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Will We Really Rally?

A colleague called me on Friday and said "You know what?  I was listening to NPR and some guy who with works with or for, or around George Soros was just on and said he expects the market to rally into summer and then collapse this fall!  That's just what you were talking about..."

 

Well, yeah, how about that? And for several months, and I have my reasons.  Nevertheless, I continue to get emails from people anxious to insist that the rally is illusionary and we're just inches from the jaws of hell.

 

Because it's Saturday and we've got a little more reading time than usual (*most of us anyway) let me share a particularly well drafted example:

"It should be clear to you that what you call ‘rocket fuel’ has already been discounted in the world markets, so therefore only has limited, and short-term, effect.

There will be no rally this summer [as you believe] because the game is really over. We’ve already seen the desperation [what you call the PTB have resorted to. I don’t have to tell you that collusion to manipulate the market is a severe criminal felony – but of course that doesn’t apply to the PTB. But we already know that they are buying up the market [with well-coordinated buy programs – it had to be well-coordinated because they cannot do it on their own anymore like they used to in those critical moments in yesteryear] and then having to continue these collusive and criminal exercises in order to keep the markets from collapsing again. But they’ll soon run out of gas. It may take us into the fall or winter, but they’ll become exhausted trying to do what can NO LONGER be done.

As I said: the game’s over. The rocket fuel they’re using smells a little more each day – doesn’t it remind you of just ‘bad wind’-?

But there’s something much more important than the markets or the economy…. Because while we try to profit from knowing, we are sacrificing our souls. Our complicity is passive perhaps, but we are in truth playing the game with them. It needs to be seen for what it is ….involuntary conspiracy. Thus do we all become guilty-!

Just look at what the power cabal has done in its criminal war adventure [just to be firmly in the oil site]. How much criminality are we supposed to endure? After all, there is still some moral position that is called ….collective responsibility, no-? And torture-? And bombing of women and children – that is …what do you call it-?

Perhaps we should all be impeached and strung up ….for permitting these horrors! Perhaps we will be…. The real horror is that no one is standing up and shouting ‘stop it’!

No, George, it’s too clear the game’s over. Those who have the slightest stake in it will neither see it nor know what otherwise to do. The world-class marketers already know it. The US is bankrupt …morally, socially, and economically – it just hasn’t gotten to main stream yet. But it will. Mark me!

So marked!  But, please mark mine as well: Even though we are a morally bankrupt, moral-compass-gone-missing kind of country that will bomb anyplace that threatens our version of global economic/dollar hegemony, that doesn't mean that we can't have one more good stock pump-and-dump episode before we take the last deep breath economically speaking.

 

I think of  investors (*as a group) as being like House, MD on teevee.  We're got the strangest damn set of symptoms going on here, so we have to keep running through our symptoms and see what diseases fit - or, what's the disease that we don't fit but yet is close and might just present differently here in this patient because of a hidden variable that's not adequately considered?

 

Certainly, one of the 'hidden variables' could be the extent to which financial markets frame their expectations based on numbers offered by government agencies, such as the Jobs Report out from the Bureau of Labor Statistics on Friday. 

 

In this week's report, I didn't get after BLS in my usual rabid drum-beating way for asking us to believe the numbers as presented, but a reader in Illinois remembered my enough of my previous rantings about how the Birth/Death Model is used to create jobs out of thin air to send this:

"George:

 

A take off from the old song …Who do you Love…should be Who do you Trust..    

 

This was a very weak jobs report. But it is even worse when one looks at Birth/Death Model assumptions.

 

He then went on to explain how the notion of adding 44-thousand jobs in the leisure/hospitality sector and how 28-thousand construction jobs were created is a major stretch of credibility (*should any exist after reading the recent inflation numbers).  Nevertheless, the BLS numbers are presented as Gospel and sites like this one that question their veracity are mainly discounted by the Establishment Media, also known as the MainStreamMedia, MSM, as hangouts of conspiracy theorists and nutjobs, than you very much.

 

While it's true that Ben Bernanke was forced this week to admit that there are serious signs pointing to a recession, we also see some very positive press going to the idea that the worst is nearly over, and even in the LA Times site, there are concepts like this one pop up: Ben Bernanke is a hero.

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While my esteemed other reader thinks the world is ending right here, my view continues to be tempered with a longer perspective.

 

First, we continue to see movement, such as the Dick Cheney's trips earlier this month to anywhere he can find a landing slot for Air Force Two in order to get everyone on the same page about U.S. intentions in the Middle East in general, and as they relate to Hamas, the Syrians, and Iran in particular.  This should play out shortly over coming weeks.

 

When war sooner or later does show up, it's good for the economy, even if it's a little inconvenient for its victims.

 

The second point is that gloominess about the jobs picture plays well on the Street where maximums like "Markets climb a wall of fear" abound.

 

I will grant you that "Huge Job Losses Set Off Recession Alarms", but at the same time I'd remind you that the view around Wall Street of jobs (* of other people, not traders and banksters) seems mostly one of contempt, with the marketing's figuring "Ah, more dead wood has been rooted out - cause for more optimism for higher profits to come thanks to lower overhead..." and thus layoffs in the minds of traders can be a good thing. 

 

Especially so when coupled with the word "bottom" because the conventional wisdom is that markets discount things anywhere from 9 to 18 months into the future.  This view suggests, recession or not, the market is already trading anywhere from year end 2008 into the fall of 2009.  If you believe the conventional wisdom, that is...

 

The third point has to do with technical indicators, so ponder these

• My friend Robin Landry figures we could have one more final blow-off top into summer to complete (*in Elliott wave terms) a fifth-of the fifth- of the fifth.  in other words, yes, this could wrap up the final advance from the lows in 2002 and would then open the door to a major decline down to a Super Cycle bottom that could take us under 3,000 in the Dow, but not just yet.  OK, fifth wave failures are not unheard of, but can I bet on that?  Not me, said Chicken Little.

• The Dow, from a technical standpoint looks pretty healthy.  Not only has the Dow put on 393-points this week, but a two-year look at the volatility index shows that we are backing off from recent nervousness (*where volatility is really spiking), and even  more important to me, under Dow Theory which offers that moves in the Transport Index are key to the market's underlying health, I see a major divergence in the three month view,  and an even larger divergence in the one-year view.  Are the Transports leading the way up?

 

With all this in hand, what do I think will happen next?  At least during some of the early going next week, I expect the market to pull back some - looks like it got just a little ahead of itself.  Not that the divergences aren't significant, but I look at four technical indicators. 

 

If you pull up the Dow Index on your trading platform, put in the MACD, the RSI, and both fast and slow stochastics.  To me, these look like they have gotten a little ahead of things, so a flat/somewhat down market next week could certainly be in the cards.

 

On balance, however, and for my personal trading decisions (*I don't offer financial advice, but I'm more than willing to share my view and tell anyone anything about what's going on in my account), I am optimistic that we are in a fifth and possibly final wave up.

 

Historically, fifth waves up have been really good for commodities, and so that's where my bets are placed now -- in my commodity account with call options in wheat, silver, and coffee.

 

Between now and summer, with perhaps some hesitation next week as headlines like "US loses jobs at fastest rate in 5 years" sink in, I expect a strenuous climb of that wall of worry, accented by a "patriotic rally" as the Middle East lights up.

 

So there you have it:  As paradoxical as it seems, Mr. Permabear is bullish in the very short term (*into summertime), at which point I may move a good portion of what's in the commodity account back into the stock side and buy LEAP puts and government inflation-indexed  bonds like there's no tomorrow.  (There might not be one.)

 

When we get to, say, August, I'm expecting to be 100% focused on capital preservation through what could be anything from a tempestuous pullback to sailing off the edge of the known financial earth - a fine time to be battened down for heavy weather indeed.

 

Again, THIS IS NOT INVESTMENT ADVICE - YOU'RE ON YOUR OWN THERE.  This is just my current trading plan, subject to change without notice, especially when the "Speculator Slices" is posted by HalfPastHuman, probbly late Sunday.

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My colleague asked me what I thought about Financial Advisors and I let him in on a little secret. "You know who my favorite financial advisors are?" I asked him.  "My wife Elaine and my sister Suzi.  Every time they ask me a question about any kind of consumer item I look at the stock in the underlying companies because a word from Suzi or Elaine is buzz and that means they have the potential to be home runs."

 

"Let me give you some examples:  My sister Suzi asked me a few years back what I thought of her buying a hybrid Toyota Prius when they first came out.  What automaker would have been a no-brainer pick when they came out with the Prius a few years back?  From when she asked about the Prius, she got one of the first ones delivered, the stock has better than doubled."

 

"Then, about 9-months back, Elaine's sister in Spokane told her about this great new cleaning thing called a "Swiffer" - which I have two of in my office now, along with replacement pads - one for the floor and one for the light dusting of other things, books computers and radios.  The stock of Proctor and Gamble ran from 62 1/2 to 74 1/5, roughly a 20% pop in 6 months probably due in large measure to Swiffers." 

 

"Then this week Elaine tells me about this Hasbro .MP3 playing toothbrush.  So, I am watching Hasbro climb."

 

Turns out my colleague's worst performers were those stocks he had purchased buying them 'by the numbers'. 

 

"Rearview Economics!" I told him.  "All you need to do to become a genius-level investor is to keep your eyes open to what's going on in the marketplace.  Where's the next Big Thing coming from.  You're not going to find opportunity in the trailing twelve month (TTM) numbers. Spot that next big thing, and who needs and investment advisor?  If you aren't good at spotting the next Big Thing, then by all means get yourself an advisor, but also realize their performance might not equal good stock handicappers who know how to spot value and innovation and who are willing to back up their hunches with some cash."

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Do I presently own Hasbro, P&G, or Toyota?  Nope.  As I explained, my present tiny portfolio continues to focus on commodities, driven by "Rust to fertilize food price surge", "Silver, gold turning into green," and "Coffee Increases as Dollar Falls."

 

Enjoy the weekend - I'll be doing taxes.  But keep your eyes on the headlines.  "Rice jumps as Africa joins race for supplies" says one headline as rice hits records.  After we get through what I think will be the last-train-out rally into summer, you can bet (*at least for now)  I will be getting extremely defensive.

 

Have a great weekend (HAGWE) and see you Monday morning.

 

(Unless you're a Peoplenomics subscriber, in which case, tomorrow we'll go over "How Would You Play the Crash?")

 

This week for Subscribers to Peoplenomics:

Long Term Solutions: Three Action Points

One of the occasional criticisms leveled at my writings is that I don't spend enough time offering solutions to what are the obvious problems that face the world's humans today. This week's report will be very short and to the point with three major solutions being offered. The first action point is a response to numerous emails from readers who say "I'm poor - and I can't get to debt-free and a paid up place to live, because of my miserable circumstance." I explain how to team with other family members or families to set up a very robust self organizing collective (*SOC). The second sketches the outline of a global political party to counterbalance rampant global corporatism; a short discussion of why a global political party (GPP) might actually work. The third is a short discussion focuses on the question "What is money?" and how we store 'value'.

 

                More for Subscribers                 Subscription Information

 

Invite Your Friends to Wake Up

If you know anyone who is sick of those endless "me too" and "good times are just ahead" reports on the economy, tell them about this site and our strange outlook on things.  If they still like you fine, and if not, you didn't need them anyway....  Click here to send 'em an invite...

 

$10 to Save Thousands

There are lots of ways to save money on food, shelter, transportation, and such.  It just takes a little reading and one source of good ideas is  our handy ebook "How to Live on $10,000 a year or less.  Still just $10.

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Last week's report is here.    If for back issues of this site, click here.  (Goes back to 1997!)

 

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Friday April 4, 2008

Employment Collapse: A "Marginally Attached" Reality Check

First the summary: Biggest losses in five years: The unemployment rate jumped more than some expected in the report out today -- up 3/10th's of one percent in March:

The unemployment rate rose from 4.8 to 5.1 percent in March, and nonfarm payroll employment continued to trend down (-80,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Over the past 3 months, payroll employment has declined by 232,000. In March, employment continued to fall in construction, manufacturing, and employment services, while health care, food services, and mining added jobs. Average hourly earnings rose by 5 cents, or 0.3 percent, over the month.

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Over the month, unemployment rates rose for adult men (to 4.6 percent), adult women (4.6 percent), and Hispanics (6.9 percent). The jobless rates edged up for blacks (to 9.0 percent) and whites (4.5 percent), while the rate for teenagers (15.8 percent) was essentially unchanged. The unemployment rate for Asians was 3.6 percent, not seasonally adjusted. (See tables A-1, A-2, and A-3.)

In March, the number of persons unemployed because they lost jobs increased by 300,000 to 4.2 million. Over the past 12 months, the number of unemployed job losers has increased by 914,000.

The civilian labor force rose to 153.8 million over the month, offsetting a decline in the prior month. The labor force participation rate was 66.0 percent in March and has remained at or near that level since last spring. Total employ- ment held at 146.0 million. The employment-population ratio was little changed over the month at 62.6 percent. The ratio was down from its most recent peak of 63.4 percent in December 2006. (See table A-1.)

The number of persons who worked part time for economic reasons, at 4.9 million in March, was little changed over the month, but has risen by 629,000 over the past 12 months. This category includes persons who indicated that they were working part time because their hours had been cut back or because they were unable to find full-time jobs.

Now, a nickel's worth of analysis here.  First, the Labor Department let's on that there were really another 1.4 million people who were 'marginally attached' to the workforce.

"About 1.4 million persons (not seasonally adjusted) were marginally attached to the labor force in March. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.   (<--- Can you believe this??? -gu)

Among the marginally attached, there were 401,000 discouraged workers in March, about the same as a year earlier. Discouraged workers are defined as persons not currently looking for work specifically because they believed no jobs were available for them. The other 951,000 persons classified as marginally attached to the labor force in March cited reasons such as school attendance or family responsibilities."

Hand me the calculator and a bottle of Jack, please? 

Add the admitted 7.815 million unemployed to the 1.4 million 'marginally attached that they didn't bother to count as 'unemployed' and we get 9.215 million, which on a workforce of 153.784 million pencils out to an RCH under six percent unemployment rate but it gets even worse because if you add the table A-12 (unadjusted) U6 (*Underemployed like PhD's flipping burgers) you get an unemployment or severely underemployed rate of about 15.3%.

And that's with a war going to keep the economy on life support!

Welcome to the Greater/Second Depression I've been writing about...

Did the linguistics or did they not say employment collapse in March?  80,000 jobs is close enough to collapse for us...

Revolution Meme: More Evidence?

A Digg to the Wayne Madsen report looks interesting: "Confidential Doc in Congress Warns of Conflict in America".  It's a subscriber item at WMR, but if you've been following the emergent meme you can understand why this is coming up on the Hill.

 

Say, you don't think 15.3% percent un and under employment would fuel such concerns, do you?  Meantime, back at the Cape...

 

Rocket Fuel and Spaghetti

I told you about how the Fed is pouring rocket fuel on the markets with free money in an effort to avoid the implosion of the Western financial systems that would accompany a large-scale financial lock up.

 

In his appearance on the Hill yesterday, Ben Bernanke was selling lawmakers that the Bear bailout was something that had to be done, although in truth, if the company had been allowed to go bankrupt, the fat cats at the top would have had to pay back millions in bonuses, which the bailout neatly avoided.

 

And the restructuring are continuing.  Take this morning's headline that "UBS urged to split off Investment Unit" as just one example.

 

Now, I don't want to sound conspiratorial (*although what the hell) but all the restructuring in the industry of late has an odor to it - the smell of money to be made.  The underlying strategy seems to be to take companies which picture themselves as mere victims of a crisis of confidence and split them into two pieces:  The disposable piece, where all the bad/liar's paper is concentrated, and the "core business" piece which seems to make money.

 

You notice that "Citi merger architect calls deal 'mistake'" in the Financial Times today? In the TimesOnline, we read how "Bear Stearns says traders' false rumours took bank to brink." Fer cryin' out loud, that's what traders do for heaven's sake - they push markets to extremes for money!  Get real.

 

The Fed bails out the bad business for a while, loaning them money on whatever pretext is handy, and the we get one more big rally before things all head south next fall or later; preferably in a democratic administration so the republicorps can promote their Big Lie of fiscal responsibility to a public which is nearly 50% on anti-depressants.  Ought to work just fine - has in the past, anyway.

 

In fact, the republicorp spin for a fall crash would be "Oh, it's 'cuz the markets are so worried about income democorps..."  Is this a great (duopolistic corptocracy of a ) country, or what?

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So, what kind of headlines would you be writing down on the Street if you were trying to keep the illusion going that, as my friend Jim Kunstler would put it "It's all good" or, as they said in the 1930's Depression "Good Times are Just Ahead!"?

• "Bernanke: full effect of rate cuts yet to be felt"  (*as I explained, rocket fuel can be slow to light when surrounded by skeptics.)

• "How to cash in on lower interest rates"

• "Tax Payer bail-out ideas stabilize US dollar, trip gold"

• "When economy perks up, where will your cash be?"

 

What's going on at the more subtle levels is that the crisis is cycling up to boil and then simmering - back and forth like, just when I make a big pot of spaghetti like I will this afternoon.

 

The "Fed", being better at cooking the monetary spaghetti than me, reckoning they will know the exact moment to remove the spaghetti from the inflationary heat they've been applying, such that everything will be OK.  I'm betting they scorch it, and we get a short burst of Hyperinflation and then a massive deflation, which would be akin to cold, burned spaghetti.

 

Bankers to the Life Boats!  You women, children and families, ya'll just wait over there...

 

The Runs: Fonda Obama

Jane Fonda has endorsed Obama.  Wake me up when this is all over?

 

Sore Loser

Say, remember the Zimbabwe elections where Robert Mugabe by many accounts lost?  Well now, the country's police are running around arresting opposition party leaders and so forth. 

 

Follow-up: Plane Plot Bust

"British Muslims 'planned to kill thousands by brining down SEVEN transatlantic airliners in one go with liquid bombs"  says a Daily Mail  report

 

Hey Pope! Department:  Bring Your Own Crackers

The headline "Pope to Visit NYC Synagogue for Passover" reminds me to mention to the Pontiff "Bring your own crackers...the national shortage of Tam Tams continues..." Better headline than mine is in the NY Times: 'It's Hide the Matzo" for real: Tam Tams are scarce."

 

 

Coming Monday: CorpPharm's War ON DNA Testing

Drop by Monday morning for that - I'll be finishing up the research that over the weekend.  Daughter Denise is way into this one...The short version if you can't wait (or want to contribute research): CorpPharm is going after independent DNA testing outfits with what feels like a smear campaign because 'one-size' fits all medicines are way cheaper/more profitable than acknowledging that different genotypes have different reactions to the same medications! Quick, run 'em out of business!

 

Correction: Falklands Oil

OK, so this makes sense now: Yesterday I offered that there was no reason for the Brits to hang on to the Falklands with such vigor as they had no oil...so why bother?  A zillion or two readers reminded me that no, there's in fact as much as 60-billion reasons for British gunpoint diplomacy there - that many of barrels of oil...  I sit corrected. Got to have something to do when the North Sea releases its last drop...

 

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Coping:  That Alternate Reality

A reader, taking note that we seem more likely every day to be living in an alternate reality, offers this clip from NPR that explains the economy.  It's a little more complicated than my Leveraged Laundry Obligations explained earlier this week, but it's worth 'earing (sic).

 

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If you have snips or bits of useful information, which will help people cope with the world a little better, please send them along to  george@ure.net. Sources are always treated confidentially.

 

Food Storage

Worried about the record high price of rice this week, or the prospect that Ug99 will go global and we'll all be eating McBurgers with our fingers and no buns?  If so, you probably have stored away at least a little food to hedge against possible hard times and high prices in the future.

 

But, if you think that food hoarding can't be made illegal by the government, go read a little history of World War One in the NY Times archives...Click the pdf file for the while story.

 

While this is going on, of course, we've been telling you ab out shortages and famine to arrive shortly - right now, in fact, if you care to read about how a "Silent' famine sweeps globe."

 

Got your garden in?

 

You Are What You Think - and More

Over the course of the past seven-years that I've been involved with the time monks at HPH, working on how the shadow casts a shadow before it, in the form of subtle language shifts on the internet, one of the things that has fascinated me most is the question of just how that future-to-present connection works.

 

Going well beyond Dean Radin's groundbreaking  Time Reversed Human Perception work, there's now something running called "The Intention Experiment".  What it gets to is that people's thoughts do seem to have a huge ipact on what follows.

 

Extended, I see this as almost a scientific explanation of the underlying mechanisms behind prayer and mediation, which is to say that those who are somewhat along the adept's path to slipping the stream really can accomplish remarkable feats and insights. 

 

*If you don't know what the stream is, it's back to the books for you: but you could start by reading between the lines of Castaneda's "A Separate Reality", a little research on ayahuasca and various planes of existence.  Those that have slipped the stream, aware or unaware of what they were doing [as in unprepared drug users, or in vivid dreams] act a little strangely it seems because things are more than a little strange int he stream.  Those readings followed by a big gulp of Graham Hancock's Supernatural and you'll be well on your way to 'getting it' with this intention work.

 

A kind of interesting sidebar here, which bears some pondering:  There's a report out this week that "Sodom and Gomorrah Destroyed by Asteroid".

 

I don't know if you have ever had any direct contact with the future through prophetic/symbolic dream or not (*I have, but only a couple of times in 59 years) but it makes one sit back and wonder if some of the characters that are enshrined in Biblical and other traditions tracking historical events were using metaphors for what happened to them. 

 

How would you explain a prophetic dream (or stream slipping) if you had a much more compact language with an extremely limited range of concepts  that was mostly spoken and passed down? Just a thought, so don't stone me as a heretic for asking the questions which are obvious when they come up.

 

Brain food for Breakfast:  this short movie on Monkey Mind. 

 

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Around the Ranch:  Facing the Music Everywhere

Sitting in the comfort of my ultimate home office (more radio, computer, and music gear than you can shake a stick plus a very well equipped metal and wood shop just outside the door not to mention a couple of bottles of El Don sipping tequila and cigars at the ready...) it's sometimes hard to fathom the concept of facing the music.  Still, this seems to be the weekend when that occurs in three ways.

 

First, later this morning we'll be taking delivery of three more females to round out our registered Boer goat herd.  What they do around breakfast time and the dinner hour to remind us of their need for feed is something akin to a bunch of drunks trying to sign a capella.  Not a tune to be carried with a forklift, but music to our ears in a strange way, nevertheless.

 

The second facing of the music will come tomorrow when Elaine heads back to Wal-Mart to pick up a new 'musical electric toothbrush'.  This is something she reported back earlier in the week; seems it promises to put music in your mouth while brushing.  I've gotten pretty tired of the SoniCare one-note samba, but more important, this new consumer gizmo leads down the path of ultimate technological absurdity: I can hardly wait for the MP3 loading toothbrush to pop up. 

 

E's mission: Buy one of whatever these are so we can see the important incremental advances that technology is brining us packaged as goodness and a better liefstyle.  Certainly one research point will be whether the Bureau of Labor Statistics or the gnomes at the "Fed"  counts this as a major productivity increase, after all we will be able to eliminate radios while brushing.  Hells bells that ought to be good for a 4-5%  increase in GDP in and of itself.

 

Last, but not least, I'll be facing the music on taxes this weekend.  Pappy, back when he was still around, always made the point when I whined about it in my younger days.  "Come on, this is the greatest country on earth and besides, if you owe taxes, you at least made some money, right?"  Here lately, I have begun to wonder about the former (what with spies at every turn and Executive Orders a/k/a ruling by decree swamping the Glorious Constitution), but out of respect for Pappy, I'll face the music this year with appropriate accompaniment: Either the soundtrack of Field of Dreams or a plain funeral dirge.

 

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Thursday April 3, 2008

Short Takes Thursday

It occurs to me, after spending about 45-minutes earlier today watching Vista doing yet more amazing things to my computer (*which has gone from a 160 gb drive to a full 40 gb drive when I restored from a backup) that I really need to be very focused today.  We're getting down to the fun part of the year when I finish up all the financial loose ends around the ranch.  Some of these loose ends include doing the adjustment entries in QuickBooks to finish up the 2007 personal financial statement, running off taxes for the quarter and doing the 2007 tax filing (made possible with TurboTax which has a small business edition) and all the rest.

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A couple of folks have asked me why I don't use a tax professional (*the tax attorney, for example, which I do from time to time, but mostly for hare-brained ideas) and do a really elegant filing.  The answer is simple.  We don't have a lot of expenses and when all is said and done, trying to weasel out of a few bucks by filing a long and involved return is a lot more work than just doing a standard deduction filing and being done with it.  In past years, we've never come anywhere near the standard deductions anyway, so it works fine for us.

 

Complicated depreciation schedules for the farm truck?  Why?  Just do the mileage allowance and be done with it. That kind of thinking.

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All of which goes to underscore my very simplistic approach to finance.  If something can be made complicated or simple, the simple path works best for me at least most of the time.

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A search of the headlines over at the Google news site brings few interesting headlines, headlines:

1. "World's fattest man enjoys the simple things"

2. On the other hand a website called "fitsugar.com" says "Diet Tip: Keep the Formula Simple."

3. Van Morrison's new alburm out this week is "Keep it Simple"

4. As I approach Geezerhood, I'm pleased to learn that there's a "Simple new phone for seniors"

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Wednesday April 2, 2008

"They're Pouring Rocket Fuel"

About halfway through the Tuesday trading session my [tax] attorney called and asked a really simple question:  "Do you remember when we were going to the moon the liftoff of the Saturn Five rocket?"

 

Crap...does everyone on the planet know I'm old enough to be verging on geezerhood and might actually remember this stuff off a network feed in 1969?  "Uh...well...er...(my mind was racing to change the subject somehow)..."Are you sure it was a Saturn Five?"

 

"Yes, I am, of course it was a Saturn Five," my consigliore scolded, perhaps thinking I had  early Alzheimer's symptoms in addition to not aging gracefully.  Nevertheless, he was polite enough to continue "The thing about that launch was remember how very slow it was when it first moved at lift off?  It took the damn thing something like 15 to 20 seconds before it got beyond the launch tower and gantry. it took it quite a while in fact, but by the time the first stage was finished, it was going something like 600 miles an hour and was many thousands of feet up.  You get it?"

 

Ashamed to admit that I had my head buried in a client issue (dealing with dropped emails getting to me) I feigned a knowing "Hmmmm...."

 

"Eggggzactly!" 

 

Whew, I had skated!  Washington & Lee University apparently didn't teach late 1970's tax law students about over-the-hill reporters who bluffing about with words like  "Hmmm..." and thus succeed at fishing for information rather than seem complete fools.  Suspecting this to be the case,  I had to do was shut the hell up, and he's tell me everything. Being an attorney, I shouldn't have long to wait.  It worked:

 

"The way I have it figured is that the "Fed" has been pouring rocket fuel on the market for the past month or two, what with all the bailouts and everything.  Something like $360-billion by one count, but could be more.  My point is that what's happing today (yesterday) is that the rocket fuel is now catching fire and the rocket ship is going to take off.  It's going to be one last moon shot, so to speak  You were right.  I was right.  We might get one last chance to bail out before the big crash! Our friend Robin Landry is right!  Absolutely smack-dab on-the-button right"

 

I didn't have the heart to tell him the Crash, which will become The Second Great Depression, is already here, thanks to the fine spending policies of president Herbert Bush who seems as immune to the reality of tent cities for California's homeless as he does to the current price of gasoline.

 

In fact, the reality of the Second Depression is so strongly cast now that even the British press is headlining: USA 2008: The Great Depression.  Ain't that cheeky?  They're whining but we're paying for it and the word "depression" is only used on the money honey channels to describe a medical condition and reasons why we should throw money at Big Pharma companies.. 

 

I don't know if my friend Jas Jain has trademarked the term "Greater Depression" -- a term he's been using among a bunch of us econ students/pundits since 1995 (*I prefer Second Depression, but Jas' name for it is better from a marketing stand point.). Maybe I should call him and see about licensing the use of the name so I can come out with a timely line of "Depressing clothing" and "Depressing Sportswear".  Add a tent city/soup line logo and a line of designer wrist bands for the tent city dwellers and.... Ooops.  Where was I?  Oh yeah...

----

Need a personal financial bailout?  No problem, come send us your tired, your poor, your bankrupt bakers yearning to be free - we'll save 'em - it's what we do in the New America (*the one without a Constitution). 

 

Got some old laundry tickets?  No?  Well how about a couple of dry cleaning claim chits?  I show you in a second how to turn those into millions if not billions.

 

As close as I can figure, that's all it takes to qualify  as an asset-backed security anymore, although a claim chit for a hocked chain saw at a pawn shop could be similarly leveraged. How much do you  wanna borrow?  Good Times are just ahead, Citizen!  Lord, I wish I owned a pawn shop.

 

OK, sure, CONgress is making a big MainDreamMedia (MDM) production of out the few bumps along the way - like killer gas prices -- but the reality when you scratch down through the spin layers is that a lot of the old boyz on the hill are just working over the old boyz in the oil patch for a little bigger slice of the good 'ol pie.

 

My consigliore had earned his retainer again.

-----

Robin Landry (rlandry@allegiance.tv) , although feeling under the weather with a terrible cold (proving to me that people get sick when they go on vacations, especially on luxurious cruises around the Caribbean) had told me not a half hour earlier that the April Fool's Rally was likely the last train out for people who want to unload before we sail off the edge of the charted financial world later this year.

"I told you I was in Orlando for an investment conference about a week and a half ago?  Well, even though I didn't do a paper this year, a lot of people asked me about my model.  When I told them that my model had issued a long term sell signal, just like it did in January 2000, before briefly pulling back in February, or so, I told them that I'd be looking for the same kind of divergence to develop this summer.  I think it will look like about April of 2000 when it comes to divergences.

 

You know what George?  Not a one of them believed me back in 2000 and no one wants to believe me now!  It was amazing.  All these people I talked to in Orlando just didn't want to believe it could happen that way again, even when I showed them the chart and the count. 

 

But you know what?  I've got my count and it all fits along with all my other indicators.  It looks like we're starting into  (wave) 5 of 5 of 5 and after that, if you're not out, bar the door 'cause that will be all she wrote.

---

I've have [managed account] clients who I've already moved out of the market calling me.  One guy called and said that his account was down 3% since the high and I asked him if he had considered how the overall market had been doing since I got him out - It was down  about 20%.

 

George, these are the exact same people that were calling me when I got them out of Enron when it was over $100.  They all told me I was nuts.  Well, it's going on like that right now, all over again."

After ,talking to Landry and my consigliore, I admit to feeling pretty smug:  I can see the economic future almost plain as day, although this is not financial advice. 

 

We seem to be 'lifting off' our final barn burner rally I was telling you I expect for a couple of months and that come this summer, we may even take out the old high and install some new ones.  By the end of  July, I wouldn't be surprised to see the 16,000 mark.  If I were playing with stocks instead of commodities, I'd be chest deep in index calls with a July or August expiration.

 

Why?  Because as consigliore says, "They're pouring rocket fuel", or as Robin says, "It looks like the 5th of the 5th of the 5th."

---

As the mood swings over to positive here for the next six months, I expect commodities including gold and silver to turn around and rally, especially silver which is due to become more endeared to the public based on the HPH linguistics -- I'm betting that the endearment will be accompanied by a price move - that's my gambling gene kicking in.  But then comes the Fall and the fall and we'll be so battened down that anything which comes ought to be survivable, short of George pushing the Big Button.

 

Remember what I told you a long time back?  There may come I time when I would think about loading up to the gunwales and going short with every dime I can raise.  I think that will be here late this summer.  Short term, 14,000 seems like a good first stop.  But by late summer, I might be inclined to short some commodities if any look overpriced then, along with the indices and maybe (gulp - am I writing this?) buying some government bonds, as well.  This ,weekend for subscribers to www.peoplenomics.coim: "How Would You Play The Crash"?

 

All that, of course, is way off in the future.  We might go hyperinflationary along the way, in which case the metals ought to scream upward). That'd be all the rocket fuel catching fire at once, in late April to mid May.  For today, I'll just get my nose back on the grindstone.

 

So you see, there's really nothing to worry about -- Ben and Hank have saved us -- a little profit taking at the open maybe, but seems to me (and my more learned colleagues) that we're all going to the moon because this band of garage financial racketeers...Ooops, I mean  rocketeers... have been pouring straight rocket fuel into the belly of the markets for a couple of months.  Yesterday smacks of liftoff.

 

It's like swallowing a couple Fizzies on a bet when I was a kid.  I wouldn't feel anything for a minute or so, but then I could let out with some world-class length belches; Fizzies being a sort of flavored/sweetened Alka-Seltzer sort of thing.  (*I was the guy belching root beer.)

---

This morning's discussion is about much more serious matters than my juvenile munching of Fizzies, though not by much.  It's about the nature of rocket fuel and how the Treasury and the Fed are getting this rocket off the launch pad.

 

If you'd like to learn about civilian sources of rocket fuel, so that you can maybe launch some rockets of your own, feel free to click over to the website of the  National Association of Printing Ink Manufacturers.  However, be advised that if you do try to mix up some of this kind of rocket fuel at home - make absolutely certain that you don't write the words "United States" on any your work product, for it you do, you can quickly get into regulated rocket fuel territory.

 

On the other hand, if you have a couple of left over dry cleaning tickets that you haven't picked up yet, combine them and issue a new financial instrument of your own.  Call it something like a Leveraged Laundry Obligation (LLO).  If you're like a good chunk of American rocket fuel printers, you might be able to sell your LLO's to China (*but they already have good historical reasons to be suspicious of Americans and laundry instruments, so failing a sale there, you could no doubt sell them to someone in the Middle East.

 

Before you know it, your personal fortunes will have swollen immensely and  when they do, please remember to tip the tipster (*me) generously.  Wire transfers are fine, or a good 3-4 year old Porsche Cayman or 911 (coupe), no Tiptronic thanks, manual only.  Oh, and throw in a fresh clutch face.

 

Just be damn sure, whatever you do, to be out of harms way, miles from the rocket range, before anyone tries to get real value for your LLO's.  The specific caution being that people tend to get seriously pissed when they find out all about your dirty laundry.

 

Rockets away!

 

I've been working on axioms/ mnemonics to help me remember my plan.  Try these:

• "Sell in May and go away"

• "Sell in June - is it too soon?"

• "Sell in July and then fly"

• "Selling August to avoid a Bust"

• "Sell in September, or the wife will remember"

• "Sell in October and it'll be Over"

• "Sell in November, bankrupt December"`

 

Yeah, those help. ;-)

 

Housing Hope

"Paulson says Treasury "Flexible" On housing measures."  I wonder if that measure choosing between a tent and a shelter?

---

You might want to click on the NY Fed's housing troubles map (very slow to open, plan on it being open when you get back from lunch...)

 

Islamic Economics

"Adopt Islamic Economics: Jeddah Conference" is the headline.  What?  And give up the Western usury/inflation approach?  Look, just because algebra works, that doesn't mean a system of buy/sell/negotiated fees instead of the floating interest rate craps game would work, does it?

 

"Is this Progress?" Department

The report in the WSJ today that "Cuba's Opening Marks Shift Away from Fidel" may sound like good news.  Cuban residents may be able to get private cell phones and stay in previously tourist-only hotels.  haven't these people figured out yet that the Mark of the Beast is a recurring monthly bill?

 

Fortress Earth

George Bush is off (*no smirking at sentence fragments this early) in Europe where he's pushing for an expansion of NATO.  Whatever will humans do when we have no more straw man enemies with which to justify huge spending on wasteful military expansions when we could be converting to alternative fuels use, and funding better education?

 

Dumb and Dumber

"George, lay off that perpetual pro-education stuff, would you?"  I can almost hear it.

 

Look: How are we going to have an informed electorate if  this is true? "Report: Half of US student sin Big Cities Never Graduate"

 

Bowing to the Public

A semi-right move by the DHS folks: "US Government waives obstacles to border fence" is the headline.  Seems folks in the Beltway are a little slow to hear the public out here in the hinterlands.

 

Airport Arrest

A man heading to Jamaica was busted at an airport in Florida Tuesday carrying pipe, pipe end caps, some suspicious liquids, and a laptop with bomb making literature.  I only have two questions:  have they given this fellow an IQ test?  Or, absent that, Was the laptop running Vista?

 

--- snip and save section ---

 

Coping:  Genetics and Crops

A lot of people ask me what's going on in the genetic modification of foods and why I don't spend as much time on that as I should.  So today, two very important backgrounders for you.

 

The first involves the case of Percy Schmeiser who, according to a Monsanto Canada press release last month (which got completely overlooked here due to workload/gout/etc) is worth reporting here:

"Mar 19, 2008 11:09 ET Percy Schmeiser Settles Small Claims Court Issue with Monsanto Canada

 WINNIPEG, MANITOBA--(Marketwire - March 19, 2008) - Monsanto Canada today announced that Mr. Percy Schmeiser has agreed to settle the Small Claims court case he initiated against Monsanto Canada related to unexpected Roundup Ready canola volunteers on his chem-fallow field in 2005.

Mr. Schmeiser originally filed a statement of claim with the Small Claims Court of the Provincial Court of Saskatoon, Civil Division in October 2006 seeking reimbursement of costs of $660 for the removal of unexpected Roundup Ready canola volunteers from his land.

Monsanto Canada had previously agreed to assist Mr. Schmeiser with this specific issue in the fall of 2005 and pick up any and all costs associated with this matter, but Mr. Schmeiser turned down Monsanto's offer of assistance after refusing to sign Monsanto's standard release form.

"Although we are pleased Mr. Schmeiser finally approached us and agreed to settlement terms, it is frustrating that he essentially accepted the same offer we put before him in 2005 at the time we visited with him and offered him solutions to address the presence of unexpected Roundup Ready canola volunteers on his land," said Trish Jordan, public affairs director, Monsanto Canada. "At the time, we chose to treat Mr. Schmeiser the same as any other farmer who might find themselves in a similar situation. This entire matter could have been resolved more than two and a half years ago and Mr. Schmeiser would have saved himself some legal costs."

Several other western Canadian farmers have willingly agreed to similar settlement terms in order to have their individual issues addressed by Monsanto. For example, in 2007, Monsanto Canada assisted 16 farmers with addressing similar unexpected Roundup Ready volunteer issues. In 2005 - the same year Mr. Schmeiser experienced unexpected Roundup Ready canola volunteers - Monsanto Canada assisted six different farmers with resolving their particular situations and all costs were picked up by Monsanto Canada. None of the farmers who previously accepted Monsanto Canada's offer of assistance ever raised any issues with signing Monsanto's standard release form.

Earlier this week, Mr. Schmeiser - through his lawyer - approached Monsanto Canada and offered to settle this matter prior to the scheduled hearing on the case set for Wed. March 19, 2008. Since the outcome was essentially the same offer Monsanto had previously made in the fall of 2005, Monsanto Canada settled with Mr. Schmeiser on terms agreeable to both sides.

Terms of the settlement offer accepted by Mr. Schmeiser are as follows:

- Mr. Schmeiser will receive $660.00 from Monsanto Canada - the purported cost he incurred for removing Roundup Ready canola volunteers from his specific field.

- Mr. Schmeiser picks up all costs associated with filing this statement of claim with the Small Claims Court, Saskatchewan, Civil Division.

- Mr. Schmeiser signs a release form absolving Monsanto Canada from any further responsibilities for this issue. As such, he releases and forever discharges Monsanto Canada from any and all future claims made by Schmeiser Enterprises in this particular matter, and all claims for recovery arising out of the presence of Roundup Ready canola volunteers discovered on this particular parcel of Mr. Schmeiser' land in 2005. Monsanto Canada assumes no liability. "

Of course, around here, Elaine and I hold to the view that since no life has ever been created from the ground up that any life form is unpatentable.  Clearly, neither of us has worked for an intellectual property law firm - many of which argue that if you improve on an existing 'something' it becomes IP. 

 

But that's a two beer discussion and until the gout is completely gone, I can even say 'beer' aloud.

 

Then I got this really interesting email about UG99 wheat rust:

"Hi George: If you figure out who, what and where, I am, keep it to yourself.

The best article is the farmandranchguide. I included some old sat. photos of how dust is moving around the planet. The one of Gobi Desert dust landing in Colorado, is particularly important. The rust has already spread globally. It will take about two years to fully become threatening. Once the spores reproduce, they will infest those areas for decades. Also note, the rust kills oats, barley and wheat. Few populations will be spared. Beer could also become expensive (there are severe restrictions on using fungicides on barley/hops, the residues kill the yeast).

There are some fungicides that can prevent or suppress the fungus, but those areas that are the most vulnerable, are least able to afford the cure. With so much of the global population dependent on 5-10 acre plots, they will be unable to utilize "modern technology as a North American farmer looking at $600 profits/acre. Spending $25 an acre is possible logistically and economically. That amount is insurmountable to a Pakistani farmer.

There exists a belief that Monsanto, Dupont and others, have nefarious reasons for including "suicide genes" into their proprietary seed strains. I personally know why they do it. It is business, not conspiracy. Let me explain.

I personally worked for several years, doing one very small part, in developing what was the world's best rice herbicide. We spent altogether, $230 million and 6 years bringing it to market. It was the most effective and safest discovered to date.

Consider developing a chemical that selectively kills only certain weeds or insects, while being able to spread it over large areas of the environment, on the very things people will eat, it is scientifically challenging beyond belief.

The herbicide was a money maker for sure. And of course we wanted to sell it in China. China stipulated that to sell it there, it had to be made there. Ok. So we built a plant. The workers (selected by the Chinese gov.), worked like dogs for 6 months. Then one day, nobody showed up for work.

Two weeks later, they were building "their" plant to make our chemicals that they had reversed engineered. They worked just long enough to steal everything they needed. They did not have time or money invested, so they undercut our price and drove us out of the country.

Again, I have worked helping to develop GMO seeds. If you do not include a "suicide gene", they just steal the hybrid. As you have said, the Global Business Environment is not a level playing field. If we steal from them, they sue us in our own courts. We are unable to do the same back. Separate case.

We have another well known product which we intentionally left out some key information in the patent. Sure enough, the Russians, Japanese and Chinese all reversed engineered the patent. They marketed their (ours) product as proof we were price gouging. Shortly afterward, theirs started to fail during use. All three went bankrupt and we ended up with a monopoly.

We also doubled our prices. Our little way of saying "f* you". Let me point out, we spent 23 years developing that product. That's right, 23 years. Little hard on the ATOI. (*methinks he meant ROI as we all know ATOI is  ASCII to integer conversion in C++ - G)

Some background. I've spent 24 years doing Ag research, 12 of it doing Environmental Modeling of all economically relevant agriculture areas (globally). I looked at primarily Off-Target Impact of pesticides. This is how I learned about Global Warming before it became a buzz word. It is also why I put it all on the line, to jump into Fuel Cell research (reaction kinetics modeling), where I put in 6 years.. Bad move, different story.

Forget CO2 and global warming, it ain't us, but did not know it at the time. I still keep my hand in the modeling part. Which is why your time monks might be seeing a little of what I'm seeing. I think it is going to get real hungry out there, starting next year.  (<----!!!!!! Note this point seriously!!!!! - G)

1. Severe food shortages in about two years.

2. The weak link in the food chain is not what you think. You'll have to "Google" it. Start with "Grain Elevators, bankrupt". They use Bridge Loans (credit) to buy billions of dollars worth of grain each year.

Extrapolate this out to cattle feed lots (what do you think 100K head and feed cost x 1K feed lots).

The credit is no longer there and you may see global famine, while bumper crops rot in the fields. The credit is from lower and mid-tier local banks.

3. One bushel of wheat for one barrel of oil

4. Commodity futures sounds swell, until the other side can not cover and walks on you.

Hey! Got your garden planted yet?

Holy smokes!  Keep us posted - contributions are welcome from this first class thinker any time!  Meantime, make a note on your calendar to short any diet companies in 2009.  World's going to take over that sector and obsolete it.

 

---

 

Send comments and more snip and save section info to george@ure.net

 

--- end snip and save section ---

 

Around The Ranch:  Random Notes

 

1. I am trying to catch up on a few Peoplenomics subscriptions this week - just been miserable with the leg still on the mend

 

2.  A reader sent me a really neat device called a Cyro/Cuff which is a really cool way to chill a sprained whatever - more on that tomorrow.

 

3. Prices for HDTV's may have bottomed briefly.  E reports the 42" she was looking at yesterday was $1,200 but you can do much better online.  E says she doesn't like the shiny bezel, though so she didn't bring one home.  Says the reflections off the bezel were distracting to watch.  (Whew!  Keep shining 'em up!)

 

4.  Back from town Elaine observed that the busiest intersection in town is the crossing in front of the Wal-Mart food section door into the parking lot...  Yup, if that's the busiest intersection in your town, you're in the country.

 

5.  I didn't have my garden in when we had 2" of rain over 2-hours this week.  Guess who's doing tiller time this weekend?  My garden will be in by Sunday.  This year, I promise not to drink beer while planting so we know in advance which plants are coming up where.

 

Seems last year I put in all the plants and was going to put the labels on after I got all the seeds planted.  A Bud here, a Bud there, a phone call, a trip to the neighbors for something, another call, needed something from the shop...next thing you know..."Hmmm...what did I plant here..."

 

I call it "Texas Surprise Gardening."  Not this year. Well, maybe not this year...

 

---

George Day, April 1, 2008

April Fools:  The Simpleton's Analysis

"You were what?"  "Playing 'charades' with Paulson on the TV during the Q&A after this presentation," admitted Elaine.  "He seemed to be having a problem with a word here and there so I was just tryng to help..."

 

Indeed, the words of Hank Paulson were extremely carefully chosen Monday in his "We're going to save everything" press conference - and he did just fine in the end. 

 

The world seems convinced for now (*significantly it is April Fools Day) that 5,000 years of recorded history of collapsing fiat monies have now been rewritten and things really are different this time. 

 

With just a little more concentration of power, not to mention a little change in regulations, the economy will be saved - and no need for Congress to even deliberate such things.  They're treated as an accomplished fact.  Why, just look at how oil is declining today in the wake of the Paulson Saves Us press conference!  Why, even in gold-crazed India, the gold-bugs are being beaten and stoned (metaphorically).

 

So what are we to make of this glorious plan? 

 

I feel compelled to offer The Simpleton's Analysis, mostly because my pal the Mogambo Guru is presently recovering from case of self-inflicted over-medication (*his family was cheerfully offering to help in case he couldn't manage it himself, I hear),

 

Step over here to the whiteboard with me.

 

We begin with a quick scan of the Monday press release, a/k/a/ what they're going to tell yah:

SHORT-TERM RECOMMENDATIONS

President’s Working Group

• The PWG, created in 1998, is the most useful interagency coordination tool for financial services regulation.

• Treasury recommends modernizing the current PWG Executive Order to reinforce the mission and purpose of the group as an ongoing mechanism for coordination and communication on financial policy matters including systemic risk, market integrity, investor and consumer protection and capital markets competitiveness.

• Treasury also recommends expanding the PWG membership to include the OCC, OTS and FDIC.

Liquidity Provisioning by the Federal Reserve

• Treasury recommends specific enhancements to the process of expanding access to Federal Reserve lending channels.

• First, future lending to non-depository institutions should be calibrated and transparent.

• Second, the Federal Reserve should have access to sufficient information on non-depository institutions with access to Federal Reserve loans. This could include on-site examinations or other means as determined by the Federal Reserve. The most important information relates to funding and liquidity.

• This will provide framework for oversight of non-depository institutions with temporary access to Fed lending while recognizing the differences between banks and non-banks.

• These are difficult issues that should be addressed. The optimal structure tries to address some of these questions but we are learning more every day as the Fed is working with the primary dealers. The PWG should evaluate these issues.

The Simpleton's Summary

Let's only worry about the Big Picture:  As a simpleton, I believe in single-mission thinking. 

 

Remember the Victorian secret management principle that I learnt (sic) in grad school: 

General Motors doesn't make lingerie, and Intimate Brands doesn't make diesel trucks, although they both make things that are racy:  (If the Mogambo were present, I'm sure here would tell you to see GM's idea of racy here, or Intimate Brands idea of racy here.)

This relates to what?  What is the purpose of the "Federal" Reserve?  Answer: Print paper money.  I told you this was simple.  Not examine banks, not manage loan originations, not to control movement of wealth or regulate securities offerings.  Nope:  Single mission: Print money and lend it back to the public at interest of 6%.

 

In fact, they are genius-level creators of "money" insofar as the rate of "money" creation, at least according to John Williams work and the chart over at Trader Bart's site, is now any other Simpleton can see is now back to pushing upwards of 20% per year.

 

Lately, the problem the "Fed" (*in quotations so you're remember it's not really government, it's not really private, it's as explained yesterday a sort of Hungarian goulash kind of entity) has been facing is that the creation of CMO's, CDO' SIC's and XYZ's (fill in whatever here) is that such pseudo money competes in the marketplace for investment capital.

 

Suppose you were the printer with an exclusive franchise and someone said "Get control of the printing, please!  Do something about all these upstarts!"

 

You would not only look at your own printing presses, but those of others who are beyond your direct control.  You'd look as far as Wall Street and Fleet Street and try to get some control of those presses, too.

 

Somewhere in the clear thinking "Fed" research department, someone figured out a long time ago that the "Fed" was not the only game in town - Wall, Fleet and various back Streets were creating money. 

 

In simpleton terms, that's why the M-3 report was ditched by Alan Greenspan.  A sort of financial "You can't handle the Truth!"

 

As long as the M1 and M2 showed essentially only what was being created by the "Fed" it could be argued that everyday  results of monetary excess, such as inflation, would still roughly correlate to the "Fed's" printing output.

 

And it's true, to a certain extent:  The Fed was likely aware that the pseudomoney would not get to the consumer/working class folks in the country anyway: It is, after all, a special sort of money that only circulates in the Greedosphere of banksters. 

 

Out there in the Greedosphere, it has provide lush returns to the blessed/anointed, it has been the basis for bonuses that would last most of us a lifetime, yet you never saw it show up as change at the grocery store. 

 

Why? The Bankster's pseudomoney is really a second tier currency in America.  Notional money, if you will.

 

Simple?  You bet.  And, as long as the players at the top tier exercise restraint, no problem.  But when things get bad, the value of pseudomoney wobbles all over the place.  That's where we get financial crisis after crisis from.

 

The core problem is that this pseudomoney only had value as long as the players were all playing nicely with one-another.  Unfortunately, things have gone off the track because lately pseudomoney has had three values, not just one:

• mark-to market,

• mark-to-zero,

• or mark-to-whatever borrowing entities can pass off at the Fed window. 

 

Yes, it's a simpleton's view, but it seems to fit the available facts.

 

Mission Creeps

Armed with this wonderfully simplistic view of things, we can now get to the specifics of Mr. Secretary's plan.

"• Treasury recommends modernizing the current PWG Executive Order to reinforce the mission and purpose of the group as an ongoing mechanism for coordination and communication on financial policy matters including systemic risk, market integrity, investor and consumer protection and capital markets competitiveness."

Credit where due here:  John Crudele of the NY Post has been one of a handful of journalists who have even covered the existence of what I've come to think of as the "Price Fixing Team."  (This, after losing thousands in my personal account, incurred when I took the position that market's were anything approaching free. )

 

Recently, I moved my compulsive gambling genetics into the commodities market, where for a short time, my gains approached 1,000% annualized.  However, thanks to the disappearance of rational markets (*or, more specifically interventions) even those fat returns are now quickly evaporating.

 

Ah. This doesn't speak to the use of the Treasury's Economic (now called "Exchange")  Stabilization Fund providing for direct intervention, to calm jittery markets now, does it? 

 

It just talks about "determining private sector solutions wherever possible, but it doesn't say "Get out there and intervene, if you need to, boys!"

 

I would argue that absent Congressional authority, there would appear to be a class-action lawsuit basis here on behalf of all investors who have lost money because of interventions in the financial markets by the Treasury and its proxies.  I don't see where that's specifically authorized, but I may have missed something.

 

Of course they do intervene:  A trip to the Treasury Department's web site reveals that in 2000, the ESF made a billion dollar move to sell Euros, presumably with the purpose of bolstering the US dollar.  We can see how well this strategy has played out!

 

Nevertheless, the dollar is up this morning and in 2007's audit report, ESF admits to $83.6 million on changes in special drawing rights and a further  $1.678 billion playing "foreign currency denominated assets".  (Page 15 of audit) Not bad, huh?

 

But wait!  The financial report points to retained earning of $37.8 billions, but what about a little  something back to the shareholders?  (*You and me?).

 

The once Economic Stabilization Fund is now the Exchange Stabilization fund, although it's a kind of "hide the sausage" situation.  A Treasury Auditor report for 2007 informs us in a repeated comment from previous audits of the ESF, in part that there are a few reporting problems related to ESF (page 35).

 

It's HOW BIG?

I know I have whined a bit about the perceived impact of moves by ESF on my personal trades, but let's now click over to the Monthly Report on the ESF for January 2008 and see how big this 800-pound gorilla really is.  Their operating income for January 2008 was $753 million  while their current fiscal year net income is $1.7 billion.  That's profits - look at the dollar values moving around: Page 2.

 

Check the number of dollars moving.

 

An SPP/Mexico/NAFTA Connection?

Here's another Simpleton question for you:  Why is this page 3 of this ESF Monthly report PDF file  marked "Sensitive-unclassified"?

 

Could it be Notes to the Financial Statement #3?

"The ESF had an exchange stabilization agreement with Mexico for $3,000 million; this agreement was renewed in December 2007 for an additional year. No drawings were outstanding under this agreement."

Maybe we have to be ready to maintain the Peso's relative value to the Dollar for NAFTA/SPP to keep moving smoothly?  Just a Simpleton's questions, but something I'm sure a few FOREX (*foreign exchange) traders would like to keep in mind before placing Mexican Peso vs. anything bets.

 

So, What's the Problem?

If General Motors, or any other publicly traded company, was going to water down its stock through an issuance of addition new shares, or in the reverse, was going to reduce the number of shares through a stock buyback program, there would be plenty of public notices.

 

In such cases, the aware investor would be able to say "Hmmm...with x shares outstanding today, an increase of y shares might do this to the stock price, or a decrease of z shares would do this.  Such is the world of splits and reverse splits.  Simple enough for the Simpleton.

 

But, what about all this digimoney stuff?  What about these interventions?  And, as long as I am ranting, what about the price of gold beat-down which is underway this morning? 

 

The fundamental question unanswered in the Secretary's proposals Monday is this:

"Why are not ALL government monetary operations carried out in the open with real-time reporting so the average investor can move their portfolios around appropriately?"

As things stand today, the PowersThatBe have an incredible edge over everyday common workers like you and me, in that they have sophisticated ways to see using lots of technology and an advanced understanding of intermarket behavior, how to spot the 'footprint' of a particular player's moves.

 

You and me?  We don't stand a chance on this kind of playing field.

 

The bottom line appears to be that:

• Treasury wants less independent regulation of financial markets, and wants to centralize control within the President's Working Group.

• Presents the "Fed" centralizing of power nominally as a solution to the mortgage crisis, but...

• Does not advance the interest of 'regular' investors through increased transparency into the real heart of the matter:  Namely, what are the interventions of the ESF, when, and for how much, on a near-real-time basis?

 

Absent this kind of genuine transparency, the small investor has been, and seems likely to me to continue to exist as little more than trading-fodder for the bottom lines of proxies of the PowersThatBe.  Those colleagues of Treasury in the private sector who are knowledgeable about these facts.

 

Pricing of Gold

Most people haven't penciled out the government's cost of gold.  It costs about $1.00 per ounce.  How so? The government just prints up about nine $100-dollar bills which costs them about a buck, and buys what it wants.  Nevertheless, there is still enough popular support for gold and silver that  a headline today announces "Gold the best asset over last one, three, ten years."

 

As a Simpleton, I will probably continue exactly what I have been doing - going against the grain, reducing debt, paying my bills, paying my taxes, and converting everything I can into goods producing outputs, such as building my herd here at the ranch.

 

It may turn out to be an antiquated approach, now that we're all being saved from economic reality by a complex and convoluted (*and well-hidden) support net invisible to all but the most trusted insiders.

 

I reckon that just about ensures that as a Simpleton, I won't get Rich.  But, it may also help me avoid getting screwed by the printing-press crowd, which took the reins when Congress abdicated in 1913.

 

That's it for this morning's report - out of time.  Drop by tomorrow.  The Simpleton has to get back to consulting in his area of practice, management turnarounds with a focus on sales and marketing.

 

Be well...and trade eyes wide shut.

 

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Monday March 31, 2008

Revolution Monday: A Fed Beyond "Money"?

You might want to put a big red "X" on today's date.  It may mark the start of the biggest financial revolution in the nation's history, and is a landmark in the planned, or otherwise, transition from 'free markets' to an emerging 'socialism for the rich' which is aimed at shifting the cost of bailing out bankers and speculators to the wallets of America's working class. 

 

It will come packaged as a 200 page set of proposed regulations which  broad new powers to the (not really) Federal Reserve, designating it a "market stability regulator".  In plain English, it means something like "if it would be in the public's overall best interests to be a market manipulator, it's ok." 

 

Which is to say, if markets are going in a direction not desired by the PowersThatBe, the Fed will have expanded powers to venture out of the singular business of printing the nation's money (and charging interest on it) into the new realm of regulatory control in commodities as well as securities; it's billed as the biggest regulatory change since the Great Depression.

 

I've demonstrated that we're already in a Second Depression now; see the Aggregate Index chart here.  The key thing is that unlike the Great Depression, which was marked with high unemployment and massive deflation, this Second Depression has been [human] capitalized, such that a single person working can no longer support a family at a 1950's standard of living.  Husbands and wives both work just to make rent, and judging by foreclosures, even that's not enough lately.

 

A quick trip to the Treasury's web site reveals that as early as 2000, the Treasury ESF was making $1.3 billion dollar interventions to try to hold the buck's value, selling Euro's in that operation. 

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Free markets are marvelous things:  Left entirely to their own, they go through periodic massive economic corrections called Recessions and Depressions.  Sure, they're uncomfortable as hell, as the Panic of 1873 and the Depression of the 1930's underscore.  But in socioeconomic terms they periodically destroy malinvestment and wipe out bad debt, just as long waves in economic cycles have done all the way back to the Jubilee Years in the Book of Leviticus.

 

Today, the proposals which will be put forth by the Treasury Secretary will make it clear:  Given the abuses, lying, cheating, misrepresentations, and other morally bankrupt practices that have accompanied the Housing Bubble's collapse, this administration, along with the political duopoly (republicorps/democorps), will attempt to prop up the financial system so that America can continue its 'business as usual' and pass on a continuously higher mountain of debt to future generations, and thus ensure servitude to holders of debt and government in perpetuity. 

 

You don't still believe in those antiquated limited powers of government as the Framers envisioned envisioned in the Constitution, do you?  Hand me my crack pipe and another bottle of Jack, please.  You just ain't getting it.

 

"This is New America -  the Land of Do-Overs:  Lie, cheat, and misrepresent CMO/CDO's?  Oh well:  Here, have some money, which we'll just print up on the public's behalf without congressional review, and be on your way.  Just be better (*or at least move clever about it) next time, would you?"

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Consider that the economy operates much like a self-cleaning oven.  You can bake just so much in an oven before it gets dirty.  And, just like baking, sweetheart and crooked financial deals create a little something of a mess (*like pies do when baked), the more sweetheart deals and liar's paper, the more urgent the need for cleaning.

 

Periodic economic corrections are like putting the oven on "Self Clean" for a cycle.  There's a lot of smoke, no shortage of fear, and some serious pain to the pan drippings,  But after a while the smoke clears and the oven gets cleaned out.  In the same way, the economy can get back to its natural state of cooking right along.

 

What we awaken to this morning, though, is that the 'guardians of the oven' (if I can characterize them as such) have so many sweetheart deals cooking and so much pie baking that instead of letting the self-cleaning cycle take place, they will instead rewrite the manual on using the oven.

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To carry the analogy one step further:  There was a time when all the Fed (whose ownership is a bit murky - we'll get to that in a minute or two)...all the Fed did was essentially regulate the oven temperature.

 

Today's proposal will expand the Fed's role:  By getting into regulation of  areas previously the domain of the Securities and Exchange Commission, the Office of Thrift Supervision and the Commodity Futures Trading Commission to name a few, what the Fed is, in effect, going for is not only control of the oven's temperature, but also what goes into the oven.  More powers for the PowersThatBe.

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Don't get me wrong:  I don't want an economic recession or worse, a depression.  But, on the other hand, the US Dollar was been watered down since 1913 from buying a whole dollar's worth of purchasing power to a scant 4.5918-cents worth.    Fine guardians of the oven, they have been, indeed. 

 

Perhaps the PowersThatBe know National books are best cooked slowly?  Sound money?  Created by Congress?  Did you skip that "New America" concept again?

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A friend who's a financial writer for one of the MainStream teevee networks thinks I make too much of today's event, writing in part:

"Revolution tomorrow [Monday]? I don't think so. Revolution connotes big change and a replacing of the old guard. All I see are more vagaries than specifics in the Executive Summary of what amounts to the the Paulson "Homeland Financial Security" plan. This is typical end of administration clap trap to fool the people into believing that something "sweeping" is being done. This is also vintage Bush playbook - just wrap it all up into a giant government agency. At its darkest, it's a power grab. What investors and the general public really need is greater transparency and greater tightening of accounting standards so that we and the financial industry no longer have to guess which financial entity is solvent. After all, is the present crisis about solvency where banks are hoarding and not willing to lend to each other in overnight and short term markets? Plus, Paulson is all about slight of hand and controlling information (subprime is largely contained, said he many times last year) and perhaps if we knew the answers to the issue of solvency, many might not be able to handle the truth! But transparency and truth are still better than flying in a cockpit with no instruments and windows. We're not getting that with this new "sweeping" plan.

...

All of what we hear [Monday] will largely become moot when more financial shoes related to the OTC derivatives mess begin to drop. Ultimately, there will be the stark realisation that even the Fed and Treasury shall be buried once the OTC derivatives start to unravel en masse. It's an end game that I'm surprised to see has come so quickly to the forefront and to which Paulson is merely firing flares at with a small handgun."

Perhaps.  But, I think not.  I'm expecting this roll out in the same way the (misnamed) "Patriot" Act did:  Groundwork laid, pretexts presented, and then a sudden crisis to kick things over onto the new path in emergency/reaction/no deliberations mode.  The OTC derivative meltdown, as my friend mentions, would fit the bill just fine, and I shouldn't be surprised if it comes along more quickly than my friend expects, too.

 

Meantime, emails are popping up in the inbox right and left explaining in the most graphic terms why the bottom in terms of housing, employment, and the economy is in general, is nowhere near 'in' yet:

"I am a real estate/mortgage broker of many years in the Las Vegas market. That this did not all fall in sooner still amazes me. Since 2002 I have been selling out and as of early 2006 was out of all commercial and residential. Last summer, say June, I sat with several local bankers and other well connected individuals having an end-of-week cocktail. It was put forth by several of those at the gathering that the real estate/financial market had clearly crested, that we would see over a 50% correction in most real estate prices in the next couple of years, and that before this was all done entire subdivisions, city tracks of land, and commercial parks would be under management via Federal Reserve bail outs of the securitized secondary market, ala feudal land lease …. That this land may possibly never be owned again privately, but rather leased on a 50 or 99 year arrangement, much like what is done on other federal land. Most everyone laughed, but some of us, yours included took these words as an ominous omen.

...

Let’s not forget peak everything, solar flares increase in a eleven year cycle blow out come 2012, and food shortages, half of the eastern US is on medication, and I keep telling myself this is only the beginning …… OMG OMG

What most people don’t have a clue to including most federal, state and local municipalities (FSLM) , is that anything and everything that had even the remotest dollar value has been securitized to some crazy overvalued amount and sold by the PTB wonker- stooges and sold all around the world to unthinking institutions and people with too much money and no sense.

In October 2007, Judge Boyko {*US Eastern District Court, Ohio - gu] pointed out the obvious and demonstrated the testicular mass in the Deutsche Bank rulings, securities do not have standing in court for which they can seek remedy through foreclosure. Securities are only owned by shareholders and represent a speculative derivative, not ownership/title.

FSLM have been securitizing property tax debt, parking ticket tax debt, income tax debt, blah, blah, blah and selling this worthless, speculative paper by means of the PTB wonker-stooges, who collect great bonuses doing so. FSLM have been creating money out book entries of alleged debt, by use of securitization, to build elaborate, non-sustainable governments. Hence the collapse of the muni bond market.

It is not just the USD that has been overprinted, but through the use of securitization, hedge funds, and other specialized monetary vehicles have been passing this worthless paper to the point that no one has any idea what is out there or what it is worth. It is sooooooooooooooooo bad and irretrievable. FUBAR

...

The present financial system is doomed. Likely its successor system will also be dooooomed until a major paradigm change is made towards individual and local community sustainability. I don’t see that happening anytime soon. SO ….. breath deep because in-and-amongst the wreckage of bygone systems of government and thinking are the beginnings of who we will all have to become. Plant your garden, cherish your friends, be prepared and work your dreams. "

Not to worry Hank Paulson, George Bush, and Ben Bernanke are going to save us all.  The price?  Just a little more authority, a little more printing of paper, a little less sound money, and a little more faith in those who rule us, please.  Isn't it always the same mantra?

 

So, you make the call:  Is today when the next mini-revolution in the seizure of the Constitutional government takes place, as were the days in 1910 on Jekyll Island where the plot was hatched to seize America's money and have government pay interest on it's own money to a group of bankers?  Or, is this the dawn of a new prosperity?

 

Sidebar:  Who Owns the Fed? Most people think the Federal Reserve is owned by the government.   It is not.    The Federal Reserve website attempt to persuade that the Fed is somehow part of the government by saying: Who owns the Federal Reserve? The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects. As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government." The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year. To be sure, there are lots of folks on the 'net who have researched the relationship of Fed member/share owning banks to overseas banking interests, the core families of the PowersThatBe, and foreign (*British) government interests, such as this site.   A more moderate (*and well footnoted) assessment may be found in Bill Woolsey's work at LibertyUnbound.com.

 

Today is like to be a 'flash in the pan' kind of financial news event  because if I'm right, we'll have some major "breaking news" events along shortly, to conveniently overshadow this one so the PowersThatBe can get this implemented under some kind of financial emergency and skip the bothersome discussions with congress.  They don't matter much lately, anyway.

 

Road To War

I suppose you picked up on the report over the weekend that the Saudis are bracing for radioactive fallout from an expected attack on Iran?

 

The CIA's Director Michael Hayden makes the point this weekend that he believes the Iranians are continuing their work on a bomb program.

 

The cynical would note that the US did not promote preemptive bombing or attacks on Russia, China, India, Pakistan, Israel, England, France, Germany, or South Africa (and perhaps others) when they were busily developing nuclear weapons.  But, then again, they weren't sitting on top of 11% or world oil reserves at a time of peak output, either.  Gee, you don't think there's any connection there, do you?

 

OK, so the Russians are reporting US is building up forces near Iran, what of it?  They've been saying it for how long?  Try 2007.   It's our oil anyway, isn't it?  Hand me the lighter and the Jack again, would yah? Ah, yeah...better.... where were we...oh yeah...

 

Leaving Las Vegas

Speaking of Las Vegas, as we were a minute ago, did I mention there was a story out earlier this month that Lake Mead could be gone by 2021 and a 10% chance of it being gone by 2014?  Click here and scroll down the March 12 entry, advises my hawkeyed attorney, who won't let me buy real estate on the cheap there, yet.

 

Nose Counting

The "Vatican says Muslims more numerous than Muslims."  And the Catholics are  more numerous than Catholics.  And the Lutherans are more plentiful than the 8% Interest Church of Sound Money followers.  And the point is what?

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Meantime, we read how a Russian Doomsday cult has had to leave their cave hangout where they've been waiting for the end for the past five months.

 

Global Circular Economics

Let me see if I follow the money in this one:  "Spanish firm using loan from U.S. [government] to build segments of Texas toll road..."   So not only do we take US road revenues and turn them over to private groups, but we also make them loans?  Pinch me...I must be on some alien planet...

 

Zimbabwe: Echoes of Florida & Ohio

So along comes an election with a strong-man incumbent.  The exit polls say the opposition has won.  Today, in Zimbabwe, the question is whether results at the polls will really mean anything as Robert Mugabe's hold on power seems to weaken following elections this weekend.

 

Royal Inquest: Still Selling Papers

Stop the tabloids and get this one teed up for the front page:  "Coroner: No evidence of Diana murder plot."

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Let me see here:  I should live to at least 85 or so.  That means another...uh...26 years.  The story has been going on since 1998...so will it still be press-stopping content for supermarket checkout rags then?

 

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Coping: Living in Virtual Reality

Life seeming a little surreal of late?  Well, figures one reader, its because we've slipped into a VR stream...

"Hello George:)

The problem with the future is the same as the problem with a rigged casino game: no matter what you do, you lose.

Well, how is the future rigged?

We live in a virtual reality; so intervention in our future is possible.

If you doubt that we live in a virtual reality, then please see:

Wikipedia, overview  http://en.wikipedia.org/wiki/Simulism 

Nick Bostrom,, 2002 http://www.simulation-argument.com/ 

Brian Whitworth, 2007  http://www.newscientist.com/blog/technology/2008/01/vr-hypothesis.html?DCMP=NLC-nletterbanner&nsref=blogtech 

In addition to those arguments, one way to explain the apparent fact that space and time and mass and energy are quantized would be to say that their quantization is a result of the fact that the 3-D monitor, in which our virtual reality is displayed, has a finite spatial screen resolution, and a finite repetition rate."

You mean Second Life is nearly  just as real as this one? OMG....

 

Elephantcasso?

Ah, now the world makes sense: Thanks to the trillions invested in computer technology all over the planet, we can now see video of an elephant doing a painting of itself on on YouTube.  Hell of a note when an elephant can paint better than me...it would cross right over into humbling, except the elephant can't print up money.

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Send snip and save ideas/commnets to george@ure.net

 

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