Take a little time this Sunday AM to look at the USDebtClock.org site. They have added some new information, and when you put your cursor over an item, it now tells you the source for that information. Citing each piece of data's source is a great addition, and one that is made much easier using the internet.
Some day, what I think years from now, when the US dollar does finally implodes or to prevent the dollar from imploding US interest rates skyrocket, people will be outraged how did this happen? It's easy, no one cared about the facts of US government financial's. The US Government was treated like an infinite source of wealth. When in reality, it is an infinite source of debt.
I keep wondering, what is the magic tipping point, 100% of GDP in debt, 200%? 10,000%? There has to be a bottom for credit-worthiness.
I dislike Glenn Beck. But he does come out with segments that clearly outline critical issues. This video goes over the US debt and the world carry trade, which Japan suffered from 20 years.
The markets are pushing into a decision on direction based on longer term trend lines. So is the market about to go down like a cheap hooker? Or rocket higher?
Its all about the USD valuation, and the devaluation game to get the markets to go higher can continue, but not forever. USD is at about 75 on the charts, somewhere between 65 and 25 would trigger a panic and collapse of the USD. That won't be good for stocks.
From market index perspective, this chart says it all. I am short the market, but not with heavy conviction. If we are significantly lower into Wednesday, I will probably cover a bit in anticipation of black friday doing better than expected.
I printed a while ago that the FHA is an abomination and must be closed. Let me expand upon this, ANY business that can be handled privately must be abolished.
The role of a government is to create rules to construct a society we want to live in. FHA is a black hole where trillions of tax dollars are used to subsidize houses people can't pay for.
Taxes in the next 2-4 years are going to skyrocket to levels people will not have believed possible. Federal, State, and local will try everything in their power to resist becomming efficient. A great way for a government to remain inefficient is to just raise more money to paper over inefficiencies.
Of course, no one will avoid this disaster, so instead, we must watch this train wreck in slow motion, until it comes to a head. Then, and only then, will agencies like FHA appear on the chopping block.
So much wealth will be lost in 401k savings, US dollar purchasing power, real estate collapse as houses drop further to pay for the real estate taxes.
But I digress, what I find refreshing is a private company that PROFITS from the existence. Exerpt:
Notice what I highlighted in bold? Of course every American is aware of this and all the other near calamity for the economy, since the news does such a great job in reporting what matters. Like the final 3 couples in Dancing with the stars.
Mike, If I was you I would wait for that heavy selling on strength day. That would give you an edge. 99% of all significant declines have one or more of these at or close to the top.
Anything else and your just guessing at a top in a powerful bull market. That's no edge.
The best we can do in this game is play the edges when we get them and be patient enough to wait for them.
Gary if of course right, and right way more than me, so once again, stop reading my blog, and pay to read his advice. :) Otherwise read mine for the fun of it, not for profit.
Facts from my perspective: NOTHING has fixed the banks, or fundamentals adversely affecting America. Instead we ahve changed laws (no mark to market), fictitious accounting (delaying fixing off-balance sheet debt) and had government bribe people to spend (cash for clunkers, housing tax credit).
The market is ridiculously over-valued, many companies have P/E ratios over 100.
The entire bull run of the market since August is funded by destroying the US Dollar value vs other currencies through reckless spending and converting private company losses into public owned debt.
I started re-entering short, sold gold miners Tuesday. I'll add to them the day SPX either starts o accelerate failing or SPX hits 1120.
Target is 10% lower before re-evaluating final target, whihc in next year or two is SPX 400.
All that matters is the US dollar, is the country going to lose control of it's currency falling? Or will the currency start to appreciate. Notice frm the graph, recently USD seems to be finding resistance to falling below 74.75
Unfortunately for me, my job will prevent me from checking stocks all Tuesday, which is very very unfortunate. Tuesday the 17th marks what from a charters perspective is the turning point for this ridiculously high move we have seen.
So let me share my plan of losing tons of money with you.
I'll wake up Tuesday AM, check the markets, if down substantially, I'll put some orders in to get into the short side. If the market is flat-ish or up, my orders will trigger on S&P 500 hitting 1120 (1121 is target) to hit the bids on some shorts, and inverse funds. I can do this though Interactive Brokers, which allows trigger orders based on any fund or index.
So if the markets blow right through S&P500 1120 tomorrow, you can just imagine how bad of a day my account had. However, if you are able to watch the screen and you see the markets turn, jump on board.
Target is for S&P500 to resist falling below 1,000, we'll see. The market still goes higher with a lower dollar, god help us all when a weak dollar brings the market down, and a strong market brings the dollar down, then, there is nothing left to counter the stock market slide.
Good luck, and I went flat the gold miners today, GDX at 51.25.
All of this is subject to change, without notice. :)
A couple of charts, first SPX (S&P 500) then GDX (gold miners). As my previous post points out, I am once again bailing on GDX hoping to rebuy in cheaper. The market has had a fantastic run up since march, up 65% on S&P 500. If there is a correction, even if mild, I don't want to be holding longs "hoping" for it to be a mild dip.
When it comes to gold miners, I wish back in October 2008 I would have put every nickel into gold miners and walked away for years. Would have saved much anguish. As Gary of the Smart Money tracker points out, trying to time the markets is impossible.
But I am going to try....and possibly fail...to time it again. Since 11/3, I have been back in some gold miners and GDX, with impressive returns, of about 8-20%, not bad for two weeks. Monday I am going to sell until some clearer direction materializes.
If you can stomach the long haul, and you have positions, ignore my waffling. But for now I am going to move back out, and hopefully jump back in when GDX is back down to the bull trend line.
I adjusted the recommended stock plays accordingly
UPDATE: I just read Gary of Smart Money tracker report, he has similar opinions. I can't recommend strongly enough paying for his service. I was reviewing EWI & TheChartStore that pushed me to run like a little girl away from the scary gold miners.
The effort to control pollution through an international body that supersede the US jurisdiction of itself will be a major, if not traitorous event it that is signed.
Next up is a Bill called the "Anti-Counterfeiting Trade Agreement", which among other things, legalizes and forces Internet Service Providers to monitor it's users, and to remove internet access, without due process, when the ISP deems it believes you are not following the law.
Think about this, suppose the phone company was forced years ago to listen in on all phone calls, and remove phone service if the topics you discussed where deemed illegal?
Without due process?
Citizens would revolt. But unfortunately, the aging baby boomers, don't get Tech, and will probably write it off as a necessary evil. Since the majority won't care, the minority that does will suffer for decade(s).
This isn't a financial event directly, but indirectly this slippery slope could cut off critical information flow. I could see a day that "private corporate documents" from wikileaks is deemed as a copyright infringement for example.
Already the number of corporations that control the majority of information companies in the US went from 50 to 5, controlling information flow. (see graph below)
This bill should not pass, due to the illegality of circumventing due process, and privacy. But my guess is in a few years, this will be reality. And less information flow puts the individual (small investor) at a greater disadvantage larger organizations (companies).
Once again, thanks to blog reader Ryan Swan for the video link.
During the Great Depression, there was a global race to devalue currency. All countries competed to make their currency weaker. This only intensified issues between countries fostering more political instability.
Today, the race is back, as the US tries to devalue, rather successfully, its currency lower than everyone else's. What the US needs is strong leadership, fiscal responsibility, and enforcement of law. True leadership. But that's hard to do. So instead, it's currency debasement to "fool" the public that the economy is doing fine......even though weekly over 300,000 jobs are lost.
Case in point, back in the year 2000, the US stock market hit all-time highs. When the stock market is adjusted against gold prices, it is a high still stands to this day, even though in US dollar terms the market went much higher in 2007.
OK, so you don't like gold as a metric, I can understand that, its just a shiny rock, no different than a piece of steel, or a brick, a piece of material.
If you like the US dollar as a "unit of value" instead, then the US dollar's value should be compared to other currencies. For this metric, we will use "US Dollar Spot price". I found this on TheChartStore.com.
In 2000, the US stock market, S&P 500 hit about 1550 for most of that year. The US dollar spot price was about 120.
Today, the S&P 500 is about 1,100, and the US dollar spot price is about 75.
Lets have fun with math shall we? Lets convert the US stock market index to "international dollars" ,the value of US dollar to the world currencies.
Year 2000 US dollars 120 x 1,100 = 132,000 March 2009 US Dollars 90 x 1,100 = 99,000 Today US dollars 75 x 1,100 = 82,500
So, in effect, the US government has placed a hidden "tax" by devaluing the USD by 37.5% since 2000. Since March 2009 devalued by about 17%. And that doesn't include inflationary living costs.
But this game has a finite end, somewhere between 65 and 25, the USD devaluation would cause a panic and the dollar could collapse.
It doesn't comes as surprise that the world doesn't like the US winning the currency devaluation game, as some countries announce they will buy US dollars to try to prop it up.
This game is a dangerous one, the US is in effect blackmailing the world into buying IOU's (treasuries) to try to keep the dollar up. If the world can turn the US dollar around and raise its value, the US stock market is about to fall.
If the world cant hold the dollar up, or decides to give up on the US dollar, then a collapse would force the US government to raise interest rates to try to defend the dollar. That would cripple the economy.
For now, the dollar can decline, the market can rise, until the wall is hit.
Today the US stock market made new 52 week highs, with S&P 500 making a new high at 1105.37. Also the USD dollar made new lows, and gold miners made new 52 week highs.
At this point it is clear, there in only one stock, and that is the US dollar valuation. As the Dollar falls, the markets rise and vice-versa.
I am sticking with GDX needs to close above 50.50 for it to be time to buy more miners OR when gold miners retreat to the bull trend line, about 44.
I can see the Dow Jones hitting 12,000 or 13,000 now before rolling over. But its all dicey from here.
The stock market valuation going higher is a parlor trick by devaluing the USD. The Market Ticker has an excellent comparison of market valuations to US dollar devaluations.
It is a near perfect correlation. Therefore there is no significant economic recovery, but a destruction of the US dollar's value, and therefore long term destruction of US buying power, and it's economic future. If this trend continues, we will see real unemployment at 25%, and gas moving towards 5 bucks a gallon and continue much higher.
All the services I read are in high gear, with everyone watching the trend lines I keep drawing for my blog. Some say breaking higher, others, its the final swan dive.
Some say gold about to mega rally into Q1 2010, others time for a swan dive of epic proportions.
You can see the tension by just watching the market trading, its trying to keep between the two major trend lines. I think the finally act will be violent, and sudden, catching both sides off guard.
So its anyone's guess. I am holding my Gold Miners .... nervously. Ready to buy more if GDX closes above 50.50.
If I had to guess, today the Gold miners made a short term top, now its time for it to retreat. But if GDX was to close ABOVE the downward trend line, I will buy more miners with some reasonable short stops.
GDX made a bee line drive from 42 up to above the upper trend line in about 2 weeks.
I try not to be superstitious, but the graph I drew a few weeks back of the last Great Depression and what is being experienced now in the markets is eerily parallel.
Looking at a long term view of 1929 through 1930, from a "chart pattern" perspective, there are some very curious parallels when using trend lines. By no means should anyone use this as a basis for heavy investment decisions. But it is starting to give me pause on how far this market can run up. I suspect the ending may be different, instead of a deflationary collapse we may have an inflationary currency collapse.
But really, its anyones guess how this ends, and it's really up to the US government to determine the outcome. Make no mistake, whatever the outcome, THERE ARE NO VICTIMS. The outcome is in the making, by deciding to not enforce the law, and to give trillions to unsound businesses in the form of direct and indirect taxpayer money.
First, the last great depression, second, the SPX as of today.
Life is picking up and is pretty freaking busy. My job has been full swing busy for last few weeks, and looks so straight into January. I just bought a house last week, and now I must move. And my son is about to hit 7 months, I suspect crawling any day now.
On top of all that, I was lucky enough to catch a break buying into the gold miners at the right time. So now what for investing?
Since life is getting so busy, I will continue to post, unfortunately I suspect my depth of posts will continue to suffer. I want to finish my money series, that I started a few weeks ago.
I wanted to take a step back and assess where the heck the markets are, and where they are going.
First off, I professed, and continue to profess the markets are going to 30 to 60% lower from the near term market high. Either the high has already passed ( SPX 1101.36) , or there is more to see first. To me, the markets ending up much lower is a "fact" not a question. The question is, how does the market manifest the 50% lower target. It could be in the USD dollar crashing, (becoming worth less than other currencies), and the stocks don't rise as high as the dollar's fall. (example, dollar worth 1/4 of today, but markets up only 25% higher)
Or the USD, as I think we will see, firms up and gains vs other currencies, dragging the market lower. I have no clue if this is next week to start, has started, or won't start until March 2010.
NEAR TERM
But for the NEAR term, I can't add to shorts until I see the market retreating. What I am *guessing* at here is gold moves higher regardless, and gold will see 1,300 an ounce.
There are two bloggers that have my ear on gold. As always Gary of The Smart Money Tracker. Gary is frankly in a class of his own with gold. You would do you bank account a service to never read my blog again, buy his subscription, and read AND invest.
The other is a newbie to my ear, a guy named Harry Dent. He wrote a book called "The Great Depression Ahead: How to Prosper in the Debt Crisis of 2010 - 2012". I listened to him in this podcast (click) and he made a ton of sense for his predictions. I am still a little leery of him, mainly since his investment service (which I will not pay for) is $5,000 for 1 year. Anyone who charges that much better either be THAT RIGHT or a snake oil salesman. In any event, Mr. Dent calls for gold much higher in to January.
The last influence is a guy I know told me he just sold GDX 2 weeks ago. Since his timing is from the "non-investor" mentality, I figure his selling was likely the worst time possible. Yea, a bit crude as a reason for me to buy into the miners, but the market is after screwing with your head so you make the worst moves possible.
And since I have been on my high horse about natural resources is a good investment, I want to put my money where my mouth is. But I may change my mind at any time and go back to full pessimist mode.
So for now, I am back onto the GDX band wagon, I expect GDX to pull back to 44-43 before breaking 50. And if/when GDX closes above 50, we may see a really good ride for a while. Two other ideas for investing is RJA (food) at 7.43, DBA (food) at 25.52, and energy companies (XLE) 57.08. Set stops, buy in slowly, still be cautious. A catastrophic fall could be in the cards for the entire market.
I also have a TINY amount of shorts on my murfs stock plays.
I ran across this video on youtube. It SEEMS genuine, but I have not verified any of the content, so take it with a grain of salt.
But if true, it does seem like a Russian who experienced inflation/deflation explains from his perspective what happened in Russia. But keep in mind, Russia and the USA have different government structures. But as the USA centralizes power, and takes over companies, it becomes more like Russia from the perspective of the government controlling the economy.
Again, not up to my normal video series, but interesting none the less.
First, let me be clear, I see high risk everywhere. By no means should anyone reading this post take this for the same confidence I had in buying gold miners back in October 2008.
Buying into the Gold Miner ETF, GDX is a decent risk play at this point, with a defined entry/exit point. I plan on buying additional shares if/when GDX hits the bull trend line again (lower line on picture) . I may buy may on any given day, with stops to build a position in case miners make a run for the upper bear trend line. My stop (exit) point will be 1 buck below the trend line when GDX hits the bull trend line.
Right now, that is about 41.50. I'll sell vast majority of miners if we hit that point again. Keep in mind some sort of devastating event could cause the miners to "gap down" over night, and best price you can get is much lower than your stop. However, I would think that kind of fear would keep gold up, not down.
If interest in gold miners, you can get higher returns and possibly lower risk by using the links on this blog to investigate individual miners. I have gold miners on my "stock play" tab on the right.
I'll probably go back to posting news items on this blog, until GDX breaks out of the upper line depicted, or breaks below the bull trend line.
