didn’t work...

9. If that proves insufficient, cap yields of Treasury securities at still longer maturities, say three to six years. Check (they’re buying out to 7 years right now.) That didn’t work...

10. Use its existing authority to operate in the markets for agency debt. Check (in fact, they “own” the agency debt market!) That didn’t work...

11. Influence yields on privately issued securities. (Note: the Fed used to be restricted in doing that, but not anymore.) Check. That didn’t work...

12. Offer fixed-term loans to banks at low or zero interest, with a wide range of private assets deemed eligible as collateral (…Well, I’m still waiting for them to accept bellybutton lint & Beanie Babies, but I’m sure my patience will be rewarded. Besides their “mark-to-maturity” offers will be more than enticing!) Anyway… Check. That didn’t work...

13. Buy foreign government debt (and although Ben didn’t specifically mention it, let’s not forget those dollar swaps with foreign nations.) Check. That didn’t work...

A little humor.... <==== more

Today Primary Wave 2 Peak?

  • Today was likely the peak of the primary wave (2) or "b" of the current bear market. After the Fed meeting optimism was at historic extremes (very bearish) and the market sold off rather quickly after a weak breakout attempt. Of course today might not have been the very peak, however a peak is imminent and the start of primary wave (3) or "c" is coming.
S&P 500 Index

  • Wave C is going to be long and hard, this is the wave where our current debt bubble will collapse and the zombie financial system will be cleansed. Wave C is likely to bring dramatic social and political changes to the United States. It is safe to say, if primary (2) peaked today, that we are witnessing the end of an era and the United States will never be the same, as it is today, again.
  • Notice on this chart, showing our debt/GDP ratio, that debt is at historic levels never seen before in the United States. That debt bubble has not popped yet, just as the debt bubble of the 1920s didn't pop until 1930, a year after the stock market peaked. I have mentioned before that this bear market is on a scale higher than the 1929-1930 one. The debt/GDP chart puts this in perspective.
United States Debt/GDP Ratio
  • This bear has only just begun to awaken. Right now we are where the Dow was in 1930 at the peak of "b", debt was still rising, the market had rallied 50% from the lows, and people were speaking of a recovery. What followed was a total debt collapse and a 80% drop in the stock out....wave C is upon us....

Dow Jones during The Great Depression

Sunday, September 20, 2009

Friday, September 18, 2009

Thursday, September 17, 2009

Two Short Set-Ups...

Mylan Inc (MYL)

Macy's (M)

Why Aren't We Teaching This In Our Schools?

Source: M3 Financial Analysis - great work and great blog, republished here

One of the other points I would like to make in regard to come of my earlier posts, is something that has grave impacts economically and for investors. People need to be very active in managing and understanding what is going on in order to protect themselves and understand the real impacts of a potential dollar rally on their purchasing power, assets, and employment.

First and foremost, I would like you to take a close look at this dollar chart. Do you notice anything? Okay, look very carefully at the only significant dollar rally since the Fed has been responsible for the dollar?

Clearly debt pushing policies inflated asset values from 1913 to 1929. During this time dollar purchasing power declined markedly if you want to call 50% markedly. This was Fed engineered. There was a reason so many banks popped up during the 20's...and its the same reason that this century has been the era of the banking - so far - THE FED and its conflicts of interest...and fractional reserve lending. Fractional reserve lending is the manner in which 95% of the money in the world is created and the primary dilution factor for the dollar.

Now lets go back to my previous post, in which I refer to the dollar as a certificate representing the corporation of the United States of America. Well, the dollar IS the stock certificate of the United States...and that certificate is currently not an asset or value, but an IOU.

The selling/issuing of dollars through credit (IOU's) - is a short sale that by implication will need to be covered. Its just the same as a short on or AIG common shares or ES SP500 futures...the sale of these securities needs to be covered with the purchase of same to close the transaction.

Ron Paul has said it many times, the dollar reserve system has ended and the question is what is next. But the question is also how are all these short sales going to be closed...what kind of mess will that create?

We have appointed people to be responsible for our national value and stock certificates who are the equivalent of appointing a bunch of AIG shorts to run AIG. Additionally, you can tell that the Fed and its governmental co-conspirators have done a terrible job...the chart says they did.

Why are they still employed? Normally you would try to cover your tracks or at least do a bad job, not a catastrophic one, if you were trying to steal from someone while smiling at them at the same time. This dollar chart is catastrophic.

Subsequent to the debt pushing of the 1913 to 1920's, when debt became oversupplied and dollars to service the debt became scarce - as has happened now - we had the only rally in the dollar purchasing power of consequence in nearly 100 years. That rally for the dollar was the great credit contraction called the "Great Depression" - curiously, this was roughly a 27.2% rally.

The Fed used the depression to ensure that their goals would be achieved. The panic of those times led anyone who was scared to the conclusion that its beyond imagination the Fed could engineer such a condition. Worse yet, to be able to conceive that they, instead of attempting to fix the problem, would implement an agenda to make a much bigger one. So, fear led to more and more power which the Fed used to continue to expand its policies - ironically under the guise of preventing a depression which they engineered in the first place.

In achieving these objectives they did an excellent job. Is it any wonder that the SP500 bottomed at 666? I wonder?

Is it any wonder that your Dow Jones Industrials certificates are now worth less in purchasing power in real terms than at the peak of 1929?

So, where to from here? Well, that is a very good question. Look again closely at the dollar chart. Theoretically, the dollar is worth .04 cents. Under a reasonable scenario (but still a bad one), a short squeeze capitulation rally could take the dollar's purchasing power to between 15 to 30 cents...that could be a 750% increase in the purchasing power of the dollar. I am not going to go into details as to what that would do to the values of stocks, real-estate, and other assets such as silver and other commodities.

Though I really hope to god that none of this happens...recognizing that it can happen - because it has happened before - is an important thing to do given where we stand currently.

There may be some further efforts to fuel a hyper-inflation story. If gold rallies, for instance, people will think that inflation is about to explode...but that rally will likely be short lived.

How Does The Federal Reserve Push The Debt (create money) ?

The Story
Money is created when the factory (bank) loans you principle. An imbalance is created when you promise to repay money that does not exist - in the form of interest.

I know this is difficult to rationalize. But its the way things work. As long as ponzi scheme bankers can keep giving out loans and increasing the money supply the imbalance is not apparent. Until it is of course.
Now, if I was a smart ponzi scheme banker (and they are). What I would do is, try to create theoretical money. Imaginary money that everyone believed actually existed and could be used to settle future obligations - such as Warren Buffett's potential $50 billion+ obligation on his european style puts. (see: Warren Buffett - the ultimate bull-market manifestation)

The vast pools of money
You have probably heard of the vast global pool of money - its supposed to be around $70 trillion. This pool of money simply trades the debt money created by fractional reserve lending activity - paper. $70 trillion does not even begin to touch the amount of debt + interest obligations there are in the world. One of the key elements of fractional reserve lending is that once a credit is created...a note or paper is created that represents the value of the borrowers promise to repay and assets he posts as collateral. That is what trades in the vast global pools of money. And as long as the music is playing - everyone is dancing. Credit (Money), however, is not for the most part created by these pools of money (theoretically that could represent value and that would not be good for growth). In the majority, it is created by regulation via fiat when fractional reserve lending takes place. And this is why the dollar chart looks the way that it does. The banks have shorted the dollar into oblivion and sold it to suckers who think buying a depreciating asset and paying interest for it is great if they can invest that money in inflating assets that theoretically outperform the depreciation of their dollars. Obviously, this is a hair brained plan and can not work when the music stops. It also blows up when your inflation assets depreciate.

Just to announce it formally - the MUSIC HAS OFFICIALLY STOPPED...but the fed is still dancing.

So this brings is to derivatives.
Ok, we have all heard of naked shorting. This essentially means that people are selling shares that don't even exist. I have seen instances where the float of a company was tripled due to naked shorting. This operation creates theoretical shares. This is what the banks do with our financial system every day - only with currency.

Now what are derivatives? Who came up with them? Why did they come up with them?
There are a lot of reasons that people will give as to why a derivative is useful or required.
  1. Hedging
  2. Risk Management
  3. Speculation
But do we need them and why were they created?

Let me answer that question in two parts. Firstly, people who work at banks do not ask themselves what money is. The question seems almost too ridiculous. So, most bank employees can not give you the correct answer as to what money is and how it is created. So, we have a lot of smart people furthering a scheme that they don't even know they are participating in. As long as its not illegal they go along with it.

With derivatives we have a similar situation. A lot of brain surgeon types who never asked essential questions about what the real impacts of their work was. But lets look at what that is.

Theoretical money
  1. Asset appreciation
  2. Credit
  3. Interest on credit
  4. Modeled Obligations
When stocks or real estate go up, money is created that never existed before. When they go down the opposite happens.

When a loan is given, money is created.

Interest on credit theoretically exists...but the credits (Money) for that interest money need to be created somehow. This is why we need derivatives or vehicles like them, to create the money for the interest due on debt money that is created by banks.

If I loan $100,000 to someone on a 30 mortgage at 7.5%. I create $100,000 of new money...but the person promises to repay me $251,717.22. So, I need to create $151,717.22 somehow. If on the basis of that issue of credit I create more credit, I will have to create a lot more than $151,717.22. In any case, the only way to create the interest money is to create credit - which creates interest obligations (and that debt money does not exist in the system) and ultimately blows up the system.

Modeled Obligations - to the rescue - they can create money at a whim similarly to how the stock market does...theoretically with no standard interest requirements and very few participants which is rather advantageous when compared to the stock market or other publically owned and priced assets.
If I have a fraudulent money system. I need mechanisms that can create money (Debt) without requiring interest. That's what derivatives are for. And that's why we had 790 trillion dollars of them at one point and why JP Morgan currently has 89 trillion of them on their books (all perfectly hedged mind you).

But what are derivatives?
Derivatives are Modeled Obligations.
  1. Options
  2. Futures
  3. Exotic Agreements
  4. CDS's
  5. CMO's
  6. CDO's
  7. Structured Products
Options are fairly simple - though spreads and volatility make them complicated. All derivatives have option characteristics. Options themselves do not usually create very much new money.

Futures are also quite simple. However, highly leveraged. With 1 future you can control 40, 50, 60, 80, 100 times the money requirement to trade the future. Guess what? That creates money...theoretically of course. Since you have agreed to take on all the risks of that position - the 100,000 of theoretical money can be written into the books - again theoretically of course. If you look at what it costs you to control that amount of money there is a problem. Clearly this credit is being supplied at such a high discount that there is barely a cost in the standard form of credit issuance. Therefore the money system is creating new money that can be theoretically used to pay the interest on existing credit with money that creates very little interest. Remember, how our money system operates - theoretically - of course.

Most of the other structured products and other derivatives operate on the same basis except even more leveraged and primarily based on ratios of one agreement to another...bundled up as a unit they can considered a single derivative - i.e. a derivative is usually built out of multiple subordinate derivatives.

What's our total debt?
The total dollar debt in the world is roughly in the 350 trillion area...with interest requirements that over the term of those notes requires 500 to 600 trillion of theoretical money to be created...this can be done as I indicated earlier through inflation or through theoretical mechanisms. Derivatives are the Fed authorized/endorsed/promoted mechanisms capable of theoretical money creation that does not implicitly create large interest obligations and can be used to support expanding asset inflation and as a result create enough money to theoretically repay all the interest on the total outstanding obligations.

When Tim Geithner discusses the need for Derivatives regulation, keep in mind that the development of derivatives was explicitly developed under his watch and Greenspan's auspices. These guys knew we needed derivatives. It was their only way out. And they implemented the scheme deliberately, promoting SIV's and off balance sheet transactions and flakey accounting along the way for spice, so that Bank balance sheets could be manipulated and theoretical money could be created without standard interest obligations.

The Fed is the driver of the Fraud. JP Morgan is one of the primary vehicles for it and the most dangerous bank in the world.

What to do about this debacle:

Learn as much as you can.

  • Watch the dollar. If the dollar breaks out strongly...then we know a bad case or worst case scenario is playing out. For the scenario discussed here to not take place, the dollar MUST sell-off and remain weak. If that does not happen (I know I am repeating) things are going to get very bad.
  • Make a not trust the FDIC...they are the primary enabler of the debt pushers...I heard these two guys on CNBC discussing how "you should not even worry about the FDIC - its backed by the full faith of the US Government." That's called complacency...complacency and investing do not go together. If politicians were rational, we might not have to worry. But if politicians realize that they will be voted out of office for putting the US taxpayer on the hook for another trillion here and another trillion there...we can not be sure that the faith of the government will be there when it's required. I know is seems improbable...but if you told me that we would put the supposedly smartest minds in finance on the job of protecting our purchasing power, managing prices, and protecting the dollar and they would run it into the ground 96% - I would say that is improbable too.
  • Watch this movie: Money as Debt. Show it to people you care about.
  • Help Ron Paul and Rand Paul defend the Constitution and reign in the Fed


-George Orwell


Corporations and Political Donations

No one will argue that every person has the right to donate to their political candidate of choice. Some people have argued what a person is, and the Supreme Court has ruled that corporations are considered people when it comes down to almost all rights granted to people in the constitution. This means that, under the first amendment, corporations are allowed to donate to a political candidate just like you and I. There is a limit to how much a corporation can donate; Obama’s largest corporate donation was from Goldman Sachs coming in just under a million dollars and if you didn’t already hear the Supreme Court is voting on a proposed overhaul of the campaign finance system that would eliminate donation restrictions from corporations.

Looking at this from a moral perspective, obviously a corporation can’t think for itself like a real person. So how does a corporation decide who to politically support? Board of directors or CEOs. These are people who already have their own human rights. So what this boils down to is a board of director member has more than twice the human rights than you and I do because he gets to choose the fate of his own rights plus the corporation’s rights. The worst part about a public corporation donating to their political belief of choice it the fact that they wronged the shareholders. Shareholders have the right to profits after reinvestment and I’m sure that I would rather receive a higher dividend next quarter then have my money donated to the board of director’s buddy politician. That is theft.

Let’s look at this from a different perspective and assume the board of directors leaves their personal political, social and moral views behind and focus in on only maximum profit. Maximum profit does NOT mean maximum benefit but the corporation doesn’t think like that and there are millions of examples if you care to look. The job of the board of directors is to maximize profits, which is a good thing, but they shouldn’t influence political elections that shape our morals. Without real conscience human beings making decisions like you and me making moral decisions then it is left up to the corporations where its feast or famine on the people.

Wednesday, September 16, 2009

Why are our Presidents, Economist, and even our own Professors explicitly are lying to us????

What does the future hold?

  • Here are two charts comparing the Dow Industrials (1921-1933) to the Nasdaq Composite (1978-2018).........I am a firm believer in Elliott Wave Theory. It is not the be all end all, but it does give you a firm grasp of where we are likely to head in the future. The Dow from 1929-1933 experienced a Supercycle wave IV decline. To those unfamiliar with Elliott Wave this is a corrective phase in an even bigger bull market. Since 2000 the Nasdaq has entered a Grand Supercycle wave IV decline. Yes, this is a correction in the midst of an even larger bull market, however this correction isn't over yet.
  • Wave IV's behave somewhat the same in how they unfold, that is why we can 'predict' what the market is likely to do over the course of the next few years by looking at what it did during past wave IV declines. The Nasdaq decline will look a lot similar to the Dow of the Great Depression, however it is one degree larger (Grand Supercycle rather than Supercycle) so its devastation and scope are likely to be larger.
  • But remember.....THIS IS A CORRECTIVE PHASE IN A LARGER BULL MARKET!!! So when this rocky bottom does come there is reason for optimism. The trick is arriving at the bottom with a penny to your name.
Dow Industrials (1921-1933)

Nasdaq Composite (1978-2018)

Tuesday, September 15, 2009

Market nearing MAJOR top....advise go to cash

  • The market is nearing a major top as we speak.....this is a VERY important point, one where deflation should start to take hold and where the market should fall dramatically farther than it has already. Wave C of Grand Supercycle Wave IV is going to be something bad enough to completely change the structure of this country you had better be ready, 2012-2014 bottom here we come!!!!!

S&P 500 Index

  • The lagging bank index is another indicator that this market is ready to roll over and start its march lower
Bank Index

  • Here is a little comedic relief after all the pessimism

Monday, September 14, 2009

Law Worth Pondering

It's no secret that I don't like police officers. It's not that I don't like the concept of law enforcement. It is that I do not like the laws being enforced. The list of unconstitutional laws that our police officers enforce is growing by the day. I just figured I'd throw one out there for you to think about.

Have you ever wondered how you can cruise down the interstate at 75 mph on a motorcycle (in some states without a helmet), but when you get in your car (by far more safe) a police officer can write you a ticket for not wearing your seatbelt? This just doesn't make any sense to me. The government does NOT have the right, under the Constitution of the United States, to tell me that I HAVE to wear my seatbelt. I WILL wear my seatbelt, because it is safe for me, but I will NEVER wear my seatbelt because some out of shape "officer" of the law told me to. Police officers are there to protect us from other people, not from ourselves. The enforcement of victimless crimes is insane and I will not respect the gentlemen in uniform for that enforcement.

Go Get Em' Mr. Police Officer

Sunday, September 13, 2009

Friday, September 11, 2009

If you haven't watched this yet.....I suggest you do!!!!

Bullish on dollar?

Dollar has 5% bulls at this point and IMO just completed a 5th wave lower, in other words, it is time for another rise in the dollar and a fall in the stock market.....picked up 10 December 09 Calls on UUP with a $24 strike........

U.S. Dollar Index

Wednesday, September 9, 2009

Barack Obama Campaign Contributions

I stumbled onto something today that I find very interesting. Take a look at Barack Obama's top campaign contributors. It just so happens that 6 of the top 20 are banks. 4 of those 6 received Federal bailouts and 3 of them (Citigroup, GE Capital, and UBS AG) are still clinging to life support. Not to mention that UBS AG isn't even an American company and they are using their money to influence American government. Goldman Sachs, Mr. Obama's 2nd place contributor, didn't even need a bailout. They easily could have survived the storm, however, they were the first to be paid when U.S. taxpayers saved AIG (American International Group).

Another part of this list I find interesting is the random law firms (Sidley Austin LLP, Wilmerhale LLP, and Skadden, Arps et al) that contributed to Barack Obama. What do these huge international law firms want to please our new president for? The only clue I have to answer this is what these law firms specialize in. Skadden is an expert in the Troubled Asset Releif Program (TARP), acquisition finance and corporate restructurings.

WilmerHale spells out their specialty right on their website, "Lawyers in WilmerHale’s Corporate Practice are renowned for their work in initial public offerings, venture capital, private equity, mergers and acquisitions, strategic alliances, corporate governance matters and the representation of start-up companies. Clients look to WilmerHale’s Financial Institutions Practice for assistance with complex, challenging federal regulatory and legislative, litigation, enforcement, and business transaction matters that impact them as banks, card issuers, insurance companies, broker dealers, mortgage lenders, database operators, on-line firms and other financial services providers." Their list of clients includes GE Finance, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and UBS. All of these companies have been subject to corporate restructuring, more regulatory reform, or have participated in a merger and acquisition backed by taxpayer money.

Sidley Austin LLP fits right in with the group. "Sidley has a major capital markets practice and a broad transactional practice. Major practice disciplines include corporate and securities, mergers and acquisitions, securitization, intellectual property, funds and other pooled investments, bankruptcy and corporate reorganization, bank and commercial lending, public finance, real estate, project finance, tax and employee benefits, as well as trusts and estates."

Is it a coincidence that the banks who contributed to Barack Obama were bailed out or were the beneficiaries of easy acquisitions? Is it a coincidence that the law firms who contributed to Barack Obama were hired to oversee these acquisitions, help with corporate reorganization, adhearance to TARP, and the implementation of new regulatory reforms? You be the judge!!

Swine Flu Scare Tactic

Swine flu is considered a pandemic by the World Health Organization and “the spread of the virus worldwide is now unstoppable”. With the estimated 2010 United States death toll could be 90,000 and Bloomberg reporting that “The H1N1 strain is genetically related to the 1918 Spanish Flu strain that killed an estimated 50 million people”, I think I’m heading for my underground bunker to wait out flu season.

Well, maybe not. Not because I literally don’t have an underground bunker but because I think the swine flu, in its current form, is a scare tactic. Not that I’m a scientifically inclined but I’m pretty sure I would have figured out that H1N1 Influenza is somehow genetically related Spanish Influenza and when the swine flu deaths of just over 1,000 gets closer to the 50,000,000 toll the Spanish flu killed, then make a comparison.

In a normal year Center for Disease Control and Prevention estimates 36,000 people die every year from Influenza. Let’s just say that WHO actually got their prediction of 90,000 deaths right. This would mean a two and a half times increase over the normal Influenza death toll but still only 14% of what heart disease kills; I personally would be more worried about eating all of those Big Macs and double Whoppers before the swine flu.

Even if you happen to be one of the unlucky ones who contracts swine flu there is only a 0.69% death rate in the United States. I am not saying H1N1 is not an issue to deal with but I am saying it is blown out of proportion and I personally think it is being used as a scare tactic to pass a socialized health care plan.

Six Articles Showing The "Recession" Isn't Ending

  • One Sixth of All Construction Loans in Trouble (MISH)
  • FDIC Proposes Six-Month Extension for Debt Guarantees (Bloomberg)
  • Record drop in consumer credit outstanding in July (Wells Fargo)
  • Food Stamps Reach 33.8 Million in April, 5th Consecutive Monthly Record (MISH)
  • The Fed Can't Monitor 'Systemic Risk' (WSJ)
  • Greenspan, "Market Crisis Will Happen Again" (MISH)
Chart of Job Losses in Post WWII Recessions (MISH)

Excerpt from: Greenspan, "Market Crisis Will Happen Again" (MISH)
However despite his belief in a brighter future, the former Fed chief did warn that the path to recovery should steer clear of protectionism as applying strict regulations could hamper recent developments that have opened up global trade.
"The most recent endeavour to re-regulate is a reaction to the crisis. The extraordinary impact of these global markets is making a lot of financial people feeling they have lost control.
"The problem is you cannot have free global trade with highly restrictive, regulated domestic markets."
Ding Ding Ding we have a winner. Greenspan is correct "you cannot have free global trade with highly restrictive, regulated domestic markets."

And what bigger regulation is there than the Fed itself? The answer is "none". The Fed micro-mismanaged this crisis by its manipulative interest rate policies. Yet for all his faults, and Greenspan has many, the one thing he has consistently gotten correct is his stance in support of free trade.

Indeed, one of the biggest risks now to the global economy is a huge round of protectionism. Unfortunately, it's probably only a matter of time before Congress overreacts. That's human nature, Congressional style.
Blamed by some for not doing more to prevent the crisis, Mr Greenspan denied any responsibility for the problems gripping the global economy. "It's human nature, unless somebody can find a way to change human nature, we will have more crises and none of them will look like this because no two crises have anything in common, except human nature."
Human nature is is what allows people like Greenspan to never see their own role in the mess they created. It's human nature to blame someone else. The way to get Greenspan and Bernanke out of the way so that their "human nature" does not add to the problems is to abolish the Fed.


Source: Fund My Mutual Fund

Consumer Credit Tumbles at a 10% Annualized Pace (THIS IS DEFLATION!!!!)

Just some amazing statistics out of the Fed late this afternoon in consumer credit - and it doesn't bode well (near to intermediate term) for the 70% of the economy that is based on "spending". It does bode well for the long run as Americans actually act rationale and try to shed debt. Part of this data set is due to financial institutions pulling back on credit, but much of it is the reality that many Americans have enough stuff and need to delever. After 25 years of debt accumulation at which point anyone who doubted the American consumer was made a fool, the average domestic shopper has finally been "scared straight" if you will. This was finally the turning point where they have seen what little cushion they truly have when times get rough. As I've been saying for 2+ years, without a house ATM to provide a secret piggy bank, consumption patterns will change significantly for many.

If you are a stock market perma bull this is where you note each month Americans pullback buying "stuff" is laying the groundwork for the massive "pent up demand" that is coming "around the corner". I will repeat what I say each time this argument is brought up - you can wish ("demand") anything you want, but you need to have the ability to pay for it.*

*note: that was in the old economy; in the new economy the government helps to pay for it - so the ability to actually pay is not such a hurdle.
"As great as the clunkers program has been, it's tough to head out and buy a big ticket item when you don't have a job," said Richard Yamarone, economist at Argus Research. "Don't expect consumer credit to increase any time soon; the job situation is dismal, at best."
Long story short - even with the government handing us money to buy cars and homes (real estate is NOT covered in this report) we are seeing record setting % drops in credit. Keep in mind the tail end of July was the beginning of cash for clunkers - which means even with government handing us money to layer on debt to buy new cars, non revolving debt levels STILL contracted at a dramatic rate. And par for the course, June's data was revised downward - notice almost every government report is announced with great fanfare as "better than expected", than quietly revised downward 30-60 days later ... it is called "managing the market".

Nice Chart by Evil Speculator


Tuesday, September 8, 2009

Relevant or not? You decide.....

Market Forecast....worst case scenario IMO

Euro/U.S. Dollar breaking out......

EUR/USD is breaking out today. This is bullish for gold and other commodities and represents inflation ahead. Watch for continued strength in the commodity space.

Morning Highlights

Notable News Stories
  • Dollar Slumps to 11 Month Low (FT)
  • The Next Financial Crisis (The New Republic)
  • UN Want New Global Currency to Replace Dollar (Telegraph)

Elliot Wave Update

Bank Index

Recession Not a Depression......yet

This chart clearly shows the difference between employment now and during the Great Depression. As of now we are not experiencing a depression, however, I do not have a crystal ball to predict the future. Stay cautious.

Monday, September 7, 2009

Current method of Fed oversight

(Video that was emailed to me from Denise Legg.)

Sunday, September 6, 2009

Comcast breakout!

Feeling great about this long....

Friday, September 4, 2009

Updated Wave Count....

It looks like the red scenario is done for.....look for green or blue to materialize in the coming days....

Thursday, September 3, 2009

Sign These Petitions

Americans For A Balanced Budget: Americans for a Balanced Budget Amendment is a non-partisan grassroots organization dedicated to passing an amendment to the U.S. Constitution that would address the urgent need to stop the federal government’s massive and unsustainable deficit spending.

Abolish The Federal Reserve Act of 1913: This petition calls for the abolishment, by Congress of The Federal Reserve Act of 1913. To return all the rights and profits, from the creation of money to the rightful heirs, the citizens and the U.S. Government. It is outrageous that private banks and the FED can create our money and collect interest on it. If we must pay interest on monies created and loaned, let it be the United States of America that receives it, not some private interest.

Bought puts on IMO

Nice head and shoulders setting up on the daily chart.... running into resistance on the weekly. IMO could find some support from late last year but the puts were too cheap to pass on($0.60 per contract; Nov exp. $30x).

UPDATE: RBY making new highs

Why CEO compensation isn't that bad.....

Source: Fund My Mutual Fund

CEO Pay At TARP Banks 37% Higher Than The Average Bear

Let me preface this with the normal arguments

(1) the skill set of American public CEOs is 1 in a 100 million; only a few humans on Earth can do this work and none of them live in Europe (ex UK), Australia, or Asia. That is why the CEOs running large companies in those countries make a fraction of American (and some financial type British) CEOs. Only Americans have the skill set so hence must be paid.

(2) the skill set of these people have expanded greatly in the past few decades. When CEOs only made 70x what the average American in the 1970s that showed CEOs were not pulling their weight in that era. Now that it is over 400:1 it shows they have really gotten that much better than the lackeys who used to run corporate America 30+ years ago. Let us applaud this adjustment.

(3) It's a free market; as in a small group of board directors compete with other small groups of board directors in ever upward compensation that has little to do with performance and a lot to do with rubbing backs. After all many board members are former politicians and/or executives at other companies. That's how a free market works - duh.

(4) CEOs in private companies are likewise weak and frankly close to incompetent; hence paid appropriate to their inability to feed at public troughs... err, to land jobs at US public corporations. By being paid similar to public European CEOs, the private American CEOs are shown what they truly are: socialists who only feed on the state.

(5) You can't just look at 1 year; maybe compensation was lower (chuckle) last year or will be (cackle) next year. Taking any 1 year of compensation alone is clearly taking data out of context. (dogma)

(6) CEOs are not motivated by things normal mortals are - like pride, putting food on the table, or providing a roof over their head. Without these pay packages you will simply have completely unmotivated folk in $5000 suits who are not productive. We can't have that.

(7) What would you have us do? Turn into the Europeans (ex British) and become (gasp) socialist by setting pay at some ratio like 7 to 1, 10 to 1, 50 to 1 versus the common peasant worker? That's unAmerican - we don't do socialism*.

*Unless you count corporate socialism where the peasants give their money to bail out corporations or provide subsidies. Then it's acceptable and no longer called socialism, I believe the term then is "capitalism".

(8) If you don't pay these people, they will take their skills and MOVE! To somewhere like the UK! (at least if they are in the banking field) And if they are not paid in the UK they will MOVE! To ... (crickets chirping) ... well they will find a place. (is Croatia hiring? UAE? Antarctica?) So don't you dare stop paying them, or they... will.... move. Don't ask any questions over and above that. Just be scared of the thought and empty your wallet into the receptacle.

(9) If you are unhappy or (as the blog writer apparently is) unAmerican (codeword for European) and can only resort to class warfare, you can walk with your feet. When you sell your 300 shares, the CEOs will notice and only THEN can we change behavior. Try it right now - sell your 300 shares of company XYZ in your Ameritrade account. I assume the CEO will be in fetal position within minutes begging corporate directors to rescind the handouts... err, payouts.

Anyhow, CEO compensation is a great topic but I try not to beat a dead horse because it will never change in our brainwashed society. The American idols (Fed heads, public CEOs) are now part of the celebrity culture. However at times, a story pops up that requires a mention and we will put on our populist cape and blog about it (always puts an end to injustice!)

Maybe when the ratio of pay hits 5000:1 (public CEO: US peon worker) while countless remain unemployed or relying on public assistance to survive, someone might scratch their head and review their dogma, but for now 430:1 seems just fine. (thanks for asking) It's all become ludicrous and completely detached with performance but now we see those banks who received socialism* (the American kind - corporate) are doing even better (37%) than the average CEO. Because their skill set (unique, 1 in 100 million) delivered them into the hands of the US taxpayer... and that requires extra compensation. Heads they win, tails they still win - American style. [Sep 27, 2008: Heads We Win, Tails We Win]

Reverse Robin Hood - long & strong.

Via Bloomberg:
  • Chief executive officers at 20 banks that got U.S. aid received compensation 37 percent higher than the average for leaders at Standard & Poor’s 500 companies and may be poised for gains as stock values rise, a study showed.
  • Average CEO pay was 430 times larger than for typical workers, and at nine of 20 banks the value of stock options soared $90 million in a year, the Washington-based group said, citing proxy statements. (nice! let me guess these were granted because the old stock options, which were supposed to be enrich CEOs only if the stock performed, did not work out. Hence in return for non performance a batch of newly issued, lower priced options must of been granted. Otherwise, the CEOs would ....move)
  • JPMorgan Chase & Co. led with a $20.6 million gain for five executives, followed by $17.9 million each for American Express Co. and PNC Financial Services Group Inc., the study showed, based on calculations using proxy statements.
Generational wealth - the type that will provide for 5-6 generations of your family can be yours if you simply get one of these coveted spots. Perform once the spot is secured? No need - just get to the throne (literally not figuratively). Even if your firm fails to the point it requires government intervention to prop you up, you win. As do your kids, their kids, their kids, their kids, their kids...
  • The top five executives at the 20 banks had a three-year pay total of $3.2 billion, with $1.2 billion in 2006 and 2007, and $800 million last year, the study showed, citing corporate proxy statements.
That is 100 people ... 5 execs, 20 banks. And trust me, even that number will be highly skewed to the top 40. Oligarchs united.

But it is ok, that's what the "free market" will bear and you dear reader should see the offset being borne in your higher bank fees. [May 29, 2009: USA Today - Banks Find Ways to Boost Fees] Thank you for your service to your oligarchy.

Reform? Ah, memories. As we do every crisis a lot of clucking happened when people were mad - but we have short memories. Just keep these "15 proposals" in storage - during the next crisis it will save time... we won't have to redraft them. We can just dust the same 15 off, wave them in the air during CSPAN coverage while winking to the lobbyist seated in the back of the chamber, and once the peasants are calmed (heavy does of NFL, American Idol, Jon and Kate Plus Eight), put the proposals back into storage. Rinse. Wash. Repeat on 5-7 year cycles.
  • The institute’s report showed 15 proposals for direct pay restrictions, revisions to tax policy for deducting compensation, setting governance standards or requiring disclosure that have failed to be enacted into law.

It was an excellent article until they uncovered a "socialist" to provide these outrageous quotes... a shame a great story about free market capitalism* had to be marred by what I can only assume is a European based writer. (what type of American would try to throw in quotes like this?)
  • “We need to look at the overall level of pay,” Sarah Anderson, report author, said in a Bloomberg Television interview. “As long as people can continue to be able to make tens of million of dollars in bonuses it is going to encourage outrageous behavior that can endanger our whole economy.”
And to add insult to injury they threw even more "socialist" propaganda to close the piece:
  • German Chancellor Angela Merkel and French President Nicolas Sarkozy this week said they will urge Group of 20 leaders to regulate banker bonuses.
Merkel and Sarkozy are the gravest threats to a mass exodus of our oligarchs moving to Croatia or Dubai - where they will find public corporations that will pay them more. I urge you to call your Congress(wo)man to stop the madness - we cannot let our oligarchs go without a fight. Without these few hundred people running our public corporations the likely outcome is a huge excess of risk taking will happen, which will then crash the financial system, thereby requiring hundreds of billions, indeed trillions of bailouts to stop the whole system from imploding. [Mar 31, 2009: Bloomberg - Financial Rescue Pledges Now $12.8 Trillion]

And we don't ever want to see something like that happen in our country.