Stand Bye to Rally (Bounce)

The big news of the morning is that there is NOT a war going on in Ukraine, and with the market putting in a decent low yesterday, we should be set for a major market turn in the near future, which has a whole methodology that will be part of Peoplenomics tomorrow morning.

For now, however, the “big deal du jour” seems to be that the US is looking at a wide range of sanctions against Russia.

But, when comes down to cases, what’s on the table is more “for show than for dough.”

The idea of the US not attending the G-8 meetings – or even going so far as to kick Russia out as some reports have suggested – is hardly meaningful.  the G20 is the real game and the G8 is little more than an afterthought in today’s world.

My in-box has been overflowing with hate mail because of our coverage, but please note that we have so far called events nearly right.  And so we should be in a period of quiescence while the West and Russia figure out what to do.  The real resolution of this won’t come until summer, or there abouts.

What matters in the very short term is that our long position in our Trading Model has been correct again, our intelligence on what’s to come is pretty good.  And about the only question is whether George Soros bailed out of his massive short position in yesterday’s market hemorrhaging.

With word that Soros is about to make a big bet in Spanish real estate, we are inclined to speculate that maybe he has, although actual knowledge is far above our pay grade. 

But back to point:  Vlad Putin is making it clear all over the place that they have no plans to annex Ukraine and that it is deeply indicative of a double-standard for the US to be preaching about intimidation tactics given how many trillions we’re into the Middle East and all.

And high integrity news sites like The Daily Beast are out with reports that echo what we’ve been saying all along here.  Go read “How the ‘Realists’ Misjudged Ukraine” and the theme ought to sound familiar.

One of the sad truths revealed by recent events is that a lot of people I know who mindlessly support the Obama administration (one likened questioning their moves to sedition) reveal a fact of polarization politics.

If you can’t deal with facts in an objective manner, you’re going to come to the wrong conclusion a very high proportion of the time.  I’m sorry we got this one right, but Russia is not about to lose their warm water port and they will go nuclear to defend it.

Anyone who can’t grok that and believes they understand the situation is seriously delusional.

But no worries.  Such people may have a “hole in their rock & roll soul.”  To help with repairs, go listen to the 1976 ballad by Al Stewart  “Roads to Moscow” over here on YouTube….  Things should come into focus…

Cultural memories are something you don’t mess with.  Unless you’re a fool, of course.

Or the EU.  But then, I repeat myself.

Do take the headlines about “Russia Massing Troops” with a grain of salt.  Remember, they’ve been invaded by Europeans before and they get extremely angry at historical reruns that challenge their sovereignty.  

I of course support the US response, just as soon as Congress has declared war in Afghanistan and all the other places we’ve been killing people and breaking things without the Russians confronting us on it.

You did catch the Venezuelan foreign minster calling out “international forces” for trying to whip things up in his country (too).

Meantime, John Kerry is talking about a billion dollars of US aid to the flash-government in Kiev?  ViceGrips and doobies all around!

We’re up to our butts in debt and we’re doing what with your tax money? FMTT. 

New Road to Wealth:  I’m going to some small country, get some Androids, start me a revolution, and get rich…

Global Whating?

While the rest of the country is about to get some Texas-style snows back east, we can’t help but notice that one of our favorite number-crunching realists (Warren Buffett) has been eyeing the Global Warming hype with the same kind of suspicions we have.

“Warren Buffett: Supposed Increase in Extreme Weather ‘Hasn’t Been True So Far’’.”

But the facts haven’t kept Al Gore from going around the country making speeches about it.

Hmmm…where does that put us?  We have war-mongering and Gore-mongering, shall we go for a Trifecta?

(Bingo!)  Poor Mongering!

The Los Angeles Times has a worthy read about how the Obama budget plans would shift tax benefits from the wealthy to the poor.  That would be a good thing.

Except, of course, the rich control the purse strings of the K Street Mafia, so look for the actual benefit to the poor to be minimized in the end. 

Still, credit where due: The Obama crew is trying to do the right thing.  And that should last about 3 weeks on the Hill where election cash trumps right thing every time.

Mr.

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Coping: Can “Luck” Be Accumulated?

Since I haven’t taken a day off since our Seattle/California trip in September, Elaine and I will be hitting the road on Thursday morning for a visit with her boys in Arizona.  Panama’s on guard duty here, so no worries on that front. 

We will be up in Payson, Arizona this weekend at a mid-sided casino/hotel where I will be testing out my latest collection of thoughts on gambling.  We’ll get to those in a minute.

Le me begin with today’s BBQ:  Big Burning Question:  Do you have any “secrets of luck” that you’d like me to test and report on while out there?  If so, send them along.

A couple of very good ones that relate to gambling that I have used in the past, with varying degrees of success, are these:

1.  Money Management.  In this approach, you pick a game with decent odds (like blackjack, for example).  You bet a single chip.  If you win, you bet a single chip again.

However, if you lose, you double the bet.  And you do this every time you lose. 

In the short run, this can be a very good system.  However, the shortfall is that there are house limits.  On a $5 table, for example, the limit may be $500.  So you bet $, $10, $20, $40, $80, $160, $320  (if the cards are running really cold) and now you’ve arrived at the point where you can’t bet the $640 it would take to win.  Screwed by the house limit./

Another feature of this betting scheme is that when you are on those higher rolls, remember that the only thing you will win is the original wager *($5) so bettering $320 to get $5 is stupid.  But, it can work in the short run, depending how the cards are running.

2.  Craps variation:  You can do the same kind of thing on craps tables, without going to such extremes, by playing the odds.  This, however, takes time and patience,

And you can use the “money management” technique on the pass (or don’t pass) lines in craps, but again the house limit is you enemy.

3. Let It Ride.  Back when the Desert Inn opened, in the mid 1970’s, I took one of the few “press junkets”  in my newsing career.  The Summa Corp (Howard Hughes outfit) flew me and the (then) wife down for the grand opening.  Dinner with Robert Mitchum and Juliet Prowse (just us as a foursome, such are great to legendary press junkets…)

Another freebie was a two-hour intensive with “The Professor of Chance.”

He told the story of two people, who walked up to the same table and were betting (I forget which game) but whatever it was, they were getting 3:1 odds.  Bet $1 and get $3 back.

The house then had a run of games go against it:  six in all.

Now, consider what happened to the players.

One, using the money management technique, won $2 of the house money on each hand.  Six hands, so he won a total of $12.

The other fellow used a “let it ride” strategy.  He won as follows:

Hand #1: Bet  $ 1, gains $2 from the house, total $3.

Hand #2:  Bets $3, gains $6 from the house, total $9.

Hand #3:  Bets $9. gains $18 from the house, total $27

(See where this is going?)

Hand #4:  Bets $27, gains $54 from the house, total $81.

Hand #5:  Bets $81, gains $162 from the house, total  $243.

Hand #6:  Bets $243, gains $486 from the house, total $729.

Subtract the original $1 bet and the second player is up $728 while the hapless conservative player made a whopping $12 profit on the same run of luck.

The lesson, the Professor of Chance, explained to me, was to learn to recognize winning – and losing – streaks.

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Ukraine as a “FlashGov”

Pardon the unscheduled update: Russian media are reporting today the appointment of a couple of oligarchs to key positions in ruling two western districts of Ukraine loyal to the Kiev FlashGov. Oligarchs are an important item at the moment, since Ukraine’s flash-mob government is about to run out of money. Having a few ultra-wealthy industrialists around would give the FlashGov the financial “street creds” to load up on Western debt. In the meantime, the information war is in high-gear.

Only Fools Blame Ukraine for “Manic Panic”

Go figure this one out:  The Russians actually have their senate VOTE on the use of troops in order to secure their border and the world panics.  When the US invades countries, we conveniently forget about Declarations of War.

So the only inference I can draw from all this is simple.  What’s spooking the market may be John Kerry going to Ukraine, as much as Russia securing its naval base and military resource in Sevastopol.

A couple of Analogs?  Sure:  Ukraine breaking away size-wise would be like California, Oregon, and Washington announcing they were seceding from the US. 

And you don’t think the USA would march into Cuba to protect our base at Guantanamo?  OMG, people, how shallow are we?  Tit-for-tat.

What Ukraine was – and continues – is an oversized flash-mob of anarchists and now we’ll see if they can pull it into something more real.  But the anarchist spew is really soiling the picture.  Whether Kerry can find a moderate government (which could avoid war with Russia) is the open bet.

And judging by the futures, the market is shading that.  So, when a “breakthrough” comes, look for a 200+ point relief rally.  Or, have your flash-goggles ready if it goes the other way..

Our Monday begins with trying to dig out the real reason for the decline.  It’s not Ukraine.  It’s the fact that the Big One – China – was down 1.47% overnight.

So while the (me-too) press is tying all the negatives in the market to Ukraine, the wise investor is reading stories like “China move hints at 30% market correction.”  Key quote from the article:

Chinese policy makers’ move to weaken the yuan may affect stock market valuations all around the world.

Well, guess what?  China is the big dog here.  Japan was down, but only 1.27%.  And a tiny 1/3rd of a percent in Oz.

What’s going on in Europe right now is ugly:  The Brits are down 1.83% while the Germans and French are both down more than 2%.

I will grant you that Ukraine does weigh on the EU – since the Western-backed uprising is not going like a walk in the park (nor will it).  But the first 1.75% is laid at the feet of China.

If you want to believe that Ukraine is driving, have at it.  It’s partly so.

The more realistic view is that the global economy is set for a massive 30% correction and that brings our target of 1,540 on the S&P (Robin Landry’s view) into play.  In the short term, we may see his predicted bounce of gold to $1,400, but from there things should fall to the $1,000 an ounce level or under.  Just saying.

This kind of outlook is not going to win me any popularity contests.  But, in case you haven’t noticed, I’m not interested in a fan following. 

Being right matters more.

Russia’s actually voting on deploying its troops in advance.  There’s a great lesson there in who’s running a democracy lately.  I must have slept through the US vote on sending troops to how many countries is it, now?

Personal Income and Laughter

What better way to start Monday than thinking that paying down a credit card is “savings?”

While I fetch us the ViceGrips and roll us a doobie, you read the personal income and expenditure press release.  Particularly the bolded part:

Personal income increased $43.9 billion, or 0.3 percent, and disposable personal income (DPI) increased $45.2 billion, or 0.4 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $48.1 billion, or 0.4 percent. In December, personal income decreased $5.5 billion, or less than 0.1 percent, DPI decreased $9.7 billion, or 0.1 percent, and PCE increased $6.5 billion, or 0.1 percent, based on revised estimates.

Private wages and salaries increased $14.8 billion in January, in contrast to a decrease of $9.1 billion in December. Goods producing industries’ payrolls increased $1.8 billion, compared with an increase of $1.7 billion; manufacturing payrolls decreased $0.4 billion, in contrast to an increase of $0.2 billion. Services-producing industries’ payrolls increased $13.0 billion, in contrast to a decrease of $10.8 billion.

Personal saving — DPI less personal outlays — was $540.1 billion in January, compared with $544.5 billion in December. The personal saving rate — personal saving as a percentage of disposable personal income — was 4.3 percent in January, the same rate as in December.

There…want a hit of nitrous to go with that?

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Coping: Monday’s Quest for Enlightenment

I keep looking at books like The Maker’s Diet: The 40-Day Health Experience that will Change Your Life Forever and wondering if I would benefit from going on a 40-day fast.  No doubt it would clean out all kinds of accumulated stuff and drop some pounds.

The reason I mention this is a first-hand report of someone who has done it and how it changed them.  Check out this from reader George E:

“Hello George:)

42 days in desert, south of Winnemucca. Life-changing. For instance, while walking eastward along US 95 on the north side of the “Forty Mile Desert” (dry lake bottom), I said, “This sure is a lot of nothing.” In response, somebody said, “I made it.” Somebody also changed my eye-sight so that I saw the dust as multi-colored sparkling dots of light in the wind. Somebody also changed my emotions so that I felt a lust for it. Although I was returned to ordinary in less than a second; you have to know that I have not been as-before ever again even though 26 years have passed.

What can I tell you that I have learned in those 26 years? This solar system will become a black hole in order that an additional universe can emerge from the white hole which will be on the other side of it. Endless series: black hole entrances; white hole exits. All imagined by the same entity, no matter how many entities it pretends to be.

Later, George E”

I had one of those “drop of water absorbs the Ocean” moments in my mid 40’s – and its something you don’t ever forget.  But yes, it would be nice to go back and do that again. 

It’s not an overwhelming feeling of bliss, exactly.  More like a profound “seeing how it all works” and then (“zing!”) you’re back in Now and all that lingers is a feeling of awe.  It’s like the “wow factor” breaks the moment…

(kinda like “Aw shit…that is cool…wait!  Where’s it go?

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Peoplenomics: Blame the Future on ERP

Can commercial real estate implode? We began Wednesday looking at the Star Trek economy and wondered if Bitcoins might be one step on the path to that kind of idyllic world. As far as I know, Star Trek hasn’t yet had a banker or investment advisor in a script yet and the reason’s pretty simple: Accounting is (and ever-increasingly trends to) a background task that can (in most businesses) be totally automated. This morning a short course in how this and the field of ERP (enterprise resource planning) with integrated accounting has been changing business models for the past 15 years and where it leads in the future.

Ukraine Flashpoint: Someone’s Securing Airports

Background:  I have been warning for weeks now that the situation in Ukraine could end badly for both sides, US/West/EU and the Russians.  The reason I cited is that Russia has considered Ukraine it’s property for more than 300-years and despite cutting it some autonomous slack in 1954 by letting it form some local governance, the ties to Russia were firmly held.

The US however (shades of Benghazi), has an acute ability to misjudge the obvious.  This is especially clear this week in stories like “The Endless Benghazi Cover-Up” in the Wall St. Journal op-ed by Karl Rove.  Yeah, I know…Depends who you want to listen to, I suppose.  But it would be intensely interesting to here what retired General Carter Ham has to say about Ukraine…

From the Western perspective the Crimea, being Russia’s warm water, year-round port, it would seem a simple task to foment uprising in Ukraine and (bonus time) pick up Sevastopol and pick off the Russian port facilities.  Their ability to project power into Africa and the Middle East would suffer greatly.

You’ll recall I suggested that Russia would NOT take this laying down and with the arrival of unmarked gunmen in the Crimea, and this morning’s report of “unmarked soldiers” [possibly Russian] securing airports in the Crimea, we are convinced our paradigm framing been right on.  Still, a few reports call the soldiers “unknown” (as in this USA Today report) so time will tell who has put “first boots” on the ground; Ukraine, US/EU, or Russia.

Breaking Today:  That said, the Ukrainians are accusing Russia of an ‘armed invasion’ following the airport takeovers.  Game on for WW-III?  War is a historical tool to cover-up economic calamity and misfeasance….

The Russians are reassuring the US that their “readiness drills” are not linked to Ukraine, but you’d have to be an idiot not to draw that conclusion. Action speaks louder than….

Looking Ahead:  The next move, if things stick to our scripting, should be the US calling for emergency talks and perhaps a presidential news conference along the lines of the Cuban Missile Crisis back in ‘62.

This will play exactly as the Russians have been planning.  They have been holding preparatory “readiness exercises” but another way of thinking of this is as “rehearsals” for a real, overwhelming, show of force in coming weeks.  They need two more weeks to move up “overwhelming” resources to the front.

In the meantime, Vlad Putin is promising aid for Ukraine, but is also backing the ousted president who is due in a Russia town near the Crimea for a press conference today.

For now, we don’t expect the markets to tank just yet.  However, since “cash is a position” I may lighten up on a long position later today despite the fact the markets have touched some marginal new highs.  If the market closes down, say 50-Dow points, and there’s a decline in the S&P, we could simply put in a “double top” formation and those can be followed by violent down moves.  That could depend on the Ukraine (and Venezuela) news flows next week.

Alternatively:  On the other hand, a peaceful resolution to present events, however unlikely it may seem, could light the markets off like a skyrocket…so patience and judgment are key.  Is war good for markets?  Well, of course….and they cover up so much other stuff….

US Spillover: Flash Mobs to Revolutions/Digilutions

Background:  As I expressed in yesterday’s column, there is a fine line between the digital technology that allows for a gangstah posse in Chicago to form a “flash mob” at a local merchant and the scaled up kind of thing that has gone on in Ukraine, a super-sized flash mob to take a country.  But this has also been played as part of Arab Spring, and may also be in place in Venezuela, as well.

Today:  Could it spill over into America?  Well, reports one reader in Vancouver, Washington, maybe it’s already spilling…

Since you are a native of NW you are probably aware of the demographic makeup down here in Vancouver,  WA with a huge Russian and Ukrainian makeup, they are not overly fond of each other but lately things have been real bad, I work with 4 Ukrainians and 2 Russians and have been really offended at comments made by some Russians such as “Ukrainians are cowards” “They are sign-toting monkeys” the same one who called them monkeys moments later called them “Slavic brothers” so the relationship is a bit bi-polar but overall I get the impression the Russians think of Ukraine as belonging to them and Ukrainians as second class compared to them, very similar to how the 19th century English viewed us Scots.

I have no doubt EU is thrilled about this with Ukraine being one of the worlds three great bread baskets and a industrially a giant, 6th largest arms exporter, technologically advanced enough to launch multiple satellites yearly and the largest army wholly within Europe, its a real prize, but 78% of the country is ethnically Ukrainian and they have a long painful history with Russia (and with corruption) and they want a fresh start, considering how bad Yanukovich was eventually they would have rebelled over some other spark if not the EU.

Outlook:  If our tracking continues accurate, we may see a simmering for 2-4 weeks (new market highs in the US markets in the meantime) and then an overwhelming Russian response to ensure they don’t lose their warm water port that allows them to project naval power into the Middle East.

Or, the escalation path could be much quicker, which is why an astute investor will need to weigh that three-way decision fork:  short, cash, or stay long?

GDP Out, Up

New Gross Domestic Product numbers may help, but only a bit.  Just out today from the Bureau of Economic Analysis is this:

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.4 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the “second” estimate released by the Bureau of Economic Analysis.

In the third quarter, real GDP increased 4.1 percent. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.

In the advance estimate, the increase in real GDP was 3.2 percent. With this second estimate for the fourth quarter, an increase in personal consumption expenditures (PCE) was smaller than previously estimated (see “Revisions” on page 3).

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Coping: With Ukraine War Woo-Woo

Every so often our www.nostracodeus.com project comes up with something that is truly amazing.  And sometimes we get more than a slight hint of the future in the process. And readers there contribute some amazing emails…and that gets me to the point:

Suppose for a moment that I told you that a prediction that the “Third World War to begin during Winter Games in 2014” was made by astrologers, shamans and parapsychologists in Russia ways back in the spring of 2011three years ago!.

Well, it’s true, the prediction was, in fact, made.  You can find it in Pravda’s English language archives here.

No kidding!  And, if you read the story closely, you’ll find today is one of the “hot days.” 

WoWW:  A Case of “Future-Vision”

This report on happenings in the World of Woo-Woo is just flat amazing!

Dear George,

As my son and I were leaving our Karate school last week I glanced into the window of the Consignment store next door and noticed it was empty.  I commented to my son that they must have gone out of business.  He replied, “What are you talking about?”  I looked again and the store was full of woman’s clothing and a window display of pink garments for Valentine’s day.  “Never mind.  It looked like it was empty for a minute.”  I could have sworn it was.

I went to karate class tonight without my son and this time when I looked into the store it was empty.  All that was left was a glass counter and a “Closed” sign on the door.  I called my son and asked him if he remembered me talking about the store being closed and it wasn’t.  “Yeah, why?”  “Because tonight it was empty for real-they went out of business.” 

My son and I both marveled at the weirdness of it all and I’m convinced that I saw a week into the future when I believed the store was empty last week.
Love your column and especially the woo-woo stories.

Take care,  Rebecca  Tampa Bay Florida

I’d be really interested to collect any additional facts about the previous trip.  Any odd clouds in the sky, any unusual foods?  How about music or….anything else about that visit which had an odd vibe to it?

SERIOUS Personal WoWW

WoWW – The World of Woo-Woo – is something we get only smatterings of now and then.  Most of our reports come to us second hand.  Someone puts down a set of keys – and said key’s promptly disappear –  only to reappear some weeks later in a different place.  Or like the store closing (in advance) in the previous story. 

It’s like when a reader sits a stapler down on the desk and an hour later it has gone missing.  It remains missing for several WEEKS and then –out of the blue – shows up somewhere that has been previously searched (to no avail).  Yet there the damn object (of the search) is.  It’s in complete defiance of logic.

So on to this morning’s case report is special because it is first-hand.

Background: A number of weeks – maybe a month – back Elaine asked me “Have you seen my little exercise ball?”

Years back, when I was at Campus Management down in Boca Raton, we gave out these little fabric-covered exercise balls with the company logo on them at one of our user conferences.  Hugely popular since the users were able to use them to work out the stress from hours on a keyboard.  Carpal tunnel and all that, right?  Elaine loves hers and has been squeezing it since about 2003…Fabric on it is all stretch out, logo is mostly gone, but she loved it.  When it went missing, she went into action.

She had searched the house high and low.  Ripped cushions off furniture, moved throw rugs, moved furniture, vacuumed, and on and on…Not just once around, either.

So for the last several weeks almost daily I’ve been answering question: “No, I haven’t seen it….but it will be along one of these days…because that’s how this WoWW stuff seems to work…”

Secretly, of course, I didn’t believe it for an instant.  The senior scientist in me scoffed. “Reality isn’t really like that,” it kept insisting.

Besides, three days ago she bought a brand new exercise ball.  Bigger than the little one she loved, but that’s what was available in the local Wal-Mart.  I figured the little one was gone, kaput, end of tale.  Odd for it to disappear in the house, but oh well….got other fish to fry.

Until 10:47 AM Thursday when Elaine stormed into my office and triumphantly announced “Here it is!”

“Here WHAT is?” about the time my eye caught a small black ball inbound at 21 miles an hour in a low, under-hand toss from the smiling blonde lady… 

“It was just sitting there!  About 4-inches out from the middle of the couch….where would would have seen it a million times… had it been there…”

And of course, she was exactly right because I’d watch with some amusement from my recliner as she had torn the living room apart three or four times over; down on her knees with a big LED flashlight looking every damned where.  Inspector Gadget would have been proud of her search efforts.  It just plain wasn’t there and I would have seen it had it been.

I had felt around the couch, too.  Between and under cushions, down on the floor…nope, not there.  But now it’s back and I’m left wondering to figure out what it all means…

The living room floor has also been vacuumed twice a week, so the odds of it missing the vacuum almost a dozen times is right at zero, as far as I’m concerned.

We chatted about it…and then she confessed that was enough talk.  To her brain, this was in the same league as that teleportation event I told you about a few months back.  The one where she went to sleep in her recliner in the living room and woke up in bed with the TV still on….and that still totally freaks her out.  Now the ball case.  Can you say “Odd?”

In many of these “disappearing objects that reappear cases” the person has some attachment to the object and just as they move past the attachment – BANG!  It’s back.

Maybe that God’s (or Universe, or whatever’s) way of teaching us something about attachment.

Or, maybe reality really is a Swiss cheesy place and we don’t understand the half of how it works; not really.

And maybe the joke’s on us:  We may be smart enough to materialize a picture live on a smartphone, but how come we can materialize the means to make the monthly payments for it?  That kind of thing.

This is the kind of stuff I mull over when I’m out working in the shop or around the house on weekends.

If I ever get a solid insight, be sure and read Monday columns.But “seriously odd” doesn’t even begin to cover it.  Profoundly contrary to the way things should work, is more like it.

Why I’m Not a Lawyer

An email from reader Richard points out the flaws in my thinking (or at least some of them)…

George,

I believe that your assessment of the veto by Gov. Brewer of S.B. 1062 is as misguided as the propaganda put out by the LBGT community.

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Worms of Inflation

OK, the big worry on Wall St. is that inflation is going to come along and blow over the first domino.

In case you haven’t followed UrbanSurvival often (you fool!) the game works like this:

There are huge piles of (made up, QE’ed) money laying around in bonds.  This is because there is almost zero risk.  Unless you had bankrupt city bonds, but everyone knew that was a bit risky.

In the meantime, as the rate of interest keeps going lower (which is why the Fed hasn’t raised rates) that means stocks can keep going moonward because a Penny of Dividend is worth a dollar of stock price when the interest rate is 1%.

The first big gust of wind that comes along is going to collapse the bond market and the stock market for losses that could be 50% or greater.  It’s baked in the cake of longwave economics which is our forte around here (along with practical economics in all areas of life).

So this morning, with word that durable goods was up (better than what had been expected by some) the stock futures turned only slightly weak and it looks like the markets will continue to be more or less range-bound this week.

New orders for manufactured durable goods in January
decreased $2.2 billion or 1.0 percent to $225.0 billion,
the U.S. Census Bureau announced today. This
decrease, down three of the last four months, followed a
5.3 percent December decrease. Excluding
transportation, new orders increased 1.1 percent.
Excluding defense, new orders decreased 1.8 percent.

Transportation equipment, also down three of the last
four months, drove the decrease, $4.0 billion or 5.6
percent to $67.3 billion. This was led by nondefense
aircraft and parts, which decreased $3.4 billion.

Shipments of manufactured durable goods in January,
down two consecutive months, decreased $0.9 billion or
0.4 percent to $232.3 billion. This followed a 1.8
percent December decrease.
Machinery, down following five consecutive monthly
increases, drove the decrease, $0.9 billion or 2.6 percent
to $34.5 billion.

Bad news:  December numbers were revised downward…and they were bad already.

Comments to come from Janet Yellen and the fluid situation in Ukraine could change that, however, so we shall see.  The worms of inflation hasn’t turned into golden butterflies just yet though but this week’s Triple A Fuel Gauge Report shows gas is up 4.7% in the past month and so at some point, the soaring prices at the store and gas pump are going to start hurting other areas of the economy.  Just not this morning – yet.

Ukraine: The Dance

Step 1:  Protesters storm Crimea parliament building.  No, wait, the Russian flag went up so the mainstream is calling these guys “armed gunmen” in lieu or protesters.  See how this plays?

Step 2:  Russia docks warship in Havana, Cuba.  (Remember my references to Cuba Missile rhymes?  Close, huh?)

Step 3: Ex Ukraine president hangs out in Russia.

We shall see what the day brings…but the biggest risks will be over the weekend.  I may go to cash for the weekend or short….just thinking out loud here…

Merkel Jerk

By this account Germany’s Angela Merkel looks like she’s selling the EU brand of soap to Brits who are skeptical of joining the EU and giving up local governance.

The EU reminds me of the old Yellow Pages ads: “Never stop selling…

Crapping in Your Food (A rant about “Change”)

Government apologists (a/k/a/ corpmedia) are all over the story this morning about how the Fooled and Drugged Administration is about to change food labeling laws so that they reflect what Americans actually eat, rather than the fictional  12 potato chips that some fool thought was an “average serving.” 

Whoever that doof was must not drink beer.

Here are two HUGE problems that the government is not addressing in their labeling reform dance because it involves big corporations that, in turn, give megabucks to the people who go to Washington to get rich:

1.  The proposed FDA Rules do not out genetically modified content as part of their labeling reform.  I noted this week how Forbes is labeling GMO as a pseudo-controversy.  Not around here, bubba. I’ll explain in a sec, but I don’t do poison-laced foods my body was never designed to process….

2.  The second second level of crapping in your food comes as a tip from a friend who runs a consumer cooperative in the Northeast:

A big issue that’s under the radar is that the USDA is asking for comments on a proposed policy of coexistence between farmers growing sustainably and conventional farmers. Basically, the policy will put the burden of contamination from GMOs or pesticide spray on the sustainable farmer who was damaged, not the farmer who sprayed or used GMOs.

And, if you’re in Pittsburgh, this press release from the East End Food Coop will be of interest:

“Right now there’s already a burden placed on organic growers operating in close proximity to fields containing GMOs,” explains East End Food Co-op’s Marketing & Member Services Manager, Heather Hackett. “They often lose acres of their land by leaving it empty to provide a buffer between the genetically engineered crops on their neighbor’s farm and the natural crops
on their own.

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Coping: Revolution + Digital = Digilution

For a long time, people on the web have been talking about global revolution.  You heard terms like “globalrev” and “Arab Spring” and how what’s going on in Ukraine fits the mold.

Unfortunately, the concept of globalrev or democratic uprising in places like Ukraine rings hollow – especially to the Russians. 

As Russia’s head of their Foreign Relations Committee (of their equivalent of our Senate), Mikhail Margelov explained Wednesday:  The government that arises in Ukraine is not necessarily democratic.  It’s just whoever was the most violent, persuasive,  and assertive on the streets of Ukraine.

As the violence continues moving eastward in Ukraine, inspired (and partially funded by the West (US/EU) the real objective is clear to any military strategist:  Deny the Russians that warm water port in Sevastopol and thus, thug-led  “revolution” becomes the order of the day in the Crimea.

But what of the aftermath.  How does that work?  We’re also left to ponder whether revolution – more properly rerevolution – could come to the United States.   It’s a question we tackled in Peoplenomics recently and data suggests that the answer – at least in conventional revolution terms – is no. Not likely here.

The basis was study of more than 200 revolutions what emerges is a nearly universal existence of one (or more) major third parties to throw funding into a revolution.

Even when we saw the fall of the Former Soviet Union (FSU) it’s no secret that the US wasn’t going to win on simple competitive forces.  So, the Reagan administration announced the Star Wars Program and that, essentially, forced the Russians to ramp-up spending on defense to levels that didn’t make sense.  Collapse followed shortly thereafter. The mere size and scope of the Strategic Defense Initiative placed it beyond Russia’s grasp.

Thus,. the Russians allowed their system to begin changing, but in many ways that change-rate has been too slow for the West.

As a result, the interest in economic subjugation of Ukraine and, eventually, Russia itself.  The domination of the EU from “Lisbon to Vladivostok” is clearly in play. 

Yet Vlad Putin finds himself in a similar position old-style patriots in America:  At what point do the borders become firm and a country takes a stand?  Could Ukraine be the Russian Mexico?  In some sense, perhaps.

Indeed, the long border between Russia and Ukraine: 1,426 miles worth.  As a crow flies, that’ further than from Tijuana to the lower central mainland of British Columbia.  By comparison, the US-Mexican border is 1,933 miles long and we all know how problematic that border has been.

Prospects for US Civil War:

Personally, I don’t believe that the prospects for civil war (in conventional socioeconomic terms) is very high he US.

But there is a very high probability of attempts to “polarize and galvanize” by anarchists who don’t have the patience to work through the existing available processes to achieve change for their own ends.

The difficult task (likely to become harder, not easier) is caused by a high level of polarization as a result of native economic forces and where we are in the Long Wave economic cycle.

Recall that during the 1930s we saw such groups as the Industrial Workers of the World, the Socialists, and even groups like Technocracy make inroads.

In all these cases, however, and despite some deaths (martyrs as branded) by the Wobblies of the IWW, for the most part the increased social spending and ready work opportunities of the New Deal served to defuse the situation.

In much the same way, the most likely course for the US is to follow a similar path:  Having secured  delays of things like pipelines crossing western Asia, the most of the US is not to consolidate industrial resources, specifically energy in large measure, in order to have a solid foundation going forward.

But it doesn’t mean that anarchistic attempts at domestic revolution won’t arise.

In fact, just this week there was a report on LikeLeak about how “Police probe threatening ‘1 percent’ graffiti left on Atherton (CA) homes.”

In the Atherton case, the targeted one percenters are a majority. 

That area – in the hills west of the South Bay 101 freeway and the 280 freeway that winds its way up the peninsula that San Francisco sits on the north end of – is not exactly low income.

There’s a reason for that.  Atherton is just 20 miles up from San Jose, even less from Santa Clara.  And only 14-miles from Cupertino, famous for another major Silicon Valley company.  All those well-paid people have to live somewhere.  And back when we lived on our sailboat in  SF (2001), homes in the area were typically in the $750k-$1-million class in 2001 dollars.

It’s not what you’d expect to find at the heart of a revolutionary movement.  People driving 5 and 7-series Beamers didn’t use to be prime recruiting material for revolutions.  In the main, they “got theirs.”

On the other hand, if you’re trying to “send a message” it would be a logical place, but then so would the hills of Palo Alto, the mansions around Los Gatos, and all the rest.

Digilution

There is one thing new on the “build a revolution” front that has not been present in past revolutions, like the US Civil War, or others – and we see it operating in Ukraine and we saw it (past tense) in Arab Spring: 

Mass communications of the one-to-many sort.  The same stuff that makes flash mobs.

The conventional “revolution” needed a much more dedicated core than the modern variety.  There was a need for a critical mass to evolve.  Some place that number at anywhere from 3 to 10 percent of a population.

What’s changed (and it’s one of the reasons I fully expect one of the future casualties of digital revolution talk to be the Internet in general and social media in particular) is that one person with an idea can use digital means to turn a hundred dollars worth of idea and promotion into a million, or more, page views.

Like old-style revolutions, there’s a critical threshold that would be necessary to achieve a critical mass to overthrow a government, as happened in Arab Spring (and is going on in Ukraine) but the emphasis on the aspects of digital revolution/ digital warfare have not been so pronounced in Ukraine because it scares the PowersThatBe shitless.

One discussion worth noting, on point, is this Bloomberg video in which  Google ideas founder Jared Cohen, explains how Twitter and other digital platforms shaped the narrative of what was going on recently in Ukraine.

Meanwhile, there’s another revolution going on – this one down in Venezuela, and as was the case with Ukraine, there is a dominant external interest (the US) dumping in plenty of support to the various interest groups.  Remember: Venezuela’s former leader Hugo Chavez got at least some of the country’s gold back and the country is a prime supplier of US energy.  So what’s not to go for?

A very good article is “Protesters in Venezuela, Ukraine turn to peer-to-peer messaging app” to achieve their ends.

It all puts governments globally in something of a box.  It’s becoming clear that the Internet is a kind of huge Brain Amplifier.  And, because it’s about quality of thinking (and argument) it holds the potential to become a kind of upper boundary layer, beyond which governments can not go, or they will face failure through the prospect of digilution.

Future of Digilutions

What’s difficult, however, is figuring out (for the PowersThatBe) how to put down the limits on personal use of communications.  There are a number of tactics.

1.  Licensing of the Internet.  In this scenario, there would be a worldwide licensing scheme set up – just as there is for cars with international driver’s licenses and such – and it might include (in place of safe braking distance questions) “What’s the right response to a message about a flash mob?

2. Government Control of Social Media and Peer-to-Peer.  Under this scenario, government would admit that it is worried about prospects for digilution but in order to maintain order and prevent a revolution over digital fascism, it would simply own the digital tools and limit their use through word filtering strategies.

3.  Hands Off – Then Respond With Force.  This is the one Russia is actively looking at not just for Ukraine’s west (which is more European-leaning) but now they have to face the issue in the Crimea.  That’s a lot harder.  So does government bend to the will of the people, or will Russia put up a major military move this weekend and march in with network blocking tools, and shut down further digilution efforts?

4.  Hands off – Roll With Change.  This is ideal – except, of course, that when true democracy reigns, it’s anarchy shortly thereafter.  The poor will vote themselves rich, the rich will be beggared. Communism was nothing more than democracy pushed to the extreme, is one way of thinking about it, except that eventually a dicktator (sic) will arise and that’s that…  But, of course, the rich will lose power in this work out, so it’s not even really on the table.

How It Runs from Here:

1.  Revolutionary thinking is part and parcel of the Long Wave economic cycle.  Ask the Wobblies.

2.  Revolution + digital = Digilution.

3.  Digilution reduces the threshold for change and ends “barriers to entry” by other parties.

4.  Digital unity in a Digilution has two aspects, however.

a.  Unity if immediate action (Ukraine or Arab Spring)

b.  Unity in long-term outcome.  This one often doesn’t work.  Ask Egypt and Libya, and let’s see how Ukraine works out in five years.

It’s like selling any other kind of soap.  Makes a lot of promises on the front end.  But revolutions and digilutions are no different than Proctor and Gamble selling soap.

Call me lazy, but I’ve read enough economics to see that the need for my personal participation in digilution is hardly necessary.

The continued watering down of paper money purchasing power, the hacks of Bitcoins, the bankruptcy of governments because of compound interest?  Remember them?  They’re going to do the revolution/digilution for me.  At age 65, I’m less interested in taking it to the street so much as being able to get across it, lol.

My only real task in all of this is (referring to the How It runs) list is to watch for my local #4 and then jump ahead of the crowd to the right answer to #4 b above.

That’s how to prevent jail time, make money and maybe preserve lifestyle, and as a bonus: Not get all wrapped around the axle of the police state.

Warren Buffet’s statement about class war (“…and my class won…”) may very well come back to bite him.  And those folks in Atherton, too.

But it may not be from something as “policeable” as graffiti artists. Compound interest and catastrophic returns to historical norms are just as effective as barricades, tweets, and Molotov’s and a whole lot less personal effort.  Slower, but slow is good anymore.

In the end, digilutions are just another brand of soap and I don’t see them cleaning governments any better where that brand has been used. It’s may be more appealing hype-wise, but it’s all HS&J (hype shuck & jive)  until Shangri-La* emerges from the digital wreckage. 

And I don’t see it yet – anywhere.

* [from Wikipedia: “Shangri-La is a fictional place described in the 1933 novel Lost Horizon by British author James Hilton.

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Russia Plays “the Nuclear Card”

In an interview on RT (Russia Today) Russia’s head of their Foreign Relations Committee, Mikhail Margelov made several interesting points about the current chaos playing out in Ukraine. There were a couple of points which deserve to be passed on as “thinking points” because they may be telling us something about how future events will play out. First, he expressed concern about the number of nuclear power plants that are operating in Ukraine (six) and the number of reactors (17). Recalling that this is the region of Chernobyl, he said Russia (which is obviously downwind) has legitimate security concerns. But in terms of the basis for the conflict, he said that Russia was not to fault.

Beyond Bitcoin: Transition to the Star Trek Economy?

Just posted for our www.peoplenomics.com subscribers: As Russia puts troops on alert this morning, we have our “Phasors locked on stun” this morning as we consider how the Star Trek economy worked. There are some very interesting possibilities, especially when we see the arrival (and momentary decline) of the new cryptocurrencies.

Home Prices: Losing Momentum

It looks like our often-stated “double dip” might get legs based on the latest housing index reported out this morning by S&P/Dow Jones in their Case-Shiller report:

New York, February 25, 2014 – Data through December 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed that National home prices closed the year of 2013 up 11.3%. This represents a slight improvement over last quarter’s annual rate of 11.2%. In the fourth quarter of 2013, the National Index declined 0.3%.

In December, the 10-City Composite remained relatively unchanged while the 20-City Composite showed its second consecutive monthly decline of 0.1%. Year-over-year, the 10-City and 20-City Composites posted gains of 13.6% and 13.4%, approximately 30 basis points lower than their November rates. Chicago showed its highest year-over-year return since December 1988. Dallas set a new peak and posted its largest annual gain since its inception in 2000. Denver declined 0.1% and is now 0.7% below its all-time index level high set in September 2013.

The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S.

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