Amazon to issue currency

The title is overstating the reality somewhat, but Amazon is taking its first baby step to have it's own virtual unit of value, in the form of Amazon Coins.

I welcome this huge milestone, where I hope a swarm of competitors enter the arena.  Through heavy competition a new, trusted value system may emerge, one that could compete with traditional government fiat currencies.

The current incarnation is not remotely in the same league as a government fiat currency.  I am sure its goal is to play some shell games to drive sales and usage of Amazon services.   

In January 2011, in post Ideal form of Money - Power to the People , I describe my ideal of what Money should be.   I quote:

I think what is required is to allow any company to create a system, using open review and process, to be a viable storage of wealth.

Amazon, thank you for putting your toe in the water.  If we do see tech starting to create their own version of bitcoins (the current premier outside currency experiment), this will be the weapon that will bring down gold, silver, and precious metals as an option for currency.  By the way, bitcoins seems to be getting traction, and it's virtual currency is up about 50% since January 1st alone.  However, this is likely heaver speculation and hoarders appearing.

What we will see is a movement from Precious metals ( 1930's and earlier), to leveraged precious metals (mixed fiat and precious metal ratios), to pure government fiat currencies (Nixon), to community based-trust currencies. (social/technology driven)

If this can happen the transition will be very painful, but on the other side I believe rampant economic growth to take hold, globally, as a trusted, controlled, transparent, competitive currency system gives business the confidence to move ahead.

I am getting waaay ahead of my self here, any electronic money system to gain traction is likely to occur after the global currency crisis that looms ahead.. (2017?).

I am putting this in my Financial Ground Zero series.  This is not contributing the the future crisis ahead, but will offer a solution to the crisis.

Canary in the Coal Mine - Japan

My friend John said years ago that Japan is the Canary in the Coal mine to watch.   Japan's demographics and extreme deficit spending makes it worth while to watch.  They are in effect ahead of the US trajectory.

Unfortunately, I believe if Japan enters currency crisis, a vortex over the year following will take with it other countries not too far behind it. I am not predicting that Japan enters a crisis, (2014-15?) merely stating that if Japan hits a currency crisis, this will be the beginning of what I feared all the way back in March 2009. (about the bottom of the market)

The decision to transfer all risk from private to public, put the public financial system at risk.  Since money IS about trust (work done today, will be paid back tomorrow), once trust in the system hits a tipping point, it will get ugly.

Japan recently announced basically an all out currency war, pledging to break the yen.  While the yen is not yet broken, it has had a nice decline rather rapidly.  It has lost valuation, wiping out 2.5 years of gains in months.   If Yen reaches below 0.0083, in my mind, its game on for currency crisis.




Safe havens for a possible currency crisis are going to get severely slapped around.  As tensions mount, I expect safe havens to fall, not rise at first.   Even once the worst has past, the safe-heavens should remain under brutal assault throughout the currency crisis.  There is no free lunch, and no easy way out.  A currency crisis will shake the very foundation of everything, and bring on an era not seen since the 1930's.

The last great depression got started the same way, loosely speaking.   A huge credit bubble, credit burst, currency war, then depression and world war 2.  I obviously hope we will avoid WW 3, and at this time don't expect it.

I do have optimism overall.  I believe we are seeing a massive redistribution of capability starting, preparing for the new economy after the worst has past.  I am re-iterating my doom and gloom call for USD until 2015-2017 time period, more likely in 2017.

Gary of the Smart Money Tracker has more to say on this topic, recommend subscribing to his service.

Future Tech - The Double Edged Sword

I have written about the perils we are facing with bigdata and new technologies that will result in having your online history follow you, and held against you.

In the future, law enforcement will have Google-Glass type technology merged with face recognition and instantly see verbs about you.  For the first time ever, your decades of data will be instantly available to anyone with the technology on you.  Instantly see who are your friends, relatives.  And not too far away, to see who is the closest person (proximity) to you that you are connected to.

I recently ran across the video I saw years ago that brought this technology to my attention.  Since I haven't seen it years, I wanted to post this video and the Google glass video for your viewing.

Apple stock, a buy?

If you like Apple, today is a very good day to buy their stock, chart wise.  It should open at 459 a share.  This will place the stock just on the very long trend line I showed a week ago.
If the stock closes on or below 450 today or in the future, sell.  Otherwise the long trend support may hold, and what does not go down will go up.

March of the Robots, Deflation for decades

Many economic blogs for years have called for US Dollar inflation.  This has not materialized as a general event.  I have covered this on the blog before.  Credit = Money, and Credit is not expanding like it did into 2007.   High unemployment stagnates wages.   And as I have called for since 2008 natural resources would creep up in cost over time due to global resource competition.  Specifically as India and China grow wealthier, they will consume a larger chunk of the resource pie.

Another deflationary force is Technology.  Every year less people can do more work.  Technology does create new jobs, but typically for higher education at the expense of lower skilled workers.  The wages are higher, but there are net fewer jobs.

I am a techie, I love tech.  I am not suggesting the world follow the Amish.
But I see technology efficiencies now biting into the technology world.  The area of growth for jobs is now also becoming a victim of the success of itself.

Pure capitalists state that if we freed the economy from the shackles of all government intervention, that the market will find optimal balance.     I question if that balance can ever equal full employment again.
People use history to project future events.  The capitalist 1800's and 1900's that yielded the middle class and a booming economy is not the same backdrop we face today.

The Western Baby boomers are aging, the younger generation have endured a decade of stagnant jobs.
And technology marches on.

What I think is happening is a shift in who is employable.   If you look at the industrial revolution, people shifted from agriculture to the urban centers to staff factories.   Those who did not adapt may have had to experience lower wage jobs in the fields relative to the new industry wages.

I think that is what we are starting to see now, the efficiencies of technology reaching deep into the economy to 'raise' the bar.   I have a couple of items for you to consider.

First, there is robotics.  This industrial industry has for the last decade taken a chunk out of the large manufacturing jobs.   Consider this, Apple is moving some manufacturing BACK to the USA from abroad.   Termed reshoring work.  But instead of 1,000s of factory workers, it is expected TOTAL employment, including the receptionist, to be 200.  Why? Automation.

Baxter, a robot targeting SMALL companies to replace 'expensive' workers at 9 bucks an hour is being marketed for a total of 22K per Robot.  In 18 months you can expect this robot to do much more than today, and every 18 months thereafter.  Dare I say the price will also steadily be reduced.
It isn't out of the question in 6 or 8 years that the Robot be under 10K. In a decade every McDonalds will have 2 people and rest robots running the operations.

Combine above trends with IT trends of eliminating IT datacenters and consolidating on the cloud, and we have massive deflationary forces at work.

Now for a quick higher level view of job facts.  Mish posted two images below about the US labor force over the last five years.  Considering the US government is spending 3.4 Trillion of a 15 trillion economy each year, the US is barely treading water.  Dare I say the forces I quote are hard to keep at bay. Simply look at industries hardest hit.  Those that can be automated or outsourced.

What does this amount to?  Well we are in interesting times in the years ahead.   There will be explosive new companies with tremendous growth as new areas continue to unfold.  Society is a bell curve of capability, and the bar for new jobs will continue to be raised.  I expect an ever increasing higher REAL unemployment rate. (if you don't ignore those who give up trying to work)  There will be continued deflationary forces between baby boomers retiring, technology, and overall unemployment.  And I still think natural resource contention as China kick starts their consumer economy along with India.

I do have optimism, to read that post, click here!

Bullish on Miners

I have been waiting for WEEKS for a clear sign that Gold miners are a strong buy.
The best indicator I can muster is the mining sector has held firm from further declines in recent months.

Gary of the Smart Money tracker posted on his public blog that this time its different with miners.
An indicator, a mild one, is that this time instead of the usual sharp down in miners like we have seen for years, this time its more mild.  Click here to read and see charts.

What is likely happening is that gold miners are being bought, en mass on the recent down slope preventing the usual sharp down forcing action.  But this is speculation, no scientific proof.  The chart could be round for  any reason or no reason.

The market was expected to swan dive because of Government Fiscal cliff, that fizzled.  Also sharp downturn AFTER the elections.  Also because of bad Christmas sales.  Frankly, pick any of 100 reasons why it should turn down and has not.

And that is the point, it hasn't.  What can't go down usually will go up.  While some stocks may soar (think AAPL as a comeback king temporarily) I still like the gold miners for long play for my 401K.

ETF for Gold Miners GDX is at 45.82, GDXJ at 20.48
ETF for gold (GLD) at 163 and silver (SLV) at 31.12

Currency War is raging or Germany in trouble

I have been saying since 2008, we are in a currency war.  A currency war is when all countries try to boost prosperity by making THEIR currency go lower, so that their countries products are cheaper, relative to the rest of the world.

The problem with this scenario is the other countries see what is being attempted and actively prevent this master, grand plan from occurring.  The net result is all currencies devalue, resulting in higher prices for natural resources.  Natural resources being physical cannot be as easily manipulated like services or other assets based solely on currency worth relative to other objects in the same currency.

Germany on Tuesday announced "Bundesbank to pull gold from New York and Paris".  This is a first sign that the international banking system is losing it's cohesion OR that Germany having more difficulty dealing with the Euro than is publicly known.  Moving gold back to Germany to allow Germany to use the gold as they wish, as they attempt to stabilize their currency.

Either way, this is a tell-tale moment in the history of banking since the great depression.  Since then the western countries have been evolving the financial system based on a trust system.  That ideal actually is the right one, the world banking system at it's heart is trust.   Embracing trust is a good thing for prosperity and business.  However, if that trust is abused, sentiment changes.  Or possibly the trust is just as strong, but the financial system strains is pressuring Germany to deal with and needs the gold closer to home.

As a reminder, I STRONGLY oppose gold as money.  It is the exact opposite of trust.  A currency system based on gold basically allows zero growth without first paying a 'tax' to extract gold, refine it, and print coins as overhead to expanding the economy.  In the very rapid changing world we live, such draconian limitations would smother the economy.

Either way, 2013 is shaping up to be a fun year.

Apple

Back on Feb 16th, 2012, I posted "Apple chart and the Market".
Apple has just started its parabolic rise.  At that time, when Apple was worth $520 a share that consider putting in stops or taking some profits.

My timing was off, but the sentiment was true then and true now.  The stock went parabolic and became the worlds most valuable company in human history in August 20th, 2012 post at 664 a share.  Apple was worth more than Merck, Intel, Anheuser-Busch, Toyota, and Verizon combined within days after that post.

Looking back, that was clearly when the bell was rung , that Apple was near its all time high.  Apple may break that high, but I seriously doubt in the next 4 years ahead (if ever).

Here we sit, with Apple at 486 a share.  From a technical perspective, one can argue it is merely a correction for the stock to revisit new highs in the year ahead.  Perhaps.

But if Apple stock hits 450 a share and CLOSES the market at 450 or lower, to me, Apple is a broken stock.
The stock will have shattered it's uptrend in place since February 2009, 4 years later.  That should give anyone pause for thought.
As a techie, I don't like Apple's future, and I haven't since Google announced Android OS.
Apple to me is the IBM/Microsoft of phones, and Google the IBM PC clone/Linux competitor.  The innovation in Android can't be outdone by soo many companies against 1.    Hardware will continue to be commoditized  and the consumer won't see a difference in apple that is material than android.
And that is EXACTLY what Google wants! Commodity hardware but their software to enable Google services.

And I for one do believe, Steve Jobs cannot be replaced.  Apple faltered when they kicked him out, and they will falter again now that he is gone.  He was that good.

With that said, I have 3 iphones, 2 ipads, another iphone used as itouch, and a MacBook.
My father and nephews have iphone/itouches.  And I still recommend iphone to anyone non-technical.
But for the power user, the Google Nexus 4 is closing the gap.  There are not many gaps left, actually.  That is a setup for the year ahead for Android to outshine Apple, and that, will not be good for the stock.  Apple as a tech company could announce tech and surprise on the upside, to me that isn't as likely as when Jobs was running the show.

Further, the iphone form factor is NOT THE END GAME!  Next up is Google Glass, then something else, then brain control.  So unless Apple can lead in every new device in the years ahead, it will be a commodity player.

Combined with the news that Apple slashed orders, well, you get the gist.  If you own Apple stock, put a stop in.  Not for all shares, say, 25%, and repeat this pattern to ensure some profits are locked in.

If you held all the way to the top, don't hold all the way to the bottom, that isn't stock, that's a family member.

Trend line below since 2009.
EDITED 10:37 pm
Friend sent me this link on Apple options.  It indicates that the near term bottom of this downswing won't turn around until on/after January 18th.  So if the stock can stop the slide, and you actually want  more Apple stock, the 18th may be a good time.  I still remain pessimistic of Apple hitting 700 a share given reasons above.

Solar, Buy Low Sell High - 6 months later

In post on June 27th, 2012 titled "Solar, Buy low Sell High" I discussed the value play to buy FSLR (solar company) , TAN (Solar ETF) , and OIH (Oil ETF) purely based on they were beat up at that time.
Also called out FSLR as it started to move at 20.50

TAN was just under 18 a share, now at 18.96.
FSLR was at about 15, now 32
OIH was at about 33, now at 40.70

I did two posts today, both throwback looks on the non-gold miner stocks to buy.
See other called 'Social Media Stocks - Five Months later'

Charts below with red circles on the items.
For these stocks, a long term hold for years is not a bad idea.  A stop at just above your purchase price for the long haul hold.  Otherwise set stops at comfortable levels to lock in gains if they pull back.  Be sure to leave plenty of wiggle room.

Social Media Stocks - five months later

On August 15th I posted "Social Media Stocks".  In that post I called for a bottoming of the social media stocks beat up so badly.  My biggest error, being such an IT person, is to buy that day, and not roll into the stocks over next couple months.

In any event, the play is shaping up good.  Facebook is significantly higher than that day.
Groupon is about break even from that day.
ZNGA, well, its down percent wise still pretty decent, but looking to be firming up.

If you bought these stocks, time to start placing stop losses and looking for an exit.
I posted then, and still continue to believe, holding long term presents significant risk in these companies.

With that said, there is nothing wrong with adjusting stop losses periodically upwards and continue to let it ride higher.  You may get severely punished overnight with news causing stock to open down significantly.  But when isn't that possible?

Below are the charts, with the red circle on when I called for purchasing.  Good luck.

Time to buy Gold Miners...again

I have posted a few times in last 6 months or so looking to get into miners.
I am buying more miners here...again.
Slowly building position.  4 year charts below.
Gold is an option too.

GDX is at 44.36
GDXJ is at 19.89
GLD is at 160.49

Cost of Living Measurement

The US government publishes data on Consumer Price Index (CPI) and calculates annual inflation.  The purpose of calculating annual inflation is to provide a measurement of cost of living adjustments required annually to keep up living standards.

The concept is sound, and reasonable.   Everyone knows prices change over time.  Some change due to technology and efficiency.  Some change due to resource scarcity, and yet some is currency valuations.  I am sure if you search the web, you can find some pretty interesting theories on drivers of basic living costs changes.

In truth, probably each one has some play in prices, the emphasis on weight of the contribution is really the debate.

But one thing that has come under hot debate is the measurement of cost of living changes.  To me its pretty simple.  Cost for food, energy, and shelter should be the core components, with a smaller component related to basics realities in a modern world that everyone must face to compete.  The smaller component I will ignore, since it is pretty much impossible to gain consensus.  (Example, must you have one of these: house phone, cell phone, or internet?  In my opinion yes to be gainfully employed in a job above minimum wage).


The economic aspect that concerns me the most is the Baby Boomers in the USA.  This demographic has dwarfed my entire life experience as I travel in their wake.   The inflation 70's, to gogo 80's, and the bubble 2000 can be traced back to their influence.  As they retire, its certain their economic impact will be staggering.

The government entities are painfully aware of the dwarfing economic challenges this presents.   Stand-up politicians who talk straight on these issues are not to be found, for those that do are un-electable.
Thats OK, its life.  People vote for the story they want, reality of trouble is not welcome.

But for my lifestyle, it is important to keep an eye on the dwarfing aspects of the baby boomer retirement ahead.   And one way the government can 'kick the can' a little is to play games with the CPI.

How? A continual slow under-reporting of CPI ensures that the baby boomers don't get the value out of their Social Security dollars.  To those getting benefits, no one 'cut' their promised entitlement.  They are getting what is promised in monthly checks.  But if the cost of living is higher than reported, the net is the baby boomers must live with less than what was promised decades ago.

This in a strange way, benefits me.  For I am not a baby boomer, and that generation gets less, which in turn means I have to pay less of my work contribution to sustain their living standards.

But this also hurts me potentially.  As the CPI is used to determine what is a fair annual raise, inflation-adjusted interest rates, and other gauges that will also curtail my own future living.

So what to do?  You can keep an eye on TRUE annual inflation to gauge your own living standards for your own future.

A web site called Shadow Government Statistics does this for you.  The site maintains a deluge of information bases on 'old government  metrics that were created at a time the goal was to actually accurately measure statistics.  These old standards when used to current situations gives an interesting gauge of current reporting vs older reporting.

One can argue, and there is truth to this, that the weight of economic changes shifts in importance as the living of USA citizens shift focus on different items.  For example if US Postage stamps had a part of CPI, in today's current world, it is immaterial.  When in the 1890's, it may have been more material to citizens.

In any event, I highly recommend looking at Shadow Government Stats inflation charts, if anything to give perspective.

Below is two graphs, first is 1990 CPI, second is 1980 CPI government computation methods.  Both compared against current computations.
The 1980 shows 10% annual inflation, while 1990 shows 6% inflation, compared to 2% today.
Keep in mind, the USA had the highest average gasoline prices on RECORD in 2012, yet inflation is 2%.
Fuel costs are passed into the entire supply chain, alternate fuels are not substantially inplace yet.
I happen to think inflation is BETWEEN 2% and below 6%.  I think there is truth to the changes made over the years.  I don't think the government as ahead of its time for changing process to match reality, so I am sure changes were needed.

But one thing is certain, if your a baby boomer, in 1979 when promised your future social security benefits, the CPI that was used when that promise was made is not nearly comprised of the same components of today.  And I suspect it will be modified again in the next 5 years even further.

Predictions for 2013, and beyond

In the last year, my focus on the pulse of the global financial disaster has waned.
There are many reasons, some personal (work, family), some because my disposition is shifting.
I have a longer term view of what is happening than I did a few years ago.  I see all this turmoil as part of what is required to reset the financial system into a new model, one more technology driven and open.  Less pointy hat wearing mean with secret sauce to make the world go round.

How this plays out will be very interesting in the next four years.  I think the party is over from 2008 to 2012, and its time to get down and dirty.  I have high hopes that the entire system will remain in tact, but not better for wear by 2017.  By 2017, that is when I have grave concerns of the system stability.


With this backdrop I have a hard time making a predictions for 2013, for I see any of this happening over the next few years.  But making a 4 year prediction is no fun for anyone.  So I'll try my best for 2013 predictions.  I reserve the right to carry some into 2014.

1) Currency wars will continue to escalate.  Everyone is all in for currency debasement, with one exception, China.  They are of course FOR currency debasement, when it suits them.  If China believes they can withstand a rising currency, they will, for their advancement of global financial leadership.  Europe has shown to not have the stomach to hold the line, they too, will print.

2) Gold and Gold miners will do WAAY better than 2012.  2012 wasn't fantastic year for gold or gold miners.  I expect 2013 will be the start of the spiral up.   Gold will hit 1900 an ounce in 2013, may end lower, but will not cross below 1500 an ounce.  I wouldn't be surprised if the low for 2013 for gold will be in January.

3) CRB index bottomed in 2012, and will not break the 2012 low in 2013.  CRB will end HIGHER than it entered in 2012.  As for it's high and low, eh, its part of the process that I described in 2008 The Big Picture.

4) Europe, this will be toughest call.  Status quote may be maintained.  It will all depend on the will of the people under 40 years old in those countries under stress to make change happen.  Greece, Spain, Portugal, and other countries under duress may lead to leaving the Euro.  Bottom line is Europe WANTS these distressed countries to remain, and keep the debts in tact and raise more debts.  These citizens must decide to live under debt slavery passed down from the generations, or restart.  I'll go with one country gets either out or some strange modifications to Euro-membership rules.

5) in 2012 I made a prediction that the market would end lower, its a miss.  I am modifying the position.  If the US stock market was prices RELATIVE to CRB index, it will end lower in 2013, 2014, 2015, and 2016.  When I say end lower, I really mean trend lower. December 31st is not a magical day, so the exact position to 1 year before is kinda random on the pulse of the market.  But I'll go with lower relative to cost of resources.

6) OK, this is one hell of a call to make, I am making the call that the US 30 year treasury bond rate that has trended lower since 1986 will BOTTOM in 2013.  It may or may not break out of the range.   The setup is breaking up in 2013 or setup for 2014 to beak up.  The key element here is final US 30 year interest rate in 2013 as a low period 37 years after it trended downward.

7) US dollar will NOT go higher than it did in 2012.  If it does, it will be a 'spike' on panic for less than a week.  In general, the US dollar has seen its uplift since 2008, time for it to swing lower.  We WILL BREAK the USD low set in 2011, but may not be materially lower. Again, setup for 2014.


8) China will have a major scare here and there, but will not go materially lower in the markets than what was set in December 2012.  May dip 'for a month' lower, but china markets will end higher than today.
Overall China reform will get under way in 2013.


9) No major reform of US financial markets.  This includes continued fantasy accounting in place since 2009, no significant laws to match Glass-Steagall act dismantled in 2000 by Clinton.  No significant prosecutions of financial wrong doing.  More appeasement and lack of law. (some may read this as a gimme )

10) A major world event will happen in 2013.  Major on the magnitude of a bomb in Israel, a country like Iran, North Korea, etc having a revolution.  2013 will see a spike up in stability issues, leading into 2014-2017.  Sorry I can't be more specific, but I don't have my fortune telling cards handy.

Items 9 and 10 may seem hokey, feel free to disregard and hold me to the first eight.  I tried to be as specific as possible.

Karl of the Market Ticker has his predictions.

Predictions 2012 recap

1 year ago I posted predictions for 2012, lets see how I did.  Text in Italic is original article, quoted.


Roundup:
2012 - 2 miss, 1 partial, 7 hit
2011 - 2 miss, 2 partial, 6 hit
2010 - 1 miss, 3 partial, 4 hit
2009 - 7 miss, 8 partial, 5 hit  (my first year, some crazy predictions!)


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

2) Commodity prices will bottom in 2012 - there will be a pattern of a low hit in 2012, with the CRB index moving up from that low set in 2012 at the end of 2012.  This will be the setup for a hell of a 2013 that no one will forget.  This index represents commodity prices in USD terms.  (This includes Gold, Oil, and food.) This will be key setup for the inflation issues ahead.
A hit for 2012, we had a distinct CRB bottom mid 2012.  The only question is follow through in 2013 or not. This could be a fake hit, if CRB breaks into new lows in the years ahead.  See chart at bottom on CRB.

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

A hit.  China regime change happened in November. I am sure everyone is aware of the details, since the largest country on the planet changed government once every decade....    Chinese stock market hit a low first week in December not seen since 2008, and has been on a tear upward since.  Up 10% in less than a month.  There have been multiple contention points with China in 2012 on trade and military.  China is positioning to take over Japanese controlled islands, as it continues to breach Japanese territories on water and air. A tariff war has not started between China and USA, although some tariffs around solar and wind power are in progress.  The New Leadership is trying to reform the corruption, which is required to take over the US as world leader.   Only miss is mainstream media ignores china in USA.

4) The Euro will NOT be the same as it entered 2012.  The nations bankrupt will be either kicked out of the euro, or a new two-tier model created, or a new Euro model that allows printing to finance debt emerges.  The facade of all nations must adhere to fiscal responsibility will in effect be gone.  The nations that need to print, can, either through the euro or on their own.
Utter Miss.  Euro is kicking the can, and nothing has changed, except appeasement and perpetual financial turmoil.

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

6) US 30 year bond rates will NOT break out of the channel in effect since 1986.  This is critical, for if we do break out of this, chances are most of my other predictions will be wrong.
A hit!  Another year of 30 year bond rate decline since 1986. What won't go up, must go down...until zero is hit.

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

8) State and Town bonds will continue to deterioration as high quality choices for investments.  I am pulling back from my 2011 prediction of a significant shift.  Instead for 2012, predict more issues, more bankruptcies, and some interesting court rulings.
Hit, if I stick to the bold line above. Towns are winning right to go bankrupt, but no avalanche yet.  Also all States operate solvent, even if not truly solvent.  However, no state bankruptcies.

9) Since this is an election year, there will be a few TOKEN prosecutions around financial wrongdoing, but overall, we won't see the law enforced like we did back in the Savings and Loan crisis.  Lack of law enforcement continuing is crucial for the 2013 crisis setup.
Hit, really no major push to prosecute for trillions in fraud.

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

End of year Market Wrapup

The Year is drawing to a close. I wanted to take step back and look at where things stand since 2008.

Generally speaking, relative to 2008, things are still good.  Relative to 2008 this is what we are trending now.
USD neutral, looking weak
Gold Miners mixed, leaning weak
Gold looking mixed, leaning weak
S&P 500 - Trending middle of up range since 2008
TYX - US 30 year interest rates on verge of trend change up.

If we are to believe these indicators, 2013 is not going to be fun.
I need to think on this, and possible lessen positions....again.

To the charts!

Market heading to new lows?

Is the market heading down to new lows multi-decade lows?

You be the judge, found this interesting site today.

Economic posts for thought

I regard Mish of Global Economic Analysis as the best economic bloggers out there, and well worth a daily read over any other blog, including mine!

Next up is Karl Denninger of Market Ticker.org, who is better than Mish in his activism stance against corruption and other market distortions.  Mish tends to cover a wider, more even view of topics at hand.  Karl is next blogger I place in high regaurd.

Then comes Gary of Smart Money tracker.  For the most part, Gary focuses on making money, and positioned at the precious metal sector.

A few great rants recently I highly recommend reading.

Smart Money Tracker
EUPHORIA STAGE

Global Economic Tracker
Crazy Incentives in Welfare System; The Welfare Cliff; Welfare Spending Per Hour $30.60 - Median Income Per Hour $25.03

Exit Strategy? What Exit Strategy?

Apple to Relaunch Manufacturing in US, Net Result +200 Jobs; Lights Out

Incredibly Easy to Balance Budget Without Repealing Obamacare and Without Fiscal Cliff Tax Hikes

France Unemployment Rate Hits 10.3%, Youth Unemployment at Record High 24.9%; New Business Activity Plunges

Senator Jim DeMint, Republican Tea Party Activist, Resigns From Senate; DeMint Seeks to "Harden the Jello"

Market Ticker
The Real Problem With America: Morality
"Unions Destroying America"

Market Musings, What next?

Looking at all things objectively, its hard to get optimistic on the markets.
However, we have had weeks of market movements that has been sideways action.
The US Dollar rose quite a bit, but now shows signs of weakening.

Once again, it isn't a bad time to buy a LITTLE more gold miners.  (GDX and GDXJ) The last two times I said this, we are lower than when purchased.

What is at stake here is global currency pressures, global economic pressures, and gold pricing.
To the charts!

Public Posting Opinion, is it worth it

Earlier this year I posted Giving Opinion, is it worth it .
In that post, I stated I need to roll back my posting on potentially harmful posts on my future self, or my family.  Specifically reducing or eliminating posts on Corruption, among other things.

Today I get a link the solidifies what I already knew.  The patriot act opened pandoras box to marry technology with government desire to control with unprecedented invasion of privacy.
Back when the Patriot Act was created, I discussed this with some coworkers.  Their view was we need to be kept safe, so its ok to erode civil rights in the name of saftey.

The logic being, its a large herd of people, and in the crowd it won't affect me.  The net should make it safer for me, with occasional unwarranted casualty.  The problem with this logic is what is 'reasonably' ok today can quickly turn on a dime to be not ok.  But once the tools are in place, curbing mis-use of tools will take a force GREATER than those using the tools.

So while all is well, and I do not believe I, or anyone is under immense threat to free speech, the groundwork is in fact, operational.

William Binney is 2012 Callaway award winner for civic courage.  An award given to a US citizen for take a public stance at some personal risk to advance truth and justice.

You can read his interview by clicking here, or watch video below.
With the view I have, the question is, is any public posting opinion post with any political implications worth it? In light 99% of Americans (including myself) will not be mobilized at all with this news available to change it.

Market Levitation

I am quite impressed how the market has held up.  Europe is in near daily crisis.  Recession is basically recognized by most to be in the cards, but not yet official.

Manufacturing down, profit crappy.

Through all this the market levitates.  It's hard to imagine, but the correction may be over?
I remain cautious into February.  I think by then we will have our answer for 2013.  By then, the US fiscal cliff buzz will be resolved, and the markets levitation resuming.

Chart for perspective, with the long term weekly below.

I am removing my bear on my blog, and refer back to my October 1st post 'Getting out of the Market'.

Free Speech

Free Speech takes many forms, not always written and oral speaking.
The ability to wear what you want, do what you want, use money the way you want, and yes, say what you want.  As long as those activities do not directly invade someone else's rights to pursue happiness. (murder, theft, bullying, etc)

The internet is the biggest leveler of the playing field in the history of mankind from the top percent to the masses. Anyone can speak, participate, contribute to the social order.

To keep the internet vibrant and growing is GOOD for investing.  It enables new opportunities as I posted in my Manufacturing Revolution posts.
Allow the tiny few to control the construct, the internet, is doomed to limit everyone's freedom.

I urge to to simply sign this petition and pay attention.  Support free speech and don't allow it to be taken in the dark.

Googles' Free and Open Speech campaign

Keep the power with the people.

Manufacturing Revolution, early examples

I posted about the American Manufacturing Revolution that is underway, and gets very little press.  I am not sure what it will take for the press to take hold of this story.     Probably will require a significant success story, a company going public on the stock market, or if enough commerce starts flowing through this area to be material.

To track this on my blog, I'll  label as Manufacturing 2.0

Below is one of many examples on Kickstarter of new tech being created, by the people.  Collaborating not with just US citizens, but world wide.
America is on the bleeding edge, but not alone.  With the web the rest of the world is joining America.

Watch this video, and ask without the internet and web sites like Kickstarter, how much harder, longer, or even impossible it would be for YOU to get this product TODAY? One of the first in the world ever made?

Amazing stuff.









All of the projects above may not succeed, but that isnt the point.  The possibility is there, when it wasnt before.

Shopping, Getting the Best Price Possible

If your looking for deals, I always recommend checking out Dealnews.com (click).  Its a news feed of best deals on the net.
The site also lists all black friday deals.  However, many of these deals are impossible to get.  I sometimes try for online sites, since there are no lines, just good timing.

Amazon has Lightning deals, the good stuff usually sells out in 60 seconds, so you have to be at your PC when it goes on sale. Good news is they tell you what goes on sale when, just not how much ahead if time.

For electronics, I alway check out Newegg.com, be sure to always look at reviews of the product before purchase.

If you go shopping, be sure to check out Wow-Coupons, and PRINT your coupon before you shop. Save!
For online coupons (Codes), I  use DealNews Coupons.

Even with all the tricks above to save, use a credit card with cash back, and save even more.
Well thats it, happy hunting for the best deals for stuff you need!  Save more by not buying it ;)

Already time to buy miners?

The market and news continues to look weak, if not near future, but the year ahead.

It is perfectly sane to stay in cash at this point.

However, looking at the Gold miners, from a historical perspective, we are hitting levels where the risk is now reduced compared to the reward.

I believe GDX will hit easily above twice the current price by 2016.  Of course, I have been wrong before.

But looking historically, entry into GDX has significantly less down risk than two weeks ago.

GDX is now at 46.47, GDXJ at 21.51.

I am adding shares here.  good luck.

Hostess Bankrupt, who to blame?

I have not done my typical 2 hour scan and seek 'the truth' on the Hostess bankruptcy.
What does amaze me is how the public unions is publicly persecuted and we, the people buy it completely.
It should go to show how amazingly powerful the media is, and how it is not a LEFTIE establishment as popular myth says it is.

Reporting should provide full analysis on topics, so I the reader can get the short summary.

Take a look at fox news coverage here titled "Hostess to close, lay off 18,500 after 'crippling' union fight".
Notice how the final straw gets all the blame.  Its like blaming the doctor when a 500 lb fat man dies of a heart attack on the operating table.

Now, back to how i started this post.  I did NOT seek the truth on this topic, to spin to what I believe reality is.   But I do notice the news is not impartial, it is framed in a very specific way, to place 100% blame on the strike at the very end.  The news reads to blame greed of unions for the company failure.

Now, lets look at an alternative view.... What Killed Hostess?
For a more radical view.... Blaming it on Venture Capitalists.

What we are seeing frequently as baby boomers retire is massive improper funding of a pension.
Pensions, should have never been allowed to exist.  They are a future promise, to be paid by magic in the future.    Yes some pensions are well funded and self-sustaining, but many many more are not.

Under funding a pension, lack of re-investment, innovation, food attitude changes, greed resulting in debt piled upon debt, and bad management. If you are a manager, and a victim, then you should not be a manager.  Own up and take responsibility, or join the blue collar workforce.

Blame the union? I am sure they are not innocent.  But lets be more objective than blame the final act, that 500lb man dead on the hospital table, it's not the doctors fault, its the shape the man/company was in at the time after years of abuse.

Don't take public spin, its almost always wrong.

Power Back and Internet Restored!

I got power back a week ago.
As of about 3pm today, my internet has been restored.
That was 19 days of NO INTERNET!  I haven't gone that long without the net since it was first made public available in early 90s.
I may go a little overboard posting :)

Market Musings, Part 2

So the SPX is broken below 1395.   I am very bearish on the overall market. (reconsider SPX 1316)  Gary of Smart Money Tracker expects gold and gold miners to buck the rest of the market.  Having some of this sector to build on is always a good idea in my book.

We are ENTERING another recessions, globally.  Such a recession I doubt will resolve quickly.  A good turn around would be spring or summer of next year.  Turn around right now seems hard to imagine.

The republicans lost the presidential race, and the fiscal cliff in January 2013 approaches.
If the republicans can maneuver to force the fiscal cliff to occur, thereby injuring US economy significantly, they will have setup Obama to have another hard four years to try to stabilize the economy.

The more the Republicans can injure the US economy, the more they can make Obama look like the problem, with the solution being a Republican president in 2016 elected.

I am no fan of Obama. If the republicans played nice and worked with Obama, I do not believe his medicine will fix it.   The most likely outcome is if both sides fight, and fail to unite to compromise, we all lose.  That is the likely path I see.  Republicans do not believe in compromise, and Democrats seemingly cannot grasp fiscal and government discipline.  This is not a political blog, but politics do affect your investments, so it must be kept in the spotlight.


With a backdrop of Christmas upon us, election over, North East impaired and deficit spending to restore normalcy, Europe in perpetual crisis, and the fiscal cliff ahead, I see no reason to run to stocks.

If you have a burning desire to buy stocks and not fixed income, as always for the loooong haul I like Oil, gold, food, and alternate energy.   Some of these sectors have been BRUTALIZED in the last year.   Stocks  that have been gaining in this market decline recently are:
NAK - 4.19 , HTM - 0.33 , AUQ - 8.46 , AUY - 20.36, UNG - 21.19
EFT's for miners holding their own
GDX - 51.41, GDXJ - 23.92,
And metals
GLD 168, & SLV 31.38
Alternate Energy and Oil are getting punished with the dowturn.
TAN -14.55 (solar) is at a low, and OIH 37.19 (oil companies) is getting punished.
DBA - 28.78 (food) also getting mildly punished

Market Musings

I am without internet access for foreseeable future at home.  This will severely impact my postings.
I'll try to post, but likely not in earnest until my access is restored.

Gary of the Smart Money tracker likes gold right here.  And GDX & GDXJ are holding up since my post "Decent Spot for Market Entry".  If the market can't make significant decline a week after the presidential election, my market optimism for gold miners will increase.

For now, if you wish to buy on the low, now is good, with eye on SPX 1395 as a mark to reconsider investments.
The S &P 500 has has a floor above 1400 since a week ago, October 23rd.

In a nutshell, nothing decisive yet.  Some minor technical breaks to indicate gold higher, but not impressive yet.  For actual real analysis, click on Gary's link, 10 buck special to try his service.

Rare Earths

I posted before about my enthusiasm for Rare earth metals.  Since then, much has changed in market prices, collapsing with the economic downturn.

That is a huge issue with natural resources, when economy is picking up, even moderately, resource stocks are fan-tastic.  The moment stocks lose momentum, stock prices can easily be cut by 50% in months.

I am still bullish on Rare earth metals long term for a few reasons.
1) The materials cannot be fabricated by alternate methods.  Companies may say they can, but at what cost of R&D?  Too much compared to just using whats available.
2) China produces 90% of rare earth supply to the world, but has 30% of the rare earth resources
    That gives too much power to China over such a key resources, I expect China to abuse this position.
    The net result of abuse will be at some point, higher prices and competitors entering market.
    It is the competitors I have interest in.
3) New tech, new materials will likely come from exotic materials.   These materials have not been used in earnest until recently.  

As for item 2, ran across article of China tightening rare earth production, and a desire to make production tightly government controlled.  Production has been cut this week to force prices higher.  While I don't expect a price jump immediately, this bolsters for item 2.

Decent spot for market entry

While I remain very concerned of a longer term market decline, I'll be first to admit that anything could happen.

On the PLUS side for market advance, the market knows corporate profits are missing and getting pinched. But yet, the stock prices had not moved down severely.
There is the thought that all financial institutions, governments, and corporations all want stocks to go up.   Financial institutions are employing sophisticated trading platforms to 'manage' the market, such as High Frequency Trading.  The government changes laws to make corporations look better, such as changing accounting rules in place since the great depression.  Corporations continue to innovate to move liabilities to off-book accounting mechanisms.


So while I am skeptical of the market making new highs, doesn't mean it wont.  Today is a good entry point if your mildly optimistic, with a stop-loss if the market closes below SPX 1395.
Futures are pointing up.  US presidential election home stretch is upon us.  The USD may resume it's decline, bolstering stocks until the effects take another bite out of companies.

Image below.  I will buy some GDX, GDXJ today on advice of Gary of the Smart money tracker, but not to the same degree as he may.  Also lighten on HDGE. Good luck.

Paul Volcker Interview

The last Federal Reserve Chairman I have great respect for is Paul Volcker, from back in 1980.  I have posted post from him before.  Recently, did an internet search, put recent interviews of him.

In the third video, Volcker quotes as his hero is John Bogle, I mentioned him post Worst Market in 60 years.

USD time for a break, revisited

On September 24th, posted blog entry USD fell quickly, time for a break?.  In that post I called for USD to trade in a range, and stop the freefall the USD was experiencing at that time.

Four weeks later, this view has proven to be correct, the USD has traded sideways.  However, I believe that this will soon break, probably as the presidential election approaches.

The only question is, which way does it break.   Gary of the Smart money tracker is calling for USD decline.  While I agree the USD will decline, and make spectacular new lows, we may get some surprises in the near term.  But I do agree that it is more likely that it will follow Gary's prediction.

The reason for my restraint on calling for USD decline resuming in earnest is Europe and other countries are struggling.  USD currency valuation is a relative measuring to other fiat currencies.  In a relative world, I call into question the USD will move significantly lower in the next 6 months.  As an example, Japan which has lead the west in debt to GDP ratio, has recently called on printing more, to keep up with other countries in fiat currency creation.  In such a world that countries race to the bottom, its hard to call out USD as leader to the bottom.

I fully expect USD to take the lead after markets depreciate enough to justify the Fed to up the ante beyond QE3 and break the USD as a currency. I expect the USD to begin a lifetime of decline decline.

Right now its watch and see.  USD recovers and rises in the months ahead, expect stock prices to continue to decline.  If USD declines, expect a more choppy market.  Natural Resource costs are already eating away corporate profits.  A lower USD will accelerate that trend, and hardly can stimulate significant market valuation gains.

Stock Tend Lines

Did some quick analysis of the trend lines since 2008.
Food for thought below.

Stephen Diggle a billionaire trader speaks

Stephen Diggle made over 2.5 Billion dollars in collapse of 2008.  As a hedge fund manager, he was calling for an enconomic collapse years before others, and was ridiculed.

He has given a speech of his view then, now, and the future

The Next Apple Stock

Smartphones are now mainstream, and so are tablets.  The competition for consumers are now from many manufacturers.   I expect this market to continue to be fractional-ized, akin to the car manufacturing market.  In the phone & Tablet markets it will settle into bands like the car market, BMW (Apple?) and Toyota (Samsung?), etc.

So while investing in this market can still be very profitable, the form factor is defined. Sure Android has the cool feature to touch phones shoot over data to another phone, unlike iphone, but all of this is incremental.  A new design like Google Glass will eventually take those form factors on.

Quite amazing when you think about it, the iphone was introduced in June 2007, and here we are in 2012 and the form factor is reasonably defined with tons of competitors.   

I can't but help compare this to the Ford Model T, released in 1908, and mass produced in force by 1914.   Competitors took years to take on Ford en mass.  The model T was so successful, the first model car to surpass Model T production run was the Volkswagen beetle in 1972!  Samsung has already outsold the iphone in recent quarters, although not nearly as profitable as Apple.

We have witnessed the smart phone market to be born in it's full glory and in 5 short years highly competitive sales.

For investing, the future holds the greatest gains.  Biotech, nanotech, alternative energy, and the maker community all offer opportunities for companies to be born to mirror Apple's success.   I think the nature of cell phones, tablets, and PC's cannot easily duplicate the same level of success of Apple in other fields.  But even 1/10th the success of Apple is huge for any company.

I continue to be fascinated by the Maker community, and one of the forces 3d printing.  I am watching carefully which company first makes a break to advertise end consumer 3d printer, which I fully expect in the next 5 years to be announced.   Once Pandora's box is open expect innovation in 3d printers to accelerate and consumer pricing to improve dramatically.

Already companies like Airbus and Boeing are embracing 3d printing as part of their design process.

On kickstarter today, I ran across a 3d printer that you can buy, today, for 580 bucks.  It requires your own assembly and paint.   I am amazed that for the price of a hotel stay in NYC, you can print almost any plastic object you desire.  Granted, the resolution isn't what I'd like to see, for that you need MakerBot for 2K dollars.  I can't wait to see the mass production for general public entrant to this market.

Consider selling stock in any company that makes it's living on cheap plastic parts. ;)
First two videos are summary of advantages of 3d printers, and below that, 3d metal printing, below that 3d printing of human organs! (maybe someday food?)

ETF Proxy Shorting the Market

I can safely say that shorting at the right time, right place, can yield huge gains.  However, math isn't on your side.  In post "this time its different", when the market falls, valuations drop around 50%, but gains are over 100%.   To properly short and gain valuations requires a commitment of time and careful positioning.

I do not have the time, nor the desire to embrace shorting the market as I did in 2006-November 2008. (I couldn't short Dec 2008 to march 2009, I didn't have the guts)

Aside from simply buying fixed income, which by the is the safest play normally, there is an alternative.
There is an ETF called HDGE that manages active shorting.  Meaning, they change their composition and try to remain nimble.  The fund was made public in 2011, and has wiggled around since then.  It's valuation isn't impressive.  Then again, the SPX has moved from 1300 to 1450 in the same time period, (up 11%).

So purchasing HDGE is pretty risky.  But I wanted to share with readers as I am buying some shares the last two weeks, and I'll follow up with some posts as the market develops.

HDGE is available recently around $20.50, I can reference this post in the future.

To find out more about HDGE, here are some handy links.

HDGE fact sheet, video, and current shorting macro allocation.

This time, it's different

I am growing in concern once again about market valuations to the extreme, my position changed on October 1st of this month in post titled "Getting out of the Market".

I wanted to take a step back and look at the market long term from two different angles.  First from 1995 to present, the more recent history of market valuations.  Using this history as an example, looks pretty compelling that we are in for a market correction.

The market hasn't seen below SPX 700 (except briefly in 2009) since 1996.  Assuming SPX 700 is the new bottom, then the rise in 1996-2000 was about 115%, in line with the last two bull markets.

However, if we look back to 1995-6, the market moved from a norm range of 400 to 700 and has never looked back.  That rise was in fact "this time its different".
The market moved from a whole new level.  So using the logic back in 1997 as market went from 400 to 800, you would have been sorely mistaken.

Wanted to give some perspective of market view, from the last 18 years, and from before.   I for one think 1996 was the realization of technology, and the last two bubbles have been  ponzi-scheme-like driven. However, Nano-tech, makers, biotech, alternate energy could be poised to bring us to the new level.

The market may recover and hit a new all time high, but I can't get on board with SPX 1400 moving to 2000 or 2800 in the next 3 years.  A MAJOR random element of course is USD currency valuations.  I simply cannot see a major USD decline until 2016-17.

Pictures for thought.  Fixed income, some core precious metals (small) and possibly short fund. (I'll do post on ETF short fund HDGE).  To the charts!