Year: 2015

With Iran and Russia both pumping oil for all they’re worth, you’d think that some of the Big Brains in Washington could figure out that while “sanctions” sound like a high road morally, the reality is that when you kick a country enough, they will react in any way they can to set things back to normal.

So, quite naturally, when we put sanctions on Iran, it just gave China a cheap way to fill up its new strategic petroleum reserve.  And then along came the Russia sanctions, a gaff in the last Fed wording and next thing you know, we are at the 49 handle in oil with $40 and under getting to be a real distinct possibility.

Not every country has the natural resource at hand to jack their economies back to level after we deliberately try to push them over.  Some countries don’t – and in this case, you get the “cornered snake” effect.  If you don’t follow this, ask North Korea (or Sony) how this plays out.

Oil’s Collapse and The David Bird Mystery

Meantime, the mystery of David Bird continues. 

Odds are, you won’t remember his name, but he’s a Wall St. Journal reporter who forecast that with the end of the Federal Reserve’s quantitative easing, there would be potential for a catastrophic collapse in oil prices.

A year so, after writing such hard truths (such as are now coming to pass) David Bird simply vanished.  Even this weekend, there was coverage in New Jersey of his disappearance and the mystery that surrounds this most odd twist.

Or, is it really so odd? 

Dead bankers seem to be popping up all over the place, including a top Belgian banker who was found in the North Sea.  This fellow was #36.

All of which begs the question:  Who would be offing reporters for outing the Federal Reserve’s quantitative easting calamity which has only served to jack up commodity prices and thereby reduce the obviousness of our non-recovery?

That’s a toughie. 

One thing’s for sure, lots of people in the Oil Patch saw it coming, including and especially our source Oilman2 who yes, really is a rig engineer, and yes, really holds patents, and yes, really designs specialized equipment for rigs…One can almost imagine a massive intercine war in the oil patch over various kinds of oil-gang turf  like Bakken & Frackin’…

Hey G –

The big boys will be doing M&A stuff as the over-leveraged have to bail out of their sinking businesses. This is baked in for some now, but if prices stay as-is through end of Q1 (or lower), it will be baked in for the remainder of the year. Halliburton may benefit hugely by this in their acquisition of Baker-Hughes….wonder how many shares Dick Cheney holds of Big Red preferred???

Traditional wells (unfracked) have costs that can make money at $30-40. This is what we did in the 1990’s and industry grew. There will still be drilling, but it will be with rig count around 800-1000 in the US most likely. This means huge layoffs in the rig sector, oilfield services and steel mfg sectors. Difference this time?  There is no dotcom craze to switch a career into – can’t just know HTML or system admin and land a job anymore, as the digital sector is mature, not burgeoning.

For me?  Hell, I am 57 this year and consulting.

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The regular “heartbeat” of the Kondratieff long wave in economics has been jiggered with. 

By all rights, we should be in the Greater Depression right now, not still looking for it to develop over the next couple of years.

I’ve been telling you about this “Big Ugly” that’s set to visit the generation since 1997, so some skepticism on your part is, indeed, warranted.

Nevertheless, my buddy Robin Landry up in Shawnee, OK, who’s one of the best technical analysts ever, figures that his worst-case numbers (which in the very long term put the Dow at levels not seen since the early 1960’s) will be along sooner than later.

We passed an important milestone with the ^TNX (CBOE 10-year Treasury) trade”  Landry’s immediate concern is that we have already set up to take out the “2-handle”  (e.g. the TNX trading at under 2%)  But the real worry is that the 1-handle (an interest rate of one percent) will be taken out as well.

And this morning, with oil now down under $50 bucks in a convincing way, we have to sit back and review harsh realities around here.

Landry expected $80 oil would pause at $75…and that didn’t happen.  We then took out $70, then $60, and now $50.  The reason to hope oil will stop at $40 on it’s wan to the $30-handle is what, exactly?

We can already sketch in some of what the “NEW – New Economic World – will look like.  It just won’t be pretty:

• In the 1930’s depression “job sharing” was a common feature.  Today, we’ve already half-shot that gun with so many part-time jobs without benefits.
• Ditto in the front-end of the 1930’s government was actually solvent.  Today, we’re sitting on a stack of bills for free lunches that total just a bit more than our National Product annually.
• And unlike the 30’s, we’ve been holding shooting wars about every six months over in the sandbox countries, so we’ve spent a lot of resource there.

Looking ahead, to the end of this month, the Fed has a terrible problem:  If they attempt to raise rates, it will collapse the “employment recovery.”  But, if they lower rates, it will send the message that deflation is really here and that will spook the markets into a 4,000 point collapse before summer.

Their choice might come down to another quantitative easing because easy money is what had been holding up oil prices.  Without more QE, we could see not a 30 but how does a $20-handle on oil sound?

Our government folks are showing their lack of common financial sense in foreign policy:  Take the Russia “sanctions” for example.  This is driving the Russians into a 4 to 5% drop in their GDP this year.

You don’t really think a nuclear-armed, serious player is going to just roll-over and honor the Nobel-winner and his posse, do you?

Hell no:  Russia and the bomb-lusting government of Iran have both announced that they will be pumping more than ever.  Repeat after me:  The Player’s just been played.

Now we see no restraint on the Saudis, either, as they want as much dough as possible since they are writing the checks for the Global Caliphate to be set up. You don’t really think that mosque-building world-wide was strictly for fun, do you?  No sir.

All of which makes dandy strategic sense, if you can still stand looking at the world as a 12-sided chess game where all the players are using slightly different rules.  It’s how the world really works.  The Saudi version of “win” is different from the Russian version of “win” – and so forth.  Which leaves each of us to look for the next capture en passant and try not to be swept up in the passing.

How do we manage that little trick?

The Major Systems of Life

Count them up:  There are just seven of them:  Food, shelter, energy, transportation, environment, finance, and communications.

If you are able to provide for minimal levels of each of these items, your life will go on just fine, no matter how nutty the world around you becomes.

Just last night, my son called me up to inquire as to whether he could move down here to the Texas Outback (bringing a wife with him…he’s still running filters on that process) so he could build his own house.

As he explained it, none of his friends knows how to do bupkis – and he wants to pick up the old man’s ability to pour concrete, run wiring, do plumbing, put on a roof, and so forth  without paying of government along the way.

Oh, sure, building codes are nice (and we follow them – or better) but it’s the seeking permission part that gets him.

He’s seen us put in a simple (works great) septic system.  It cost next to nothing:  $750 for a large tank, another $350 in drain field and supplies plus $300-bucks in rental for the backhoe.  They are great fun to run, by the way.

All perfectly legal in Texas because if you observe 100-foot setbacks from property lines, have more than 10-acres, and other fine print, and no one complains of smells and such as you’re doing it, the process is easy-peasy.  But the cost differential is huge. A commercial septic is on the older of $18,000.  I know because I priced it out.

This is sweat equity.  Get used to it.

If you’re going to elevate yourself from the “run of the mill masses” who do nothing but play video games and RENT THEIR LIVES from da Man, then you’re going to have to figure out how the real game of life can still be played to win.

OK, he gets that with a house.  If you build your own, it will be easy to keep it in good repair virtually forever because you will have intimate knowledge of how it works.  And you’ll have both the sink wrench and basin wrench instead of needing to call a plumber.

And when comes to food?  You’ll be able to grow your own.

“Dad, what’s this Homesteading stuff I’m hearing about?”

Late-comers to the party, son. 

We’ve left a few back issues from our old Independence Journal site up over at our www.ruralpioneer.com website, but right now everyone with two flower pots and a home-schooling book thinks they are a homesteader. 

As we edge closer to the financial brink we will add content over there, but in the meantime, how to design/build a grid-tied solar power set-up is covered in our www.peoplenomics.com library which is almost 700-back issues deep and only maybe 50% of that is economics.

Still, the point of this morning it to try and figure out how to reduce your outgo, build your income, and try to avoid the position of believing too much about what people tell you the future is going to be like.  They’ll be wrong.

Classic example:  The US Department of Labor’s Occupational Outlook does not use the word “robotics” to describe the future of automation.  The word robot is used a few places, the the world they are describing?  Pure fiction and not a very good guess.  They still project a huge increase in carpenters, for example, which means they miss the social reality scene completely.

the LBGT movement means a lot of historical singles are happily coupling and that takes less square feet.  And childless unions sort of impact school and teacher projections, you think?

Someone in government “gets it” but then turns on a policy of Stupid by importing illegal high-risk kids with a propensity to gang and tosses them into the works in every major city.

Trust you saw the report that 700 miles of US border with Mexico is still ineffectively managed?

Trusting the future to government is like trusting the hen house to a dog that’s being used in LSD experiments.  Which is why, to our way of thinking, the closer you can get to freedom now the more you might be able to enjoy down the road.

Given that it’s now the first week of August 1927 (with a chance it’s August of ‘29) we should mention that the main point of this morning’s ramble is to alert you that the Fed could do something really stupid at the end of the month.

With the 10-year note headed for 1.5%  (my consigliore’s model) or at least down to the 1.75% range, you really need to figure out which part of the coming soup kitchen’s you wish to occupy.

Here are your choices:

• You can be a small-scale farmer and sell whatever is excess at rock bottom fair prices to the soup kitchen.
• You can manage or cook in the soup kitchen
• Or you can be in line to eat.

To me, this don’t sound like a terribly difficult problem to solve.  We’ve already decided (back in 2003 when I finished up my next-to-last big turn-around project) that when financial engineering collapses, the wise person will have a water source and the 4-Gs:  ground, gun, gold, grub.  Toss in a tent and a few tools and that’s how America was hacked out of wilderness.

OK, that and screwing the First Peoples over, but that a two beer discussion for another day. 

For now, the only question is: How long do you rent your life and do you ever go out and own it?

You can either voluntarily reduce your lifestyle on your own terms (as we have done), or you can wait for financial engineering to collapse and trust da Man to do it for you.

Which either makes us crazy, or just not very trusting of people with poor track records of getting things right.

Computer’s ARE Out to Get Us

Some reader feedback on our adventures with our media computer/Win 7 attack:

Oilman 2 contributes this map which shows the computer war in near real-time.  (Awesome find!)

Grady at our future-predicting web-scanning project (www.nostracodeus.com) offers this:

My anti-malware program caught an interestingly named Russian site in the scans yesterday: 

matchbox.alfatarget.ru 

Reader Rick (here in The Republic) offers this (with no warrantees from me!):

George, you may not know it but I am a reseller for Bluecoat https://www.bluecoat.com . They have a free Web filter program called K-9. You can download it here for free: http://www.getk-9.com/ It has NO adware etc. Bluecoat gives it away for free because it passes the URLs that people use to the Global Threat Analysis system (WebPulse) they use in their commercial products. All of their products send url requests to this system and it goes out to those sites and automatically classifies them for over 80 different classifications with up to four possible classifications per site. So, if K-9 asks WebPulse what a site is and it does not know, it checks the site and if the automated analysis is not 98% sure it knows it flags for a human to look within a few hours. In the meantime it classified as “unknown”.

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This wasn’t much of a weekend.

Most of it was spent fighting computer attacks and here’s the odd coinky-dink:  my buddy Gaye up at www.backdoorsurvival.com was also having her fair share of problems.

Not that they were insurmountable, in either case, since we are both “children of the Halt and Catch Fire days up in the Silicon Forest.

I don’t think she’d mind my sharing this from a New Years Day email about how her new year started:

About 4PM yesterday Malwarebytes started popping up with “blocked malicious site” message every 20 seconds.  Looks like I got the SysWOW64 virus.  Tried to remove it but finally posted in the bleeping computer forum – eta for help is 5 days.  Don’t know how the hell I got it.

Like us, she keeps computers in reserve/offline ready for this kind of emergency and by noon on New Years, she reported:

Good news.  It pays to have the premium version of Malwarebytes.  They responded to my support request within an hour, gave me a list of things to do, and all is now well.

Unfortunately, that’s right about when things started to hit the fan around here. 

Remember last week when I was telling you about how our internet service was terrible?  Still is dreadful, but about noon Friday one of our computers – the one hooked up to the big screen in the living room, and the one which streams YouTube, TedTalks, and Amazon & Netflix – kacked.

Antivir  which is one line of defense, started telling us we had a virus – which when removed, reappeared in less than an hour, and without being online.  Bad sign.

So that got me to running a full virus scan (clean) followed by a Malwarebytes scan (found one virus) and thought that would be it.

Wrong.

By Saturday, the computer was up to it’s terrible performance again – but neither Antivir nor Malwarebytes was finding anything. 

In fact, the only indication of something wrong was a buttload of .js and .json files up in the (sometimes hidden)  user local and roaming files; this was a Win-7 box.

Even with no viruses found, the system kept on creating these Java files and it was really bizarre.  In fact, the first time I ran Windows onboard file clean-up, it found somewhere north of half a million files up there.  And even when deleted, they would come back.

So that led (Saturday afternoon) to me going to war with the computer.  I got out an axe (figuratively) and went after everything.  Killed everything in the StartUp, uninstalled programs that I didn’t use often (*like Java, thinking that might have something to do with all the .js  files showing up) and then I took off Chrome (which was being spawned into background activity, and even Firefox which was suspect.

That led to a read of the Mozilla warning on the Java Deployment Toolkit.

To continue, I downloaded a fresh database for Sophos Virus Tool, and decided to let it run overnight.   No soap.

Again (now into Sunday morning) there was no virus found and our files that were just removed had appeared in the hidden user directory.  The files count was up to something like 255,000.

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Although the market looks to open up this morning, it’s not really “up” in the sense that everything in relative.

For those who missed Wednesday’s trading session (Dow –160 and S&P down to 2,058.9) it wasn’t a whole lot of fun.

Later today, I’m sure my consigliore will call to scream victory since he’s been a fan of the End-of-Year rally for several months now.

Normally, that wouldn’t be a bad thing.  Except that if the top of this pig is really in, then we ought to be able to test some of our long-standing theories.

One is that from a top, a real “crash” develops around the 55-day mark.

Since Yahoo is kind enough to keep daily trading stats on the S&P in public view here, all we would need to do is thumb back through the data until we come to the recording closing high from 2014 at 2,093.55.

Looking at the intra-day highs, that occurred on December 29th, which is more than ample reason for my consigliore to score the point.

Since Excel is better at math than me at this hour, that means a crash date around February 22nd.

Since that is a Sunday (and I was supposed to be a cruise ship that day) the collapse will happen either before, or after that weekend.

One possibility is Friday the 20th, but there’s a problem with that:  It is a holiday-shortened week.  President’s day is February 16th.  So the week before should see a minor bounce (the holiday effect) and then the market should be retesting lows put in back in October 2014 (or even lower levels) since it is axiomatic that crashes don’t happen from market tops:  They happen from bottoms.

Whether this just sets up the final manic run for a couple of more years to money-printing-delirium highs, or whether this is the Big One remains open.  But we are confident enough of the look-ahead that we will not be going on a cruise with friends.  We’ll be staying home to watch the money pile up.

Of course, there’s another possibility:  The market will put in new highs this month, which would push the crash period out two further months.  In which case, it will be revealed to the world that I’m a cheap old Scrooge who didn’t want to spring for a nice balcony room on an NCL cruise which would not doubt be almost as much fun as staying home to count (and make) some money.

Time will tell.

The real point of this morning is to welcome you to the first Friday of 2015 and note that even though the market is looking bullish at the open, as the high-end graphic upper right indicates, whether it will really be an “up” day, is questionable, indeed.

What Really Matters?  Budget

The mainstream media has unwittingly fallen into unquestioning belief in press release language manipulating the playing field.

In a column this morning, The Hill looks at the looming budget battle in 2015 between president Obama and the GOD controlled congress.

It’s a generally good article, but I’d draw your attention to this little bit in here:

“….with entitlement programs such as Medicare and Social Security a potential target for cuts…”

Hold the phone, there Bucko. 

Since when is Social Security an “entitlement?”

It’s a subject for future analysis as a Peoplenomics piece, but take someone like me:  In my lifetime, myself and employers have paid in $400,000 to Social Security. 

Now, there are those who would argue that this isn’t quite right because my “out of pocket” was around (for example) $200,000.    And where can I get the kind of payout I anticipate with that kind of pay-in?  Glad you asked.

Unfortunately, the inflation game gets played on everyone at this point, because 99% of the American public isn’t as smart as you and me. 

In 1982, for example, I made $39,500 per year.  And about (round numbers) 14.5% went into Social Security.  In today’s dollars (those dirty, watered-down, mostly made up [96% made up]) things, that would be $98,392.

What’s more, in 1980, if I had taken the 14.5% of $39,500 – my part and the mandatory employer part came to $5,727 – and put it into the S&P 500, which at the time was what?   Well, December 22nd (1982) the S&P was 138.03.

For the REAL $5,727 at that point, had I been managing my own money and just tracking the S&P  instead of being held at gunpoint by Uncle Sam, that year alone would be worth today how much?   14.9 times the original sum and that’s just tracking the S&P for that period.  That would be $88,000 and change and that’s for just one work year.

I worked 50 years with those kind of numbers.  Some much higher, some lower.

Would results always be this good:  Hell no.

But I want to be extraordinarily  clear on two points here:

1.  If employees had been paid the “mandatory employer part” and invested it, we would be the richest country and the richest generation alive ever.

2. The fact there never was a “Trust Fund” – it was “invested in agency paper and other idiotically low returns” reveals that Social Security, while well-intended, had turned out to be a payoff of the poor and a terrible swindle of middle class and up earners.

Since I’ve now worked 50 years, what Social Security should be paying me on is actually well into the millions.  Watering down the money is key to the swindle, though.

So when someone dares imply that Social Security is an “entitlement” take ‘em out back, slap them around with a calculator, explain inflation to their thick skulls, and tell them you’ll wash their mouth out if they can’t see a swindle when they’re the victims.

Oh, wait, seniors are remarkably slow learners on inflation and they are largely dumb enough to believe politicians.  Two strikes.  Shall I mention the third?  That’s failure to pass on hard-fought mental acuity to the next round of suckers…

Wrong Message to Terrorists

This one caught my eye:  “Death penalty for Tsarnaev? Why Bostonians don’t favor that possibility.”

To my (admittedly jaded) way of thinking, this sends exactly the WRONG message to would-be terrorists.  The liberalistas of Boston have just painted a big target on themselves.

I’m sure my liberal pal will call incensed that I am going down the path of eye-for-eye justice.

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Yeah, I know:  Holiday morning and what the hell is George doing up writing a column?

Well, lemme see:  Elaine got up for a snack, the cat wanted in, it was cold and I was wondering if it snowed.

Since I was up, I made a pot of coffee and spied a dandy picture from SoCal sent in by our friend Jeffrey out there. 

Yee-gads!  Snow down to the what level?

“In a rare event, snow fell on the local mountains here in Orange County. A picture is attached. Apparently, the snow level went all the way down to 2000 feet.

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