Large Macro Issues

Chris Martenson  created a video series I posted back in March 2011 in post Chris Martenson.

Recently I posted his recent 38 minute talk at Mish's fund raiser in my latest New Reader Post.

Mr. Martenson just released a 58 minute video quick crash course compared to the 2011 series.
I urge everyone to watch.

Technology

I look at my life, one thing that has had the greatest impact has been technology.
That is of course, excluding my wife and son :)  They dwarf everything, but that is a different level of impact.
My parents, family, friends, and the masses give depth, breadth, perspective, and giving content to life.

But for the mind, for my interest, to learn, grow, observe,  connect, earn a living, entertainment, technology crushes everything.
I have witnessed at age of 8, the first personal PC, the Apple 1 released in 1976.
I still remember my father showing me article BEFORE 76 about these hobbyists making home PC's then when Apple 1 came out about them.
Fast forward to today, my cell phone contains much more power than computers that drove spaceship Apollo to the moon.  At any whim, I can watch just about any video ever made online. I can listen to any music, audio book, read any book, look at any picture, learn any topic, basically do anything that is not a human connection but of the mind.
Sure there is social media, a farce of a personal connection.  I was lucky enough to live before the internet to see the difference of knowing people vs 'connecting' with them.

I now see a future that includes local creation of any physical object below computer chips from every home as 3d printing technology advances.  Local sourcing of energy with a combination of sun, wind, water and thermal.  Automation to wipe out any job that does not require a doctorate in a generation. Decentralization removing the few commanding the many on many fronts, culminating with decentralized currency and government.

It is truly an amazing time to live, to see this unreal transition in the core of humanity.
It is actually possible for this post to be discovered 1,000 years from now, heck a million years from now and become a topic of some sort of viral boom.

And all it took was for me to sign up using any PC, tablet, and phone to Google and spend a few minutes to create this post.  Seconds after I hit save a person anywhere in the world could read this.

As much as I am awe of technology, the ability to level the playing field from the mega rich to the poorest of the poor, I can't help but worry about the other side of the sword.
All technology has two edges, a side for good and evil, makes it even more human to see how we use the tools available.  I no longer watch TV or read fiction.  The mystery of  past, present, and future on a personal, professional, and humanist level is so engaging, why bother?

Sure, I have a a few personal indulgent vices like occasional video game,  I'll chalk that up to human self indulgence.

But what keeps me going at this age is my immediate family, sheer curiosity of how all this chaos turns out, teaching the next generation of brilliant minds I encounter, and my awe of scientific method driving humanity from humans 4,000 years ago.

There will come a time where the advancement in computing processing power will advance in 1 day what it took from 1971 to 2001.  This is Moore's law in effect to this day, and if it maintains what it has done since 1971, it will happen.
Can you conceive of computing power advancing in 1 day equal to 30 years global human of effort to advance computing technology?  It will come to pass and the NEXT day will be that plus extra.

Lets hope through this advancement we keep perspective on human life, relationships, and enjoyment of the gift of life.

The Golden Bull

Wow, Gold is really picking up the pace, take a look at the first chart and after years of downside it is exploding up.  If you think you missed the entry, keep in mind its a long way to gold over 1900 an ounce as second chart shows.  The advancement in GDX, GDXJ, and GLDX has been nothing short of stellar.
On Sunday night I revised my New Reader entry to highlight my concerns and positioning on gold.
Wednesday of last week my post Gold miners, Stock Market what next? all of the stocks below where even lower than Tuesday AM, so gains are even greater in 7 days.

Assuming GDX breaks above 27, the long term stock indicator will indicate a probable multi-month rally.  since gold has been very suppressed for so long, I suspect the pent up demand and heavy short covering will make this scream higher.
                   
                    Tuesday AM             EOD Thursday         Percent gain
GLD            122                             127                            4.1%
GDX            23.75                          26                              9.5%
GDXJ           38                               43.07                         13.3%
GLDX          14.25                           15.90                        11.5%
  

Gold, 10 year view

Gold miners indicating multi-month rally

The etf GDX, gold miners, has crossed on 20-50 weekly SMA, indicating a potential multi-month trend change.  GDXJ, junior gold miner ETF may have better return on investment, as well as the etf GLDX, gold miner explorers.

Since the 20-50 weekly SMA just crossed today, it is not yet a convincing indicator.  GDX hitting above 27 I believe will be a clear indicator of trend change.  However, the miners have been depressed for so long, there is a good chance this is the beginning of the final, multi year rally I have been waiting for since April 2011, in post Precious Metals into 2015-2017.

In that post, I violated my own advice with this statement:
I am sitting more on the sidelines as per his paid service recommendations. I am keeping core positions, as I will until this run ends, sometime after 2013.
I grew impatient and started re-entering gold miners earlier, to my detriment.  It is 2014, and I think the down trend may have finally run its course.


Throw into the mix of Iraq falling apart, Russia acting very aggressive, and China always looking for ways to advance itself as the next world super power, any instability should send gold shooting insanely higher.

My original thesis for liking gold is still in tact, that India and China as they grow richer will buy more gold as part of their culture.  See blog post why I like natural resources better than bonds.

Below is GDX 20-50 weekly SMA long term investing indicator, as explained in post when to buy stocks or get out of the stock market.

Welcome New Reader

You will see text hyperlinks throughout posts, please link through for more information.

Welcome new reader, my name is Mike Murphy, Software Architect and arm chair global financial watcher.

Back in August 2006, while talking to my friend John Chinnock, came to realize that the entire financial markets where based on a ponzi-scheme of subprime mortgages and off-balance sheet derivatives.   Since then I was obsessed with reading ever aspect of the global economic forces at work, up until about 2013, as you can see by looking at my posting activity.

One of the reasons I have posted less is in my minds eye, I grasp enough to personally satisfy my own curiosity of the pressures on the global economic system.   I hope to someday boil down all the information into a concise summary.  For now, here is my short-sweet version.

**UPDATE** Skip all the summary below and read future of employment Post (click).  While below are all important and factors, the reality that affects you most is your ability to be employed.

The world faces unprecedented challenges today, the most critical being peak oil.  Fossil fuels are the reason why we have the lifestyle we have today in the west.  Fossil fuels took about 400 million years of sunshine on plant life to create, and mankind will take about 200 years to burn.  That release of stored energy has created the incredible world we live in today.  Peak Oil basically means that the era of cheap fuel is over.  I urge you to watch the 58 minute video below to indoctrinate you on the many resource challenges we face today.

The world is facing epic deflationary forces driven by technology, except monetary policy which is helping hide the financial strain. As of this writing I believe stock market valuations are precarious at best, partially inflated due to monetary policy.  However, after living through the last few years I have come to realize that investing depends on laws, or lack of laws to determine valuations.   Given reasonable expectations of maintaining sane law enforcement in the USA,  a reversion to the mean is historically likely.   For an ample discussion on this, please see the third video below, starting at 50 minutes in.   An independent indicator for longer term investing that you can read more about here, I do apply this to other stocks and ETF's as an indicator.  The jump the shark moment will be if US Treasuries break the downtrend of last 40 years.

If you think China is somehow going to pull the global economy, I for one don't believe it.  I have posted much about the China ponzi scheme, and with Jim Chanos providing an excellent job in his 2013 synopsis below on China's troubles.  Even if somehow China is wildly successful it would result is substantial cuts to western lifestyles due to resource redistribution.

I do believe in crypto-currencies, a great place to start is my series on money, and what I wrote back in 2011 the ideal form of money.  I think crytpo-currencies are a manifest-ion of what I described back in 2011, and I am lightly following bitcoin and 100 other crypto currencies as they develop.  And I have great hope for the new economy that is brewing with latest manufacturing revolution. But for the old generation I see deflation for decades as robotics and technology sheds millions of more jobs.  Its a generational shift, bad for the older employees, good for latest smart students out of college.

As of June 2014 I do think Gold Miners are a good buy, however due to all the issues above I am nervous about them as a longer term play.  ( GDX at 24 dollars)

For more information, if you care to research, my old new reader post is here.  If you browse my old posts keep this in mind,  the world is changing as I am, which affects viewpoints over time.  Posts in 2008 are likely to be significantly different than my current view.

I highly recommend the first two videos as a must watch.

Headwinds ahead

China is NOT the answer

Market Investing June 2014

Gold Miners, Stock Market what next?

Gary of the Smart Money tracker is getting bullish on Gold Miners. I myself added to my options a few weeks ago. There is a neutral indicator that I have used and at times dis-reguarded to my own detriment of a stock direction. Please refer to post When to buy and get out of the stock market, a guide for long term investing.

Using this same indicator, I applied it to GDX, and it is not yet clear that GDX is on the rise using this indicator, but the stock may push the indicator over the edge in the days ahead.
Below is a graph of GDX, calling out when the 20-50 weekly SMA crosses, potentially indicating a stock trend change.

As you can see it is reasonably accurate as an independent indicator over long periods of time.

Using this indicator, there is ZERO indication of a market trend change, so for now the sky is the limit.

Audio Books

Very good sale today 6-10-2014 for 4 bucks on Audible for Niall Ferguson's book
The Ascent of Money: A financial History of the World.
http://www.audible.com/pd/Business/The-21-Irrefutable-Laws-of-Leadership-Audiobook/B002UUKMXI

If you don't belong to Audible, can get two books free to join

http://www.audible.com/t1/amazon

Books that I either recommend
Outliers: The Story of Success
My most recommended book, a must read for anyone under age 30, or with kids.
http://www.audible.com/pd/Nonfiction/Outliers-Audiobook/B002UZDRK8/ref=a_search_c4_1_1_srTtl?qid=1404474932&sr=1-1


No Excuses, Existentialism and the Meaning of Life
http://www.audible.com/pd/Nonfiction/No-Excuses-Existentialism-and-the-Meaning-of-Life-Audiobook/B00DDY7SWS

The World is Flat
http://www.audible.com/pd/History/The-World-Is-Flat-Audiobook/B002VA8GTO/ref=a_search_c4_1_3_srTtl?qid=1402408697&sr=1-3

On Intelligence
http://www.audible.com/pd/Science-Technology/On-Intelligence-Audiobook/B002V8LKTE

Getting things Done
http://www.audible.com/pd/Business/Getting-Things-Done-Audiobook/B002V0PPRU/ref=a_search_c4_1_1_srTtl?qid=1402409266&sr=1-1

I have on my queue to listen to:
The Fourth Revolution: The Global Race to Reinvent the State
http://www.audible.com/pd/History/The-Fourth-Revolution-Audiobook/B00KCSJ8NU

Corruption, Gold, Bitcoin, and Beyond

I ran across a summary of recent massive corruption in the US financial system of preferred treatment. I actually have Zero against the rich or influential, I have a problem with the law not being applied evenly. Not because its immoral, but because a system without law, is a system that is bound to fail, as history has shown many times over.

 As I write this, gold MAY have bottomed last week, and Gary of Smart Money Tracker is thinking it has. I did buy some options last week for a GDX bounce, but time will tell. If gold rises, miners should follow. Bitcoin has exploded from about $50 a coin when I bought in a couple of weeks ago to 650 a coin. I should have put ever nickel into bit coin, but its hard to pull that trigger.

The market on the other hand is the gift that keeps on going. I wrote back in 2010 that the market may instead break up instead of down in the next crisis. What I meant by that is if corruption is so great, there is no reason for markets to ever go down. If there is no accounting, no law, no one to judge negatively, then the next market failure maybe the dow 10 times higher than now. In that scenario, being outside of USD is best.

Even though the markets are at all-time highs, there is something very disturbing. Banks are back giving loans to anyone and everyone. the problem with this is once you are willing to give loans to people who cannot pay them back, whats the next level of 'loose' money to get the next leg up? I guess banks could start giving $1,000 bucks for every $10K you deposit, or some other insanity. And that's what we have ahead, either a 2007 correction, or we must be much more reckless than now.

 Either way, the outcome will not be pleasant, 2014 is really shaping up to be the decision for the next 4 years. Good luck!