Broken Web II: Digital Anarchy Arrives

As if this will take any of the readers of “Broken Web:  The coming collapse of the Internet” by surprise, the Sony hack has put a whole series of perspectives into place about what life will be like on the digital frontier from here forward.  We’ve got everything from “made up money” in the crypto currencies, to rips of books, and robots following close behind.

A primer on digital anarchy after our ChartPack, a review of the Trading Model, and a few significant headlines to light off Saturday…

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Markets and the “Angle of the Dangle”

imageI’m sure, if he were reading my column this morning (which he isn’t because he’s off in Vail skiing), my consigliore would be saying something like “Neener, neener, neener, Told You So!”

Still, we won’t be out of the woods completely on the markets unless we exceed the old highs in the next couple of weeks, but with futures up, that looks quite possible.

In fact, based on how the market closes today, we will have a fresh set of projections for our Peoplenomics.com subscribers in tomorrow’s report.  But we have run back from the edge of the abyss, at least for this week.

So what’s going on?  I mean, fundamentally we still have problems and this still has the look and feel of the Roaring Twenties.  There is a general collapse of Oil Prices underway, and while that means great things for manufacturing, plastics, and gasoline prices in the very short-term, it also means that down the road a ways, there will be problems with oil companies on the exploration side laying down rigs and calling it quits.

OK:  The KEY QUESTION then becomes this:  Will a decline in the oil sector be large enough to cause an even greater collapse than did the House Bubble falling in on us?

My friend Howard Hill, author of “Finance Mon$ter$” who was deep in the backrooms of the banks where financial engineering was born sums the problem up this way:

“Today, about two-thirds of all CDS trades are booked with central clearing operations and subject to calls for margin capital. Failure by one participant results in that participant being wiped out, but not a daisy chain of other participant failures.

For the other reason, I checked records that FINRA, the securities dealers’ self-regulation organization, keeps of various deal types, broken out by year of issuance, and what I could glean from the MarkIt web site without being at an institutional client that pays for details.

His post  “Lowering Threat Level to Orange” is exactly one of the routes which could press the high of the Dow into the 18,000 plus area early in the new year.

imageStill, if you remember the Peter Falk Columbo character, the famous line is “’Scuse me, mam, but ders diss one ting dat bothers me…

It’s triggered by the slightly off-color old fire-house saying “The heat of the meat is inversely proportional to the angle of the dangle…”

And when I look at this week’s chart, the “angle of the dangle” is what has me concerned that the market might not make it.

While there’s a good chance of a double-top, the scope and power of the rally this week is mighty impressive.  Maybe someone besides Howard has run out the numbers and figures the public can be sucked back into the market one more time.

Still, when the angle of the dangle is this steep, it’s either a falling market rally OR  a major change in how the Fed is planning forward.    I’m  pretty sure there’s something in Gann’s work, too:  Reflexive rallies that are much sharper than declines are suspect.

The problem – which isn’t clarified many places – is that if the Fed is admitting that they don’t have pricing power enough to raise rates without killing the economy, that argues persuasively that deflation, not inflation is still around and maybe even growing stronger.

Look at the price of oil.  Could the Russians and the Chinese be doing the beat-down on oil in order to bankrupt the United States?  A kind of brutal payback for Reagan bankrupting the Russians with Star Wars and Kojack episodes, while the Chinese may not really want the tentacles of control offered in a most domineering way by corporate globalists…

imageA check of the latest Fed data shows the M1 and M3 levels are indeed not collapsing and the rate of growth in money creation is back up to higher levels (in the case of M1 than they were in the 6-month view and M2 is almost back up to the 6-month view,

What it suggests to a small mind like mine was that the Fed actually thought for a few moments that the recovery was real and that the bankster scum could be gently weaned off cheap and easy money.

I’m always willing to be entertained, of course, but seems to me that rehab from the easy money and low interest rates is something of a wet dream and the market’s recent decline was just making this point.

Whether there’s enough “juice” to bust through 18,000 should become apparent shortly.

Putin Critic Slammed

Looks like a critic of Russian prez Vlad Putster will have up to 10-years to think about when to hold his tongue.  As in Russian style, the critic is being charged with embezzlement so it will look like it was for a legit crime.

But there’s a fine global lesson here:  When government that’s bigger than its people takes hold,l they can make up the rules on the fly and to believe otherwise is foolish.

IRS Hostage Taking

Here we go again, the Obama administration’s IRS is threatening the speed of refunds in the coming tax season and blaming budget cuts at the agency.

If you’re lucky enough to be a small businessman and filing quarterly returns, the idea of having your money held hostage is not very appealing.  So I suspect I won’t be the only one firing up TurboTax Home & Business 2014 Fed + State + Fed Efile Tax Software + Refund Bonus Offer  and running out our 2014 returns on a pro forma basis to figure out to avoid overpaying on the Q4 filing due in early January.

Over the past few years I’d gotten into the habit of paying my quarterlies at higher than necessary rates so we would always get a refund about the time annual airplane maintenance bills came in.  Not this year.  I’ll probably whittle down that Q4 and keep the float for myself, thanks.

Until they threatened to hijack prompt refunds, I’d always looked at overpayments as something of a savings program for myself.  With the threat this week, I’m (how to say this?) disinclined to continue that practice.

Speaking which, Gaye up at BackdoorSurvival   (her 60 prepper items for a buck each is a great source of gift ideas, BTW) turned me on to the high-speed Fujitsu ScanSnap iX500 Deluxe Bundle Scanner for PC (PA03656-B015).  Although spendy, it makes keeping perfect tax records a breeze.  Virtually every bill we get goes into the thing, is scanned as a PDF and is then backed up on local and off-site drives.  One must document, document, document in this world.  And this scanner does two sides at once and is just smokin fast.

Time to Nuke North Korea?

I say this advisedly:  When it comes out that North Korea has plans to send in commandos to the US and attack our nuclear power plants, it’s maybe time to rethink our ‘tude toward them.

While the Obama administration may be able to send in Dennis Rodman, now and then, I’d say the egotistical head of state has revealed himself too much with the attack on Sony and (worse) their acquiescence to the crank demands.

The simple US response should be a half dozen well targeted cruise missiles into a single high value target.

How should the US respond?  Simple:  Follow up with a hand-written note from the President of the US:  “Try that again and you will regret it. “  Include a Dale Chihuly business card as a hint.

Might work with some radical Islamics, too.  No point in carrying a gun to a knife fight if everyone knows you can’t pull the trigger.