Welcome new reader!

Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Tuesday, March 31, 2009

Bankrupting America - Including Pension funds

My Sunday's post may have been a bit over-the-top. I believe I'm accurate that Americans are doing next to nothing to stop the tidal wave of change sweeping through the government.

What will be interesting to see is what Americans will do once the government agency insuring 44 million American's pension funds significantly depletes its reserves.

Article quote:
"Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks."

"If the auto companies go under, they have huge unfunded liabilities in pension plans that would be passed on to the agency."

We have heard that in 2008, stocks devalued 40% from 1 year ago, and many pension funds took a significant haircut. Right now baby boomers are retiring in droves, and older companies like GM with huge pension fund liabilities may be left without a parent corporation to cover the shortfalls. All of this is not leaving much time for these funds to "recover" their losses in the market. If the stock market collapses 40% lower from here, as I expect it will, these pension funds will need help.

That help is suppose to be Pension Benefit Guaranty Corporation, which as you read above, made a significant timing error. Since we won't see these pension funds running out of cash for years (not decades), we better hope the government doesn't max it's credit cards by the time the pension funds need bailing out.

South park, importance of saving money

Blogger Roundup 3-31-09

I haven't done a blogging roundup in a month, I had to cut out many great posts, to make the list reasonable. All of them are must-reads.

Mish's Global Economic Trend Analysis Blog (all articles are worth a read)
Quantitative Easing Begins; "Operation Twist" Revisited
Geithner articles on arrogance, Bad Bank Plan, and Gigantic Confidence Game
A Paycheck Away From Ruin
Bernanke's Grand Experiment Continues
Judge Rules Vallejo Can Void Union Contracts - Will lead to more government contracts voided if upheld
In Search of Common Sense
Boomers' Future Went Down The Drain
Is Debt the Lifeblood of the Economy?
Deflationary Depression Returns To Haunt America
You Walk Away LLC sued in class action lawsuit <-- I found this business particularly interesting.

The Market Ticker

Three Month Wrap-Up (1Q 2009)
- One of Karl's better rants
Open Letter To The FDIC Ombudsman - Since proven right click here.
The Bezzle Defined - Great listing of issues in US financial markets
WayBack Machine: HellFire Call
The end game approaches
Reserve Banking - Great explanation of how Reserve Banking works
The Inescapable Math on Mortgages

The Smart Money Tracker
Make a living or get rich
Here we go - Basically Fed can't print its way to prosperity
Mining stocks starting to decouple

Sudden Debt
CDS money in the shadows - Great case for deflation is bigger than inflation
More on CDS, and Great Depression vs now - Gold Standard vs Fiat currency
CDS: The Equity Connection Today
Race At Havoc House Bank

Mises Institute
The Fed Did It, and Greenspan Should Admit It
Is This America's Dark Knight?
Printing like Mad
Why Congress Must Stop the Fed's Massive Pumping

The Big Picture
How well does diversification work? - Nifty chart
Stocks vs Bonds - Fixed income may be boring.....but it works
Quadruple Confirmed Evil Knievel Formation - VERY funny...if not so true...graph of what is to come
New Home Sales Fell 41% in February 2009 - The bottom is NOT in

Many more great blogs can be found on the right of this blog, do your own reading.



Monday, March 30, 2009

News Roundup 3-30-09

Russia backs return to Gold Standard to solve financial crisis - Ahh gold, solver of all the world problems. :) It would be odd if somehow the new world currency became gold. I can't see that working.
Singapore May Devalue Currency, Allow 4% Loss - Another country joins the race to the bottom
Bank of America May Increase Salaries for Investment Bankers - to compensate for congress taxation
Geithner Says Some Banks to Need ‘Large Amounts’ of Assistance
Canadian Prime Minister Would Support Bank of Canada Extraordinary Steps
Europe Central Bank joins US & world with monetary helicopter - Big news, the world is all debt spending, so relative to each other, we are the same. :)
New Task Seen for Fannie, Freddie - Continue to kill capitalism, Socialism!
MGM's Las Vegas CityCenter averts bankruptcy
George Soros: Britain may have to seek IMF rescue - The IMF doesn't have enough gold to save all the countries that will need saving.
Romania gets IMF emergency loan - Case in point for Britain....
European Industrial Orders Plunge 34%, Most on Record
IBM to shift services unit jobs to India: WSJ
China calls for new reserve currency - I have blogged on china before, part of the agenda to take over as world leader.
US concerned over assertive China - If US was very concerned, we would stop needed China to fund our debt spending.
U.K. Bond Auction Fails for First Time Since 2002
California Home Prices Sank 41% Last Month on Foreclosures
Japan Exports Drop Record 49% as Global Slump - Absolute DISASTER for Japan. Lets see how long the yen maintains its value.

Sunday, March 29, 2009

Political Shift in America

My previous post talks about conspiracies, and my view of them, please read before proceeding to ensure you understand my perspective.

I have been thinking for years where America is headed towards politically, and I don't like what I see. In December 2001, fear mongering was used as justification for giving up hard earned freedoms, starting with the Patriot Act, without any significant opposition from the people. Fear mongering was used again in 2008, as I recognized the start of the insanity. TRILLIONS of dollars is being allocated from the public sector to the private sector to "save the world from collapse". This money is being allocated by very few people, with great secrecy, and no accountability. Further, we have central figures, such as US Treasury head, Geithner, making power grab to expand their powers beyond what has ever been done before. This also is being done without any real opposition. This past week we had a private institution, The Federal Reserve proposing to transfer assets from the Fed to the US Treasury, to assume the financial responsibility for the profit or more likely loss, of the transaction. As mentioned, this is in direct violation of the US Constitution.

There are more extreme examples such as US sponsored torture, the wiretapping of citizens without warrants, US Government building detainment centers across the country, US Military troops being deployed inside the US, and I'm sure you could find dozens of other examples, some from shaky news sources.

Read the paragraph above, think about the trend. Are you angry? Are you angry enough to do something? Donate to ACLU? Join the NRA? Spread the word to friends/family to spread the word about the trend? Write your congress people? (my line is here currently) Visit your congressional representatives? Join a protest?

If you answered at a level below "spread the word", the trend will not stop. And no one can predict where the spiral will lead to.

I am not making a case for conspiracy. I am making a case for "like minded people" pursuing the same needs and wants. The like minded in this case are those who seek centralized political, economic, military, and law enforcement control.

Without the US Democracy having active participation by the majority (NOT minority of radicals) to keep the US government in check, politics will shift, away from representing the public's interests to those of private interests. The strong will have have always taken advantage of the weak since the first two single cell organisms bumped into each other. The US public is behaving "weakly" compared to the strength of centralized power.

I will continue to post economic relevant information, and comment on it. I will post political events as they unfold. I will resist posting any political commentary. I urge you to find the line you are willing to oppose efforts by the power minority to weaken the power of the majority. I do have hope that the internet may enable enough information flow to resist the possible shift. Unfortunately, the vast majority of US citizens do not follow news to the depth that is required currently.

The political shift that I fear doesn't have to be "dictatorship" or anything that radical, it can come into a form of "public debt" enslaving the US from activity, resource shortages such as food, or other public fear tactics to justify consolidation of power.

I now have some insight of what a Jew or political activist went through with the rise of Hitler, each step is not that bad, but by the time the journey is recognized, the point of no return may have left you behind.


Given such turmoil in the world economy, the significant amount of fraud being uncovered, and the irresponsible responses by politicians, conspiracy buffs are having a field day.

I just finished watching "The Obama Deception" the that I posted on the 14th. I have been seeing a bit of Conspiracy stuff more and more, and felt it important to post my view on conspiracies. Understanding my point of view will be critical for subsequent related posts.

This will be a rather long explanation, for those with ADD, or busy lives, scroll to the end to see my synopsis.

Lets start with the definition of conspiracy, " any concurrence in action; combination in bringing about a given result." Other definitions involved criminal intent, etc, but I believe this one is suited best.

I believe that people in a similar situation, with similar values, with similar goals, will have similar wants and needs. For example, if you poll a bunch of "white, upper/middle class yuppies in Westfield, NJ", their voting habits, preferences for politics, etc will be "more aligned" than say, homeless people in NYC. The fact that Westfield, NJ residence may (I have no proof, an example) resist selling their house to someone they percieve as a threat to the image of Westfield, NJ, does not, in itself, make all people in Westfield, co-conspirators.

For someone who does not understand the background, mindset, and history of westfield, NJ, new to the area, if they felt they are being not treated fairly, may see all those involved "conspiring" against them.

So, in my opinion, a group of people, with like dispositions, with similar power (actions), together, does not make a conspiracy. To me the foundation for 99.99% of all conspiracies presented today is based upon seeing similiar behaviors and explaining it with a conspiracy.

For example, the mass fraud committed across the world by selling mortgages to people who in no way, could ever pay them off, does not mean there was a consirpacy among bankers to defraud. What is more likely, is once the RULES OF THE GAME WHERE CHANGED BY THE GOVERNMENT, the players (bankers) across the world found themselves with a similar desire to maximize profits by selling mortgages, repackaging them as "MBS", and reap huge personal profits. As the sales process became harder, the solution was to reduce the standards of loans, rather than the management and sales teams reduce their personal income.

Every step, from the realator to bank presidents where affected. Many politicians where incentified through donations, and the "quick" economic boost their voters experienced. The majority of the people in the world didn't care, their personal world seemed fine.

If you where to look at a group of people at a company, you could say that corporation boards "conspire" to increase profits, families "conspire" to provide a stable home and well being for their kids.

Take any conspiracy, and try to position it in this light, and you will see that the far majority of situations can be explained away as "like minded people" behaving in concert, rather than an overt gathering to plot/conspire to achieve a result.

I find that conspiracy buffs behave similar to some pagan religious beliefs. Looking deeper than the surface image takes work, and thought. Think for yourself before pushing or accepting a conspiracy theory.

UPDATE: 1-28-2016 , Great Article on probability:  http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0147905

Saturday, March 28, 2009

Saturday Video Post

Ron Paul, one of the best political patriots in Washington, fighting the tide of apathy.

Ad Ron point out, it is unconstitutional (and who cares!) for the fed to appropriate money.

Ron's fighting the fight, but as he points out, the US Dollar will face a crisis.

Part 1 of 2

Part 2 of 2 (despite title)

Friday, March 27, 2009

Lottery Tickets - 3 weeks later

On March 5th, three weeks ago, I posted time to buy lottery tickets. At this point the market has run up so much, so quick, its time to take some profits if you haven't already done so. This Friday I will hit 50% out of the lottery tickets, to lock in profits, and reduce my cost for the remaining shares.

I will likely not post again on lottery tickets, perhaps once a month or more, until I think the market has topped. But for me, this blog entry is fun to check on the lotto results.
The purchase price is assumed to be the day of the post, 3/5/09 . (posted at 12:01 am)

Stock 3/5/9 3/26/9 Percent Gain
AA 5.25 8.12 54.7%
F 1.81 2.94 62.4%
GE 6.66 10.9 63.7%
LVS 1.99 3.12 56.8%
MGM 1.89 3.09 63.5%
DRYS 3.54 5.12 44.6%
C 1.02 2.81 175.5%

I also mentioned "small miners" and they did great too. So returns did awesome for 3 weeks. I hope someone reading this blogged joined me in this stock lotto, and made a little extra.

The market has risen so fast, I will hold most of my other positions, but may take "just a little" off the table Friday.

Great Video from England, thanks to both John & Swan for submitting. Many parallels to the USA here.

Thursday, March 26, 2009

Insanity Expands to new heights

After writing yesterday's entry, I thought, wow, that's some of the craziest stuff I have heard in a few months. Then comes today.

First, Congress seeks to expand the US Treasury power to "at will" take over companies that are NOT banks. This means the US Treasury could take over, AIG, or any insurance company, or anything "deemed" a financial company. I'm curious if that would include companies like GMAC. This of course, is yet another unprecedented level of consolidation of power.

Next up, "U.S. Treasury Secretary Timothy Geithner said he was open to considering a new global reserve currency. " The US fiscal autonomy would be eliminated. I am assuming instead of one currency, there would be 4,
the Euro, Amero, Afro, and the Eco. My greatest concern would be the influence of China in this new world order of currency control, and such centralized power to the banking system, as to enslave the world through its consolidated power.

Both of these items are unprecedented. If either becomes a reality, they will join my "Financial Ground Zero" moments. In any event, this level of "crazy talk" by the US Treasury just re-enforces how critical natural resources is.

Speaking of which, gold has been strong, very strong. My only concern is why isn't it at 2x the current level. This type of "crazy talk" I would think would drive gold much higher than it is.

If I posted the US Treasury would entertain the idea of dissolving the US Dollar in favor of a new world currency back in October 2008, you would have written me off as insane. And here we are today, when it is a reality. Hence I only hinted at it in October of 2008, creating 4 global currencies.

Wednesday, March 25, 2009

US Fed and Treasury enter into incestuous fiscal policy

In the last week the Federal Government has entered into outright manipulation and incestuous fiscal policy with two far reaching actions.

1 - Federal Reserve transferring debt to Treasury (spending taxpayer money) without congressional spending approval.
First, the Federal Reserve Bank under the cover of providing market stability purchased "assets" from private industry as collateral for companies to use against federal loans. This isn't new. What is new is the Treasury was under a court order to reveal information about certain "assets" that the Treasury money was used by the Federal Reserve Bank under Freedom of information act. (In an attempt to avoid disclosure) The FRB has "asked" the US Treasury to take ownership of these "assets". This will nullify the court order, since the Treasury will take the assets onto it's own books, and not involve a (quasi) private interest, FRB. This also has the added benefit of the Federal Reserve Bank's balance sheet being cleansed by off-loading assets (that no one wants at their price) for US Treasuries (basically cash).

Short Take
Fed takes "assets" from banks, gives T bills to banks and/or counts "assets" as reserves to meet margin requirements. Fed gives "assets" to Treasury, in return for T bills. Repeat cycle. Treasury now responsible for eventual profit/loss for the assets.

Assuming a loss, this translates into the US Treasury "spending" money, without authorization of the US Congress. This is in direct violation of the US Constitution. (See Karl's blog entry)

But here is the secret. NO ONE CARES! And once this action completes unchallenged, only the most naive would think this is the last time this will occur. The Federal Reserve can pave the way to continue to take on "assets" then "stick" them to the treasury, and therefore the taxpayer. I for one applaud these actions, the Fed should (and will) continue to do illegal actions unless the citizens care enough to pressure the government to stop acting illegally. After all, its not illegal if no one enforces the constitution. At some point bloggers can be dragged into the streets and executed for inflammatory writings. And they should if no one enforces the law.

2 - Federal Reserve buying US 2/10/30 Treasury Bonds with "Assets (see 1) / extra cash".
The Federal Reserve in purchasing "long term T-Bills" is willing to accept lower interest rate on 30 year T-bills than the public.
Let me boil this down. Would YOU buy 30 year T-bill with under 5% return? I wouldn't and so wouldn't most since no one wants to lock in a low interest rate with all the financial games going on. So the 30 year T-Bill interest rate is going higher compared to the short term T-bills. I, and others will take 1% for 30 day T-Bills. (Previous post)

Solution? Have the "private" institution, the Federal Reserve Board, buy T-Bills at a lower interest rate. After all, we are all friends here, why would FRB ask for higher interest rates?
And in return, the Treasury will accept alternate forms of "money" (see number one above)
Once T-bills are purchased, the Treasury can "print" more money. (See Mish blog)

Why this is bad

The Federal Reserve board is a QUASI private entity acting on the "behalf" of the government. Lets get real, The FRB IS A GOVERNMENT ENTITY. These are all semantics.

If you accept FRB is basically the US Government, then what we have here is one branch of the government taking on debt/(spending) and buying from itself long term T-bills to artificially hold down rates, so the other branch can use the new cash to buy more assets. Further, the FED buys T-Bills from the Treasury, which allows the Treasury to print money.

If none of this sounds suspiciously like banana republic finance, then buy 30 year T-bills and don't worry about it, everything is going to be all right. For those more skeptical, buy natural resources to get off of US currency based valuations while you can.

These recent actions combined enter into my own classification of "Financial Ground Zero" moments.

Hurray for watching history in the making.

Tuesday, March 24, 2009

The Bull is here

From WebSurfinMurf's Financial Blog

Me and "Happy John" where a little early for the Obama rally we expected in January. January started with DOW 9K, recently ending at a low of about 6469. Today the DOW was up 6.84% at 7,775.86.

The target for this rally is come close or pass through the 200 day moving average. The 200 day is DOW 9,500 currently. Probably by the time this rally gets near that level, 200 DMA will be DOW 9000. If this rally somehow fails, hell should open and Satan's minions released upon the earth. :)

Gold I expect to fall in the near term. Gold miners should lose value, but I am *hoping* not too bad, since the stock market is rallying, it will somewhat help keep miners stock up. This is why I dumped GDX, and reduced my baby miner positions, as previously blogged. UPDATE: To clairify I have 1/4 of all my cash in baby gold miners CLICK (maybe more). I am still a huge gold miner proponent, I am just not adding here.

I am in 80% long in various commodity stock plays & lottery tickets, with 20% cash, mainly since the tax man will want his pound of flesh shortly. Everything rallied, OIH was a huge winner, Lottery tickets, etc. Frankly everything did great.

I expect a nasty pullback sometime in the next day or two, to "con" the shorters back in before rallying again.

Let me be clear, this ENDS very badly. We are entering the territory of currency wars, which can lead to real wars. The market will not hold its value when deflation regains its hold and takes it down. I am playing this long, (as I have been since January) for the full run. I'm in commodity stocks to hopefully protect myself if the USD has a currency dislocation.

For now, its party time. My friend Happy John had stronger faith than me, mine wavered in the final week of the beat down of the market. At the "top" wherever I think that is (200 DMA), I'll probably buy some puts, add to gold/gold miners, and wait for the final collapse of the world markets.

Commodity Rally
Happy John sent me this tid-bit on the commodities index, CRB. The CRB just recently hit 200 recently. CRB first broke through 200 back in 1974! And that was in the midst of massive inflation. Think about this. Natural resources, something that every human being and government on the planet needs just collapsed in an unprecedented way. Commodity valuation is like the "alternate" currency, meaning as every nation devalues their currency, commodities are a "scare resource" and therefore should hold or make significant gains compared to "photo copying cash".
This is the buying opportunity of a lifetime, one to retire on.
RJA (food), USL (Oil), OIH (Oil companies), GDX (gold miners index...just not now), GLD (gold...not now), SLV (silver), UNG (Natural Gas), etc.

Please see 50 year graph of CRB, with 50, & 200 moving averages. Notice how low risk commodities are compared to the history of valuations. Equities (stocks) only went back to values of the mid 90's. CRB went back to 1974 levels. To give you an idea how insanely cheap this is, in 2009 "$200" is worth "$74 bucks" in 1974 dollars. So adjusting for inflation, CRB just hit valuations ALL TIME LOWS!

From WebSurfinMurf's Financial Blog

Monday, March 23, 2009

Taxpayer Bonanza Giveaway

This past weekend the treasury department announced plans to "facilitate" the trading of Mortgage Backed Securities (MBS). To read on how this works, I'll defer to Mish's article (click). (Also see Karl's analysis here) US Treasury Tim Geithner article on his spin can be found here.

The bottom line to me is still the same. The question people should ask, is the government's actions helping PROPERLY assessing asset values or changing laws to fix broken financial structures?
The answer to me a clear NO.
What is happening is the US Government will "facilitate" buying/selling of these assets at prices banks are willing to sell at. This translates to me as the taxpayer PAYING the delta between true value and value banks want to sell at. ONLY a free market buy/sell with ZERO guarantee on losses will properly value the assets. This action, is enough for me to create another "Financial Ground Zero" entry, which I may add later this week.

Back to the goal. The goal is to understand how to properly hedge in financial markets for the ramifications. And this SCREAMS market rally! Possibly month(s) of rallying. And why? Because its yet another money give-a-way to the banks and other financial institutions. The more the taxpayer takes on risk(losses), the more these companies have less of a chance of failing. (NOTE: This translates into INCREASE chance of US Government failure, risk cannot be averted)

My previous graphs of reward to risk still apply, but the game is attempted to be rigged by the referees. If they are successful, the upside reward is greater than the risk.

I still like resources, I am still cautious on gold, but bullish on index funds, Oil, Food, health care, and lottery tickets.
For those with higher risk tolerance on a long term view, India and China funds.

Sunday, March 22, 2009


The most popular blog entry has been my article on USO vs USL. I decided to spend a little time looking back on both of these indexes. There is no way to "own oil" for investing purposes, except trading futures contracts. USO & USL attempt to allow a person to buy an ETF to "represent" the value of oil, and capture the % gain/loss reflecting oil's valuation movements.

The last blog entry on 2/11/09, I stated USL over the long haul has done better than USO. This is still the case. I also wrote that USO could do better "in the short term" if oil gains value, due to the way these ETF's design. Reviewing USO vs USL from Jan 07, "year to date", and since 2/11/09 (article date), USO did -17%, -12%, and +4.7%, respectively. Therefore if you stayed in USO since the blog article, the ETF performed better.

In any event, the premise that USL over time has retained value better than USO is still correct. In addition, if you want to gain value in the "short term", the ETF's DXO and UCO, "Double long" oil is a better way to capitalize SHORT TERM oil gain. (see more below USO/USL Picture)

From WebSurfinMurf's Financial Blog
Both over the long haul will lose value, due to expenses, but since 1/1/09, DXO and UCO appreciated by +18% and -30% respectively!
WOW, that is a HUGE difference. I couldn't find much details on DXO vs UCO on its fundamentals. If you have better luck, please post in the comments on this blog entry. In any event, its apparent that DXO works "better" than UCO, but that may also be a function of the price of the ETF (DXO 2-3 buck range, UCO 10 buck range)

I believe (unconfirmed) that:
DXO is based on Deutsche Bank Liquid Commodity Crude Oil Index
UCO is based on ^DJAIGCL Oil Index (Dow Jones-AIG Crude Oil Sub-Ind (^DJAIGCL)

Below is the graph of DXO vs UCO Year to Date, and a graph for last 5 business days. Notice that YTD UCO had a 48% difference from DXO, and in the last 5 business days UCO did worse by 1.40%!

Unlike USO/USL, I am unsure why UCO does so much worse than DXO. And frankly, I am not sure I care. The horrific performance difference is enough to look at DXO over UCO.

UPDATE:5/1/09 See entry on leveraged ETF's being Front Runned.

From WebSurfinMurf's Financial Blog

Saturday, March 21, 2009

Saturday Video Post

Former Presidential candidate, Texas Congress Representative, Ron Paul has been pretty much on target with the US fiscal disaster.

Ron candidly speaks out on the current bailouts, AIG bonuses, and how US Voters are culpable in allowing all of this to happen.

Marc Faber talks about commodities (of which I own gold, oil, food, etc)

Another Peter Schiff audio, its part of a longer series of clips. This particular gets to the heart of the fiscal disaster the US faces.

Peter Schiff discusses 1920's depression

Friday, March 20, 2009

News Update

Obama sets primetime news conference 3/24, 8 p.m. - My Spin - I expect similar to Bush announcement "Mission Accomplished", Obama to announce "bottom is in".
Intercontinental Clears $7.15 Billion in Credit Swaps - My Spin - If the CDS market becomes traded on a regulated exchange, such as this one, this would be a major step to avoid future AIG debacles, as well as improve market stability significantly. CDS valuation is over 40 trillion, so this is a small start.
Prudential Insurance credit rating cut to baa2 from A2 - No spin
OpEd piece - The United States Of Ponzi - My Spin - More accurate than mass media spin
NAACP accuses Wells Fargo and HSBC of steering well-qualified blacks into subprime loans - My Spin - Accurate or not, this spin I suspect won't play off well with millions of Americans burned, and we now have a black president.
Mexico Applies Tariffs to U.S. Products After Truck Dispute - My Spin - such a small story, with such huge ramifications if Tariffs as a "solution" gains steam.
Honda’s Credit Rating Cut by Moody’s on Decline in Car Demand - My Spin - I'd bet on Honda over GM when this is over.
Citi Losing Economist to Treasury - My Spin - Hopefully his new employer fares better than his old one.
In a first, bankruptcy judge rules Calif. city can void union contracts - My Spin - If this ruling stands, you can expect many cities to follow. Government unions will be the next to get broken. Those decades of promised paradise benefits in retirement will be curtailed.
AIG Consumer Lender, Plane Unit Downgraded by Moody’s - No Spin
U.S. credit card defaults rise to 20 year-high - My Spin - Anyone taking bets we will see an all-time high before this is over?

Thursday, March 19, 2009

US Government announces printing of cash will solve US problems

OK, my title is a bit of a paraphrase of what the Fed announced Wednesday. I'm glad I didn't sell my longs, and of course, hindsight being 20/20 wish I bought more. :)

So recap of today, the Fed announces two critical actions.
1) The Federal Reserve. a Branch of the US government, will buy 300 Billion of long term securities from the US Treasury, a branch of the US government. (This is the start, not the end of this policy)
2) The Federal Reserve, will purchase an extra 750 billion in "bad debt" from private institutions.

The news of this sent the markets soaring....and Gold, OIL, resources soaring!

So obviously if everything went up this is great news, right! Let me dive into item #1 a little more. After the Fed buys treasury department bonds, the treasury will then have the ability to mark the "Debt" sold the same as if it was sold to say...china. The Treasury can then print money, or do other financial actions with the "investment" it receives from the Federal Reserve.

Whats wrong with this? Let me go a little slower. Lets say I create two companies of which I own 100% of. If company A, buys debt of Company B, and Company B now has more "cash" to invest with, am I "more wealthy"? (for the conrads out there, its NO!)

ANY Announcement the "Skeptic" should ask, is the action that the government is taking "fixing" a root problem with business?
In the current situation it needs to be addressing
1) Transparency to regain trust of corporations (Honest accounting )
2) Enforcing laws to bankrupt companies that are in fact, bankrupt
3) Curb debt spending to strengthen the US balance sheet.

If it doesn't do one of the 3 items above, alarm bells should go off.
For a more in-depth analysis, read Mish's Post here.

OK, so what does this mean for investing, currency, and resources?

Well, in general, resources exploded today! This on anticipation that the USD will fall significantly, requiring more USD to buy resources. Also banks, and equities exploded today! in anticipation this "Free money" will raise market valuations.

Who knows where this ends, testing the 200 DMA yesterday I thought was slim, now I think its extremely possible in the months to come.

Bottom line is, steady with buying resources. Hold onto to lottery tickets, and enjoy the ride while it lasts. If you look into history "printing free money" has never brought prosperity to a country. It has brought high inflation, market collapses, and revolution. This kind of a rally is what I expected mid January, I was a tad bit early...again. Happy John kept the faith in the government doing the wrong thing, and the government didn't let us down.

If we rally into Friday close, you may want to consider lightening up for a possible Monday reversal.

I'm still not convinced gold is on a mega bull run, waiting to see gold go above 1100 and ounce. Long term however, this is the first step, in a series of steps, to ensure resources are winners, and all USA citizens are losers. Enjoy the ride.
Update Thursday 8 am: Both Gold and Oil on an incredible tear today, I may eat my hat on the gold comment just last night.

Wednesday, March 18, 2009

How Far does this bull run?

The bull is running, spilling blood on shorts. On Sunday I created a graph to show the possible upside. Today I refined it a little, with the greater picture shown. Since June of last year, the SPX has not broken upwards the 25, 50, and 200 day moving averages. The market has been in a freefall since.

The market is about to break upwards over the 25 moving day average, with possible throw over the 50 day. If this was to occur, the SPX should break the 50 around 900. The 200 day moving average to me is out of the question. If it does, it will route all pessimists, shorting the market.

So the upside (excluding the 200 day) is 6 to 16% up from here. The down is still about 35%. Moral of the story if you where caught long, and are a gambler, you can wait to see if the 50 day is broken upwards. But if we do, better get quickly protective and get out of your longs.
Between the 25 and 50 is by no means certain.

I think the 50 will get broken, if anything, to screw over the shorters/pessimists. The market likes to take the "easy money", and right now that's the market shorts.

If the 50 day moving average is broken, I may put some shorts (option puts) on companies. I'll re-assess at the time, but companies I want to short are: Deck (deckers), MA (MasterCard), buy SRS (double inverse short commercial), AMZN (No Rush), APPLE (no rush), TOL (toll brothers), Moody's (MCO). If I do, it will be a minor position compared to the LONG positions I have on RJA (food), USL (oil), GLD (gold), GDX (Gold miners), and various gold & silver miners.

For now its watch and see, and I'm not adding to my long positions. I do have OIH, USL, DXO, UCO, various gold miners, PFE, PPH, RJA, FEED, VMW, TBT, MU, EMC. Minor positions in FXI, FNI, and lottery tickets.

From WebSurfinMurf's Financial Blog
***CORRECTION**** There is a typo in the chart above, should read 3/17/09, NOT 5/17/09

And the next time you hear someone NO ONE saw this occurring? Watch this November 2006 video. Some of what he predicted is still yet to come.

Tuesday, March 17, 2009

Fed meeting Tuesday, announce Wednesday

On Monday I wrote about a series of serious steps recently discussed or being taken by the government in an attempt to "help" the financial quagmire. The FOMC is meeting Tuesday, with announcement 2:15pm Wednesday. This makes the next two days basically "who knows" what will happen. This Saturday is options expiration, which historically have had some major game playing by the market.

So Tuesday may be another move down, signaling the recent rally is breaking down. However the Fed makes its announcement 2:15pm Wednesday (click). I am not concerned about the down move unless SPX breaks below 666 with conviction. The Fed announcement could quickly reverse this trend.

So I refuse to buy anything, and I am glad on Monday that I sold 1/2 of many of my lottery tickets that had 50+% upswing in 4 days. (see my twitter account, info in link on right)

Once again, the market could collapse, yet again. Hopefully readers sold some of their positions Monday, from my Sunday post.

Listen to this 80 minute audio from Peter Schiff. If you do, you can stop reading my blog, he pretty much covers 100% the theme of almost all my posts.

Entertaining and Educational Peter Schiff Audio
VERY long for all parts, 10 minute increments, listen to part 1

Monday, March 16, 2009

Political actions are solidifying a Great Depression 2

Today, several news items came out that in my opinion, are making matters worse. No one action turns a recession into a depression. A collective of bad decisions to avoid attacking the root problem and attempting to create a patchwork of changes, construct a loooong recession or depression.

News Items today that I find particularly troublesome.
Price controls being considered. - Absolutely insane. Does everyone have a memory that lasts only 5 years? The 70's price controls was a DISASTER. My God. I thought this was suppose to be a free country, where CAPITALISM determines price. Apparently Stalin and Castro where right, the government should set price, not private industry. Start kissing *ss with well connected people, because the concentration of political power will escalate. Lets just hope this is talk and it ends there.

Mexico threatens tariffs in trade dispute - Yet another absolutely insane....but I predicted... Trade barriers start to erect, which if continues, ensure a horrible economic spiral. The last Great Depression was created when countries escalated a protectionism war, crippling international trade. Seems like once again, no one studies history, so we must repeat it. I'm sure Mexico has some very valid issues with the US, but tariff wars will not help anyone. OBAMA BETTER address this ASAP, otherwise other countries will smell blood in the water, and create their own sticks to beat the US and each other up with.

FASB rule changes for companies to value their assets, vote occurring on April 2nd: It would allow banks and other companies that have had a difficult time valuing illiquid mortgage and other securities, the ability to use "significant judgment" when valuing the assets. Once again, instead of restoring faith that companies are properly valued, rules will be changed to allow companies to "decide" what their assets are worth?!?! There is no end to this disaster.

Obama: AIG can't justify 'outrage' of exec bonuses - Great. Obama may interfere with pre-existing contracts by the government intervening and nullifying legal documents? If such action is to be taken, to undermine the rule of law, how about start by ENFORCING laws, before tearing the rule of law apart? AIG would not be paying out these bonuses if the government enforced honest accounting! People don't get bonuses on bankruptcy! This just goes to show political grandstanding to appease the masses takes priority rather than meaningful change. What the politicians don't realize that eventually the masses will still be unhappy.

The Federal Reserve new powers that include authority to monitor and address broad risks across the economy - That is the answer, increase the powers of a financial dictator in the US government to "address" issues as he sees fit. There is no time for debate, or congress to actually vote on spending money. No time for the government to enforce honest accounting. What is needed is more seat-of-the-pants last-second world-will-collapse action. My god. More power without democracy. More quotes "government to have comprehensive authority over all financial products marketed to consumers, including the consistent enforcement of consumer-protection laws related to mortgages and credit cards" This is an all out assault on capitalism.

Wells Fargo calls US Government "Stress test" asinine - One thing he is honest and right about is: "“Is this America -- when you do what your government asks you to do and then retroactively you also have additional conditions?” Kovacevich said. “If we were not forced to take the TARP money, we would have been able to raise private capital at that time” and not needed to cut the dividend to preserve cash, he said. " What this man misses is that the government has a deep need to takeover for capitalism, because capitalism can't be trusted. It needs to be orchestrated with price controls, minor dictators, and government "estimates" on value. The rule of law is about to die. Long live the new kings.

There is a bunch of other bad news out tonight, but the items above, show me that I am correct in doom-gloom for a long, prolonged, deep recession/depression. Unfortunately, it will take economic disaster of high inflation or financial collapse of S&P to 500 to prove me right.

And if there is a terrorist attack, the grab for power may make Bush seem tame. Lets just hope I am wrong, and these actions will make the US capital markets more "Free".....how it can is beyond my comprehension.

A music video on buy & hold of stocks, enjoy (Tnx Swan)

Sunday, March 15, 2009

Buy, hold, or sell US Equities

On March 5th, I posted buying some lottery tickets , that since then have paid off reasonably well. In the last 5 days, the US Stock market has advanced about 12% on the SP500 now at 757. As previously posted, a reasonable target is around 800+ range, and a high target is back to the level we saw Jan 2nd at about 930. However, the long term target for the market is 400-500 range.
Whats the point? The market has recovered 12% in 4 days, looking for additional 5% to 15% higher, with long term target if up to -45% more down.

If you where caught long during this collapse, the potential risk-to-reward to stay long is kinda like a game of chicken now. I never advocate buying 100% or selling 100% on any given day in your own positions. But to scale in and scale out is prudent, to reduce risk. Consider moving a percent of your holdings into something more secure than common equities, while looking at the downside risk to upside reward.

From WebSurfinMurf's Financial Blog

*NOTE* High inflation changes everything, if it occurs S&P500 could hit 1,5000, but inflation would be high.

I am still holding the lottery tickets, hoping to put stop-losses in if/when they pass 50% up mark. Also, the target down does not apply in general to resources, however, if/when the equities make new lows, I wouldn't be surprised to see resources also be affected downward.

Bottom line, NOTHING is easy, and everywhere I still see risk. I am still in somewhat looking positive, but getting concerned that the up side may be getting stretched thin soon.
What is also amazing is that any significant news from the US government to actually address trust, transparency, and the true issues behind the market, could change the entire outlook of the up and downside for the better.
None of this is destiny, but without proper action, my long term view of S&P down 35-45% from here holds.
NOTE: Please read the disclaimer found here. I have zero professional credentials on equity trading, and further, you should assume I am as incompetent as your own stock broker. :)

Saturday, March 14, 2009

Saturday Video Post 3

For the majority of us, the market is up this week, and we need to keep the good mood going.

For those who can't get enough of paranoia, world kaos, New World Order, etc, a new YouTube 2 hour movie called "The Obama Deception" is the thing to watch! I plan on watching it this weekend myself. (Thanks for my paranoid reader Swan for the link, ready with his bag of gold, a gun, and a map on crossing into Canada)

The Daily Show has been shredding CNBC, one of the targets was Jim Kramer.
The comedy channel has the videos, but the site has been destroyed by the traffic of viewers.

Jon Stewart was no hold bars on the attack. But the best point is, wealth is created by work, not leverage, and that is EXACTLY why I think this recession is going to last a while.

It is a great watch, enjoy

Friday, March 13, 2009

Lottery Ticket Results - 7 days later

One week ago, I posted time to buy lottery tickets. I am trying to hold my lottery ticket stocks until I get 50% returns, then put stop - losses for 50% of the shares to minimize my total costs. I reserve the right to panic out. :)

Lets take a look at the returns/losses 7 days later. Keep in mind, when I posted the lottery tickets, they where long term lottery tickets, just so happens the market turned this week.

All prices are the price on post day (after close) and next day price, to cover the range you might have bought at.
AA bought 6.25-5.25 Currently at 5.98. Change between -5% to +14%
F bought 1.87-1.81 Currently at 2.10 Change between +13% to +16%
GE bought 6.69-6.66 Currently at 9.57 Change between +43%
LVS bought 2.23-1.99 Currently at 1.77 Change between -21% to -11%
MGM bought 2.21-1.89 Currently at 3.17 Change between +43% to +67%
DRYS bought 3.90-3.54 Currently at 4.31 Change between +10% to +21%
C bought 1.13-1.02 Currently at 1.67 Change between +47% to +63%

So average returns are +18% to 30% in 7 days. Great start for "lottery tickets".
Not to mention, the "small miners" are mostly winners also. And of course, the ONLY lottery ticket I bought in large size was LVS, I'm damn good ;)
Of course in 7 more days the gains could easily be wiped out. But hey, these are lottery tickets, fun to see where this lands!

MONSTER Bear Market Rally

This bear market is pissed off, and is biting back hard!
I was "waiting" for a monster rally for weeks, I "finally" threw in the towel Feb 27th. My friend happy John never lost the faith.
So how high are we going? S&P500 a good guess is 800-825 range as a reasonable target. However the market could bite back much harder and keep going.

Expect a pullback, possibly tomorrow. But the Bear is loose, and gutting the short sellers. The short sellers will now panic and cover adding fuel to the fire. Of course, government news can kill the entire run if they do something stupid. Right now the government is talking about suspending mark to market accounting.

Has the fundamentals changed? Hello no! Is the world facing another great depression, heck yea! Is there an army of bad news, of course. Is spending TRILLIONS of dollars by giving it to reckless corporations going to have consequences, yes! But for now its time to follow the whipsaw of the market and ignore the financial fundamentals. Lets look at the S&P500 below. Target is S&P about 800-840 range. My 1st grade charting guide shows an extreme high is 900-950 range. Update: See "The Smart Money Tracker" for Gary's spin.

From WebSurfinMurf's Financial Blog
Right now the 752 may be upper resistance, hence why we may pullback tomorrow.

For those readers in the market for the next 10 years+, take notice, I don't think this is the bottom, just a "short term" bottom. Take a look at the chart below to put where the market is in perspective to the last 20 years. If you truly believe (I respectfully disagree) that this is 'the" bottom, load up on stocks, get in cheap. But I don't see the economy turning around for years, and therefore the market is destined to break the recent lows. This rally could last months and go even higher than I posted, just long enough to start convincing people the water is safe...it is not.

So hang on to some longs. I'll post on the "lottery ticket" performance, 7 days later.
From WebSurfinMurf's Financial Blog

Thursday, March 12, 2009

Gold and Gold Miners buy now to buy later?

I blogged yesterday that I am trying to avoid buying Gold miners until they pullback and are "cheap" I also said "Gold and gold miners should get CRUSHED, as I previously blogged.".

I subscribe to a variety of pay-for-blogger analysis, and frankly, I don't do any analysis except try to take in everyone else's. Sure I look at charts, daily moving averages, etc. But that's about it.

Gary of the "Smart Money Tracker" has a pay service that is a must if your into looking at precious metals and miners. In today's pay service email, he makes a strong arguement to buy Gold miners now or around here, etc rather than wait for a cheap purchase that may not come. If you want more details, go pay for his service for his explanation.

For myself, I'm a bit torn. I know with all my passion that gold miners is the play for the next few years, and I want to get into miners full tilt at some point. But I recently took a pretty decent hit in the market, and I don't want to take a chance of another hit. So I am going to take my own advice and buy over time, up or down. The next decent down day I'll add, a little. And try to buy gold miners between Gold at 900 an ounce down to 600 an ounce. It may never get cheaper than here, but could go to 750. 600 an ounce I'm planning for as a worst-case scenario. This is better than trying to pick some sort of exact bottom.

If gold makes a run for the border and hit 1100 an ounce, I can "chase" later, although I would rather not. But I just can't take the chance that gold tanks and be overly invested.

I have blogged a bit on Gold, Oil, food, resources, and I do truly believe they are all long term winners. But its been a struggle for me to convert from shorting financial stocks and buying into what is basically a long term "doom" play.

UPDATE: "Happy John" in response to this blog entry said:
1 - when a good case can be made for an asset to move either higher or lower in the near-term, it's best just to stay out.
2 - Money missed is FAR better than money lost! Opportunity is endless, money is not.

I wish I had seen this video when I posted "Preparing for Anarchy", pretty funny stuff (thanks Swan)

Wednesday, March 11, 2009

Rocking Tuesday

The "big" news today is Citi turned a profit .... if you ignore the billions given to them by the government. I'll make a separate post for other News.

Tuesday is the market is off to the races, DOW 10K here we come! ;)
OK, one day of the markets riding high hardly marks a turn around. The markets could easily turn around and tank. But if the market continues to rise, the short sellers who have been king for 6+ weeks will start to run for the hills, and the markets could really fly high.
S&P500 above 752 with conviction is something I want to see, with possibly a pullback, retest, and continue move up.

Gold and gold miners should get CRUSHED, as I previously blogged. I am revising target even lower than before. No worry, resources are still the #1 play for the next few years. But I plan to be cheap buying back into the miners. I'm talking wal-mart cheap. I'm going to try to sit on my hands until gold crosses below 750 an ounce and re-evaluate. As previously blogged no one wants gold to rise, (including all governments) except fear buyers and miners. Another reason I fear gold will get crushed is every town now has 10 store signs saying "we buy gold". Once gold falls fast enough these mom/pop shops should get panicked, starting a buzz for gold lower. Also I am very concerned that gold could not make significant new highs as the market plunged from DOW 9K to 6.4K in 8 weeks! That should have generated enough panic to see gold at new highs, which we did not.

I am still a big buyer of gold miners, but looking for fire sales prices in the months to come. However, who knows, gold may never get low enough and I'll miss the run up. That's OK. I'll admit I'm wrong if gold gets above $1100 an ounce. I refuse to get burned.

What else is bullish, how about China's trade deficit with the USA has COLLAPSED. This makes the US look much stronger. In November, China trade surplus was 40 billion, last month 4.8 billion. This is an absolute disaster for China and a big push for the USA. But don't be fooled, this will end once inventories are consumed and the US must start re-importing from China.

I previously blogged about lottery tickets on Thursday, quick update on the stocks.
AA 6.24/6.12, F, 1.87/1.85, GE 6.69/8.87, LVS 2.23/1.66, MGM 2.21/2.87, DRYS 3.90/4.47, C 1.13/1.45

LVS is a big loser, I may hit out, but over all not too bad after first major up day. I'm holding all of them looking for 100% profit to sell 1/2 and let the rest ride.

As promised a GREAT video from The Daily show, making fun of CNBC well worth the watch!