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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.

Tuesday, May 31, 2011

In-Sync with Gary of Smart Money Tracker

Gary of the Smart Money tracker has a paid service, pretty much the only one I pay attention to anymore. Why? The chart trackers are terrible future predictors, but are good for indicating turning points. The chart trackers also do not take into consideration that the "real world" has changing rules, such as the Federal Reserve Bank's ability to print money.

Gary recently waffled in the last thirty days as the final near-term rally of gold is underway. As a result, I have joined him in staying out of metals.

Gary has laid out his multi-year view. I encourage readers to purchase his service, for I think Gary is smack on, and it is in-line with my view.

I am going to recap my view, but it parallels Gary's. For this reason, I'll avoid putting up charts and going into a deep explanation that Gary has, for it could be viewed as stealing his pay-post.

The market will roll over with the global economy. Europe, China, and America are all showing obvious problems with their economies. Once the market rolls over significantly (15%? 30%? 50%?) lower, the Federal Reserve bank will be encouraged to do respond with "what they know". For the Federal Reserve Bank is not able to control any other aspect other than monetary policy. This reaction is wrong, and allows the politicians to defer to the Federal Reserve bank to "fix" the economy.

The problem isn't the Fed's monetary policy at this point, but is a much broader, structural problem that can ONLY be fixed by politicians. The Federal Reserve Bank actions ENABLES politicians to avoid making hard decisions for now. Eventually the Fed's actions will totally become ineffective, and then the politicians will have no choice but to act. But by then, the problems in 2008 will seem easy, as we have magnified all the issues since then.

Once the Fed resumes printing, there will likely be a nice market rally, with a resumption of it falling. The dollar will start to decline after a nice, large rally from the pending market decline.

And here is where the epic divergence will begin. The market while spiking up, will overall trend down as profit margins are compressed. The dollar will resume trending down, with spikes up for each market decline (flight to safety).

But contrary to a recessionary environment, some sectors of resources will trend up. Why? Global political tensions, fiat currency issues, and yes, overall consumption.

Of all the possible resource sectors, me and Gary expect precious metals to do well. I dare to venture to say that other resources such as Oil, Food, and other resources will either maintain price in a range, or rise. This falls in line with my pontification in 2008 that Americans will see their lifestyle significantly degraded as Chinese citizens gain wealth, meeting at a closer equilibrium in the years ahead.

On my party, I am going to rely heavily on Gary for the green light to get back in the markets, after a decline. The markets may in the months ahead hit new highs, I will sit out. For when the rally ends, the decline COULD be sudden. I'd rather not play this one, for I don't think the remaining upside percentage is as great as the potential DOWNSIDE snapback.

Overall, I am in agreement with Gary, and as mentioned at the start, he has an excellent post from this past weekend that goes into great details about market cycles, charting, and bringing it together with current political policies.

Monday, May 30, 2011

This Week in Charts

Today I have only two charts. Why? Because I see nothing but gloom again.

And the gloom I see, I don't have faith to add to my shorts.
If you haven't watched it, watch the Marc Faber video, pretty much sums it up for me.

To the charts!

Saturday, May 28, 2011

SNL skit on Europe woes

I found this skit pretty funny, covering problems of Ireland, Greece, Spain, Portugal, and the IMF chief caught trying to rape a cleaning girl at the hotel.

Last Saturday had Justin Timberlake, who I find very funny on SNL, couple of skits I liked can be found here and here.


Marc Faber

I agree with Mr. Faber that once stocks and assets deflate enough, the government will come in and inject money again.

When that time comes, I'll be loaded back in commodities.

Friday, May 27, 2011

Deflationary collapses, how quickly we forget!

WAY back in 2008, we had a market collapse followed by an economic collapse. In August of 2008, oil was spiking to 145 a barrel. All systems where go for a global economy on fire.

Then just 4 months later, oil was hitting 40 bucks a barrel. Amazing.

But what caused the collapse? The mass media did an utterly piss poor job explaining it.
Was it the fall of Lehman Brothers? Bear Sterns? Banks?

And how could a few companies failing be responsible for what turned into a global economic collapse? If they where to blame, holly hell, what where government regulators doing since 2001?

I'll ignore the corruption, the outright lies, and other main contributors for getting America to that fragile state.

The issue was simply LEVERAGE! If the US Financial system had no fractional reserve lending policy, it would in effect have no systematic leverage. What would happen is for every dollar a bank lent....a dollar must exist! Then if a dollar was lost, the existing dollar would pay for the bad loan.

In such a world, its hard to get into trouble, since, there is deposits that could pay off bad loans. Further, even when loans go bad, a percent does, not all loans do. So a 10% haircut may be painful, but a company would easily be able to survive based on it's remaining assets.

But thats not the world we live in. The world we live in is 100 deposited dollars can be leveraged to create a total of 457 of deposits, with 357 in loans, and a bank requirement to keep 89 dollars in reserve. (click for Wikipedia details)

So as you can see, if a loan goes bad, the "reserve" can be used quite quickly, leaving no reserve for remaining outstanding loans.

This my friend, is at the heart of a deflationary collapse. Once started, it can snowball into a cascade collapse. Banks and other institutions must dump assets to gain cash to maintain reserves. The system makes for some GREAT bull market runs and makes it easy for private institutions to fund growth. So when things are going good, the marketplace and business world is flush with liquidity (money) to finance business.

But if a tipping point of selling occurs, usually because of bad loans, a cascade failure can happen.
In 2008, the Federal Reserve, to its credit (its rare I complement them), acted quickly to stop the chain reaction to prevent a full all out collapse.

Unfortunately, the lesson learned was, lets do it again, but this time, lets press harder and involve the federal government directly. With governments involved, what could POSSIBLY go wrong?

For an example, lets take a look at Greece. That countries debts and financial situation is at a point of implosion. Greece will likely be the first country to be asked to leave the euro, and it won't be the last. (Spain, Portugal, Ireland) Once any country is asked to leave, it will make it easier to ask for others.

The question is, why is the European Union fighting so hard to prevent this from happening? Do the Germans, French, and other European nations love Greece for its art, food, and vacation spots? Is it they are really nice and like to lend money to others in a time of need?

I am of the belief that the European banking system is about to experience what America already endured, a deflationary collapse due to bad loans, fractional reserve lending.
Don't believe me? Lets see what a former European Central Bank Economist has to say about Greece.

“I’m skeptical about Greece,” said Former ECB Chief Economist Otmar Issing, who joined the ECB a year before the euro’s inception in 1999 and stayed there until 2006. “Greece is not just illiquid, it’s insolvent.”

This statement comes after many of the blogs I read have painfully detailed out that Greece is insolvent, while the European Banking system says otherwise. Mish has a great post of the quote above, and full detail of the pending Greece implosion.

In 2008, America took the hit as directly causing the financial collapse. 2011 will mark the rest of the world causing the next leg down. The European Union, and very likely, China. America's financial markets will get hit, and you can be sure that companies like Goldman Sachs will get caught in the "credit default swap" market losses it was a party to in Europe.

For since 2008, Credit Default Swaps which dwarf global output, ranging in the 55 trillion dollar liability range, with near zero regulation still!

So those looking for hyperinflation, think again, a little country like Greece may be the start of the great unraveling, and that is a deflationary event.

The currency debasement I fear will come AFTER this event. I still think currency debasement with hyperinflation is possible, that years off at earliest 2015-2017.

Thursday, May 26, 2011

Reducing Risk

I already stated quite clearly that I am keeping the vast majority of money out of the stock market. However, on advice of Gary of Smart money tracker (paid service), I had put some into Gold (GLD). Gary has been waffling recently, I think part of his problem may be the insane amount of emails he likely gets from traders burned, nervous, or upset.
I am an old subscriber, so I have been there, done that, and I am past that. Gary is an analyst, not a prophet, and as such, he provides his view, and should not, cannot be held accountable for when he is wrong.

Plus the markets have changed from "go go" to what the heck is going on?
In any event, Gary changed again to sell, and he may be wrong, but I already had nervousness about any longs. Since I pay for Gary, and he has been more right than wrong, I'll join him.

As always however, I am keeping my core 2008 positions in gold an gold miners. Rest, off the table or entering more shorts. I am putting more onto DXD (double short DJIA).

Good luck.

Wednesday, May 25, 2011

New Form of currency - Bitcoins

Earlier this year in my post titled: "Ideal form of money - Power to the People", I posted how the current money system is doomed, and a new form of money is required. Well today I discovered an evolutionary step towards this future .... bitcoins. (click)

I haven't fully absorb how the system works, and I doubt that the way bitcoins today works is fully flushed out to replace modern currencies....but the mere fact that others are driving to find new currencies is very encouraging. Bitcoins even have an currency exchange! 5 Million USD traded in the last 30 days. (It's a start!)

Below is a short video, that obviously can't answer all questions. In the weeks to come, I'll post more about bitcoins and I'll assess how it matches up to my post from January.

It is only a matter of time that a new, decentralized, people driven (rather than government driven) currency materializes. When that happens (10 years+ from now?) the world will be a better place for the bottom 99% of the wealth population.

Thanks to Eric for the link!

Tuesday, May 24, 2011

Oil Prices and Energy Supply Problems

In August of 2008, Oil hit 145 a barrel. Immediately afterwards with the market crash, Oil hit 30 dollars a barrel.

Said it then, and I still believe that we will never in our lifetime see 30 dollars a barrel again.

Flash forward and in Q1 of 2011, oil was rising rapidly towards 115 a barrel (and beyond?).
But unlike 2008 when the global economy was full steam ahead, now its a tepid growth. The rising oil prices are resulting in energy supply problems around the world.

I expect in the years to come, 200 dollars a barrel will be come the low end of the scale, not high end for oil. In effect, prices of oil will find a new range, higher than historic prices. To read up why, see Wikipedia on Peak Oil.

So what does this mean for investing? Last time oil shocked the global economy towards a collapse. This time, it maybe a tepid retreat of the economy. But one thing I can count on, as oil rises above 140 a barrel and beyond, I doubt corporations in America and most western countries will go on a hiring spree.

Cheap energy has financed global growth since adopted. Technology and cheap oil is the defining difference between the 1500's and the 1900's. Without cheap energy, good luck on complex technology being affordable.

If/when the market retreats, at the "bottom", a great buy alternative to gold is oil producers, for as oil gets more expensive, their profit margins rise.

Video from Jim Rogers

Monday, May 23, 2011

Posting less...why?

I continue to read on a daily basis the information streaming from all corners of the earth related to the financial crisis.

From various parts of the USA, different states and cities are bankrupt, but refuse to recognize the reality. The US constitution and in general, the law, doesn't apply to those of privilege. As a simple example, it is well known trillions of dollars of fraud in mortgages where perpetrated, and not one conviction of wrong doing.

I read Mish, The Market Ticker, and many others you can find on the right side of this blog.

For me, there really isn't much to say. I can repeat the onslaught of information, but it boils down to this.

1) Rampant fraud and government spending are responsible for the market rise, not solid fundamentals.
2) The debt pyramid is crumbling at various levels of society, Greece, Spain, Ireland grab headlines. But the USA can't manage to trim any fat of a 3.6 Trillion dollar budget, and thats with 1.6 trillion in debt spending!
3) States like California refuse to face reality, and states like NJ while trying to face reality are not doing enough.
4) Most of the big US banks are insolvent.....and if you think they are solvent, ask why hasn't mark to market accounting been re-instated? Why have banks stopped or slowed down drastically foreclosing on houses?

I really don't have any commentary to add except that the massive fraud and stealing from each other will not end well. I would not be surprised for all of this in the years to come to result in another war. America has 3 wars now, why not 4? Heck why not 10? Apparently financing is not an issue.

So I read on, I plot along trying to plan my savings into keeping something to help my family in the future.

I am more focused on work, family, and three weddings I am attending this year. Life gets busy, no time to post about the world collapsing. :)

Have a good one.

Sunday, May 22, 2011

This Week in Charts

I am of the belief that a multi-month, if not year long market decline has now begun.
Even if markets hit new highs, I have a hard time believing it can levitate for a few more months.

One good long, as always, is Gold (can use etf GLD). I will be placing some longs on Gold Monday, as per Gary's recommendation (pay to read his analysis). Once gold makes a new top, I may bail on these new gold positions.

For higher risk takers, can buy DGP (double gold ETN)

Otherwise I am out of most stuff...and I am doing something I couldn't even think of doing in the last year....SLOWLY adding shorts!

Best place for shorting ideas is TheSlopeOfHope.

For me, the shorts I am looking at are:
Din, HXM, ODP, XLI, ..... and a crappy short, DECK.

Possibly some double inverse stocks such as DXD, etc.
Could buy FAZ , or short FAS, but these are much much riskier.

But the best is fixed interest, and for one of the best ideas, re-read the guest post from John Chinnock (click).

Today I am doing just one chart.

Thursday, May 19, 2011

Market Exhaustion finally here

I must say, the lows of Fall 2008 and March 2009 to now have been one hell of an experience.
The lengths the government will go to change laws, invade markets, and fail to enforce law in the name of a better economy has been spectacular.

Frankly, I was not equipped to appreciate the great lengths the government would in effect, double up, on previous bad policies of the Bush administration.

So here we are, with S and P 500 at 1343, the recent high was 1370.58, and people trying to guess whats next.
I have landed on that what is next is market declines, USD rising, and the bear market is back.
I may be premature, or a tiny bit late (from the high), but I think in the span of life it is splitting hairs.

Cash is king, run from equities. This bear should be 6 months upwards of 18 months before the government starts QE3, or some variant, to create the next fraud bubble.

I may...dare I say it....buy a out of the money put on something, or add a short position!
But I'll play it by ear, after a market run from 2009 to now, shorting seems like a hobby for the insane.

I read TheChartStore.com private blog and the charts he has is stunning for how extreme the markets are right now. Some quick examples.
At the top of 2007, the S&P 500 advance-decline line was at 14,000, at bottom of 2009 at 2,000, and now it is at 18,000. Advance-decline measures number of stocks advancing vs declining. The numbers also show how extreme the swings have been.

Further, the total equity market capitalization value as a percent of GDP hit an all time high in 2000 at 180% of national GDP. In 2007 143%, and now, 122%, forming a nice downtrend line we are now pressing against.

There are many other signs, the breaking of silver market, copper, failure of computer chip manufacture index to also hit new highs with markets. And the whopper of them all, that the BANKING index has failed to make new highs with the market.

Plus, as I have posted, the long term bond rates are declining, not rising, indicating there is massive purchasing of US treasuries.

All of this adds up to me, big smart money out, and dumb, public money in.

I may follow Gary of the Smart Money tracker into gold in the next three months at a critical trend line if we decline enough. For my original thesis for gold and silver was NOT its maintaining value because its real money. (it is not money!) Its because Chinese and Indians love precious metals.

In a deflationary collapse, we may see an influx of panic purchasing to try to protect wealth, I may join in that ride up.

For now, equities bad, for quite some time, cash is great, and precious metals....I will get back to you.

Wednesday, May 18, 2011

Politics as bad as it gets

This post has nothing to do with investing, but politics. So if not interested, move along to next post.

I personally am against "enhanced interrogation techniques", aka torture by the USA. But regardless if you are for or against, the debate should be very factual based, not trumped up propaganda. Promoting "close to torture" techniques must be taken seriously as a nation if the US wants to promote countries around the world to embrace as constructive approach for government security.

With Bin Laden killed, I have heard quite a few calls about how Bin Laden's death can be directly attributed to "Enhanced interrogation techniques". (I will call EIT rest of post)

I am very happy to see John McCain has broken ranks from Republicans trying to use politics to take away Obama for taking down Laden under his watch, but instead to focus on the topic. Can EIT be attributed to Bin Laden's death?

See video at end of this post of his speech, where Mr. McCain clearly debunks linking EIT to killing Bin Laden. For those not educated about McCain, a true patriot, he himself was tortured for over FIVE YEARS by the Vietnamese. I may not always agree with McCain politics, but I do respect his life and commend his contribution to America, both military service and public service.

Those in Republican politics should frankly be required to know this fact about McCain. And if your a contender for the Republican nomination, it must be mandatory.

So it's to my surprise that former Sen. Rick Santorum, a republican presidential candidate, aid Tuesday about EIT, and I quote:

"And so this idea that we didn't ask that question while Khalid Sheikh Mohammed was being waterboarded, he (McCain) doesn't understand how enhanced interrogation works."
."I mean, you break somebody, and after they're broken, they become cooperative. And that's when we got this information. And one thing led to another, and led to another, and that's how we ended up with bin Laden," said Santorum.

There is no excuse, this man should publicly apologize, and re-affirm that he is willing and PROUD to speak opinion without any research, knowledge of facts, or appreciation for his opponents perspectives.
That his opinion matters, and his basis for opinion is not important. For all opinions have equal weight regardless of facts. And that this is the mantra for those in politics who winning is everything, and content is a casualty of the game.

For me, siding with the thoughtful and considered opinion on EIT by McCain vs Santorum, I trust McCain above all other politicians, for he is the most informed to make an EDUCATED opinion.

Between this , the US constitution 4th amendment being dismantled by the Supreme court, and trying to pass a bill allowing the military to perform operations like bin Laden raid anywhere any time, including inside the USA? I ask, how much lower can we go? Answer, much deeper than I can imagine.

Tuesday, May 17, 2011

Markets, Politics, and Personal Perspective

Today I had a bit of a rude awaking at work, a complete disaster of bad communication all around. I had a hand in it, I think others are guilty also.

But it showed me how at a very basic level that people at different levels of responsibility have completely different levels of perspectives. And that the higher you go, the increasing likelyhood the more detatched from detail and depth is required to make a decision.

Notice I say required. The higher you go, the more "issues" bubble to you. Messages as you go up must be simplified. I equate this to how organized decision making occurs in the brain. A great book to read how the brain works is "On Intelligence". But by the very nature of requiring less detail, and (over?) simplification of work/effort/effect any one decision to be made increases the risk of deciding poorly.

It is such that I am becoming more accutely aware that in life, and organizations, decisions are basically coin tosses. Sometimes the right answer is chosen based upon deep knowledge OR shallow understanding. Sometimes the wrong choice is made by being too close (not having broad perspective) or shallow understanding.

The decision is boiled down to guessing. And when you guess wrong.....you will learn your wrong and return back to the other choice. All guessing correct does is save time of revisiting the original decision to go down the other path.

As a techie, I tend to place too much emphasis on trying to make the right decision the first time. I sometimes spend years watching the price of a product to buy it on super sale. Or maybe I research heavily about which product is better.

But in the end, what do I really truly know? Do I know the lowest price for a product available anywhere on the globe? What is the chances I learn of a sale at the right time? When I research products, how do I know if the information I am using for a decision is legitimate?

Such questions could be applied to your daily job or life. In the end we are all guessing.
The critical quality for success isn't about making the right decision, it is about how quickly you recognize a wrong one and react to change course.

This brings me to the macro view of the global economy. For those trying to play "lets control the global economy", how realistic is it that these people and organizations are really making correct choices? The question is really more a probability exercise, how long will it take that enough wrong choices in a row tips the global economy into another tailspin.

The answer is clear. As long as we allow individual institutions and people to have undo influence on the global marketplace, the HIGHER chance multiple mistakes in a row will happen. If the decision making/process was distributed in a purely capitalistic way, the net result, which is likely contrary to common sense, is to DECREASE the chance of multiple mistakes in a row. The prejudices of the few increases the likelihood of failing to recognize bad decisions and change course.

The more decisions are distributed, the more "random" the decision process. The more controlled, the more likely prejudice or agenda's of individuals make a pattern of decisions...right or wrong...to occur. (For techies reading this, think open source vs big software companies)

To me, this makes it clearer to me than ever, that the IMF, the Federal Reserve Banking system, and those like Ben Bernanke are by construct, setting the rest of us up for one whopper of a series of mistakes and failure to recognize bad decisions.

Let's hope that we as a race are smart enough when we pick up the pieces to create an open, transparent, capitalistic system where all market participants have equal influence on the marketplace of bonds, stocks, currencies, futures, and commodities. And recognize it was the control of the few, not the many, that are the root cause of the problems.

Monday, May 16, 2011

Wednesday, May 11, 2011

Back to Basics

As I posted a week ago Monday, I sold most non-core positions.
At that time I said I'll sit on my hands for months....and here I am looking already to get back in.

Frankly, its insanity, and I am not getting back in. What snapped me awake was Gary of Smart Money tracker. His paid service said something similar.

I said it over a week ago, and how quickly I forgot!

So find some nice federal bonds to put money in and wait...for a month or so, and lets get clarity.

I still have my core gold miners and AVL. But for now, time to take a break.
Good luck.

Monday, May 9, 2011

This Week in Charts - Natural Resource Update

After this past weeks natural resource correction, I figured I'd check the sectors for status update.

Below are the charts. I think buying any precious metals this week is risky after such heavy losses.
So why am I buying? Because the media loved to report on how things fell, how gas will be cheaper this summer, etc. Also, some of the charts don't look too damaged yet.
Of course, I won't go full in, the losses could continue.

But I avoided most of the damage, so why not jump on in? To the charts!

Sunday, May 8, 2011

Every year for decades will be worse for Americans fiscally

My original post, back in 2008, explained how I believe US standard of living will continue to spiral down, as India and China push up.

Zero Hedge has a great post detailing how the debt saturation of America will mandate US citizens to have a reduction of standard of living. Click here to read.

It's a good post, alerted to me by The Hope of Slope blog.

Well worth the read, and just another fun tidbit to bring up at parties.

My spin is the people who are 5 to 30 year old, will eventually say "no more", and America will default on debt. So there is hope after the people are freed. My guess is 10-20 years from now.
By then, we'll have several lost generations of chronically unemployed.

Friday, May 6, 2011

Damage done to silver, rebound rally buy

I may buy back into silver Friday, and hopefully my AVL positions hold.

I talked to a friend .. "happy john" stating I thought this was a setup to get gold/silver weak hands out for the next run up. I also admitted the dollar may be near a new low.

And now I just finished listening to a podcast here.

Then followed up reading the blog here.

Plus Gary of smart money tracker is hitting out of AGQ.

Put this together I smell panic run! And that may be best time to buy.
If silver closes on a low Friday, its a now brain-er, I am in full force!

So I'll see what I do Friday, but starting to buy looks good.

Thursday, May 5, 2011

Silver got SMOKED, as well as resources

If your in natural resources you may have seen some horrible losses on your screen.
I hit the bids hard Monday AM, as my post HERE stated.
It was a gamble, the markets could have recovered and I'd be the idiot selling at the low.
As luck would have it, what was a risky run-for-the-hills move, it turned out good.
The market was near upper trend line, and at the bottom of this post, you can see what happened once the market hit that line Monday.

Further, I sold my AGQ position last week at 364....well.....the charts tell all on how lucky I got.
So if you have been reading this blog, I am not saying now is the time to buy into resources, but things just got a nice haircut, making entry less risky.

And today the US Dollar EXPLODED higher. if this doesn't change soon, we may have seen the USD hit a year low, and we are going to see USD make a nice long run for years up....until I expect it to return downward in 2013 into new lows by 2014-2016.

For now, I am waiting to see what happens as I stated Monday. Mostly cash, just some money left in AVL, it almost hit my stop losses today. I may get hit out of that next.

I may dive right in and try to catch the falling silver knife...but I'll play that by my gut.

To the horror charts!

Monday, May 2, 2011

This Week in Nervous Charts

I am nervous about resource positions, check out this silver chart, my god.
I am going to take profits in some of the positions, and lower my holdings of AVL, basically moving largely into cash.

I plan to stay in cash for months, and see what happens. I don't believe the dollar will outright collapse, and I don't believe we are starting a multi-month bull run of the stock market.

So instead of trying to time exact tops, I'll just opt out. My core gold miner positions will remain.

Bin laden was killed, I get nervous around such events too. Markets can spike parabolic up, then fall, but the news will focus on other things....like Bin Ladens' death.

Also maybe the USD hits a bottom WITHOUT breaking 2008 low? And that was Thursday? Anything is possible.

To the charts!