This Week in Charts

I made these charts early today, but didn't have time to post them.
Today didn't produce a material change, so the view still is in effect.

Gold is the mantra, with the debt vote pending next week.
I wouldn't be surprised if the S&P 500 breaks upward and looks like a bullish run then collapses sometime in the next few weeks.

To the charts!

From July 25, 2011

From July 25, 2011

From July 25, 2011

Buy Gold or Rare Earths

This is a tough one for me, I think in the near term, Gold may really start moving. But I see Rare Earth metals as the ultimate long term play.

If you read about the large deposits of rare earths under the sea near Japan.....wake me up in 10 years when mining there MAY matter.

I am buying gold and rare earths, but beware, when the federal government closes the budget this year, it may be fireworks in the markets or a big yawn.

See this article for Rare Earths.

US Debt - IOU USA

In honor of the current US debt crisis, were I believe nothing of substance will be resolved, I bring back IOU USA, the 30 minute version.

If you haven't seen the movie, watch it. The movie focuses on the US comptroller David Walker for over 10 years and presents views from his perspective. If anyone should fully understand the situation, it is him.

For those who think US debt to GDP ratio is endless, watch this 30 minute movie, I.O.U. USA.

For information about full movie and it's web site, click here.

US Dollar headed for disaster

We have full blown monetary crisis brewing in Ireland, Greece, Portugal, Spain, and Italy. We have seen Iceland collapse. Countries have fallen to political, but I contend economic pressures.

It has been dubbed Arab Spring, and has resulted in revolution in Tunisia and Egypt. About 10 other countries in the region experienced uprisings that failed to over throw their governments.

There is no doubt, in any rational person's mind, that the last year has been nothing like the previous 40 years when it comes to western country stability.

The question is, will anything of significance happen in the USA. Each day of poor fiscal decisions draws the US closer to an event to occur. That is most likely to be the loss of the US dollar as the world' reserve currency, and eventual assault on US debt credit worthiness.

Once this line is crossed, I am very skeptical that we can ever recover with the current system. Nothing short of a complete overhaul of the financial system will be required to restore faith.

Today I have graphs for you from Zero Hedge, one that shows the US debt to GDP ratio. Not since World War 2 has America crossed the line of debt higher than GDP. And even then the steepness of debt creation was not as severe as our current assent over the last decade.

The second graph is a bit of trickery, for the two items gold value and US debt levels are not correlated. The two graphs have been scaled to look like they are. The key item for me isn't the scaling of gold value to US debt. The key item is how the TIMELINE does match for gold's value rise and US debt rising. So while we can ignore the alignment of gold value to debt level, it is difficult if not impossible to dismiss the timeline of golds rise with US debt. I still contend that the rise of gold is due to China and India's rise, but possible related to US debt because they are increasing their creditor status as US increases it's debt.

Third graph is USD vs other major currencies valuation, latest graph always available here.

The purpose of these graphs today is food for thought, is America so mighty, no matter what it does it cannot be injured? I think not. With enough bad decisions, even the likes of Lehman Brothers, Merrill Lynch, AIG, Bank of America, Freddie Mac, Fannie Mae, IndyMac, and over 467 US banks have failed since 2007. If US financial institutions can fail as such epic and breathtaking volumes, so in my opinion can the US itself.

Both compliments of Zero Hedge, and thanks to my friend Mr. Karl for the article link.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Peak Oil is real, the true crisis

I may focus on various economic issues, focus on currencies, gold, food, and energy.

But the single worst disaster the world faces is peak oil.

The global society is predicated on cheap energy. Without it, the laptop I am using right now would be insanely expensive to produce.

The world is facing catastrophic problems with energy costs, as the world is too dependent on oil for energy. Oil unfortunately has a problem with increasing production capacity to meet increasing demand from China and India (2.5 billion people) and western consumption. The US is already back at peak consumption levels set back in 2007, with a weak economy.

The concept of Peak Oil eludes most people, and many debate it as real. Let me be crystal clear what peak oil means to me. Oil will NOT run out in the next 50 years. Oil will continue to be more expensive to procure and rise in price by lack of increasing total global output. So in a sense, peak oil is lack of continued increase in net oil production, at a low price.

The net result is too little oil for too much demand, with higher production costs. This will be a continual problem for the rest of human existence until we can find a new primary energy source.

The net result will be increasing costs in food, energy, and consumer products relative to income. This is in-line with my view of continued downward spiral of US living standard, along with western countries, until these economies can experience a rebirth away from debt and new energy sources.

To articulate finer points on this issue, I have links to resources.

Shell Oil predicts Great Depression 2.0 Sooner rather than much later - Full PDF here

Financial Sense News hour podcast, Energy Crisis likely in 2012

Baron's Magazine, calling for Oil at 150 a barrel and beyond.

As a side note, Saudi Arabia is building a large solar farm. For the largest oil producing country in the world to entertain Solar tells me they think it will be cheaper than consuming their own oil.

Mentioned in the Shell article is movie Collpase, never heard of it. Snippet below.
UPDATE 6-21-2016 - the PDF and video are gone, I found alternate PDF copy here

Macro View of Economics

I have mentioned the Financial Sense News Hour before, a wonderful podcast that provides a wealth of information. This particular podcast episode is one of the best I have heard in a very long time. I strongly recommend everyone to listen to it. Jim talks to George Karahalios and can be found by clicking here.

I may refer back to this entry, when it comes to justification about US Monetary Policy, Corruption, and economic competitiveness.

The world will transition in a major way in the future, natural resources are key holdings to maintain wealth.

In addition, an excellent podcast from Marc Faber, and why currency devaluation will overcome deflationary forces, and why buying gold now is still a great idea. I was surprised by Marc's comments on many of his Jewish friends purchases gold related assets in the 50 to 100% allocation level. Jewish heritage has a long term view on how to preserve wealth and build it for generations to come.

Federal Reserve Bank Magic

I ran across an old article explaining how the Federal Reserve Bank creates money and some of the games it started playing back in 2008 to combat the deflationary collapse in progress at the time.

The article is written by James. T. Hamilton, an economist who writes for the blog Econbrowser. The article is named "Federal Reserve Balance Sheet", written in December of 2008. A very good read, I highly recommend it.

This Week in Charts

This week in charts, a focus on the S&P 500, and some food for thought.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

This Week in Charts

Well, that was some summer rally!
It went much faster than I thought. I am now questioning if this market can stay positive through August. Such a violent upturn is bound to be punished.
But I'll reserve for a down move below SPX 1260 to call this market a down trend.

We may correct, and rally right back, we'll see.
But the US Treasury interest rates may be telling us something.

To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Time to invest in Gold?

I am still waiting for the other shoe to drop in the markets. So far, that isn't materializing. The markets are in a holding pattern, likely for economic news reported on Friday.

What is a bit surprising is Gold's strength the last few days. Gary of the Smart Money tracker is calling for starting to enter.

I won't even attempt to cover his reasons, pay for his service. But I feel compelled to start entering, just on the fact I am trying my hand at following Gary beyond my gut.

I will be cautious, for I can't help but think gold will get that punch down before it rallies. But it is possible we have already seen that.

In 2008 the deflationary collapse caused gold to fall. In 2011, could it be the safe haven? Time will tell.

GLD etf, GDX for gold miners. GDXJ for small gold miners Good luck.

This Week in Charts

Aside from normal charts, a quick reflection on my postings.

On night of 6-21-2011, I posted that I expected a Major Rally Ahead, perhaps into August.

I backed that comment up on 6-22-2011 that Greek Default Not Likely.

Followed by the market taking a nice downturn, against my rally theory, and I posted I refused to flip flop.

Since then, the market has been on quite a very fast tear straight up. I was so stunned by the upswing, being so quick, that I finally added some shorts Friday. Assuming we do get a pullback, I'll get out or set limits, for I still think the market will bounce around until August.

Basically, I don't expect market downturn in earnest until at EARLIEST August. Could be much later.

First chart shows what happened and how I reacted, then normal charts for your own review.

To the charts!!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Too far up, too fast

I added shorts today, mainly due to the market rallying way too quick for my tastes. I still think the market will trade in a range until August, so this is a short-term trade.

Plus 3 day weekend equals greater chance for bad news to be released at the Friday close.

I always keep my core gold miner positions.

Ideas for shorts:
ODP, PCLN, DECK (bad idea, but I am sticking to it)

Buy DXD (doubler inverse short)

Good luck.