Gold Miners - A buy?

My friend John contacted me about gold miners today.  When a frugal investor  is looking at miners, its worth buying.  Then I jumped onto Gary of the Smart Money tracker site, he is turning bullish too.

Worth starting to jump in here, with some stops.  Keep in mind GDX has been in a range for a while, if it can build up and break out, this may go on for a bit.
Good luck.

From WebSufinMurfs FinancialBlog2

Thomas statement on White House absence

Bruins goaltender Tim Thomas released the following statement Monday evening regarding his absence from the Bruins' visit to the White House this afternoon:

"I believe the Federal government has grown out of control, threatening the Rights, Liberties, and Property of the People. 
This is being done at the Executive, Legislative, and Judicial level. This is in direct opposition to the Constitution and the Founding Fathers vision for the Federal government. 
Because I believe this, today I exercised my right as a Free Citizen, and did not visit the White House. This was not about politics or party, as in my opinion both parties are responsible for the situation we are in as a country. This was about a choice I had to make as an INDIVIDUAL. 
This is the only public statement I will be making on this topic. TT"


I have mixed feelings about refusing to attend as a political statement.   But his statement is directly on target.   And we haven't seen nothing yet.  Thanks John for the link.

The long march to US Currency Crisis

I have heard many people say the US dollar can't have a crisis like other countries due to fiscal irresponsibility. The US is needed too much by the world for them to allow the US dollar to have a crisis.

While I still agree that 2012 is too early for such an event, 2013 to 2017 is the target I am watching.
Since the US dollar has been the world reserve currency since the end of World War 2, there has to be steps first to allow for the US dollar to enter into crisis mode.

We already saw the first step, when countries selling oil started accepting other currencies.   The event itself did not cause any issue for the US dollar, but it is a step in a long list of steps of the world decoupling from US dollar dependency.

In the last year we have now seen China, India, Russia, Iran and Japan are exchanging their currencies directly to resolve debt.  The US dollar used to be the 3rd party clearing house for such exchanges.  These events are a natural outcome of the global currency war raging right now, that gets little press.  This started in earnest back in 2009, and continues to this day.  The last time this happened, the Great Depression hit the world.

Again, I do not expect any issues with the US dollar valuation due to these moves.   It is only a technicality that these countries used to take currencies and go from Country A to USD to Country B currency.   But each action of eliminating the USD from world financial transactions enables the day when the US Dollar will have it's own crisis.  For once the world is sufficiently (but never completely) insulated from USD valuation change, we may pass the tipping point for the world accepting USD as the world class currency.

The actual opinion shift of USD currency is likely to be resolved with the next president.  This is why this election is going to be the most important in my lifetime.  Ron Paul, although not a well rounded candidate, is the best option to avoid this event.   Such an event exceeds almost any other topics being discussed by the candidates, and this ONE topic is not being discussed.

I am adding this to my Financial Ground Zero series, for the on-going decoupling of USD is a key setup for the larger crisis ahead.

Years 2013-2017 will be nothing like we ever seen before.  At least life won't be boring.

This week in charts

Another week has passed, time to look at the charts for what is the trend.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Thirty story building made in 15 days video

I have knocked China a bit on the fraudulent construction and real estate valuations.  For a country so large, and so populous, it only stands to reason that with massive influx of construction, would be massive gains in construction productivity.

The video below is a great illustration how truely efficient the Chinese have become at construction, not only in ability to create in record time, but to make energy efficient buildings.

With such capability and so much land, I wonder how anyone thought real estate prices would continue to go up forever.  If 30 story buildings can be created every 15 days by one company!  I have to imagine China has 1,000 companies just like this, creating new buildings at an amazing pace.

Market Trending

I posted last week of optimism getting extreme, and a market decline follows. The post explains why the herd mentality creates such a reaction.
Today on Gary of Smart Money Trackers paid premium service, he quoted the same statistics. However his post had a more refined measurement of optimism than my post. Using his data, the peak should happen in the next 8 business days.
So by January 22nd, the market should already be heading lower.
I stand by my original post last week, just may have been a little too early.

This week in charts

In spirit of the new year, posting charts with a longer historical view.
The charts don't scream anything really.   The most interesting is how low Fed 30 year bond rates have fallen without a market crash.
Overall, still bearish because of this signal (click).
To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Brutal Truth of the source of the World Financial Crisis

Since paying attention to the financial disaster in the making since August 2006, this has to be the best video by far to speak clearly and specifically at the root of the financial cancer the western world faces today.

Simple put, enforce laws, and change behavior that brings failure.
Best 8 minutes on the source of the world ongoing financial crisis.

Until we as a society correct our behavior, the situation will continue to degrade.

I have added this to my Financial Ground Zero series, for this video encompass the overall problem the US faces.

Take control of your finances with mint.com

The number of accounts I have between checking, savings, investing, as well as debt accounts like credit cards, car loan, mortgage, etc is daunting to track and fully understand your finances.

A web site offers for free to track all your finances, help categorize, and automatically monitor spending.  In under an hour, you can easily have a full view of every transaction and your total net worth.  The web site is called https://www.mint.com/ .  They use high encryption, and represent bank level quality protections.

So make it your new years resolution to get organized, track, and tighten those budgets.   For a penny saved adds to your 0.1% savings account earnings.

:)

Market crash immanent based on peoples optimism

Market declines do not begin when people are pessimistic, but rather optimistic.

It is actually easy to understand why.  First, lets dismiss the fundamentals of stocks.   Dismiss you say? How?
What is more important is the wave of buying or selling, and the herd mentality.

Lets look at the overall market.  When the market hit lows in March 2009 with S&P 500 hit 666, why was that the bottom?
Did some sort of news make it the bottom?  There was quite a few events that happened (including adopting fantasy accounting by changing mark to market accounting in place since 1930's.), but none that have been pinpointed to cause a market reversal that day in March.

What is more likely what happened is when the S&P 500 went from 1550 down to 666, by then, who was left to sell?
What I mean is the vast majority of people who did panic, or open to selling, did by then.  I have a hard time believing that there was SIGNIFICANT amount of people left to sell as a percent of stock holders waiting for S&P 500 to hit 600 or 550 before selling.  The point is, those who saw losses and weren't committed to hold did in fact sell.

So on that day, we had a swing, from not enough sellers to over-run the buyers.   From that day on, overall there was more buyers than sellers.   The pessimism that day was at a all time high on market view.   The market does not turn around with optimism, but when MAXIMUM pessimism is reached.

We now have a dangerous situation.  We have a high in LACK of pessimism.  I dare not call it optimism, but people are not concerned of a market decline.  We are seeing the highest lack of pessimism - optimism - in a year, and at levels seen in early 2008.

This trend of market levitation and lack of pessimism to me puts more fear about a market decline than any fundamentals.

2012 Predictions

Last year, I think I scored pretty good on the predictions.   For full list of scoring click here.  Scored better than 2010 predictions, but I didn't fare that bad either that year.  2009 predictions was funky, i wasn't very clear on the predictions, making it hard to judge.

So here we are, lets see how I do this year.  Let me state this upfront, my assumption that Ron Paul will NOT be the republican candidate.  If he gains support, my entire prediction scheme will be way off.  The reason is simple, Ron Paul, although not exactly mainstream or well balanced, does represent fiscal prudence.  Even if he cannot accomplish much without congress backing, the mere electing (or thread of being elected ) should move markets in 2012.

Its a pretty big opt-out for my predictions this year.  But Ron Paul generally speaking doesn't look like he will gain public support, so its probably not going to come into play.

2012 predictions
1) The market will end LOWER on Dec 31st 2012 than Jan 1st 2012.  Last year I waffled and said couldn't tell, and the market did end about flat.  This year I am not going to hazard how low the market goes.  It could move higher before lower.  But with the election over by November, pretty much the hype of the next president will be over, and the market can take a nice dive, like it did in 2008.

2) Commodity prices will bottom in 2012 - there will be a pattern of a low hit in 2012, with the CRB index moving up from that low set in 2012 at the end of 2012.  This will be the setup for a hell of a 2013 that no one will forget.  This index represents commodity prices in USD terms.  (This includes Gold, Oil, and food.) This will be key setup for the inflation issues ahead.

3) The worst of China's financial crisis will come to pass in 2012.  A new regime will take over, and plans for creating the worlds largest consumer nation will be center stage.  China's stock markets will bottom in 2012.  In effect, China will throw down the gauntlet at replacing the USA as world economic driver.  The transition will take years.  This setup by China will move from the corners of blogs to mainstream media.  Expect China to take shots at USA like trade tariffs etc.  It will be all positioning for them to take the upper hand in the world arena.  The issue won't be why the tariff is justified or not.  The issue will be China can do it and the USA can't respond in kind.  It will in effect be a test.

4) The Euro will NOT be the same as it entered 2012.  The nations bankrupt will be either kicked out of the euro, or a new two-tier model created, or a new Euro model that allows printing to finance debt emerges.  The facade of all nations must adhere to fiscal responsibility will in effect be gone.  The nations that need to print, can, either through the euro or on their own.

5) US, and Europe will be declared in a recession.  The media has hinted, but this hasn't come to pass.  Although this may be a "gimme" on my part, it is still an important event for the 2013 lineup.

6) US 30 year bond rates will NOT break out of the channel in effect since 1986.  This is critical, for if we do break out of this, chances are most of my other predictions will be wrong.

7) US dollar will NOT break below the low in 2011 until after August of 2012 (or may not at all in 2012).  With the election, there will be enough political spin to keep the dollar from crashing until close to the election.  This is related to, but not tied to the previous item, Euro, China, and the market movements.

8) State and Town bonds will continue to deterioration as high quality choices for investments.  I am pulling back from my 2011 prediction of a significant shift.  Instead for 2012, predict more issues, more bankruptcies, and some interesting court rulings.

9) Since this is an election year, there will be a few TOKEN prosecutions around financial wrongdoing, but overall, we won't see the law enforced like we did back in the Savings and Loan crisis.  Lack of law enforcement continuing is crucial for the 2013 crisis setup.

10) The end of the world will not happen, China will not declare WW3, and mass riots in USA will not happen.  In a nut shell, 2012 won't be chaos erupting, but 2012 will be the layup for 2013+ for issues heating up.  My 2013 predictions will make all previous years look tame. :)

There ya have it, 10 predictions.  I covered  the market, commodity prices, currencies (US and Euro), interest rates (bonds),  corruption trend, China, and a tongue in cheek of end of the world stuff.  If the end of the world does hit, then you can email me about such a failed prediction. :)

Recommend reading Mish's predictions that can be found here.

Karl Denninger's 2012 predictions below