Saturday Video Post 8

A quick shout out to one of my blog readers, Milind Shah. He organized a fund raising effort for Doctors Without Borders around the new Star Trek Movie, read on.

If you haven't watched, watch Obama speech from Tuesday click here:

Pretty good video, critiquing doom-gloomers such as me, and interviewing Schiff & Celente.
And I hope that the video is right, that I am on this track because it makes me "feel smarter" rather than actually happening.
If it does happen, I'd like this guy to create another video saying "they where smarter", but of course, in life, that never happens. :)

Ron Paul critiquing Obama speech, and of course, I agree with Ron Paul....

News Roundup 4-17-09

Goldman Sachs beat earnings at 3.39
Goldman Sachs buries losses to beat estimates - Pretty amazing that the mainstream media (CNBC) don't look below the surface when GS beat estimates this week.
Wells Fargo may need 50 Billion in capital
MetLife Won’t Seek Capital Injection From Treasury
HSBC Finds Buyers for 97% of Record Rights Offering - 22% US Stock dilution with a 41% discount.
U.S. Planning to Reveal Data on Health of Top Banks
Treasury says some Life Insurers will get TARP money
Fed sees no economic recovery this year
Nationwide Mutual cuts 480 jobs and CEO steps down
Fed buys $7.37 billion in Treasury's - I have posted my opinion on this before, click
PIMCO U.S. Debt Holdings to Highest Since 2007 - I cannot comment, PIMCO is owned by Allianz
UK Debt to reach 12% of income - Opening act for the main show, USA.
Biggest recessionary output drop since World War II - Nothing to see here, the worst is behind us, move along

CHINA

China Slows Purchases of U.S. and Other Bonds
China moving into precious metals - Copper? - If the worlds largest country believes resources makes a good investment over treasuries, I won't argue with them!
China Loans, Money Supply Jump to Records on Stimulus
China 1Q09 - 6.1% GDP estimate - AMAZING how only 6% GDP growth is considered "bad" for China. I still contend China leads the US out.
China Mulls New Stimulus to Boost Consumption, Bolster Recovery

One of the reasons I am currently bearish on gold can be found in the comic below, since gold is the "popular" play with the masses.

Market direction one day before options expiration

This Saturday, stock market options expire. Historically this event has been a magnet for odd stock market moves. I wouldn't be shocked if the market opens up down big Friday or Monday, as part of the market manipulation games that are occurring.

In any event, lets take a look at the DOW chart:

From WebSurfinMurf's Financial Blog

The market has risen 24% in about 6 weeks, pretty far, pretty fast. Even though I do expect the market to go higher, possibly DOW 10K, the market usually doesn't make the move in a straight line. The market is over-due for a correction.

To give you an idea how significant 24% is, in 2003 from the recent market bottom, the market rose 24% in 24 weeks. And back then the world banking system wasn't under a possible crash scenario.
I won't bother posting the charts, but stocks I am (and most Happy John is also) shorting these stocks:

Stock	4/16/9	NA	Percent Gain
AAPL	121.45		%
BAP	50.01		%
BBY	38.53		%
EAT	18.78		%
DEE	82.72		%
DECK	62.33		%
WYNN	33.47		%

The ETF DEE is kinda a crazy one, so I am doing only 100 shares to watch. If DEE gets to 100+ I'm in big. I'll reprint the list above when I start to cover.

Happy Johns "high risk" play is buying FAZ. I have been raped by playing with FAS, so I'm not joining him.

So I expect a market pullback, few days or a week or two, before the Obama rally party resumes.

I am still in long resource stocks in Gold, Oil, Food, etc, but lightened up a little and added the shorts above.

Obama Speech on the Economy

Obama's speech on the economy today was refreshingly honest. Point for point, almost to a tee he is on target for what has happened and what this nation faces.

He defends, quite credibly, his deficit spending and bailout actions. I have fundamental issues with the USA's future health. For a good critique, read Market Ticker (click). Obama does seem to grasp the challenges, and he presents the case that he will lead the nation into the transformation required.

I would hope that his critics, including me, spend more energy in supporting transformation than critiquing. For if the nation stonewalls economic transformation, we will guarantee the outcome to be my worst case scenario.

I encourage you to watch Obama's Speech

Delayed Posts

I became a Father on 4/9/09, Joe Murphy born 11:52 am, 9lbs 7 oz.
So my posts may be erratic this week.

This post is a tad bit late for Monday (its Tuesday), but being neurotic, I want a post for each day.
The posts Since Thursday where all canned, Looks like I should have had a weeks worth ready to post.

Now onto my Tuesday post, delayed but actually posted on Tuesday!

Bonds is where the action is

Everyone is focused on equities. How their 401K is now a 201K, which may become a 101K. Also people have been focusing on bonuses to AIG executives, or GM executive expenses.

What REALLY matters is this nations debt spending. AIG exec bonuses are "seconds of interest" that the nation pay on its debt. GM executive or Labor union costs don't even register compared to the national debt.

As the government attempts to "stimulate" by spending at a record pace, there is a cost. Interest rates.

When the US government deficit spends, it doesn't just "print money" (yet). The US government issues US Treasury Notes (bonds) to finance it's debt. The interest the government has to pay adds to the debt. So the US government wants to issue US debt as cheaply as possible.

But there is a slight problem. Our creditors...the rest of the WORLD.... may want higher interest rates for throwing money at an obviously out of control spend-a-holic, the US government. If higher interest rates take hold, it will curtail the ability for the government to spend, and make credit (borrowing) more expensive, and in general, choke the economy as it tries to get its footing.

So what is the government to do? Since regaining control of the US finances is "crazy talk", the government has to create an environment where people WANT US Bonds more than a better return.

That has been happening with fear and stock market prices dropping. When fear/panic takes hold, or equities fall, money is moved into US Treasuries as a "Safety play". When people buy US Treasuries for safety sake, there isn't that much quibbling over 2.75% interest vs 3.4% for a 10 year note. People take what they can get.

What happens when the market does well, and the fear is taken out? Well the US government faces pressure to "compete" for better returns with other investments. Further the US creditors may demand higher return, out of fear that the world's largest debtor nation may someday fault on it's massive credit bill.

OK, so why does this matter? Well, the actions we have seen in the last 6 months, and the next year or so has this battle playing in the background and pulling the strings on what happens to US equities. The stock market has been rising, and so has US treasury interest rates. At some point, the US government may need to push the "create fear button" to get interest rates down.

If interest rates rise, as people refinance their debt, the costs go up. As costs go up, more people "Fail". As the spiral progresses, the system has greater failures.

Below is a graph of the US Treasury 10 year note, on 4/6/09, it's return was 2.95%. The TNX traded about 29.50 to reflect the interest rate change.

I have blogged on this before, lets hope there isn't a dislocation in the US Treasury sales, where interest rates jump higher due to lack of interest in US bonds. Such events can send shock waves of fear.

Today its Stock prices, 401k, tomorrow its currency valuations, interest rates, and cost of borrowing.

There is NO FREE lunch, as the government tries to manipulate the marketplace for a desired outcome, it will continue to find when one thing goes up, another goes down. The game is efficient, and cost will be realized in the system.

Saturday Video Post 7

Dutch Tulip Bubble

Throughout history, there have been many financial bubbles. There has been repeatedly an "irrational exuberance" of crowds sending investments soaring only to crash back to reality. One of the more odd ones was the Dutch Tulip Mania, where the price for Tulips exploded, sucking in huge investments only to crash.

The madness of crowds can be so powerful that during the Dutch Tulip Mania, certain tulip bulbs became the most expensive object on EARTH in 1637!

Reading history helps keep perspective on economic bubbles. I found this comic particularly funny, which inspired this short post.

From WebSurfinMurf's Financial Blog

Where AIG Money went

Today's post is short. An older graph I recently ran across showing where more than 170 Billion of AIG money went to.
Keep in mind Credit Default Swap guarantees where paid at full rate.

From WebSurfinMurf's Financial Blog From WebSurfinMurf's Financial Blog

How bad is the US Financial Situation?

Two pieces of news released today.

First, the US government under Obama has been reviewing the books of the banks, and putting the bank financial through a "stress test". This is good news, as a step (not a big enough one, but a step) to exposing the bad banks vs solvent ones, and regaining some confidence.

Banks will be releasing their earnings soon, and their earnings will likely be better than expected. How is this possible? Well the government announced a change to mark to market accounting, which basically means the government is changing basic math and reality to allow Banks to return inflated earnings.

To ensure that this good news is released without a hitch, the government ALSO announced they would delay the results of the "stress test" until AFTER earnings season.

Second, the US government announced intentions to extend TARP (money "lending") to Life insurance companies.

Lets recap. First just "sub prime", the financial woes are contained. Then there is no recession, just a problem with some isolated financial companies. Then it was said a short recession, eventually the D word has been mentioned, but the "worst" is behind us. Then the government has helped companies like GE, AIG, and GM. (all non-banks) Now the government will extend money lending to Insurance companies.

Does anyone see a pattern here?

As for market direction, maybe down more, but I still think we end up going higher. However, with the announcement of delaying "stress test" results, and TARP extending to Insurance companies, we will see if this will spook the market, or will it continue to ignore reality and move higher.

If fear returns, gold will appreciate. Time will tell. And no one cares about reality, its all about the grade, er stock price. But just like real life, you can change the report card, but the truth will eventually come out.
The gold/silver miners pulled back enough that if you have been itching to get in, now is a ok time. I bought some GDX, thanks to Happy John for telling me of his trade. Just slowly add to avoid getting caught too deep in the event of miners resume their slide.

Lottery Tickets - One Month later

This will be the last update on stock market lottery tickets. With returns now achieved, I consider these tickets success. I am now selling beyond 50% mark. At this point, you should put stop losses on ALL remaining shares on these lottery tickets. 150-200% profits are the lottery ticket jackpots. How greedy can you get for 4 weeks?

AA is reporting Tuesday after the close. Holding that stock to Wednesday is a high risk - high reward hold. If AA gets slapped down Wednesday to below 6 bucks, its a long term buy for your portfolio. Maybe the last great entry for a while.
If your already in it...best to lock in some profits. I am rolling the dice on this one.

The purchase price is assumed to be the day of the post, 3/5/09 . (posted at 12:01 am)

Stock	3/5/9	4/6/9	Percent Gain
AA	5.25	7.91	50.7%
F	1.81	3.77	108.3%
GE	6.66	11.19	68%
LVS	1.99	4.96	149.2%
MGM	1.89	5.53	192.6%
DRYS	3.54	5.11	44.4%
C	1.02	2.72	166.7%

MGM and LVS have some shaky news out. Citibank may eventually go bankrupt. Ford may be a long term hold. AA, GE, and DRYS I expect to remain volatile.

Shorting Stock Trade

One of the pay services I listen to is the bullz and the bearz.
http://thebullzandbearz.com/
He made a compelling argument for shorting a bunch of stocks at these levels.
I liked three of them. BBY, BAP, and SBAC.

I won't go into detail of where to short, what is the levels, targets etc.
To get that, please pay Kirk his pound of flesh, only 4.99 a month, a STEAL.
He has a video where he lays out his analysis. Good stuff. Dare I say it is better than my old standby Karl at the Market-Ticker blog for day-trading advice.

In any event, this blog is also to mark my trades. All 3 of these stocks I will roll into as a bigger short as the stocks move up, with an even higher ticket entered to cover if/when "Wrong".

Market Direction

I'm not going to graph, or do news. Just a summary of thoughts for Monday.

I'm still a huge bull on natural resources and related stocks. However, looking at the charts, Oil is a little "toppish", or perhaps is about to make a break for much higher territory.
DXO, UCO, USL, USO, are all showing near top resistance levels we have historically seen the last 4 months.
Gold (GLD) looks like another 3 bucks may come off gold ETF GLD, bringing GLD to around 84. Although gold may go much lower, at 84 GLD is starting to be more reasonable priced, and may be a good time to add slightly to the gold miners.

Food ETF RJA may move another 0.50 up before hitting hard resistance, as well as DBA moving another 2 dollars.

General point is, if your looking to buy into resources, it may be a good time to wait for them to retreat a little more first. Those already long, a little higher in oil/food may be a good time to lighten up.

If your in it for the next 5 years, every major resource stock is a buy and hold! Alcoa (AA) announces after close of business Tuesday. This one stock may set a trend for resource stocks to retreat or explode past these resistance levels.

The Best Way to Rob a Bank Is to Own One

A refreshingly candid video can be found on PBS web site, with Bill Moyer interviewing author William K. Black. (Click to watch) Mr. Black wrote about S&L scandal of the early 90's, writing a book called "The Best Way to Rob a Bank Is to Own One", 2005.

If you prefer, a transcript can be found by clicking here.

Mr. Black candidly point out several items about the current USA financial situation, echoing my previous posts, some highlights:
The section below, I marked in Italic, I didn't even know about. The FBI WARNED of the massive fraud of mortgages back in 2004!! So the next time someone says no one could see this coming, refer back to my previous posts from Peter Schiff, Jim Rogers, Marc Faber, and others, and the FBI record by clicking here!

WILLIAM K. BLACK: The FBI publicly warned, in September 2004 that there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle. And that they were going to make sure that they didn't let that happen. So what goes wrong? After 9/11, the attacks, the Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents. So even today, again, as you say, this crisis is 1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis. There are one-fifth as many FBI agents as worked the Savings and Loan crisis.

BILL MOYERS: You talk about the Bush administration. Of course, there's that famous photograph of some of the regulators in 2003, who come to a press conference with a chainsaw suggesting that they're going to slash, cut business loose from regulation, right?

WILLIAM K. BLACK: Well, they succeeded. And in that picture, by the way, the other — three of the other guys with pruning shears are the...

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WILLIAM K. BLACK: To know everything. To know who committed the frauds. Whose bonuses we should recover. How much the assets are worth. How much they should be sold for. Is the bank insolvent, such that we should resolve it in this way? It's the predicate, right? You need to know the facts to make intelligent decisions. And they're deliberately leaving in place the people that caused the problem, because they don't want the facts. And this is not new. The Reagan Administration's central priority, at all times, during the Savings and Loan crisis, was covering up the losses.
BILL MOYERS: So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
I recently wrote about people acting in concert (no need for conspiracy) to reach common goals.
The entire speech is worth a read or listening to. I wanted to highlight those specific aspects of the interview. Thanks Lou for forwarding the video link!

Saturday Video Post 6

Extensive interview with Marc Farber

Gold Break?

Before I jump into gold, I found a list of commodity ETF's that may be worth looking at.
Do your own research to pick a fund you may like. I may toss a few bucks into DYY, double long commodities or GSG, general commodity funds.


I have been skittish on Gold, but long on resources
Today pretty much followed this pattern, Oil and Food advanced, while gold declined.

Just yesterday's post I showed a GLD chart, showing that if the trend stays in the lines, looks bullish.
Well, today we can argue that GLD broke below the trend, and therefore may be collapsing.
NOTHING goes in a straight line, I wouldn't be shocked gold goes higher between now and Monday back above the line before falling once again.

From WebSurfinMurf's Financial Blog

Notice in the next graph Gold vs Gold Miners (GDX). GDX is significantly outperforming gold valuations since the lows in 2008. This gives me hope that Gold Miners may get hurt as gold depreciates, but not to the same degree.
If GDX cracks below 32, I''ll get nervous on the Gold Miners.


For the most part, as happy John would say "Long and Strong" for my resource positions.
Daily funny

Trend Analysis

Today I am posting S&P 500 (SPX) index, Gold, and GDX (gold miners).


The S&P 500 (SPX) is valued about the "middle" between the recent low, and the highs of early January. Notice the 200 moving average is on a course to meet the S & P valuation sometime in the next couple of months, which is the target.

S&P500 (SPX)

From WebSurfinMurf's Financial Blog

Gold and Gold miners have some interesting resistance levels. The Gold Miners (GDX) clearly has a resistance level around 43, both from previous highs and previous lows.

Gold itself is actually a good buy here, unless gold breaks below the lower red trend line. In general gold is on an upswing. So even though I am a little skittish on gold, "the charts" show decent room for GDX to move up to 43, and Gold in general trending higher.

*WARNING* Any break below the trends depicted is a sell

Gold (GLD)

From WebSurfinMurf's Financial Blog

GDX

From WebSurfinMurf's Financial Blog

Warning to gold bugs

If you have been reading my blog, I have been a proponent of resources. One of them gold, but recently I have been skittish, and sold excessive gold positions back in February. I stated then, and repeat, no one wants gold to hit new high levels, except speculators (crackpots?) and gold mining companies.

This situation reminds me when I started shorting sub-prime lenders in September 2006. It took 2 years for the public to understand the disaster the US and the world faced and for the stock market to reduce it's excess valuation. No one wanted the markets to collapse, including me. But the math and reality made it impossible to avoid.

For 2 years every trick was done to avoid devaluation until the tricks no longer worked. I see gold to be under the similar political pressures. All normal sanity shows gold should break out at any time. The IMF announced more talk on selling gold to help poor nations. A "side" effect (benefit?) is this may help keep gold prices in check, keeping pressure off of fiat currencies. Eventually the IMF and world governments willing to dump their gold to suppress prices will run out of resources and gold will rise significantly as it should against fiat currency printing.

The question is when will gold start to break out? Next week, next year, or 2012? Make no mistake, reality will also be reflected in gold prices. It will take patience just like it did for me back in September 2006.

I have significant positions in various baby gold miners. But those positions I can take a 30% drop without too much pain. For me its wait and see for Gold.

Bankrupting America - Including Pension funds

My Sunday's post may have been a bit over-the-top. I believe I'm accurate that Americans are doing next to nothing to stop the tidal wave of change sweeping through the government.

What will be interesting to see is what Americans will do once the government agency insuring 44 million American's pension funds significantly depletes its reserves.

Article quote:
"Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks."

"If the auto companies go under, they have huge unfunded liabilities in pension plans that would be passed on to the agency."

We have heard that in 2008, stocks devalued 40% from 1 year ago, and many pension funds took a significant haircut. Right now baby boomers are retiring in droves, and older companies like GM with huge pension fund liabilities may be left without a parent corporation to cover the shortfalls. All of this is not leaving much time for these funds to "recover" their losses in the market. If the stock market collapses 40% lower from here, as I expect it will, these pension funds will need help.

That help is suppose to be Pension Benefit Guaranty Corporation, which as you read above, made a significant timing error. Since we won't see these pension funds running out of cash for years (not decades), we better hope the government doesn't max it's credit cards by the time the pension funds need bailing out.

South park, importance of saving money

Blogger Roundup 3-31-09

I haven't done a blogging roundup in a month, I had to cut out many great posts, to make the list reasonable. All of them are must-reads.


Mish's Global Economic Trend Analysis Blog (all articles are worth a read)
Quantitative Easing Begins; "Operation Twist" Revisited
Geithner articles on arrogance, Bad Bank Plan, and Gigantic Confidence Game
A Paycheck Away From Ruin
Bernanke's Grand Experiment Continues
Judge Rules Vallejo Can Void Union Contracts - Will lead to more government contracts voided if upheld
In Search of Common Sense
Boomers' Future Went Down The Drain
Is Debt the Lifeblood of the Economy?
Deflationary Depression Returns To Haunt America
You Walk Away LLC sued in class action lawsuit <-- I found this business particularly interesting.

The Market Ticker
Three Month Wrap-Up (1Q 2009) - One of Karl's better rants
Open Letter To The FDIC Ombudsman - Since proven right click here.
The Bezzle Defined - Great listing of issues in US financial markets
WayBack Machine: HellFire Call
The end game approaches
Reserve Banking - Great explanation of how Reserve Banking works
The Inescapable Math on Mortgages

The Smart Money Tracker
Make a living or get rich
Here we go - Basically Fed can't print its way to prosperity
Mining stocks starting to decouple

Sudden Debt
CDS money in the shadows - Great case for deflation is bigger than inflation
More on CDS, and Great Depression vs now - Gold Standard vs Fiat currency
CDS: The Equity Connection Today
Race At Havoc House Bank

Mises Institute
The Fed Did It, and Greenspan Should Admit It
Is This America's Dark Knight?
Printing like Mad
Why Congress Must Stop the Fed's Massive Pumping

The Big Picture
How well does diversification work? - Nifty chart
Stocks vs Bonds - Fixed income may be boring.....but it works
Quadruple Confirmed Evil Knievel Formation - VERY funny...if not so true...graph of what is to come
New Home Sales Fell 41% in February 2009 - The bottom is NOT in

Many more great blogs can be found on the right of this blog, do your own reading.

News Roundup 3-30-09

Russia backs return to Gold Standard to solve financial crisis - Ahh gold, solver of all the world problems. :) It would be odd if somehow the new world currency became gold. I can't see that working.
Singapore May Devalue Currency, Allow 4% Loss - Another country joins the race to the bottom
Bank of America May Increase Salaries for Investment Bankers - to compensate for congress taxation
Geithner Says Some Banks to Need ‘Large Amounts’ of Assistance
Canadian Prime Minister Would Support Bank of Canada Extraordinary Steps
Europe Central Bank joins US & world with monetary helicopter - Big news, the world is all debt spending, so relative to each other, we are the same. :)
New Task Seen for Fannie, Freddie - Continue to kill capitalism, Socialism!
MGM's Las Vegas CityCenter averts bankruptcy
George Soros: Britain may have to seek IMF rescue - The IMF doesn't have enough gold to save all the countries that will need saving.
Romania gets IMF emergency loan - Case in point for Britain....
European Industrial Orders Plunge 34%, Most on Record
IBM to shift services unit jobs to India: WSJ
China calls for new reserve currency - I have blogged on china before, part of the agenda to take over as world leader.
US concerned over assertive China - If US was very concerned, we would stop needed China to fund our debt spending.
U.K. Bond Auction Fails for First Time Since 2002
California Home Prices Sank 41% Last Month on Foreclosures
Japan Exports Drop Record 49% as Global Slump - Absolute DISASTER for Japan. Lets see how long the yen maintains its value.

Click here for video with US Treasury Geithner on "This Week", Transcript here

Political Shift in America

My previous post talks about conspiracies, and my view of them, please read before proceeding to ensure you understand my perspective.

I have been thinking for years where America is headed towards politically, and I don't like what I see. In December 2001, fear mongering was used as justification for giving up hard earned freedoms, starting with the Patriot Act, without any significant opposition from the people. Fear mongering was used again in 2008, as I recognized the start of the insanity. TRILLIONS of dollars is being allocated from the public sector to the private sector to "save the world from collapse". This money is being allocated by very few people, with great secrecy, and no accountability. Further, we have central figures, such as US Treasury head, Geithner, making power grab to expand their powers beyond what has ever been done before. This also is being done without any real opposition. This past week we had a private institution, The Federal Reserve proposing to transfer assets from the Fed to the US Treasury, to assume the financial responsibility for the profit or more likely loss, of the transaction. As mentioned, this is in direct violation of the US Constitution.

There are more extreme examples such as US sponsored torture, the wiretapping of citizens without warrants, US Government building detainment centers across the country, US Military troops being deployed inside the US, and I'm sure you could find dozens of other examples, some from shaky news sources.

Read the paragraph above, think about the trend. Are you angry? Are you angry enough to do something? Donate to ACLU? Join the NRA? Spread the word to friends/family to spread the word about the trend? Write your congress people? (my line is here currently) Visit your congressional representatives? Join a protest?

If you answered at a level below "spread the word", the trend will not stop. And no one can predict where the spiral will lead to.

I am not making a case for conspiracy. I am making a case for "like minded people" pursuing the same needs and wants. The like minded in this case are those who seek centralized political, economic, military, and law enforcement control.

Without the US Democracy having active participation by the majority (NOT minority of radicals) to keep the US government in check, politics will shift, away from representing the public's interests to those of private interests. The strong will have have always taken advantage of the weak since the first two single cell organisms bumped into each other. The US public is behaving "weakly" compared to the strength of centralized power.

I will continue to post economic relevant information, and comment on it. I will post political events as they unfold. I will resist posting any political commentary. I urge you to find the line you are willing to oppose efforts by the power minority to weaken the power of the majority. I do have hope that the internet may enable enough information flow to resist the possible shift. Unfortunately, the vast majority of US citizens do not follow news to the depth that is required currently.

The political shift that I fear doesn't have to be "dictatorship" or anything that radical, it can come into a form of "public debt" enslaving the US from activity, resource shortages such as food, or other public fear tactics to justify consolidation of power.

I now have some insight of what a Jew or political activist went through with the rise of Hitler, each step is not that bad, but by the time the journey is recognized, the point of no return may have left you behind.

Conspiracy

Given such turmoil in the world economy, the significant amount of fraud being uncovered, and the irresponsible responses by politicians, conspiracy buffs are having a field day.

I just finished watching "The Obama Deception" the that I posted on the 14th. I have been seeing a bit of Conspiracy stuff more and more, and felt it important to post my view on conspiracies. Understanding my point of view will be critical for subsequent related posts.

This will be a rather long explanation, for those with ADD, or busy lives, scroll to the end to see my synopsis.

Lets start with the definition of conspiracy, " any concurrence in action; combination in bringing about a given result." Other definitions involved criminal intent, etc, but I believe this one is suited best.

I believe that people in a similar situation, with similar values, with similar goals, will have similar wants and needs. For example, if you poll a bunch of "white, upper/middle class yuppies in Westfield, NJ", their voting habits, preferences for politics, etc will be "more aligned" than say, homeless people in NYC. The fact that Westfield, NJ residence may (I have no proof, an example) resist selling their house to someone they percieve as a threat to the image of Westfield, NJ, does not, in itself, make all people in Westfield, co-conspirators.

For someone who does not understand the background, mindset, and history of westfield, NJ, new to the area, if they felt they are being not treated fairly, may see all those involved "conspiring" against them.

So, in my opinion, a group of people, with like dispositions, with similar power (actions), together, does not make a conspiracy. To me the foundation for 99.99% of all conspiracies presented today is based upon seeing similiar behaviors and explaining it with a conspiracy.

For example, the mass fraud committed across the world by selling mortgages to people who in no way, could ever pay them off, does not mean there was a consirpacy among bankers to defraud. What is more likely, is once the RULES OF THE GAME WHERE CHANGED BY THE GOVERNMENT, the players (bankers) across the world found themselves with a similar desire to maximize profits by selling mortgages, repackaging them as "MBS", and reap huge personal profits. As the sales process became harder, the solution was to reduce the standards of loans, rather than the management and sales teams reduce their personal income.

Every step, from the realator to bank presidents where affected. Many politicians where incentified through donations, and the "quick" economic boost their voters experienced. The majority of the people in the world didn't care, their personal world seemed fine.

If you where to look at a group of people at a company, you could say that corporation boards "conspire" to increase profits, families "conspire" to provide a stable home and well being for their kids.

Synopsis
Take any conspiracy, and try to position it in this light, and you will see that the far majority of situations can be explained away as "like minded people" behaving in concert, rather than an overt gathering to plot/conspire to achieve a result.

I find that conspiracy buffs behave similar to some pagan religious beliefs. Looking deeper than the surface image takes work, and thought. Think for yourself before pushing or accepting a conspiracy theory.

UPDATE: 1-28-2016 , Great Article on probability:  http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0147905

Saturday Video Post

Ron Paul, one of the best political patriots in Washington, fighting the tide of apathy.

Ad Ron point out, it is unconstitutional (and who cares!) for the fed to appropriate money.


Ron's fighting the fight, but as he points out, the US Dollar will face a crisis.

Part 1 of 2

Part 2 of 2 (despite title)

Lottery Tickets - 3 weeks later

On March 5th, three weeks ago, I posted time to buy lottery tickets. At this point the market has run up so much, so quick, its time to take some profits if you haven't already done so. This Friday I will hit 50% out of the lottery tickets, to lock in profits, and reduce my cost for the remaining shares.

I will likely not post again on lottery tickets, perhaps once a month or more, until I think the market has topped. But for me, this blog entry is fun to check on the lotto results.
The purchase price is assumed to be the day of the post, 3/5/09 . (posted at 12:01 am)

Stock	3/5/9	3/26/9	Percent Gain
AA	5.25	8.12	54.7%
F	1.81	2.94	62.4%
GE	6.66	10.9	63.7%
LVS	1.99	3.12	56.8%
MGM	1.89	3.09	63.5%
DRYS	3.54	5.12	44.6%
C	1.02	2.81	175.5%

I also mentioned "small miners" and they did great too. So returns did awesome for 3 weeks. I hope someone reading this blogged joined me in this stock lotto, and made a little extra.

The market has risen so fast, I will hold most of my other positions, but may take "just a little" off the table Friday.

Great Video from England, thanks to both John & Swan for submitting. Many parallels to the USA here.

Insanity Expands to new heights

After writing yesterday's entry, I thought, wow, that's some of the craziest stuff I have heard in a few months. Then comes today.

First, Congress seeks to expand the US Treasury power to "at will" take over companies that are NOT banks. This means the US Treasury could take over, AIG, or any insurance company, or anything "deemed" a financial company. I'm curious if that would include companies like GMAC. This of course, is yet another unprecedented level of consolidation of power.

Next up, "U.S. Treasury Secretary Timothy Geithner said he was open to considering a new global reserve currency. " The US fiscal autonomy would be eliminated. I am assuming instead of one currency, there would be 4, the Euro, Amero, Afro, and the Eco. My greatest concern would be the influence of China in this new world order of currency control, and such centralized power to the banking system, as to enslave the world through its consolidated power.

Both of these items are unprecedented. If either becomes a reality, they will join my "Financial Ground Zero" moments. In any event, this level of "crazy talk" by the US Treasury just re-enforces how critical natural resources is.

Speaking of which, gold has been strong, very strong. My only concern is why isn't it at 2x the current level. This type of "crazy talk" I would think would drive gold much higher than it is.

If I posted the US Treasury would entertain the idea of dissolving the US Dollar in favor of a new world currency back in October 2008, you would have written me off as insane. And here we are today, when it is a reality. Hence I only hinted at it in October of 2008, creating 4 global currencies.

US Fed and Treasury enter into incestuous fiscal policy

In the last week the Federal Government has entered into outright manipulation and incestuous fiscal policy with two far reaching actions.

1 - Federal Reserve transferring debt to Treasury (spending taxpayer money) without congressional spending approval.
First, the Federal Reserve Bank under the cover of providing market stability purchased "assets" from private industry as collateral for companies to use against federal loans. This isn't new. What is new is the Treasury was under a court order to reveal information about certain "assets" that the Treasury money was used by the Federal Reserve Bank under Freedom of information act. (In an attempt to avoid disclosure) The FRB has "asked" the US Treasury to take ownership of these "assets". This will nullify the court order, since the Treasury will take the assets onto it's own books, and not involve a (quasi) private interest, FRB. This also has the added benefit of the Federal Reserve Bank's balance sheet being cleansed by off-loading assets (that no one wants at their price) for US Treasuries (basically cash).

Short Take
Fed takes "assets" from banks, gives T bills to banks and/or counts "assets" as reserves to meet margin requirements. Fed gives "assets" to Treasury, in return for T bills. Repeat cycle. Treasury now responsible for eventual profit/loss for the assets.

Assuming a loss, this translates into the US Treasury "spending" money, without authorization of the US Congress. This is in direct violation of the US Constitution. (See Karl's blog entry)

But here is the secret. NO ONE CARES! And once this action completes unchallenged, only the most naive would think this is the last time this will occur. The Federal Reserve can pave the way to continue to take on "assets" then "stick" them to the treasury, and therefore the taxpayer. I for one applaud these actions, the Fed should (and will) continue to do illegal actions unless the citizens care enough to pressure the government to stop acting illegally. After all, its not illegal if no one enforces the constitution. At some point bloggers can be dragged into the streets and executed for inflammatory writings. And they should if no one enforces the law.

2 - Federal Reserve buying US 2/10/30 Treasury Bonds with "Assets (see 1) / extra cash".
The Federal Reserve in purchasing "long term T-Bills" is willing to accept lower interest rate on 30 year T-bills than the public.
Let me boil this down. Would YOU buy 30 year T-bill with under 5% return? I wouldn't and so wouldn't most since no one wants to lock in a low interest rate with all the financial games going on. So the 30 year T-Bill interest rate is going higher compared to the short term T-bills. I, and others will take 1% for 30 day T-Bills. (Previous post)

Solution? Have the "private" institution, the Federal Reserve Board, buy T-Bills at a lower interest rate. After all, we are all friends here, why would FRB ask for higher interest rates?
And in return, the Treasury will accept alternate forms of "money" (see number one above)
Once T-bills are purchased, the Treasury can "print" more money. (See Mish blog)

Why this is bad

The Federal Reserve board is a QUASI private entity acting on the "behalf" of the government. Lets get real, The FRB IS A GOVERNMENT ENTITY. These are all semantics.

If you accept FRB is basically the US Government, then what we have here is one branch of the government taking on debt/(spending) and buying from itself long term T-bills to artificially hold down rates, so the other branch can use the new cash to buy more assets. Further, the FED buys T-Bills from the Treasury, which allows the Treasury to print money.

If none of this sounds suspiciously like banana republic finance, then buy 30 year T-bills and don't worry about it, everything is going to be all right. For those more skeptical, buy natural resources to get off of US currency based valuations while you can.

These recent actions combined enter into my own classification of "Financial Ground Zero" moments.

Hurray for watching history in the making.

The Bull is here

From WebSurfinMurf's Financial Blog

Me and "Happy John" where a little early for the Obama rally we expected in January. January started with DOW 9K, recently ending at a low of about 6469. Today the DOW was up 6.84% at 7,775.86.

The target for this rally is come close or pass through the 200 day moving average. The 200 day is DOW 9,500 currently. Probably by the time this rally gets near that level, 200 DMA will be DOW 9000. If this rally somehow fails, hell should open and Satan's minions released upon the earth. :)

Gold I expect to fall in the near term. Gold miners should lose value, but I am *hoping* not too bad, since the stock market is rallying, it will somewhat help keep miners stock up. This is why I dumped GDX, and reduced my baby miner positions, as previously blogged. UPDATE: To clairify I have 1/4 of all my cash in baby gold miners CLICK (maybe more). I am still a huge gold miner proponent, I am just not adding here.

I am in 80% long in various commodity stock plays & lottery tickets, with 20% cash, mainly since the tax man will want his pound of flesh shortly. Everything rallied, OIH was a huge winner, Lottery tickets, etc. Frankly everything did great.

I expect a nasty pullback sometime in the next day or two, to "con" the shorters back in before rallying again.

Let me be clear, this ENDS very badly. We are entering the territory of currency wars, which can lead to real wars. The market will not hold its value when deflation regains its hold and takes it down. I am playing this long, (as I have been since January) for the full run. I'm in commodity stocks to hopefully protect myself if the USD has a currency dislocation.

For now, its party time. My friend Happy John had stronger faith than me, mine wavered in the final week of the beat down of the market. At the "top" wherever I think that is (200 DMA), I'll probably buy some puts, add to gold/gold miners, and wait for the final collapse of the world markets.

Commodity Rally
Happy John sent me this tid-bit on the commodities index, CRB. The CRB just recently hit 200 recently. CRB first broke through 200 back in 1974! And that was in the midst of massive inflation. Think about this. Natural resources, something that every human being and government on the planet needs just collapsed in an unprecedented way. Commodity valuation is like the "alternate" currency, meaning as every nation devalues their currency, commodities are a "scare resource" and therefore should hold or make significant gains compared to "photo copying cash".
This is the buying opportunity of a lifetime, one to retire on.
RJA (food), USL (Oil), OIH (Oil companies), GDX (gold miners index...just not now), GLD (gold...not now), SLV (silver), UNG (Natural Gas), etc.

Please see 50 year graph of CRB, with 50, & 200 moving averages. Notice how low risk commodities are compared to the history of valuations. Equities (stocks) only went back to values of the mid 90's. CRB went back to 1974 levels. To give you an idea how insanely cheap this is, in 2009 "$200" is worth "$74 bucks" in 1974 dollars. So adjusting for inflation, CRB just hit valuations ALL TIME LOWS!

From WebSurfinMurf's Financial Blog

Taxpayer Bonanza Giveaway

This past weekend the treasury department announced plans to "facilitate" the trading of Mortgage Backed Securities (MBS). To read on how this works, I'll defer to Mish's article (click). (Also see Karl's analysis here) US Treasury Tim Geithner article on his spin can be found here.

The bottom line to me is still the same. The question people should ask, is the government's actions helping PROPERLY assessing asset values or changing laws to fix broken financial structures?

The answer to me a clear NO.

What is happening is the US Government will "facilitate" buying/selling of these assets at prices banks are willing to sell at. This translates to me as the taxpayer PAYING the delta between true value and value banks want to sell at. ONLY a free market buy/sell with ZERO guarantee on losses will properly value the assets. This action, is enough for me to create another "Financial Ground Zero" entry, which I may add later this week.

Back to the goal. The goal is to understand how to properly hedge in financial markets for the ramifications. And this SCREAMS market rally! Possibly month(s) of rallying. And why? Because its yet another money give-a-way to the banks and other financial institutions. The more the taxpayer takes on risk(losses), the more these companies have less of a chance of failing. (NOTE: This translates into INCREASE chance of US Government failure, risk cannot be averted)

My previous graphs of reward to risk still apply, but the game is attempted to be rigged by the referees. If they are successful, the upside reward is greater than the risk.

I still like resources, I am still cautious on gold, but bullish on index funds, Oil, Food, health care, and lottery tickets.
For those with higher risk tolerance on a long term view, India and China funds.

USO vs USL, DXO vs UCO

The most popular blog entry has been my article on USO vs USL. I decided to spend a little time looking back on both of these indexes. There is no way to "own oil" for investing purposes, except trading futures contracts. USO & USL attempt to allow a person to buy an ETF to "represent" the value of oil, and capture the % gain/loss reflecting oil's valuation movements.

USO vs USL

The last blog entry on 2/11/09, I stated USL over the long haul has done better than USO. This is still the case. I also wrote that USO could do better "in the short term" if oil gains value, due to the way these ETF's design. Reviewing USO vs USL from Jan 07, "year to date", and since 2/11/09 (article date), USO did -17%, -12%, and +4.7%, respectively. Therefore if you stayed in USO since the blog article, the ETF performed better.

In any event, the premise that USL over time has retained value better than USO is still correct. In addition, if you want to gain value in the "short term", the ETF's DXO and UCO, "Double long" oil is a better way to capitalize SHORT TERM oil gain. (see more below USO/USL Picture)

From WebSurfinMurf's Financial Blog

DXO vs UCO

Both over the long haul will lose value, due to expenses, but since 1/1/09, DXO and UCO appreciated by +18% and -30% respectively!
WOW, that is a HUGE difference. I couldn't find much details on DXO vs UCO on its fundamentals. If you have better luck, please post in the comments on this blog entry. In any event, its apparent that DXO works "better" than UCO, but that may also be a function of the price of the ETF (DXO 2-3 buck range, UCO 10 buck range)

I believe (unconfirmed) that:
DXO is based on Deutsche Bank Liquid Commodity Crude Oil Index
UCO is based on ^DJAIGCL Oil Index (Dow Jones-AIG Crude Oil Sub-Ind (^DJAIGCL)

Below is the graph of DXO vs UCO Year to Date, and a graph for last 5 business days. Notice that YTD UCO had a 48% difference from DXO, and in the last 5 business days UCO did worse by 1.40%!

Unlike USO/USL, I am unsure why UCO does so much worse than DXO. And frankly, I am not sure I care. The horrific performance difference is enough to look at DXO over UCO.

UPDATE:5/1/09 See entry on leveraged ETF's being Front Runned.

From WebSurfinMurf's Financial Blog

Saturday Video Post

Former Presidential candidate, Texas Congress Representative, Ron Paul has been pretty much on target with the US fiscal disaster.

Ron candidly speaks out on the current bailouts, AIG bonuses, and how US Voters are culpable in allowing all of this to happen.



Marc Faber talks about commodities (of which I own gold, oil, food, etc)


Another Peter Schiff audio, its part of a longer series of clips. This particular gets to the heart of the fiscal disaster the US faces.

Peter Schiff discusses 1920's depression