Goldman Sachs Market Target S&P 500 at 800

I trust random crackhead homeless people in downtown Trenton more than I trust Goldman Sachs.

Usually whatever Goldman Sachs says, the opposite is the truth.

So today's analysis is confusing to me from Goldman. Their prediction if QE2 is initiated, the market target may still be S&P 500 at 725-800.

A general summary, that I saw on a forum post, of what the economic positives vs negatives I thought was very funny and accurate:

Case for the market falling

• Lloyds dropping profits by 50%
• Banks downgrading each other
• Ireland, Greece, Spain, Portugal, Latvia...
• Global retail dropping off a cliff
• Intel cutting expectations
• Widespread fraudulent foreclosures
• Currency wars with the BRICs
• Trade wars starting
• HFT Flash Crashes garnering more attention (ie obvious corruption)
• Gold prices garnering more attention (ie obvious devaluation/inflation)
• Virtually no change (barring the Fed injection of $1.7 trillion) in the masses of worthless CDS, MBS, and bank balance sheets since 2008 when they were all insolvent

Case for Market Rising

• Fed contemplating QE2
• Widespread political corruption
• Refusal to enforce the Rule of Law

Goldman Sachs release

GS Sep 10 Econ Update

Gold, Silver, Miners and Food

I am adding to all positions across the board, providing the market doesnt open Wenesday down big. The thought is that Ben Bernanke will be forced to print more money. Right now it looks like dollar is resuming its decline, and resources are going up.

I for one, am NOT convinced Ben will take us down the rabbit hole and try to break the US Dollar's back. But I can't rule it out either. I'd rather get in on resources now, and when it comes time for Ben Bernanke to announce the next action, be able to dump over-valued shares than try to grab onto a rocket last second.

What is amazing, is everything feels more fragile that during the 2008 crash. No one knows for sure if Ben will pull the trigger and take the US down the path of destruction. But if history is a guide, we are screwed, and Mr. Bernanke will put us in the line of fire.

But that play seems too easy, so caution is the word of the day.

International Cracks Appearing

It is well known Ireland would have been by now into a financial tailspin if it wasn't for the Euro. As it's debt problems continue to build, there is political positioning occurring. The economy is contracting, there is uncertainty of the Irish government to cover bank debt has triggered Moody's to downgrade Anglo-Irish bank. While there is not raging fire yet, there is smoke appearing out of Ireland.

South Korean banks' loan delinquency rate rose to the highest level in 15 months in August as more corporate borrowers fell behind their repayment. Again, no raging fire, but smoke is visible in South Korea.

The cost of insuring peripheral euro-zone government debt against default continued to rise Thursday, with the spread on Ireland credit default swaps, or CDS, widening further into record territory. .... The spread on Portuguese CDS widened to 419 from 391.2, CMA said, while Italy widened to 204.8 from 195.3. The Spain five-year CDS spread was at 242.5 basis points versus 234.3 on Wednesday, while Greece widened to 828.6 from 813.6.

China Blocks Vital Exports to Japan - Note, I think China already has restored shipments, but this highlights the tension between China and Japan. Each country has detained nationals from each other's countries. Also highlights how the world can be bullied by China, as it controls manufacturing and natural resources the world wants.

Norway's Central Bank sues Citigroup on $835 Million Stock, Bond Losses - What struck me is a central bank is suing, until now, I don't remember a central bank breaking rank and file on the financial games going on.

Latvia PM says International Monetary Fund support still vital - Translation, the country would be under immense financial pressure without subsidized loans.

A complaint has been filed with the antitrust division of the U.S. Department of Justice claiming that the top credit-rating services in the United States, which control an estimated 90 percent of the industry, are complicit in hiding billions of dollars of China's debt. What nice timing, now that William Buffet of Berkshire sold most of Moody's. I am sure it is just coincidence that just days ago Mr. Buffet dumped more shares before the government filed charges. Must be nice to be so lucky.

European Central Banks Halt Gold Sales - what? gold is at all time high, from from 200 to 1300 an ounce from 2001 to today. SELL SELL! Or maybe the demand is high enough that banks selling won't suppress prices. Time to hold onto the emergency funds.

Head of Vatican Bank Caught in Money Laundering Probe - Looks like world religion is joining into the financial games.

This Week in Charts

I have 4 charts to show, S&P 500 since 1995, GDX miners since 2007, USDollar last year or so, and the 30 year interest rate.

Notice, the only investment that is at highs is gold miners. Rest is not doing so great in comparison.

Also notice the USD is falling into critical area.

Not good, not good. Oh well, American Idol season starts, and who cares if the USD starts making its way to new lows. Market is holding in there, it is all good.......

To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Below is USD, notice the dollar is falling below previous support.

From WebSufinMurfs FinancialBlog2

Ditto Head - One month later

On August 24th, I posted an entry called Ditto Head, where I basically stated I finally became a convert of Gary of the Smart Money Tracker. While I always agreed in general with Gary that precious metals is a good long play in these uncertain economic times, I have been skittish on Gold, Silver, and Gold/Silver miners at times.

Gary on his blog, and on his paid service, is now calling for a possible pullback on gold/gold miners starting as soon as Monday, but the bull will resume. I am not going to republish from his paid service the details of what levels he is predicting, duration, targets, etc.

While I am confident that in the next three yeas Gary is going to make some huge mistake (he is human), I am also confident his insight and methodology is sounder and more accurate than anything I could come up with. Therefore, if you want the odds in your favor, seek out his advice and invest at levels your comfortable with considering the risk the international market faces.

My blog is just going to be commentary on the financial goings on, politics, etc, and not for specific investment advice for the foreseeable future.

With that said, I also believe Gold is the last, and Ultimate Bubble, one that will come with the eventual international currency crisis. And all bubbles pop. I do NOT believe gold is money, and I do NOT believe Gold is a lifelong investment.

Gold is a commodity, like coal, or oil, or copper. And the hedge why I have always liked gold is as India and China have more paper money liquidity, more money will flow into gold. Both these countries have 1,000's of years of the common people having gold as a centerpiece in the social behaviors. Between the economic and political uncertainty, and 2.5 billion people having more paper money to spend in commodities, is why I like precious metals.

But in the very long run (5 years? 10? 50??) Gold will pop, like all bubbles. But I'll worry about that if/when Gold really starts to skyrocket as a parabolic blow off is occurring.

So, lets take a look how the ETF's and stocks I mentioned on August 24th have done in 30 days, since I announced I am now a Gary Ditto Head. (Note Gary sticks to gold/silver, does not dabble in food)

UPDATE: I screwed up making the chart below, i forgot to make the prices static for 9/24. See post Ditto Head, 7 weeks later

I will be adding this post to my New Reader.

Good luck!

Savings vs Deficit spending, which is better for economy

Special thanks to Harry Yee for sending me this link.

Below is a snippet from the article, click on the text to read.

The foundation of the Obama stimulus plan is easy to understand, and to Chris and lots of smart people, it appears to make sense. Once again, its goal is all about raising growth right now by shifting money around, without durable incentives for expansion -- what we call "Static Impact." It seeks to shift hundreds of billions of dollars in U.S. and foreign savings to government and consumer spending. The Treasury is borrowing $862 billion in funds that families and governments don't need to use now, and hence are saving. The federal government is then spending part of it quickly and returning the rest, through programs like the "Making Work Pay" tax rebates, to consumers most likely to spend it. The rationale is that all the extra outlays in these two categories will raise GDP far more than if all of that money had flowed to places where savings go, into corporate bonds, stock offerings, CDs, or bank deposits.

But the plan contains a gaping hole. The rub is that savings, just like the dollars government channels into salaries and auto fleets -- and that consumers lavish on restaurants, tourism and computers -- are all spent. They're simply spent on different things, namely corporate investment for research, robots and software. Hence, a dollar transferred from savings to consumption doesn't add to total spending, or to GDP, at all.

So let's answer Chris' question directly. Let's assume that the government never borrowed that $862 billion and that the money stayed in the hands of American families and foreign governments. Remember, all of that $862 billion is being spent under the stimulus by our government or consumers. If the savers simply kept the money, all of it would remain as savings. So those dollars would flow into the banks in savings accounts and CDs. That money would then be available for the banks to lend, chiefly to large and small businesses.

Chris' point is well-taken: In this sluggish economy, would companies actually borrow those extra savings, and then spend the money on such investments as R&D or computer systems?

The answer is that banks are in the business of collecting interest, and would indeed lend the extra deposits. "Money never sleeps," says J.D. Foster, an economist at the conservative Heritage Foundation, borrowing a line from the title of the new movie "Wall Street II." How would that money make its way to private investments in a market where demand for capital is extremely weak?

It would happen in two ways. First, the supply of savings would surge, and government borrowing would be far lower. So the pool of funds available for companies would increase, and the competition for those funds would fall. As a result, interest rates would drop even below today's bargain levels. Lower rates would reduce financing costs for companies, making it more attractive to buy everything from forklifts to new systems for logistics.

FOMC Meeting, results

FOMC meeting was Tuesday, and what was indicated was basically change nothing, but threaten to initiate Quantitative Easing part 2.

Part 1 drove markets from the depths to the highs, and markets have cooled off since QE 1 has stopped.

The threat of more QE (basically fancy way of saying raw printing of currency, to devalue the currency), gold shot up.

Click here for a cynics look at FOMC minutes.

Charts of FOMC (at 2:15pm) announcements in gold, USD. Bond market closes at 2pm, so we will see rate impact tomorrow.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Peter Schiff and Senator Bernie Sanders on Economy

The second part of this video is excellent, Peter Schiff hits the nail on the head.

Obama on Economy, take 2

I posted once before on Obama talking on Economy. There was a "town hall" on the economy yesterday.

Below is a link 1 of 7 of Obama talking on the economy.

Yesterday, it was announced the recession ended in June. Obama plays down the economy recovery.

Part 3
Part 4
Part 5
Part 6
Part 7

This Week in Charts

What can I say? Gold looks good, gold miners, silver miners, etc.

Market overall seems to be holding in there.

To put the overall market into context, I'll start off with SPX logarithmic chart to show market valuation relative to a percent view.

The USD is at a critical point, a break lower should start sending metals higher, and possibly markets...for now.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

US treasury rates are clearly on the rise, breaking from previous trend line.

As long as rates stay below 50, it isn't time to yell the sky is falling.

From WebSufinMurfs FinancialBlog2

I didn't bother doing GDX, GDJX, or silver miners. They all look great as of today.

Below is gold's trajectory.

From WebSufinMurfs FinancialBlog2

I looked a chart of AAPL after talking to a friend, anyway some comments below.

From WebSufinMurfs FinancialBlog2

Gold, ETF GDX and GDXJ breaking out

Since 2002 there is only one area of investment that I am aware of that has been on a bull run, and that is Gold. We are now witnessing gold making new highs, gold miners making new highs. It is increasingly likely gold will go on a parabolic to the upside. Right here and now, a person can invest and take on risk of about 10% loss by placing a stop at the trend lines depicted below. The upside is increasingly likely to be over 50%, and if this goes parabolic, could net 100 to 500% before it terminates. (assuming a parabolic run ever starts)

Seek a registered financial advisor before buying Gold, Gold miners, etc. But if considering it, act, don't wait. What will happen is you will say to yourself "when this pulls back, ill buy". Well if the parabolic run does start, the risk of loss will increase, and you will not find a foothold to buy.

In any case, to the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Gold makes new highs

USD is positioned to resume it's slide, or that gold is making new highs.

I'd rather the USD be gaining value than losing, but I don't set monetary policy.

In any event, Gold is positioned to rally hard core. If you do join in on the gold and/or gold miner bubble, be careful not to over-extend yourself. A bubble pops as quick as it comes. I doubt that the bubble is near popping, its just getting started.

And on Monday I said it was OK to stay out until a breakout occurred in gold and gold miners. Ding, its Tuesday, and here we are, breakout time.

A GREAT read on what may be going on is from Hussman funds. Mr. Hussman describes quantitative easing as the "cheating" of the system allowing rates to adjust to keep equilibrium in the system. And instead forces accelerated devaluation of the currency. Note, this does NOT mean collapse. Just a more rapid decline before appreciation can start to rebuild. I may post more on this later.

Two charts for your review.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

NJ Governor Chris Christie on Teachers

I live in NJ, and Governor Chis Christie is one of the only political leaders taking action against the onslaught of massive debt. NJ is bankrupt due to the actions of politicians over the last 20-ish years.

This video shows a teacher asking, and Chris Christie responding, well worth watching to hear the perspective of the fiscal crisis and Chris Christie's justification for his response. While I can't blanket back every action Mr. Christie is doing, I do applaud Mr. Christie is TAKING FISCAL ACTION. In this respect, we would do much better as a nation if there where more of him.

This Week in Charts

I kinda expect this week to be a down week across the board, but who really knows, its just a gut guess. I'm still watching gold, and expect a punch in the face soon. Then we'll see the true action after we get that out of the way.

The real show is interest rates. Rates are spiking on the 10 year US treasuries. If they break much higher, its bad news for all debt issuers. This may be because of fears of China having

One week from now, I guess we will have our answer on US treasury rates and the fate of US dollar valuation.

To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

This Week in Gold Charts

Gold continues to look strong. Here are the charts.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

This Perma-Bear turning Bull

Don't get me wrong, the world financial system is sick, and will forever be so until honest accounting is restored for corporations.

However, I am optimistic on purchasing gold and gold miners here and now. We may be in for another round of spending. We have already seen announcements from Europe, and I'll bet anyone 5 bucks some shenanigans will be announced in the US as the elections approach.

There is no way I go long the general market, any long is risky. But I have and continue to like the extra bull market argument for gold. Gold is probably the ultimate ponzi-scheme, more so than the US financial system. For now, I trust that ponzi scheme more than the broader stock market.

So for me its gold, gold miners, silver, etc until further notice. I recommend everyone who is even considering buying into this area to subscribe to Gary of the SmartMoney Tracker. I resisted for quite a while, but now I am a full "ditto head" of Gary. I have no analysis on why to buy into this sector, Gary has a great newsletter rotating between a half a dozen reasons why it is a good idea.

Also check out Gary's latest commentary on the market. While I am quite a bit more cautious than Gary on the market optimistic outlook, it is a good read. And if he is right, yet another reason to go with Gary.

So in a way, I am an optimist. I am an optimist that the paper printing and corruption will continue until the bankers and governments are physically stopped. I am optimistic that because the root cause of the financial problems are being ignored, the problems will manifest in other ways. I am optimistic that before this very long crisis plays out to the end, near the final peak of the crisis precious metals will soar.

I am also optimistic that after the final crisis moment, which may be 5 years out, passes, precious metals will collapse in price as sanity is finally restored to the financial system. A good indicator of this about to happen is when sane accounting practices are restored.

In any event, I will review this viewpoint if/when the S&P 500 breaks above the April highs OR the S&P 500 below 1,000.

Good luck

Europe joins the Financial Ground Zero events

Europe, which by many aspects is more opaque and corrupt than the USA, has decided to jump with both feet into the Financial Ground Zero list of my blog.

Europe had previously created a 500 billion dollar borrowing "slush fund" to stabilize countries that are basically insolvent, such as Greece, Ireland, and a list of countries in the EU.

Today the IMF announced, not only would the original 500 billion "emergency loan" fund be extended in duration, but doubled to 1 trillion. Further, there are discussions according to bloomberg to double the IMF debt cap every 6 months, resulting in a 4 trillion emergency fund by end of 2011.

In addition, any cap of max amount loanable to any one country based on IMF's quota is now removed.

In essence, the world central bank has said "we will print and dole out money to any country, no matter how fiscally irresponsible, to anyone we want, and raise the limit and duration by any amount we deem fit".

Congrats Europe, and IMF, this event has qualified as a "Financial Ground Zero" event on my blog. This sad march will eventually culminate into a world wide crisis that will make 2008 look like a small opening act.

There is always still time to turn things around, but here is where I differ from my friend John Chinnock. The politicians will not only kick the can, but will be quicker act and with larger sums, potentially accelerating the crisis. The world will march right into the heart of the beast, and will only recognize the crisis created after the current approach becomes unsustainable.

Unsustainable is when world government bonds and currencies are in a direct crisis, forcing the hand of the government and the banks to reform. They have shown since Reaganomics to not stop, but to continually expand fiscal insanity, and will not change until forced. So a bond and currency crisis isn't a might, it is a must, to enable change.

The question is, only when. And on this point, I fully agree with John the final crisis maybe 5 to 10 years off. (potentially). But I'd rather start positioning. Probably a better way to store wealth is to buy cheap, off-the-grid, land as a "wealth storage" vehicle. Check out http://www.landandfarm.com/.

On the IMF news, gold valuation spiked, but gold is still in a topping danger area. It needs to break above 1,265 an ounce and remain higher to establish a new base for larger gains. And was likely a catalyst for markets moving higher Tuesday. I suspect we will see stocks fall from here, possibly as low as 899 on S&P, giving Ben Bernanke the ability to announce his next round to follow up the IMF.

Will be interesting next 8 weeks. Cash is still king.