Friday, May 13, 2005 06:00 PDT
How to Live on
$10,000 a year
Treason in Border Patrol?
The Washington Times has a dynamite piece this morning that reports US Border Patrol agents "got the word" that they were not to increase arrests in the area where the Minutemen were volunteering to reinforce the underfunded efforts of Border Patrol agents. This frightening report means to us that someone "upstairs" in Border Patrol is running an agenda contrary to the Laws of the United States - and to our way of thinking the term treason seems to fit. Not the rank and file, mind you. They are among America's finest. What I specifically refer to is anyone who would pass an order that countermands the laws of this Great Country. Unfortunately, we don't expect any patriots are left in DC (except Dr. Ron Paul who's one of the nearly vanished breed os 'statemen") - the land of lobby money and "campaign financing" - the modern day euphemism for corruption. Want an example?
DeLay's Big Night
Big money turned out for Tom DeLay last night - with conservatives (generally people with big money and vested interests) throwing in $250 a plate to show "support." Meantime, we hear home district support is dropping, but nothing that more campaign money won't fix.
You recall the definition of a conservative, right? That's a person who has never been arrested, been unemployed, or had assets seized. A liberal is someone who has been unemployed. A libertarian is someone who has been arrested, and a radical is anyone who doesn't agree with a conservative. Simple enough.
Bolton Gets Nod
Not that we're pleased about it - we wouldn't appoint John Bolton dog catcher - but then again, it's not our call. We don't make sufficiently large campaign contributions, as I see it.
Friday the 13th
If you are looking for a little bad luck, look no further than how people who bought the "buy and hold" claptrap with their 401k's have been doing with new money this year:
Dow Jan 1 10783.75 Today 10189.48. Net Loss: -5.5% (before inflation hit BTW)
NAS Composite Jan 1 2184.75 Today 1963.88. Net Loss: -10.1% (Again, before inflation)
S&P 500 Jan 1 1215.81 Today 1159.36. Net Loss: - 4.6% (before inflation)
Most brokers won't tell you how long it took to get money invested in 1929 back to break even in purchasing power. Sometime in the 1950's as best I can recall. Probably the 1960's if you throw in the inflation of money supply which watered down purchasing power of the FeRN's (Federal Reserve Notes) in that time.
The Distractions Before the Storm
Although the marked dropped, just as I predicted yesterday, 110 points toward the close after bouncing up a bit at the open, we expect the same sort of thing today. The market should get a nice bounce upward from three or four bits of economic news - some of them significant, but others which could bode ill for next week. Let's click through them, shall we?
The townsfolk in Round Rock Texas have to be happier than a frog at a fly hatching - word is that Dell earnings are up - and even more important, a lot of the earnings are on export equipment - a great sign.
Unfortunately for Dell exports, however, the dollar is also up. The dynamic here is that US companies like Dell generally benefit by a falling US dollar because it makes US-made goods cheaper for the rest of the world. So dollar strength, beyond a certain point is bad for companies like Dell and Boeing.
China To Hold on Revaluation
There are lots of reports out this morning from various sources that China is not planning to revalue the Renminbi or Yuan any time soon. Not only are the Chinese themselves reporting it, but it has been picked up by Business Week and Forbes, so the Chinese message is getting out. This means, we expect, a gradual move attempt. We don't think it will work because at some point there will be a tipping point for major Chinese dependent companies such as Wal-Mart, but for now, it's the hype - China may hold back.
French May OK EU
Also along the currency front, although it will take a bit longer to come into play, will be the elections in France shortly on whether buy in to the whole EU thing. The latest guess is that it will get the nod from French voters.
Speaking of Money
Off the headlines for a minute, there's a report out of Asia that there are something like $2.3 trillion in hedge fund monies looking for an exit.
A bit of good news as Moody's hasn't dropped Ford bonds all the way to junk. Close, but no cigar on that one.
This weekend's Inside Report (Peoplenomics) deals with The Singularity - a concept that has gone business mainstream, but if correct means the end of life as we know it... (Subscription Info)
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Should You Worry?
The short answer is "Hell yes!" The long answer is a little more complicated, so here's the medium-length overview: The pieces of the investment puzzle are starting to look a bit less confusing today for two reasons: We know that one hedge fund has been in trouble - and we know that what we reported yesterday about nuclear WMD fears had at least some substance to it as the Capitol was evacuated yesterday. All of which could be chalked up to a lucky call if it weren't for us doing this kind of thing with some regularity. The issue today is whether a few retail numbers can pull the market back from the abyss.
Today, and through tomorrow, we're looking for the bottom to really fall out from under the market - and there are rumors that more hedge funds are getting into trouble and that the Fed recently sent two planeloads of technical experts to China to help them with the technical aspects of unpegging the Yuan from the dollar. Maybe with a slight upside at the get go from retail sales which were up a bit. The situation is so worrisome that Cliff over at www.halftpasthuman.com issued a rare between bot runs email advisory to his subscribers that says in part:
It sounds like three efforts to stem a decline which end in failure, a rather specific read, but remember this is how emotive sums look, not necessarily how the market itself will play out. But from a fractal standpoint, it doesn't look particularly encouraging either:
While we don't offer any specific financial advice, limiting ourselves to the general market conditions, we nevertheless expect something like maybe a little pop up on news this morning and then the gates of hell opening up between now and about 2 PM Eastern time Friday. So this is a "check your seat belt" kind of day, although we're sort of hoping for one good whump down in silver so we can pick up another 40 pounds or so.
It's on days like this that I notice that if gold did nothing more than make up for the falling purchasing power of federal reserve paper since its $850 high in 1981 it would be at $1,901 today and silver from its one-time high of $50 in the same period would be in the neighborhood of $112.
Now back to my reference about the fed and the Yuan. There's another thing hanging on the market which will seep fully into consciouness of investors today: When China revalues, the Wal-Mart operation will face some "issues." The reason being that they depend so heavily on China for goods to sell. Today they report Q1 was fine, but Q2 has a big question mark over it.
Iceland: Shaken and Stirred
All five earthquakes that shook Iceland yesterday were close together and the only quakes to make the USGS big list. A great circle from there to the quakes off South America crosses (gulp) our neck of the woods here in SoCal.
Waiting for the Nukes
Notice how nuclear weapons are becoming like the weather - everyone talks about them but no one does anything about them. Russia says the US is to blame for North Korea building them as such a feverish pace. And Europeans are warning Iran about their efforts. We'll just sit back with the SPF 5000 and potassium iodide pills for the inevitable outcome.
Commanding the Waves
The television waves, in this case. We have two democratic CONgressmen saying that adding more conservative programs to PBS may violate partisanship rules. We find it amusing that we have CONgresspersons protecting us from "bad TV" but where were they when the Patriot Act was stealing our cherished Freedoms granted by the Constitution? Is TV programming a higher priority?
How that new Warner Music deal is going depends a lot on who you ask. If you just look at the numbers, it raised a lot of cash. But if you listen to the working types in tinseltown the rap is that 1,600 workers were laid off, a few execs got big bonuses and now the public is being sucked in. Like I said, it depends on whether you read the numbers of listen to the street. Does the company have clear sailing ahead now that they have some money? Not hardly. Go check out sites like www.fonogenic.com which are popping out artists too small for the handful of corporate music promoters - and figure to turn a buck on volume at the grassroots not branding and retailing positioning of product. What a concept, huh?
Innovation of the Year
I'd like to congratulate my former colleagues who are up for Microsoft's "innovation of the year" award for taping a modified ASP model together with tariffed third-party services using XML.. When we started the project more than 3 1/2 years ago, a number folks were skeptical. Now nearly four years later it's up for Microsoft's innovation of the year. It's like deja vu all over again - just as in 1983 I did the first ever broadcast of computer data to the general public while News Director at KMPS. That wireless data including news and NAPLS graphics idea was about 15 years ahead of the curve, while this modified ASP + BizTalk tied in to third party XML services was only 3 1/2 years early. One of these days I will get the timing right and make a few bucks...
There have been several folks who have passed on the report that so-and-so on some post is predicting two Nagasaki sized events today and Saturday. While we don't put much credence in any American city going poof or North Korea testing yet, it still makes for an interesting weight on the markets today if the rumor hits the floor. If big quakes don't get us instead, what is more likely to blow up, at least this week I think, are derivatives. The mere rumor that one hedge fund was on the rocks sent markets tumbling yesterday. Contagious as hell. But the Big Boyz will keep Herstaat Risk away from the sheeps. Too scary and would spook the herd. Good news about trade should keep things up early on today
What we're hearing in a second and third hand way is that the underlying math calculations are no longer working in some of the financial models used to drive derivatives trades - and that's got by the rumor mill, hundreds of quants going nuts trying to figure out why. As www.halfpasthuman.com human advised web bot subscribers yesterday from one of their sources:
Then there's some interesting market behavior with China's stock market tumbling to a 6-year low. Could the Yuan be about to float?
Our Kentucky windage would be up early, weak late for the markets today - the odds of a single hedge fund being "caught out" seem low - others may have the same problems and just not be reported on yet - the problem seems generic rather than firm specific. But there is some good news this morning on trade for a change...
Good News on Trade
The trade deficit actually improved in the latest reporting month, a development that comes as a bit of a surprise - and a pleasant one at that:
Harder Worker, Less Money
Real wages have fallen at the fastest rate in 14 years, in case you missed it in Tuesday's headlines.
Simple Iran Question
A reader wants to know "If Iran has so much oil about, why aren't they building a refinery or two instead of a nuclear plant?
Good question but I expect the answer is in economics - if a foreign country will lend you the technology in return for oil - and back it up with muscle to keep you independent (as Russia seems to be doing) then why not? I expect the Iranians know that oil reserve estimates are really inflated.
More than 60 people are dead from suicide bombings in Iraq - and the day is not over yet.
In Afghanistan, 4 people are dead in rioting following reports that foreign interrogators (that'd be us) torn and otherwise desecrated the Koran during interviews with prisoners.
Putin on Foreign Investment
It looks like Vlad is trying to limit the death grip foreign banksters will be allowed to get on his country as he tries for limits on foreign investment, especially in critical industries and natural resources. Once again, it's a move which will give Russia relative freedom of movement on various policy fronts when they decide to sell some of their oil for Euros in lieu of dollars.
United Skates On Pensions
I have a lot of friends who have retired from United Airlines - and I don't think any of them are happy with UAL being allowed by a bankruptcy judge to skate on their pension obligations. Now here's how I see this: There has been a growing tendency in the courts to overlook consequences of executive actions because they are "too big to fail." Write down the prediction: First UAL will skate on pension obligations, then GM retirees and other large firms as well. Here's Mr. Ure's no cash option: Force the company to give retirees stock in the company commensurate with their retirement's present valuation. Yes speculators would take a bath, and so would a bunch of banksters, but you know what? That's what risk is about. I figure there ought to be some way for my friends who worked for 35+ years to get something of value even if the cash isn't there.
We've been hearing from our friends in the music industry for several weeks about how cool the new Rolling Stones tour will be. It's not just the novelty of the aging geniuses on the road again, nor is it Mick Jagger's hard-nosed management of tour costs which I understand to be pretty impressive. Rather, I'm waiting for details on some of the technical innovations. One rumor, for example, has it that there may be a moving section of the audience staging, where the center section will be on rollers and will roll forward and turn to face the stage. But while technical innovations are part of the picture, it's all about the music and word on the street in the LA music industry is the sound track includes some "best ever" new material.
While out for a quick shearing at the places that pince your FRN's, Elaine happened to stumble across genuine chicle chewing gum. On the way back from Trader Joe's where she located it, we got into quite a discussion about practical uses for the gum. "You could use it as an emergency wound dressing," she suggested. I privately pondered if my blood pressure would spurt off such a flimsy emergency end cap. "How about to put on your nose instead of zinc oxide?" wondered E. Then, it dawned on me faster than a republican with a tax cut for the rich, that chicle is so old and out of style it doesn't even show up in my spell checkers.
I've pretty much given up on what useful things can be done with well chewed chicle that you can't already do with a cotton shirt, welding torch, sledge hammer, or a bottle of Barr's StopLeak. I may be one of the few souls to appreciate that the submarine Nautilus' first trip under the North Pole was made possible by a can of StopLeak for some hydraulic system or other.
Back back to my question: Is there anything you can do with gum (besides chew it and use it as a short duration adhesive that makes a mess outside of your mouth? Come to think of it, my relationship to gum is a lot like my relationship with words, which also make a mess outside of my mouth now and then. Click here to send ideas. Nothing obvious, like fixing a leaky hose, or something to stick in your ear while eating.
I don't think it works as a patch with modern tubeless tires (although it might in the Arctic). I wrote out some detailed testing instructions and signed them as offered by the the people next door, because I knew they would it they had time. "Take this ice pick and these few pieces of gum which you have chewed. Stab your front tire a couple of times and see if the gum will keep it from leaking. (again, signed on behalf of the neighbors). After a fair spell, if figured out this one particular truck of a loud very largish and not particularly happy looking resident who might be interested in lending science a hand.. Then, for the briefest moment, I had second thoughts about putting the testing implements by his truck. You better think of something quick before one of my experiments is fielded.
Jim West, the republican mayor of Spokane, Washington is taking a leave of absence as allegations are swirling about concerning sexual favors. Allegations about a gay chatroom resulting in a city appointment are gathering steam in the Pacific Northwest. What's interesting to us is not the specifics of the sexual conduct alleged, but far more telling will be the reaction of the conservative townsfolk of the Inland Empire. We think it may become a bellwether which will be watched by Washington pundits who are observing Gaygate Major develop on the net. none of which is particularly interesting to us except that it might have large economic impacts if a large portion of the GOP core begins to feel that they have been betrayed or misled. We expect Karl Rove is reading all the Northwest papers trying to map out a strategy should Gaygate Major go mainstream.
Iran Resumes Fuel Program
Not that everyone believes it is a fuel program - because in nuclear circles, what could be fuel could also be used to make bombs. So as Iran begins processing enriched uranium, we look for the odds of a Blitzkrieg type attack on their nuclear facilities as an increasing risk, with Israel the most likely perpetrator should it come.
Speaking of nukes, Russia is planning to build more reactors in India. One heck of a technology to export.
Oil Up, Pumps at Limit
Back to $51 - and with it, another report that OPEC is pumping pretty much flat out.
Now let's play "connect the dots" for a minute. We see that oil is at $51 - and we see in the work of several colleagues that the purchasing power of the US dollar may be about to resume its downward spiral. So when we see stories like the one about Russia and the EU signing landmark cooperative accords, we see more to the picture.
One thing, just to think about, is what will happen if before June of 2006 Russia were to start denominating its oil business in Euros instead of US dollars. Remember as we watch the increasing threat of an attack on Iran, that the issue is not really nukes. There are already plenty of nukes around the Middle East. Iran as reportedly had at least two since the breakup of the former Soviet Union while Israel at latest reports was around 265 warheads, plus or minus a Hiroshima or two.
No, the real issue with Iran is that they are still planning to open an oil trading bourse in March of 2006 which will trade oil for Euros - and Russia is jockeying into position to sell oil for Euros. Because such a development would end dollar hegemony, the US and its controlling banker interests won't likely allow it to occur, even if it means a first strike on Iran - a move Russia has already signaled would involve great peril should the West do anything so aggressive.
Anti Israel Summit
The Arab press reports that Israel's occupation of Palestinian territories will likely be condemned as a summit in Brazil gets underway. One reason: Israel has stopped the planned evacuation of 21 settlements in the Gaza Strip raising questions about Israel's intent to withdraw.
I am constantly amazed at how I become improperly labeled an enemy of Israel for reporting stories like this one or coverage of Israel's spying on America. Yet when I report stories about Palestinian extremists engaging in acts of terrorism (the flip side of the issue) no kudos. As I see it, there are two sides to the Middle East mess and we'll continue to cover both as what matters to us is the outcome, particularly as it relates to energy and America's national security, not the ideology of either side.
While our friends in the Los Angeles area report this has been one of the cooler springs they can remember, off to the south, people in Australia are sweltering as a huge drought continues. Residents of places like the Sierras are dealing with the typical violent spring weather and over in our home state, we read about concerns in the Texas Hill country. Whether this is just normal excursions from the mean is something a lot of scientists will debate, bur normal or not, it is predicted to cause problems in China later this year. We also expect economic conditions of Europe to be adversely affected because the great thermal conveyor belt of the gulf stream slowing. With some long range weather models predicting an average to above hurricane season, people on the East and Gulf Coasts seem frankly oblivious to the danger. Go figure.
Inventories and Sales Report
Although this is a rearview mirror report - it shows what we already expected - sales are weaker than expected - want one reason? See the jobs number report below... or back out petroleum sales and you find tyhere has been no increase in sales - a net loss in fact.
Jobs Number Scam
Hands down, this was last week's prize winning reader analysis of the markets:
Against this dismal disclosure, not yet widely appreciated by the spoon fed press, we read headlines suggesting the market just lacks direction or "Uncertainty Outweighs Good News."
Double Sun Issues
While we've been waiting for the web bots "double sun" to be delivered, we again catch sight of reports that NK may go with a test nuke in our high risk period (May 12-27 ish as the time has moved slightly ahead).
Then there is the Drudge report of the NYT splash on "the most dangerous two miles" in America - about chemical plan dangers from potential terrorist acts.
Let's start with the matter I referred to last week as "Gaygate." This is the buzz surrounding the Jeff Gannon (if that's his name) story and allegations about how much time he spent at the White House - and doing just what - is a matter of conjecture. But the frequency of reference is increasing. So is the detail.
While we don't make value judgments, there's enough in the way of rumor and innuendo circulating on the 'net presently to cause us to consider what the investment impacts would be if there were any truth to such reports. Our expectation is that it would send a horrific shockwave through the whole of the NASCAR Belt - as you'd expect if millions of the country's conservative core were to hear such report. And they may, as we have several sources indicating several sexposé's (both US and foreign) dealing with this topic are on the way.
While we may well see some shocks from items like North Korea, problems of India, and perhaps Iraq, there's no doubt in my mind that if this Gaygate story hits the mainstream in a meaningful way there will be investment outcomes as public confidence in the Bush administration changes in character.
7 Days in May Start Now?
Indeed some "out of left field" surprise to the conservative core may be what the www.halfpasthuman.com reports are encompassing in their future-scanning technology based on internet linguistic shifts:
We wonder if it will be a melt up or a meltdown this week as a result.
I have been besieged with great emails from readers along with a flood of tidbits out of the current web bot run that individually aren't earth shaking by themselves, but when you put a bunch of pushpins on the wall, the tendency is to say "Wow! What a mess!" Some examples:
Roger that, Roger
I've been on a mailing list from Roger Reynolds for some time - he doesn't send out bills - just sends out his thoughts as emails to a group of us economics wags. His latest pretty much sums things up:
I mention this because Roger is having a free public meeting this week:
If I were in North Carolina I would plan to be there Tuesday night - anyone who sees how prices don't go up, the purchasing power of money is being (aggressively) watered down is a worthwhile investment in time and effort to go hear.
News from Elliott Wave International
Write when you get rich,
George Ure, The People's Economist
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