Europe poised to blow in 2013

Granted, I have stated YEARS ago that Europe was going down the tubes.  And yes, I was year(s) too early.  As I have watched over the years Germany and the European union contort, twist, manipulate, and do everything under the sun to maintain the Euro status quote, I keep wondering, is it time yet?

I am amazed at how really stupid the European Union is behaving towards Greece, Spain, and other countries.    The European Union had entry criteria for each country to maintain a certain fiscal responsibility inorder to ensure the Euro wasn't undermined by some countries using the clout of the Euro to get a free ride.

Here we are years later, and its known that many countries used off-balance sheet tactics to hide massive debt, to play games with their balance sheets to appear more compliant than they where.

Once the derivative insurance schemes blew sky-high with cost, the jig was up.  No longer could these countries afford to pay the premium to ensure the risk, to offset their at risk balance sheets.

The right thing to do for their citizens was one of two things.  Either get the Euro onto a path of fiat currency, allowing countries to run debts not tied to a central authority OR to exit the Euro and return to a soveriegn currency.

Neither of those things happened, instead these countries have sold everything that wasn't nailed down, and cut services to the public to reduce spending.  At the same time, jacked up taxes to new highs in hopes of balancing their budgets.  Recently Greece initiated a 'savings tax', basically taking a % of all savings in banks, under certain criteria.

The result?  Business plummeting, unemployment syrocketing, budgets blowing wider, not narrower.  And like a crack addict trying to get his life together just by taking 'one more hit', it just gets worse.

Greece is entering into full implosion mode.  The society is devolving into a barter society, with credit collapsing.  Food stocks are low, estimated two days in super markets.   Bank losses are going parabolic, and cash shortages due to the credit collapse.

The Greek government due to lack of strength to choose what is right for the people, has set themselves up for a violent revolution.  Something that I didn't even think was possible 2 years ago.  Never did I think the leaders would outright ignore the public and drive into private interests, bankrupting a nation.  I knew that was the path they where on, but I thought this game of chicken would have ended a couple of years ago.

Next up is Spain, then Italy, then the rest of the weaker European countries.  If Greece falls into revolution, we will have a Euro Spring, with a contagion that cannot be contained.  If Germany doesn't relinquish its tight demands for fiscal responsibility, deflationary collapse is going to occur.   Once started, it may actually take France down with it.  I do think Germany will not fall, but will go under some severe stress as it tried to hold the line.

I really do hope I wake up tomorrow to hear Euro come to their senses.  Forcing countries down a deflationary collapse and under economic strain to jack up taxes, slash services is not sane.

I do agree that all of that needs to happen - but under local rule.  In this situation its a foreign entity - European Union, forcing fiscal responsibility.  This will force the common Greek to enter a mind set of nationalization, us vs them.  A more prudent path would have been Greece to have its own currency and due to its lack of fiscal constraint their own currency devaluation forcing Greece to reform. 

I really hope that this collapse does not occur, that the nations can see fit to change the construct.  The irony is if Germany holds the line, the Euro should shoot up like a rocket in a deflationary collapse with the dollar plummeting.   As the European nations go under immense strain, the rising euro should give it a one-two punch accelerating the chaos.  I am mildy optimistic that the US fares reasonably well, as the currency war favors the dollar in the near term.  Take a look at the chart at the end of this post.  Pretty amazing eh? Its nice to be the big boy on the block.

Gold should do well, but may get a punch down as asset fire sales occur to raise capital.

I could be wrong on all of this, but its starting to look pretty dicey to me.  I went from looking at this situation that the policy makers would see the problems and realize that the path was destruction.  Now its obvious that there is only one way to change course - by force.

Euro Doomed

The Euro was doomed to fail the instant it was created.
It is not a true fiat currency.  A true fiat currency can be printed, at will, for whatever reason.  Need more cash, just issue more!

The euro requires memebers to try to keep a fiscal order.  If you have high debts, then get it under control.  The US has no such limitation.

So countries like Greece, Spain, Italy get slammed while the savers of Europe, such as Germany scream they must get their lons repaid.

The result is a currency at odds with itself.  If countries like Greece had their own currency, they would print more money - answering to no one - and continue on their merry way.  Their currency would likey trend lower vs German currency.  The local Greeks would be appeased and not rioting.  However, rest assured, german exports would be too expensive for most greeks and not buy german products.

So one side benefit of the Euro is to ensure everyone keeps currency relatively flat to each other.  This DRAMATICALLY favors the sellers and puts the debtors at great disadvantage.

Niral Firage has a nice speech about recent step being done.  Announcing to the world taking money from EVERYONE's savings as a tax, over-night, no wardning.    The message is: dont keep money in banks, keep them in mattresses.

It is stuff like this that WILL create a crisis, and assets keep value, some like gold may explode up.
People still don't get it.  Printing money doesn't cause currency problems, faith in the stability of the finance does.  And what message does it send to announce taking people who have money to pay off some of other people's debt......

Facebook, ZNGA ,GRPN

I posted a while back to buy beaten social media companies stock.

Back then facebook when it was at 22 range.  Recently the stock hit over 30.  I had a stop loss in at 26, and closed my position.  if Facebook comes up with a new micropayment model to infuse money to its user, the stock should explode significantly higher in the year ahead.  Who knows if they will do something so significnat.

Zenga was at 3, now at 3.38, I am going to hit out 2/3 of the position now purely because I am nervous.  I'll put other 1/3 at 3 to stop out.  It would not surprise me at all that ZNGA moves up to 4.50, but who knows.

Grpn is back to same place as bought, about 5.50.  I wish I watched this stock closer and hit out at 6 recently.  I'll problable dump entire position, I have no faith in Grpn model.

Good luck!

Gold miners

Gold miner ETF GDX recently hit under 36 bucks a share, quite a fall from 55 in september.
And the overall market is hitting new highs, something that i am sure leaves a bad taste in everyone's mouth.

I have been having second thoughts on long term for gold miners, I'll share them in a post hopefully soon.
But looking at the charts, longer term trends, and price of gold, I am adding a little here.

I stayed out of miners for over a year, to get in just before it rallied and crashed....lower than before I got in.
Not a nice experience, but, timing stocks perfectly is not how you win, its being in for the next rise, no matter when getting in happened.

Good luck.

Technology and Economics

Good video on economics and technology.
I agree that a company like Flattr needs to go viral and re-engergize the economy.
If we can make micropayments work, I see a booming economy instead of a dying one.
I could see the market soaring much higher from here, if we can simply include the internet generation into making money.

A setback for gold and gold miners

My contention since I liked gold is that it will rise in price due to indian and chinese demand.
I am not one who believes gold is money, and it should NEVER be money again!

The logic being, as the two largest consumers of gold increase in wealth, they would buy more gold!
Well, Indian government is putting a damper on my master plan, but actively fighting Indian purchases of gold.
The government is blaming currency imbalances on Indian high gold purchases.

So they are actively tyring to slow gold purchases, now with tarriffs.
I am not saying gold will collapse, but if the west hates gold as a threat from guns and gold bugs who think the world would be better if the economy was dictated by mining production, and the Indian government is also fighting gold.  That leaves China to pick up the slack, and I am no fan of China's economy.  China needs to prove they can change their model from exporter to consumer.

I am unsure what to do, time to leave gold?  At very least I am not a buyer of more.

Economic Disruption 3d printing

I have posted before about a collection of new capabilities that are emerging that I believe is a funamental shift in small business and manufacturing.

You can read the post here titled American Manufacturing Revolution

This video does an excellent job to tease your mind about the disruption that is ahead.
Don't believe the hype? Look at all the industries that have been dwarfed by technology in the last 20 years.
Enjoy the video

The Building of an Epic Rally

When a sector of stocks plummet, they have two destinies.

One is the sector has shifted, one to a long term lull that will wiggle around at a level substantially lower than   before their decline.  This is a common pattern.  Think of gogo 90's for tech, and after the bubble burst, although some tech has done very well, few from before the boom recovered their all time highs.

The second is selling exhaustion.  One has to look back to March 2009, when the S &P index hit 666.  Around that day, I did a post called Preparing for Anarchy, and a post only a couple of weeks later The Bull is here.

In Preparing for Anarchy post, it was a bit of tongue in cheek that the market was very unlikely to continue downward.  Reflecting back, it is obvious what happened that month.

Whoever sold at S&P 500 hitting 1000, then 900, then 800, then 700, well, anyone who could hold onto their longs are the same people who would hold on if S&P 500 hit 600.

Basically, overall the market ran out of sellers.  There was left only the people who hold and those who bought on the way down.

Looking back, I wish I really dumped my entire life savings and borrowed money to buy the stocks from my post just one day before to preparing for anarchy post, called "time for lottery tickets".

So what does this have to do with today's market?  In 2008 crash, the gold miners crashed WITH the market.  Now, they are taking, rather hard core, (GDX at 39.37) when the market is rallying.  This is very unusual.  The market sentiment of the gold miners after watching for years it do really poorly, now doing extra poorly.

Frankly, this is the time when the sellers are running for the door.

What I am expecting is the same thing with miners, at some point the sellers will be few, and that will build a base for a multi-year rally.  

There are two very unfortunate realities around this statement.

First, it may not happen, precious metal mining sector in its entirety could go the way of long term lull.  I don't think so, but it is very possible.

The second is we maybe in for a CRUSHING sell off, one with a market decline.  This would mirror what happened in late 2008.  The miners got crushed, and then started to rally AS the overall market got CRUSHED worse into March 2009.  

So its easy to look back and say, boy I wish I bought those lottery tickets, or bought options 3 years out to make a killing.  At the time of the crushing sell off, there are three kinds of people.  Those not in the sector, those holding blindly, and those trying to trade and find a bottom.

Any of those 3 options may be the best strategy, depending entirely on the next two years for the sector.

Your guess is as good as mine, I think hold is better than dump.  I don't see this sector as dead, I still believe in my post The Big Picture.

Ps. Special thanks to Gary for a similar post, for sparking my own twist.

Saving Money in Shopping

There are several steps that my family takes to cut costs for supplies for the home.
We buy primary supplies from wide variety of places.
Cheap is good, but quality for food is more important.  I'd rather eat meat from a better supplier than from the most factory treated cattle.

Taking this into consideration, below is where shopping is done.
I may post a page on each store on what is primary purchase to find lowest price.
After all, a 10% (or more savings) is huge compared to interest you will get on savings (often 1%)

I'll update with links on good deals at each by enabling links. (Amazon only currently)

Barths Market- In my home town, highest quality meats, combined with AMEX blue card, 6% cash back
Shoprite   - Primary food, combined with AMEX blue card, 6% cash back
Target      - House supplies, combined with Target 5% cashback Credit Card.
BJ's          - Bulk supplies, combined with AMEX Fidelity card, 2% cash back
Amazon    - Subscribe & Save, combined with AMEX Fidelity card, 2% cash back

Also, look for good deals and make occasional purchases that take precedence.
Look for deals at Woot.com, Dealnews.com. Coupons at Dealcoupon and Wow-Coupons.

Amazon Shopping

This post is part of Saving Money in Shopping Series.
I am continually looking to increase my purchases from Amazon.com.  Amazon has many items at rock bottom prices that beat or at least match lowest prices available.

To maximize savings, we buy items under the subscribe and save program.
Any item bought on subscribe and save automatically gives a 5% discount AND automatically free shipping.
As of February 2013, if you ship 5 or more items under subscribe and save for a given month, you get 15% discount on all items. (some items excluded).  For additional savings, use Fidelity Amex card and get 2% cash back!

I have a list of many of the items that we purchase from Amazon under this program.  The prices listed ASSUME the 15% discount applied.   Feel free to post in the comments of this post to call out cheaper alternatives.  However, some of the items are more costly due to higher quality.  For example, instead of imitation vanilla extract, we want real vanilla.

I'll try to update this post periodically.  Subscribe and Save isn't as easy as I'd like, prices and product aspects can change, so you must keep on top of your shopping list. Some below I may be grandfathered into an offering that isn't available today.

The New US Economic unReality

Many may pontificate about the market direction, hard resource valuations, the effect of debt, health of nations, or any aspect of the financial reality since 2008 crash.

There are many things that make a marked difference between 1980's until March 2009 and from March 2009 to today.

First, the accounting system using fair market valuations was dismantled in 2009.  The REALITY is the measuring stick between 1980's until 2009 is not the same as we use today. Therefore if Mark to Market accounting has been suspended, we are valuing financial institutions on what those institutions say assets are worth - not what they are worth if they where sold.  This alone distorts the reality of corporate health, and there is no hard-date to ever return to the gold standard of accounting - recording asset values for what people would pay for them if sold.

Add to this, that US Government statistics are being distorted, the very basis for many financial decisions and financial guidelines.  For example, official inflation alters the income of disability, and social security payments. (and many other social programs).    I already covered how inflation is being routinely changed, in effect changing the measuring stick.  Also, it is widely covered how unemployment numbers are continually being adjusted, distorting any reality of the unemployment rate.

Throw on top of all this the recent scandals of the global interest rate (LIBOR) used to determine most loans has been discovered to have been gamed for years.  This affected literally trillions of dollars of credit.

Throw on top of that the Federal Reserve Bank is making routine purchases of debt, and lending (giving) money to foreign banks to the tune over 230 Billion dollars in the last four weeks alone.

Looking into the private sector, we have Nobel Laureates such as Paul Krugman who have only one drum beat, ignore today for a better tomorrow.  I hope the most ardent fans of such approach are starting to question the one-way mantra for decades.

Throw on top of that nations like Japan having their government directly taking over direction of central banks to promote monetary policy for the government direct benefit, is an outright attempt to shape their own reality.

All of this speaks to how we are in a new reality, the unreality from my life experience.  Under such a new reality, any market musings are futile.  The sticks to measure at every fundamental level are not reliable.  The will of the private and government sector is to promote distortion.  The one reality that does exist, is we are divorced from reasonable capitalistic controls.

May this bring a bright future, well, atleast for the people who this new reality is their reality.  For those who resist believing and take the red pill, I continue to be concerned.
The one item that cannot be forever manipulated is resources.  An example of how governments cannot control those valuations is seen repeatedly in history.  Every government that has tried, has failed.  That is an impressive failure rate.  For the latest attempt, one has to watch as Argentina implodes in 2013.  My only glimmer of hope is a privatization of money, which should bring on a new prosperity  for the next millenia.

Anonymous, Extremists against the FRB

There is an extremist technology based terrorist group out there called Anonymous.  This group has launched  various small attacks against the Federal Reserve Bank to give visibility to their agenda.   While I agree that the current global fiat currency system has issues, I do NOT view this as a conspiracy to oppress the world.

In reality, centralized systems weakest link is, they are centralized.   Centralization stifles innovation, in effect evolution.  Centralization magnifies mistakes they make, as the people part of the central authority will over time, align with like-minded approach.  In the current Federal Reserve Bank, there is no question that overall the entire establishment believes in the mantra of Keynesian economics.  When a body of people follow a methodology, a religious like belief system, their decisions become extremely prejudice.  They are responding to a problem with 'What they know'.   That is what we are witnessing.  I am NOT a believer of Conspiracy theories.

Anonymous launched an attack and breached the Federal Reserve System, announcing it on SuperBowl Sunday.  I am of the belief while a black eye on the Fed, I really doubt there is any information they retrieved that has any remote effect on the security of the country banking system.

Anonymous, assuming they believe what they say, are unfortunately, misguided in their approach.  I believe they are likely young, under 30 years old, and view themselves as helping save the future for themselves and others.   What they don't realize is their attacks will have the exact opposite effect.  The Federal Reserve Bank are the established, lawful, and community supporting entities, and Anonymous are the rogue terrorists.

And I actually believe that this view, is a correct one.  Anonymous is the problem.

If their acts moved away from concerning of the current framework, and focused on a better framework, as I describe in my post Ideal form of Money - Power to the People, then they could help provide a solution to a system that will fail to competition of a better system.

If they actually triggered a situation by their acts, a run on the banks, they will create kaos and much death.  I'd like to not see that please.  I'd rather transition  like people did with Music, Video, Software services, tablets, smartphone, and other tech-era revolutions.  Some can stay on old, some will move to new, and eventually the new takes over, replacing the old.  That is a transition I'd rather face.

Same goes for the protest group called  Occupy Wallstreet. Stop protesting, and get on with a solution.

So if you follow these guys, this time, don't root for the under-dog.  Root for the old system, The Federal Reserve Bank, until something better is obvious.
Notice in video below how they combine what I see, Commodity Costs increasing, currency crisis, but their root is the evil conspiracy people while my view is, the world is evolving.  Its nice and simple to view bad guys are holding back paradise.  The reality is people do what they think is net best for them and others (in that order), given the construct they have to work with.  Notice they want to punish selfish people, supporting this is supporting global extinction.  Humans are selfish, its called self-preservation.

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'.