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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.

Thursday, December 30, 2010

Where was the Precious Metal Pullback?

back a few months back I wrote the low in precious metals should hit about now, before the next leg up.

Well, gold and other precious metals haven't gone down, they in fact are maintaining price if not rising.

Gary is speculating for return of the final wild ride of the bull precious metals market. In his pay service has set a dollar price when that will trigger.
It's hard to disagree with Gary's logic. I submit that it is a good time to start adding to positions, but I am not sold on loading up right now. If'when the USD breaks below 78, I think it is a good time to load up. It should be a clear sign that the USD is going lower instead of higher.

The fact that precious metals did not pull back significantly is really a good sign that the precious metals market is about to take off upward. But as they say, big reward comes with big risk.



Tuesday, December 28, 2010

Rare Earth Minerals

I listened to a pod cast last month that got me into Rare Earth mineral. For some reason, I didn't blog it. Kept slipping my mind, I thought I had posted on this.

At the time, I bought AVARF and LYSCF, both pink sheet stocks, priced 3.11 and 1.70 respectively at the time.

Unfortunately, I missed the announcement that AVARF was going off pink sheets with new symbol AVL and being placed into the S&P 500 ETF named TSX, announced December 20th.

The stock has started a significant rise, one I expect to be a long one for AVL.

Today it hit a high of $7.18, but beware (130% gain), this week stocks are trading with odd volumes being a holiday week. This could be a pop that goes back down. But I doubt this stock will see sub-4 bucks again.

The volume has been huge, over 8 million shares traded today. When I bought this stock it traded at about 100,00 shares a day.

So jump in now at your own risk. At this price we could see a pop just below 5 bucks to get people shaken out, but it could also make a blazing run much higher.

If you don't know about rare earth minerals, I mentioned it in a previous post (click).
China mines 95% of the worlds rare earth minerals, many of which are key to high tech electronics, military weapons, and new energy technology. (solar, wind, etc).

China has also announced they plan to limit the rare earth exports in raw form, basically blackmailing the world to manufacture products in China, since they own the raw materials.

Since rare earths are in the category of resources, I like the play.
I added to my position, but I am late to the party, if I wasn't sleeping at the wheel, I would have bought more when it broke through 5 bucks.

I may continually add to this position if it continues to rise. A stock fresh out of pink sheets may have quite a bit of room to run.

Wednesday, December 22, 2010

US Budget Crisis Ahead

My post today on Military spending gave me a response from a friend in email.

The 2010 deficit is projected to be about 1.2 trillion dollars, according to Wikipedia.

Further, below is a projection of how in 2015, at current spending rates, each working US person will have a debt load of 1.2 million dollars for current US debt and future debt obligations. That is a little mis-leading, as it assumes the US will pay off what it has promised in the future.

Excluding future broken promises, by 2015 each working person will be servicing the interest rate of $200,000 of government debt. Assuming the government can borrow at 5% interest in 2015, which I believe will not be possible, but lets assume it, then each person in the US will need to pay 10,000 just to pay the interest on the 200K. Then extra money must be spent for military, education, social security etc.

As you can see, it just won't happen. This is the crux of my current fixation. The transition from our current trajectory to what is actually possible to sustain will be dramatic unless action is taken.

Anyway, 2015 projected debt clock below if we do nothing to improve matters.

US cannot afford military spending

Military spending is by far the worst way any country can spend its money, economically speaking.
When the government spends money on the military, the investment payback to society is low. For example, if the government decides to build a un-needed bridge, at a minimum the local population does leverage the bridge to build up their economy. Even such an expensive project, if done when not economically warranted, pays back to society.

If a battalion is stationed in a foreign country, the military spends in that local economy. A missile, after built, when used, does not give back a return on investment. The items built, and labor spent, does not produce a product that American Society can leverage.

Granted, the world is not one we can merely trust and disband the military. America, as any leading nation, must have a military that can defend itself. And if needed wage war to protect it's interests.

So while I do support the concept of America having an army, I don't believe it should be spending 5% of total GDP on the military. Think of it this way, if every economic transaction had a 5% "surcharge" tax to pay for war, to avoid deficit spending, would the support for the large military system exist? Or would a 1% surcharge be more supportable?

Click to read topic by Mish, and an eye-catching graph to highlight America's over-allocation to military spending.

Tuesday, December 21, 2010

State and Local governments bankrupt

Back in 2008, I posted on how the bankruptcies would eventually spread states. I was a TAD bit early. Sixty minutes posted a video on how the states are bankrupt. While I welcome the recognition by main street media, I am constantly bewildered how long it takes media to pay attention to these crisis situations.

NJ Governor Chis Christie pulls no punches.

"This is different, isn't it?" Kroft asked New Jersey's governor, Chris Christie.

"It is very different," Christie said. "The reason it's different is because the only choices left are choices that people previously have said were politically impossible, that you couldn't do. You couldn't cut K to 12 education funding. You couldn't do those things. They were, you couldn't talk about pension and benefit reform for the public sector unions. That were third rails of politics. We are now left with no alternatives."

"Just the third rail?" Kroft asked.

"Yeah, that's it. I'm just gonna grab it and go, and let the chips fall where they may," Christie said.

"This is unsustainable, right?" Kroft asked.

"Totally unsustainable. We have a benefit problem," Christie said. "It's not an income problem from the state. It's a benefit problem. And so we gotta change those benefits."

To be fair, New Jersey didn't fund the pensions 13 of the last 17 years. But there is no going back now....and instead the state employees will get hit. Every year NJ didn't fund the pension there should have been marches on the capitol to insist to alway fund. Water under the bridge now.

Video well worth the watch.


Monday, December 20, 2010

This Week in Charts


Not much to say, markets staying up there. US 30 year bond rates pulled back, oil is up, gold is hanging in there. It is looking like the last few weeks of the year will keep up there into 2011.

For those that held positions from before 2008 crash, the markets rebounded 87% (typo not 187) from lows. Only 20% more gain from here to new highs. Not sure if the right thing to do is keep it all in the markets or take some off. Well, I know I wouldn't keep it all invested, but then again, my 401K has been in bonds since 2007. I'd be in resources, but my 401K doesnt allow that.


To the charts!

Sunday, December 19, 2010

Bernanke's War

I try to listen to the pod casts from the Financial Sense News Hour, by Jim Puplava when I can.
This week the episode titled Bernanke's War is a must listen for those paying attention to the monetization of the economy by the Federal Reserve bank and US government.

While I find the pod cast on target about Mr. Bernanke, I do warn listeners that both people presenting the episode are gold bugs. Meaning gold is the real money or safe storage of wealth. So while I listen and learn from such podcasts, please be aware everyone has something to prove and sell on.

I am a gold bug, but probably not for the same reasons as most. China and India are going to continue to consume gold as they increase in wealth. This podcast does back this view, but mixes that gold will go up due to money printing. I find this view slightly flawed.

But the important part isn't about gold. The important part is knowing the man, the myth, the legend, Mr. Bernanke.

Enjoy.

Saturday, December 18, 2010

View change

I have updated my new reader comment and added the bold below.

Short take
The US Stock market and the US economy will see substantial pressure from a massive deflationary collapse that will not end until the US government enforces honest accounting and loses by US banks are realized. Current target for S&P500 and DJIA for a "bottom" is 550/5000 respectively
or lower either in USD cash or living standard degradation equivalents. For example, if cost of living increases by 25-50%, in real terms a S&P 500 at 1,100 is at 550.

This is an important shift for me, I have been essentially at this opinion for the last 6 months, but figured it was about time to articulate in this blog and on my new reader.
If Americans cost of living radically increases, the likely cause will be a lower valuation of the US dollar in terms of cost of resources.

This is a differing view than most who look at USD in currency exchange rates from other nations. Therefore, I am of the opinion that it is possible that the market does not go materially lower in us dollar terms. But the expenses of Americans going up in effect is the equivalent of a market crash. So theoretically, the S&P 500 could go up to 2,000, but be making new lows in relation to living standards of Americans.

For example, if new mortgage rates are at 15%, food has doubled, gas has doubled, in terms of people's daily "wealth" related to market valuation, a S&P 2000 is worse than if it was S&P 500 and the cost of food, gas, and rates where lower, say food at 25% discount, gas at new lows, and rates at lowes.

The general point is, the US financial system still faces many challenges, and the losses stemmed from corruption and bad policies must be realized. The decisions being made may result in the market not going 50% lower, but living standards cut drastically. Someone has to pay for the losses, it will be either stock holders, bond holders, or the people.

And it is increasingly looking like politics want it to be the people.

Friday, December 17, 2010

Gold is NOT the answer to fixing money


I previously covered the Secret of Oz DVD, and I recommend purchasing it.

Updated 8:27 am, thanks to Anton for comment.

I recommend watching the full video available on Youtube.
This compliments how gold produces worse inflation/deflation swings than fiat money, explained by Karl here: (A MUST READ, and video below)


Alternately available by link to watch the video by clicking here. You need about 2 hours.
Adding you tube video to welcome new reader link

Thursday, December 16, 2010

The US crisis ahead, inflation vs deflation

As previously covered, the US government bond market is a key component for the economy.
The ability for the US government to continue to deficit spend and be able to finance such activities depends on interest rates. If rates explode higher, the cost of debt rises, and will curtail government ability to continue unlimited spending.

There are two primary camps in the apocalyptic view of the world of the fate of the US, the US dollar, and debt.

Inflation
View one is that Ben Bernanke and the federal reserve will be able to inflate us out of this mess. Please keep in mind that if they succeed, that will mean the cost of EVERYTHING will rise, but historically societies do NOT keep up with wages to compensate for higher cost of living. The net will be a very painful period as people struggle to pay their bills, or simply just to buy food. Part the transition expect middle class america wiped out. What will remain is the upper 5% and then everyone else. The good news is, people can pay their debt off with a much less percent of their income, since their income will go up, but the debt owed will not.

Deflation
The other view is the US government becomes under such stress, they curtail their financial bottom line. This will cause more private companies to fail, more bankruptcies, and less government spending. The less credit/money available, the more deflation will take over. The US dollar will remain relatively strong, and purchasing power of people who save will be maintained.


The moment of truth
I am in the camp at the moment that we will see a currency crisis, that will result in the US dollar to go down as faith in the dollar diminishes.

The moment of final tipping point will be with a bond market crisis results in the inability for the US government to sell debt at a rate it offers. The bond market demands of the US government will default, higher prices for bonds.

It will be then that we will know if the dollar remains relatively strong, or collapses. (over time)

No matter who you talk to, if they know for a fact it will be one way or another, it is to say that you know how people will act in pressure or crisis situations.
The fact is, people are not always predictable. Keep an eye out for the bond market crisis moment and act accordingly once a new coarse is set.

What I CAN say to tip the scales is we have not had significant bouts of deflation since the creation of the federal reserve bank in 1913. See chart below and read more at The Market Ticker.

This indicates the likely (but not certain) outcome will be the USD thrown under the bus to avoid deflation.

Below is inflation vs deflation rates since 1750. Notice that once we went off a gold standard, there is only monetary inflation.


Bonds, Cost of borrowing is the heart of all finance

The stock market, derivatives, real estate, natural resources, and the host of other financial instruments put together does not compare to bond interest rates.

True, unregulated derivatives markets total over 600 trillion, and they alone could destroy the world economy. But bond interest rates is the foundation of the solvency of most countries, corporations, and citizens.

The cost of borrowing for a day, 1, 5, 10, 20, and 30 years is the lifeblood of the economy. Credit, not cash, is where the real action is at.

Americans have enjoyed a relatively stable US bond market for about 25 years, after my favorite Federal Reserve board chairman, Paul Volcker, used the federal reserve bank to tame the markets back in 1981. He did this by RAISING rates to control credit creation and inflation.

Unfortunately, after Mr. Volcker we got Greenspan and Bernanke, who have used their position to use monetary policy to blow financial bubbles in stock markets, real estate, banks, and now resources.

The counter to such wreckelss monetary policy is the US treasury bond market. The rates paid for the government to borrow is the basis for much of private borrowing costs.
The US has enjoyed a DECLINING cost in borrowing since about 1985. Recently bond rates have been accelerating at a rapid rate. If rates break the trend line established back in 1985, we will be in new territory. It doesn't mean the financial world comes to an end.

But it DOES mean we are in a new financial world. The cost of debt will be on the rise for the first time in 25 years. The implications of impact are enormous.

The first chart is bond rates since World War 2 to today. Notice once Volcker tamed bond rates, and Greenspan/Bernanke took over, rates have been on a trend lower.

The lines represent experienced trading channel during this time. A brake of the trend line signifies a NEW trend. The second chart is from bigcharts.com, depicting 30 year rates since 1994, for a closer look.
We are possibly weeks away from witnessing a shift in American debt cost, one that years from now will have meaning, and currently will be noticed by very few.

Wednesday, December 15, 2010

US bond rates accelerating higher

US 30 year bonds are accelerating higher. At this pace, rates will hit critical levels by end of year.
In addition, netflix, salesforce.com, and bestbuy are looking pretty weak in stocks. While bestbuy has much less risk.

Market holding up as rates rise. But I can't see the market flying higher if long term rates start heading towards levels that we haven't seen since 2008.

Tuesday, December 14, 2010

More Chanos videos

I like Chanos interviews, he shoots straight and is direct about reality.
I posted a video on Friday, and on the same day he gave another interview.

Mish's blog has a nice article on this video Chanos video.

The most staggering thing is China's GDP is comprised of 60% of real estate, which is a HUGE bubble. I have posted videos quite a few times, about China's massive Real Estate problems. Only 5% of China's GDP is exports. That should tell you how precarious China's economy really is. Once that real estate boom busts, which it will, it will get interesting.














Monday, December 13, 2010

This Week in Charts

Brief This week in charts cover. Markets all point higher higher higher. Nothing wrong with joining in and putting stops. Please be WARNED the US government is thinking of tinkering with commodity futures rules, which could trigger a nasty sell off in all commodities. But be sure, after that sell off, the advancement will continue.

Toe the charts!

And here is the fly in the ointment with loose monetary policy...

Friday, December 10, 2010

China false real estate boom

CNN Money interviewed Jim Chanos recently about China's economy. (click)
I agree with Chanos in the next 5 year term, but over the longer term I am not so sure.
China has great population and that population is on the economic upswing. Another CNN link focusing just on the real estate bubble.

When watching the video, the fog you see is pollution. I was in Hong Kong and saw it first hand.
There is a much longer video I posted back in Feb 2010 that is well worth the watch, and is on my new reader list. Click to watch that video.



Thursday, December 9, 2010

Ron Paul to be named Chairman of Monetary Subcommittee

I must admit, I was skeptical that Ron Paul would be named Chairman of the Monetary Subcommittee. According to this video, he is to be announced chairman.
This is a step in the right direction to start cleaning up our act in the USA. By no means is this alone enough.
But I'll take change where it comes, lets see what can be done in 2011.


Tuesday, December 7, 2010

Support Ron Paul for Chairman of Monetary Policy Chairmanship



Five GOP leadership aides, speaking anonymously because a decision isn't final, say incoming House Speaker John Boehner has discussed ways to prevent Paul from becoming chairman or to keep him on a tight leash if he does.

Mr. Boehner will decide some of those chair subcommittees as early as Dec. 8. There is no time to waste. Please phone, Fax, AND email Boehner today. Demand Ron Paul be given chairmanship of the monetary policy subcommittee.

Please email (click) House Speaker Boehner .

Just click on the link. If your browser does not interface with email, then email Boehner at
AsktheLeader@mail.house.gov

Send an Email a day until the chairmanship is decided.

Phone: (202) 225-4000
Fax: (202) 225-5117

If you truly want change in America, act and support appointing Ron Paul in this position. While I do not agree with Ron Paul on all issues, I do agree his viewpoint is a radical change of policy, and that is what is needed to implement meaningful change.


(Portions of above taken from Mish)

Monday, December 6, 2010

This Week in Charts

Basically, we are either about to make some significant moves higher, or a "failed breakout".
Buying resource based stocks in earnest here isn't a horrible play, but must set stops to sell positions if wrong.

The problem I have with resource based stocks continue to scream higher is the chaos it will cause in the US economy. That of course won't stop it, but those watching resources have to be aware of how detrimental this will be to any chance of a recovery.

Out of gold, food, energy, Oil is looking strongest to me.

In any event, I have about 80% in resources, and ALWAYS will, my buying, and selling is just the fringe.
Good luck, to the charts!

Sunday, December 5, 2010

Economic Videos

The video links here come from Mish's blog post (click for his post).
The video series looks excellent. I have watched only the first one.
I will be adding this post to my "welcome new reader" post again. In one week I have added three posts to the Welcome New Reader post, very unusual. I can go six months without adding to the welcome summary.

Anyway, video at bottom, and some other videos listed below. I may not 100% agree with every aspect represented, it is always worth while to listen to different sources of information on topics to help form your own opinion.



Friday, December 3, 2010

Inflated: How Money and Debt Built the American Dream

Inflated: How Money and Debt Built the American Dream is a new book by Christopher Whalen. I ordered my copy today as a kindle book. Below Mr. Whalen talks about the core corruption of the Federal Reserve Bank, and from the video below, is directly on target mirroring the message I have been trying to get out, the system is failing. The Federal Reserve Bank must be abolished.

I highly recommend watching this video, this is yet another video I am adding to my new reader welcome page. I am once again adding this to my Financial Ground Zero tag, to further support what David Cote, Honeywell CEO said.


Thursday, December 2, 2010

Guaranteed way to make money in the market

Special thanks to Elms for sending me this video.

First a warning, there is cursing, so please play in an appropriate setting.
And by the way, I get it, the market goes in only one direction up. Anyone can read a stock chart since the "emergency" started in 2008 and can see that. It is amazing how my own thinking got in the way.

Corruption, eh, who cares

If you haven't seen the post just before this one, please read it. It has some optimism for a change.

This post, however, rips that optimism away and further proves my point. As previously discussed here, the value of a currency is not just about the amount of printing/currency in circulation, it is about faith that it retains value through law enforcement.

Well, several items where released, about what I consider damning corruption. Often in these cases its just the tip of the iceberg.

Revealed that SEC did not prosecute BAC for illegal activity, due to government financial intervention. My spin : Why didn't the SEC investigate BEFORE government intervention in BAC, that would have been a great reason to not intervene.......

Federal Reserve Bank has revealed it participated in common stock purchases of AIG. According to section 14 of the LAW regulating the Fed, they are forbidden to do so. So the bank that "creates money" uses it to buy stock....interesting.... This is explicitly illegal....no cops to be found.


This part isn't corrupt, but it clearly shows the public wasn't informed. Back in 2008, the Federal Reserve bank made 9 TRILLION in overnight loans. Wow. Total GDP of USA is 14 trillion ish.

This IS corruption to me, but it technically isn't. The web site Wikileaks has been taken out by the government.

This IS corruption to me again, but it technically isn't. Google kicks out prisonplanet from it's service. Can't easily get information out without an international forum.

FDIC prepares to crack down on officials of failed banks. Where are the cops? Why does it take a bank to fail, be liquidated, months if not years to pass, then try to make a case for law enforcement? Could it be FDIC needs to get money from the officials and now decides to report criminal activity in an effort to get funds? What about just plain old enforcement of the law UPON seizure of the banks, freeze the bank officials saving? I deem this corrupt from the perspective the law is not enforced....

Honeywell CEO advocates action before US implodes

I must say, I am starting to have a sliver of hope entering me. I am still 99% of the opinion the US dollar collapses, and the US will enter a very dark period. However, this video is a nice glimmer of hope that the greater public is starting to get it.

We need to act, immediately. Not acting will create some serious problems for US citizens and the world. The US debt will be 1 trillion dollars in INTEREST per year by 2020.
As Mr. Cote says in this video, if 1 million dollars was spent every day since Jesus was born, you still wouldn't have spent 1 trillion dollars. And thats just the interest, with assumptions that the rates don't skyrocket for borrowing like Ireland.

This video is well worth the watch. I will add it to my new reader link, as well as give this the label "financial ground zero". This time instead of documenting the death march into financial chaos, to document moments when the nation can change direction.

The nation is facing a collapse aka Rome, and the public just isn't aware. A slap in the face from the bond market is what I unfortunately believe is required to invoke action.

Wednesday, December 1, 2010

Wikileaks to expose US bank corruption or fraud

Wikileaks released government sensitive documents on Afghanistan and Iraq wars. This was an extremely controversial step, since both wars are on-going. Documents shown that US military has been not diligent on acting on war crimes and other digressions.
In any event, at the time of the documents release, wikileaks was NOT under a cyber attack, nor was the founder sought under international arrest. The Wikileaks released documents, and life moved on.

Now the wikileaks leader has announced his group is to release documents on a large US bank. Specifically he has about 5 GB of data. It is assumed to be email data, but it has not been confirm.


I do question the legality (criminal ramifications) of leaking government classified documents about war operations during an active war, overall, I place wikileaks as a critical tool for the public to get information exposing corruption. Without a place like wikileaks, information is difficult, if not impossible, to get proper international exposure to gain traction for action.

In essence, it is freedom of expression at the core, a modern day newspapers used to serve the world public.

Thomas Jefferson said: "If I had to choose between government without newspapers, and newspapers without government, I wouldn't hesitate to choose the latter."

I agree with Thomas Jefferson, and support the concept of wikileaks.

Video from CNBC