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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Wednesday, December 30, 2009

2009 Predictions, closing the year out

Back in January 2009, I was a tad bit cockier, as having a great two years in investing.
I posted 2009 market predictions and market trend predictions relating to finance and some politics.

In July, I posted Half Way to Hell, my commentary on the scorecard so far, and what remains.

How funny my 2009 opening lines read now, I quote:
I'm hoping I am becoming more accurate in my time line, and the person I am now would not have predicted complete collapse in 2007. I have learned the world moves slowly, but when the panic hits the heart of people, it moves quicker than anyone can imagine. In large numbers, fear is more powerful than greed.

The world moves slowly? And here I predicted it would move quickly in 2009. Ha!
I didn't listen to myself on how slow the world would move!
So lets cut to the chase. 2009 greatest hits and misses, see Italic BOLD for current commentary

2009 predictions met
  • Unemployment will hit 8% in 2009 in official figures, unofficial (REAL) numbers easily top 12%
    Real unemployment officially over 10%, unofficially easily at 15%
  • All countries will continue to race to devalue their currencies. The race to devalue will help ensure the US Dollar doesn't collapse as compared to it's peers.
    I count this as a win, the world is trying to race to devalue their own currencies, US dollar did devalue, but has been rallying back. USD did not collapse
  • Oil will hit 50 bucks a barrel in Q1 2009. Oil will hit over 60 a barrel before EOY 2009.
    Check, hit 49.47 in Q1, it hit about 67.56 bucks a barrel in Q2 (both hit higher in reality)
    Oil hit over 80 bucks a barrel in 2009
  • Oil for shorter term traders, on the pop up in Q1, will sell significantly out of this trade. Oil went straight down from 140 to 36, it needs a counter rally.
    Oil hit over 80 bucks a barrel in 2009
  • Gold, Oil, and resource plays are NOT guaranteed safe heavens, but over all investments, it will fair pretty well compared to the alternatives. See previous bullet as to why. GDX will hit 55 a share in 2009, wouldn't surprise me if this occurs in Q1.
    Check, GDX hit 55.40 in 2009
Near misses for 2009
  • Obama cannot save the USA and the world in 2009. (proven in short order
    Cant prove either way, so took it out of the met
  • With all this doom and gloom, predict the market WILL RALLY, sometime in Q1/Q2, and fool people into thinking the market has recovered before failing again. From 2009 market top to bottom will exceed 50%. (hence why I am long currently resource stocks/oil)
    Market did retrace 50% back up, as of December 2009, so we did retrace, but through Q4
  • DOW will hit below 6,000 (I'll take ANY bet on this one). And it wouldn't surprise me to hit DOW 4,000. (over 50% drop from current position)
    I thought below DOW 6,000, hit 6,469.95, off by 7.8%
  • Counties and states will face financial crisis, as many as 5 counties will outright fail in 2009, causing municipal bonds to sway.
    Many taking drastic action, .states like California have had major financial crisis, same with counties. But I haven't read of 5 counties failing.
  • Stock DECK (at 80 now) will trade at below 25 a share by Jan 2010 (may need extra month for earnings report)
    Near miss Went to 37.25, in 2009.
    And I suspect a complete miss for the price target by Jan 31 2010 of 25.
  • Gold valuation is unknown for Q1/2/3. Long term Gold is a great buy here again, and will be higher in the next 2 years. GDX is is currently at 33, and will hit over 55 in next Q1/Q2, target is close to 100 in 2009. This will be due to golds high price, but low energy costs and cheap labor (other miners such as copper laying off in droves).
    As previously mentioned hit 55 2009, 100 will be at end of 2010 possibly. So half right.
  • Inflation in Gold, Oil, or Food, will occur in 2009.
    I qualify this as a hit, as resources as measured in US dollars, did go higher
  • If gold collapses, will recover by Q4.
    Gold didn't collapse until extreme late Q4.
Misses for 2009
  • More insurance companies will have severe financial issues.
    There has been serious problems at various insurance companies surfacing, but as a whole, not severe.
  • The housing collapse is 50% there, as per my previous entry. The NorthEast will see acceleration as the financial market layoffs take effect in the region.
    Not achieved, and there is no recovery, but cracks are appearing
  • In Q2, the market will pull back, sucking the bears in for the short of a lifetime. They will be disappointed as the market rallies back in Q2/Q3 and hurts the bears.
    I WAS the sucker that I predicted! And the rally extended through Q4 DESTROYING bear traders
  • Deflation will "win" in wages, stocks, and real estate.
    Wages check, real estate - check, stocks - WRONG
2009 Debacles - Big Misses
  • The ETF SRS will hit over $200 a share in 2009, currently at $53. May hit $25 before $200. Over $500 a share would shock me.
    SRS hit below 25 a share, its at 8 bucks, hardly a miss, its a huge miss on 200 buck target.
  • The market will have a rally over Obama and his policies to save the world as the new savior. The rally (or trade sideways, lack of collapse) will last into Q2
  • After the rally of Q2/Q3, the market will finally collapse to new lows in Q3/Q4.
    Obama Rally lasted straight into the end of 2009
Summary
Over all, I have to say my predictions werent a complete debacle, but there is enough wrong to not count it as a banner year for meeting expectations. For 2010 predictions, I'll try to be more pointed in predictions, and keep it to a few. Often palm readers and other prediction nuts use the technique of predicting 1,000 things and highlight the right to paint themselves as good visionaries.

I had too many diverse thoughts, muddying the assessment.

Tuesday, December 29, 2009

S and P 500 new highs

Monday December 28th, the S&P 500 hit new highs, 1,130.38, as well as some other market indexes. What amazes me, that it wasn't significantly higher. On December 26th, the US government announced that all losses, no matter how big, are 100% backed by the US government from private institutions Freddie Mac and Fannie Mae. By inference, the market can assume that this isn't the last no-hold-bar, we got your back maneuver, and that there is more to follow.

With a one-sided bet, all upside, and no downside now in the pocket of private large financial institutions, I expected a much higher blow off. The last week in December is so far extremely light on volume. I would not be surprised to see the S&P 500 hit a new high of about 1155 before this market finally turns.

However, make no mistake, these actions are sealing the US fate, if not the world to a horrible multi-year economic downturn, similar to Japan's lost 20 years trying to cover their debts through government intervention. Japan was a CREDITOR nation, and that country took similar steps to prevent their companies from taking huge losses through government intervention. The result was that stock market fell from 40,000 down to 7,000 to 20,000 range for 20 years, currently at 10,800. The US is a DEBTOR nation, and if in the next 10 years the US can muster it's currency from collapse, and keep market valuations higher than here, then that is a great feat.

So, yes, the market made new highs. But nothing is fixed. All that has happened is transferring risk from the private sector to the US government, and by inference, the solvency of the nation. This fixed nothing, and is a direct repeat of history from Japan to the US's own great depression.

The wall that the world will hit, is the US bond rates. That is already happening as 30 year bond rates are creaping higher. There will come a point where mortgage rates will rise enough to further crush housing prices. And the government will have to choose, the stock market or the housing & debt market. To me the choice is clear, tank the stock market and save the debt market.

But one thing 2009 has taught me, stupidity runs no bounds, and the choice may be to crush the housing and debt market, and throw this country into a GREATER depression in an effort to keep the stock market valuations higher.

Happy Holidays, the multi-millionaires got their bonuses, and trillions in government handouts, what will be left for the pension funds, retirees is going to be coal in a few years.

Monday, December 28, 2009

Twitter

I ran across http://FedUpUSA.org twitter account here (click).
Worth following for highlighted stories.

I really don't feel like posting on the market today, I will close out 2009 prognostications and create 2010 prognostications.

I am so disgusted by the actions I posted on Sunday.

Sunday, December 27, 2009

US has abandoned all fiscal discipline

On Sept 6th, 2008, the US government took over Freddie & Fannie, I wrote a blog post titled "Financial Ground Zero", where I marked that event as the potential beginning of the end for the Financial system in America.

I have hoped, and continue to hope that America's Government decides to stop the insanity of trying to expand the US debt to any level, at any cost. The end result if left unchecked is US dollar collapse or interest rates soaring as the US government tries to defend its currency, and its legitimacy as the ruling government.

On December 26th, 2009, the Obama administration has announced the US government will take private investments in the Freddie Mac and Fannie Mae corporations and make the losses in those government institutions part of the public debt. Simultaneously, it also announced a 70 million dollar bonus for 12 executives running these companies over the next two years.

Making private losses part of the US governments budget is outright illegal, only the US Congress has the authority to appropriate funds. But the word legal is no longer defined as what the constitution reads, but what is enforced.

This one act, isn't the end of the US government, but it definitely puts the path ahead straight towards that destination. The US government has now made it crystal clear, that all losses, no matter how much, from banks, mortgage companies, car companies, are the public's responsibility.

This sets the tone in stone, that all large corporations should not fear insolvency, Uncle Sam has a printing press, and will use it.

Oh, to boot, since World War 2, all oil purchases have been made in US dollars, with some small percent as an exception. The four Oil gulf countries (audi Arabia, Kuwait, Bahrain and Qatar) announced their own currency to be created, presumably that the world will need to convert to the gulf currency to buy oil. As if that wasn't enough of a blow to the US dollar, the Central banks of the four Gulf countries will halt their lending operations next week in line with their landmark agreement to launch the world's second major monetary union, a Saudi newspaper reported yesterday.

So lets recap, the US is on a debt binge, passing universal health care, covering all losses from two companies that own 5.5 trillion dollars worth of mortgages and counting, and one of the strengths of the US dollar, being used for oil purchases, is on the verge of evaporating soon. This is ontop of my other Financial Ground Zero moments I have noted since the original Fannie/Freddie takeover.

I'll be posting my 2010 predictions, and at this point, its not going to be a fun read.
Fasten your seat belts, inflation, deflation, currency collapse, or interest rates soaring, something is going to give, and the masses will pay for it.

MicroPoll Results

Today I'll just post some nifty fluff, results from the polls done to date.
Question that was asked at top of each poll
Did you have more presents given to you, and purchased by you this year over last year?
Results link, map below by region



On Dec 31st, 2010, what do you expect the DOW index to be at? (2009 high 10,504, 6,478 the low)
Results Link, map below by region



Do you believe the US economy has seen the worst of the economic downturn, and is on the road for a multi-year recovery?
Results link, map below by region

Tuesday, December 22, 2009

Stock Trader to watch

There are tons of 2 bit (like here) blogs where plenty of BS for stock trading is available.

But there is a bottom line, and that is, what is the RECORD of the trader.
My record for 2007-2009 spring was pretty darn good. Not so good since July.
But I'm not going to go into detail.

There is a site called KaChing where traders can tie their trading to the web site to have verified positions and results. Basically put up or shut up. The site is pretty interesting.

One trader I have been half watching for a year now is Atilla Demiray of blog xTrends. He is a "bear" on the market, but to his credit will flip sides as he see's fit. But definitely leans towards shorting.

Atilla is up 60% since September, not too shabby. As of this blog entry, he is down about 3 million on his most recent positions (wow), but I guess when up 60% and trading capital of 40 million, all in a days work.

Better yet, find a KaChing designated "genius" and you can setup your interactive brokers account to mirror the genius traders moves automatically! Who needs a stock broker giving advice "do as I say not as I do"? These guys show the money they risk, proving their personal conviction. All of this is high risk, of course, but interesting none the less.

Monday, December 21, 2009

This week in Charts

Another week has past, and the holidays are upon us.
I may give this blog a break from the 24th through Jan 2nd, with an occasional post instead of daily.

For now, lets look at the charts, and see how the markets look. I threw on a chart of US debt vs the world from The Market Ticker, pretty interesting.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Sunday, December 20, 2009

More evidence China is not the near term solution

Mish's Global Economic Trend Analysis had a good article this past week on China.
I have posted quite a few times on China, and in the last 6+ months, how China is NOT in a position of strength. Sure, long term, between now and 2035 China has a rosy future, but quite a bit can happen between now and then.

My previous blog post Chinese Economy more fraudulent than USA showed plenty of excess capacity in some of China's largest cities. In one city, more excess commercial space (unused) than the entire commercial space available in Manhattan.

But this next video takes the cake. An entire city built without the people of China being able to afford to live in it. Why may you ask? China is operating in the global insanity that the US also follows, as described in Misrepresenting Economic and Financial Data. The explanation in Mish's post on why China has so much overcapacity is China paid people to build the city and other excess capacity, so the WORK DONE can be counted towards China's total GDP!

This is clearly an active distortion of reality, building a city, to not be used, but to count the work, and developed real estate to build up China's numbers is a distortion of productivity.

There is no one country that can save the world from itself. The lies must result in losses, and the cleansing must occur before the next economic cycle can begin.
The good news is, once this downturn ends, the next economic upswing should bring on a fantastic growth period.

Watch this video, to scratch the surface of understanding the mentality of a country to build an empty city, then think about the massive inefficiencies/distortion/over valuation that must be through the entire country of China. Frankly, its incomprehensible.

Saturday, December 19, 2009

Jim Rogers says invest in food

Jim Rogers on a wide variety of commodities, including gold.
Right now Jim Rogers is a US Dollar bull






Friday, December 18, 2009

Time to buy Gold Miners?,,,,Again?

REMINDER: Saturday is once again options expiration. Expect market games between Friday and Tuesday noon.

Thursday the Gold Miner ETF, GDX, has hit the long term bull tend line. If you are in the camp the US dollar is about to implode any day now, and Gold is the only "real" money, now isn't a bad time. You could buy GDX at this level, and set a stop-loss point at around 44.

However, for me, I can't do it. From a charting perspective, seems like a decent play with a set risk threshold. My problem is the stock market I still believe will correct. And I can't see how gold miners explode higher if the market is falling.

Oh yea, there is also the US dollar. As the USD gets stronger, I have a hard time seeing gold explode higher. It can, there is no tie between the two. But it is an uphill battle.

From WebSufinMurfs FinancialBlog2


From WebSufinMurfs FinancialBlog2

Thursday, December 17, 2009

The Bond Wall

After the market crash in 2008, the answer to Time magazines person of the year, Ben Bernanke, savior of the world, was to create money and fund insolvent corporations.

Combine this with the US congress spending into the trillions, the US is showing its over-the-top disregard for fiscal responsibility.

So, who cares? When money is "created", the mechanism, as previously covered, the US government must issue treasury bonds. The yield, (interest rate) of these bonds are not dictated by the US government, but is set in the market place. For example, if the government wants to sell 100 billion dollar of US 30 year treasury notes at 0.01%, then can offer them, but it is likely not one person will buy it. So the government would raise the rate until the bonds are purchased.

Higher interest rates have huge ramifications on the US government and the economy. As rates rise, corporate debt rates tend to raise also, as corporate bonds typically need to offer higher yields than US treasuries to "compete" in the bond market. Mortgages are indirectly linked to US treasury yields. For example, if US treasuries had a yield of 30%, it wouldn't be possible to find a bank willing to lend you 400K to buy a house at 5.5%. The bank would be better off buying US 30 year bond notes with much less risk than lending me the money to buy a house.

If mortgage rates rise, say from 5% to 7%, house prices typically fall to keep the same monthly-payment for the buyer to be able to afford the house. Each point can mean upwards of 10% fall in housing prices. For example, 30 year mortgage on 400K at 7% is $2,661 vs 5% is $2147. at 7%, to get a monthly payment of $2147, the house price must drop to 323k.

The competition for cost of debt ripples through the entire economy. I have posted many times, that the real fireworks will be the bond market. The 20008 market crash was an opening act, a prelude to wake people up of more to come.

This ridiculous idea that deficit spending will lead to prosperity, and giving insolvent companies larger credit lines will have no effect on main street is outrageous. As the bond market demands better returns on a higher risk debtor - the us government, the cost of everything in the economy feels the effects through increased cost of debt.

THERE IS NO SUCH THING AS A FREE BAILOUT.

Which leads me to the graph below, the US treasury, 30 year interest rates. As you can see, the trend is up, at about 45 degree angle. Rates are reaching into the range of pre-market crash prices, and threaten to continue into July 2010 to new highs.

Hopefully the man of the year, will have an answer on how the US can produce infinite amount of debt and keep the cost of that debt low. Ben knows the answer, FEAR. If the markets enter a fear state, people will run to bonds, applying downward pressure on rates.

The other option is stop issuing new debt. If the government doesn't issue new debt, it can set the rates to anything it wants. if no one buys, government wouldn't care, and it can then set the price. But the government lives in debt, so it MUST find a buyer, and therefore will increase rates to find buyers.

The wall is coming, I don't know the magic number, but at some point, as rates rise, the Federal Reserve bank will need to choose, the economy or crush the stock markets.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Banks CEOs tell Obama they run the show

In what I consider a real slap in the face, a few bank CEO's at the last minute excused themselves from meeting with President Obama, with some flimsy excuses.

Goldman Sachs CEO Lloyd Blankfein, Citigroup chairman Dick Parsons, and Morgan Stanley CEO John Mack all skipped out on a scheduled dressing-down today from Barack Obama because "inclement weather" made it physically impossible for them to travel to Washington.

In my 20 years of traveling, I have missed one appointment due to flight issues. No matter what happens, I scramble to work around a flight issue, and I do NOT have access to a private corporate jet. I have flown into neighbor cities and drove to locations. For important meetings I always fly in the night before the meeting to allow for problems and recover.

Apparently these 3 CEO's left zero room for error for the meeting with the president, and a flight issue caused them to not show up. I wonder how come their corporate jets weren't able to fly instead of taking a commercial flight.

Nice try Obama, you don't run the country, the banks do.
But this does give me optimism, perhaps Obama is a quick learner, and is starting to get more firm with the banks behind the scenes.

Wednesday, December 16, 2009

Misrepresenting Economic and Financial Data

I am happy to get back to my monetary post series starting with What is Money, Creating Money and Credit, Economic and Monetary Inflation and Deflation.

Next up is misrepresenting economic and financial data.

As described in the series, Money, in an ideal state would have the same worth for work today, for work tomorrow. But because of various monetary policies, the value of money may vary significantly over time. Most people believe that it is inherent in paper currencies that they devalue over time. For example, in 1939, a gallon of gas may have cost 10 cents, now it costs 4 bucks.

But currencies do NOT have to devalue over time. This is a result of the fiat currency, fractional reserve lending, and the Federal Reserve bank. All of which America did NOT have until 1913, when the Federal Reserve Bank was created. Before this event, a person could take a US dollar bill, bury it, and 100 years later it would have the same purchasing power. As a matter of fact, if you bury 100 dollars in 1800, in 1900 it would have MORE purchasing power! (Click here, try 100 bucks from 1800 to 1900, then try 1800 to 1922, and continue into the future)
The old monetary system also had issues, specifically it was linked to gold directly, which resulted in periods of uncontrollable deflation. But the net result over time was a stable currency value system across generations.

Think about that for a second, "A dollar saved is a dollar earned" actually would be true. Now flash forward to today. $100 us dollars in 1808 saved would have purchasing power of $157.39 in 1908, and purchasing power of $7.16 in 2008!!!

What people don't realize is this hidden inflation changes, or secretly alters, the view of all economics. When people look at stock charts for example, typically it is viewed from an absolute view, when in reality, all stock charts should be adjusted for inflation. This is why I quote the S&P 500 valued in terms of Gold, to help give a different perspective on US stock market valuation in more absolute terms. Gold is an object that has value across all world currencies and other physical assets in a more neutral view than US dollars. By no way is this the perfect way to compute value, but it is more accurate than US dollars over the last 10 years.

In summary, inflation allows to skew, or mis-represent data in terms of money over time.

Next is skewing economic data measurements.
After the last Great Depression, some of the reforms that came out of that period was to have the US government act as a neutral party to present data on the economy so all investors could make decisions on a more level playing field.

There are 100's of metrics that grew out of the government for measuring the economy including unemployment, monetary base, Gross Domestic Product (GDP), import/exports, inflation, etc.

All of these metrics where semi-straight forward when created. For example, if you where once employed, and you became unemployed, you where counted as....unemployed. But now there are dozens of sub-categorization of what is unemployed. For example, if you are unemployed for a long duration, you are re-categorized as no longer in the work force. If you are receiving unemployment checks beyond the normal duration, but are in the "emergency extended benefits" category, you are no longer considered receiving unemployment benefits.

I can go on and on. But there is something very nefarious about changing what it means to be unemployed. The history books showing the percent of Americans unemployed in 1982, or 1935, are NOT adjusted using the latest metrics. The result is you will have people look at the history of unemployment numbers and make statements like "US is at 10% unemployment, not seen since 1982".
When in reality, if in 1982 the same methodology used today was used in 1982, perhaps unemployment then would be 8%, not 10%, and therefore you may need to go back to 1930 with the adjusted methodology to find a time matching today's experiences.

Changing of metrics, without retro-changing the history of previously published data, is a severe distortion of reality. This is yet another way to mis-represent the reality of the economy to put the individual investor at a disadvantage.

This is an issue on all levels of critical metrics the US government publishes. One particularly disturbing skewing of reality is on measuring inflation. By mis-measuring inflation, all inflation adjusted metrics are also skewed, distorting even trying to determine what 1 US dollar is worth today as compared to 10 years ago. This has deep distortion effects across all measurements of value and wealth over time.

And when a metric cannot be skewed, or distorted, the solution has been to eliminate the measurement. For example, the Federal Reserve Bank on 10 November 2005 announced that as of 23 March 2006, it would cease publication of a money supply metric called M3. (ShadowStats continues to try to estimate M3) This was deemed as no longer needed metric. If you click on the shadow stats link, notice M3 exploded right after reporting it stopped. I am sure that is just a coincidence.

Bloggers have pieced together true inflation together with M3 from other data to yield reported inflation from true inflation. Currently as of 12/15/09, inflation reported is about 2%, when real inflation is about 7%. So if your savings is not yielding over 7%, your savings is in effect losing value in terms of US dollar. And this DOESN'T include the fact the US dollar plunged from 90 to 74 in 2009, a 17% drop in terms of world valuation. (US dollar currently rising, back to 77ish)

Inflation not being reflected in economic data, changing of economic metrics without retro changing past data, dropping reported data such as M3 monetary policy, currency devaluation, all have the effect of misrepresenting reality and putting the common investor at a disadvantage.

Please keep in mind, this was not a significant problem 40 years ago, all of this has been a continual morphing of the US government to skewing data to hide the reality of the economic data. In effect each political administration contributes to the distortion so on their watch, the claim can be made that the economy is better than the reality. I am not a conspiracy nut, there is no world order behind this distortion. What is at hand here is human nature, easier to "cheat" by changing the grade on a report card, than buckle down and study harder.

Unfortunately, the decades of accumulation of these changes has yielded much of the reported data so skewed, its hard to judge where the economy, and value of savings, stands.

In Summary
  • Fiat Currencies as they change in value over time, are not reflected in most economic historical data, like stock charts. Not auto-adjusting all economic data based on inflation distorts economic information.
  • Inflation itself is distorted, which in effect makes it even harder to actually compare financial and economic data over time in more absolute terms.
  • All other metrics of economic data are also changed over time, without retro-changing past values to put proper perspective on data.
  • All of these distortions create an environment where stored wealth is near impossible to assess if keeping up with devaluation over time, and a view of economic health to make informed decisions on money allocation.
  • These distortions are not a reflection of a world conspiracy, but a reflection on human nature to change the test, rather than work harder to have a better grade.

Tuesday, December 15, 2009

Predicting 2010 stock market

I'll be reviewing my 2009 predictions in a few weeks, to keep my scorecard honest.
Then, of course, a 2010 prediction to see how I do next year.

In the mean time, here's a poll to see where your fellow readers fall in their optimism/pessimism scale.

Sunday, December 13, 2009

Reader Poll

Recently, I ran across a web site called "micropoll" which lets you setup a reader poll easily. So, for the heck of it, here is my attempt.

Please take the time to answer, my readership bounces between 50 and 100, depending I believe on how violent the market is. Lets see if a Dozen answer. If I get a good response, I may have more interesting poll

Friday, December 11, 2009

Extreme Day

I find today to be an extremely over-extended up day. I am adding shorts, holding what I have, and waiting for the hyper-extension up to end with a snap.

But then again, I have thought that for a bit, good luck.

High Risk, High reward plays that I am involved with.
DECK at short 100, FAZ buy at 20.40, SRS buy at 8.30, TZA at 11.30, DXD at 29.55, short BAP at 74.50, short AMZN at 135,
Look at anything that went parabolic up since March without fundamentals for opportunity.

Thursday, December 10, 2009

State of New Jersey is screwed

I remember in high school being told one of the better things about New Jersey is it's bonds where AAA, and debt low. New Jersey has a high per capita income on average compared to other states. Plenty of corporate headquarters are in New Jersey.

I knew New Jersey had strayed and was piling on the debt, but I didn't realize how much.

New Jersey has $36.5 billion of gross tax-supported debt.
New Jersey has a population of 8,682,661.
That is $4,203 for every person in New Jersey, employed or not.

Compared to California
California has $75.2 billion of gross tax-supported debt.
California has a population of 36,756,666.
That is $2,045 for every person in California, employed or not.

Considering that California's economy dwarfs NJ, this is a little disturbing. What really disturbs me is if this economic downturn lasts through 2012, as I expect, NJ's options will be limited due to the debt burden it has already created.

To read more, see Mish's Blog post "Coming Collapse of Municipal Bonds; States, Cities Dig Deeper Holes"

Wednesday, December 9, 2009

Job situation being mis-represented

There are two great posts by Mish on the US Job situation. There are two major distortions of reality being perpetuated on the Public.

First there is the unemployment report distortions as discussed in post "Are you unemployed"?. What is considered to be unemployed is frankly, not "honest" assessment of the job situation. Further, when Jobless rates are quoted compared to the past, the past methodology was more honest than today. So 10% in 2009 is not the same 10% in 1992.

When you account for people who's benefits run out, took part time work but want full time employment, etc, its closer to 17%.

Second, the future projections on job creation is an outright ridiculous fantasy being presented by the US government. Some stats
  • At height of internet bubble, monthly new jobs rose to 264k.
  • At height of the 2005 real estate bubble, new jobs rose to 212k per month
  • The Feds forecast calls for 260k new jobs per month for the next 3 years to achieve 6% unemployment by end of 2012.
260k new jobs per month? I may be pessimistic at times, but come on, who believes this stuff? The public does, since the news headlines read "fed predicts 6% unemployment by 2012". The press doesn't dig beyond the headline, so the only place you can find sanity is on the internet. (and plenty of insanity, hence this blog).

To read more on the simple facts, and a more realistic forecast, see Mish's article titled "Fed's Unemployment Projections From Mars".

I added a new tag for posts that cover "RealityDistortions" to help document the ridiculous lies being fed to the public.

Tuesday, December 8, 2009

USD Making a comeback

US dollar is making a comeback, the question is, can equities levitate?

US Dollar chart for the last 6 months, the dead dollar may be rising again. As a US citizen, I am happy if this trend continues, my life savings is more secure. But any long equity investments are in jeopardy.

Natural resource plays, such as gold, are also in jeopardy, hence my exiting a week or so back.

From WebSufinMurfs FinancialBlog2

Where should long term investors invest?

The topic comes up frequently of where for retirees, long term savers, or just extra savings regardless of time horizon, put cash for safe storage and growth?

The number one real answer is, seek a certified financial adviser, I am not qualified.
With that out of the way, here is my opinion :)

The vast majority of savings should be in short-term low-yield US Treasury backed funds. Not state, not 30 year bonds, basically keep liquid.

The goal is to roll the cash into a longer term savings. But not now. US stock market is super-extended due for a correction. The US has done minimal reform, it has papered over its problems. The good news is, so has most of the world, making the US "not that bad" as being judged by it's peers.

Gold/Oil/Food/Resources? The time to load up was November of 2008. If equities pullback, as I expect it, they should deflate too.

The real question is, what is the next BUBBLE? 2000 was tech, 2008, was real estate, next up is resources (either just peaked or about to peak), the final end all bubble is US treasuries.

There is really 4 places to look to move from cash to investments. All of them require PATIENCE.

1) US international corporations - If/when the markets fall significantly, when prices look cheap again, us companies with international exposure should fare better in the next 10 years.
2) Natural resource companies - Right now, my opinion is with the market they pull back, but buying some natural resource based companies "on the cheap" to help hedge against a dollar fall . Alternately could put money into a currency you have more faith in, like Chinese yaun. (not sure if wise)
3) US Treasuries - if the day comes where US treasury interest rates go higher and higher, then one day, the treasuries change direction, perhaps after the Fed raises rates it starts to lower, 30 year treasuries to "lock in" the higher interest rates. Right now the rates are at lows compared to the last 20 years.
4) Emerging countries - once again, emerging countries are not valued cheaply. All the world markets have risen due to loose monetary standards. One day when it looks like the worst time ever to buy stocks, buy a little of emerging country index funds. India, China, are decent starts.

By investing when the next collapse occurs, or when one pops, your buing on the cheap. Right now, nothing is cheap. Make a plan and stick to it. Diversify when the sector is depressed.

Good luck, and don't put all investments in US cash and/or US stocks. Diversify into resource based funds, international corporations, and emerging markets. Thats a plan for the next 10 years.

Near term stock pricing
Slope of hope has excellent chart support/resistance lines, one dating back to 1932!
Gary's two cents on US dollar hitting a bottom and reversing.

Monday, December 7, 2009

S and P 500 price levels to watch

Some arm-chair basic price levels. When the market goes lower (sometime in the next 6 months....) these are the price levels to watch from the recent chart pattern.

If the market retreats, I am not so sure we will see any major down correction, probably the slow bleed/wiggle down. I am guessing the over-night surprises will be up, not down, to try to keep bears off their positions. But who knows, SPX 1152 before 1050 is possible.

From WebSufinMurfs FinancialBlog2

Sunday, December 6, 2009

Possible US Dollar reversal, market decline to follow

On Friday, the US dollar made a major leap in valuation. This is critical since a stronger US dollar means a stronger US, cheaper resources, lower interest rates, cheaper foreign goods. It unfortunately will likely mean a decline in the US stock markets, and has already started a panic sell on gold.

I have posted in the past about how the USD devaluation was a direct link to US stock market appreciation. IF the US dollar is going to start to appreciate, for months to come, one can expect the reverse to happen in the US equity market.

The world would love to have the US dollar appreciate. In effect their goods and services become cheaper to the US consumer, and therefore we can afford more of their stuff. Also, many countries are US creditors, and those "assets" appreciate. So before you start predicting US dollar collapse, ask yourself, what countries other than Iran, North Korea, and Syria want the US dollar to collapse?

China, ha! India? Russia? All of these countries directly benefit from the US government NOT collapsing, and their currencies getting cheaper vs USD. We witnessing currency devaluation insanity warfare. I warned of this previously as part of the mistakes made the LAST Great Depression. At the end of this volley will likely be all FIAT currencies suffering devaluation, with resources like gold and oil skyrocketing. Just not this month.

As previously started, I'll try hard to be conservative and load up on the gold miners when it is a GIFT for the next wave up. (click to read) I may start when Gary of Smart Money Tracker says to, but wont load the boat until I believe its time.

OK, to the charts! Gold, Gold Miners, US Dollar, US stock market, and beyond!
For the gold miner chart below, click to see buying gold miners on 10/30/09 and post on selling miners on 11/17/09.
From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

If The stock market breaks below the lower trend line, watch out!
From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2


FAS

There are some ETF's that represent 2x and 3x moves in underlying sectors on the stock market.
I have written about some of these ETF's, including FAS & FAZ. I have lost more than I care to say on these ETF's.

In any event, the Slope of Hope has an interesting comparison of FAS charts.


Saturday, December 5, 2009

Ben Bernanke confirmation hearing

Readers of this blog know I am not a fan of the Federal Reserve. Ben Bernanke has "saved" the world by spending trillions, and solved nothing. What it has done is kick the can so the next downturn will be worse.

The video below is a Senator Jim Bunning grilling Mr. Bernanke (to be fair mostly lecturing him). Well worth the watch, and good to see there are some Congressmen who get it.



Friday, December 4, 2009

Japan announces it is NOT dumping US Treasuries

There was a rumor flying around today after hours that Japan was going to start selling US treasuries. Of course, no one will get prosecuted for market manipulation, but that's a different post.

In any event Japan clears the air there is no plans to sell us treasuries.
This news should help support a stronger US dollar, which at end of day Thursday started to gain strength again.

The chart to watch is the long term bear trend line, which remains in-tact. I am out of gold miners (maybe 2% in), long nothing, short everything. But quick to cover if we break out above the line. See chart below. And good luck.

From WebSufinMurfs FinancialBlog2

Thursday, December 3, 2009

New Market Highs

The S&P 500 hit a new high today. Everyone but everyone believes the market is now entered into a new era. The sky is the limit.

And they are right, if you believe an infinite debt machine (US government), infinite US dollar devaluation, and increasing number of people unemployed are all fine without repercussions in asset valuation.

By reading this blog, it is quite obvious trying to pick the top of an irrational stock market is just plain idiotic. But it is equally idiotic to buy into a stock market based upon perception and not reality.

Gary of the Smart Money tracker, one of my favorite pay bloggers, sent the following in his daily update. (snippet of a much larger email)

I don’t know about you but when the average retail trader is sure the market can’t go down I start to get nervous. Even more interesting is the fact that large traders also don’t believe a correction is possible and their level of put buying has dropped even further than Moe Ronn’s. Folks, apparently no one thinks the market can correct. One thing I’ve learned is that when everyone is thinking the same thing then no one is thinking.

I’m going to add to that the recent Investors Intelligence numbers. This week’s survey had bearish advisors at the third lowest reading in twenty years. This kind of complacency hasn’t led to positive results over the next month. Considering we have a cycle low coming due in the next 3-4 weeks, I’d say we have another big restriction to further sustained upside.


Some Basic concepts I have learned in the last 3 years.

1) If everyone is "betting" on one outcome, that outcome cannot be the result.
2) Your chances of being right in an investment is significantly improved if you following the of insiders and large investors when it is good to buy or sell. This isn't to say they could be wrong on timing, but odd are better.
3) Items like This week’s survey had bearish advisers at the third lowest reading in twenty years. Must be taken as a warning. Rare events such as "3rd lowest reading in 20 years" means that this is not normal. And the more abnormal a situation is, the more likely the environment will return to the "Center".

Am I concerned the market may run much higher before turning? YES! The stock market could stay strong into January.

Am I concerned the market will never again cross below SPX 1025? Not at all. It will hit lower in the next 2 years, if not 2 weeks.

Good luck as always, and keep majority of savings in cash, under FDIC insurance. Or more preferably across 3+ banks to ensure you can't lose all your savings. Be ready to start buying gold miners SLOWLY when the next selling wave eases.

Wednesday, December 2, 2009

Chart Crazy

The US Stock market seems to be flat lining, the question is, what next? Is the market resting bfore lunging much higher, or a correction? If you know the answer for a fact, let me know.

For your enjoyment, some charts I am looking at. First up is S&P 500, will it break above bear trend line.

From WebSufinMurfs FinancialBlog2


I expect GDX to hit new highs then to roll over....but maybe this is the big move up already?
From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

http://picasaweb.google.com/WebSurfinMurf/WebSufinMurfsFinancialBlog2#5410528893468593922

From WebSufinMurfs FinancialBlog2



It really is a crapshoot, but the market must go lower in the next 6 months.

Tuesday, December 1, 2009

Dubai World and US Dollar

Dubai World
Quote from article:

“It is correct that the government owns Dubai World, but the decision when it was set up was that it should receive financing based on the viability of its projects, not on government guarantees. It’s not correct to assume that Dubai World is part of the government of Dubai. The lenders should bear part of the responsibility.”

Dubai world is a "flagship" financial company of the country of Dubai. That company is akin to Fannie/Freddie in the USA, where private sector assumed the government would back the companies debt in the event of a crisis.

In the USA, there is no amount too great to put onto the public debt load, in effect taking private companies and making losses public, while profits remain private.

In Dubai, so far, the country has not backed Dubai World. Do I think Dubai flinches and backs Dubai world, probably. But atleast that government is using this as an opportunity to strong arm compromises and political power before it assumes the private debt.

US Dollar

Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion.

Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?


Click on the quote to read the full article. What we have here and now is the world facing the US debt machine and questioning if it should be backed by the world. This crisis of faith is reflected in the US dollar valuation. If the US behaves more like Dubai, making private companies take their own losses, or at the very least use the issues as leverage to maximize the governments position.

I for now, am voting against US dollar collapse, and therefore I am once again out of gold miners.

Remember, if your for a stronger US dollar, and therefore, a stronger America in the eyes of the world, you are in effect for the US stock market to fall. If you want the US stock market to rise, without making REAL changes to the financial system, then your for a continued policy of US dollar devaluation until the US faces total collapse, and more than likely US government instability.

I'm for a stronger US, and stronger dollar, let the chips fall as they may. 2009 was not a fun year to trade, 2010 is setting up to be a tad bit more exiting.

Sunday, November 29, 2009

Gerald Celente

Audio interview of Gerald Celente, tells it like it is.
The stock market is a casino and the house always wins.


Saturday, November 28, 2009

Debate on Economics & Politics

I take this series with a grain of salt, but always good to hear various opinions.
Reason I take it so lightly is "Joseph Stiglitz" is part of this debate.
I have distrust for his motives and methods in general.

The full series can be found here. (click)




Thursday, November 26, 2009

Art

Today being Thanksgiving, I wanted to do something fun/different.
This has nothing to do with finance, but eh, its my blog.

I enjoy various photography, and one site is "deviant art".
Some artwork below. A second site for awesome desktop screens is InterfaceLift.

Tuesday, November 24, 2009

Economic News Roundup

In its second reading of third-quarter gross domestic product, the Commerce Department said the economy grew at a 2.8 percent annual rate, rather than the 3.5 percent pace it estimated last month.
My Spin, considering job losses are between 300K and 500K per week for the last year, and GDP according to current US Government estimates is 2.8%, and US national debt was increased by about 10% in ONE YEAR, this is not good. But if we ignore massive government debt, 2.8% is respectable all things considered, but hardly considered a strong recovery.

MUMBAI: The US dollar is expected to remain the carry trade currency of choice in the near term and the unwinding of this carry trade is unlikely to be as severe as that of the yen carry trade seen in the early 2008, say currency experts.

My Spin: When Japan became the carry trade of choice for the world, they experienced a 20 year recession. Their stock market and real estate has not recovered in 20 years! Let's hope the US dollar does not become the defacto carry trade currency for the next 1 year, much less 10+ years. And disregard people who say a weak currency is good for America. Ask that person why don't they put their savings into Zimbabwe currency or Mexican Peso?

FDIC deficit $8.2 billion in Q3
MySpin: The FDIC is BANKRUPT. The FDIC is floating the idea that banks pay their FDIC premium for the next 3 years upfront to get cash. Once that money runs out, what next? Ask banks to pay a premium for next 10 years? I'll tell ya whats next, the taxpayer will print money to pay itself. If that day comes, Gold is definitely where the action will be.

U.S. consumers seem slightly more confident about the economic outlook in November, but their appraisal of short-term prospects remains decidedly glum, according to data released Tuesday by the Conference Board.
My Spin: There is hope yet, the public gets that no real improvement has been made, except a paper shuffle. Now if only people would demand to enforce the law and stop making private debt into public debt to pay for billions in bonuses.


Japan Exports Fall Least in a Year on Global Stimulus

My Spin: Read the reality: Shipments abroad slid 23.2 percent from a year earlier, compared with a 30.6 percent decline in September, the Finance Ministry said today in Tokyo. Get that? A decrease of 23% is great as compared to 30% decline?!? My Rose colored glasses aren't as bright as other peoples.

Monday, November 23, 2009

The next phase of investing

History
If you read my blog, its no secret that 2009 was NOT a good year for my investing. (Gambling?) In March 2009, I wrote and my friend John Chinnock called "the bottom" of the near term Market, within a day or two of the actual bottom SPX 666. The lottery ticket recommendations made at that time paid off between 100% and 300% on investments across the board. Unfortunately for me, I didn't go all in, I treated it like a lottery ticket.
So while those trades where profitable, unfortunately, trying to call a market top took those winnings away. The market top picking started between 930-1000. Although the market only moved up 10-20% from that point, the market stayed high since July, wiping out all my earnings for 2009.

As Gary of the Smart Money Tracker and Karl of The Market Ticker both say, the markets can stay irrational longer than your bank account can handle. Meaning, trying to pick a top isn't a good way of investing.

Resources & Gold Miners
I point this out now because the next leg I am preparing for investing is trying to pick another trend, this time a parabolic bull market up. Since October of 2008, when the gold miner index (GDX) hit 17, I have been a resource bull. Meaning, resources directly or indirectly are a great investment overall, but I like Gold for the "extra fear" and therefore hyper-extension possibilities.

Sometime in the summer of 2009, I got cold feet and dumped my gold miners, probably not the wisest of moves. But it is what it is.

However, as a long term play, I have since October 2008 professed we will see Gold reach all time highs, possibly as high as 2,000 to 8,000 an ounce, but probably more likely between 1,400 and 2,000 an ounce.

Near term bearish resources & Gold Miners

Below is a a quote from another blog post, which sums up why I am against resources....again. Main reason? Because almost everyone thinks skies the limit.

While the fundamentals underpinning the gold price and gold mining stocks remain very positive, a growing subset of investment professionals has been arguing that the fundamentals are already priced in at $1,145 per ounce. Well-known market pundit Robert Prechter, founder of Elliott Wave International, released a bearish report on the gold price in his latest Elliott Wave Theorist publication. He noted that in the past two days, 97% of futures traders report being bullish on the gold price. According to MBH Commodities, this is the highest two-day reading since the organization began keeping this data in 1987. Moreover, the only other time there was a 97% reading was for one day - March 3, 2008 - only two weeks and $30 prior to the gold price reaching its previous all-time high of $1,033 per ounce. Prechter also pointed out that the silver price is still below its March 2008 high of $21.40 per ounce, while 95% of futures traders are bullish on silver. Mr. Prechter argues that the record bullish sentiment readings with respect to the gold price and silver price, along with the divergence of the gold price reaching new highs and the silver price lagging behind, provide strong evidence that the gold price is close to a significant top.

Recent View for next play
I have become interested in a market trend analyst named Harry Dent. Mr. Dent's rational for investing is based on population and market cycle trends. Mr. Dent called the market crash of 2008-2009 I believe 15 years ago, and in his 2009 book "The Great Depression Ahead" calls for natural resources to reach highs late 2009 or into 2010, before a nasty collapse. Unfortunately, this prediction is in a book published Jan of 2009, and his more recent refinements of his predictions are only available if you pay about $300 yearly for his newsletter. I paid for it today, so I have no comment on it yet, nor have not absorbed his latest vision. And quite a bit has happened since January 2009.

This past weekend, Gary of the Smart Money tracker reviewed his view of gold in his paid service. I will not go into detail of his market analysis, if you wish to read, pay his low fee of 80 bucks for six months. Anyone who has an interest in metals/resources should pay for his service.

In any event, in general Gary is looking for a leg down in gold/miners before the next and possibly parabolic rise of this sector higher.

The trick of course is when to get into a play, and when to get out. Gary will give his 2 cents on when to get in, and my opinion may differ than his. But Gary gives much more analysis than I do, so his 2 cents counts more. (hence pay for his services).

The gist is, I plan to ride this next wave down short the market (not short resources). I'll start looking for rolling into precious metals/resources WHEN IT LOOKS LIKE A GIFT. John Chinnock (friend) and my 2006-2008 market purchases where all spot-on for long term. John is and continues to be a sage of market timing. However I am unsure if this next play John will agree with me. This play is more of my opinion, faith in Gary, and a curiosity of Mr. Dent's predictions.

If you continue to read this blog, and plan to follow some of my market investments, I highly recommend paying for Gary of the Smart Money tracker, reading Harry Dent's book, and consider Elliot Wave International (stock charting) to get a reasonably wide view of the markets from different analysis.

One thing I learned in 2009, is don't get cocky, question everyone's 2 cents, scale into positions over time, and go with my gut. My gut says follow Gary's lead, and Mr. Dent a nice coincidence or corroboration to Gary. For now, no resources, and short the market.

See my disclaimer on the right about investing, and good luck to everyone.
And I reserve the right to change my mind completely, with new information. :)

Sunday, November 22, 2009

US Debt Clock

Take a little time this Sunday AM to look at the USDebtClock.org site.
They have added some new information, and when you put your cursor over an item, it now tells you the source for that information. Citing each piece of data's source is a great addition, and one that is made much easier using the internet.

http://www.usdebtclock.org/

Some day, what I think years from now, when the US dollar does finally implodes or to prevent the dollar from imploding US interest rates skyrocket, people will be outraged how did this happen? It's easy, no one cared about the facts of US government financial's. The US Government was treated like an infinite source of wealth. When in reality, it is an infinite source of debt.

I keep wondering, what is the magic tipping point, 100% of GDP in debt, 200%? 10,000%? There has to be a bottom for credit-worthiness.

From WebSufinMurfs FinancialBlog2