This week in chart

The dollar has bounced, and the market fell, no surprise here.
The question is can the dollar find footing, I suspect not yet.

So today, I bring the market view of the last 6 months, to put 10-31 market trade in context.

From WebSufinMurfs FinancialBlog2

News round up

I haven't done this in a while, but there are multiple news events worthy of your eyes.

MISH'S Global Economic Trend Analysis
Race to Debase Currency Back On - Japan Finance Minister Promises to "Intervene Until I'm Satisfied"
Head of EFSF says Bailout Fund Could One Day Issue Bonds in Yuan - My Spin - this would eventually lead to WW3

Czech PM Considers Referendum to Halt Joining EU - Unintended consequences by EU doing the 'wrong' thing.
Treaty of Debt - An Eye Opening Video on the ESM Bailout Mechanism
Spain's Unemployment "Unexpectedly" Rises to 21.52%
Shanghai Homeowners Smash Showroom in Protest of Falling Prices; Developer Warns on Price Drops; "Twilight Zone" of Phony Accounting and Shadow Money
 The "Most Transparent Administration Ever" Seeks Law to Respond to Freedom of Information Requests with "Information Does Not Exist"

The Market Ticker
Word on the street, Greek bond deal WILL trigger CDS default event

Slope of Hope
Compare the Stock Market in the Great Depression to today (worth a quick look at the charts)

Zero Hedge
Interview with Author about Germany's hyperinflation after WW1

Savings and loan bubble vs mortgage loan bubble

For those readers who can remember 1989, they will remember that the savings and loan bubble back then was blamed for the early 90's recession.   When the bubble popped, the prosecution began.

Even though I was barely an adult, I do remember the media coverage of the prosecutions.
Below is a street interview of Bill Black, where he recalls his part of the prosecutions in the S&L fraud, and compares it to today.  He also refers people to the blog http://neweconomicperspectives.blogspot.com/ for more information.

Although I agree with the outrage that we have entered in to large, unabated, lawless era.  I don't view it as the same outrage as most.   The protesters, Karl of the Market Ticker, are screaming Stop the looting and start the prosecuting!.

I the lack of the prosecutions, or law enforcement as a reflection of society.  The lack of law enforcement tells me the average person in government, police, and politics, do not have passion for taking the harder road and diligently enforcing the letter of the law.   It is relatively easy to prosecute a man for petty theft, violence, or assault.  It is quite another to work a case involving intricate situations with vague boundaries to make a case and prosecute to the fullest extent of the law.

The country must degrade to the point that the AVERAGE person is ACTING upon this desire.  I don't believe this will change until 51% of Americans are motivated to participate in the system, not just vote.   I fall into this category, so I am not preaching from up high.

Interesting ad-hoc video below, audio interview from earlier this year can be found here.

When does the other shoe drop

It is quite clear the markets are in rally mode.  Nothing moves in a straight line, but assuming Europe does succeed in advancing its voluntary debt forgiveness but this is not a default according to law plan, markets may levitate for a while.

But there is a fly in the ointment on multiple fronts.  First there is this Christmas sales.  The US Economy is still judged by public consumption.  So if sales are poor, or margins cut deep, companies may not have a good season.

But lets assume that sales do OK, what else is on the horizon?

Think back to August, what news was on every tv, every hour, and had a buzz about on every news program?
Think back.

Wait for it......

The US debt default, end of the world.  How quickly we all forget the end of the western world almost happened in August.  And it was true! right? It wasn't political.....wait....maybe it was overblown slightly.  It was a crisis right?

I am here to tell you there was ZERO crisis.  But it doesn't matter about reality, it is the perception that matters.   And at that time, the debt ceiling increase passed, but under the condition of a special super committe is formed to determine government spending.  That the committee must come up with 1.5 trillion debt reduction over 10 years.

What a freaking joke.  The government will agree to basically cut 150 billion a year on a 3.7 trillion dollar budget for 10 years.  Does anyone at all believe any of this?

Again, it doesn't matter about the reality.  But one thing is for sure, next year is an election year.  That means the Republicans and Democrats are going to be filling the airwaves AGAIN about budget, this time deadline November 23rd.

So before we look to the sky for how far the market will run, consider that the news will once again be financial topics, and being spun loudly for November 23rd.  The market hates uncertainty.

My bet?  I don't want to be long markets into November 25th, right after Thanksgiving.  Between the Christmas sales and newly passed budget cuts, I am not betting on a new market high.

Between now and then, Gold goes up, dollar goes down, markets climb or trade in a range.  I'll stick to gold, gold miners, and silver.
Good luck

UPDATE: 10-28-11 @ 8:50 am  Election worries drive deficit talks

Europe Celebrates Lawlessness

The fiscal problems in America and Europe have driven government sanctioned fraud globally.  In March 2009, with the global crisis hitting lows, the FASB changed accounting rules to allow banks to mark 'assets' at a valuation they determine, rather than what the asset is worth on the open market.  This was called mark to market accounting, instituted back in the Great Depression.

The idea is that assets have value, equivalent to what others are willing to pay for it.  For example, if I state my house is worth the amount I paid for it, but nobody today will buy for that price, then what people will pay for it today would be the 'mark to market' price.

Since then, banks across the world have enjoyed a great run, and why not? Their assets in accounting terms don't lose value.  Its a great gig.

Europe now proposes that Greece will be able to write down their bond debt by fifty percent AND this will not trigger a default on their debt.   The second part is key here.  If the debt write down is not termed a default, it cannot be an event that triggers legal action when defaults happen.

This to me rings of what I see in society often today, avoiding responsibility by changing the rules.  This will have ramifications that I believe will far outweigh the benefits in the years ahead.
How can anyone enter into financial agreements if accounting rules can change, if definitions like debt default are altered to suit the "other side of the tables" needs?

The answer is, if you act responsible with your money, you can't  You will avoid entering into such agreements in an industry that has a track record of avoiding adhering to the construct the agreement was based upon.

If the Greece plan comes to pass, the event will AVOID triggering the debt default agreements (like insurance) called Credit Default Swaps.  In the near term, this is a fantastic thing.  I have covered before how CDS coverage exceeds gobal GDP by multiple times.  If CDS is not triggered, is greatly reduces the change of a financial depression.  Thats the good news.

The bad news if money is not treated with respect, and does not have a rigid enforcement of law, the other result is currency collapse.

While I am not stating that a currency collapse will happen, I am stating there is no free ride for avoiding responsibility, there will be consequences.  For today, time to celebrate, markets will go up.  Watch gold and gold miners, I may buy more.

My Favorite quote during this event is
"The world is watching Europe and Germany; it is watching whether we are ready and able, in the hour of Europe's most serious crisis since the end of World War II, to take responsibility," Merkel told parliament.

The way I see it, above was a twist of words, below I have fixed it.

"The world is watching Europe and Germany; it is watching whether we are ready and able, in the hour of Europe's most serious crisis since the end of World War II, enforce responsibility," what Merkel should have told parliament.

Gold explodes upward

Today, Gold exploded up, also silver.  Gold miners had a nice up day also.  Gary of the Smart Money tracker is convinced its time to buy.

I am real nervous.  We are on the cusp of an announcement from Europe.  If your of the belief the Germans will cave and finance the debt of Spain, Greece, Portugal, and Ireland, then buy Gold and miners on the open Wednesday.

If you think the Germans won't go for this, then a deflationary collapse is about to begin.  In such a collapse, I have a hard time believing gold rockets up.

So I am splitting the baby.  I am buying a little bit of GLD (gold) and SLV (silver) .  Why? Because if the metals explode up, it will be very hard to buy.  Each day you will look and say "that has to come back down".  It may not.  I'd rather have a toe hold to use as leverage to buy more as gains amass.

Conversely, if gold and silver are indicating a rise, but instead collapse trapping all of us in those sectors, I want to minimize losses by not taking huge positions.
I cannot day trade, i have no time.  I don't like stop losses since as we saw today, metals can move huge swings in a day.

In addition, probably buy 100 shares of gdxj, the junior gold/silver miners.
Again a toe hold, and each day I wait for the market move of Europe indicating, inflationary or deflationary event in the year ahead.  Also if the Fed announces yet another attempt to break the USD into a death spiral.

One thing is on the side of Gold and silver, no matter what happens fear tends to push up the precious metal sectors, and European fear can only help Gold Silver.

Ron Paul Speaks

I am actually scared if Ron Paul becomes president.  I do admire the man for keeping the eye on the ball about reforming the government and pulling back spending.

But he has touted in the past the Gold standard for money.  I am completely against tying money to shiny rocks, dull rocks, or any other natural resource with independent value of work done and work owed.

But Ron Paul is ALWAYS worth listening to.  Where else will you get new ideas, insight into fundamentals, and  ideas on actually reforming the government?   I don't completely agree with Ron Paul, but I agree more than most other candidates.  I had hoped (and still hope) Chris Christie joins and becomes president.  Other than him, I see a wasteland from the top two parties.

European Union, the 20th Deadline to resolve is Wednesday

Wednesday's deadline for the Eurpean union to resolve their sovereign debt, after a string of deadlines for over a year to resolve, is now in focus this week for the markets.

I haven't commented much since I was so confident zero would get done, and I was right.
But this week, there may be a peep, I doubt final answer on the European crisis.   But we may actually get some foothold of the new reality out of Europe this week.

We could hear it Wednesday, but I suspect just one more kick the can into Friday for an announcement.
In any event, this is a crucial decision of Europe that will shape all of western countries next couple of years.   I just don't believe the right thing will be done.  Instead I expect more paper games to cover the crisis, until the crisis gets so big, no European country can avoid the vortex created.

It just boils down to take your medicine now, or wait until Europe is on the hospital operating room with a massive near fatal heart attack to see the outcome.

Market Commentary

If I exclude the possibility of the US Dollar hyper-inflating (which in the next year or two seems highly unlikely), I am now very pessimistic for the market.

I can't stress hard enough that cash is king.
See yesterday's post, and combine that with Gary of the Smart Money Tracker private pay advice (I won't republish, join to read) I am more bearish than ever.

I may be tempted to buy double inverse funds.......to catch the down swoop in a "positive" way.

Good luck.

The US Market Charts in the BIG picture

Today, I have two grand market valuations to look at over the century.  One is S&P 500 in terms of it's valuation RELATIVE to gold valuation. (in essence, if we used gold as money)   The second is the S&P 500 since 1870 to today.
Regular readers know I do not believe gold is money.  But it does serve as a relative valuation to judge how fiat currencies are valued relative to non-fiat valuation.  I would rather have chart of the US market in relative terms to all commodities (averaged).  In absence of that, the gold chart will do.

The charts deliver one message to me.  In relative or non-relative terms, from a charting perspective, the markets are headed don to 700 range....AGAIN.  This is using historical trends projected into the future.  I DO NOT think this is a required outcome.  Man can change laws, and change "Relative valuations" but doing things such as breaking currencies.  Then the charts are meaningless.

To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Greece, Spain, Portugal, Italy, Ireland

Greece, Spain, Portugal, Italy, Ireland are at risk of outright failure, unless Germany backs all their debt.  Time will tell.  Some nice video debate.  Nigel Farage is my European Parliament hero.

A step closer to Americas Financial end game

Question, what is the designation of the Federal Deposit Insurance Corporation?
Lets take a look at Wikipedia:

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. As of November 18, 2010, the FDIC insures deposits at 7,723 institutions.[2] The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages banks in receiverships (failed banks).


More is available on Wikipedia, but the gist is, it insures people cash deposits. (savings, checking, etc).
It is not for insuring corporate trading or risky assets.

But what if a bank, that exists due to suspending accounting practices since the Great Depression, and is solvent due to new legal accounting tricks, wants FDIC insurance?
What if that same bank has over 1 Trillion dollars in deposits AND has dodgy derivatives from a previous purchase, should the bank be allowed to transfer those dodgy debts from it's high risk trading group to the bank holding company, thereby shifting risk to the FDIC?

Apparently the answer is, yes.  No matter how much risk assets have, and even though those assets have ZERO to do with normal banking, the assets (debts) can be shifted from the higher risk trading group into the bank holding company, and thereby force the FDIC to insure something that no corporation in their right mind would ensure.

This may be great for the depositors of that bank, but it won't be good for the other savings depositors from more stable banks.  If an event is triggered, this will become a tax on all savers in banks NOT insolvent to pay off the debts to the insolvent bank.

If BOA ever triggers a FDIC event, FDIC will be insolvent for years to come just from BOA.
Good luck on the banks to follow.  From article:

Bank of America is the only U.S. lender that lacks a rating of A3 or higher among the five firms listed by the Office of the Comptroller of the Currency as having the biggest derivatives books.

From FDIC
The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.


This entry has earned the recognition in the Financial Ground Zero event series.

Most disturbing video I have seen in years

As I have repeated, China is not the world economic savior of the world in the near future.  I  think there will be a revolution of sorts in China, and the rebirth may be a rival for world leader.  Apparently a Mish reader hopes so.

Mish posted this video, and has other chinese readers who vouch for what it represents.

The first driver in the video didn't come down, but tried to kill the little girl instead, because he knew that killing someone in an accident would probably involve a lump sum and maybe sometime in the prison, whereas being responsible for her medical bills would mean bankrupting his family. The legal system, which is enacted by and for the governing elites, is inefficient (at best) and corrupted, especially any level of governments are involved (and they are involved in almost everything). From their own observations, many people lose hope; many turn cynical; and even more just become numb. Avoiding uncertainty at all cost is not a bad strategy to protect oneself.

A media friend of ours who lives in Shanghai calls the current time in China "The Carnival before the Judgement Day". And indeed tension if built up inside and I won't be surprised it hits a wall soon. Unlike many more patriotic Chinese, I do not want China to become a new world power soon - at least not in the current form. The still growing economy is the only legitimacy left for this system to maintain in power, and I am actually hoping for an economic hard landing in China if that's what takes to wake people up to challenge the status quo for the better.

Click the link above for the full Mish article, and video.  It's moments like this that remind me how quickly and low people will sink once the conditions for self preservation surmount moral decency.

This Week in Chart

The USD may start to resume it's climb, after a nice pull back for two weeks.
I think it all depends on USD move where the market goes from here.
A never-ending-decline of USD with never-end-rise in the market isn't possible, nor desirable.
So something will shift.

From a charting perspective, we are in our range created after the multi-year trend breakdown.
So for now, its watch and see.  I am still very nervous that the market breaks down from here.....but when am I not?   :)

To the chart

From WebSufinMurfs FinancialBlog2

China is imploding

As I have posted before, China's near term over-extension of credit makes them NOT the saviour of the world economy.  Building cities that no one lives in does not lead to a solid foundation for an economy.

I have featured Jim Chanos before.  He is back in the news, some good clips to watch.

At the end, Jim throws down the true issue, are we a fair, capitalist system or a broken financial system that rewards the money risk takers and punishes the average person.  Jim, its the latter.

Time for Markets to end the Rally?

Back on October 5th, I posted "Time for markets to Rally".
Back then, I said I doubt this lasts more than 2 weeks.

Here we are, October 12th, and two weeks from the 5th will be the 19th.
We are in the home stretch for the rally to potentially end.

The next leg down should be not very nice if your long the markets.
Today I am going to consider adding to my exit of stocks.  Each day is really playing chicken with the market.  There is now law that the rally can't run for 2 months more.  But with the observations of China, Europe, USA, and other issues bubbling to the top, I have my doubts.

On October 5th, pre-open, the S&P 500 was at 1,120.  Today pre-open markets at 1,195.
On October 4th, markets stretched down to 1075.  So from 1075 to 1,200 (I expect a up cross today) is +125, or +11.6%.
In a world where US government bonds for a YEAR make under 1%, an up gain in +8 days of 11.6% is impressive.  Don't be greedy, for the next down swing should go below 1075, more than 12% lower from here.  See the bear at the top of this blog, he is still in control until proven otherwise.

Good luck

End of day: S&P 500 hit 1220 on 10-12-2011.  That is a 13.5% in eight days.  The gains count only if you keep them.

Federal 1 year bonds at 150 percent interest rate returns

Well, not US federal bonds.....

Here in America, a US bond gets near zero percent for a 1 year bond.  In Greece, you can buy a Greece 1 year debt bond and get 150% interest rate!

Imagine that, give Greece 1,000 bucks, and in a year, you will get 2,500 bucks back in euros!
So why invest anywhere else but Greece?

For one thing, you must have faith that the European Union will save Greece by paying for their debts.  And so far, Germany is having cold feet to pay for Greeks heavy debt load.  Next up of course will be Spain, Italy, and  eventually Ireland....again.

So if your the optimistic sort, it's a great time to buy Greek government bonds.
For those like myself, I'll take good old US bonds under 1% for now.

BTW, Greece offers us all a glimpse of a potential future for all western countries, if we don't start changing our behavior.....NOW.

Western Financial Collapse and the East

Nice quick summary of the world economics, and I agree with this man 100%.

Global Financial Meltdown In Two To Three Weeks

Not sure if the title of this post has any merit.  An adviser to the International Monetary Fund said it.  Does that give it more weight?  Remember, his focus is Europe, and I do agree Europe is in a old-school Great Depression, deflationary collapse.  And I do agree the next crisis is waaaaaay worse than 2008, and its going to happen in the next 12 months.    You decide if the video makes a compelling argument the next "3 weeks".

The video references Credit Default Swaps, which was the underpinning to a possible global collapse in 2008.  Here we are in 2011, with no transparency, and no significant improvement on unregulated CDS, which exceed total global GDP in liability.  Apparently there is only one way to fix this mess, and that is after a collapse.  We had 3 years to reform CDS, and we didn't.  WE will, when its forced.

My greatest short-coming in all of this is lack of understanding how people when faced with apparent obvious issues refuse to address them.  The European union I recognized over a year ago starting to fall apart, and no significant progress to address was done.  Same with CDS, this was an obvious issue back in 2008.

I hesitate to put timelines on such historic events, but I did quote it was time for this to begin in June 15th post "Three strikes, time for global economic implosion".

Time for markets to rally

The market is in overall down mode, but yesterdays extreme mid-day down action would have shaken all nervous stock holders out. Now there are more buyers than sellers. Plus the usd has risen at breakneck speed. It too must now move lower. Combination is a market rally. I doubt this lasts past 2 weeks. The bear is still in control. Good luck

Wall Street Protests

Although I may be very critical of financial situation of US government and law enforcement, I haven't been commenting on the Wall Street Protesters.

The reason is I am unsure of who is pulling the strings of the protesters.

One of my favorite bloggers, Karl Denninger.  He appeared on CNBC on this topic, watch below

Visit msnbc.com for breaking news, world news, and news about the economy

Time for market bloodbath

Well, that was quick, and we now have our answers.

From WebSufinMurfs FinancialBlog2

This Week in Charts

As of week of September 11th, this market is in a down trend, that should last for a full year or more.
Expected top to bottom losses of 35% (or more).  I'll re-evaluate when S&P 500 hits 780 OR the long term indicator flips into bull mode.

This blog will be pretty freaking boring for months to come, until I can see some glimmer of hope for natural resources or the market.
Cash is better than putting it anywhere else.

To the chart that matters, the market range.

From WebSufinMurfs FinancialBlog2

European Stock Market is Toast

I am not so sure about the title of this post actually happening, but it's what this trader says about Europe.
What I do agree is Europe will in the next two years will be forced to breakup the Euro.
If German law is observed, then it becomes quite likely that the Euro will fail much sooner.

Once Europe implodes, then the world will follow.  Notice what this man says about Goldman Sachs....
What I can safely say is Prediction #2 of my 2011 prediction list is fulfilled, whatever happens.

In the end, all markets will implode without a severe intervention by world banks, which to date, seem to be taking a defensive stance for once.  Fun times.