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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.

Sunday, January 31, 2010

A Safe investment, US Nickels

For emergency purposes some people are buying gold, to have on hand and preserve wealth. One problem I have with that is someday the Government may outlaw gold as a form of payment, as was done in the Great Depression. Also it does smell kinda apocalyptic to me. Storing in US paper dollars may involve the extra risk the USD has some real issues in devaluation. If that happens a little nest egg for emergency purposes may not be worth that much when needed.

Another way to have some cash on-hand and have it rise in value is US coins. Not all coins mind you, certain coins that are valued more in material (metal) than the face value. One example is the US nickel. Did you know that one 5 cent piece (US Nickel) is about 5 cents in raw metal? There are better returns on investment in older coins, but on the nickel you can go right to a bank, get a bunch, and ensure it will always have a reasonable value no matter what happens to the US Dollar valuation.

As USD strengthens, the nickel will in-fact retains it's 5 cent face value, but may be worth less than 5 cents in material. So no matter how you look at it, its a pretty safe, but not very practical, storage of purchasing power.

For more on coins value in the material visit http://www.coinflation.com/

And once again, thanks to reader Ryan Swan for the link.

Friday, January 29, 2010

Market Rumblings and GDP

Friday at 8:30 am, GDP numbers are announced. It could trigger a market retrace (rally) from the recent lows. The key is to watch is S & P 500 hit above 1150, until it does, I believe the markets are going to continue lower for the next few weeks, before reversing. After 10 months of a strong advance a little reality is needed before the market may resume its uptrend.

This market is considered by some as a new bull market. At no point in history has a bull market produced such a huge rally, S&P 500 up 72% in 10 months. Last time that happened was the Great Depression. As further item to consider is the recent market movements. The market first hit S & P 500 at 1080 4 months ago, and in 7 days the market retraced down. The last time the S&P was at 1080 was about 10 weeks ago.
The point is, at any sign of issues the market is tracing quickly as compared to the advance.
Food for thought.

A chart for your pleasure.

From WebSufinMurfs FinancialBlog2

Thursday, January 28, 2010

State of the Union responses

President Obama's State of the Union address

Peter Schiff Responds

(thanks Swan for Peter Schiff link)
Ron Pauls pre-State of the Union comments

Ben Bernanke reconfirmed

Mr. Ben Bernanke getting renominated is yet another major blow to the long term health of the US economy. The Federal Reserve's policies since Mr. Greenspan was nominated have inflated bubbles through monetary policy manipulation. Each time the bubble bursts with significant impact.

There where bubbles blown in the 80's and 90's, each one adding to the slush fund of financial corporations, with the first major blow off in 2000 with the Tech hype boom bust. That followed with the real estate boom and bust. The next bubble I suspect will be US Bonds/currency valuations. If I am correct, the bust of that will wipe out the US dominance as financial leader. As much as I don't want this to happen, the recklessness with monetary policy, deficit spending, and lack of law enforcement has brought this moment onto ourselves.

The way this plays out maybe months or years. Assuming it will come to a final pop over years, it will be hard for people to connect the dots on how we arrived at the end-game.

I am attempting to mark each event with a label on this blog, Financial Ground Zero. Of course at the time of the pop the last straw will get the entire blame for the pop, but nothing in life is that simple. If there is a huge crisis in the US bond and currencies, make no mistake, it took years, if not decades to make it happen.

And boy, do I hope I am wrong, misunderstanding the big picture. In the near term, anything is possible for the various asset valuations across the wide variety of investment options with Mr. Bernanke getting reconfirmed.

Jim Rogers interview

Comments on US stocks, dollar, and US government officials.

US Dollar strengthening

After watching a video with Jim Rogers, I discovered another analyst that caught my interest, Kirby Daley. I did some searching on the web, Mr. Daley works for the Newedge group, based in Hong Kong. I couldn't find a place to follow his thoughts on the economy unfolding. But Mr. Daley is starting to appear in various media segments.

I found an interesting video of Mr Daley, recorded around Dec 21st where Mr. Daley makes some future predictions. One of them was strengthening of the dollar, which has come to pass since the interview. I created two links for me to reference periodically for appearances of Mr. Daley, one using google news, another using youtube.

Second video is the most recent discussions from Mr. Daley from Jan 11th, where he states US markets prone to correction at anytime. Jan 19th was the high (so far) for last 52 weeks of US stock market.

Wednesday, January 27, 2010


I didn't get to hear the entire Obama speech yet, so I may follow up with a more definitive commentary.

In general, plenty of programs to help the economy.......through the government once again stimulating the economy through more deficit spending. One of the things I heard Obama say was cut taxes and raise "Fees" for the big banks.

Frankly, it sounded like to me a hodge-podge of buzz words with no comprehensive plan to make the US stronger by reducing the dependence on deficit spending.

I did like hearing ending tax breaks for companies to move workers outside of the US. That should have never been the case anyway. What country except the US pay's its corporations to off-shore work? There may be others, but I doubt its above single digits.

The upshot is the market may move quite a bit up, gold may find a near term bottom, or the open could be up and quickly turn. It really is, as always anyones guess whats next.
The level to watch is S&P 500 (SPX) stays under 1150, if that breaks, the chartists will say markets are going up.

Good luck

Indicator the market is about to turn

CNBC during the upswing doesn't showcase the core Stock Market Analysts I follow to state their case for a market downturn. Now that the market looks like it may have topped, here comes the interviews from CNBC, this one is Robert Prechter of Elliot Wave International. Aside from charting, cycles, or other stock market predictors, this may be the best one.

NOTE: As things heat up, I am likely to have more than one post a day. There will be more information worth noting as the market declines. Today my other post on Fear and Incompetence is a rant. :)

Fear and incompetence

The SEC announced plans to place restrictions on short-selling starting next month. Shorting stocks is the same as going long stocks, but in reverse. Most investors want to buy low, and sell high for a profit. Short sellers want to sell high and buy low. The shares they sell are "Borrowed" from 401K and other huge blocks of shares that are not liquid.

Further short sellers do not comprise of the majority of stock activity, by far most people are long stocks. There are two reasons for this, first is risk. You can short a stock and theoretically lose infinite money. Meaning, the price you short a stock, it could just keep going up for the next 20 years. A good example would be if you shorted 100 shares of Microsoft when it went public. That would bankrupted just about anyone.

Second reason there is not as many short sellers is based on mathematical profit, it isn't in your favor. Say you buy a stock for 1 dollar, and over time it goes to 101 dollars, you made 10,000% profit. Pretty good! Now say you shorted a stock at 100 dollars and ride it to ZERO (below a buck), best you can do is double (100%) profit. There are other methods you can use to get greater returns, such as stock options. But for direct share buy/sell, buying has math on its side for higher profit.

So why even allow shorting? Well, a one sided bet isn't really a bet and it will tend to cause stocks to become more volatile and over-inflated. Anytime a short seller goes short a stock, EVENTUALLY he has to buy back that stock. That is basically what happened in the last 10 month stock rally. At some point, most people short had to cover, the losses would be too great to withstand. As the short-squeeze occurred, the stock market lost most resistance against rising and caused it to become over-valuated. The correction as you can see is pretty harsh, since there are no buyers. If there where short sellers in the game, many would buy as soon as they have a decent profit, and attempt to re-short higher. Once the shorts get short-squeezed, there just isn't enough buyers on the way down. The price of the stocks are over-valued, and even the bulls don't want to load up.

When short sellers are thrown into the lime-light as adversely affecting price, its from ignorance and incompetence. The COMPETENT thing to do is to enforce the law and ensure company values are transparent and quantified. Then the stock price will stand on it's own. Also to ensure the only way to "bet" against a company is on a listed and regulated securities exchange. Large corporations have what are called "dark pools" of money that trade off-exchange. This has the effect that trades they want you to see are one direction, when the dark pools may be doing the opposite. (selling)

In effect, when you restrict shorter's, you restrict traders with net worth under 100 million dollars or so. Those who can't get into the dark pools to trade unregulated. Further, typical restrictions do NOT apply to market makers. So market making companies can still short stocks.

When regulators FEAR the ability for a capitalistic market to determine price, unfettered, the INCOMPETENT action is to try to change the market rules. The COMPETENT action would be to ensure those companies are properly valued by supporting transparency, able to withstand extra selling pressure, and to ensure all bets are visible on regulated exchanges.

Monday, January 25, 2010

Monday Charts

I have been slowly honing into a pattern. Sat/Sun, videos, audio, etc. Monday charts, leaving Tuesday-Friday for random blogging. So true to spirit, Monday is chart day!

I went a little chart crazy this past Thursday, the 21st. Today a smaller subset.
First up is my favorite Index, the S & P 500, (SPX), next is QQQQ, which as of the 21st was a non-confirmation of a trend change.

From WebSufinMurfs FinancialBlog2


From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Sunday, January 24, 2010

One trader short 23 percent all silver

The precious metal bugs are always looking for conspiracy, and they have found something worth noting. This video supports the idea that 23% of ALL silver is shorted by one trader?
Seems insane and a potential disaster in the making.

(Thanks Swan, crazy gold bug ;) )

Saturday, January 23, 2010

Gold is NOT the answer

Let me be clear, I may become a huge investor in gold once again, but that isn't because I believe gold is a true form of money. If I do turn to gold, it will be to catch the bubble in gold as a valuation asset, but it too will eventually implode as it is just a shiny rock, not true wealth.

Gold as a utility for money has some advantages, a small amount has large value, so it is portable, it has universal value, and it has a scarcity in the production.

The negatives are many, first off it only has high value if it is in demand. If governments declare it illegal tender, or other measures, it will devalue. If the public becomes disgusted with gold due to disappointment of it's valuation, it will fall. Gold as previously blogged is not a good mechanism to capture productivity in the form of money. It forces every action in society to be linked to mining activity, hardly a good thing to tie to.

Bill Still of the Secret of Oz has a video where he tries to highlight historical refrerences how a Gold standard does not help the common person.

Friday, January 22, 2010

Peter Schiff and Marc Faber Video

I have blogged before about Peter Schiff. He is now running for Senate.
In any case, Mr. Schiff's comments on recent regulation, economy, and gold.

Below that is Marc Faber commenting on Obama and economy.
Thanks to swan for links

January 21st 2010 in charts

January 21st was pretty anti-climatic for me. I feel almost silly for looking for market reversal since SPX hit about 930. Assuming the recent high of SPX 1150 holds, I was only off 23.6% from the market top! :) Ok, just a tad bit too early. Unfortunately for me, I repeated history from myself. In August 2006 I started to short stocks thinking the market would start to reverse in 2007, only to be a full year too early.

Back at SPX 930 I was so sure what was in store for the market next. After witnessing the greatest Bull market comeback in US stock market history, a 72% gain in the S&P 500 in about 10 months, I am not as sure. One thing I am looking at is what I discussed in post on Catastrophic Wave C, if you haven't read that post please click. I am NOT certain that charting has any merit yet. My biggest concern is the impact charting has at investment corporations around the world.

But Wednesday the 21st WAS a major day, it signaled a break in the bull trend line dating back to March 2009. Maybe the correction we just witnessed is it, and another 10 month gain resumes, but I do doubt that. When the S&P 500 breaks to a new high, I may start having to rethink were this is all going. But for now I'll take it day by day assuming the market direction overall is lower.

I strongly recommend anyone long to look at their positions and set stop-limits now. I won't preach what level, because maybe the market resumes the advance. But if it doesn't, and the decent resumes, you need to cut your losses. (or keep profits) I am speaking from experience, since I sold my longs at 930 and starting to short...24% too early!

For your reading pleasure, the US stock market in charts, and a big bear at the end of this post to signify the Bear has come out once again. How long is yet to be seen, but a sleeping bear for 10 months may be a bit hungry.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSurfinMurf's Financial Blog

Thursday, January 21, 2010

News Roundup

There has been daily events of news being reported worth noting. Of course, the mass media doesn't highlight most of them. There was some news today that inspired me to do a news roundup.

The Federal Reserve Bank made a killing on AIG contract settlement
- What is great about this is, the US Treasury and Federal Reserve bank worked in concert to take taxpayer money and pay 100 cents on the dollar for paper worth 33% of that, if not less. But with this parachute bailout, the Fed makes money on selling illiquid assets. Good stuff. I wish the Federal Reserve Bank was a public company, I'd put all my stock in a company that can take taxpayer money in crisis to profit.

Obama to Push Volcker Reforms to Limit Big Bank Risks - I have covered Paul Volcker before on this blog, pretty much one of the only high ranking officials that knows what must be done to shape up America fiscally. Obama's proposal still falls short, re-instate Glass-Stegall, the law that was in place since the Great Depression, and because of it's repeal in 1999, caused the vast majority of this economic mess. And a proposal is a far-cry from enforcement.

Japan Loan Demand Falls Most in Five Years - Japan has some severe issues ahead of it, after 20 years of a depressed economy and stock market. America is following their fiscal plan, as I blogged before. Mish has a GREAT post on Japans situation.

Federal Housing Administration to Raise Fees - "The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout." The FHA is basically out of money, and will need a taxpayer bailout eventually. And tightening standards? That doesn't smell to me to be a boom for housing. The FHA is an abomination to mankind and needs to be killed, as any government business that could be handled by private business.

Stiglitz Urges Second Round of U.S. Stimulus Spending - And then a third, fourth, fifth, and sixth round. Basically continuous government deficit spending until the government also goes under. The other alternative is return back to capitalism, clean house, and restructure the corporation (carrot) executive bonus system.

NY Fed’s Response to Subpoena on AIG Is ‘Incomplete,’ Issa Says - I am shocked! The Federal Reserve Bank isn't forthcoming with information? Issa must be mistaken. Accept the Mob, I mean Federal Reserve Bank is above the law and move along.

Greece widens funding search, euro takes fright - If the president of Greece happens to be reading my blog, I have the answer to your problems. Cut spending to the point your country has an annual SURPLUS instead of DEFICIT. With a company....I mean country....that takes in more money than it spends, I suspect it will make it a little easier to get funding. Just a hunch. Luckily the US is able to run infinite deficits and will never have to face this problem.

China's fourth-quarter GDP up 10.7% vs. year-ago - I used to be impressed by China's statistics, until I read about how China builds cities no one (really) can afford to live in, or have more commercial real estate in 1 city unused than all of Manhattan has. Making stuff no one uses should be excluded from GDP, and then I would be impressed.

Swiss Banker Blows Whistle on Tax Evasion - The moral of the story, only people with under billions pay taxes. So start cracking and get your savings up, so you too can avoid taxes.

China Asked Some Banks to Limit Lending, Regulator Liu Says - Drop in the bucket, not impressed, but it is a start.

And finally, we'll finish off with some nice conspiracy theory. (Johnny if ur reading, remember what I said about Obama....) I stated I don't believe in conspiracy theories, this topic is the exception. :)
TrimTabs on that ‘US government-rigged stock market’

Tuesday, January 19, 2010

2010, year world destabilization begins

Unfortunately, during severe economic downturns countries try to gain support from it's citizens by diverting attention to global politics. Frequently these political topics are really over-hyped trumped up topics that push hot buttons on citizens. In the USA, we experienced it by targeting Iraq after 9/11 which by the Bush Administrations own reports stated Iraq had nothing to do with 9/11.

There are countless examples through time. Individual events happen all the time, however when the world experiences pressures on multiple governments world wide, the result can be unexpected. Iceland already collapsed. Venezuela, Argentina, Ireland, Greece, Dubai, Hungary, Romania, Bulgaria and the Baltic states of Latvia, Lithuania, Estonia, with Spain, Portugal and Italy right behind them. (I'm leaving out the many countries typically teetering on brink of disaster like North Korea, and obviously Haiti.)

As Argentina destabilizes, to redirect attention away from the government Argentina passed a new law declaring part of the Falkan Islands as theirs. For those of you over 30 years old, you may remember Argentina tried this years ago, and England came in and retook the province back quickly.

This will unfortunately start protectionism to escalate and more demonization of other countries. I fear at some point the US will be the target of wider range of demonization as the crisis unfolds.

America is already starting to demonize China. Granted much of it probably has merit, but the right time to deal with these issues was when trade was opened up. To go back now and take actions against China after trade is flowing freely will be reacted to with a stiff response. The US is calling for tariffs added to Glass, Steel, Tires, Pollution, and many other items. Of course China will retaliate with their own tariffs and the escalation will continue.

As the financial pressure builds, so will political spin. Look past the topic at what always matters, what is going on with the money flow in that government, and the answers will become clear on the real issues that should be focused on.

Depending on how this law is attempted to be enforced, we may quickly see Britain have to use military force once again. Argentina has no chance to just quietly annex the Falkans. So why do this? It is obvious to create an enemy outside of the government, to mis-direct. This may work with it's citizens in the short run, but in the long run the government will need to face it's issues.

Monday, January 18, 2010

This week in Charts

My last post is about how Elliot Wave Chartists are calling for a "Catastrophic wave c", downturn in the markets. For this week in charts, I went a little nutz and created a bunch of graphs, some long term view, others since march 2009. Purpose is to help me and readers put current situation in context of history.
NOTE: The wave C that is being called for is clearly NOT CONFIRMED according to the charts below.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Sunday, January 17, 2010

Chartists and Catastrophic Wave C

From WebSurfinMurf's Financial Blog

There are many schools of thought on how to predict market trends. All of them are flawed. But many make excellent history-documentation systems, meaning they can't predict the near term future but can as we use a very large etch-a-sketch creating the stock market indexes document the market's movements.

Some use time and general repeating history trends, like a drum beat, showing how the market has cycles every X period of days. The Smart Money Tracker seems to use something like that, I am not fully able to comprehend all the data he uses for his prognostications. To Gary's credit, his drum beat seems one of the most accurate from my perspective. Pay for his service if you want to learn more.

Another system is stock chartists. Stock chartists use patterns to "document" historical charts, and using such a documentation system claim to be able to forecast where the market is going. The (voodoo?) science is extremely detailed and to me, interesting. This system has been in-place for decades being used to assist armies of chartists in market investing.

To explain the US stock market history, back to the great depression, and the chartists view of the market trends to today is beyond the scope of this blog. A short summary by McHugh is available here. For more information, see Elliot Wave International and check out their books or pay for their service.

The bottom line is, all of the chartists I have followed have said, we are approaching the biggest swan dive ever witnessed in the US stock market. Their view is 2008 was an opening act. Ignoring the argument whether Elliot Wave charting is science or sophisticated palm readers, one thing is clear, their voice and viewpoint does give the markets something to listen to. To me it's like listening to Fox news, or NPR, the information generated may only have a grain of truth, but when people are nervous, the spin voice gets more weight.

So when these chartists say, that "Catastrophic Wave C" has begun, its prudent to pay attention. Catastrophic Wave C targets the stock market BELOW the lowest levels we have seen to date. This will take place, according to chartists, on an undetermined time line, but once started, the markets will not see a new high beyond the start for years. ( I am leaning towards the bottom of this swan dive may rise hyper-inflation that will have the markets far exceed the highs, but then again so will everything else.)

Elliot Wave international has announced, it has begun on Friday. McHugh, another chartists with a pay service says they SUSPECT it has begun.

ugh is of particular interest. Back in August of 2009, McHugh called for the Dow Jones Industrial Average to reach a high around 11,000. This past week at close Thursday the markets reached a high of 10,767. If that was the final high, hats off to McHugh, thats a pretty good call over 6 months ago. Since McHugh called this (so far) correctly, vs Elliot Wave International who thought the high was August 2009, I am putting a little more weight on McHugh. (Of course, I listened to EWI instead of McHugh....)

McHugh's pay service also announced the POSSIBLE start of catastrophic wave C on Friday. They have a few more indicators that have to trip to confirm this has begun.

The fact that both these chartists are now almost in agreement, unlike in 2009, should give any investor pause for concern. The chartists (voodoo) science isn't worth debating. What is important is to recognized there are legions of investors who do believe in Elliot Wave Analysis. And what is more important is they will en-mass in a reasonable time-period come to the same conclusion. And that may be the trigger for the sell off.

Charting, to me, is either a valid science, or merely a science that becomes a self fulfilling prophecy tool. In either case, time to wake up and pay attention to the stock markets. The greatest come-back in the history of the US stock market may be over, (72% in 10 months) it may be time for the bear to return.

Control people through pain or pleasure

Good commentary on society today in the comic below, found on the Slope of Hope.
If you think about it, pretty much is a commentary that communism ruled by a stick, and capitalism ruled by a carrot. And what we are witnessing is the extreme conclusion of capitalism today.

I agree, Huxley was right. Enjoy (Thanks to John for the link)
From WebSufinMurfs FinancialBlog2

Saturday, January 16, 2010

Financial News Hour

One of the podcasts that I don't listen to enough (there just isn't enough time) is Jim Puplava of the Financial Sense News hour.

One of the podcasts the site creates has one on the financial crisis, but one special guest is Dr. Robert McHugh of http://www.technicalindicatorindex.com/. This podcats covers several books and gives some 2010 forecasts.

I recommend you go to the homepage to check out the material there.

Thursday, January 14, 2010

This isnt a typical recession, revisited

A while back I posted the chart below from Mish's blog. This time, a blog called Financial Armageddon put together some interesting charts worth looking at.

I lifted only the first chart, got to click to the blog to see the rest. Pictures tell the story. The takeaway to me is, this isn't the typical recession. I doubt charts presenting the downturn like this would ever appear in a mainstream publication.

Click on image to see the full blog article.

From WebSufinMurfs FinancialBlog2

Wednesday, January 13, 2010

Tuesday, January 12, 2010

Unprecedented Market Rally in History of US Stock Market

Monday the US stock market is breaking records for highest percentage gain without a significant correction unseen since the 1930's. For those of you not familiar with history, 1929 marked the worst stock market crash in modern US history, followed by the largest percentage rally in US history, followed by the Great Depression.

The stock markets have climbed higher today, but on low volumes. Two of the services I subscribe to, which I highly recommend, is The Elliot Wave International Financial Forecast & Gary of the Smart Money Tracker. What I find fascinating is two different respected market technicians I follow, Elliot Wave and Gary of the Smart Money Tracker have significant contradictions on the next market move. Gary in a recent post pretty much called charting ignorable, since the market will follow it's own trajectory. EWI has quite a lot to say about the current market retrace using charts.

For me, charting isn't a predictor (aka Gary), but it does serve to illustrate extreme situations, which puts context in historical, and therefore probability. But for anyone who has been burned at the Casino knows, the most improbable can happen when least expected.

This months Elliot Wave International issue of the Financial Forecast (Jan 2010) has much to say, Two charts I asked for reprint permission for my blog, and are presented below. I do believe has impact as it tells a startling story. The first graph compared the start of the Great Depression where the US stock market retraced 52.3% before its multi-year decline. The US stock market is over 53% retraced, surpassing the Great Depression rebound. That alone should be a warning sign that things are not normal.

But as Mish's Global Economic Trend Analysis points out, the more recent event of Japan shows it's stock market retraced 140% from it's low before it resumed its 2 decade devaluation which continues even today. As Karl of the Market Ticker points out, Japan is considering such drastic measures as to put the currency at risk, and by the Japanese central bank continuing to promote its 2 decade failed (and wrong headed) battle to turn the economy around through fiscal games. If anything Japan illustrates what the US will probably do, repeat the wrong headed policies until the implosion of the US dollar. Hopefully Japan beats the US to it, and the US wises up from that event.

But I digress. The important point is even with a failed economic policy, counter rallies can extend farther than anyone would expect.

Another chart from Elliot Wave shows in context from the .com bubble and now, illustrating events that mark a likely market top. This includes glorifying the Fed chairmen who brought the US financial disasters to our doorstep in the first place, investor confidence at all-time highs, these are all typically contrarian indicators.

So while all indicators are pointing to a massively over-valued US market, Japan shows we could have a long ways to go, as per Gary. Elliot wave is trying to pick the top, which I have personally experienced is a fools hobby. In any event, all of this should tell you, we are in abnormal times, and ensure you pick your pain points to change investments.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Monday, January 11, 2010

Unavailable first half of this week

I will be unavailable to post on this blog through Wednesday, but I may be able to find some time.

The markets soaring on an already over-extended run, farther than the 1930's, is disturbing to say the least. What we now face, due to the interference on a grand scale by the world governments is one of two "broad" scenarios. A large market correction, over months or many years, or currency crisis.

The currency crisis will be in the form of currency devaluation to a new low, and that will send commodities, something that the world is competing for, into a price surge up. Ironically, that is the theme I starting talking about in the fall of 2008, and why back then I bought gold miners (but didn't hold).

Gary of the market ticket expands on this thought, and pretty much says doing chart patterns is idiotic. If inflation does come, in the form of currency depreciation, the markets returning will look like a party until the bill comes. Then through the face of rocketing resource prices, then the market will fall.

Sunday, January 10, 2010

Playing Bond Markets

For those who don't have the savings to play in the bond market, or lack of knowledge of how to do so. (thats me), there are some interesting ETF's.

Check out these ETF's



I am very sure that there will be volatility this year in the leveraged ETF's. Worth checking out. Remember, the 2x and 3x funds tend to lose money over time due to expenses.

Saturday, January 9, 2010

The Secret of Oz

I recently watched a great video called The Secret of Oz. You can purchase it at Amazon (click).

I highly recommend anyone who would like to know the US history on currency, and the Federal Reserve Bank. In a nutshell, Mr. Still covers how the country originally did not need banks to create money. The Federal Reserve Bank is the 6th incarnation of the banks involved in money creation.

Sure, some of this sounds a bit fringe, but the history presented made me think more critically about the US debt and financial system.

The backdrop of the movie is explaining how The Wonderful Wizard of Oz was a story created using symbolism of the US monetary system. For example, the gold path is gold, etc.

Thursday, January 7, 2010

Great Quote from Mark Faber

“The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I’ve been doing my part.” - Marc Faber

Thanks to John Chinnock for the quote.

Wednesday, January 6, 2010

Hussman Funds

One of the blogs I periodically read is on the Hussman funds web site.

Below is a snippet from the most recent article. Click to read entire article here. Its good to see people like hedge fund managers are capable of seeing what is really going on.

January 4, 2010

Timothy Geithner Meets Vladimir Lenin

John P. Hussman, Ph.D.
All rights reserved and actively enforced.

Reprint Policy

“The best way to destroy the capitalist system is to debauch the currency.”

Vladimir Lenin, leader of the 1917 Russian Revolution

Last week, while Congress and the nation were preoccupied with the holidays, the Treasury made a Christmas eve announcement that it would be providing Fannie Mae and Freddie Mac unlimited financial support for the next three years. The Treasury's press release notes:

“At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth. Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years.”

Put simply, in a single, coordinated stroke, the Treasury and the Federal Reserve have encroached on spending powers that are enumerated for the Congress alone. Under the Housing and Economic Recovery Act of 2008 (HERA), the Treasury has no such open-ended authority. Indeed, the applicable portion of the Act explicitly limits the total amount of mortgage principal (not losses, but total principal) as follows:

"LIMITATION ON AGGREGATE INSURANCE AUTHORITY.—The aggregate original principal obligation of all mortgages insured under this section may not exceed $300,000,000,000."

Tuesday, January 5, 2010

All of this will end badly

US dollar is finally on the mend, US stocks hit new 12 month highs, US manufacturing increased in December. All is well, and another 5 year bull market is to begin.

Or is it? I really want to believe it. I would love to just end my fixation with the stock market, go back to focusing only on computers. But I know that the largest financial bubble ever created has weakened, and all the printing of paper, changing accounting rules, and lack of law enforcement will NOT result in prosperity.

What I don't know is how the downside will manifest. Stock market collapse lower than before? Market flat-lining 30% lower? US dollar collapse? Hyperinflation?

Point is, this rally will continue to whatever level the steam runs out. Heck, another 6 months is not impossible.

But a few facts to consider.
  • Root problem of the financial system as not been addressed, only papered over.
  • The greatest stock market rebound since 1930 is now. SPX 666 straight up (almost straight) to SPX 1132 today in about 9 months.
  • US dollar recently retested historical lows before firming up. US dollar isn't high enough to call it safe from being devalued to new lows.
  • Unemployment is about 10% officially, and closer to 16% if you include underemployed and those who couldn't find a job after benefits expire.
  • There is no growth leadership industry. late 90's was Internet. 2002+ was cheap loans to finance very nice large houses. As covered already, 30 year interest rates for US treasuries is approaching a long term trend line, that if broken, will signal significantly higher rates.
  • Events like Iceland collapsing, Latvia, Greece, Ireland, and other countries under severe pressure from world community. Large corporations failing or becoming zombie institutions under government control.
These are NOT normal times. Hence the reason why laws are not being enforced, and litterally trillions of taxpayer money is being used to cover private debts.

But covering debts doesnt make it go away. It shifts who takes the hit from the bad investments. If capitalism was adhered to, the investors of the corporations who took too much risk would fail. That's it. The economy would take a significant hit and begin to rebuild.

But instead the losses are shifted, not eliminated. The manifestation of those losses will come as higher interest rates for eveyone and every business, US dollar devaluation, or some other way. The losses just don't go away with no impact.

So rejoice the market is higher. But if the market goes 100% higher, everyone's life savings will be destroyed through inflation. If interest rates rise in response to ridiculous spending curve of the US government, then housing will fall, more companies will fail as debt load will cripple, and US government budget will get pinched as the 15 trillion of debt has a higher cost to maintain it.

The image on this blog states "There is no such thing as a free bailout", and I firmly believe it.

Monday, January 4, 2010

2010 Predictions

I made quite a few very specific predictions last year. This year I want to try something different. That is, to make a few general broad statements of where I think the markets will be 1 year from today.

This serves two purposes. One to provide a clear, concise view with less confusion in the predictions. Two to mimic what most people are trying to do, and that is pick a place to put some savings into.
  1. 2010 will reach a crisis in the US bond market. Interest rates will (if not already) become a concern and will need to be put in check. Rates will over all drift higher, squeezing the life out of the US government and economy. Rising rates will apply downward pressure on housing.
    a) Disclaimer: US rates will NOT be a concern if the US stock markets collapses in 2010. We are talking down for the count collapse.
  2. US stock market will be lower on 12/31/2010 than 12/31/2009. Guesstimate is a wide range, SPX 1,000 to as low as 500. Since that is pretty ridiculous range, I'll choose 750
  3. Inflation, despite everyone's concerns will NOT manifest. However, Currency devaluation is possible, and that would be reflected in higher commodity prices. US Dollar gains strength first half of 2010 in general, and loses strength, in general towards end of 2010. US Dollar remains above the lower trend line, as depicted here (click) for 2010.
  4. Precious metals (gold) will have major valuation issues between Q1 and as late as Q3, but should firm up between Q2 and Q4. I am very sketchy on time line, since precious metals valuation turn around will depend on US dollar, interest rates, and stock market fear.
  5. With that said, Gold will end higher at the end of 2010 than current levels or at the very least rising rapidly to surpass current levels. (from it's low)
  6. US economy will NOT rebound, and will be in a quagmire of problems straight through 2012 and beyond.
  7. There will be major crisis in 2010, including, but not limited to: State(s) faulting on debt, counties failing (avoided in 2009), more countries failing, and in general, increasing unrest in the world (wars, terrorism, etc)
  8. Protectionism will continue to rise (tariffs, refuse to trade, etc)
    NOTE: This is one potential event to destroy stock market valuations.
this list is pretty broad. But it covers 8 specific points that can be judged on. Items 7/8 are a little squishy, but I should be able to look back to judge.

Feel free to put in the comments your own 2 cents, and I'll try to add them to my end of 2010 summary.

Sunday, January 3, 2010

2009, A year in charts

It helps to take a step back and put a little perspective on things.
Today's post is 2009, with various charts showing 2009 in context of the last 2 to 14 years (depending on stock)

In general, pay special attention to the US 30 year treasury rates, this is a hint of what is to come.
From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2