Commodity Futures Trading Commission to limit commodity positions

The Commodity Futures Trading Commission has introduced a plan to limit the size of futures positions by individual institutions. The idea is, no one entity should have a undo influence on commodity pricing.

Commissioner Bart Chilton stated:
“While I will now support publishing a position limit proposal for public comment, I will continue to make the case that we need to address excessive speculation in these markets immediately,”

Further commentary

“In light of the existence of large speculative positions in today’s energy and agricultural markets, it is imperative that the Commission to do something now, and without delay, in order to address these large positions and send a message of confidence and certainty to market participants,” said Jim Collura, spokesman for the Commodity Market Oversight Coalition.

Changing rules would likely take more than 90 days, due to process of changing rules. So while this change will not directly change the pricing of commodities in the near future, the writing is on the wall for a temporary decline.

I say temporary, since speculators drive price up on commodities when there is tight supply. For example , if the supply of corn was at an all time high, speculators would fail to drive the price up at all, due to all the excess available.

This measure, once enacted will be called as the fix for the commodity bubble. In reality, it will be temporary relief. Every year it is my position commodities will get tighter due to China, India, and other developing nations require more resources. Once the supply gets slightly tighter, the excess speculation will not be needed, and prices will resume their march higher.

keep in mind, temporary relief could be upwards of a year as the excess supply is consumed.

Only then, there will be no more tricks to stop the march.

Very interesting put-call ratio chart to S and P 500

Well worth the watch of put vs call ratio with S&P 500. Notice in extreme swings low in the ratio, the market typically falls. (too much optimism).

We are in an extreme state currently of optimism, one I even fell for.

I reduced positions today.

http://www.indexindicators.com/charts/sp500-vs-put-call-ratio-total-1d-sma-params-2y-x-x-10ma/

Niall Ferguson: Empires on the Edge of Chaos

Excellent video, well worth the watch by everyone.

Takes an hour, feel free to skip the guy introducing Niall Ferguson, the intro is too long and unwatchable.

I added this to Financial Ground Zero series, since it captures the essence of what is happening.

S and P 500 20 day volatility index hits 39 year low

OK, this is quite an obscure extrapolated statistic. The VIX (Volatility index) measures implied volatility in pricing of options / cost of risk. The VIX index today traded around 17.75, not an historic low.

However, looking at the past 20 days, the vix has been very stable, and that hasn't happened to this degree in 39 years. I think part of it is an anomaly of the holidays, but considering how fragile the financial world is, it is pretty astonishing.

Pretty freaking amazing, it can't help me think that extreme volatility is around the corner.

2011 Predictions

Each year I do this, I am learning more about mankind. First, it is more apparent than ever to me that people in general always choose the way to avoid pain today, even if it means much worse pain tomorrow.

Unfortunately, my worst fears about this entire situation is coming to bear. The world is not taking effective, proactive steps to avoid an all out disaster in the world economy. Instead of dealing directly with the issues at hand, every step the short-cut to avoid pain today is taken.

In effect, we are kicking the can down the road, and making sure the fix will be much harder than if it was dealt with upfront.

Again, this isn't a dig on Obama, European union, China, or anyone. It is a lesson on humans. Finding true leadership to do the right thing seems impossible to find. Maybe revisionist history presents a false image, and such a thing doesn't exist until no other options are left.

There is a quote by Churchill that sums up my outlook on politics about America..

"Americans can always be counted on to do the right thing...after they have exhausted all other possibilities."

-- Winston Churchill

So with this in mind, my predictions are based upon my opinion that real change to improve the situation will NOT occur until crisis happens. The kick the can policy, started with Regan on China financial relations and the Federal Reserve Bank paper games will continue until it isn't possible. No matter how grim the situation looks, I have full faith for the wrong decisions to be made, if they are available and less painful than the right ones.

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.

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.

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.

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.

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.

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.

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.

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.

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. ;)

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

Well, thats my top 10. Pretty freaking scary really. Notice in 2010 predictions some make a comeback for 2011. Mainly since things are playing out slower than I expected. I am still bullish on commodities, but recognize as the crisis unfolds, resources will be volatile.

2011 will be volatile, and it will set the stage for 2012-2013 when things will get ridiculous.
So enjoy 2011! :)

Closing out 2010

Well, 2010 is here and gone. Lets see how I fared in my "2010 predictions" post.

I have reposted the content below, and made the original text italic. My comments are added below.

By my own judgement, out of 8 calls, here are the results.

1 Complete fail

4 Correct calls

3 Partial correct calls

Not too horrible. And honestly, how many readers thought What I wrote would happen?

Onto 2011 predictions in another post!

See 2010 summary/analysis below.

2010 Predictions

I made quite a few very specific predictions last year. This year I want to try something different. That is, to make a few general broad statements of where I think the markets will be 1 year from today.

This serves two purposes. One to provide a clear, concise view with less confusion in the predictions. Two to mimic what most people are trying to do, and that is pick a place to put some savings into.

1. 2010 will reach a crisis in the US bond market. Interest rates will (if not already) become a concern and will need to be put in check. Rates will over all drift higher, squeezing the life out of the US government and economy. Rising rates will apply downward pressure on housing.
   a) Disclaimer: US rates will NOT be a concern if the US stock markets collapses in 2010. We are talking down for the count collapse.
   >> Complete FAIL on this prediction
2. US stock market will be lower on 12/31/2010 than 12/31/2009. Guesstimate is a wide range, SPX 1,000 to as low as 500. Since that is pretty ridiculous range, I'll choose 750
   >> Partial correct. the 2010 low was 1,010. I'll call that a hit, (I said 1,000 as top end).
   >> But the market ended higher. Started year about 1125, ended 1257, for a 11.8% gain.
3. Inflation, despite everyone's concerns will NOT manifest. However, Currency devaluation is possible, and that would be reflected in higher commodity prices. US Dollar gains strength first half of 2010 in general, and loses strength, in general towards end of 2010. US Dollar remains above the lower trend line, as depicted here (click) for 2010.
   >> Correct call. Dollar rallied, then pulled back hard. And it remained in the trend area.
4. Precious metals (gold) will have major valuation issues between Q1 and as late as Q3, but should firm up between Q2 and Q4. I am very sketchy on time line, since precious metals valuation turn around will depend on US dollar, interest rates, and stock market fear.
   >> Correct call. Gold firmed up in August, and has made a huge run up
5. With that said, Gold will end higher at the end of 2010 than current levels or at the very least rising rapidly to surpass current levels. (from it's low)
   >> Correct call, kinda duplicate to #4.
6. US economy will NOT rebound, and will be in a quagmire of problems straight through 2012 and beyond.
   >> I believe this is a correct call, despite the pundits. Official unemployment is about 10%, real is closer to 20%. The Federal Reserve bank has announced more fiscal recklessness of printing, banks still don't have honest accounting. Government is over-spending to hold things above water. This is hardly a rebound, more like a drug fix to give pain relief.
7. There will be major crisis in 2010, including, but not limited to: State(s) faulting on debt, counties failing (avoided in 2009), more countries failing, and in general, increasing unrest in the world (wars, terrorism, etc)
   >> Partial correct. We have seen Ireland, Greece under severe pressure. We have seen California and other states insolvent. Recently, we have seen states like Illinois call for bankruptcy of cities. However, we haven't seen a blow out like I expected. Band aides are holding back the dam from breaking. So no major crisis in 2010 per say.
8. Protectionism will continue to rise (tariffs, refuse to trade, etc)
   NOTE: This is one potential event to destroy stock market valuations.
   >> Partial correct call. For the most part, to my surprise, it is mostly China starting to do this. I did expect more countries. China is hitting with various quote limitations on exports of commodities, but mostly concentrated on rare earth minerals.

this list is pretty broad. But it covers 8 specific points that can be judged on. Items 7/8 are a little squishy, but I should be able to look back to judge.

Feel free to put in the comments your own 2 cents, and I'll try to add them to my end of 2010 summary.

Where was the Precious Metal Pullback?

back a few months back I wrote the low in precious metals should hit about now, before the next leg up.

Well, gold and other precious metals haven't gone down, they in fact are maintaining price if not rising.

Gary is speculating for return of the final wild ride of the bull precious metals market. In his pay service has set a dollar price when that will trigger.
It's hard to disagree with Gary's logic. I submit that it is a good time to start adding to positions, but I am not sold on loading up right now. If'when the USD breaks below 78, I think it is a good time to load up. It should be a clear sign that the USD is going lower instead of higher.

The fact that precious metals did not pull back significantly is really a good sign that the precious metals market is about to take off upward. But as they say, big reward comes with big risk.

Rare Earth Minerals

I listened to a pod cast last month that got me into Rare Earth mineral. For some reason, I didn't blog it. Kept slipping my mind, I thought I had posted on this.

At the time, I bought AVARF and LYSCF, both pink sheet stocks, priced 3.11 and 1.70 respectively at the time.

Unfortunately, I missed the announcement that AVARF was going off pink sheets with new symbol AVL and being placed into the S&P 500 ETF named TSX, announced December 20th.

The stock has started a significant rise, one I expect to be a long one for AVL.

Today it hit a high of $7.18, but beware (130% gain), this week stocks are trading with odd volumes being a holiday week. This could be a pop that goes back down. But I doubt this stock will see sub-4 bucks again.

The volume has been huge, over 8 million shares traded today. When I bought this stock it traded at about 100,00 shares a day.

So jump in now at your own risk. At this price we could see a pop just below 5 bucks to get people shaken out, but it could also make a blazing run much higher.

If you don't know about rare earth minerals, I mentioned it in a previous post (click).

China mines 95% of the worlds rare earth minerals, many of which are key to high tech electronics, military weapons, and new energy technology. (solar, wind, etc).

China has also announced they plan to limit the rare earth exports in raw form, basically blackmailing the world to manufacture products in China, since they own the raw materials.

Since rare earths are in the category of resources, I like the play.

I added to my position, but I am late to the party, if I wasn't sleeping at the wheel, I would have bought more when it broke through 5 bucks.

I may continually add to this position if it continues to rise. A stock fresh out of pink sheets may have quite a bit of room to run.

US Budget Crisis Ahead

My post today on Military spending gave me a response from a friend in email.

The 2010 deficit is projected to be about 1.2 trillion dollars, according to Wikipedia.

Further, below is a projection of how in 2015, at current spending rates, each working US person will have a debt load of 1.2 million dollars for current US debt and future debt obligations. That is a little mis-leading, as it assumes the US will pay off what it has promised in the future.

Excluding future broken promises, by 2015 each working person will be servicing the interest rate of $200,000 of government debt. Assuming the government can borrow at 5% interest in 2015, which I believe will not be possible, but lets assume it, then each person in the US will need to pay 10,000 just to pay the interest on the 200K. Then extra money must be spent for military, education, social security etc.

As you can see, it just won't happen. This is the crux of my current fixation. The transition from our current trajectory to what is actually possible to sustain will be dramatic unless action is taken.

Anyway, 2015 projected debt clock below if we do nothing to improve matters.

U.S. National Debt Clock 2015 at Current Rates

US cannot afford military spending

Military spending is by far the worst way any country can spend its money, economically speaking.

When the government spends money on the military, the investment payback to society is low. For example, if the government decides to build a un-needed bridge, at a minimum the local population does leverage the bridge to build up their economy. Even such an expensive project, if done when not economically warranted, pays back to society.

If a battalion is stationed in a foreign country, the military spends in that local economy. A missile, after built, when used, does not give back a return on investment. The items built, and labor spent, does not produce a product that American Society can leverage.

Granted, the world is not one we can merely trust and disband the military. America, as any leading nation, must have a military that can defend itself. And if needed wage war to protect it's interests.

So while I do support the concept of America having an army, I don't believe it should be spending 5% of total GDP on the military. Think of it this way, if every economic transaction had a 5% "surcharge" tax to pay for war, to avoid deficit spending, would the support for the large military system exist? Or would a 1% surcharge be more supportable?

Click to read topic by Mish, and an eye-catching graph to highlight America's over-allocation to military spending.

From WebSufinMurfs FinancialBlog2

State and Local governments bankrupt

Back in 2008, I posted on how the bankruptcies would eventually spread states. I was a TAD bit early. Sixty minutes posted a video on how the states are bankrupt. While I welcome the recognition by main street media, I am constantly bewildered how long it takes media to pay attention to these crisis situations.

NJ Governor Chis Christie pulls no punches.

"This is different, isn't it?" Kroft asked New Jersey's governor, Chris Christie.

"It is very different," Christie said. "The reason it's different is because the only choices left are choices that people previously have said were politically impossible, that you couldn't do. You couldn't cut K to 12 education funding. You couldn't do those things. They were, you couldn't talk about pension and benefit reform for the public sector unions. That were third rails of politics. We are now left with no alternatives."

"Just the third rail?" Kroft asked.

"Yeah, that's it. I'm just gonna grab it and go, and let the chips fall where they may," Christie said.

"This is unsustainable, right?" Kroft asked.

"Totally unsustainable. We have a benefit problem," Christie said. "It's not an income problem from the state. It's a benefit problem. And so we gotta change those benefits."

To be fair, New Jersey didn't fund the pensions 13 of the last 17 years. But there is no going back now....and instead the state employees will get hit. Every year NJ didn't fund the pension there should have been marches on the capitol to insist to alway fund. Water under the bridge now.

Video well worth the watch.

This Week in Charts

Not much to say, markets staying up there. US 30 year bond rates pulled back, oil is up, gold is hanging in there. It is looking like the last few weeks of the year will keep up there into 2011.

For those that held positions from before 2008 crash, the markets rebounded 87% (typo not 187) from lows. Only 20% more gain from here to new highs. Not sure if the right thing to do is keep it all in the markets or take some off. Well, I know I wouldn't keep it all invested, but then again, my 401K has been in bonds since 2007. I'd be in resources, but my 401K doesnt allow that.

To the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Bernanke's War

I try to listen to the pod casts from the Financial Sense News Hour, by Jim Puplava when I can.

This week the episode titled Bernanke's War is a must listen for those paying attention to the monetization of the economy by the Federal Reserve bank and US government.

While I find the pod cast on target about Mr. Bernanke, I do warn listeners that both people presenting the episode are gold bugs. Meaning gold is the real money or safe storage of wealth. So while I listen and learn from such podcasts, please be aware everyone has something to prove and sell on.

I am a gold bug, but probably not for the same reasons as most. China and India are going to continue to consume gold as they increase in wealth. This podcast does back this view, but mixes that gold will go up due to money printing. I find this view slightly flawed.

But the important part isn't about gold. The important part is knowing the man, the myth, the legend, Mr. Bernanke.

Enjoy.

View change

I have updated my new reader comment and added the bold below.

Short take
The US Stock market and the US economy will see substantial pressure from a massive deflationary collapse that will not end until the US government enforces honest accounting and loses by US banks are realized. Current target for S&P500 and DJIA for a "bottom" is 550/5000 respectively or lower either in USD cash or living standard degradation equivalents. For example, if cost of living increases by 25-50%, in real terms a S&P 500 at 1,100 is at 550.

This is an important shift for me, I have been essentially at this opinion for the last 6 months, but figured it was about time to articulate in this blog and on my new reader.

If Americans cost of living radically increases, the likely cause will be a lower valuation of the US dollar in terms of cost of resources.

This is a differing view than most who look at USD in currency exchange rates from other nations. Therefore, I am of the opinion that it is possible that the market does not go materially lower in us dollar terms. But the expenses of Americans going up in effect is the equivalent of a market crash. So theoretically, the S&P 500 could go up to 2,000, but be making new lows in relation to living standards of Americans.

For example, if new mortgage rates are at 15%, food has doubled, gas has doubled, in terms of people's daily "wealth" related to market valuation, a S&P 2000 is worse than if it was S&P 500 and the cost of food, gas, and rates where lower, say food at 25% discount, gas at new lows, and rates at lowes.

The general point is, the US financial system still faces many challenges, and the losses stemmed from corruption and bad policies must be realized. The decisions being made may result in the market not going 50% lower, but living standards cut drastically. Someone has to pay for the losses, it will be either stock holders, bond holders, or the people.

And it is increasingly looking like politics want it to be the people.

Gold is NOT the answer to fixing money

I previously covered the Secret of Oz DVD, and I recommend purchasing it.

Updated 8:27 am, thanks to Anton for comment.

I recommend watching the full video available on Youtube.
This compliments how gold produces worse inflation/deflation swings than fiat money, explained by Karl here: (A MUST READ, and video below)

Alternately available by link to watch the video by clicking here. You need about 2 hours.

Adding you tube video to welcome new reader link

The US crisis ahead, inflation vs deflation

As previously covered, the US government bond market is a key component for the economy.

The ability for the US government to continue to deficit spend and be able to finance such activities depends on interest rates. If rates explode higher, the cost of debt rises, and will curtail government ability to continue unlimited spending.

There are two primary camps in the apocalyptic view of the world of the fate of the US, the US dollar, and debt.

Inflation

View one is that Ben Bernanke and the federal reserve will be able to inflate us out of this mess. Please keep in mind that if they succeed, that will mean the cost of EVERYTHING will rise, but historically societies do NOT keep up with wages to compensate for higher cost of living. The net will be a very painful period as people struggle to pay their bills, or simply just to buy food. Part the transition expect middle class america wiped out. What will remain is the upper 5% and then everyone else. The good news is, people can pay their debt off with a much less percent of their income, since their income will go up, but the debt owed will not.

Deflation

The other view is the US government becomes under such stress, they curtail their financial bottom line. This will cause more private companies to fail, more bankruptcies, and less government spending. The less credit/money available, the more deflation will take over. The US dollar will remain relatively strong, and purchasing power of people who save will be maintained.

The moment of truth

I am in the camp at the moment that we will see a currency crisis, that will result in the US dollar to go down as faith in the dollar diminishes.

The moment of final tipping point will be with a bond market crisis results in the inability for the US government to sell debt at a rate it offers. The bond market demands of the US government will default, higher prices for bonds.

It will be then that we will know if the dollar remains relatively strong, or collapses. (over time)

No matter who you talk to, if they know for a fact it will be one way or another, it is to say that you know how people will act in pressure or crisis situations.

The fact is, people are not always predictable. Keep an eye out for the bond market crisis moment and act accordingly once a new coarse is set.

What I CAN say to tip the scales is we have not had significant bouts of deflation since the creation of the federal reserve bank in 1913. See chart below and read more at The Market Ticker.

This indicates the likely (but not certain) outcome will be the USD thrown under the bus to avoid deflation.

Below is inflation vs deflation rates since 1750. Notice that once we went off a gold standard, there is only monetary inflation.

From WebSufinMurfs FinancialBlog2

Bonds, Cost of borrowing is the heart of all finance

The stock market, derivatives, real estate, natural resources, and the host of other financial instruments put together does not compare to bond interest rates.

True, unregulated derivatives markets total over 600 trillion, and they alone could destroy the world economy. But bond interest rates is the foundation of the solvency of most countries, corporations, and citizens.

The cost of borrowing for a day, 1, 5, 10, 20, and 30 years is the lifeblood of the economy. Credit, not cash, is where the real action is at.

Americans have enjoyed a relatively stable US bond market for about 25 years, after my favorite Federal Reserve board chairman, Paul Volcker, used the federal reserve bank to tame the markets back in 1981. He did this by RAISING rates to control credit creation and inflation.

Unfortunately, after Mr. Volcker we got Greenspan and Bernanke, who have used their position to use monetary policy to blow financial bubbles in stock markets, real estate, banks, and now resources.

The counter to such wreckelss monetary policy is the US treasury bond market. The rates paid for the government to borrow is the basis for much of private borrowing costs.

The US has enjoyed a DECLINING cost in borrowing since about 1985. Recently bond rates have been accelerating at a rapid rate. If rates break the trend line established back in 1985, we will be in new territory. It doesn't mean the financial world comes to an end.

But it DOES mean we are in a new financial world. The cost of debt will be on the rise for the first time in 25 years. The implications of impact are enormous.

The first chart is bond rates since World War 2 to today. Notice once Volcker tamed bond rates, and Greenspan/Bernanke took over, rates have been on a trend lower.

The lines represent experienced trading channel during this time. A brake of the trend line signifies a NEW trend. The second chart is from bigcharts.com, depicting 30 year rates since 1994, for a closer look.

We are possibly weeks away from witnessing a shift in American debt cost, one that years from now will have meaning, and currently will be noticed by very few.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

US bond rates accelerating higher

US 30 year bonds are accelerating higher. At this pace, rates will hit critical levels by end of year.

In addition, netflix, salesforce.com, and bestbuy are looking pretty weak in stocks. While bestbuy has much less risk.

Market holding up as rates rise. But I can't see the market flying higher if long term rates start heading towards levels that we haven't seen since 2008.

From WebSufinMurfs FinancialBlog2

More Chanos videos

I like Chanos interviews, he shoots straight and is direct about reality.
I posted a video on Friday, and on the same day he gave another interview.

Mish's blog has a nice article on this video Chanos video.

The most staggering thing is China's GDP is comprised of 60% of real estate, which is a HUGE bubble. I have posted videos quite a few times, about China's massive Real Estate problems. Only 5% of China's GDP is exports. That should tell you how precarious China's economy really is. Once that real estate boom busts, which it will, it will get interesting.

This Week in Charts

Brief This week in charts cover. Markets all point higher higher higher. Nothing wrong with joining in and putting stops. Please be WARNED the US government is thinking of tinkering with commodity futures rules, which could trigger a nasty sell off in all commodities. But be sure, after that sell off, the advancement will continue.

Toe the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

And here is the fly in the ointment with loose monetary policy...

From WebSufinMurfs FinancialBlog2

China false real estate boom

CNN Money interviewed Jim Chanos recently about China's economy. (click)

I agree with Chanos in the next 5 year term, but over the longer term I am not so sure.

China has great population and that population is on the economic upswing. Another CNN link focusing just on the real estate bubble.

When watching the video, the fog you see is pollution. I was in Hong Kong and saw it first hand.

There is a much longer video I posted back in Feb 2010 that is well worth the watch, and is on my new reader list. Click to watch that video.

Ron Paul to be named Chairman of Monetary Subcommittee

I must admit, I was skeptical that Ron Paul would be named Chairman of the Monetary Subcommittee. According to this video, he is to be announced chairman.

This is a step in the right direction to start cleaning up our act in the USA. By no means is this alone enough.

But I'll take change where it comes, lets see what can be done in 2011.

As a shoutout to my friend Bob, check out the video, as Ron Paul discusses of proposed legislation to redefine the word "journalist" and redefine the word "publisher", both scary thoughts. Paul would oppose such legislation as being contrary to the first amendment and likened measures to the book "1984".

Support Ron Paul for Chairman of Monetary Policy Chairmanship

Five GOP leadership aides, speaking anonymously because a decision isn't final, say incoming House Speaker John Boehner has discussed ways to prevent Paul from becoming chairman or to keep him on a tight leash if he does.

Mr. Boehner will decide some of those chair subcommittees as early as Dec. 8. There is no time to waste. Please phone, Fax, AND email Boehner today. Demand Ron Paul be given chairmanship of the monetary policy subcommittee.

Please email (click) House Speaker Boehner .

Just click on the link. If your browser does not interface with email, then email Boehner at
AsktheLeader@mail.house.gov

Send an Email a day until the chairmanship is decided.

Phone: (202) 225-4000

Fax: (202) 225-5117

If you truly want change in America, act and support appointing Ron Paul in this position. While I do not agree with Ron Paul on all issues, I do agree his viewpoint is a radical change of policy, and that is what is needed to implement meaningful change.

(Portions of above taken from Mish)

This Week in Charts

Basically, we are either about to make some significant moves higher, or a "failed breakout".

Buying resource based stocks in earnest here isn't a horrible play, but must set stops to sell positions if wrong.

The problem I have with resource based stocks continue to scream higher is the chaos it will cause in the US economy. That of course won't stop it, but those watching resources have to be aware of how detrimental this will be to any chance of a recovery.

Out of gold, food, energy, Oil is looking strongest to me.

In any event, I have about 80% in resources, and ALWAYS will, my buying, and selling is just the fringe.

Good luck, to the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Economic Videos

The video links here come from Mish's blog post (click for his post).

The video series looks excellent. I have watched only the first one.

I will be adding this post to my "welcome new reader" post again. In one week I have added three posts to the Welcome New Reader post, very unusual. I can go six months without adding to the welcome summary.

Anyway, video at bottom, and some other videos listed below. I may not 100% agree with every aspect represented, it is always worth while to listen to different sources of information on topics to help form your own opinion.

Other Econ 101 Videos

• Indexing the Capital Gains Tax to Protect Taxpayers from Inflation,
  
• Repealing Obamacare and Restoring a Free Market in Healthcare,
• The Job-Killing Impact of Minimum Wage Laws;
  
• Deficits, Debts and Unfunded Liabilities;
• Cost of the Internal Revenue Code;
• Lessons Learned From Sweden; Government Monopolies; Moral Hazard;
  
• Don't Copy Europe's Mistakes.

Mini-Documentaries

• Tax Competition Primer,
  
• VAT-Hidden Tax,
  
• Global Flat Tax Revolution,
  
• Cutting the U.S. Corporate Income Tax,
  
• Promoting Prosperity,
  
• Obama's So-Called Stimulus,
  
• Obama's Deferral Proposal,
  
• Case Against Class-Warfare Tax Policy,
  
• President Obama's Dishonest Demagoguery on Tax Havens,
  
• Six Reasons Why the Capital Gains Tax Should Be Abolished,
  
• Benefits of Tax Havens
  
• Laffer Curve.

Inflated: How Money and Debt Built the American Dream

Inflated: How Money and Debt Built the American Dream is a new book by Christopher Whalen. I ordered my copy today as a kindle book. Below Mr. Whalen talks about the core corruption of the Federal Reserve Bank, and from the video below, is directly on target mirroring the message I have been trying to get out, the system is failing. The Federal Reserve Bank must be abolished.

I highly recommend watching this video, this is yet another video I am adding to my new reader welcome page. I am once again adding this to my Financial Ground Zero tag, to further support what David Cote, Honeywell CEO said.

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

Guaranteed way to make money in the market

Special thanks to Elms for sending me this video.

First a warning, there is cursing, so please play in an appropriate setting.

And by the way, I get it, the market goes in only one direction up. Anyone can read a stock chart since the "emergency" started in 2008 and can see that. It is amazing how my own thinking got in the way.

Corruption, eh, who cares

If you haven't seen the post just before this one, please read it. It has some optimism for a change.

This post, however, rips that optimism away and further proves my point. As previously discussed here, the value of a currency is not just about the amount of printing/currency in circulation, it is about faith that it retains value through law enforcement.

Well, several items where released, about what I consider damning corruption. Often in these cases its just the tip of the iceberg.

Revealed that SEC did not prosecute BAC for illegal activity, due to government financial intervention. My spin : Why didn't the SEC investigate BEFORE government intervention in BAC, that would have been a great reason to not intervene.......

Federal Reserve Bank has revealed it participated in common stock purchases of AIG. According to section 14 of the LAW regulating the Fed, they are forbidden to do so. So the bank that "creates money" uses it to buy stock....interesting.... This is explicitly illegal....no cops to be found.

This part isn't corrupt, but it clearly shows the public wasn't informed. Back in 2008, the Federal Reserve bank made 9 TRILLION in overnight loans. Wow. Total GDP of USA is 14 trillion ish.

This IS corruption to me, but it technically isn't. The web site Wikileaks has been taken out by the government.

This IS corruption to me again, but it technically isn't. Google kicks out prisonplanet from it's service. Can't easily get information out without an international forum.

FDIC prepares to crack down on officials of failed banks. Where are the cops? Why does it take a bank to fail, be liquidated, months if not years to pass, then try to make a case for law enforcement? Could it be FDIC needs to get money from the officials and now decides to report criminal activity in an effort to get funds? What about just plain old enforcement of the law UPON seizure of the banks, freeze the bank officials saving? I deem this corrupt from the perspective the law is not enforced....

Honeywell CEO advocates action before US implodes

I must say, I am starting to have a sliver of hope entering me. I am still 99% of the opinion the US dollar collapses, and the US will enter a very dark period. However, this video is a nice glimmer of hope that the greater public is starting to get it.

We need to act, immediately. Not acting will create some serious problems for US citizens and the world. The US debt will be 1 trillion dollars in INTEREST per year by 2020.

As Mr. Cote says in this video, if 1 million dollars was spent every day since Jesus was born, you still wouldn't have spent 1 trillion dollars. And thats just the interest, with assumptions that the rates don't skyrocket for borrowing like Ireland.

This video is well worth the watch. I will add it to my new reader link, as well as give this the label "financial ground zero". This time instead of documenting the death march into financial chaos, to document moments when the nation can change direction.

The nation is facing a collapse aka Rome, and the public just isn't aware. A slap in the face from the bond market is what I unfortunately believe is required to invoke action.

Wikileaks to expose US bank corruption or fraud

Wikileaks released government sensitive documents on Afghanistan and Iraq wars. This was an extremely controversial step, since both wars are on-going. Documents shown that US military has been not diligent on acting on war crimes and other digressions.

In any event, at the time of the documents release, wikileaks was NOT under a cyber attack, nor was the founder sought under international arrest. The Wikileaks released documents, and life moved on.

Now the wikileaks leader has announced his group is to release documents on a large US bank. Specifically he has about 5 GB of data. It is assumed to be email data, but it has not been confirm.

The result? Wikileaks is now under a cyber attack, and the founder is now on an interpol arrest warrant for the military leaks. I already reported legislation that is being sought that would result in criminalizing leaking corporate documents. (click).

I do question the legality (criminal ramifications) of leaking government classified documents about war operations during an active war, overall, I place wikileaks as a critical tool for the public to get information exposing corruption. Without a place like wikileaks, information is difficult, if not impossible, to get proper international exposure to gain traction for action.

In essence, it is freedom of expression at the core, a modern day newspapers used to serve the world public.

Thomas Jefferson said: "If I had to choose between government without newspapers, and newspapers without government, I wouldn't hesitate to choose the latter."

I agree with Thomas Jefferson, and support the concept of wikileaks.

Video from CNBC