Web Bots Eerily Right - Again!

Our colleagues at www.halfpasthuman.com are almost starting to freak us out with some of their prescient forecasts of future developments based on linguistic shifts across the vast reaches of the internet.

The web bot runs for months have been referring to the present period (December 5 onward) as a period of emotional release and a time when the Bush entity (in computer modelspace) would suffer a severe "wounding."  Well, damned if we don't find George Bush himself talking about being wounded in a television interview this week! 

This period is also one where "secrets revealed" would add to the wounding and CNN late Saturday morning reported that Tom DeLay would not seek to regain his leadership role in CONgress.  Other recent "secrets revealed" include NSA spying (eavesdropping without appropriate court oversight) on American citizens inside the US.  Oh, and let's not forget the Jack Abramoff revelations.  Calling this period "secrets revealed" and the "wounding of the Bush camp" 6-months in advance is amazing.

But even more so is what's coming next:  "Rejection by all" of the dollar which we see getting underway with China, Bill Gates, and Warren Buffett all reportedly making alternative currency plans.  (see next story)

As we've warned before, expect economic pandemonium this spring and a transition from a meta data period of militancy to something far worse by mid-late summer.  Go read our story earlier this week on the "war counsel" which we've heard this weekend from highly placed sources is uncomfortably accurate about where things are going.

As reports that the Iraq war alone could cost over $2-trillion show up, repudiation of the dollar externally becomes almost a foregone conclusion.  Thus the market can rally on a paper basis but the gap between the Dow and gold is likely now to rapidly close.

Not Presactly a Breakout

A number of readers have written in saying things like "Where's your Crash?" Damn good question.  While I am not especially anxious to see it come, let's have a little reality check.  First, we have to look back on Friday's news events and see what was happening to give the market such confidence:

• The Chinese, as we reported, are diversifying out of US Mal-Bucks now and are looking for something better.  Ticks off Treasury Secretary Snow, but he doesn't run China.

• Democrats (reports the Drudge Report) are planning to ambush the Sam Alito nomination to the Supreme Court.

• Not a hanging party for the DeLay folks in CONgress, but with Abramoff & friends about to rat out other members of CONgress, it doesn't seem to inspire much confidence in the political system.

• George "Here, have some free lunch" Bush was speaking in Chicago about tax cuts.

The "deal" with the street is pretty simple:  When George and/or Snow speak, the market rallies.  Got it?  The Fed turns on the easy money, and off we go on a tear.  Of course, the observant reader will notice gold popped nearly $13, too.

So while no, "my crash" hasn't shown up yet, let's look at things in a comparative manner and see where the Dow should have gone if it had increased on Friday at the same rate as gold.

Gold opened Friday at around $526.20 and closed around $538.80 (at least by the Kitco.com chart above, and no, let's not quibble about the small differences between dealers and buy/sell spreads, for the sake of this discussion, OK? That's a 2.414% gain in one day.

Now, if we look at the Dow, we see it gained 0.71%.  If the Dow had kept up with gold, it should have closed the week at 11,144.84 - a 262 point gain for the day.  Instead we got this weakish 77.16 point gain - there's 185 points that didn't show up.

While I'm pleased to report "my crash" didn't show up this week, let's try to keep in mind that the Dow is underperforming gold (by a huge margin) over the past several years.  I don't wish any ill toward my beloved country, but when we are living on OPM/CM (that's Other People's Money - China's money to be precise) the sober-as-a-judge call we have to make is that pump and hype aside, our Fed is between a rock and a hard place that looks to me to be moving more toward toward nuts in a vice than paradise. 

Around the Ranch

This weekend, construction continues on the new and improved UrbanSurvival Office.  The outer walls are being repaired now - and I've been expecting six windows to arrive any old time.

I'm working on another article for IndependenceJournal - our part-time for now - home improvement site.  I'm doing a lot of garden prep the past day or two - getting the big tiller out, ordering a bunch of open pollinated and heritage vegetable seeds, and getting a new mini-tiller.  This year, the plan is to actually do rwo crops, as opposed to last year, where we tried the "Texas Seed Festival" method - where you throw out seeds, water now and then, and sort out the weeds from the foodstuffs when harvest time arrives.

The problem with this approach is that it lets the weeds get to seed, and so the garden turns into a mess pot.  So, this year, Mr. Tiller is going at things in a serious way, putting in soil conditioners, more rabbit poo from the rabbitry across the way, and we'll see how the yield is.

The Best Possible Investment

This week, our $30/year subscriber web site, www.peoplenomics.com goes off looking for the world's best possible investment in today's climate.  The answer is interesting, to say the least.   Subscription info here. 

Cheap is Good

Our book "How to live on $10,000 a year or less" continues to be a runaway best seller.  It (and a lot more) is in our bookstore which pays for some of the bandwidth we gobble up.  Click to browse.

Spread the Word

Click here to send your friends an email and tell this about this site.  Referrals and links are appreciated.

Friday Jan 6 2006

We Be Toast

An alert reader picks up "New Tipster of the Day honors for catching the the story that China has had it with the US Dollar and is about to go elsewhere for a reserve currency.  "Well George this headline caught my eye this morning. Is this retaliation for the Fed talk of slowing or stopping interest rate hikes? Or do they know they have us boxed in and just telling the world we're pullin the trigger?"  Something like that, yeah. With all the corruption floating around DC these days, the arrival of Peak Oil, and such, the inscrutable folks are probably right in thinking that except for the 17 financially hip people who read this site, no one else is going to get it.  Meantime, we watch gold (up) and dollars (down).

Shopkeeper Economics, Redux

As the Labor Department issued its latest report on unemployment (a tich better 4.9% in December) we have to recall that hundreds of thousands of out of work and under-employed are not counted thanks to handy-dandy "make it good" statistical techniques.

Total nonfarm payroll employment increased by 108,000 in December, and the unemployment rate was little changed at 4.9 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The December in- crease in payroll employment followed a gain of 305,000 in November (as re- vised). Several industries added jobs over the month, including food serv- ices, professional and business services, health care, and manufacturing.

Unemployment (Household Survey Data)

Both the unemployment rate, 4.9 percent, and the number of unemployed per- sons, 7.4 million, were little changed in December. The unemployment rate has ranged from 4.9 to 5.1 percent since March.

The unemployment rates for adult men (4.3 percent), adult women (4.5 per- cent), whites (4.3 percent), and Hispanics or Latinos (6.0 percent) showed little or no change in December. The jobless rates for teenagers (15.2 per- cent) and blacks (9.3 percent) declined over the month; the rate for black teenagers had an unusual large decline and fell to 24.4 percent.

Even our U-12 (Alternative Measures of Labor Under utilization) improved a tad.  Why is this?  Genuine improvement?  Well, let's see, first we notice that the civilian labor force was reduced by 30-thousand....and a smaller denominator does what?

The Northwest Bureau

Abramoff Insight

From Skykomish Slim, our erstwhile reporter of Pacific Northwest gossip, comes this gem:

One of the biggest national news stories these days is the guilty plea to felony charges of influence peddling by long time Washington, D.C. lobbyist Jack Abramoff. In exchange for not spending the next thirty years of his life in prison (being the sex slave of a 250 pound lifer named Rufus) Abramoff has agreed to turn state's witness and sing like a canary. There's speculation he may bring down dozens of people (or more) in high office and some folks who are connected in one way or another to holders of high office.

As the investigation into how many congressmen and others Abramoff bought off widens, few people around the country know that Abramoff worked for six years for the big Seattle law firm of Preston, Gates & Ellis. (Bill Gates father, William Gates Sr. is one of the founders).

Below, Seattle Times columnist Danny Westneat writes a story about how he first head from Abramoff via a phone call seven years ago. The piece is wonderfully instructive not only for it's inside look at how the power game is REALLY played behind the scenes (and how highly paid PR people try to pressure reporters into writing a news story with a certain slant) but it also hints at the reason why we have so many jokes in this country about ethically challenged lawyers.

WARNING! This story may not be suitable for children and others who believe that the U.S. our government is actually run by the people, for the people and of the people.

While we're pleased to read stories of "Lobbying Reform" floating about, we put little stock in them because they would work counter to the interests of Big Money and the Military-Pharmacological complex.  Spare me the happy talk. Something about zebras changing stripes comes to mind.

War Powers

Although there is talk about CONgress looking into Presidential War Powers, it seems likely that there's enough political dust being stirred up that a real public resolution of the issues will a long shot.  Jeff Huber has a good article with the background and what's ahead.  Still, it's really clear that the web bot project's call for "secrets revealed" and the "hot dates" of Dec. 5 and 15th were all about spying on Americans and the political consequences.

In an effort to look "leader-like" a big show was made Thursday of seeking bi-partisan input on the Iraq War.  Whether anyone listened to what was said, remains to be seen.

The Post-Sharon World

As Prime Minister Ariel Sharon teeters between this world and whatever comes next, a few billion people are wondering "Will this change the Middle East?"  The acting Prime Minister is trying to be reassuring, but yes, we think Sharon's departure from effective control will change the balance.

Alito on Thin Ice

One of the fallouts from the DC Troubles of late may be George Bush's nomination of Sam Alito to the Supreme Court.  Seems the upcoming hearings could be long and delayed.

Bird Flu in Turkey

A fine series of puns, perhaps, but no laughing matter as a third case has been spotted.

One Less Airline

No takers to buy Independence Air, so they are out of business today.

Stock Hype

I don't know what to do with all the stock hype sheets that I have received in the past month.  It seems like since November, my inbox has been getting 2-3 stock touts per day.  A typical one claims claims this stock (or that) is about to "break out" and every adjective in the world is used to try and hijack my sense of greed.  I never asked for "hot stock tips" and I'm thinking about drafting a thank you to send to each of the companies involved, which are invariably either in the "pink sheets" or small offshore companies, thanking them for sending my their tout and offering to forward it to the SEC.  What a BS way to select an investment, huh?  I may put up a page of "small stocks to avoid because they are resorting to shameless hype and tout."

Speaking of advice, here's some really excellent advice from a reader:

"Investment Advisors (IAs) come in all different intellectual, professional, and alphabetical varieties. They range in educational qualifications from High School dropout to PhD, and can be professional Accountants, Insurance Salesmen, Stock Brokers, Investment Managers, Dentists, Lawyers, TV personalities, and Gourmet Chefs. Anyone can be an Investment Advisor! It seems reasonable that your trust should gravitate toward those who have educational credentials, hands on experience with their own money, and no direct financial benefit from the advice provided. Stay safer by finding a fee only advisor who has just one profession… and the ability to say NO.

Why do people become Investment Advisors? Call me skeptical, but I don’t think it’s the ethereal glow they feel after implementing your new Financial Plan. Actually (once you appreciate that IAs are the primary delivery system for Wall Street’s huge collection of one-size-fits-all products), you’ll realize that it’s the money. No conspiracy here, just a subtle brainwashing that has convinced you that the Advisor’s primary objective is to protect your family. In reality, the primary goal of commissioned advisors is to protect their own families, and they accomplish this by selling Investment Products. The Investment Advisor label has become a euphemism for product salesperson just as Financial Planner nearly always means Insurance salesperson. Stay safer by finding a fee only advisor who has just one profession… and the ability to say NO.

Serious IAs can be identified by acronyms following their names (also by dark three piece suits and facial hair), RIA and CFP being the most common. As professional as this seems, designations do not create trustworthiness, for several reasons: IAs must become RIAs to be licensed to sell investment products. Most practitioners affiliate themselves with major Wall Street Institutions to defray their start up costs and many are subsidized in return for pushing their sponsor’s products. Finally, most advisors will remain in bed with one company at a time throughout their careers, constantly touting the present firm’s products as “best”. Hmmm. Hundreds of companies, thousands of IAs, convincing millions of shoppers (investors) that they have just purchased the one very best product to achieve their financial goals. From cradle to grave, most IAs dance to a tune that’s not being played by their clients.

Over the past several years, Wall Street has managed to invade the once respected Insurance Industry by attaching Mutual Funds to life insurance and annuity products, making them far too speculative to achieve their once guaranteed objectives. But the “variable products” scam dwarfs in potential long-term impact to the more recent high crime against investors. This is the one that ignores the (in-your-face-obvious) Conflict of Interest when Accountants sell investment products! Many professionals have multiple degrees; few have multiple practices. You deserve a specialist. If your CPA/Lawyer/Doctor (who’s next) can make a living in his primary practice, why sell investment products? Greed? Hubris? And why does Wall Street allow these non-professionals to push investment products? Don’t be naďve, the more people out there pushing Investment Products, the bigger the bonus for the Masters of the Universe. Stay safer by finding a fee only advisor who has just one profession… and the ability to say NO.

In spite of the fact that the “burn out” rate among IAs compares with that of restaurants and Mutual Fund Managers, and that the advisory business itself is a cut-throat, competitive battlefield, the Financial Institutions that employ the majority of IAs prosper, multiply, and produce more product for your “eyes wide shut” consumption… because you, your products, and the management fees remain! A caring and successful Investment Advisor makes an excellent income and should; a successful financial institution buys other financial institutions!

The hierarchy of commissions paid to IAs can exceed 10% on “private deals”, limited partnerships, and a litany of speculative products and services. On the more controlled substances (sic), Annuity commissions can run above 8% with 10-year lock up provisions common and Mutual Funds provide a generous 4% to 6% whether you see them or not. New issues, odd lot Bonds, and other securities that don’t show a commission, include marketing fees and mark ups that can be substantial. What ever happened to individual Equity portfolios? It’s a combination of in-greed-ients… products are less work and produce more money. Stay safer by finding a fee only advisor who has just one profession, the ability to say NO, and who knows something about individual securities.

Most people need Investment Advisors. Life Insurance protection is vital; fixed annuities are helpful for people of limited means; Mutual Funds are the only option (pity) in most self-directed retirement plans. The vast majority of employed Americans are Investors, actively or passively, with little time or expertise to select securities and manage portfolios. (If the Democrats would accept this, they just might win an election.) But recent experience confirms that we all have a responsibility to our own money, a responsibility that we should only delegate to a professional if we know what the professional is supposed to know. The fact that he or she is an XYZ Fund representative just isn’t enough. You need an independent advisor that has ideas rather than products and an understanding of markets, not marketing. If you are willing to ask the right questions, you can find an IA who might just be able to help you (and herself) at the same time. Try these for starters: Do you sell any products? Do you have a personal portfolio that I can review? Do you provide a “fee only” advisory service? How long have you been in the financial services business, and is it your only business? (It’s not your job to educate “newbies”!) Are you affiliated with any other financial services companies? Do you have at least five non-family clients who you have been advising for at least five years… that I can contact directly? Will you be compensated for referring me to someone? Stay safer by finding a fee only advisor who has just one profession and the ability to say NO.

The ability to say NO? An advisor will tell you not to do something that he feels is inappropriate… a salesman will do what you tell him to do.

Steve Selengut sanserve@aol.com  http://www.sancoservices.com  Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

I'm not an investment advisor (I don't offer investment advice, just news coverage and commentary)- and while there are a few good advisors out there (I can't vouch for Selengut, but he seems to be on the right track) most of the Big Company "advisors" and "brokers" reps merely try to sell whatever the Company has the most inventory of or what pays highest commissions.  A few old line honest firms are out there, but the number seems to dwindle. No, I'm not going to put up every investment advisor's site, but I am sharing this one because Selengut's book might be a starting point for someone who's not familiar with the behind the scenes functioning of the financial industry.  It's a blend  (or think of it as a ratio) of "investing" (what's good for the investor)  and "promoting sales" (good for the firm) that varies by outfit.

Thurs Jan 5, 2006

War Counsel

While all of the public comments have been to the idea that the Bush Administration is hauling in former secretaries of defense and state to talk about Iraq, we're rather inclined  to suspect there's more to the day's big meeting than meets the eye. While it's possible that the meeting is designed to seek ways to keep Iraq from devolving into civil war, there's a chance of something more:

This is precisely the kind of thing that I would expect to hear George Bush reference in a few months - after we attack Syria and/or Iran - with a somber looking Bush saying "You may recall, in January of this year, I asked former Secretaries of State and Defense to come to the White House and help us search for an alternative.  They had none."  So by the July/August timeframe, or perhaps earlier, I expect today's meeting might be a "showcase" effort which will in retrospect be referenced as a "bi-partisan effort to find an alternative to war against x."

Not that Iraq isn't a huge mess. More than 120 people will probably ultimately die from today's suicide bombings at a Shiite mosque in Karbala and elsewhere.  Again, evidence that the country is breaking down into civil war.

Then there's Israeli Prime Minister Ariel Sharon hovering near death from a massive stroke.

But as I step back from the map (and maps of energy resources), the big picture is that Iran has lots of resource and the US efforts to bring them to heel - preventing this sovereign nation from getting nuclear weapons like nearby countries have, including and especially Israel with an estimate 300+ warheads - are meeting with frustration.

Whether you believe in peak oil, we have to remember that the domestic US production has peaked (Texas did in the 1970's) and the North Sea is now in decline.  At present run rates, it's a certainty that the Kings and Queens (industry slang for the whopping big fields in Saudi) will go into decline over the next few years if they haven't already.

When that happens, there is a horrific policy choice for the administration: We can either suffer through massive demand destruction (a global economic depression is an example of demand destruction, as is a World War where civilian populations would be attacked in the US), or there's an increase in production.  That's why Iran is key, drilling in the Alaska Wilderness is critical, and why oil and gas prices will likely be going up from here for several months.

While I get downright testy with the Bush administration's seeming headlong rush to rescind civil and Constitutional rights with the mis-named Patriot Act (A NSA whistle blower wants to come forward), the geopolitical reality is that they are short order cooks in a crapstorm kitchen world politics where resources are tight, getting tighter, oil most especially, and we're in just the opening of a period that I label the Manufacturer's Resource Wars.

Some, Like FTW's Michael Ruppert, see sinister links between the arrival (if it's not already passed) of Peak Oil and the events of 9/11, and utility scandals since.  He's outlined some of it in an article called the "End of the Grid."

Watch Commodities for Tips

I know that watching commodity prices may not be your thing, but pay attention to what the futures prices of things like copper are telling us. Conventional wisdom says if copper prices hold or advance, we are heading for bigger wars (copper is used for bullet making) or a huge increase in housing demand.  Housing mortgage aps are at a 3-year low which leaves me thinking bullets, a thought further by the University of Michigan report that home buying intentions were at a 15-year low, which brings us back, full circle, to the meetings today with the formers at the White House. 

If copper and gold march lower today and rally smartly later in the week, then it would indicate to me that more war - broader war for scarcer resources - may be coming later in 2006.

Tough to Govern

Not that the Bush folks don't have their hands full on the domestic political front.  We notice that MSNBC has a very good article on how the Abramoff "crooks outing crooks affair" is going, noting that losers include members of congress, the republican party, the Hastert-DeLay crowd and the Bush-Rove staff.  Winners are the third party movement and demands for public accountability.  Very good summary by Howard Fineman.

Earth Log

We've been watching the earth change picture closely - and while we're at a lull in the Texas fires, winds will be picking up in the Lone Star Republic later today and increasing fire dangers.  Now, off at the other end of the spectrum, we note that landslides caused by heavy rain killed 210 people (or more) in Indonesia.

Socialist South America

We noted yesterday that Bolivia was getting buddy-buddy with Venezuela.  Now, as Peru has called home its ambassador to Venezuela, a British news operation has labeled emergent politics in the region as the Casto-Chavez anti-US axis.  The word "axis" is politics is a very pejorative term.  "Axis" means "bad guys" while "Allies" means "good guys."  See how subtle this stuff is?

Market Break Ahead

With all of the building pressures, our fractal friend, Gary Lammert seems the parallel to 1929 in fractal terms this way:

"There were 50 trading days from the 1929 peak to its primary first fractal low . With yesterday's high for the Wilshire there is a possible, as improbable as it seems, top to bottom primary drop sequence of 10 or so trading days. The subsequent fractal devolution in 1929 took 32 months. By simple proportion, the subsequent devolution in 2006 could occur in 1/5 or less as many months. This would roughly match gold's potential low in 4-6 months. Gary Lammert"

Just because Gold could hit a low in 4-6 months, remember that could come at a time as virtually everything else is (or has by then) "hit the fan."

Web Bot Delay

Subscribers to the www.halfpasthuman.com web bot report (406_4 is due) should be patient.  They are busy working technical problems with the report. 

Wed Jan 4, 2006

Earth Changes Continue

We are looking at the big 6.7 quake in Baja California this morning and wondering "Gee, how long before the next Big One happens a ways further up the coast?"  Yet another reason to sleep better in Texas than Burbank, I guess.  I failed to mention it earlier this week, but that 7.1 shaker down in Fiji on Monday was significant for more than its size:  Notice its depth - 579 kilometers deep.  That's a concern because when things shake and break down at that level you could be looking at the crust decoupling from the mantle.  And the outgassing is continuing around the planet with hydrogen sulfide "bad smell" reports popping up in web bot data streams.

Even further up the coast than our old L.A. stomping grounds, we see that people in the wine country up north of San Francisco are cleaning up from their flooding.  I always look at stories like this flood report and pencil out how much all that water weighs on the surface of the earth (billions of pounds, no doubt) and wonder if that could act as an earth movement/ earthquake trigger?  Seems to make logical sense, just like extreme tides cause a statistical blip in quakes.

Not that our home base in East Texas is without its issues: We are continuing to see massive fire problems from our neck of the woods north up through Oklahoma where firefighters have no relief in sight yet.  But the good news is that one arson-caused fire has been contained now.

Say Hi to "W"

No, not that fellow down the road in Crawford (He's from up North, but come to think of it, so are we... Still...).   I'm talking about the W in the Yield Curve.  Not only has it recently inverted, but at times when you look at present rates, 3-month, 2-year, and longer maturities you don't get a simple inversion - you get a "W".  Not that this changes the outlook of one top forecaster who sees recession ahead.  I think of it as the "'06 Q3 Cliff." 

Near But Unclear

We posted the Fed Minutes on Tuesday afternoon.  Was the rally yesterday of 130 points a bit overblown?  Oh sure.  Look for some rational thinking to pop in today. Lots of speculation about what the Fed really meant, too.  Interpreting FedSpeak is way closer to woo-woo than the web bot runs, believe me.  I liked the LA Times effort at divination.

Longer term, if I had to place a bet on how the market is operating, I would guess that the BIG BOYZ drove up prices yesterday on this latest FedMumble so they could short from a higher price - and thus make even more money when the recession ahead sort of sinks in to the sheeple who are presently suffering from a "phony republicans just hijacked our government" version of scrapie and generally can't think straight. 

Short term FedSpeak, garbled as it was, is the stuff equity pimps love because they can argue either side of a trade and still quote the Fed.  Neat churn tool, huh?

Will the Real Patriots Stand Up?

George Bush is questioning democrats over their failure to give him a rubber stamp on the administrations request for renewal of the Patriot Act, saying it's politically motivated.  I'm not sure about your feelings, but preserving Constitutional rights doesn't seem "political" unless your administration is trying to plead ignorance on things like domestic spying on US citizens.  You hadn't heard?  Oh yeah.  The spin is going off is now the "We didn't know about it - NSA must have done it on its own without our knowledge or consent..." angle.  That's what I'd call lame and late spin - especially after admitting to ordering it.  Do the spinmeisters think we're that amnesia prone?  Sadly, this bolsters the case for sheeple scrapie, again.

In case you need a reminder of just how poor the moral quality of politicians is, you should click over to the Wayne Madsen Report's scorecard.  And you wondered why I referred to it as CONgress?

With Jack Abramoff about to rat-out dozens on the take in D.C. we have to applaud the efforts of Alice Fisher and her legal colleagues who made it clear Tuesday that in America no one is above the law (at least that they've gotten to so far).

Why would the People's Economist bring all this sorry mess to your attention?  Simple: This will fuel the coming decline in the US dollar.  Who would want to hold more paper issued by a country which is about to go through a six-ring circus of crooks outing crooks?  Right now, I don't see any barriers to gold hitting $600 in the near future.  And as the dollar cracks, no reason I can see why the price of gold couldn't equal the Dow (as it did, or nearly so, in the Great Depression).

Picture a world where you wake up one morning and the dollar suddenly has the purchasing power of Pesos.  It might still be denominated  such that the Dow would read 12,000 (or higher) but you would be in a land of $10-$15 gas, $13 bread and $40 steaks.

From a policy perspective, a 2-3 year hyperinflationary depression will be over quicker than a 10-12 year deflationary depression.  Except that with these rocket surgeons we might get a double-whammy of both for 15-years of hell...

Investing in Food

Speaking of which, here's a little Texas common sense for you:  With the price of hay going skyward (remember those drought-driven fires?) and with many ranchers taking cattle to market now in order to lighten up the feed bills - hard hit by draught and fire - we're planning to make one of our near term investments in a side of beef to be stored in the freezer.  When the impact of the draught comes out later this year, we look for much higher beef prices.  Put another way, between now and say March 1, beef may be as cheap as it going to be if you want to do a little "home based" investment strategy. 

Hay prices were up about 7% compared with year ago levels - and that was before the holiday fires broke out.  Price steaks now and then look again in late summer - we'll see if it's a good idea.

No More Caviar

Speaking of things edible (or in this case barely so): The UN has taken steps to ban the global trade in caviar.  Never cared for the stuff personally. No loss for me, big gain for sturgeon - if they survive.

148 Years Unwinding

From our Fractal Friends:

"George, a great deal of money has been created in the last three years. This new money has been responsible for the fractal growth of the current great right shoulder to the internet/fiber optic bubble high of March 2000. The bottom line analysis is that money creation has occurred through consumer borrowing against future earnings to effect the greatest bubble in history, the current real estate overvalued market. The Fed has contributed only a part to the development of this bubble. Unregulated new lending practices competing for the least able borrower or least able married borrowing couple has lured the final remnants of a pyramid base population into one of the greatest asset overvaluations in history. Even without the ongoing evolution of a distorted and inverted population ratio - of new and younger service job tax payers to retiring baby boomers - that will soon transpire - a land and property asset devolution more severe than the US panic of 1837 and Japanese real estate collapse of 1989-90 will soon occur.

The Chinese who soon will own more US debt markers than the Japanese are efficiently producing a disproportionate and abundance of newly graduating entrepreneurial engineers, dwarfing America's annual production of its own innovative engineers. The American paradigm is this: why create when you can game and steal so much more easily and efficiently as a nifty US legal vulture feeding on the dying carcass? Which country will well compete for the world's fiat currencies and finite precious metals during this current millennium? It has been noted that China will not overtake America's GDP growth for another 40 years. What if China created as many per capital legislators and lawyers as America has? Would that not cut their overtaking the US GDP time by 50 percent? It seems logical that to more rapidly expand their domestic GDP, all China needs to do is emulate America's enormous capacity for deficit spending, legal noncontributory foo foo, third party insurance waste, and taxation wealth redistribution plans.

The current ideal weekly fractal count is 30/75/75 of 75. The 30 week base has been identified in prior postings and is a weighted average of two interpolated bases of 23 and 34 weeks respectively The daily count for the Wilshire is 11-12/29-30/17-18 of 18-22. A crash is coming. With the very recent news of a soon to be hiatus of Fed interest rate increases, a more than ever psychological contrarian event of an unexpected crash is fractally most apparent. The 3 month bill to 30 year bond spread has narrowed to less than point five percent. Think of that and why that is happening. Smart money is locking into long term 4.25-4.5 percent rates. Ultimately this will be a most sagacious investment as the three month bill- as was done in the US in the early 1930's and more recently in Japan in the 1990'-, will be lowered to near zero.

Expect the unexpected. After all this is the terminal portion of a 148 year second grand fractal cycle..... Gary Lammert"

And no, Gary & Jas Jain (another wildly deflationist colleague) do not compare notes.  That they come to the same conclusion is worth noting!

Miners: One Survived

Sad news from West Virginia where only one of thirteen miners survived that coal mine accident this week.  What's worse:  Initial press reports from the scene indicated 12 had survived and horrifically that was backward.   Twelve had died.  This is one that will go in journalism textbooks about the press blowing it.

South American Uniting

We notice that a couple of things are going on in South America sort of under the radar of most folks.  Importantly Venezuela and Bolivia are cementing ties. While this is going on,  we're reading the in the world press on the op-ed pages is that the US is being eyed more and more like the "Big Bully" of the planet.

Got Gas

Ukraine and Russia have settled - at least for now - so gas is flowing.

Tuesday Jan 3, 2006

Fed Minutes

Minutes of the Federal Open Market Committee December 13, 2005 A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, December 13, 2005 at 9:00 a.m.

Present: Mr. Greenspan, Chairman Mr. Geithner, Vice Chairman Ms. Bies Mr. Ferguson Mr. Fisher Mr. Kohn Mr. Moskow Mr. Olson Mr. Santomero Mr. Stern

(and the other "usual suspects" - GU)

-------------------------------------------------------------------------------- The Manager of the System Open Market Account reported on recent developments in foreign exchange markets. There were no open market operations in foreign currencies for the System's account in the period since the previous meeting. The Manager also reported on developments in domestic financial markets and on System open market transactions in government securities and federal agency obligations during the period since the previous meeting. By unanimous vote, the Committee ratified these transactions.

The information reviewed at this meeting suggested that the economy continued to expand at a solid rate in the fourth quarter. Industrial production rebounded, and employment growth appeared to have recovered smartly from the depressing effects of recent hurricanes. Although some scattered signs of cooling of the housing sector had emerged, the pace of construction activity and sales remained brisk. More broadly, spending by consumers and businesses was well maintained. Core consumer price inflation remained subdued, even though some of the increase in energy costs had apparently passed through to prices of final goods and services.

Private nonfarm payrolls grew rapidly in November after a small gain in October. Construction employment posted another large increase, probably owing in part to hurricane-related activity. Broad-based gains in durable goods industries augmented manufacturing employment, and employment in the related industries of temporary help services and wholesale trade increased as well. With employment rising but the average workweek of production or nonsupervisory workers falling slightly, aggregate hours slipped in November--albeit to a level above that of their third-quarter average. The unemployment rate held steady at 5 percent, and the labor force participation rate was also unchanged. Survey measures of individuals' expectations of future labor market conditions improved in November, largely reversing post-Katrina declines.

Industrial production rebounded in October after having been held down in September by hurricanes and by a strike at Boeing. The resumption of commercial aircraft production boosted manufacturing output and more than offset a fall in the production of motor vehicles and parts. Large output gains in hurricane-affected industries--such as segments of the food, rubber and plastics, and paper industries--also contributed to the increase in manufacturing output. The growth of high-tech output slowed slightly in October, mainly as a result of smaller increases in the production of semiconductors. In contrast, production of communication equipment--particularly data networking equipment--accelerated. With many energy facilities in the Gulf region still closed, output at mines, which is defined to include oil and gas extraction, slipped further in October. Manufacturing capacity utilization moved up again in October and was only a touch below its long-run average.

Real personal consumption expenditures appeared to be increasing solidly over the course of the fourth quarter, led by improvements in the fundamental determinants of consumer spending. Real disposable personal income was bolstered by gains in employment and falling retail energy prices, while continued brisk advances in house prices and the recent strengthening of equity prices contributed importantly to increases in household wealth. Consumer sentiment picked up in November and early December; some survey measures of confidence returned to the range seen during the first half of the year. The personal saving rate--while still slightly negative--moved up in October.

Activity in the housing market remained brisk despite a rise in mortgage interest rates. Starts of new single-family homes dropped back somewhat in October from September's very strong pace, but permit issuance remained elevated. New home sales reached a new high in October, and existing home sales eased off only a little from the high levels recorded during the summer. Other available indicators of housing activity were on the soft side: An index of mortgage applications for purchases of homes declined in November, and builders' ratings of new home sales had fallen off in recent months. In addition, survey measures of homebuying attitudes had declined to levels last observed in the early 1990s.

Real outlays for equipment and software posted a solid gain in the third quarter. Although business purchases of motor vehicles declined in October and November, growth in investment in nontransportation equipment appeared to have been well maintained in the fourth quarter. Rising business sales, a declining cost of capital, and ample financial resources in the corporate sector continued to foster a favorable environment for capital spending, a sentiment echoed in executive surveys, which generally pointed to widespread increases in planned capital outlays. Real spending on nonresidential construction improved materially in the third quarter, boosted by substantial gains in drilling and mining expenditures.

Real nonfarm inventories ran off in the third quarter as automakers pared their motor vehicle stocks. But even outside the motor vehicle sector, inventory investment was relatively restrained, and partial data for October suggested that real stockbuilding continued to be subdued. The level of stocks appeared reasonably well aligned with sales.

The U.S. international trade deficit reached a new record in September. A surge in imports was accompanied by a fairly sizable drop in exports, part of which was due to a steep falloff in aircraft exports as a result of the strike at Boeing. The jump in the value of imports was driven by strong growth in most categories of goods and, to a lesser extent, growth in services; increases in the dollar value of imports of oil and of industrial supplies--especially natural gas--were particularly strong, a reflection of higher prices. Foreign industrialized economies expanded robustly in the third quarter, and available indicators for the fourth quarter appeared promising, on balance.

Core consumer price inflation was moderate in recent months, although some signs of pass-through of higher energy costs were evident, especially in transportation services. Consumer energy prices had retreated notably from their elevated post-hurricane levels. Wholesale and retail gasoline prices dropped as gasoline inventories rebounded. And spot prices for natural gas fell sharply through mid-November amidst unusually temperate weather, plentiful inventories, and declining prices of competing fuels; unusually cold weather in early December, however, caused spot prices to move back up to their October levels. Presumably in response to falling retail energy prices, one survey of households in November and early December showed a marked retreat in expectations for inflation over the coming year. Longer-term inflation expectations also edged down, but stayed a touch above the narrow range observed in recent years. Although recent increases in energy costs had pushed up producer prices in some sectors, overall producer price inflation remained subdued. With regard to labor costs, the twelve-month change in the employment cost index for private industry workers in September was well below its year-ago increase. Hourly compensation in the nonfarm business sector also appeared to have slowed a bit recently.

At its November meeting, the Federal Open Market Committee decided to increase the target level of the federal funds rate 25 basis points, to 4 percent. In its accompanying statement, the Committee indicated that, with appropriate monetary policy action, the upside and downside risks to the attainment of sustainable growth and price stability should be kept roughly equal. The Committee also noted that elevated energy prices and hurricane-related disruptions in economic activity had temporarily depressed output and employment. However, monetary policy accommodation, coupled with robust underlying growth in productivity, was providing ongoing support to economic activity. And although the cumulative rise in energy and other costs had the potential to add to inflation pressures, core inflation had been relatively low in recent months, and longer-term inflation expectations remained contained. In these circumstances, the Committee believed that policy accommodation could be removed at a pace that was likely to be measured but noted that it would respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

Market participants widely anticipated the Committee's decision at its November meeting, and the policy announcement evoked little reaction in financial markets. Over the intermeeting period, investors marked up slightly their expectations for the path of monetary policy in light of stronger-than-expected data on spending and production. Nominal Treasury yields changed little, on net, but measures of inflation compensation at longer horizons--which are calculated using yields on nominal and inflation-protected securities--declined somewhat. Credit spreads on both investment- and speculative-grade corporate bonds were about unchanged over the intermeeting period. Major equity price indexes posted substantial gains, spurred by the perception that the economy had retained considerable momentum with limited inflation pressures. In foreign exchange markets, the trade-weighted value of the dollar was about unchanged over the intermeeting period.

The expansion of domestic nonfinancial debt appeared to have moderated a little from its brisk third-quarter pace. Consumer credit dipped in October, and nonfinancial firms' net borrowing in the form of bank loans, commercial paper, and bonds was a bit below the third-quarter pace. Household bankruptcies hovered at very low levels in recent weeks after soaring to unprecedented heights just before the implementation of more-stringent bankruptcy rules in mid-October. Hurricane relief payments apparently boosted M2 in October, but that aggregate decelerated in November, partly reflecting the continued rise in the opportunity cost of holding liquid deposits.

The staff forecast prepared for this meeting suggested that growth of economic activity would slow from this year's pace, but remain solid, with output staying near the economy's potential over the next two years. Although hurricane-related rebuilding would boost activity, especially in the near term, this stimulus increasingly would be countered by higher interest rates, the anticipated waning of the positive wealth effect associated with large earlier gains in equity and house prices, and reduced impetus from fiscal policy. Both overall and core consumer price inflation were projected to move higher in the first half of next year, reflecting the effects of higher energy prices, but then to trend lower as those effects ebb.

In their discussion of the economic situation and outlook, meeting participants noted that incoming data over the intermeeting period had been encouraging with regard to both economic growth and inflation. The economic expansion had shown considerable resilience in the face of higher energy prices and hurricane-related disruptions, suggesting greater underlying strength than had been apparent at the time of the November meeting. At the same time, incoming inflation data had been benign, indicating relatively modest pass-through of higher energy prices to core inflation to date; subdued gains in compensation and strong growth in productivity were holding down business costs; and inflation expectations, which had jumped after the hurricanes, had fallen back. Nonetheless, with growth solid and prices of energy products still well above levels earlier in the year, possible increases in resource utilization had the potential to add to pressures on prices, especially in the absence of some further firming of policy.

In their discussion of major sectors of the economy, meeting participants noted that, while light vehicle sales had slowed in the fall, consumer spending outside the auto sector appeared to have remained vigorous. Holiday sales were said to be off to a good start in many parts of the country. The substantial recovery in measures of consumer confidence after their sharp declines in the aftermath of the hurricanes had reduced meeting participants' concerns about a significant pull-back in spending. Going forward, consumer outlays were expected to be supported by further advances in employment and income.

Meeting participants discussed tentative signs that activity was beginning to slow in the housing sector. Reports from contacts in many parts of the country suggested somewhat less ebullient market conditions, and measures of confidence of homebuyers and builders had fallen back noticeably. A downshift in attitudes regarding the outlook for the housing sector could have significant market effects, in part by damping the demand for houses by investors and speculators. A slowing of house price increases, by restraining the expansion of consumption, and a moderation in the pace of new building were expected to reduce the growth of aggregate demand somewhat in coming quarters. To date, however, the national data on home prices, sales, and construction activity did not suggest a significant weakening in the sector.

Business investment spending had accelerated some since midyear. In part, the pickup may have reflected an increase in business confidence as the economy proved resilient in the face of this year's substantial adverse shocks. Participants noted that the improved performance of investment suggested that the expansion was becoming more balanced, with strengthening business spending potentially offsetting some moderation in the growth of household spending from the elevated rates of recent years.

Economic activity also could be buoyed by developments in other sectors of the economy. Increased federal government outlays were expected to boost output a little next year. Supportive financial conditions and an apparent increase in confidence had contributed to a pickup in growth abroad. Despite possible firming of monetary policy by some foreign central banks and the rise in the foreign exchange value of the dollar owing to global demands for dollar assets, a good portion of the recent strength in foreign economic growth was expected to persist and provide support for U.S. exports.

In their discussion of prices, participants indicated that their concerns about near-term inflation pressures had eased somewhat over the intermeeting period. Recent data suggested that, thus far, indirect effects of elevated energy prices on core inflation had been muted. Moreover, energy prices generally had fallen back on balance since earlier in the fall, and much of the increases in inflation expectations posted in the aftermath of the hurricanes had reversed. Participants noted that robust competition--including that from foreign producers--and further substantial gains in productivity were helping to contain cost and price pressures. Moreover, measures of labor compensation showed only moderate gains while relatively wide profit margins could allow firms to absorb somewhat larger increases in labor and other costs without boosting prices. Nonetheless, surveys and anecdotal reports suggested that some firms were successfully passing at least a portion of their increased costs on to customers, and many participants remained concerned that elevated energy prices could put pressure on core inflation. Also, in the view of a number of participants, the economy was possibly producing in the neighborhood of its potential, and the persistent strength in spending of late suggested that resource markets could tighten further and inflation pressures build. Under these circumstances, and with policy having been accommodative for some time, inflation expectations could rise if monetary policy were not seen as responding to contain such risks.

In the Committee's discussion of monetary policy for the intermeeting period, all members favored raising the target federal funds rate 25 basis points to 4-1/4 percent. With spending apparently retaining considerable momentum, and with the indirect effects of increased energy prices still threatening to raise core inflation at least for a time, the Committee thought that additional policy firming at this meeting was appropriate to keep inflation and inflation expectations in check. Committee members generally anticipated that policy would likely need to be firmed further going forward. In that process, the Committee would need to be mindful of the lags in the effect of policy firming on the economy. However, it would also have to take account of the effects of the sustained period of favorable financial conditions on asset prices and aggregate demand as well as the resulting possibility of further increases in resource utilization and pressures on prices. Views differed on how much further tightening might be required. Because the Committee's actions over the past eighteen months had significantly reduced the degree of monetary policy accommodation, members thought that the policy outlook was becoming considerably less certain and that policy decisions going forward would depend to an increased extent on the implications of incoming economic data for future growth and inflation.

The Committee agreed that several changes in the wording of the announcement to be released after today's meeting would be appropriate. The federal funds rate had been boosted substantially, and, in the view of some members, it was now likely within a broad range of values that might turn out to be consistent with output remaining close to potential. In these circumstances, the Committee thought that policy should no longer be characterized as accommodative. Members concurred that the statement should note that the expansion remained solid despite elevated energy prices and hurricane-related disruptions. While inflation and long-term inflation expectations remained contained, the Committee agreed that the announcement should indicate that possible increases in resource utilization, as well as elevated energy prices, had the potential to add to inflation pressures and that "some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance." Although future action would depend on the incoming data, this characterization of the outlook for policy was seen by most members as indicating that, given the information now in hand, the number of additional firming steps required probably would not be large. Some members thought that the word "measured" was no longer necessary, but its retention for this meeting was seen as potentially useful to preclude a possible misinterpretation that the Committee now saw a significant possibility of adjusting policy in larger increments in the near future. Wording of the announcement along these lines was not expected to have a substantial effect on market expectations for policy, though such effects were especially difficult to judge given the extensive changes being made to the statement. The members agreed that the announcement should end by noting that policy will respond to changes in economic prospects as needed to foster the Committee's objectives.

At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

"The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee in the immediate future seeks conditions in reserve markets consistent with increasing the federal funds rate to an average of around 4-1/4 percent." The vote encompassed approval of the paragraph below for inclusion in the statement to be released shortly after the meeting:

"The Committee judges that some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives." Votes for this action: Messrs. Greenspan and Geithner, Ms. Bies, Messrs. Ferguson, Fisher, Kohn, Olson, Moskow, Santomero, and Stern.

Votes against this action: None

It was agreed that the next meeting of the Committee would be held on Tuesday, January 31, 2006.

The meeting adjourned at 1:00 p.m.

Notation Vote By notation vote completed on November 21, 2005, the Committee unanimously approved the minutes of the meeting of the Federal Open Market Committee held on November 1, 2005.

Rally Day

Welcome to the 2006 edition of Nutty Econ 101 - where the People's Economist will try to help you sort out how to make a living while holding to American core values (like hard work, savings, modest consumption, and what the heck, a small central government, etc.) in a world gone financial crazy printing paper and calling it "money" with little basis, out of control government, which goes all out encouraging excessive debt and consumption while asking us to work all that much harder to get there. Oh yeah, and reducing our Constitutional rights to "protect us" along the way.

After selling off a bit last week, the market is set to rally early today, awaiting the Fed Minutes from the December session.  The dollar was down a bit early on based on speculation that the Fed may signal an end to rate increases, but I don't think so.  The US is, to put it in cowboy terms, in a box canyon with regards to rates.  If we don't raise them, other countries won't keep buying our debt (treasuries).  Carried to its extreme, this is like trying to find a "happy ending" to a gigantic Ponzi Scheme.  The idea is that we will just pay higher rates to encourage foreign countries with "money" (trade surplus with the greed crazed US Consumer) to keep socking away US paper instruments.

So when you read this morning how "gold and silver are up", what you're really seeing is the effect of the US dollar's external values dropping ahead of the Fed Minutes.  If the Fed notes show that the end of interest rate hikes is indeed here, then US external debt sales would become more difficult and that would be bad for the dollar rally.  Maybe Caribbean Banks will get back into buying huge amounts of US debt, something that looked a little suspect in the past and might have been the tip of a "buy our own debt" scheme.  But no matter. 

I'm not the only one expecting the dollar to reverse course.  When it does, the only question is how the workout occurs:  The choices being smooth and gradual (the preferred option because policymakers and investors can react rationally) or dramatic and sudden, in which case we get market shock events.

The past couple of weeks, our subscribers to www.peoplenomics.com have been going through an interesting "just in case" education: First, learning about how placement of news events can "shape" how a market peaks and declines, and secondly, this week's report on the use of options to make astounding profits if you don't lose 100% of your initial investment along the way.  I make it clear to everyone that I don't offer specific trading advice - this site is all about news and theory.  What you do with your money is, as we point out in the site disclaimer, between you, your accountant, your financial advisor, your lawyer, your broker, your psychiatrist, and whoever else you've paid to be in your support group.

So what drives crazy behaviors in the market?  Ah, this morning's headlines:

Rate Inversion

My deflationist friend, Jas Jain, sent along a link to the Gary Dorsch article on deflation/ rate curve inversion at www.SafeHaven.ca  this morning with the note: "Picture worth a thousand words".  Scroll down to the chart in the article and you'll see Jas' point.

Weather Troubles Ahead

As the fires continue in Texas/Oklahoma in what we're likely to refer to Dust Bowl Junior, a sage reader offers this perspective:

Check out the latest ENSO report. A La Nina appears to be forming in the Pacific. Then check out the historical data at this site........... Climate Prediction Center - Monitoring & Data: ENSO Impacts on the U.S. - Previous Events ..........The data begins in 1950 when the "Other" Dust Bowl hit Texas. Bear in mind that a historic hurricane season and La Nina attended the Dust Bowl of the 1930's. La Nina was also there during the Extreme Drought of 1995-96 in Texas, and again between 1998-2001 when we crawled through those nightmarish heat waves.

I continue to blame my neighbors across the street for the Texas drought.  It broke out immediately (and I mean within a day or two) of my neighbor putting in an acre+ pond to raise shrimp in.  The local deer are coming there to moisten their ankles almost daily, but that's about it.

Got Gas

As you may know, Russia turned off the natural gas flowing to Europe through Ukraine this weekend - and now it's back on again.  This is good news for Europe where they're digging out from weather that's been colder than a coal digger's....

Pray for Coal Diggers

I have enormous respect for coal miners.  There's no way you'd find me going into the bowels of the earth voluntarily - I got the willies at Carlsbad Caverns just thinking about the chance of earthquakes.  That's why when I read about 13-miners being trapped in a West Virginia mine I pause and hope for their safety.  I also ask "Hmmm... wonder if this has anything to do with the two big earthquakes in the past day or so:  One in the South Atlantic and one in the South Pacific.  And if you think that's stretching things and being a little nutzo, consider there was a 3.6 quake in Illinois Monday.  While the proximate cause of the explosion in the mine is likely to have been a mixture of coal dust and methane, I have to wonder if earth movement unexpectedly released methane...

Five are dead in China where a Thursday gold mine flood occurred.  Seems like a cluster to me: quakes and mine disasters.  I also  sense a connection with trail derailments too, but that may just be apophenia on my part.

Air Independence Going

Yup - another victim of passenger load factor and fuel prices. Due to close Thursday night, reports the Boston Globe.

Toy Department

Kodak is coming out with a dual lens digital camera.  Not that I will likely buy one, but from an economic perspective, Kodak has been an interesting company:  Late to the party in the digital revolution (perhaps board room denial back then and not wanting to shoot themselves in the foot in the film and paper areas) and now they're getting along and elbowing back toward the front - and they do have brand recognition.  On the other hand, two out of three digital cameras in our house this holiday were Fuji. What will be interesting is whether the digital camera market will even be a market in 5-years as the quality of picture phones is going up almost daily. A real market/technology convergence problem for the boards of Kodak and Fuji, huh?

Precious Metals

Seems my friend the Gold Trader is leaving L.A. and heading for a new home back east...

I trust your holiday festivities went off without a hitch. Mine sure did, I had my kids come over with their significant others. We watched movies and played UNO. I won of course.

The markets should be finished with all the holiday activities and we should assume that from this point forward the markets in both commodities and stocks should start in earnest. With all the strange and unusual events that have occurred over the holidays, we should start to see the "real" movements come to life. I'm still very curious about this CALPINE failure and of course the collapse in the natural gas markets. With the gas lines being squeezed by Putin, Europe should be paying dearly for is warmth this season. Rest assured that this alone will not make our market in NG rally, but the leaders of Europe just got a major awakening in regards to who the new leader is on the block. I had sent a letter out to my clients about the EU's interest in Canada's Rapeseed oil for energy purposes. The EU supposedly purchased about 80,000 gallons for diesel purposes. Some creative Americans got a few vehicles running on Bean Oil back in 1996. A Harley Davidson made it up to 65 mph on it. Of course it took over 3 minutes to get there; the only complaint besides lack of power was the smell of pop-corn. I can't imagine a smog alert in any big city, High smell of popcorn in the air today. keep all physical activity to a minimum .

I'm still calling for a major rally in petrol products, possibly during the 2nd quarter of '06. I've been using Cliff's Web-Bot in some of my suggestions to my clients. I use them along with the technical patterns that are taught globally. Some of these events that are seen thru the technology have been beneficial. Of course timing is everything in investment world. You have to be on the board and paddling in order to catch the starting wave. That's the long board approach; short board is watch for the cresting of the wave, then paddle like crazy to get on board. Natural Gas to me has bottomed out. This could be the long board approach. All of my internals are in the oversold areas. I'm waiting for the Island Bottom or Declining Wedge formations to complete and then we'll be off to the races. I try to visually see what type of formations are starting and let the market tell me when to paddle. George and I had some discussions in the past about the shortage scenario in heating products because of the 3 disastrous hurricanes. He hedged his bet quite well by buying ahead of time. His family is covered; I hope that you did some early purchasing too.

Corn and Soybeans have been getting a bit top heavy. I mentioned last week that traders should be watching for a correction. It still hasn't happened yet, hopefully we'll see it by the middle of January.   [Watch the drought report! - GU]

Gold made an Island Bottom formation and should be rising steadily. All my internals point to a climb in price for a few days at least, maybe more. However, Silver looks like it wants to drop to a newer low, and that would bring gold down with it, but not control it. I'd love to see Silver drop to about the 820 area. I'll be going to California Numismatics to buy more physical when/if that happens.

As a quick personnel note, I have left my work establishment of 15 years and am seeking entertainment elsewhere. My whereabouts are known to only a few at the present. I'm withheld from giving out information simply because of certain laws and restrictions that investment companies have with their brokers. I have been in communication with some of the biggest names in the commodities world for many years now, and am looking for the opportunity that will give me more control over the situations that will be coming soon in my business. I wish you all the best and have a very successful 2006.

-Your friendly neighborhood paranoid of earthquakes Gold & Silver Trader

Many Thanks

Elaine and I tasted a splendid single malt which we received from an extremely generous reader in Arkansas - along with a an Arkansas Razorback sweatshirt and a Razorback muffler.  I'm going to wear the sweatshirt into town (as soon as we stop hitting 75-80 degrees here).  But, I'll do so quite cautiously as I don't know how rural East Texans will react to

Monday, Jan 2, 2006

No Question About Climate & Earth Changes
Wow - the New Year is just barely underway and we've got the whole range earth changes going on.  Not the least of which are the fires which broke out a week ago, the first ones being set off by people who were burning Christmas wrappings (and leaves in one case locally).  Beyond that, floods to the West, bitter cold North, and we'll be knocking on 80 degrees for a high here in tinderbox country later today.  Fire damage in the Texas-Oklahoma area is now up to about $10-million, but I expect 4 to 6 times that before rain shows up in a meaningful way - none in the long range forecast here.

Now that 2006 is underway, we are expecting to see energy prices climbing again in the next week or two.  One reason is Russia is putting the screws to Ukraine (which has been chumming up to the U.S.).  A lot of Europe's natural gas transits Ukraine and with extreme weather in Europe, Vlad Putin has some leverage, at least for now, so charges are flying this way and that.

I won't comment on how Tropical Storm Zeta has turned the hurricane season on its ear.

We might mention a pretty good sized 7.3/7.4 earthquake in the South Atlantic.  The quake is sort of interesting because of all the volcanic activity about, including the holiday lava flows up at Mount St. Helens.

Some New Year

Not to put too much "bah humbug" out there (after all, it was a truly fine holiday around our house), but I had a chance to talk with Cliff of www.halfpasthuman.com about some of the "big picture" stuff for 2006.  While the details are for his subscribers only, in general terms, we're both expecting an economic meltdown in the first half of the year, a hugely expanded series of wars in the Middle East by mid summer.  And oh yeah,  I wouldn't be in hurry to own south Florida real estate.

One of the drivers of this year will be how Iran reacts to world concerns that they're trying to build nuclear weapons - something which Israel presently has a lock on with their storehouse of about 300 warheads.  In the latest twist to the plot today, Iran reportedly is turning down the Russian proposal that Iran not build its own enrichment operation, instead buying fuel from Russia.  Makes sense - and might have prevented an attack later this year - but Iran says as a sovereign nation there's no reason why they can't run their own program. 

Good Times - and Bad

The New York Times is a fine paper, no way around it.  But today, the Public Editor of the paper is taking it to task for failure to publish the administration's eavesdropping on innocent US civilian when they first got the story more than a year ago.

George Bush, meantime, is defending his surveillance actions which are either illegal under the Constitution, or acts in the best interests of the American public, depending on who you listen to.  Meantime, NSA has been putting illegal forms of cookies on people's computers if they visit the NSA web site.

Another Gun Site

From a reader: "May I suggest you look at Glocktalk.com? "  Done.

Ham Radio Notes

Why do I love holidays?  This being a "day off" I will be hanging around the local 2-meter repeater for the Monday night social net on 147.08 this evening, the 75 meter double bazooka is now up at 45' and works just dandy.  And, last night I worked the Island of Majorca on 40 CW.  Bands are strange but I might check out 20-meters later on this morning (low end, CW mode, call sign AC7X).

If you're interested in ham radio, check out www.arrl.org - and if you're already a ham, have you checked out www.smeter.net?

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George Ure, The People's Economist