I don't think I need to spend much time drawing the Big Picture for you - of what could happen if there was a major attack on Saudi oil installations by al Qaida.  Yet it was just that possibility that was perhaps avoided yesterday afternoon with the arrest of 172 people by the Saudis, as a major terrorist network was reportedly rounded up.  Good thing to bust up - but is there more?  The Saudis are worried there may be.

---

A report in Canada is headlined "Montreal being prime for Flase Flag Op to complete the Annexation of Canada?"  Part of me says "Oh, that's too outlandish to contemplate..." and the other side says "Yeah, that would be a push toward the un-elected government/shadow government agenda of merging the US, Canada, and Mexico into a single corporate empire - complete with a currency to be called the Amero - similar to the Euro..."

---

That something might still pop this weekend (see my "Friday Jitters" note from yesterday), as there's just soooo much that could be swept under the rug if we do see some kind of "event".  "Like what, exactly?"

• Former CIA boss George Tenet says Dick Cheney had his eyes on invading Iraq long before the events of 9/11, for example.

• Congress is pressing the White House on the use of republicorp email systems instead of official systems related to the political firings of US Attorneys who got uncomfortably close to putting two and two together...

• There's a HUGE story behind the District of Corruption escort service that has many members of CONgress and other branch by the nuts, so to speak.  We just had another resignation yesterday which is but the tip of this particular iceberg which goes back to the Abramoff scandal and who's pulling what for policy purposes.

• Then we have George Bush and CONgress arguing over war funding and the pull-out timetable.

With so many things needing to be "swept under the rug" I fear that a 'Big Broom equals Big Boom' may be the answer served up by the sinister...but then I don't buy the official (and deficient) explanations of 9/11, either...

So with all this pressure building, we find it interesting that six people have been arrested by BATF for weapons charges in Alabama.  The group was part of a free militia - which gets me to an interesting ponder point...just how "free" are we?:

As I read the Second Amendment to the Constitution guarantees the right to "keep and bear arms" - but nowhere did the Framers limit the definition of arms. That came later.  As I read the Great Document, I don't see anything that says  "right to keep and bear arms except..."  So, it's interesting to me - from an historical perspective - to see how the individual right to keep and bear arms has been eroded (one could say "just changed" but we'd argue there) from what was written.

OK, so that logic -- carried to its extreme -- would mean that individuals could hold automatic weapons (without regulation) and who knows, even things like tanks and such.  For sure, I wouldn't want an angry neighbor down the road with a 100 kt. mushroom machine, although I would be disgustingly nice if he had one, but on the other hand, if there are drug-crazed meth dealers with AK's with the illegal sear, why can't I have one on my own property for purely defensive purposes?  And - if someday I wanted an automatic weapon, is there some provision for people of less than mercenary means to afford the class x BATF permission required? 

To carry that one step further, poor folks can get an attorney free - but not a self defense weapon; you know which is more dangerous, right?  (If you didn't say "Attorneys!" you don't know many.)

In ordinary times, as society hangs together as a functional unit, I don't need an automatic anything (which is my I don't have one), but looking waaay ahead, I wonder what happens if /or might happen when things go seriously non-linear?    Don't mean to belabor the point - but it's an interesting thing to read up on and ponder.

The first quarter GDP numbers out yesterday (1.3% annualized rate) are partly blamed on the continuing problems of the housing bubble bursting.

Two critical points:  First as the People's Economist, I doodle the following equation on the white board for you: 

 -    12.3% annualized inflation

   +  1.3% GPD growth

     - 11.0%  - the decline of your standard of living if this goes on for a year.  Yes, this would suck.

OK, second point - the Mortgage Implode-O-Meter is up to 63 lenders gone toes up so far.

And one more bummer to reveal about the eCONomy:  Stellar investment advisor Jeremy Grantham says in so many words that "All the World's a Bubble" - which sounds suspiciously like what I've been whining about since things popped in 2000 with the Tech Wreck.  Still, this is a new and improved Depression - at least so far.  If you don't 'get it now' you likely will by year end.  Stick around..Good Tiomes are just ahead, neighbor.... (Where did I read that.

In Estonia people are fighting in the streets over a war monument - paradoxical as hell, if you think about it.  600 arrested last night and nearly 100 injured.  Is it something in the water?

The headline "Catching Predators: Miss America's crowning achievement" caught my eye.  Apparently will be on America's Most Wanted tonight.   Brilliant marketing.  I wonder who else will could be set up as a celebrity crime fighter?  This is one of those stories that I wish I knew how it came to be...more details how was she picked - and more important, whose idea was it?  The stories don't seem to answer that question... Hmmm....

In Kent (England, NOT Washington) an unusual 4.3 earthquake took place.  Most out of the ordinary for the region.

If you are waiting for the first installment of the current web bot run from www.halfpasthuman.com, there are delays due to health issues - a note from the event-predictive linguistic whiz kids tells more:

"Hello. Igor here. There will be a delay in posting part one of the ALTA 0108 series. Clif is ill with headcold and his wife is still sick too. Even one of his dogs has just come back from surgery. He thinks he will be able to get part one posted next week some time."

Strategic Investing

A number of emails landed in my inbox last week taking me to task for failing to point out that while it is true that gold has outperformed the Dow since the all-time-peak of the Dow (in terms of purchasing power of the index, ex-dividends) since 2000, an even longer term view would reveal that if we had compared the performance of the Dow since the all-time-high of gold at about $850 in January 1980, we'd see the opposite - that in this longer view, gold has under-performed the Dow. Again, this is all true, but it fails to answer the question which matters most right now, this instant: What should I be investing in today in order to have equivalent or greater purchasing power when I want to redeem my investment into consumables at some future time?  This week, some thoughts on how to get rich by playing long term trends and playing "follow the leader..."

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Friday April 27, 2007

Whenever I see the price of gold drop by a fair amount - as it has the last couple of days, I start to get an odd sensation around the back of the neck - sort of like when in my sailing days I 'knew' through some unknown mechanism in advance before hitting the rack to let out a little more scope on the anchor because there'd be a blow coming through overnight...that sort of thing.  So it's with some apprehension that I'm watching the headlines for something to pop between now and close of business on Monday - maybe later today or over the weekend.  Something in terms of paradigm/market changing.

---

So far, fortunately, the headline scanning hasn't resulted in anything jumping up and screaming "this is IT" at me.  For example, the Newsday report that the democorp elites that have been 'put up' as 'presidential material' are all flying around in private jets - global warming is something for us peons to worry about - not the uberclassen. Nothing new there.

The rest of the debate seemingly was not very exciting, except to see that democorp put-ups are just as slippery as republicorps.  Maybe I'm far enough into Lee Iacocca's new book  "Where have all the Leaders Gone?" to just be thoroughly disgusted with fellow countrymen who want more of the elected elitists/dynasties at the top.  Sickening.  Where's the new blood?  Where are the leaders? Why isn't someone like Howard Schultz, Jeff Bezos or Michael Dell in this thing?  Leaders - people who know how to manage and make a buck - instead we get career 'slipperies'...but I digress...

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Perhaps some leadership will show up in the debate over Iraq/Bush war funding.  The Daily Texan reports that "Congress clear Iraq funding bill, awaits veto" and the VOA says "Lawmakers discussing Post-Veto strategies."   I'm not holding my breath for some leadership in this....

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There are lots of things percolating right now which either a false flag attack on America, or a major something out of left field would do.

An "event" would pull Condi Rice out of the fire as the House has subpoenaed her to talk about the lies that got the country into Iraq.

Another thing and "event" would do is push stories like the "Probe of White House political operations moves ahead: Special counsel sets up procedures to investigate the firing of a US Attorney and missing White House e-mails" out of the headlines.

There's also some news coming out about the new natural gas group, whose membership list includes Russia and Iran, that points again toward a showdown with Iran.  The reason being that Iran is reported by an Asia Times Online article to hold an amazing 51% of the world's natural gas reserves.  Part two of the series is here.  An "event" could be spun into an attack on Iran...

Perhaps figuring that he's got gas power, Russia's Vlad Putin is planning to suspend a treat on troop levels in reaction to the US push to put an anti-missile system into Eastern Europe - which would be like Russia putting an anti-missile system in Mexico or Canada, if the shoe were on t'other foot.

See what I mean?  Some kind of "event" would be convenient on many fronts.  Maybe the Consumer Sentiment number coming out later this morning will suck, but when I see gold banged down hard I find myself wondering if I should top off the meds, gas tanks, and do whatever else would be the equivalent of checking the anchor and chafing gear.

At latest glance, the price of gold has popped back up and the dollar is dropping again, and if we take out 0.73 Euro, my sense of worry/jitters goes up more - regardless of what the Dow will do. Banging down gold just seems to portend something - hopefully I'll be much worried about nada.

Some of my friends, who has been bears about the impact of the economic long wave seem to have turned almost giddy in their bullishness - even my friend Michael Nystrom at www.bullnotbull.com, who writes...

"George,

Phony as it is, I think the Dow is going to 14K. It looks like a multi-year reverse head & shoulders pattern. But after that, the crash is coming. But the advance is P-H-O-N-Y rate, it is phony as a $3 bill - 100% inflation induced. Meanwhile, the second great depression has already begun. [We agree on this point - G]

http://bullnotbull.com/archive/dow13k-1.html 

There is an image that you have to see in this article, produced by a graphic design studio up in our old stomping ground - Seattle - called Blue Wire Studio ( http://bluewirestudio.com/  ). Its a computer/3d image of Helicopter Ben - true to his name, dropping money all over the globe from his helicopter. It is great. No way these young kids are slackers!

Have a nice weekend.

And hey - I'm rich! You always say to write when people get rich. As soon as people realize its not about the money, they'll wake up and see how rich they truly are.

Take care George,

Michael"

Hmmm...at the risk of sounding like Bobby McFerrin ("Don't worry.  Be happy, make money...", or something like that), it's ike I always say "Things always look the brightest before dark."  so I'll just be minding them hairs on the back of the neck.  Or, maybe I just need a haircut.

Federal Help

That flooding a while back has opened the way for some residents of New Jersey to apply for aid from FEMA. 

Speaking of the "We're from the government and we're here to help you" saga, you might want to see what happened to Constitutional rights to keep and bear arms in the wake of Hurricane Katrina in this video over at YouTube.

And speaking of rights and guns, I'm pleased to report that my www.CheaperThanDirt.com order for some additional 7.62X39 coyote repellent has arrive safely - back in stock for who knows how long.  I'm not sure my FedEx driver believes me when I tell him a 40-pound box that's not too big and is marked ORM-D is coyote repellent, but it seems to work fine.

"Life" Beyond Roomba

OK, Elaine has been deliriously happy with her Roomba, and if she's happy, by extension, I am.  What's more, I'm starting to look at robotics stories a little differently - especially ones like this one "What would happen if the robots turned against us?"  OK, sure, sounds like sci-fi woo woo, but coupled with the Ray Kurzweil's book about the approaching "singularity" (when created intelligence overtakes what passes as human intelligence), it's got me wondering what lies ahead.  But rights for robots?  I don't think so...

Party Gene

I don't know my daughter in genetics (ancestry/parent/health) testing ( at Genelex) can scan me for this one yet, but seems like some new genetics research is  pointing to a gen mutation called the "after-hours gene" as a reason why some people tend to be night owls.  Heck, I just thought it was either because of the pay differential for working third shift, or because the partying was so good - seemed a much simpler explanation to my small/human/non-robotic mind.

Life After Pesticides

Couple of articles:  Britain's plant storage vault (a sort of Noah's Ark" of biodiversity) has just collected it's billionth seed for storage.  And a DieOff group posting makes an interesting point about bee colony collapse...

"I'm an organic beekeeper.  Two things here. One, we would not be so dependent on commercial non-native factory farmed honey bees if we were not killing off native pollinators. Organic agriculture does not use chemicals or crops toxic to bees and, done properly, preserves wildlife habitat in the vicinity, recognizing the intimate relationship between cultivated fields and natural areas.  Two, factory farmed honey bees are more susceptible to stress from environmental sources than organic or feral honey bees. I know alot of people think beekeeping is all natural but in commercial operations the bees are treated just like livestock on factory farms."

Thursday April 26, 2007

America's Chance to Bail Out Winners?

Oil Plateau

Housing Bust

Warring and Such

This weekend, we'll do some research for our Peoplenomics.com subscribers to size up what happens to the US after it's wars.  The reason for asking the question?  The bill setting an Iraq withdrawal timetable is moving on to the Senate.

---

Mixed reviews of Bill Moyers piece on lies leading to the war last night.  Pro side reader who enjoyed it offers this:

"Wow, George - watching the show now. Amazing! thanks so much for the heads up in your column today. I NEVER thought I would see something like this. Secrets revealed, indeed!!"

On the more skeptical side:

"Sorry, I have to vent here!

Considering Moyers pretty much invented the political-emotional-spin-ad genre to put LBJ in the white house and brought us the Viet-Nam war he'd be just the one to make a career out of ratting out his own foul creations.

"Win" at all costs, by all means. Gotta get that BIG Texas mandate and go MANDATORY this and MANDATORY that!

I got MANDATORY threatened with a draft and had to MANDATORY pledge to uphold a Constitution our "leaders" used for *ss wipes.

Remember the little girl with the daisy? Remember what Johnson got us into?

Bushco just re-edited and embellished their script a little: All the real invention and innovation was done on Bill's watch.

Maybe old Bill got a visit from three spirits? I missed his apology.

Bah! Humbug! Rubbish!"

And the House is considering a subpoena of Condi Rice over her role in the war selling stories.  I promised myself that I would not headline this as "Rice Erroneous:" as Canadian Bureau Chief Tim B is pressing.  He doesn't have to worry about no fly listing.

 

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Wednesday April 25, 2007

Storms and Prices

Elaine and I managed to get some sleep last night- although honestly not much, as that band of killer weather moved through our area on its way up to Oklahoma and the Red River area which we will be watching for flooding based on the web bot predictions of some time back.  I think most of the event-predictive language was fulfilled with the storms and flooding in the Northeast a while back - which came complete with the pictures of the airplanes in the water at Teterboro (NJ) airport.  But still, that Red River/Mississippi reference has me looking, and we know linguistically similar events can mask others a ways down the timeline.

 

At least six people were killed by the storm down in Eagle Pass, Texas, and the storm moves up north today.

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The weather this year has folks debating whether commodity prices really have a major impact on food prices.  Sounds obvious to me that they would have, but the Wisconsin Ag Connection headlines that "Study shows corn prices have little effect on food prices."  The hardest part of this for me to swallow is the prediction that food prices will rise only 3.3% this year.

 

The Desmoines Register takes the other side of the discussion headlining: "High-flying commodity prices crimp US food buying for poor."

 

Bring in cut rate truck drivers from south of the border and export a few more jobs to take advantage of the "productivity and efficiency" of out-sourcing, and "the poor" will include most of us.

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With crop losses are a focus here, we've also been watching Australia where they are having one hell of a drought - and that is an oddity given that their inflation figures have come in so low. Oz-flation is running at 2.4% so their central bank is not moving rates...and in Canada, the same thing - inflation watch, but steady rates for now.

 

This will take a little pressure off the Fed to raise, although again, watch the sinking value of the dollar as a key, too.

 

In England, we note the comments of Mervyn King, the Bank of England Governor, who says that inflation will soon turn down.  Yep - that's called deflation...happens in these things called Depressions.

 

We notice that coffee and sugar have put in long-term lows - and I expect any minute to get an email from my deflationist friend Jas Jain saying something like "See!  It's not just housing!!!  Deflation is real!! It's arriving in the commodities now!!!" And, he'd of course be right.

 

The Big Shock is what happens when a large number of Boomers all try to grab their money off the table in the paper markets while they can still do something useful with it?  That's when we get crash times. I expect the market/dollar volatility late this week/early next will be nothing in comparison to the Big One that'll happen when everyone smells the smoke in the financial theater...

 

PBS - 9:00 -10:30 PM Tonight

The folks who have seen an advance say that Bill Moyers does a fine job explaining the media  spin of lies that led to the Iraq War.  And as one reviewer notes "Spending that 90 minutes will actually save you time because you'll never watch television news again - not even on PBS, which comes in for its own share of criticism."

 

As one reader writes in advance of the show...

"...the older I get, the more I think this country is so built on lies, half-truths, ancient mythology and anti-science that it'd collapse in a heap if you took it all away (what was that Jack Nicholson line??? Oh yeah, "YOU CAN'T HANDLE THE TRUTH!") Glad to see Moyers is coming back to PBS. Maybe one of these days honest and objective journalism will cycle back in (probably long after I'm gone). In the meantime, I'm counting on you and a few others...."

Meanwhile, we're wondering what Dennis Kucinich's future will hold since he has introduced impeachment articles against Dick Cheney.  May even come up for a House vote today.

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Speaking of Dick Cheney, our friends, the time monks at www.halfpasthuman.com note that Dick Cheney's blood clot is reported improving - but they hint Cheney's health will bear watching over the summer/early fall period.

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This gets me around to mentioning a follow up to Lee Iacocca's new book "Where have all the Leaders Gone?"  I sent a brief extract of the book to my kids and daughter (chef/culinary star) Allison offered some feedback:

"Nice one dad,

I agree [with Iacocca] but I don't think it will turn around for a while. If you look at a map of who voted what color, we are surrounded by people who watch reality TV and listen to the same 50 songs on the radio. Not NPR and PBS like me and you."

I hate it when the kids are right...

Wal-Mart's Intel Group?

We read with interest in the Pine Bluff (Arkansas) Commercial that Wal-Mart is recruiting ex-military and ex-government types for their global security office.  Seems to me like the move makes sense, although I'd be after some ex-CDC people, too.
 

Car Color Indicator

The folks over at www.socionomics.net have published a fascinating paper by Mark Galasiewski "Social Mood and Automobile Colors."  Seems like black, white, and red are popular in bull markets and the more earthy brow/green/beige show up ahead of and during bear markets.  And guess what's selling well now? Also of note: On the faux-wood "Woodies" like the PT Cruiser Woody, the report suggests that's mainly a downswing trend.

 

Calibrating the Exit

A reader sent a very well thought out note worth sharing:

"[You Wrote:] "I hold to a simple notion that the break in the US market in 1987 was analogous to the market break in 1920, which then led to the absolute (for the time) peak of the stock market in 1929. To complete the picture, I hold that the all-time-high of the market was 2000 and that by a clever bait-and-switch (using the twin distractions of the "terrorist attack" on 9/11 and the quick slip into war in Iraq immediately thereafter, most people have managed to remain blissfully ignorant that since the 2000 absolute market high (which I depict every week with my Aggregate Index chart at the bottom of this page), average folks have seen their lifestyles eroding."

George,

Yup, indeed we agree (for once!)...If you had a chance to read my musings a while back (maybe I sent too many and you dont read them anymore (:-)) then you might have seen I pointed out the following: 1896-29 = 33 years 1974-07 = 33 years and 1933-66 = 33 years...or 12000 days or 12 x 33 months (33 months = 1000 days) = 29 crash, 00 crash, 85-87 dollars crash, 01-04 dollar crash (Euro)

the "wave" is split up into two:

1896-1906 = part one 1906-21 = "correction" (time about 15.5 years) 1921-1929 = part two

Fast forward:

1978-1987 = ratio 1906/1896

2007-1987 = ratio 1929/1907 (or 1914 double bottom) @ 12,666.25 (double top on feb 6+ 7) odd number too, but that's besides the point.

So whereas the time in the first leg of about 15.5 years was spent in the "middle" approx. the time in the 1974-2007 leg was spent on the bottom and top for a combined 15.5 years here as well.

Total time since 74 = 33 years !!! by oct 3, 2007... Just as the "first leg".... (thats about when people will see the mess and it will roll over IMHO) Price multiple of the "first leg" 13.7x; price multiple of the "last leg" 1.618!x! that value at 12,800 ! Perhaps a co-incidence, but we will see. The multiple in 1966 was about 20x (base 1933 = 50) for reference... and at 11,400 (the top for 18months! the multiple was 20 again vs 1974)

Lets look at 1987-07 to now to stay with your comparison:

1987-1990 = 1 1990-1990 =2 ( 21% drop) 1990-2000 = 3 (breaks down like this: 90-94 = 1; 94 = 2; 94-97 = 3; 97/98 =4 ; and 1997/97-2000/01 (dow) = 5) 2000/01-02/03 = 4 (clear A-B-C equal A and C equal time each= 120 days and about 32%) 2002/03 = 2007 = 5 12,982! and 1987-1990 = 2003-2007 ratio @ 12,982 (this is close to close), if we take intra day low of 1987 we could go a bit higher say 13,070 or so... All waves are not determined by LOOKS but by my own quantitative algo...which has worked since inception of dow...DOWN and UP.

Here are some interesting bigger cycles that are in tune with your war scenario:

1789 invention of greenback and gold-standard in US (Alex Hamilton) +72y = civil war +72y = 1933 (Hitler and FDR came to power within 2 weeks) on collision for war (one could argue we hat 55 years of war including the cold one, certainly the expenses were such) +72y = 2005 (Iraq and Cave-man) not for trading but historically interesting..

General:

I would refrain from any type of "manipulation/conspiracy scenario" . IT IS MY THEORY THE DC pols and FED ARE PART OF THE SAME UNIVERSAL IMPACT WHICH AFFECTS YOU AND ME AND THUS CANNOT 'MANIPULATE' THE MARKETS OTHER THAN A BIT AT THE EDGES. Trust me, I've seen it in Forex for 35 years...they always claim success AFTER the market turned.

Ali's rate cuts to zero were co-incidental with the drop NOT ANTICIPATORY!! and when the price objective (7,200 - My tgt in nov 2000 publicly stated druing an MTA presentation and on video record!) was finished the market shot up. (oct-nov 02) while Ben was still threatening (Nov 21 , 02 or so) to drop money from helicopters..(as you can see, he operated in the dark the mkt was up 25% already).. And into the Iraq war uncertainty the mkt shot up a week or so before the war even started and we had no idea what the "WMD's" could do! In the face that rates had only one way: To go up! So Ali was part of "preparing" for wave 5 at whose end we are right now.. He, too, is part of the Whole!

So where from here?

Except for a few % points, if that, the best scenario is 1600 DJ (1987 base) for if we take the beginning of the century (07) as the base the objective was 12666 and wave "4" was the crash of 87 (wave 3 = 1932/22 to 1987) That's where Prechter went wrong. Also there is a long term channel that shows support in that area. If we were to go back to 1896 as the start (and capitalism as we know it) then the tgt zone (ie. W 4 -the 70s) would be about 600! Both of those tgts are derived from EWT not my quantitative model that only has the upside for now. But that's enough to get out.

While neither the time monk nor I offer "trading advice", I hear that "economics/economy" this fall leaps to occupy a huge portion of public attention so the "deft move" I will be looking for, perhaps along about early summer, will be to take some profits in the precious metals, and roll into government inflation-adjusted bonds if it looks to me like deflation will really dig in.

 

Right now, seems to me that we're sort of teetering on the brink of disaster with the continuing dollar declines.  They  are highly inflationary on the one hand (imported goods - which is about everything- and oil which means $4-$5 gas this summer) and might even lead (if there's enough paper sloshing about)  to a two-tier currency structure possibly within a year.
 

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Tuesday April 24, 2007

Long Wave Economics and Velocity

If you just started reading UrbanSurvival recently, you may not realize that this site was founded as an ongoing discussion of something called "long wave economics".  Without going into horribly long explanations of the subject, the general idea is that economics move in very l o n g patterns over periods in excess of 50-years.  The all-time future of the field is a fellow named variously Nicholas Kondratieff or Nikolai Kondratiev, depending on who was doing the translating. 

 

The shortest possible version of his work is that he figured out that wheat and other commodity prices going back to about the 1200's in Europe, seem to move in 48-64 year cycles.  Other authors  then took his ideas and plugged in two further notions.  First, wars tend to cluster around peaks and troughs of the long wave cycle.  If you want to see where you are in a cycle, look for a huge 'mother of all wars' kind of war.  World War One, it's argued, was a "peak war" and World War Two was a 'trough' war.  Along the same lines, the Cold War/Vietnam War was a "peak" war, and what comes along in not too many years to bail the economy out of a horrible economic depression will be a "trough war".

 

I hold to a simple notion that the break in the US market in 1987 was analogous to the market break in 1920, which then led to the absolute (for the time) peak of the stock market in 1929.  To complete the picture, I hold that the all-time-high of the market was 2000 and that by a clever bait-and-switch (using the twin distractions of the "terrorist attack" on 9/11 and the quick slip into war in Iraq immediately thereafter, most people have managed to remain blissfully ignorant that since the 2000 absolute market high (which I depict every week with my Aggregate Index chart at the bottom of this page), average folks have seen their lifestyles eroding.

 

Interestingly, I've also concluded that the current sequencing of bubbles, most recently housing, and the Iraq/Afghanistan, and anywhere else we can send troops, has served an economic purpose, namely to keep unemployment from blowing up in our faces and to give the central government a means to "pump" or "prime" the economy by spending huge amounts of money on war material.  Wars, you see, are convenient because they allow for huge expenditures and profits, without getting much back - except of course, as I bemoan often enough, the continued concentration of wealth in the hands of the few at the top of the economic food chain.

 

Down here at "street level" the issues which the popular and corporately controlled mainstream media doesn't address are the pernicious impacts of inflation - which has effectively means that it costs less to "buy the Dow" today than it did in 2000 on a purchasing power basis, and there's still the little problem of the left's of the Tech Wreck - which destroyed a few trillion in purchasing power when the internet bubble was pricked.

 

More recently, we are seeing the housing bubble pricked, and so when I get a learned note from a long-time long wave follower, like my friend Bruce X - I read it with great interest.

 

His latest note deals with how the velocity of money seems to be stratifying - and posing some very awkward problems for the Fed:

"http://www.nowandfutures.com/key_stats.html 

Hi, George. Regarding the estimated rate of growth of M3 at the link above, if so, and also applying to M2 (growing at ~6% nominal and 3.2% real, adjusting for CPI), the growth is likely related to the surge in M&A and the private equity frenzy now reaching fever pitch.

Moreover, if M3 is growing as fast as the estimate suggests, the M3 velocity (GDP/M3) is plunging, with the post-'00 average trend rate of the nominal GDP at ~5% (and real GDP only at ~2.5%) and M3 ~65% faster or more during the period. Also, with the monetary base growth flat in real terms ("neutral" Fed policy) and roughly at the nominal GDP avg. post-'00 trend rate since '00, the implication is that the M3 multiplier is soaring.

Now, consider what this might mean for Fed policy if or when the economy dips to a recessionary trajectory. If velocity is plunging (most liquidity is circulating in the financial markets, not across the overall economy), trend GDP is the slowest in decades and perhaps poised to decelerate further, and the multiplier is soaring, consider the Fed will have to do to the growth of the monetary base in the face of a recession to try to keep the multiplier rising to in turn keep M2+ or M3 velocity from sinking further with decelerating GDP growth.

No, this is not without precedent, as the most recent case occurred in Japan after '95-'97, when the monetary base was pegged at double-digit growth rates with soaring debt defaults and bad loans piling up, massive gov't stimulus (lots of bridges to nowhere), the onset of persistent deflation in Japan (after periodic bouts of no inflation or mild deflation), real GDE at ~1% avg. trend rate (from 2.3% before that), ~0% reserve rate, slow or decelerating M2+ growth, falling money multiplier and M2+ velocity, and two big Nikkei crashes in '97-'98 and '00-'03.

M&A, buybacks, and the private equity mania are richly rewarding Wall-Streeters while cannibalizing the economy, reducing money velocity, capacity, jobs, future investment, profits, and future GDP growth, while putting "other people's money" and the financial system at increasing risk; a slowing or recessionary US economy risks US supranational firms pulling back from their massive foreign direct investment (FDI) in China/Asia to produce the cheap goods for the US market, putting China's economic and financial market boom at risk of implosion, i.e., "Asian Crisis II" at some point.

WRT CPI, see the following and the attached chart:

http://www.bcaresearch.com/public/story.asp?pre=PRE-20070420.GIF 

http://www.bcaresearch.com/public/story.asp?pre=PRE-20070418.GIF 

http://www.chicagofed.org/economic_research_and_data/files/cfnai_april2007.pdf 

Historically, one of a handful of unambiguous markers of the resolution of the LW Trough is the current trend CPI reaching and exceeding the trend rate from the LW Peak; we're not there yet, implying that the LW Trough is still resolving.

P.S. I keep a rather close accounting of my household expenditures from year to year, and despite higher gas, utility, food, and private tuition costs, our overall yoy increase in expenditures is +3.4%, still above the reported headline CPI and core rate but inline with the Cleveland Fed's "median CPI". (We sold our residence in Portland, OR in Q1 '06 and have been renting since. We just renewed our lease for another 12 months at the same rent as last year. Inventory for sale in the area is up ~100% yoy, sales are down 30-35%, and the median sales price is down 7-8%.) "

You might be asking yourself, "Why did this obviously learned long wave student sell his home and rent?"  The answer, I expect, is that he has figured out that at some point, the Fed will be over-powered by the deflationary forces that are at work in the economy.  With the housing bust just now getting traction, in long wave terms, one of the most interesting bets you can make is to rent, putting assets into something than can be hopelessly watered down, like the purchasing power of US dollars, which are headed down again in the early trading today.  If a person can maintain their purchasing power through this period of time - and then when the housing bubble is really crashing (you ain't seen nuthin' yet), then like Elaine and I, you'll maybe be able to buy a rental home or two for income and operate as an ethical landlord - giving renters fair value, and at the same time, getting a modest positive cashflow together for yourself.  But would I buy in here?  Ha!  You're kidding, right?

 

Bruce X, being a bright fellow has the trend on his side.  We note the MarketWatch headline that "California home prices to weaken further: Goldman"   As an article over at "The Market Oracle" notes, "Two years ago, anyone who wrote about the housing bubble was dismissed as a conspiracy nut."   Been there, done that - and still telling my kids to save their money's purchasing power as best they can (inflation adjusted Treasuries are fine) and whatever you do, don't buy on the backside of a peak.  Wait for the bottom to come.  Maybe a year, two or three.

 

The Bloomberg headline this morning "Subprime Bondholders May Lose $75 billion in US Housing Slump" has me thinking "Gee, couldn't have happened to a better bunch of economic predators."

 

I say that advisedly.  A group of senators wrote in a letter yesterday that the Federal Reserve has the power to curb new subprime loans - and what's more - they've had that power since 1996.  The question of the day is "Why weren't they exercising that power when past Fed Knight Alan Greenspan was promoting getting all the unqualified people to buy homes using predatory loans?"  Was there some huge inflation seen in the pipeline that would have allowed everyone to pay them off with cheaper dollars?  I don't think so - the long wave is a powerful beat - and as my friend Jas Jain keeps reminding me, deflation is here - it just works out in strange ways that will fool you.

 

A nod from the time monks - later this week something economic dollar/markets should get interesting - I mean more so than usual.  Hey!  Maybe a key analyst somewhere will wake up to realize there's no engineer at the controls of this train.

 

Bot Hit -- UFO's

The last bot run had a lot of stuff in it about UFO's in the present (and through summer) time period and while I admit that I was skeptical, here's a very interesting report that the United Nations is about to debate "How are we going to deal with an extraterrestrial civilization when they come knocking?

 

As Billy Booth notes in "Something they're Not Telling Us":

"A press release issued a few weeks ago tells us that the United Nations General Assembly will debate "establishing diplomatic relations with advanced Extraterrestrial Civilizations that may now be visiting Earth.

"MAY NOW BE VISITING EARTH?"

I'll keep my eyes peeled, but I expect if the bots are right about what's ahead - along with all the hints here - we should see some dandy UFO displays over big cities this summer. 

 

I'll probably be inside watching TV when they do show up, wondering if they look like the Kanamits of Twilight Zone episode 89, circa 2002.  I'm not alone, apparently Mick Jagger is concerned enough about UFO's to have had a 'UFO detector' installed at his estate says one report.

 

Wind Power - Overblown

If you think that wind power is the be-all end-all solution to our power needs, you might want to recalibrate.  Seems wind power doesn't have the much hyped payback that its promoters claim and there's a new sheriff in town - National Wind Watch which says, among other things:

"Wind speed is unpredictable except in general terms. Even on a windy day it varies, and therefore so does the output from wind turbines. On the electric supply grid, wind turbines behave less like a supplier and more like a user, in that they are outside of the control of the grid dispatchers who must continuously balance electricity supply and demand."

Not that wind power doesn't have its place.  For example, when we were living on our sailboat in San Francisco a few years back, we had all kinds of power from our Southwest Wind Power marine unit, and not just when going to weather in "hurricane alley" just inside the Gate.

 

Our Canadian Bureau Chief Tim B fills us in on other haps:

"Lessee here--install 7300 MW capacity of bird-blenders to get 200 MW useful output? OH, don't ferget ya gotta invest BILLIONS in upgrading the grid to handle all that ampacity that won't ever be there!

ALBERTA just last week said NO MORE wind power capacity, because it is so unreliable, and above 20% capacity they risk rolling blackouts if the wind dies, so they are going to install (surprise!) NG-FIRED plants to handle peak load!!!

DIRTY SECRET--on the Canucki Prairies in dead of Jan/Feb, when it gets down to -minus 30C or even -40C, that's when there is NO WIND.

Oh, and Tim notes that Mexico is quickly running out of oil from its largest field (Cantarell).  I should maybe tell my older sister in Edmonton to move somewhere that the heat can stay on...although as far as I can tell, she has unbounded faith in the Saudi Albertans to convert those tar sands into more power.

 

11 More Months  Combat

Although the house and senate conference has worked out a compromise on the Iraq blunder, we wonder if there's not a "Dunkirk" in the wings yet to come. Maybe time to reread how Operation Dynamo worked in WW II.

 

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Monday April 23, 2007

Inflation at the Pump & Elsewhere

Lots of people seem to be figuring out that the restriction on travel coming this summer to a country near you - and long predicted by the web bot folks, may be self-imposed limits because of the soaring price of gasoline.  Looks like $4-gallon sooner than later - and we don't expect it will stop there... With reconstructed M-3 running in excess of 12% it's clear to us that a major bout of inflation is underway.  Think of it as the side dish to the blow-off top in the market.
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The folks in Australia are looking for new inflation numbers tomorrow - with speculation that an increase of 7-10th's of a percent (north of 8% annualized) would spur a central bank rate hike.  While this doesn't sound pertinent at this hour, remember that rate hikes go around like a bad flu, and could eventually hit in the US mortgage market.  Also out this week, inflation report for South Africa.

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I'm still in shock at the number of people in the US who still believe in the Easter Bunny and the concept of a "core rate" (inflation without food or energy) - this has to be one of the most glorious of all-time financial put-on's. 

 

Tomorrow about mid-morning, we'll get the latest consumer confidence numbers, but again, remember that most of economics and investing is like trying to drive while staring in a rearview mirror.

 

Pumping Fear

Whenever a "intelligence report' is 'leaked' to the press, I wonder about whether it's true, or not.  Still,  I'd be negligent if I didn't pass on the the report out of Iraq that al Qaida is planning a 'big British attack' on par with Hiroshima and Nagasaki.' 

 

Gates' Sales Trip

Want a hard sell?  SecDef Gates in Moscow today will be trying to sell the Russian government on dropping its opposition to the planned Western install of missile defense systems in Poland and the Czech Republic.  While the Washington Post calls it "talks on Defense Plan" we read in the Russian press that Gates has a "new set of proposals designed to soften Russian objections."   We expect the Russians will stand their ground - just as we would if the Russians wanted to install an anti-missile system in Canada, for example.  Hard sell for the US..

 

Wally World

The wall building in Iraq is on hold.  Arab world skepticism of the wall is very high. Another hard sell for the US.

 

Short Paper Companies?

We notice that not only is singer Sheryl Crow riding between gigs in a biodiesel bus, but she's also promoting reduction of toilet paper consumption as a way to reduce our "carbon footprint".  I hope this story doesn't rub you the wrong way (sorry, it was too good a set up line to let is just sit there...but on a more serious side) with lots of emphasis on paperless offices and low priced multiple monitor setups - and now this - we wonder what the outlook for paper products will be a few years hence?  Meantime, reports circulate that Laurie David and Crow both 'got into it' with Karl Rove at the White House Correspondent's Association dinner last night.

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Speaking of artists and such, did you see where Jennifer Lopez is picking up $3-million for playing a birthday party for a Russian billionaire's wife? Just 60-guests for this.  Somehow, Elaine and I have not been invited...but it's OK, our jet's in the shop or something...

 

Wifi Health Jitters

With an estimated 35,000 public hot spots now, people in the UK are hearing about possible health risks - and the report cites the World Health Organization as saying that about three people out of a hundred are electro-sensitive.

 

Getting High in Chicago

Developers are planning the tallest structure in the USA - a 150 story building in Chicago.  Oh, that kind of high....

 

Quick - Get Sick!

The wife of the chief time monk over at www.halfpasthuman.com - which does the amazing predictive linguistics I refer to (incessantly) came down with one of the two flu/respiratory/disease/bronchial/whatevers that seem to be making the rounds on the West Coast.  With it comes "the cough".  I was copied on a very curious email about how to get rid of the cough - and I don't know if it's true or not, but a curious email was passed on...

"Supposedly this works 100% of the time although the scientists at the Canada Research council (who discovered it) aren't sure why.

To stop nighttime coughing in a child (or adult as we found out personally), put Vicks Vaporub generously on the bottom of the feet at bedtime then cover with socks.

Even persistent, heavy, deep coughing will stop in about 5 minutes and stay stopped for many, many hours of relief.

Works 100% of the time and is more effective in children than even very strong prescription cough medicines. In addition it is extremely soothing and comforting and they will sleep soundly.

I heard the head of the Canada Research Council describe these findings on the part of their scientists when they were investigating the effectiveness and usage of pres cription cough medicines in children as compared to alternative therapies like accupressure. Just happened to tune in A.M. Radio and picked up this guy talking about why cough medicines in kids often do more harm than good due to the chemical makeup of these strong drugs so, I listened.

It was a surprising finding and found to be more effective than prescribed medicines for children at bedtime, and in addition, to have a soothing and calming effect on sick children who then went on to sleep soundly.

Lolly tried it on herself when she had a very deep constant and persistent cough a few weeks ago and it worked 100%! She said that it felt like a warm blanket had enveloped her, coughing stopped in a few minutes and believe me, this was a deep, ( incredibly annoying!) every few seconds uncontrollable cough, and she slept cough free for hours every night that she used it.

So, if you have Grandchildren, pass it on, if you end up sick, try it yourself and you will be absolutely amazed by the effect."

I've gone so far as to check it out over at Snopes (urban legends) page, and their status of this one is "undetermined" as of this writing, but if you have a cold and that horrible deep bronchial cough - like the one Mrs. Time Monk had, and you decide as your own self-contained independent person to try this (and I am NOT recommending that you do) please drop me a note and let me know if it works.  I was going to run out and try to get sick, but then thought better of it. 

 

Kitten Update

The kittens, born a few weeks ago are all doing fine - and a hearty thanks to the reader who sent along a bag of Flint River Cat/Kitten mix to get them off to a good start. Ma Cat (Pusscilla) is easing onto the new chow which is made from human-grade ingredients (no recall).  The cats are back living in the screen room, as I've reclaimed my office.  If you live in Texas and want a kitten, we'll have four available for adoption to good homes.  Another month or so while they get weaned and go to hunting classes...but if you're interested, drop us a note.  I think these guys are well-suited to farm/outdoor life. The main use of houses from the cat's perspective is someplace to store cat food.

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This weekend I put up doors on the front of the shop - so the tools won't wander off.  My motivation was not that the table saw had been out wandering, but I had to lock up the father of the kittens (Tom Tom the cat outside) because he has a vet appointment this morning for a little operation.  Apparently, Tom being no fool and 50% feral, was able to jump the nearly 7' high wall and get out.  Don't know if he'll be back in time to go to the doctor's office, but I am incredibly impressed with the leaping ability of semi-wild cats. Even while still carrying, Pusscilla was jumping onto the deck - about an even 6-feet.

 

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George Ure, The People's Economist

 

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