A One Man Business & Financial Newspaper
Saturday Sep. 23, 2006 07:00 A CDT
"How to Live on $10,000 a year
Sizing Up the Week
It was an interesting week, to say the least, for those of us who pursue the great American game of "second guess the markets." With a close at 11,508.1, the Dow held its losses to about 52.7 points for the week. The question now I think is "How far is down?"
Our fractals expert, Gary Lammert sees more than just a dropping Dow ahead - he sees the potential for a radical move to the downside because of an extra special yield curve inversion that didn't get too much press:
This weekend I'm up early Saturday writing Peoplenomics, our premium service. It's going to be hot today (93 and humid) but cold enough to get outside work done tomorrow (high in the low 80's behind a cold front) so I'm putting a series of 3-D models together that I hope will give subscribers a way to visualize what may happen this fall.
Essentially, my thought is that if you can plot events in 3-D modelspace, and then place "logical bounds" in some dimensions of the space, then you can make a more informed guess as to what future events will bring.
Take for example what's going on in housing. We're seeing a trend toward falling prices and sales, although as the LA Daily News reported last weekend, there's some drop in volume, but not necessarily prices in some parts of California. Now, if you take all the "housing stories" and think of them over time, you'll see they are moving (as a group) in the direction of deteriorating housing prices.
Now, while housing prices are drifting down, we can foresee an intersection with a couple of other trends. Foremost among these is interest rates. If rates actually come down a bit (say a quarter point) it may be enough to allow the trillions of dollars in ARM(ageddon) mortgages to be rolled over without forcing hundreds of thousands out of their homes. The problem for the Fed, of course, is how far down is the "magic number?"
If the Fed moves down more that just the right amount, then the whole housing bubble pops in a violent fashion and the economy is tipped over the edge and into recession which turns into Depression 2. On the other hand, the Fed thinks if they get everything just right, they can balance the forces that could sweep us into hyperinflation precisely against the forces of massive deflation, and thus avert disaster.
Because of the conditioning of the public, a well-timed exogenous market event could materialize, should the Fed's work at striking the perfect balance, such that the public's attention (and thus anger and blame) would be shifted away from the root causes (excessive consumption, misinvestment or malinvestment, political corruption, and confiscatory tax systems, to a more general "enemies of America" which can then direct the country this way (into Iran) or that (into other countries with resources, such as Venezuela, Egypt, etc.).
If you've been reading this site for long, you know that I tend toward the view (supposed by the Aggregate Index chart below) that Depression 2 is already here and has been unfolding since the all time market highs in January of 2000 by the Dow, and the only reason most folks don't realize it is because the whole War on Terror has appeared in the nick of time to give government the set of economic controls necessary to jiggle the economy as desired and keep the public from seeing things. I think of the War on Terror as the modern analogy to the Works Progress Administration and the Civilian Conservation Corp of the last Depression.
Thanks to the (almost too convenient) timing of 9/11, however, the positive economic impacts of the War on Terror are infrequently discussed. Without it, the country would have sunk much further into economic malaise before taking definitive action, and only then after much public rancor.
Public rancor ran high during the (first) Great Depression, and most folks today forget that in the early 1900's there was an active union movement challenging the concentrated wealth classes for control of the means of production.
Students of long wave economics might argue that major wars tend to occur both at the tops and bottoms of long wave trends. Hence, when the Baby Boomers were entering the workforce of the 1960's, government created a large war (Vietnam) and lots of government programs to soak up labor, such as the Job Corp and the rest of the Johnson Great Society programs.
The student of history would likely class World War II, and its continuation, the Korean War as "trough wars." In other words, when an economy collapses as it did in the (first) Great Depression, one of the ways to "recover" is to hold a big war to destroy excess capacity, reorder finance, and along the way redirect populations. Vietnam, goes this thinking, was a "peak war".
An instructive piece on the Grand Supercycle of the economy is offered by Wikipedia:
I didn't mean to get off on the historical perspective, but it's with these past events in place that I look at the week just ended as potentially a sort of "top of the roller coaster" as we head into what may be a tumultuous fall - lasting through next March.
A few readers have asked me why the preoccupation with war news lately - and frankly the answer is simple. Over the 10 years that UrbanSurvival has been published, I've tried to focus on areas that will shape future economic events. At the moment, thanks to the future predicting software of www.halfpasthuman.com, I'm tracking what seems to be a fit with a large number of military conflicts evolving throughout the world. Over the next year, I fully expect that war/wars/revolutions/rebellions will become a hugely important aspect of investment, thus, the additional emphasis in watching the footwork now that will lead to future events.
Money War at the Border
Western Union transfers over $500 being sent from Arizona and 29 US states to Mexico will be seized if the Arizona attorney general is successful. The company plans to fight the attempt.
Not the kind of thing that our friends in Israel want to read: Hezbollah claims it has 20,000 rockets left.
Islamists in Thailand?
We read the developments this week surrounding the coup in Thailand, and today are struck by the headlines that four policemen were wounded in a bomb blast. Given that m ilitant Islamists seem to favor bombs, we wonder...
At least 31 people have been killed in a kerosene (jet fuel?) tanker bombing in Iraq. We hope this isn't a start of coordinated attacks on American forces supply lines.
Security is tighter in Prague where police have received what they say are terrorist threats.
One of the starts of the movie Top Gun has retired - the Navy F-14.
My friend Matt Savinar has another energy special you might want to take a look at:
I'm most impressed with is the Kill-A-Watt device. It lets you see how much power an appliance is sucking up in real life. And,. you an do things like figure out how much watching TV costs...
Building a Perfect Home Office
I wish there was a single book somewhere that I could buy that would reveal all the secrets necessary to develop a “perfect” home office – where I could work at maximum productivity 100% of the time. Better: It would offer real world solutions to problems of paperwork, software hints, housekeeping, home networking and all the rest. But, alas, I haven’t been able to find such a book yet – so this week’s report is a collection of my “hands on” experience trying to develop the perfect office. This week's market view is in the ChartPack section accessible by clicking here. If you're not a subscriber, click here for instructions on how to spend $30 a year.
Some Business Model
Yeah, this site is free. Ever wonder why? Because a few people subscribe to our in depth reports over at www.peoplenomics.com. That gives us enough dough to plunk down on this site. So even if you don't subscribe to Peoplenomics (which I'm told would be a bargain at $300 a year, but is only $30 a year) the least you could do is tell a friend or two about this site by clicking here...or just send 'em an email and advise them to check out today's report.
Nifty for the Thrifty
Our ebook "How to Live on $10,000 a year or less..." Available at the Peoplenomics bookstore.
Friday September 22, 2006
I suggest that if you want to judge the risk of a "terrorist attack" in America, you need only look at the latest polls for the republicorps running for another term at the trough.
Today we see headlines that Karl Rove is reportedly promising insiders an "October Surprise" and I ask myself, what is he talking about? Could it be a false flag terror or striking Iran? Or, something else?
You'll recall that pre-election "terror" was tested in Madrid, and with a large enough event (which I am loath to forecast, but certainly fear as any rational citizen does) there would be some "rally 'round the republicorps" as a "don't change horses in mid-war" cry is sounded.
Don't get me wrong: I support America, our Constitution, our brave American Armed Forces and the Office of the President. But I disagree with George Bush who I believe is getting and taking bad advice from the neocon spin cadre that's been pressing for an Iran attack as a follow-on to the quagmire of Iraq's civil war.
If Karl Rove has an "October Surprise" planned, as reported, we call on him to announce it yesterday because if something bad happens between now and Election Day, it'd seem to me that he's on the hook. The story is spreading quickly.
Any fresher in military strategy would realize such a move leave our bravest and best in a 'pinchers move' which would be bloody beyond belief. The CIA World Factbook shows Iran has 18-million men available for military service and they can all walk to a battle in Iraq if the US does anything stupid. The US has 150,000 but they all depend on long supply lines and oil.
That's why this weekend Peoplenomics (subscription info) looks at some worse case October possibilities. We take the reports of an October Surprise as a strong possibility.
The Sense of Rising Pressure
One of the scenarios which we will flush out for subscribers is how an "October Surprise" (either a false flag, or an attack on Iran) might play out. Not that you need to think in conspiratorial terms to approach the idea, now that the word has come down from on high (via "snowflakes" to put it in DoD terms) telling the Navy to be ready for action in October, as reports the online version of "The Nation."
I don't usually recommend other news sites (there are others?) but this week there was an excellent "big picture" analysis piece on Wayne Madsen's site if you scroll down to where it says "Sep. 20, 2006 -- ANALYSIS "
Web Bot Kudos
Our confidence in the web bot runs continues to be quite high - and subscribers to the service - a new run will be started in a week or three - write in notes like this one:
Yes, it certainly does, Ollie. We'll be watching the National Strike meme closely. Remember though, the web bots tend to take things at their "worst case" rather than "best case" outcomes. It's the nature of looking at dire news about the future, knowing it's going to show up in one form or another, and trying to figure out how big an event is in advance. Still, better some vision of the future, rather than just stumbling into it blind.
Was Saddam So Bad?
While the US-installed government of Iraq brought in a "hanging judge" this week for the Saddam Hussein trial (where the swing is the thing we wonder why a trial anyway...), a UN investigator has come out and said that conditions and torture in Iraq today are worse than they were under Saddam. Hard sale, this gunpoint democracy delusion of the neocons.
Oh, THAT Economy
I call it "that" economy because there's an increasing sense that we are living with two economies in this country. One of them for the rich/high income/ republicorps, small to medium businessmen and the top of the food chain corporate owners who have money to invest in continuing their positions/favored treatment, and so forth. And then there's the rest of us.
If you wonder what is really going on in the world, I would point you to an excellent paper titled "The Productivity of Nations" by Margarida Duarte and Diego Restuccia who write - in part - in a paper for the Richmond Fed(eral) Reserve Bank that:
Wrapped up in the report is some evidence - obvious by just glancing at a chart or two - that show how the rich get richer and the poor get screwed:
While the report doesn't come out and say it, as the People's Economist I will suggest that there's a huge gulf between what corporatists are selling (e.g. "Free trade is good for everyone! Rising tide floats all ships!" blah, blah, blah") versus the reality that least cost labor without regard to purchasing power parity of workers is thinly disguised corporate exploitation of poor workers.
When a worker's income is paralleled by an equal or faster growing mountain of consumer debt, then the relative freedom of the worker and real wealth are declining.
We don't hear much about worker debt in China yet, but if you listen closely, you've been able to hear that banksters have been licking their chops ever since someone said in the mid-1960's "Just think how much pop we could sell if everyone in China drank one bottle per day..." And refi'ed every two years...
Semi Book to Billed
You don't need to venture into economic papers in .PDF-land to figure out that there is a recession coming on hard. A simple look at the semiconductor industry book to bill ratio shows that softening is here.
One of my friends, who charts such things, says he expects a 40-50% decline in semiconductor sales over the next two years.
To paraphrase Paul Harvey: "That'd be the rest of the story behind Intel's recently announced 10,000 job whack/job jack.
My friend Jas Jain proudly points to an article breaking down how deflation works and sends this in an email to one of his correspondents::
While more housing figures are due out Monday, construction is at the lowest level in three years, and you know that's gotta be a pressure on all the illegals working in that industry.
By the way, Elaine and I are pleased to accept Jas' invite to the hoe down at his ranch in 2008. At the rate land prices are going up in our area, we may be flying on our own corporate jet to attend.
I think last week I told you that our modest $1843/acre purchase of adjacent land is probably worth $4,500 an acre now based on a 7-acres sale a few thousand feet or so south of us. That's in 7-months!
But this week when E and I went into town shopping, we were astounded to find the price of a local development (5-miles from us) was over $250K per lot and that's at less than an acre in size! Granted, the "lots" have a spectacular sweeping 60-mile view (we're on the side of hill which passes for the term "mountain" in E Texas), but at even half that price ($125K each) that'd put our land at $3.6 million - and what's a jet to rent per hour?
A personal note to Jas: If you want your ranch to really maintain value, get one with water on it! We're heading into a resource poor future and having your own water and food will be the name of the game on the flip side of what's coming between now and March.
The headline today that "Profile: General Sonthi Boonyaratglin, an unusual Thai coup leader" has us scratching our heads: What is the profile of a usual coup leader?
Tight security in Indonesia where three Christian men convicted of leading attacks on Muslims are schedule to be executed today. Remember: Religion and resource wars.
Thursday September 21, 2006
No doubt about it, the market's strength in the past couple of weeks has been surprising, but then again, maybe not. There has been some good news for the market, such as the Fed holding pat on interest rates on Wednesday. But to me, the longer term picture is not so bright. Still, whenever Mr. Market gets this close to setting an All Time High, we need to take a sobering swig of the morning brew and consider whether it it - or isn't - more than illusionary.
If you would click over to the Federal Reserve Bank of Minneapolis inflation Calculator here, and put in the following numbers, I think you'll see my point. In the "In year" box put 2000 because that's when the market hit its weekly closing high of 11,723 by the Dow. The week of January 14, 2000 the Dow closed at 11,722.98, but for a lousy 2-100th's of a point, let's not quibble.
In the "I bought goods or services for $" box, enter the Dow all-time-high of 11723. Almost done: In the "then in year" box put 2006.
Press calculate and you should get 13,785.76.
Thus, your People's Economist claims that using the Fed's own numbers (which reflect how fast they are printing money beyond the actual growth in goods and services, thus watering down purchasing power so you need more paper "money" to keep even) the Dow would need to be that much higher just to break even.
Now for the detractors and "purists." Detractors of this almost to obvious point will claim that the calculation is not "fair" because it does not recognize (and maybe even compound) some of the dividends that companies pay. The detractors can sit on it and twirl for the following reasons: a) the calculation doesn't reflect companies that millions put their money in which tanked. Think Enron, Worldcom, and you know that list, although I hope not personally.
Then the detractors don't like to think about the impact of stock buybacks. These have some interesting effects (too diverse to run through completely) but let's just say that buybacks spend cash and while they theoretically increase shareholder equity, they're many times about executive bonuses which have done just fine in this period.
And with a note to the purists, who would claim that a further 2% to 3% can be added to the 13,785.76 target because of inflation in order to take into account the roughly half-year of inflation that's not shown in the Fed calculator's output, I'd have to agree. At the lower figure, we see 114,061.48 and at the higher, 14,199.33 would be the target.
Although its peak was not the same week, the NASDAQ in the "record Dow" week of 2000 was at 4,064 and the S&P (SPC) was at 1,465.
If we ignore the detractors and purists here, the NASDAQ Composite should be at 4,779.09 (ignoring the part year with unaccounted for inflation). That's just a week bit different than its close yesterday at 2,252.89. The NASDAQ Composite on a purchasing power basis has dropped 53% of its value since 2000. I know lots of folks who bet everything on high tech day trading, and will tell you that at its worst, purchasing power what half (or less) of even these sickly returns in their own portfolios.
The S&P is a little better off - but it's hardly a moonshot, either. The same calculations
show the S&P should be at 1,722.78. The close of the index yesterday (GSPC) was 1,325.18, or still down on a purchasing power equivalency basis 23.1% from its close on "High Dow" week in January of 2000.
My fractal friend Gary Lammert looks for Friday of this week to be a high point for the market and then decaying from there.
All of this is to remind the newcomers to the world of finance that when you see headlines, such as USA Today's "Markets shift into record-setting gear" this week, make sure you compare apples and apples, and don't mix in oranges. The US dollar has lost 18% of its purchasing power since 2000, and if you're not making 18% more than you were in 2000, you're making backwards progress financially.
I hope this at least partial answers an email from a reader:
The term "collapse of the dollar" can arrive in several different ways. One way is "inflationary" where it takes $10 to buy what used to cost $5. If you only have $9, you can't afford it any longer. The other way is deflationary: Where what used to cost $5 now costs only $2, but because you only have $1, you still can't afford it.
That's why whenever I talk about collapse of the dollar I try to be inflation neutral - it's all about purchasing power for regular folks and making you come up shy when you try to buy things you used to be able to afford. Your standard of living can be flushed by either deflation or inflation - and most folks don't think that through.
Lots of headlines today, but so many of them are "no impact" events, that they rate a bare mention in passing. Thailand's Prime Minister is unemployed. We don't have any job openings here at the ranch.
The space shuttle Atlantis is safely home. No one is going to give the crew credit for the nearly 5-million miles they would have racked up in a frequent flier program if NASA had one.
We could start by considering Turkey's action against a novelist for her book in which a character says not-so-kind things about Turkey, as in the country and people. No freedom of press there.
The Washington Post weighs in on the Pope's choice of words in this morning's online edition.
Here in the US a court says public libraries can block religious services in public rooms.
A new book by the general secretary of the National Council of Churches calls for moderates to reclaim religion from the far right in America. Book title is "Faith and Politics: How the 'Moral Values' Debate Divides America and How to Move Forward Together."
Adventures with "Dog" the Bounty Hunter
Let's see if I got this right: A US bounty hunter tracks down a rapist in Mexico three years ago and now Mexico wants him extradited? Bounty hunting isn't legal in Mexico...
Wednesday September 20, 2006
Fed Decision - No Change
North America Union Coming
Like it or not. The Powers That Be it turns out have been holding secret meetings to plot the joining of Mexico,; the USA and Canada into a North American Union say fresh reports. While the Bush backers and Constitution hackers claim otherwise, the odor of this is spreading - and secret meetings like the one surfacing today do little more than fan conspiracy talk 'round the net. Doubledumb of republicorps trying to hoodwink voters, unless they plan a stampede event?
Fed Watch Day
We'll post the Fed decision when it comes out later today. My money (and lots of others) is on the Fed leaving rates where they are now. A drop would signal panic about the emerging recession. Expect markets to bounce around until after the decision is formalized.
About Them Web Bots
A reader writes:
Thanks! Well, let's see: This is just the front part of the "rolly coaster" (that's slang, not a typo). We keep ratcheting up though next March and besides the mountain quake between Panama and the southern border of Mexico which wrecks a town of brick around a lake, a big west coast quake seeming likely, the attack on Israel's water supply, about the only other thing is the huge stream (pun intended) of glacial melt/fresh water unlocked which is apparently busy fulfilling the "waters receding part last run's forecast.
One of the problems with the linguistics approach to the future is that when something like "waters recede" pops us, there's a natural tendency to place the language in a more or less "natural" context. So when out pops "waters recede" we think of lakes, sea shores, oceans, that sort of thing.
But turns out that it looks likely that the whole "waters recede" thing has to do with glaciers, icecaps and what have you. The stuff is popping out all over the place.
And the list goes on and on. All of which gets us around to the "coastal event" stuff in the recent bot runs - and you can see some discussion of changing sea level starting to pop up - as the coming "coastal event" comes into more clear focus. While it may be true that glaciers have been receding for 100 years, it's also true that things like the polar cap on Mars are also going, going.....on a seasonal basis. And for several years, solar output has been going up.
As we reported yesterday, our rebellion/revolution meme from earlier web bot runs is now present in full force and if our linguistic tea leaf readers at www.halfpasthuman.com are right, tensions will just keep building through mid March 2007. I'll let you know when the next future forecasting run opens for subscriptions, but it's not for the feint/faint of heart. In fact, mostly it's depressing to get a general outline of what's coming because it's not pleasant. The current list of rebellion/revolution hot zones now includes:
New "Hanging Judge"
You may have been following the Saddam Hussein trial. If not, the libretto reads something like: "Chief Judge dismissed for not being harsh enough on Saddam, new "hanging judge" installed" If looks more and more like "the swing is the thing" so why bother with the media farce?.
While much of Saddam's trial has focused on his troops killing of Kurds, the US continues to rack up the body count.
Down with Yahoo
Oh I like Yahoo, don't get me wrong. It's just that's what the stock market did yesterday because Yahoo ad sales disappointed.
You may recall our story earlier this week that the Treasury Department has issues a consumer warning that Liberty Dollars (privately struck of silver) are "not legal tender." From a NorFed press release, we read:
All of which brings the public back to focus on the underlying issue which bears on NorFed's Liberty Dollar medallions: Since the US Dollar was hijack by the not-really-Federal Reserve in 1913, it's purchasing value has been reduced to approximately 1/20th of its original amount. Nonmonetarists, a few Keynesian relicts, and the Easter Bunny, would have you believe that the general level of prices have gone up, rather than forcing corpgov and the banksters to admit that they have watered down the currency through deficit spending by that much.
Meantime, I'd also note that even with falling gold prices since 1913, a one ounce "twenty dollar goldpiece" will fetch about $570 today (that's just the metal, not including numismatic value). So gold in the dame period of time has increased 28.5 times.
The genuinely "quick of math" will recognize immediately that $200 invested in gold in 1913 (buying 10-ounces) would be worth $5,700 today, while $200 invested in Federal Reserve notes which we note are legal tender will only by $200 worth of goods today.
I can almost hear the Keynesians screaming now "You didn't count interest!" To which I'd point out that they never back income taxes out of their calculations. Nor, do they ever point out that our beloved (non) Federal Reserve doesn't issue "silver certificates" as they used to - they couldn't back up the claims today.
Picking up from the NorFed press release:
Two other notes from the editor's desk this morning on the precious metals front:
My advance copy of this week's report from the Mogambo Guru of www.dailyreckoning.com offers this concise and clear explanation of gold's action recently:
This Mogambo's Moment of Clarity (MMC) brings important perspective
Attention Hay Runners
If you grow hay to be fed to livestock, and you sell any of your hay to anyone else (like the guy across the road), the FDA is now requiring transportation logs be kept.
Goat Weed Question
Since our logging operation earlier this year, we've got a bumper crop of what the neighbors call "goat weed" (their goats won't touch the stuff - they turn their nose up at it). I'll check with the local Ag offices. While I think they called it something else, the stuff sold by herbalists is general epimedium grandiflorum according to one site. Locals here call it goat weed. So, if you know of anyone who might have a market for this kind of thing, please drop us an email (click here). No, we're not going to sell anything without getting a positive ID on the stuff. I would be funny to sell "weed" in Texas,. though...
Zero Point Energy
If you're looking for the big breakthrough in "zero point energy" there's an interesting post up today about "negative impedance" If you're an electrical engineer, it might be worth a read.
Me? I'm still wondering how negative impedance is different from "conductance" the traditional reciprocal of resistance, measured in mho's (ohm spelled backwards). Except maybe that conductance is usually applied to resistance - and not that Smith chart madness impedance stuff, or it's tag along pal "power factor."
Tuesday September 19, 2006
Special Mid Day Update - Web Bot Forecast Arriving
You Say You Want a Revolution?
Although we've had a fair number of skeptics who have doubted the web bot forecasts of the revolution/rebellion meme going mainstream, we note that CNN is reporting tanks are being seen in Bangkok Thailand where rumors of a coup are being heard. The Thai government is still looking into explosions this past weekend which ripped through a tourist areas killing four and wounding dozens. A total of six bombs were involved there.
Sources tell us tensions are also running high in eastern European Belarus, where Russia has stipped the country of its oil export duties, and the government has signed a $1-billion dollar arms deal with Venezuela.
Southern Mexico continues tense after the US State Department issued a travel warning for Americans. And another drug tunnel into the US has been found on the Mexico border.
As we reported this morning, the situation in Hungary, where the government has admitted lying about economic figures, has continued to deteriorate 50-years after the revolution in that country in 1956..
Kofi Annan says Iraq is on the brink of civil war and needs international support.
And in the Sudan, civil war continues to expand.
Prime question now is this: If the Thai Baht runs into trouble, will that cause an Asia Contagion for which there will be no ready/healthy currency to fill the role of "reserve banker" as the US currency has been hollowed out?
NASA is trying to figure out what is shadowing the space shuttle. Our first bet: Space debris. Still, that's sure be an interesting story is it turns out to be something "other worldly."
The forest fire situation this year has been a real disaster, and the most recent fire in the Los Angeles area is reported at just under 75,000 acres late Monday. But it's not like LALA land is alone. In northwestern Ontario there are nearly 300 separate fires burning and the smoke is so heavy from the Canadian fires that it is causing haze in the maritime provinces.
And the fire picture is not confined to North America. In both Sumatra and Borneo, millions of hectares have destroyed millions of hectares in the past month. Staring into the coffee, you might think, yeah, that's pretty bad and then you start doing the arithmetic: one hectare is 2.47 acres and and acres is 43,560 square feet. Another shot of caffeine brings the idea that at least 4,000 square miles globally, and throw in the roughly million acres that has burned in China this year, likely closer to 5,000 square miles has gone up in flames..
Besides the obvious soil erosion, reduction of wildlife habitat, yada yada, there's also a new study out that says forest fires release up to 15-times more poisonous mercury that previously thought, which means in fire-stricken areas when the mercury's rising from fires, the mercury's really rising. Case for the paperless office made again.
Latest for the government's Bureau of Labor Statistics shows deceleration of the economy already:
Once again the "core rate" discussion is worthy of note:
Bottom line is finished goods are up 3.7% from a year ago.
At the same time, housing starts were down sharply in August...a bigger than expected 6% drop.
Soft, Worried Market
The Fed meets tomorrow to consider the question of rates again. My money is on a pass - meaning no change. Some publications think the Fed will be forced to cut in order to keep the economy's projected modest recession from growing into something more serious.
But such thinking is flawed, in our view. The real headline to watch is the decline of foreign investor inflows as the demand for our treasury paper is falling.
The Fed therefore has a difficult tightrope to walk in here. If they lower rates tomorrow, it will be a signal that the coming recession is very, very serious. Not that we didn't know that when reading about all the cuts planned in the auto industry already, including Daimler cuts announced today. But if they raise rates to suck in some additional overseas paper to prop up the dollar on an interim basis, then we will see a more severe recession down the road.
Our best guess: No change or down a quarter. But in the meantime, expect the markets soft today while investors figure this our for themselves.
Confused by Ratings?
We saw a crawler on the Bloomberg channel a few minutes ago that gave us pause: "Cheesecake factory cut to underweight." Somehow, Cheesecake Factory and underweight just don't seem like they belonged in the same sentence... or, maybe the guys at JP Morgan don't share our fondness for cheesecake. BTW, paradoxically JPM last month upgraded Weight Watchers to "over weight." Let me see...scale into a diet and out of my cheesecake? Gulp...
An Honest Liar
Well, how about candid then? While you may have some suspicions that all with the US economy is not as rosy as packaged by mainstream media, we are watching developments in Hungary where the Prime Minister admitted that the government lied morning, noon, and night, about the economy. As you might expect, thousands of protesters took to the streets, took over some television studios and in the process more than 100 police have been injured.
Dead Peace Deal
With dead people all over the place in Sudan's Darfur region, there's no reason to be surprise that a Darfur peace deal is reported near death also.
Illegal's Ready for Nukes?
There's a report that a lot of the OTM's - other than Mexicans - who are sneaking into the US across our (traitorously under protected) border with Mexico are carrying potassium Iodide pills. If you recall, this is the stuff used to pump iodine levels in the body when exposed to fallout. Is it just possible that folks outside the US know more than folks inside the US?
Countries of Laws
Canada has cleared a Syrian-born Canadian of being an al Qaida participant. But not till they deported him to Syria, where he was tortured for a while before being released. Which brings up the issue of whether government acting beyond the law is healthy.
Yes, there are ill-intentioned people who would harm America. But at the same time, if we don't take the high road on issues like this (e.g. honor the Geneva Accords completely and keep all legal dealings public, we're no better than the evil we seek to stop. As the case in Canada shows, governments do get it wrong.
As long as we're talking about "laws and order" I received some interesting stats were sent to me by a prisoner going time in a US federal lockup on alleged (but questionable and on appeal) "money laundering" charges.
Why with stronger terror laws, we ought to be able to push our inmate population up to 1,000 per 100,000 population, don't you think? Thanks to lawyers, the US at least leads the world is something.
One more thing: An interesting web site for you to be aware of - and scan once in a while if you have time - is "Justice Denied: the magazine for the wrongly convicted."
As my federal correspondent suggests, if one-half of one percent of inmates are wrongly convicted, that's 11,500 people wrongly boxed.
Monday - September 18, 2006
Angry Muslims, One Dead Nun
The recent papal comments about (historical) Islam have not only landed him in hot water with moderate Muslims, but sensing the momentary stumbling, the game of "pile on" is well underway. Iran, for example, says the Pope's regret is not enough. Then we see that al Qaida is promoting the idea of wider jihad because of the speech.
Even more significant: A nun who was working in a hospital in Somalia, and her body guard, were apparently targeted and killed by what is suspected to be religious gunmen (if that's not an oxymoron). On the other hand, Islamic leaders in Somalia are saying "Not us!" and they promise to go after the gunmen.
With a potential "hot date" for terrorism in the US of September 22 just around the corner this Friday, we notice that Muslims are being warned to leave America because of what's planned for our shores.
Paul (help start the Iraq War and then leave) Wolfowitz at the World Bank is making few friends at the International Monetary Fund for his firm anti-corruption stance. At least that's the ink being spewed out of the money-mongers and banksters meetings in Singapore.
Last year, the World Bank put a billion dollars of aid projects on hold for Africa over graft concerns.
To a thoughtful person, the whole picture is cartoonish. Sure, there's graft - or at least a different way of doing business - in a lot of Third World countries. But giving the scions of the rich bankrolls so they can buy up critical Third World infrastructure (like water and electric utilities) and then jack up rates to the poorest people on the planet doesn't exactly seem like the "high road" to us, either.
In some parts of South America, what's billed by North Americans as "corruption" really allows a large number of people to share in new money coming into a local economy. Functionally I'd argue that it's little different from an income tax, except it operates without the IRS, or multiple layers of "governors" and "regulators" and "bureaucrats.' Oh, but that's not corruption, is it...or is it? Speaking of which...
About Your Boat
Another one of those stories that should be leading the news, but which is being downplayed by MSM (mainstream media) is the federal decision out last week that may severely limit what is - and what is not - operation of private boats on the "navigable waters of the United States." In what seems like the complete flip side of eminent domain, a judge has ruled that riparian land owners retain rights of access to their land - and now water:
This ought to really kick up the price of waterfront homes, don'tcha think? 'Specially those with tidelands included.
A reader asked me to comment on the situation in the auto industry:
The short answer to the "Who will make their cars?" is simple. It might be General Motors, which has had some discussions with Ford according to Forbes.
I expect the government would get to collect Social Security Payments, that's a given. And, I doubt Ford consciously hires illegals in the US. On the other hand, it's almost a sure-fire bet that if the republicorps keep control in this fall's elections that the "guest worker" program that the corporatists have up their sleeve to implement right after the elections.
If the administration and financial leaders get their way - and nothing goes wrong like an inconvenient massive natural disaster showing up - then a soft landing recession is theoretically possible. If that pencils out, Ford will simply keep selling cars, like every other auto maker, to people who will refinance their homes again at lower rates (the Fed would drop rates to help the landing soften) and there you go - Presto! A magic "everything is fine" economy.
Of course, in such a world, my cheese sandwich would have more purchasing power than a US dollar bill, but China and the Treasury will do everything they can to keep the music playing. As I'll demonstrate in the next two stories...
The US dollar has continued to show a lot of strength, which is the main driver behind the recent drop in the precious metals. But now we have to ask "For how long?" It's being billed as a five month high and it has come while the G-7 is trying to promote a weaker dollar.
Treasury Secretary Goldman... I mean Paulson... is heading to China this week. The underlying dynamic is that because China's Yuan is tied to the dollar, China's ties may actually be helping hold the dollar up as their economy is booming.
While I really want to believe my deflationist friends, I look at the current account deficit and shake my head...
We read with interest a press release from the US Treasury Department about "Liberty Dollars" that was put out late last week:
The Feds note that "Under 18 U.S.C. § 486, it is a Federal crime to pass, or attempt to pass, any coins of gold or silver intended for use as current money except as authorized by law. According to the NORFED website, "Liberty merchants" are encouraged to accept NORFED "Liberty Dollar" medallions and offer them as change in sales transactions of merchandise or services. "
Now, the way I figure it, NORFED hasn't claimed their Liberty Dollars are "legal tender for all debts public and private" as the Federal Reserve claims on their paper, and if I want to accept something besides inked paper for goods or services, then I reckon that's a private exchange, and who invited government in to my private affairs?
You see the problem, of course: When too many "private exchanges" start taking place, the Feds losing their ability to take a cut. And that gets to the heart of the issues addressed in Peter Hendrickson's book on the income tax called "Cracking the Code" which is good reading.
End in Sight? 60-days?
My fractal friend, Gary Lammert claims "The puzzle has been solved!" So I wrote back and asked him: "What puzzle?"
What's interesting about this is that my 17-week cycle also shows a low very close to the same period (around the elections) which I explained to Peoplenomics readers a couple of weeks ago. So while the market may rally another day, at some point, the BIG DOWNDRAFT seems likely as we get close to the elections.
Oh, and when it happens, expect a major domestic terrorist incident to keep you from realizing that Leg Two Down of the Second Depression is underway.
Helene is now a category 3 hurricane, but this year has been a good one from a hurricane standpoint this season.
We got more than 1.25 inches of rain in the gauge overnight here at the ranch. A little late for local ranchers hoping to get another cutting of hay, but we'll see. Lots of hopeful ranchers in Oklahoma too, from what we hear.
Our local drenching comes courtesy of Mexico's Hurricane Lane - and from here the stormnants (e.g. remnants of the storm) will head east to Georgia and Florida.
News from Elliott Wave International
Instead of our customary chart, this week you get a free peak at one of our other charts from www.peoplenomics.com - this is our "Global Markets Equally Weighted" chart:
Write when you get rich,
George Ure, The People's Economist
|Bulldog Editions In the glory days of newspapering, the Bull Dog edition was the Sunday (or Holiday) edition of the paper issued on Saturday (or holiday) morning. It had all the regular features, but might not have the absolutely most current up to the minute "headline" items. We've generalized that, such that when we issue something in advance of our regular Monday morning update, we call them "Bull dog editions." Whenever you see a BULL DOG notice on the top of this page, check back later for a more recent update. Bulletins are posted as our work schedule permits and as events warrant. We try to publish Mon-Fri by 6:30 AM Pacific (9:30 Eastern. Sometimes we don't awaken on time, but when delays are expected we try to publish a projected update time for your convenience.|
Free Financial News updated daily except Sundays