While we await the second Big Quake of the late summer/fall/winter period (Peru was #1 it seems) there are plenty of other cases of Terra Intrudes going on - a lexical meme that popped out of the predictive linguistics run of www.halfpasthuman.com about a year ago with aspects like the flooding in the Midwest, advice about being ready for damaging winds (and not just in hurricane areas) and now we've in quavers and shakes. A news search for "wind storm" has lots of results.

Also in there is the notion of Diaspora (with a lot more detail, of course) but the general idea of Diaspora is people homeless and wondering about trying to find a place to make a go of things once the local /home/former stomping grounds are way less inviting. 

In the case of Peru, while there's talk of high tech helping, that's only so much comfort to the roughly 200,000 who are homeless from their quake.  Quakes of less than magnitude 8 are likely just part of the quavers - such as the quake reported in Australia today.  It's not all lost on some government officials - like those in North Dakota who are ramping up a statewide study of earthquake potential.  Curious timing?  Not hardly - that's how linguistic memes pop up - often enough to slap the aware observer about the head until the obviousness of the meme is clear.  Often followed by the word "Duh..."

More bothersome is the 'flood' meme which I've been telling you about since January.  In the Midwest, people are looking for flood recovery aid.  And North Korea has had significant flooding, as have many other parts of the world.

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One possible outcome of flooding now - and the additional flooding suggested by the future-predicting language time monks, is that we'll have food shortages in 2008.   Paul Harvey this week touched on the 'bumper crop' of wheat in Colorado. (try about 9:45 into his Thursday noon report) and problems of not enough trucks to move it.  But, the larger (general) wheat picture is record prices and as a student of supply and demand, you'll no doubt figure out that record prices does not equal bumper crop globally - and in Canada, the headline "Rising wheat prices will cause ripple effects through food chain as production expected to drop 20%.  Seems Colorado is luckier than the Canadian prairie.

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Radio show host & author Steve Quayle tells me he's been up this week flying around the areas of those huge forest fires a while back in Montana.  The 'copter pilots tell him of walls of flames 500 feet up - fire storm kind of stuff - so much so that the fires were making their own weather.  He reports that able to look from as far as you can from a helicopter and seeing nothing but burned out land, is not a pleasant thing.

I mention this because terra is intruding in Greece this weekend with a reported 41 people dead so far - worst fire season there in decades and at the root of it, the continuing drought and heat wave.

But, you don't need to travel to Europe of the steppes to find drought.  Just pick up a copy of the Atlanta Journal Constitution...or read some of the reports coming out of North Carolina. Not that the East Coast has a lock on things - the Utah drought and fires have caused a disaster to be proclaimed there, too.

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There are two kinds of analysis done in stock, bond, and commodity trading: fundamental analysis and technical analysis.  The TA practitioners look at charts, complex cycles,  and repeating fractal patterns like Elliott waves and Gann angles - and these are very useful tools to be sure.  But, its the fundamentals that matter greatly, as well.  As we get more of 'terra intrudes' as the year wears on, headlines like "Drought severely impacts farmers' Feed" should be triggering a 'squirrel' impulse in you to have some survival goods stored away for that 'rainy day' when people will have to work all day for a measure of grain.

Coming soon to a planet near you, I expect.

For Peoplenomics subscribers tomorrow, we'll go through our precrash checklist - and yes, the close of the market yesterday still keeps us "in channel" between the post peak /precrash market action of 1987 and 1929.  The week after Labor Day ought to be interesting as heck.  But you can't eat gold, silver, or paper, so off to work on a new chicken house and more on the goat fence.

One other thing: Keep an eye on the reports that Georgia fired on a foreign (presumably Russian) warplane.  Tensions rising there.  West on one side, Russia on the other...

Peoplenomics: Trading the End of the World

Before I explain to you how I use open interest in options to spot potentially tradable market discontinuities, let me first give you the REALLY BIG news: The end of corporate globalism may be pulling into view. No doubt an outlandish claim from a back woods economist/academic in East Texas, but consider that on a purchasing power basis the global markets are down more than 28% from their 2000 peak, and a 400 point decline from here would put the global market index where it was in nominal terms in March 2000. A little less 'global progress' than you thought? But it may be tradable as I'll show you with two charts and a discussion of options equilibrium.

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Last week's report is here.

Friday August 24, 2007

I had a long conversation with head time monk Cliff of www.halftpasthuman.com last evening about what may be ahead for the markets in September.  As you may recall, the predictive linguistics work, which just called the August 13-16 'panic/calamity window' has another period coming up September 3-18/19 where there's an 'emotional release'.  That emotional release period doesn't guarantee markets will go down, but it it seems that it could.  With reports of someone taking on a huge trade bettering on a 30% decline in the markets by the September 21st options expiration date, I decided to line up a little home grown research to see what the numbers would tell me.

The approach is quite simple: I shared with Peoplenomics.com subscribers a week ago how to use open interest on call and put options to determine where what I'd call the 'equilibrium point' is expected to be come September 21st's options expiration.

I've been keeping track on the back of an envelope (ok, a really, really BIG envelope t then) what the markets seem to be telegraphing us about expected closing levels in September. 

For example, on September 15th which I took my first reading on the Sept. S&P options, the equilibrium point, where the long and short options balanced, seemed to point at around 1,460-1,465 as the 'consensus' and the put to call ratio was 1.4702.  In other words, for each long/expecting markets to go up, there were 1.4702 bets that the market would be going down.

Now, fast forward six trading days to the close of business Thursday/preopen figures from this morning and let's see how the picture has changed, if at all:  Today, the equilibrium point has dropped to between 1435 and 1440.  Also, the put to call ratio has increased to 1.5162, meaning there are a few more people taking the 'markets will drop' bet.

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There has been some speculation on various message boards about what's going on - some are suggesting that a Big Player knows the markets will be trashed in September, while others look at this as a normal market action - because with plenty of bears around, funds holding a lot of stock can sell puts and increase their yield.  (The data pipes for the next linguistics run are open so we can spot discussions like this as the web bot project lives on language out of discussion groups/news groups).

Part of me wants to believe that the action is nothing more than strong hands selling off puts to hungry bears with the idea of  fattening their portfolios.  But, the idea that a major Big Player has some inside information and is laying in puts with a purpose hasn't escaped my attention, either.  You might recall that there were lots of puts laid on before 9/11 and as best I can recall, no official investigation ever got to the bottom of who made money on that event. 

Add to this, the idea that linguistically something is going to change the world again starting about September 19th.  This new technology suggests that there will be a 72 day period of building emotions that will last for 72 days. By comparison, the events post 9/11 lasted for about 6 1/2 days in modelspace.  After that, the markets were getting back to normal and the new 'changed world' was pretty much in plain sight.    But, during those 6 1/2 days, the was a lot of emotional tension as people got a bead on the 'new worldview' and new 'way of things'.  In that 6 1/2 day window, the markets had to readjust, the planes that were grounded got through their start-up, and airport security went from simple to very high.

So, we find ourselves asking "What kind of event in the world could cause a 72-day emotional build?  That would be on the order of 11-times as long a building period as post 9/11 and, at the end of it, there's supposed to be emerging an effective end of global trade.  So, what is it?

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There are lots of candidates that could change our world dramatically and on that scale.  A widespread global bio-terrorism attack, a dirty bomb attack, the death of the dollar, and something along the lines of a 2+ month long modern equivalent to the Cuban Missile Crisis.

We've also kicked around the idea that we could have a market melt up in the September 3-19th window, and then a 72-day crash.  But, linguistically, that doesn't fit well.  The reason being that a crash would be an emotional release kind of event, but the 73-days has a pretty distinct emotional build flavor to it.

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I've got a couple of candidates for what's ahead in that period, but it's only informed speculation.  If you want to know the kind of headlines that I'll be watching, consider some of these to be on the lookout for:

• Endogenous collapse of the market:  We know that there's an eclipse coming up and some of my astro-econ friends tell me there are striking similarities in the stars between 1929 and the late August / early September period.  Or, in a little more pragmatic way, the peaks in 1929 and 1987 both coincided with a new moon, and although the current peak was 5-days offset, that might be close enough -- ask any policeman of ER worker and most will tell you people act crazier at times of the full moon.  The price of so many goods is based on speculative pressures that housing and the markets could fall by 2/3rd's and that would just begin to restore normalcy to many kinds of asset prices. A few friends of mine and I are trying to spot the "next bubble" that will be put before us.  Now that the Tech Bubble collapse was slowed by the Real Estate /House flipping bubble, I figure there's likely to be one more bubble coming to try and prevent a collapse of the economy.  If you think you have a candidate for 'next bubble' send it in!

• Another is that a major State Player who is holding a lot of US dollar denominated paper could simply repudiate the dollar and say no, the dollar doesn't work here any more.  You may recall that the current tit-for-tat with China happened after Hank Paulson and company went to China on bended knee asking them to keep buying our paper and to change their currency valuation.  When that failed, suddenly we got poisons in pet food, the Chinese aren't buying pork, and then you've not doubt ready about the stories of poison in pajamas and other Chinese-made clothing.  See how this works?  The Chinese might be extremely (pardon this) pissed about being screwed over in the subprime market fiasco that continues to unfold and the headline this morning that "Bank of China Reports Heavy Exposure to Subprime Crisis:" is just one more straw on an already overloaded camel's back. China is warning on anti-dumping duties as well.  What has been a US demand to take our (arguably weakening) paper could explode into a full-fledged trade war at any moment.

• Or, Terra can simply intrude.  Big Quake # 2 is due next, following the Peru disaster. Remember that linguistically, we have seen Major Quake #1 there, and with the astronomical line ups coming late this month, perhaps something like a coast line changing earthquake in the Western US could fit.  What if, for example, we had an 8.5 or 9 that took out a lot of West Coast port capabilities and oil refinery operations, like those along the mouth of the Sacramento River, where the delta dumps in to San Francisco Bay up around the corner from Angel Island?  A 10-15 foot change in land elevations due to a seismic subduction event would be a nightmare.  How would we then get all those goods from China and Asia?  That would certainly put an effective end to global trade as we know it, and would usher in something much different.  The recent Utah mine disaster and a mine accident in China argue that the solid land we stand on does have a mind of its own.

All of this is highly speculative - and there are lots of other scenarios that could fit what is expected - large scale terrorism and such - but there's not too much point in worrying about it.  Instead, it seems like a good time for action.  Which means, making sure you're stocked up for a few months quietly and effectively.

This is not meant to be alarmist; just an opportunity to exercise some good planning skills for your family.  Whether the web bots are right about what's coming, sites, like the US government pandemic flu site, suggest that a breakdown in social fabric is something to be considered in event of a pandemic, although I'd offer that the planning for an economic crisis or major earthquake event might be similar:

"Social Disruption May Be Widespread

Plan for the possibility that usual services may be disrupted. These could include services provided by hospitals and other health care facilities, banks, stores, restaurants, government offices, and post offices. Prepare backup plans in case public gatherings, such as volunteer meetings and worship services, are canceled. Consider how to care for people with special needs in case the services they rely on are not available."

We shouldn't have long to wait.  I expect about 2-weeks from now, we might be seeing the leading edge of whatever is coming down the pike next.

Meantime, there's happy talk galore!  The new Durable Goods report is out:

New Orders New orders for manufactured durable goods in July increased $12.9 billion or 5.9 percent to $230.7 billion, the U.S. Census Bureau announced today. This was the fifth increase in the last six months and at the highest level since the series was first stated on a NAICS basis in 1992. This increase followed a 1.9 percent June increase. Excluding transportation, new orders increased 3.7 percent. Excluding defense, new orders increased 4.9 percent.

Shipments Shipments of manufactured durable goods in July, up four of the last five months, increased $8.1 billion or 3.8 percent to $219.8 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.1 percent June decrease.

Unfilled Orders Unfilled orders for manufactured durable goods in July, up twenty-six of the last twenty-seven months, increased $17.6 billion or 2.4 percent to $754.9 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.6 percent June increase.

Inventories Inventories of manufactured durable goods in July, up sixteen of the last seventeen months, increased $0.4 billion or 0.1 percent to $313.0 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a slight June decrease.

Let me see: Housing market is semi collapse and durable orders are up.  Sure, if you say so... pour me one, while you're at it, though, wouldja? Say, that defense jump is a neat impact from The Surge, huh?

Surge Report

The latest National Intelligence Estimates on the war in/on/about Iraq are not very encouraging when it comes to the George Bush "Surge".

The mess continues in the upper Midwest. Have I not been telling you since around the first of the year that "floods" is a big meme and still building?

Seems like the supreme court of Pakistan says former prime minister Nawaz Sharif can return home from exile.  That's likely not welcome news to the existing Musharraf government.

It's now 40-years of  "Two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame-seed bun," anyone?"

Sun Microsystems is changing its ticker system to JAVA. Are Cliff & I the only ones old enough to remember Stanford University Networks - long live the 68000!

Speaking of computers -- A couple of readers suggested that I point out (WRT yesterday's piece on layoffs) that no, IBM is not really laying off 150,000 as it appeared in May.  Good catch.  I try to keep things straight.

I've told you in the past how cool www.flexcar.com is - here's a good follow-up on how the concept is spreading.

While it's interesting to read that a submarine with $352 million in cocaine has been interdicted 300 milers southeast of the Mexico-Guatemala border, the admiralty questions arise: Was it international waters?

Atlanta has an active discussion about banning baggy gangstah pants which show boxer shorts or thongs.  Just what we need - More government!  Fabanianists and other collectivists should be thrilled.  But, seriously, isn't crack already illegal?

The Daily Mail reports "silver surfers beat the young as Web wizards."  Well, duh.  We can read.

"Scientists develop technique to induce out-of-body experiences" reports the Guardian today.  Thanks, already got one of those.  I call it "sleep."

Thursday August 23, 2007

I don't know how much more clear I could have been putting out the word much earlier this year about the "employment crash" that the time machine/predictive linguistics work of www.halfpasthuman.com said would be showing up by late summer.  Sure, at the time with the economy perking along on a profitable war, and a fairly optimistic outlook, it wasn't clear just where such a crash would come from, but here we are coming along to late summer and oh, lookie here, it's the employment crash developing right on [linguistically foreseen] schedule.

You're welcome to be skeptical, but if the technology didn't work, I would not have been writing back in my May 5th column that:

"If the web bot fellows talk of an employment crash this summer still doesn't sound possible to you, consider that rumors are circulating on the net now that IBM might lay off as many as 150-thousand."

So now, not only do we have continuing layoffs like that in progress, but we now read in Forbes an AP story that headlined "Mortgage Job Losses Surpass 40,000."  The Chicago Tribune headlines this morning warn that "10,500 LaSalle jobs at risk" and elsewhere, we read that every section of the country is feeling the pain, whether it's  1,100 jobs in Western Pennsylvania, or 1,600 jobs in San Diego, or the Tucson news that First Magnus Financial has filed for bankruptcy leaving  more than 5,000 people out of work nationally almost overnight.

The Mortgage Lending Implode-O-Meter continues to rcount up victim companies - 135 by this morning's count.   Curiously, there's one headline that caught my eye "Libel suit against mortgage 'Implode-O-Meter' to proceed."    Apparently not put off, the Financial Times has discovered that the Implode-O-Meter folks have started tracking Hedge Fund Blow-ups, too.

While all this is going on, the layoffs seem to be continuing with Lehman Brothers, according to MarketWatch,  shutting down its BNC Mortgage unit, which will cut 1,200 jobs.

You're welcome to remain skeptical of the predictive linguistics project all you want - but as I read it, the 'employment crash' that the time monks have been warning about since early this year appears to be arriving right on schedule.  And, while not priced cheaply, the next run with an 'event horizon' out to May 2008 is about to get underway, and I for one, can hardly wait for the first the first glimpse at the new data which is being collected now.  No, this is not for everyone.  The BIG stuff (employment crash being an example) we're allowed to post exclusively here.  But for people with significant assets to protect, the forecasts arseem quite useful. ($240 for 7 parts over a roughly 2-month period for first-time subscribers)

I have to score the "employment crash" prediction as a "hit" (along with the first of the three big quakes or summer/fall being the recent one in Peru).  And the August 13-16 period was full of talk about "panic" and "calamity" just as predicted.  Next big event sequence I'm waiting for will be the September 3-19 period and the emotional 'turn-on-a-dime' due about the 19th of September.  Seat belt snug?

OK, if you're an IT professional who has seen your job head for India (or elsewhere) you may be getting company: Lawyering/law jobs could come next. Pressure seems to be mounting to send junior work overseas.

I've been going on about the parallels to both the precrash period of 1929 and 1987 all week.  So this morning, I'll just point subscribers to my www.peoplenomics.com site to a special update including the chart display of the replay available by clicking here.  Peoplenomics is $40/year and is a trend and preparedness focused weekly newsletter.

An email from a reader:

"Howdy Word Slinger,

I've written from time to time. Being an options player, I thought you might be interested in some unusual activity today in the Sept SPY Calls.

Appears someone has a monster transaction going on.

Either a Bear Call Spread, or some kind of covered call exit of a massive SPY long position, I think. Maybe this will keep you up all night thinking about it.

What are your thoughts?

Look here: http://finance.yahoo.com/q/op?s=SPY

That is interesting.  Arb'ing? When I look at the open interest balance point (where open interest on calls and puts are about equal) I see between 156 and 157 for Sept, versus yesterday's close about 10 points lower - seems odd the SPYders show a September balance point 6% higher -   When I looked a couple of days ago, the S&P option 'balance point' was right around the 1445-1450 level, so the S&P options didn't seem to say "Sept rally" but that's how to interpret the SPY spread.  More pondering....

The reports that Bank of America is pouring $2-billion into Countrywide is a very interesting move to note:  It has me wondering if maybe B of A management is making a bold asset play.  My thinking is that even though there might be some difficulties valuing the collateralized paper bundles, some large fraction of people who are not terribly upside down in their homes will continue to make payments to hang on to their homes.  If we get a bout of inflation to inflate our way out of the crisis (and easy money is inflationary), it could work out as a very astute play - and one more reason why the market has been buoyant this week.  In crisis, there is always opportunity. Question is: Is it early?

One of the things which seems to have weighed on oil prices of late has been the specter of a downward spiral in the economy, and that, in turn, has pressured oil prices downward.  Today, there's a little strength in oil, as the markets try to price how the weakness will unfold.

Although the advance word from an oil industry consultant is that hurricane Dean shouldn't have much impact on gasoline prices, you might want to do a Google news search later today  for the search term [dean +cantarell] (and I will try to remember to do this for tomorrow's report) to see how quickly the Pemex operations come back online, now that Dean is downgraded to a tropical depression.

George Bush, out selling continued support for his troop surge, tried to link the history of the Vietnam War to the Iraq War.  But, it's not working out quite like the WH planned because some of the press doesn't seem to be buying it.

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Not to be missed: The financial warfare going on between the US and Iran with fallout for the Germans.

Wednesday August 22, 2007

Tuesday's move of the Dow down 30 points was not the best thing that could have happened, and as a result, I expect between now and next Tuesday for the Fed to be extremely accommodating at the discount window.  The reason lies in our tracking of similar post-peak market action in 1929 and 1