2011 Prediction round up

A fun tradition I have on this blog is making annual predictions and reviewing the outcome.  I say fun guessing  the timeline of reality unfolding does seem to be much more chaotic than I ever though possible.  It is impossible to predict the extreme ways people will delay reality.

Original post 2011 predictions
2 Fail, 6 score, 2 partial score

2011 Predictions

1) Entering 2012, the public won't look at state and township bonds the same as they do today.
The State and City budget crises are here and now. We cannot get into 2012 without some precedents being set. Due to courts and the kick the can, we will have cities and states entering into bankruptcy-type scenarios but likely not resolved in 2011. The exact prediction is multiple cities and states will enter into financial heart-attack type crisis mode. The Municipal bonds will be in turmoil. Due to kick the can, I don't know if the federal government will step in and back everything or let this play out as it must. Because of these crisis, government unions will get attacked on multiple fronts.

Fail - Can kicked.  We have the largest failure in US history unfolding right now, but the crisis in state and towns did not happen in 2011.

2) European Union will enter into crisis mode in 2011. 
The world of international finance smells blood in the water, and they are biting at Ireland, Greece, and eventually Spain. The European union will have to face an all in by Germany and others to stop their collapse in 2011. This of course, will not work. But in 2011, we will have our answer if there is one more big kick the can attempt or not. I don't think the European union will fold in 2011. and the euro will stay in tact. The main reasoning is, there is plenty of options for more can kicking.

SCORE!  2011 played out to a T on above. 

3) China will have some turmoil beyond what is expected.
China's policy of currency manipulation and not allowing their fiat currency to float is already backfiring. This policy allows America to do whatever they want, and China has to buy US debt. The severe inflation pressures China is already facing is starting a put-out-the-fire game, where new fires pop up as the central China planners try to put out old ones. I don't think China will melt down in 2011.

Again, plenty of room to kick the can for them also. The stage will be set in 2011 for the main event in 2012-2013. Prediction: The world view of China as leader into the next decade will get tarnished in 2011 as their massive fraud creates havoc for their financial bubble.

SCORE! China is imploding, and setting the stage for change OR more troubles in 2012-2013.

4) Canada, Australia, and other countries that avoided a real estate blow out in 2008-2009 will now get their turn.
The cracks are already forming. The world will learn that Canada is not different, and is more like other western countries for financial fraud and reckless loans. Australia and Canada will enter 2012 joining the western world financial turmoil, and lose their status as "better than the rest". At least one major bank in each country will have a crisis moment, resulting in their governments following America in socializing the private debt with public debt.

Partial SCORE!  Australia property is bursting along with economy.  Canada hasn't shown clear bursting, but does have clear bubble!

5) Gold, oil, and other resources will see unbelievable turmoil in prices in 2011.The price volatility will be amazing to look back this time next year. Individual commodities will get insane spikes as crisis occurs.

I actually have zero prediction if gold will end higher into 2012. By end of 2012, gold will be significantly higher. But since this is a 2011 prediction, I am going with higher, but I won't say 100% or 1%. The politics of 2011 will determine that.

SCORE!  Look at copper, corn and other commodities, bubbles blown and burst.  Gold started 2011 at about 1350 and is now around 1580

6) Food riots in certain countries will occur in 2011. 
As resource prices destabilize, there will be civil unrest as the masses barely able to keep up with their bills have problems buying basic resources such as food and energy. Again, no global apocalyptic predictions. Just setting the stage for 2012-2013 with destabilization.

Triple Score! - Just look at all the countries that have changed hands and food prices also issue.  Also some that haven't such as Greece but are teetering on implosion.

7) US bond rates stay within tolerance in 2011 as a guess, but if not all bets are off.
If US bond rates break out of the range established since Volcker in the mid 80's all bets are off. Once the US government loses control of it's credit worthiness, the entire shebang is thrown in the air. Anyone who knows how the politics will play out is fooling themselves or you. 2011 will be defined by the ability for the US government to keep its debt rating in this channel. Click here to view. The optimism comes into play as other countries have issues, making the US situation look less-bad.

SCORE! - US bond rates did heat up a little, but collapsed second half of the year.

8) The best place to be, all things considered, will be commodity stocks or related investments for 2011.But I am not committing to a buy and hold until 2012. Just that as this unfolds, there will be spikes higher before the game changes. The percent gains from now until the "top" in 2011 will be best in commodities.

Fail:  Stocks entered and exited about the same on S&P 500 (flat)  CRB (commodities) ended down.  Safe to say most commodity stocks hammered last two months of 2011.  Fixed income clearly won, congrats John! (Case for USD article)

9) US Dollar and stock market pricing I can't make a prediction on this time. There is so much at stake, so much at risk, so much global tensions building. I can't even guess at how the dollar and the market fares. I can say both will see significant volatility, and the market won't march up back to old highs UNLESS it is accompanied by resource prices soaring. If the market makes new all-time highs, in nominal terms of living standard, it is really a new low.
SPX won't go lower than 500, or higher than 2,000 in 2011. Best I'll do for a prediction. ;)

I'll take a score.  I was wishy washy on this prediction.  2011 stocks and USD ended about flat!

10) More countries will fail or enact protectionist measures, exasperating volatility.

Partial SCORE: China has started just recently protection acts.   Plenty of countries that have changed hands.  But there hasn't been widespread failures or protectionist acts to the degree the line implied.

Greatest Crimes are publicly known

The greatest crimes in human history are often perpetrated for all to see.  The reason that these crimes are so egregious is they occur in a social environment that permits them by the public. (either overtly or lack of opposition)

Genocide is often committed openly with full knowledge of the population of the country and the world,  as recent as Darfur.

After World War one, Germany openly attempted to pay off it's debts using it's printing presses until it's own currency imploded.  That act eventually lead to Nazi leadership, and yet more genocide and invasions without repercussions from the west. (initially)

And in America, we have widely publicized acts of financial games without any opposition from the public (or world) in significant numbers.

Before my rant runs a muck in this post, let me get to the point.  Don't assume that laws are being enforced, and that America is somehow guaranteed to be land of the free, with fairness to all.  Without strict law enforcement for everyone, the US will slip into anarchy.

I have documented many of these games being played in my series Financial Ground Zero, with additional recent headlines below.

Attempting direct theft of serialized, documented, known property of account holders to pay off bad debts by MF Global. I have yet to see Former Governor Corzine have charges against him in the 10th largest fraudulent corporate default in US history! (or ANYONE! MF video on acts) 

Enacting laws to effectively shut down news blogging by congress. - Quoting articles can be considered piracy.  I for one will stop quoting articles, as my freedom is more important to me that my free speech.  I suspect vast majority will conform like I will, to remain out of jail to be 'free'.....

Goldman Sachs offering products that on the face of it, should be predatory or fraudulent are OK.

Years after 2008 collapse, there have been ZERO prosecutions against any wrongdoing.  I posted this before, compared to the S&L crisis in the early 90's with 1,000's of prosecutions with far less fraud!

Repeat direct violations of Capital One pursuing funds against lawfully bankrupt citizens without significant legal ramifications.

JPMorgan’s Swaps Occupying Cassino Prove Curse Like World War II

Federal Reserve bank lends 586 Billion to organizations it doesn't know. Illegal if US citizens foot the bill on bad loans!  The US constitution clearly states only congress can appropriate funds.

Allegations by Elliot Spitzer that over 7.7 Trillion in loans given in secret, and uncovered years later thanks to persistence of Bloomberg.  Bloomberg thanks for wasting your time, no one cares.

There is plenty of open evidence that the USA is headed for an unbelievable crisis.  The issues are quite publicized even if no one is paying attention.  When this comes to a head in the future, there is no excuse for Americans to be surprised.  We have plenty of access to information through the internet, and all of these items have been published (not loudly) in the press and TV.  Lack of law enforcement leads to consequences, as we are starting to see from MF Global.

Pay less attention to pop culture, more to what is happening in this country,  and vote for true change, Ron Paul,  before its too late.

This post has been added to  Financial Ground Zero, for the success of Ron Paul may be the final political destiny of the 2013-2017 events.

Ron Paul

Since the start of this blog, and before, I have held the conviction that the financial issues of the USA are a result of American politicians.    And the politicians are a reflection of the population.  For the citizens of the USA could choose leadership for true change.
Obama ran on a platform of change, but from my position, I don't see change from George W bush on a political level.  Granted President Obama is more charismatic, well spoken, and does a great job of giving motivational speeches.
But from a financial stance, or law perspective, I haven't seen anything different that GW bush, with exception of a health care bill that doesn't start until past his (first?) term.

So what does this after to do with investing?  Well, my stance that USD will hit problems in 2013-2017, and gold as good long term investment directly rest on the next president.  For my view can completely change if the US elects a president who enforces laws, attempts to curtail spending, and laws affecting the Federal Reserve Bank.

From my perspective, there is only one candidate that could be elected that could provide true change, and that is Ron Paul.  Sure, you can find something I don't like about Ron Paul.  (Ron, gold is NOT MONEY!)
But that is BETTER than a candidate who tries to appease everyone, and doesn't provide true leadership.

So if Ron Paul does get elected, I have hope for the USD, and actually afraid gold collapses.  For if the US becomes more fiscally sound, gold will lose it's fear play.

I'd still be bullish on natural resources, but not nearly as hard core.

I encourage you to watch the "third chapter" in this video, when Ron Paul speaks on the Jay Leno show.
For we the people can change the future, if we truly want change.

As Mish covered, the media is of course slanted against Ron Paul, as he is not the candidate of appeasement.  To read more see Ron Paul Did Not "Walk Out" of CNN Interview; Blatantly Biased Headline by Time Magazine; Six Reasons to Vote for Paul

Further Ron Paul in some polls dominates over other republican candidates, but is marginalized by the republican party.

To donate or find out more about Ron Paul, visit http://www.ronpaul2012.com/

This week in no charts

This week I don't bring any charts.  First, I am being lazy.  Second its the last week of the year, and I suspect charting this next week is pretty much useless.
So lets look forward shall we?
 If gold etf GLD fails to break below 150, there is a very good chance that this is a near term bottom.  Seeing that Oil has not collapsed is not encouraging.
Hedging into gold is not a bad idea here, as 2012 may bring unintended consequences from this money printing party started in 2009.

The worst case for this economy isn't a market drawdown back to SP500 at 800 or so.
The worst case is a rising costs in commodities.

This is the last thing that should happen right now.  China's economy has popped. So has Australia.
And its no secret that Europe hasn't had a good time of it as of late.
Further, the public news media hints at a new recession in the USA.

All of this combined spells falling commodity prices as the major countries contract.
Therefore if the USD starts to fall, and/or commodity prices fail to lower, we could be starting to see some hangover from free money.
Gary of the Smart money tracker is calling for gold to go much higher if this is the case.  I encourage readers to pay for his services to read his thoughts.

I am not so sure.  If Ron Paul actually gets some traction as I previously posted, we may have some USD optimism.
I think the moment Ron Paul is being sidelined in the nomination, we'll have out answer.

Gold up, USD having a hard time keeping its level, and markets mixed or down.
All we need is Peak Oil, USD issues to drive oil higher and that should really put a strangle hold on the USA.

If we d start to see Gold firm up, this will likely be the last reasonable entrypoint, gold thereafter will look crazy to buy at levels at that time.
This is why i encourage everyone to buy some gold (GLD).

Oh, and this week, my best guess is up.  Why? Who could possibly be left to sell going into this not so good outlook for christmas.
if there isn't sellers, by definition, there are more buyers than sellers.

OK...I Lied...here is a chart EVERYONE should pay attention to.  I'll likely reprint this again in another post.
Food for thought about commodities.

From WebSufinMurfs FinancialBlog2

Mr Bean Merry Christmas

There is plenty of time to resume my doom posts on December 26th. :)
For now happy holidays, a Mr. Bean clip, and a clip of the classic fireplace.

Buy Low, Sell High

I have mentioned natural gas as a resource that has been beaten up.  Previously I dabbled in buying the ETF UNG. (natural Gas).

Well that didn't work out as planned, granted i didnt buy at 120 a share, closer to 10 bucks a share, but here we are touching 6.75 a share.

Timing is everything of course.   But the question is, how low does this go?   At 6.75 a share, every 50 cents is a major swing, percent wise.  Also it is possible that this ETF is simply broken. (mechanics of the etf).

I see opportunity, at this price I am thinking a bottom has happened or will be seen in the next few months.  Unlike many other resources natural gas flows 24 x 7, and there is no "savings" by producers to not sell.  So amid any demand weakness vs supply the price drops, to sell all production.

It is one commodity I think is pretty hard to manipulate.  If you like the idea of buy low, sell high, well, I think everyone agrees looking at this chart, we are in the low zone.  The only question is, will it ever be high?

I think so, just a matter of time.
Click here for latest UNG chart.

From WebSufinMurfs FinancialBlog2

The End Game

Looking ahead to next year, I see a few big drivers.
First is Europe, can they keep it together to not fall apart until after US elections.
Second is the US economy, China, and Europe, how deep does the next deflationary rabbit hole go?
And last is American politics.

If we get more Obama/Bush, its more huge deficits and a race to the bottom for the US currency.  The only candidate where that is not the outcome is Ron Paul.
Ron Paul is many things, but one thing he is beyond a doubt, pro-fiscal responsibility.
I will ignore the whole "gold is money thing", for I hope that is a complete non-starter if he is elected.
Other than that, him cleaning house means a SOARING USD, also a market collapse as reality is brought back, by restoring fake accounting rules instituted in 2009 under "emergency" conditions.
Apparently the emergency will last forever, unless Ron Paul is elected to re-instate sane accounting.

Either way, I really cant see a soaring market in 2012.  I also can't see a collapsing dollar into the election IF Ron Paul gains legitimate status for president.

And I can't see gold soaring if Ron Paul is a contender, for if there is fiscal discipline, gold is not a required hedge.

Anything could happen, there are so many factors.  But the end game for this entire debacle is with the next president of the USA.  For that president won't be able to kick the can like Obama did "one last time" for 4 years..

The dirty secrets are out, the banks, governments, and financial corporations are under scrutiny.  The people are awaking to what I realized back in August 2006.   And once they get to where I have been for years, the can kicking will be called BS, and reckoning day will finally arrive.

No, we won't die en mass, and there won't be mad max, but there will be an "adjustment" to the realities of the serious topics pressing the world.

For now, CASH is still king, and some gold is OK, until it crosses below the uptrend line.

This Week In Charts

Gold is a buy, with a stop loss, market still indecisive.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Libertarian Presidential Debate

The two candidates in the debate are  Bill Still and Carl Person.   I have posted on Bill Still in the past.  This debate is excellent to hear provoking thought on a wide range of topics.  With that said, I have an issue voting for either candidate, out of concern of being strong enough to lead a nation.  Their brutal honesty and "reasonableness" pretty much make them not leaders of nations.

At marker 26:26, Bill still makes a very fundamental point, that enslaves the US citizens and government.
At around 1 hour and 9 minutes, Bill shows how extreme he is, stating end fractional reserve lending "in a year".  Quite insane thought that fast, and that extreme.
At 1:11, excellent question about people control using fear.

In the end, both are very one dimensional candidates, and too extreme, and I doubt can handle the pressure of leading a nation.  But that does not diminish their ideas that are worth pursuing.

American Manufacturing Revolution

I am of the belief America is kick starting a manufacturing revolution.  Sound crazy?
It is if you think of the mass manufacturing of GM and classic manufacturing.

Those types of large scale manufacturing is likely dead in the USA for the rest of my lifetime.
The kind of manufacturing I am referring to is smaller, agile, cost effective companies.

In affect, the future GM's of today, that start up right here in the USA, and when reaching a point of mass employment, likely off shoring the labor.  Most of these companies likely won't off shore at all, as they won't need more than 50 people to do "huge" business.  There maybe 1,000's if not 100,000's of these businesses springing up over the years ahead.  To some, employment of only millions and not 10's of millions is not revolution, it is to me.  For these businesses will leverage the cutting edge of the internet and technology to start up their businesses with pennies on the dollar of just a decade ago.

In effect, you the reader, can start up your own company, with very little personal investment.

Now that I have set the tone of the manufacturing revolution size, lets look at what is happening.
Below are examples, but by no means is the only examples.  I list enough in each category to show the revolutionary change in the American Landscape for new businesses.

Free Business Software
There is Google docs, that provides spread sheets, word processing, and other tools that can be shared across the world, real time, to collaborate and communicate.  For example, you can create a spreadsheet and work with someone else, real time, seeing each change as it occurs, with the person across the globe.
Did I mention, Free?
You can communicate, using Google Voice, make free phone calls in the USA/Canada, and free calls across the world with other Google-ites.

You can create virtual conference rooms, using Google hangout, share a video conference with anyone.

Also, share desktops, instant messaging, and control each other's pcs using software like Adobe connect now.

Plus find 1,000's of free programs at many hosting sites, including http://sourceforge.net/ .
In a nut shell, for information based tools, free or near free costs, just need a PC for 400 bucks, and an internet connection at your local starbucks.

Cheap  Tools
For manufacturing type work, there is now many open source projects to create physical machines.  The entire blueprints are free, and you can make the device at home.  Or you can buy the device, pre-made from a manufacturer.  The best example of such a devices is a 3d-printer.  You can "print" objects, like a chess piece, using this device.  Such a device is typically 10,000's of dollars.

But you can buy such a  tool at http://www.makerbot.com/ for under 1,000 bucks.
Then you can download pre-made 3d objects to print at http://www.thingiverse.com/.

There are other projects similar,  such as laser cutter at laseraur.  Check out http://www.buildlog.net/blog/ for other tools.

For non-physical products, based on the internet (the Cloud), there are cheap options here too.
You can download a pre-canned server at http://www.turnkeylinux.org/ , and host it at Amazon E2 cloud for 0.09 cents an hour!

Cheap Labor
Need someone to do a specific technical task?  Maybe have someone do some proto-typing woodwork?  Or need an architect?
Just shop for the right person at the right price to do the work you need, freaking dirt cheap.
No need to have employees, if you can bid out the detailed work piecemeal to specialists.

When I see the prices people will do some of this work for, I am stunned.
You may make more money painting walls than doing technical skilled work.
Check out http://www.ifreelance.com/ for all sorts of job bids.
Have a specific techie job needed, try http://www.getacoder.com/ or http://www.project4hire.com/ .
Bid on construction work at http://www.bidclerk.com/ .

Cheap Venture Capital Raising
OK, so you have leveraged Free Software, cheap labor, and cheap tools.  You now have your idea started, enough to seek funds to take it all the way.   What chances do you have a bank will lend you money for your start-up?   Borrow from relatives?  Seek venture capital?

All of these methods are very hard to get money, and involve potentially high consequences for the risk everyone takes on the project.

So, how do you minimize risk? by SPREADING the risk among 100's, or 1,000's of people, each risking 1-100 bucks to fund your project.  To boot, you can give people first run's of your product, for a pre-purchase price.

Just head on over to http://www.kickstarter.com/ for funding.  Create a video, set up your funding requests, and watch the funding come pouring in.
I found several projects that I liked.  I could become a real addict to this web site.  I want to buy stock in this company!
Check these projects out:
Thin iphone wallet / stand
Connect smartphone or tablet to any external storage via wifi
Use a small little device to "interface" the real world to the web, by using built in motion, sound, and heat sensor to gather information and trigger action.

Summary
This is an incredible revolution that the media is just simply missing.  I see this as earth shattering as the last industrial revolution, back in the early 1900's.
But the successes will be 100,000's of small companies, with the rare exception of a company growing to fortune 500 status.   The average pay of these new workers will be substantially lower than the Union workers of the last industrial age.  They will need to innovate, work hard, to secure their niche 

Video about Kickstarter







Quick video on makerbot

China is setting up to be the next world financial leader

China has popped it's own real estate bubble, and has publicly signaled it will continue to allow the bubble to burst.   I am mildly surprised China is NOT fighting the popping of it's own real estate bubble like America did. Sure, China behind the scenes is probably taking steps to prevent an complete freefall.  But to signal that they won't re-inflate the real estate market is very astute.

Further, China is changing leadership next year.  This combination is setting to be one hell of a rocket ship investment.  Bottom I think (to be seen) is second half 2012, or first half 2013.  That will be the time to buy Chinese stocks, and maybe a better investment than gold!

It all depends on politics, if the next regime can convert the Chinese economy to consumption, and take out the US as financial engine.  This unfortunately also supports me looking for USD collapse in 2013-2017.

For more information, and a great summary, see this Mish article titled "China Prepared to Let Housing Prices Sink in Spite of Economic Slowdown; Transition to New Regime Underway; Decoupling in Reverse".

Also:
China’s Deserted “Fake Disneyland”; Shanghai Prices Down 40% from Peak, Inventory Clogs Market; Pollyannas Proven Wrong; Implications for US Dollar

US Dollar Strong

I have been fairly bullish of the USD in the near term.  In the future, the low of May 2011 for the USD will be a watermark level for future questions of US Dollar as a storage of wealth.
On the index I watch, that is a level of 73 on the index.

So why is the USD gaining strength?
My spin is Europe being exposed as a fragile economic model that arguably is worse off than the US.  And China's well covered Real Estate pyramid scheme has finally been popped.
Japan continues to try to devalue it's currency, and it's economy is not a growth leader.
knocking those countries out as having the strength to drive their currencies higher.

The USD, being the world currency, enjoys the benefit of others failure.
As I have written before, 2013-2017 will be the time period for USD crisis, for now, party on! Cash is King!

Chart of USD advancement since May 2011 below.
A strong USD makes an advancing market problematic.  I am amazed actually how well the US market has held up.  Gold also should suffer some setbacks in a strong USD advancement.

From WebSufinMurfs FinancialBlog2

Market Volitility

Last week, early, I dumped many positions I had that are long.
I fear the worst now, a deflationary collapse is upon us in the next 2 months.

It is of course, impossible to tell exactly what will happen.  It is possible, for example, for the banks across the world to issue more money and cause an currency devaluation.

But it seems like they are pushing on a string.  Meaning, the banks can create as much money as they want, but there is no way to cram it into the system to get used.  The only thing the banks can do with new money is to jackup prices artificially, such as natural resources, stocks, etc.   Items that provide liquidity for hopefully easy exit.

The rub here is if they can't get money flowing through the economy, the injection into resources, stocks, etc could severely hurt the common person.  As the economy stagnates, the costs of items tied to the banks investing rises, amplifying damage of a recession.

I am having a real hard time seeing how the markets overcome these forces now into the election.
Cash is king.

I reserve the right to flake out and flip flop.  For those who want a simple, non-flip-floppy trend, simply read this post and follow it by clicking here.

A GREAT read on the vicious cycle we are in with the world banks can be found by clicking here.

Police Brutality?

I ran across an older video from early November, showing students being pepper sprayed.
You can watch it here.

On one hand, its easy to say it was unnecessary.  The students are obviously peacefully protesting.  But on the other hand, in the scheme of life, this is not even close to being police brutality.  I don't think American's appreciate the level of police and military abuse that is normal in many countries.

Don't take me wrong, I am not defending the police actions.  But I am saying, lets stop focusing on the minutia, and start focusing on the grand scheme of what is happening.

But I got to love the internet, this spray attack has unleashed tons of pictures to make fun of the cop.
Click here, here, and here for some examples.  Funny stuff.

What I do love about the internet, is it brings large numbers of people attention, and using peer pressure can affect other people's behavior.  I hope this cop gets tons of attention and mocking with these images.   Socialization can bring about change in the minutia, lets not lose focus of the huge corruption that is occurring on a grand scale.   For it is lead by example that should be the focus, no laws for the top will result in chaos at the bottom.

Hitler's take on Financial Blogging

This video claims making 6 bucks a month, obviously I am not running enough adds, I am lucky if I get 3 bucks a year!
Enjoy

Hitler's take on the European Financial Issues

I enjoy the use of this video for so many different topics, enjoy.

Bloomberg takes on Ben Bernanke...

Bloomberg to its credit fought through the courts to uncover the secret 7.7 trillion dollar in secret government loans to banks.  to put into perspective, since the history of the US, the total debt created to date is about 14 trillion.  And it took about 7 to be created in the last 10 years.

Mr. Bernanke doesn't know when to keep his mount shut, and lucky for us, Bloomberg is standing its ground.  I actually have a tiny bit of optimism here.  It's very tiny, but I hope Bloomberg rides this story to it's full conclusion.

See Bloomberg article "Bloomberg News Responds to Bernanke Criticism".
I covered this in post "Eliot Spitzer speaks out about USA Financial Games" and "Daily Show on Free Money"

Go Bloomberg!

Daily Show on Free Money

It's nice to see the news reporting about the lack of law enforcement.
The sad part its a news show on comedy central

I commented on this on Sundays post on Eliot Spitzer's commentary.

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Eliot Spitzer speaks out about USA Financial Games

Eliot Spitzer speaks out in Slate magazine in article titled "Eliot Spitzer: 5 Ways to Make Banks Pay for Their Secret $7 Trillion Free Ride?".

I can't reprint the article, but her is a teaser section, I encourage everyone to read the entire article:

The total numbers are staggering: $7.7 trillion of credit—one-half of the GDP of the entire nation. $460 billion was lent to J.P. Morgan, Bank of America, Citibank, Wells Fargo, Goldman Sachs, and Morgan Stanley alone—without anybody other than a few select officials at the Fed and the Treasury knowing. This was perhaps the single most massive allocation of capital from public to private hands in our history, and nobody was told. This was not TARP: This was secret Fed lending. And although it has since been repaid, it is clear why the banks didn’t want us to know about it: They didn’t want to admit the magnitude of their financial distress.

Now to put this into perspective, lets get to the heart of the matter.  All of the money is supposedly repaid.  So what harm is there in above?  Well the institutions benefited by net pocketing 13 billion dollars by keeping money that would have been paid out at normal rates.

So while "net" the entire lending situation was extreme, the net in-their-pocket-profit was 13 billion, what amounts to be a gift from taxpayers to the financial institutions.  Considering the USA is debt spending over 1.7 trillion a year, it isn't that huge comparably.

What IS a big deal is it was all done in secret, and it took years of Bloomberg reporters working the court system to get at the information.  And this one point IS A BIG DEAL.

The precedence is now set.  The government can give huge sums of money to companies it sees needs help, with promise of payback in the future.....in secret....and its OK!   I say OK because I predict zero prosecutions for Bloomberg's efforts.  And without prosecutions , it sends signal, it is fine to do.

Therefore when buying or selling stocks, or participating in anyway in a capitalistic business, be aware that the opponent, or the target business is subject to government sponsorship, secretly.  Hardly the stuff that makes for a fair playing field.   It renders public financial information difficult to matter in assessing corporate distress or competitive edge.  For example, if you bet big on Ford becoming the largest USA car manufacturer back in 2007, the events later prevented that from occurring when the government decided to fund General motors and become part owners.  Every business is now subject to the government deciding how events unfold.  They are in effect, no longer law enforcers, but corporate competitors.

So the trick now is to get the government to view your business as worthy to secret gifts.  This is the road to currency issues, the USD cannot withstand unlimited abuse before it breaks.

This makes this event worthy of my series of Financial Ground Zero events, documenting the events that are leading to a currency crisis. (2013-2017).  Thanks to my brother for the article link

Two excellent podcast episodes worth a listen

With the failure of the 6th largest bankruptcy in US history, MF Global is one epic disaster.
I won't hold my breath for prosecutions, even though easily a dozen federal laws broken.

One of the people who lost a bundle was none other than Gerald Celente
Click to listen to:
Gerald Celente on the Smoking Gun Behind MF Global


The other is one of the weekly big picture podcasts by Jim Puplava.
What I like about this episode is he covers all the hard core issues the USA faces into 2013.
Yes, overall its a pessimistic spin, but even if you de-spin, there are some serious challenges.

Jim Puplava’s Big Picture: “Eat, Drink and Be Merry, For In 2013 We Die”

This week in late chart

Been very busy with work, here is the chart update.
Obviously, a nice bounce this week so far.  Jury is out if this lasts.
I give it maybe through mid January before the wheels fall completely off.

There are many variables, the largest is Europe.  To the chart!

From WebSufinMurfs FinancialBlog2