China view change

My long term view is China will be the economy driver of the world, mainly due to the sheer number of people entering into the world economy.

However, China has some significant problems, some so severe I question whether China will be the world economy driver in the next 5 years, or pushed out much further.

Lets look at what we know about China.

1) The information on it's economy is much more blatantly manipulated that the US. It is a communist country where the central government "dictates" published results. The US, while very manipulated, isn't in the same league as China. Dis-information is NOT a good place for investment or relying on world finance. America has it's own disinformation, called MBS (mortgage backed securities) and CDS (Credit Default Swaps).

2) The real estate boom in China makes America look like small potatoes. In Bejing alone, there is an estimated 100 Million square feet of VACANT office space. (Manhattan has 500 million square feet in TOTAL) Further, many spaces are priced at multiples higher than what a upper middle class person in China makes (like a doctor). Example: Apartments go for $800,000, average Chinese salary is 6K. Office space vacancy rate estimated 18% (NYT)

3) China is desperate to take world lead and continues to bash the US at every step. This desire to be world economic leader has it's merits as I have pointed out. However, this has lead China to instruct their banks to lend money and in general be fiscally irresponsible, to the tune of 1 TRILLION dollars since December!

4) China refuses to fail anywhere. This mentality has produced a nation encourages it's banks to NOT WRITE DOWN ANY BAD LOANS. Think US banks are insolvent?  At Least in America we know which banks in the US are insolvent but we pretend they aren't. China, who knows which are.

For a really great long running rant from Zero Hedge on China being down for the count for the next 20+ years click here.

In any event, this is distrurbing, one of my hopes is in the next 2-5 years the world economy would start to turn around due to the emerging markets. With China having millions flee cities due to lack of work, the country facing civil unrest, it is looking more and more like China is not going to pull the world out of the economic funk.

This is good news sort of for America, since the world will be forced to prop up the US. There just isn't a better alternative yet. Reminds me of my voting pattern, vote for the politician you hate less, but you still don't like either choice.

What concerns me the most is what China will do if enough civil unrest materializes to challenge the established government. If I had to guess, China would demonize America as the root of their evils, like all other countries do. I hope this is just a crazy thought.

Bottom line: We will continue to see resource fluctuations and a VERY long term problem in the world.

Stock Charting

Stock charting is the art (science?) of looking at the price movements of equities (and other financial instrument prices) to find logic and justification for future price movements.

There are many chartists theories. As a chartist skeptic, I find the mantra of chartists to be one similar to those of various religions. Everyone has a theory, justification, and historical precedence to back their ideologies. But when a skeptic eye it put to the test, one starts to wonder if the results are the "chance" happenings that people remember, while forgetting the 20+ times it didn't work out as planned.


In any event, just like real life where so many people turn to religion when they have a personal chrisis, I find myself turning to the chartists when I start to question the market direction as I see it.

A couple of the bloggers I subscribe to said we are in a "head and shoulders" formation. I took out my crayons and drew my version below. Even if this does come to pass, as previously discussed, it is possible around SPX 810 for the market to find some strength.

Best laid plans always go wrong, but if this downswing does take us to 810, it maybe time to close positions and take very small positions moving forward, but always looking to add to my gold mining positions in hope to eventually be all in precious metal miners.

In any event I have found solice in the chartists ramblings that this reversal will remain "below the head" and turn down.

Paul Volcker

Paul Volcker is an economist who was credited to have single-handedly regain control of the US financial mess in 1981, after taking office in 1979. At that time interest rates where soaring out of control, and Mr. Volcker called for a hard hand at fiscal discipline. Interest rates declined from 13.5% to 3.2%. Reagan's "boom years" would not have been possible if it wasn't for this feat.

You can read fully about Mr. Volcker by clicking here for Wikipedia entry. I for one never really read much about his past or achievements, except for the first paragraph. Mr. Volcker is 1st Chair of the President Obama's Economic Recovery Advisory Board. One could hope that Mr. Volcker's voice is carried over others, which to date, it hasn't.

I ran across an article that is well worth the full read. (click here). For your enjoyment I cut out the paragraphs I was most impressed with. Some of which you will see echoing my criticism of the "computer model" financial instruments that have ruined American Finance and need to be abolished. I for one wish his advice is followed to the fullest extent. The moment it is I would cover all shorts, and go long the American stock market for years to come.

----- Excerpted quote from article below ------

‘Speculative Fever’

The former Fed chairman started worrying about derivatives and structured debt such as mortgage-backed bonds in the early 2000s, his grandson says. In a 2000 interview with the New York Times, Volcker said he couldn’t make sense of the financial innovation going on.

“You obviously have a kind of speculative fever,” he told the paper. “It’s a kind of casino. It’s all the rage, trading certificates that have no intrinsic value.”

In 2005, Volcker was worried about the housing bubble, the U.S.’s growing trade deficit and banks’ increased risk taking.

“Under the placid surface, there are disturbing trends,” Volcker wrote in the Washington Post. “Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot.”

Overstretched Fed

The Obama administration initially wanted to give the Fed a larger role, people close to the discussions say. Volcker was opposed, arguing that too much weight on the institution could threaten its independence in setting monetary policy.

“Do we want to make the Federal Reserve the chief regulator too?” Volcker asked during a Bloomberg TV interview on April 29. “Maybe that’s going a little too far.”

The administration has since shifted away from having a single regulator, instead giving the Fed a partial role in monitoring systemic risk, along with a council of regulators.

Volcker’s concern about an overstretched Fed has shaped the views of key congressmen, aides on Capitol Hill say. House Financial Services Committee Chairman Barney Frank echoed Volcker’s views on regulatory oversight on May 28, saying he opposed a single regulator.

“My own preference is for a dual-track regulation,” Frank said, referring to two separate channels of regulation that would focus on the health of the banks and the need to monitor for systemic risk as suggested by Volcker’s G-30 report.

‘Political Games’

The PERAB is taking a broad look at financial reforms, including whether banks that take deposits should be barred from engaging in high-risk trading, according to some members. While Volcker has strong views on that -- he thinks commercial banks should be prohibited from owning hedge funds or private equity units, people familiar with his thinking say -- he’s listening to others in the group.

“We’re an advisory board, so we can present different viewpoints at the end to the president,” says board member Wolf.

The biggest obstacle to Volcker’s reform agenda is Summers, Volcker’s friends say. While the president’s top economic adviser has softened his anti-regulatory stance from his days as Clinton’s Treasury secretary, it will be difficult for him to accept some of Volcker’s proposals, they say.

That hasn’t fazed Volcker.

“If he’s of a different view, I’m sure he’ll recognize the wisdom of my view sooner or later,” Volcker said in the April interview.

“Don’t rule Volcker out yet,” says Kavesh, his longtime friend. “Paul worked under five presidents before, and he knows how to play the political games. As events unfold, he’ll take on a more direct, stronger role.”

NOTE: This entry was completed Friday, Blogspot isn't posting as scheduled.

Former Federal Reserve Banker tells truth

NOTE: There is a bug with blogger NOT posting my material as scheduled, please bear with me for the next few weeks.

Excellent video from CNBC of former Federal Reserve board member telling it like it is.
You can read more from this blog entry from Karl.

Did I proclaim Bear Market too soon?

I posted back on June 17th that the Bear is back! Today the market rallied right out of the bear trend line down, threatening to reverse.

Couple of points from my perspective

1. Today's counter rally was driven by a mix of government news/media games, European monetary action, politics (Ben Bernanke testimony) but NOT by fundamentals. Downtrend could resume shortly
   
2. We are in a bear market, hence the over-all trend is down
3. The market could reverse, hit 960-1,000 SPX before reversing again.

If this is a reversal back to SPX 960-1000, and that reversal hits it's peak somewhere around July 15th, the fall will be disastrous and with depth. A failure of this counter rally on top of a 39% rally in 7 weeks would be with extreme force.

For my bank account, for my own sanity, and for the health of this country I hope the market will resume the bear trend down to SPX 810 area, then bounce.

In all events I am prepared to do what it takes to trade somewhat out of my positions to protect my bank account, so I can double up in the event we hit new highs in mid July. For now I will take it day by day. I have said before, nothing moves in a straight line and 2009 will be a horrible year to trade stocks.

Also in the news, there has been 14 weeks of significant INSIDER selling of stocks. Translation: CNBC says it is a great time to buy stocks, but the executive members of the US corporations are selling as quick as they can.

I am betting the insiders know more than the public spin machine.



Gold miners are doing great, as GDX and miners rally. I added to my positions on Tuesday, but I am holding off on loading the boat until this market decides direction with conviction.

Buy and holding stocks equals lower returns

Back on October 7th 2008, I posted a market timing indicator for investing that I recommend for "long term" investors to use. It is pretty simple way of determining when it is a good time to invest in the US stock market.

Mish of the Global Economic Trend Analysis blog wrote an excellent article that painfully details two main points.

1) Buy and hold of stocks does worse than fixed interest.
2) Using bond interest rates as a guide, long term investors can detect when to exit the stock market.

If you are a buy and hold investor, I urge you to click on the link above or here and read Mish's article fully. Also I urge you to click on my October 7th 2008 post and read the video from Karl the market ticker.

Both of these blogger give free advice that is better than just about any financial adviser you could pay for. May I also remind you that Mish works as a financial adviser. I updated my "when to buy and hold" stock link to the right of this blog for future readers.

Also, Warren Buffett stated the economy still in 'shambles'. With all due respect, I do not trust Mr. Buffett anymore for financial advice. For someone of his stature to state something as negative as this, it is worth the consideration.

If you are still caught long, I expect S & P 500 to hit a low below 450 before this is over. It isn't too late to exit out. And if you "must" be long a stock, precious metal miners or natural resource stocks I expect to gain value quicker than other stocks.

Time to buy Gold Miners?

When GDX was at 44, I stated in the blog wait for a pullback to the bull trend line at about 37 and buy. Well yesterday GDX went slightly below the bull trend line, and today it closed above it.
I am trying different software for charting, so bear with me. The chart below shows horizontal "Fibonacci" retracement lines, basically mathematical statistical probabilities for stock price movement. Notice GDX barely poked below the trend line yesterday and quickly recovered.

If you want to buy any gold miner, now isn't a bad time. However, I have one thing that makes me NOT go all in here. I believe the market is heading lower, down to SPX 810. Therefore I have a hard time imagining how the gold miners don't break the bull trend line and get some sort of sell off. From a chart perspective its a great place to buy in. If GDX breaks the bull trend line down, the next great spot to buy GDX is 27.

If you are skittish, buy a little, say, 1/5th of the position you want right here and now, and buy more at 33, 30, 27, 24. I really doubt you will see GDX below 30, but who knows. In any event, looking at the chart for GDX, and how infrequently it spends time on the bull trend line, it is a lower risk entry point. It is times like this ACTION is needed, don't just watch the screen.

Remember, I believe (right or wrong) gold miners will return 1,000 to 10,000% return over the course of the next few years. All prices are good prices from that timeline perspective.

From WebSurfinMurf's Financial Blog

Be sure to read my disclaimer on the right side of this screen or click here.

New Stock Plays link on Blog

I added to the right of this blog a permanent link to show the current stock plays. I plan to change the format of this Google spreadsheet over time. My next change is to remove "old plays" and record the performance of those plays when I exited them.

This exercise helps me focus on my entry and exit points, and keep me "honest" with myself on my own stock plays. Someday, it may become a painful record of a catastrophic blowup, but that's the chances you take when you play with stocks, or anything but physical gold. :)

I also added target prices to exit the positions. I reserve the right to panic like a little scared girl out of these positions at anytime without notice.

Speaking of gold, the US approved the IMF to dump 400 tons of gold onto the open market. This is great news. At somepoint the IMF will run out of gold and the governments will not be able to influence it's price. At that time I expect draconian laws that forbid gold ownership and other restrictions. For now, I'll stick to the gold miners.

For those naysayers that Gold is not money (which it isn't actually), why does the International Monetary fund have over 3,000 tons of gold? Because precious metals and fiat currencies do have a historical relationship that can't be ignored.

Bear Market target

The market as discussed this past weekend has entered into a downward cycle. The SPX target for me is currently 810. Between 810 and 780 will be where I start to question how far will this go. IF SPX closes below 780, I expect new market lows, target 650-ish. WARNING: FOMC meeting Wednesday, announcing at 2:15pm, some serious games could make the market rally.

In a previous post, I showed how the xtrends blog listed the SPX valued in terms of gold. What makes this interesting is it shows the US Stock market valuation in more "absolute wealth" terms. Xtrends called for the stock market back around May 22nd to bounce off of the trend line he drew and the market would retreat. Xtrends re-affirmed this prediction this past weekend, and today it came true. I mention it as that this valuation for SPX in terms of gold I find extremely interesting. See SPX in terms of gold chart below.

From WebSurfinMurf's Financial Blog

I also posted how the US Treasury interest rates where entering into a territory where the US Government would want to ensure it did not continue to rise. The way to do this was to crash the US stock market so the US government could create more US bonds at reasonable interest rates. See this chart to see how this tactic has worked, by collapsing the US stock market, the US Bonds interest rates have come down....a little...in correlation to the move down.

From WebSurfinMurf's Financial Blog

Lastly, SPX stock chart to show where target is for this next bear move down. NOTE: It is possible we will NOT see these levels again for years. If you are long, you should consider selling some of your positions.

From WebSurfinMurf's Financial Blog

Stock Positions

3/10/10
At this point need to see us trade out of a trading range, the market may be setting up to go significantly higher or lower. All trades are dangerous.
I do not have any recommendations, except secured fixed positions and optionally some resource based investments. A word of caution, resources may decrease significantly also, but over a 3+ year period believe it will go higher.

----------------------------------------------------------------------------------------------------

Market Down week over week

This past week I made a call that the bear market has begun. If correct, the market top was on June 17th, 2009. This past week showed the S&P 500 week over week down, as the graph below shows. This week will show if this is a trend change or not.

From WebSurfinMurf's Financial Blog

US Financial system is corrupt

I have ranted quite a bit of how the US needs to get righteous, and come clean on accounting standards for banks and the US government. Unfortunately, since Obama has come into office we have seen an acceleration of the public money grab for private profit by those who are the most irresponsible. Also the government itself is in a record breaking power grab that builds upon the Bush years. If Obama is for change, the only change I see fiscally is pouring the countries financies down different drains.

US citizens are not paying attention and therefore deserve the financial ruin we will face. Lets review some recent news shall we?

US Federal Reserve Treasury Purchase
First, the US Treasury, (The people who print money) will be auctioning off record amount of bonds this week at over 104 billion. As previously mentioned, the US Bond market is starting to fight back by raising interest rates. To counter this, the US Federal Reserve, a "quasi" private institution representing the banking interests of the US government, announced: "On Monday of next week, the Fed will buy an undisclosed amount of debt that matures between December 2013 and April 2016. On Thursday, it will snap up debt maturing between August 2026 and May 2039."

Undisclosed? A central institution that is comprised of unelected officials, who routinely work hand in hand with the US Treasury, and has the "power" to set government interest rates (well short term rates, influence long term) will buy an unspecified amount of US bonds?
The fed takes on debt with US Taxpayer US government backing, therefore the Fed should operate with public disclosure. Not to mention that the Fed buying debt from the US Treasury, that is in turn backed by US taxpayers from both the US Treasury printing and US Fed as an entity is outright incestuous.
Case point #1 on Corruption, for this weeks news.
Update 6/26/09: Bernanke "forgets" his actions 6 months ago

Goldman Sachs giving out record bonuses
Goldman Sachs announced giving out to it's executives record bonuses in it's 140 year history. Let me remind my readers that Goldman Sachs has profited hugely from Taxpayer money either directly or indirectly. The taxpayer money is in effect a reward to Goldman Sachs for needing such public "emergency" action. This is outright ridiculous. Not that Goldman is giving out huge bonuses, they should. After all, they are a private company.
What is ridiculous is the outrageous claims back under Bush that 700 Billion in cash needed to be given to banks, and more money to back the financial system otherwise there would be financial armageddon.

Well if financial armageddon would mean that bankers would see their bonses brought to zero as the companies had to pay down the bad debt, well, I would prefer it than this.

Goldman is no longer an investment bank, it changed to a bank holding company, inorder to get loans from the US at incredibly cheap rates. Goldman received about 13 Billion dollars in direct funding from AIG, as a direct result of the US Taxpayer covering bad AIG bets, I mean investments. Also Goldman sold California Bonds and then turn around urging people to "bet" against those bonds. May I remind you, California is on the brink of bankruptcy, and before it is over, I am sure the US taxpayer will foot some of the bill. And to top it off Goldman announced selling over 600 Billion in Bonds (debt) backed by the FDIC. Of course Goldman has record earnings, when all bets are gauranteed winners, there are no losses to take.
Item #2 on corruption in the system, from this weeks news.

UPDATE 6/24/09: Citigroup to raise salaries by 50%

US Government destroying private investment, becoming the sole lender
I warned of this power grab back in the fall of 2008. All countries that consolidate power, as the US is doing, do so by controlling the money. This is done by being not the lender of 'last" resort, but by being THE lender period. President Barack Obama’s announced a program to help more homeowners refinance may be expanded to include borrowers who owe more than 105 percent of their homes’ values, Federal Housing Finance Agency Director James Lockhart said.

What bank can compete? When the US Government is willing to "lend" at 105% value of a home, how can any bank compete? And no bank should! This is not just being a "socialist" or left winger. This action is outright against free market capitalism, no way around it. This is ontop of Obama's unprecedented power grab over private sector being made.

Item #3 on corruption in the system, from this weeks news.

US Government Bond Caper
I blogged on the US government bonds found on two Japanese men, and later how it was announced they where forgeries.

What I still don't understand is the status of these two Japanese men. If these where forgeries I would think the US government would want a pound of their flesh. Also I would expect Italian authorities to proudly announce their plans for prosecution. But I can't find anything to this effect. There is still time for new information to come out to change my tune. But as of now, the entire handling of this event and the contridictions deserve mention. Karl of the market ticker reviews in detail the contradictions on this recent news headline.
The US media focuses ponzi schemes such as Bernie Madoff (13 billion), Standford (7 Billion). But two Japanese with 134 Billion in bonds is not worth mentioning.

Item #4 on corruption in the system, from this weeks news.

Corruption
And that is just THIS WEEKS news! I haven't been doing my news round up or blog round up for months. Mainly because of time. But also the daily grind of horrible financial misconduct and related news is so common, that I see no point in highlighting all the headlines. By now either you are or are not in the camp that America is no longer a place to do "honest" business. Me posting 50 news items a week won't change that. The take away is the system is sick, and it doesn't need 1 trillion, or 10 trillion more debt added to "fix" the system. The system itself needs an overhaul, and until it gets it, I remain a pessimist on the outlook.

I printed this comic once before, but seems appropriate to re-highlight how America rewards bad behavior.

US Bond saga

Karl of the market ticket does a great job of summarizing the US Bond caper up until now.
It is a must read (click).

The most disturbing part:

And are they still seized? That's an even better question; there appear to be (at least) two different stories there too:

Under Italian law when law enforcement agencies seize fake bonds or counterfeit money they are under the obligation to arrest the bearers. And in order to avoid misappropriation, the agency seizing the material, in this case the financial police, must quickly proceed to its destruction (i.e. incineration).

However, in case of real securities, after the securities holders are identified, the financial police must release them immediately after issuing a statement of confiscation and imposing a fine valued in this case at € 38 billion (US$ 53.4 billion). In this case, why were the two men released right away without any fine imposed?

Meaning, if these where fakes, lets see information on these two guys being prosecuted and in jail. Latest info says these two men, with 4th largest US bond cache in the world, where released. Makes you think.

Ben Bernanke is incompetent

How can I make such an outrageous statement that Ben Bernanke is incompetent? Watch the video below and make your own determination. Mr. Bernanke is NOT appointed by the public, and is a member of "The Fed", which is a quasi-private institutions. Mr. Bernanke wrote his college thesis that "The Fed" could have avoided the last great depression by aggressive action.


It is time for the government for demand a changing of the guard and remove Mr. Bernanke. Ideally, I would prefer to abolish the Fed. A good step is Ron Paul has passed in the house a bill to audit the fed.

Story of how Argentenia handled 2001 bank collapse & American action

CNBC Video of a case for it is not a good time to buy stocks long term


Rather lengthy video, kinda light on facts, more just impressions on various ways society changes to an economic decline. Argentina had a hyper inflationary depression, something the US may eventually face.


http://www.youtube.com/watch?v=SrGyUSgFyb4

US Treasury Bonds found to be fake

I blogged about two japanese men found with 134 Billion in bonds crossing into Switzerland.

The resolution to this was the bonds where fake, to be used in some sort of bank fraud scam for collateral.

My only tin-foil hat on this as the "final" resolution is, I would like to see news on the two Japanese being convicted of counterfeiting. After all, if someone counterfeits a 20 dollar bill, there is jailtime. 134 Billion better be more than a slap on the wrist.

If there isn't jail time, my tin foil hat gets more attention.

Blogger Roundup

There is always tons of news out daily, I long ago gave up on highlighting all the important news.

I was impressed by some of the blogging stories of recent note, some highlights.
The Market Ticker
The Fed is pulling liquidity out of the market.
Comments on Obama's Regulatory proposals
Karl comments on how opposition to Obama's health care package is being muted in the public media.
Karl compares Iranian protests to lack of American action on massive financial fraud robbing their life savings.

Mish's Global Economic Trend Analysis
Mish explains how dropping continuing unemployment claims may not be bullish
Senator Shelby Calls Fed's Expertise "Grossly Inflated" as Geithner Attempts to Defend the Indefensible
Obama's Blueprint for Reform Concentrates Still More Power in Hands of the Fed My Comment - ABOLISH the FED!
Obama Asks Congress for the "Power to Punish" - Gold help us all, haven't we learned from Bush that Imperial Presidencies are not the answer?
Capital One Chargeoffs Rise To 9.4%; American Express Chargeoffs 10%; Card Issuance Drops 50% - The spin is the recovery is "in", but since America's primary economic driver is consumption, how can American's consume as much as they did in 2007 and earlier when banks are resistant to giving out fraudulent loans, and credit card companies stop issuing new cards to people who can't pay?
I am trapped in my house - Mish walks through a reader's situation where he is underwater in his mortgage

China lectures Australia (and the world) that Keynsian economics should be found a failure. - My Comment: 100% agree, but I find me agreeing with China a little unsettling.

Lottery Tickets continued

As previously mentioned, the second Lottery Tickets are MUCH higher risk. So these lottery tickets aren't for the feint of heart.

These lottery tickets for me are lacking a little luster, it has been over 5 weeks since these picks. But if I can manage to hold, and the market has a severe dislocation lower in the next 4 weeks, these should pay off amazingly.

Stock	5/7/9	6/17/09	Percent Gain
FAZ	4.75	5.23	10.1%
SRS	20.15	21.00	4.2%
TZA	24.95	23.43	-6.1%

Nice to be net up on these lottery tickets. Considering these are high risk plays, not bad. Also, if you had some courage, and bought when these where lower, your average price should be lower than the prices listed above.

I expect Thursday to be a green day, and Friday to be a down day, with Monday even lower. There are more games afoot with this Friday being options expiration.

The Bear is Back!

The Bear is BACK

From WebSurfinMurf's Financial Blog

The market has broken a Bull trend line and tight trading range with conviction Tuesday. I originally became skittish when on 5/10/09, when SPX hit an intra-day high of 930. As posted on Sunday, the market trading in a tight range, needed to close outside of 925-955, which was done today. This bull trend break took much longer than I expected to be broken, over a month later than my original nervous high.

I expect this bear trend to be horrible to hold onto. I don't expect this market to move in a straight line. As I posted earlier, I don't want the market to go down, it is just what I expect.

See the SPX below. As expected the US Treasury interest rates are retreating, as the market softens. This will give the government more elbowroom for deficit spending.

From WebSurfinMurf's Financial Blog

Two Japanese men 4th largest creditors to the US Government

Just this past Friday I posted how China, and Japan both said they have 100% in the USD.
Russia this past weekend and did a 180, saying they also have faith in the USD.

The world is one big happy family, and the worlds largest debtor nation is a great risk for your life savings. As a factoid, the third largest owner of US Bonds is Russia at 138 billion, the fourth is Britain at 128 Billion.

Imagine the surprise of Italian authorities when they found two Japanese men trying to cross into Switzerland with 134 Billion dollars of US Bonds on them. You read that right, the "fourth largest owner" of US Treasuries where two guys trying to smuggle 134 Billion dollars in US Bonds into Switzerland.

Either there is a very sophisticated US Bond fraud scheme going on that threatens the USD at a very big level OR a nation (..maybe Japan?) is trying to quietly sell US Bonds.

And I believe they HAVE to be real, not forgeries. Why? Cause how could anyone "cash" a US bond worth 100 Million dollars? This isn't like forging a 20 dollar bill. These bonds are serial numbered and tracked to who it was sold to. I would hope the USD would verify a bond of such value carefully.

There is a THIRD option, and this in a strange way ties back to my Twitter link to allegations of State Street trading for the Federal government illegally, using "secret" slush fund of cash. These bonds could be illegally created bonds by the USD to fund such activities. Now it is really time to put the tin foil hats on and look to the grassy knowll for the 2nd gunman.

This isn't some sort of crack-pot blogger story, read more here, here, and here. Want to go deeper down the rabbit hole? Read this article by clicking here....

Whatever the truth is, I am sure that the results of this investigation will get full press in the US media and the average US citizen will know the truth on such an important issue. Just ask random co-workers tomorrow if they know who was voted off of "I am a celebrity, get me out of here" vs the fact that the 4th largest stash of US bonds on the planet found on a train June 4th. I suspect however, you will be disappointed in the answer you get.

In the mean time, I still advocate buying natural resource based stocks and/or physical resources, such as gold.
UPDATE: Bonds found to be fake, targeted to be used as a bank scam for collateral
Video from Glenn Beck

Gold Miners Monday

GDX continued it's pullback Monday. Gold miners may continue to retreat back to the bull trend line. If you have been reading this blog as gold miners appreciated, now is OK to start to look to getting into the miners. I already own the miners and I am willing to wait until GDX hits the bull trend line.

See chart below.

From WebSurfinMurf's Financial Blog

Silver Miners and Blog update

I changed the list of "financial blogs" listed on the right hand side of this blog. Check out the new list.

I ran across a blog entry at The Prudent Investor (click) of a list of silver miners. This list provides a quick hit-list of silver miners to look at, and more importantly, what country are they based out of. Also on my list of financial tools on the right of my blog, you can use the blog site "Mining Nerds" to find various precious metal miners.

WARNING: Miners in general, are a flaky bunch of stocks. Recommend highly going for the bigger name miners.

Market trading in tight range

The blog Zero Hedge has been some serious allegations that the federal reserve has been illegally manipulating the financial sector using an isolated trader to channel funds/market intervention. It of course, is all unproven allegations. Even if true, I really doubt the government will enforce the law, since, such an action if made public would crush the financial markets.

However, if true, and the rumors are now out there, I would expect the fed to quietly pull it's money out to cover it's tracks. Which is fine for the short plays and lottery tickets. And will help reduce interest rates. In any event, lets look at the "reality" rather than conspiracy stuff.

Zero Hedge posted a pretty good summary of what the US is facing, and it depends on the Fed actions. Since September 2008, pretty much the government is the biggest manipulator/player of the capitalist stock market. Therefore the possible actions of the government must always be thought of. And this is with discounting the tinfoil hat of illegal manipulation. If that is true, then the government has such influence, it is hard to comprehend the impact.
1) Government tightens finances, interest rates fall, natural resources fall, dollar strengthens
2) Government continues easy financing (or accelerates it), interest rates rise, natural resource values explode, dollar falls.
3) Government tries to tred water, which is still #2, but more drawn out.

Since #2 is possible, this is why I am keeping my gold miners, but it is possible I will lose substantial profits over the course of the next few months, before the miners rally hard back.

Market Snapshot

There are three primary financial indicators I have been watching, the SPX (S & P 500), TNX (US Treasury 10 year interest rates), and GDX (Gold miners). There are of course a dozen other indicators that are very significant, such as the USD value.

So lets look at the big elephant in the room, interest rates. This single variable will force the hand of the US government into action. On Friday, we saw rates come down a little. This could be just a 'break" from the bull run, or a trend change. It maybe that "big money" is pulling out of the market and parking money into US Treasuries for safe storage. In any event, if the market continues to rise, I would expect interest rates to resume their climb.

From WebSurfinMurf's Financial Blog

Next up is the S & P 500, (SPX). The market has been trading in an VERY unusual tight range. Basically 30 SPX points out of 950, thats basically flat. The market HAS to eventually break out of this range. I am banking it is down, but if up, it is going to hurt.

Notice that when I posted to sell the longs and start getting short on 5/10/09, SPX hit an intra-day high of 930. Notice here it is 6/15/09, over a month later, and the market is still trading around the 930 mark. (925-955). The market is no "better" off than when I made that post. Frankly, until the SPX closes outside of this range, I really can't comment on market direction.

From WebSurfinMurf's Financial Blog

And finally there is the Gold Miners. I posted back when GDX made new highs on 5/31/09, to look to buy GDX if/when it hits 38. I have since revised (due to trend line/time) to 37. Gold miners are retreating, and I am trying hard to not buy more until I see 37 in GDX.

From WebSurfinMurf's Financial Blog

Sunday Audio Post Fixed

I had a problem with the Sunday Audio Post, fixed it.
I had parts 1/2, no 3.

Had a two family events this weekend, took up my time, just caught the issue.
Thanks Ragnorox

Marc Faber on Global economics and US actions

Good audio commentary on US economics.
I classified this under "Audio Commentary" as well as "Saturday Video Post". Over time I may make Sunday Audio post, complementing the Saturday Video Post.



This section is a VERY interested spin on how the US will create forces to weaken the US dollar. Faber also quotes the concept of US decline with far east rise.

Video: Mish's Global Economic Trend Analysis, Barney Frank, and an Angry Redneck

Mish gave a speech at Google, it is well worth the watch.
Very factual and logical on the economic outlook




Congressman Barney Frank while being on CNBC, walked off during the interview.
Barney not being able to hold his temper when questioned about his policies. This level of immaturity is troubling, Mr. Frank has undue influence of the financial policies of this nation. I wish I could laugh, but instead only a small tear appears as I see yet more proof of what is to come.


Find the above video dry and boring? Want a redneck cursing, violence, angry music, and some racial slams, this next video is for you.



Notice at the end the gold commercial. This is why gold will go much higher, it will be the "protest" investment of many citizens. If the world had a tenancy to buy coal during troubling economic times, I would invest there. But currently it is a shiny rock that the protest vote finds solace in.

Disclosure

My "puke day" as I posted in my blog entry was Thursday.
I covered a little bit of shorts at the exact top.
Go me!

Well, my sacrifice to the stock gods seems to have satisfied the market top, today and next week will be interesting.

Time to sell the long stocks

I have been advising to buy resource stocks. At one time buying lottery tickets for the "long" side. However, if the market does turn, some of the long stocks have gone quite far.

Lottery ticket AA (Original purchase recommendation 5.25, now at 12.22) rocketed up, putting a stop loss or selling now is fine.

Long commodities such as Oil stocks (DXO, USL), food (RJA), gold miners? Well, we had a great run, and Gold will run much higher. But it is a case of too much too fast. If you can't stomach watching the miners retreat, time to sell some.

It is time to take the longs off the table, or at least a percent. If you have the stomach, short. If not sit in cash. Be ready to buy gold miners as it falls, pick your spots.

I have a sneaking suspicion you will see a very large bear on the screen in my next stock post. Even if it isn't "tomorrow" you are playing chicken with a large bear.

Below is an emotional picture on investing, where do you feel about the longs you have held since SPX 666? (Thanks to Gary of Smart Money Tracker for image idea, original source I think was "The Big Picture")

From WebSurfinMurf's Financial Blog

Everything is fine

If people come up to me, and keep re-assuring me that the "water is safe to drink", I start to wonder. If the water is safe to drink, why do people feel compelled to tell me it is OK? What do they know that makes them think I should be concerned?

I keep hearing how the US Dollar and US Treasuries are safe. And I do think they are safe, my entire 401k has been in US treasuries since January 2007. I would rather have resource stocks, but my 401k has stocks or treasuries, no resource stocks.

But I keep seeing series of news blurbs of countries around the world announcing their faith in the US Dollar.
Japanese Finance Minister Says Japan’s Trust in Treasuries ‘Unshakable’

China has to keep buying US bonds

And this with the government spending at record pace, with interest rates rising:
US Budget deficit nears $1 trillion YTD, estimate 1.8 Trillion for year. NOTE: 1 Trillion YTD, expects 800 Billion bonds sold in next 3 months.


Everyone says its great to buy US Treasuries.....and I am told this over and over. Well, if it is such a great thing, why not keep it a secret and buy it yourself? After all the less people who buy US bonds causes interest rates rise, and the buyers (like Japan, China, etc) could get better interest rates.

And I am not the only one suspicious of the USD and treasuries, seeking Alpha has an article stating "Treasuries are toast".

The real motivation of all these countries talking up US Treasuries is they want MORE people to buy. Kinda like Kramer telling his viewers to buy Countrywide, DSL, etc. It gave his buddies time to reposition their portfolio.

So everything is fine. Buy stocks. Buy Treasuries. In the mean time, I'll short stocks, and look to buy more resource stocks when they go back to lower levels.

Next down move

Second post, quick thought.

5 weeks ago, I expected a down move that would be a "correction" for moving up 40% in 8 weeks. However with the market flat lining so long, I now expect utter disaster for the market to melt. I would expect once the next down move starts, we hit the lows, SPX 666 is quite possible.

This next downmove will likely be the last time to make significant money as the world financial crisis settles on a new lower trading range.

I am a boring blogger

I am tired of blogging the same stuff, I want the market to choose a direction. If I am wrong, make me bleed, but lets move on already.

The market is trading sideways, as yesterday's post showed. The interest rates rose more today, basically now at levels before the market collapse in 8/2008.

So lets see interest rates go parabolic, have the CNBC talking heads say that high interest rates are proof of a recovery, and have the market go up to DOW 10,000. If this happens, I'll be damaged, but I'll probably go ballistic and bet the farm for a market short.


I expect the market to break UPWARDS, then make a pullback at the end of the day or the next day. That expectation may have been met Wednesday, but if I expect history to repeat itself, I need to have a day like I want to puke, and drive my car into tree. That is usually the top, and near impossible for me to double down as I see the market going to the sky.

Once this breaks, and it will after the games are done, it won't be pretty.
As a side bar, WHO is scheduled to make an announcement, I expect they declare the swine flu a world wide pandemic, but not deadly (yet).

Lets look at the US 10 year treasury interest rate chart, TNX.

From WebSurfinMurf's Financial Blog

Stock plays update

The market is a non stop bull mode. The odd thing for me is, in January I was all over the concept of Obama rally. And when SPX hit 666, I started going long with my lottery ticket picks.
But as the market came close to the 200 DMA, I got cold feet and then started shorting for a downturn.

The fundamentals are still there, huge unemployment, market is over-extended in a bull rally, and interest rates are staying high, threating to choke any "green shoots" of an economy. I am a very cautious bear now, since this bull seems to be more dangerous than I expected.

From WebSurfinMurf's Financial Blog

I still advise caution on shorts, or lottery tickets, Better to be late to the party than get yet another run against the position before the market breaks. A break of SPX BELOW 920 would catch my attention.

As a quick check, lets see how the short plays are now.

ALL of these stock plays assume you short the stock.

Stock	4/16/9	6/9/09	Percent Gain
SPX	873.64	942.43	+8.9% (guide)
AAPL	121.45	142.72	-17.5%
BAP	50.01	61.75	-23.5%
BBY	38.53	39.52	-2.6%
EAT	18.78	17.87	4.8%
DEE	82.72	54.38	34.3%
DECK	62.33	68.17	-9.4%
WYNN	33.47	38.31	-14.5%
new entries	4-24-09	6/9/09	----
DRI	39.66	34.59	12.8%
new entries	4-29-09	6/9/09	----
DIN	30.09	32.74	-8.8%
CAKE	17.65	17.08	3.2%
BWLD	40.60	35.54	12.5%

All things considered, really not hurt that bad being short a market, after such a long move upwards over the weeks. I took some off the table with BAP, DECK, AAPL, back when I warned I was getting nervous. I can tell you this, WHEN (not if) the market starts to take a turn down, all of these will collapse faster than the average stock. If you can short some of these stocks as the market rallies, and still be up 10%+, it will be much better when the market is running in your direction.

As for AAPL, as I warned, it is really dicey, but I actually like it more now as a short. But at this point I would rather add to lottery tickets than AAPL.

So if you joined me in some of these plays, and have extra equity, consider adding (small) additional positions here to average your costs.

It is all about US Bonds

I have been indicating the real action isn't in the stock market, it is in US Treasury interest rates.
And this week, the US Treasury is auctioning off more debt, to see the offerings, click here, and results click here.

As you can see on the US Treasury 10 year bond below, interest rates are threatening to hit levels before the market collapse. If the bond markets continue to rise, the likely course of action is for the government to pull liquidity out of the market and start another stock market decline. The bond market has been volatile the last 4 weeks.

Karl of the Market Ticker posted his spin on the steps everyone should start taking immediately, I recommend you read it (click).

In any event, what this means is the market will continue to be very volatile, and in my opinion this will not end well. I URGE you when you have 50 minutes to click here and watch a MISH video, it will be featured on my Saturday Video post this week.

From WebSurfinMurf's Financial Blog

Apple

I know I had Apple as possible short. However this week is Apple has a World Wide Developers Conference. Apple may really take off as new tech is announced.

Also Steve Jobs is to appear, I think his appearance alone could rocket the stock higher or over-shadow all announcements and AAPL tanks. Steve Jobs has not been well, and investors are nervous on the future of Mr. Jobs. I truly hope he looks great and is getting better.

In any event, AAPL is probably not a good short here, but if AAPL rockets to new recent highs, eventually AAPL sales will bring reality back to the price of the stock.

UPDATE 11-2012 - One of the worst calls ever

Market Recap

I REALLY wanted to update my shorts and gold miners today on the blog. The lottery tickets are still a small disaster. However, somehow as a new dad time just evaporates. Hopefully I'll have time Monday night.

Lets recap where the market and the US economy is. First, there really isn't any good news if looking objectively at the US economy. Sure, maybe things are decelerating slightly, but over-all, some pretty bad records are being hit.

Lets take a look at S&P 500, TNX (US 10 year treasury notes), and Gold miners.

First, the SPX is now above the 200 DMA, but the market is at a level that provided resistance back in 2003 and in prior periods marked on the graph in green. Notice that in a bear market once over the 200 DMA it usually doesn't stay there for long periods.

From WebSurfinMurf's Financial Blog

Second, is US Treasury yields are spiking hard. So hard in fact that mortgage rates are moving up so quick that companies break any commitment they have on the table if it isn't past the point of no return. This will put a crimp on real estate sales. This will also force Ben Bernanke to do something to pull the rates down. The only legal means (He may come up with illegal ones) to bring the rates down is to scare people into bonds. That happens when the market pulls back. Interest rates are a REAL problem, since the rates are very close to hitting levels prior to Sept 08 market downfall. This is not something Obama needs as he spends into record deficits, or consumers as ALT-A mortgages reset.

From WebSurfinMurf's Financial Blog

Third is gold miners, the gold miners are pulling back. If you are out of gold miners, but want to get in, watch for GDX to hit "around" 37 to start buying. Miners could go much lower, but so far since Oct 08, the miners have never disappointed with retaining value.

From WebSurfinMurf's Financial Blog

Video post on Evictions and Jim Rogers Don't short the market

A good watch of the effects of the economy on Lost Vegas, and some surprising eviction tactics.




This video on Jim Rogers on don't short the market. He is 100% right, I just question the timing. I still think SPX hits 700 or much lower before the inflation begins for commodities/some equities.

Are bears afraid of bulls?

Are bears afraid of bulls?

Why yes I am. However the higher this market goes the greater fall it will eventually take.
To ensure I have the purchasing power to "add" to my positions when the market feels topish, I need to start covering risky shorts, and sell some of my lottery tickets to reduce risk.

NOTE: I am keeping some positions on all shorts and lottery tickets, just reducing size. My sizes are probably too high for the risk right now. At this point, I would rather miss opportunity than get forced out of positions by a short squeeze.

SPX 1050 is the target, and I don't believe we will see it. But then again, I thought after hitting 200 DMA the market would pullback.

All the blog entries on shorts and lottery tickets are still my longer term plan, but re-positioning to minimize the risk. Gold miners are doing great, since that is about 1/3rd of my position, helping offset any short risk I have. Gold target is 1000 to 1325 an ounce, which should rocket all gold miners up.

Quick thoughts

OK, I am still not updating my short plays, its really down to haveing the time. In general, they are still doing OK, with exception of BAP (ouch!).

In any event some food for thought.

Oil rallied by 100% in 5 months from low to high. If you have USL/USO/DXO, looks like a good dumping spot. I unfortunately dumped my oil a little too early.

Gold is in for a correction. If/when GDX comes close to 38, its a good entry point to start buying. Be prepared to buy GDX between 38 and 28. I actually think it won't hit below 35, but what do I know? Unless we have an all out market collapse, I can't see GDX hitting below 28 again.

I am trying to aviod day-trading gold miners. I am holding for the long haul. Also get the benefit of much lower taxation for holding over 1 year.

Other commodities may pull back a little as the market takes a breather.

Latvia looks like it may collapse. If this happens this is in-line with 2009 predictions made back in January. The danger here is once one of these old eastern block countries falls, the rest may line up like dominoes.


I am a little surprised to see that "China Sees ‘Grim’ Job Market, Deeper Impact From Global Crisis". I thought China was talking the party line that they are doing pretty good.

And finally Federal Reserve Chairman Ben Bernanke sounded a cautiously upbeat note. Of course he paints optimistic note. If Ben said "I expect 2 to 10 years of a recession/depression", financial chaos would ensue. Also keep in mind Mr. Bernanke "as all the answers" to save the world, he has to be optimistic.

But you gotta love this statement:
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."
Translation: If the wheels come off this train, its not my fault, the politicians did it. I do agree that the politicians are screwing us all royally, but Ben's hardly clean here. Nice try ben. I for one won't buy its all the politicians fault when your doctorate thesis experiment fails.

For some great Ben Commentary, see Mish.

If I had balls, I would double up on lottery tickets if the market goes up tomorrow. Instead I'll hold what I got and hope for the best.


And finally, I lifted from Mish some great commentary: A snippet from An Economy at Risk: The Tough Decisions Ahead by Thomas Hoenig, President, Federal Reserve bank of Kansas City.

"In the long run we are all dead but our children will be left to pick up the tab".

"In our efforts to fix the oversight process for our financial system, we should not misdiagnose the patient. Unfortunately, I'm afraid we are witnessing some regulatory malpractice now. The emphasis on reform at the moment is to change the structure of the regulatory system rather than address the fundamental weakness of that system."

"Capitalism is a process of success, failure and renewal, and for it to work properly, institutions must be allowed to fail, no matter their size or political influence."

"Over the past two decades, The US has created for itself a set of economic imbalances that, in my judgment, have significantly increased uncertainty and placed economic growth at risk for future generations of Americans".

"Starting from where we are today, it is clear that interest rates must rise."

"I suspect there will be considerable pressure on the central bank to 'help out' in easing this adjustment process by keeping interest rates low for an extended period. This happens because people often confuse the establishment of low interest rates - and therefore the creation of money - with the creation of wealth".

Market Direction

The market has been interesting since March 5th - 24th when I converted to a bull. The 200 DMA was an object of fixation, and on Monday it was penetrated with authority. Tuesday the market today was up a little to a new 2009 high.

Now that the emotional reaction to the market reaming I took on Monday has passed, I have been thinking of where to go from here.

I hate to sound like a broken record, but the basics are still there to be short vs long.
The market has now risen 42% in 11 weeks, which is incredible. To go long "here" means I expect 45-50% in 12 weeks?

Also gold/resources have been rising in cost. If this was truly a market rally, gold should fall, as fear pulls back. In addition resource cost rising hurts the economy. (Including energy)

Also the US Treasury interest rates are staying high, and is positioned to gain even more ground.

And finally the US Dollar is about to break the recent lows as it collapses against other FIAT currencies.

Lets review the situation and see what the US Fed and US Treasury will do.

GIVEN: US Treasury interest rates rise more, and as interest rates rise mortgages become more expensive, further killing the housing market. The last bubble was real estate, so this trend will stop dead in it's tracks any sort of housing hope. And lets face it, the US's true problems have not been corrected.

With Equities up 42% in 11 weeks, natural resources advancing, and US Interest rates rising, and mortgage interest rates rising, which is better for the US?

1) Equities at 50% up in 12-15 weeks, OIL at 80 bucks a barrel, US Treasury interest rates reaching pre market collapse levels, and housing market collapse accelerating as interest rates rise just as ARM rates reset.

OR

2) Pull liquidity out of equities, causing the market to drop in price, resulting at the stock market 25% up (since March 10th) 12-15 weeks, OIL at 50 bucks a barrel, US Treasury interest rates falling, and housing market hope being kept alive as interest rates fall as ARM rates reset.


I am keeping my shorts, my lottery tickets, and expecting #2, its just a matter of time.
I'll update my short positions at a later date.

Lottery Ticket Update - Bull Destruction

As previously mentioned, the second Lottery Tickets are MUCH higher risk. So these lottery tickets aren't for the feint of heart.

Boy was I right on that statement. Lets take a look at the destruction by today's ramp job into new bull territory:

Stock	5/7/9	6/1/09	Percent Gain
FAZ	4.75	4.49	-5.5%
SRS	20.15	17.94	-11.0%
TZA	24.95	21.997	-11.8%

Wow, now that isn't fun. As "lottery tickets" these losses aren't that horrible. Then again, the losses may be just beginning. I am keeping my lottery tickets, and will double up when they are 50% lower (if that ever happens). So FAZ 2.40, SRS 10.08, and TZA 12.50 are my targets to add to these positions.
Otherwise I will probably just hold for the next downleg of the market.

Again, see previous post, there is nothing wrong with licking your wounds and taking some or all off the table. I won't be betting long from here, but nothing wrong with taking the shorts off the table.

So I'll keep this painful post series going until we hit 50% lower, and I'll "average the price" down by 25%. See how horribly painful it is to play in the 2009 market? 2009 is not a fun year for trading.

I did warn much higher risk, I wasn't kidding. This isn't for the feint of heart.
I'll update the short plays tomorrow night.