So Much for Santa?

As much as the market was trying to put on a happy face on Friday, things ended up in the crapper by the end of the session.  While I'd been expecting a good run at the 11,000 line, the fact is that it wasn't in the cards and the Dow settled out at 10,875.58.  That's not much of a showing, especially since the Iraq War wasn't going too badly for the Bush administration, and the week's news items were looking less dour than they have in past weeks.

The Dow isn't the whole story, of course, and our proprietary Aggregate Index, which looks at the Dow, the NASDAQ 100, and the S&P gained 42 points for the week.  What comes next may well be tax loss selling.  Despite wash sale rules, the next week could bring some corporate selling, and the week after the civilians tend to weed out their turkeys for the year.  It's possible that the market is "over" for the year and we may be doing well to end this year at last year's 10,783.01.

Putting a pencil to the Dow, as of this week, the market has gained 8-10th's of one percent. On a $100-thousand portfolio, that means you'd be up $800 for the year, all other factors being static.  But, that's not the case.  As we are quick to point out, although the consumer price index was down 0.6% in November seasonally adjusted and 0.8% before fudging, stock have actually lost ground in terms of purchasing power. This week's consumer prices report says from November 2004 to November 2005, inflation increased prices 3.5%.

What this means, to make it really simple for you, is that in order to stay even with the cost of living, a $100,000 account would have had to increase to $103,500 just to keep even with consumer inflation.  So add in the actual $100,800 that the market gains represent year-to-date and we reckon the Dow is behind 2.7% for the year.  And that's if prices hold here. 

Our modest holdings of cash (even at pathetic bank rates)  faired about the same as stocks and represented as close to zero risk as we could get without buying government bonds directly.  This is not financial advice, but it's what we do in our own accounts.

I sometimes look at how press releases are worded to get a general sense of what officials are afraid of.  This week's consumer price report used the smaller price decreases offered by the "seasonally adjusted" figures, rather than the not adjusted figures.  Why?  I don't know, but clearly with the Fed doing away with M-3 (hide the digidollar sausage, I figure) deflation is far more dangerous to the nation's economic health than maintaining the present price levels of financial assets like housing.  As the housing bubble goes, so might the rest of the economy. 

The Fed is all about maintaining the status quo.  Predictability is key when people make long term investments in pools of securitized instruments like collateralized mortgage obligations and 30-year bond rates.  In all, the longer the investment horizon, the more risk, and the lack of spread between short and long rates to us looks like a fantastic opportunity, provided the world hangs together so that financial markets survive.

As I look at the future, I keep coming back to economic fundamentals.  The reality of Peak Oil is not a "whether" - it's a when.  The mass exodus of Baby Boomers is not a matter of if but again, a matter of when.  And the reality of the essentially "going nonlinear" of the debt (which is why M-3 is going away)   is another example of when not if. 

So, it's with this perspective that we plan to enjoy a very merry Christmas in a week's time, ever mindful that these "good times" are founded on debt, exploitation of cheap labor rates in other countries, and artificially low prices of energy.  But hey!  It's our birthright, says foreign policy.

Mass denial is a good thing - it keeps the dollars flowing. At some point, whether it's global warming (this was the hottest year in recorded history) or the other threats, the chickens come home to roost.  Fortunately, again this year, it looks like the reindeer beat the chickens.

Patriot Act Fight

For now, the Senate has held off on reauthorization of the Patriot Act extension. My fear here?  If one believes the conspiracy theorists that Patriot Act was part of a society control plan (and 9/11 a false flag operation), then we should expect to see a major terrorist event - to spur passage of something more Draconian than Patriot I and II.  That is, if the Senate doesn't cave in in the final hours and pass reauthorization.  CONgress is asking embarrassing questions about administration approved spying on Americans.

Hamas Wins

Hamas won big in Palestinian elections this week.  Not something Israel is happy about.

Holiday Publishing Plans

We're planning to keep to our usual publishing plans (daily posted week days at 8 AM Central/9 Eastern) and a Saturday morning post.  Our Peoplenomics.com reports will be posted at the regular time (around 4 PM Central on Sundays)

Help Me with 5-Million?

As of this morning, UrbanSurvival will just barely make its target for the year of 5-million free page views served.  I would appreciate your help by telling a few of your friends about this site.  Why not click here to send them a note to turn them on to this page?  As of today (12/17) we have served up 4,948,982 pages year to date...

Gangs in Your Future

That's the topic this week of our weekly in depth analysis over at www.peoplenomics.com.  Subscriptions are just $30 - and they make a fine Christmas gift for your kids and friends.  Just send me an email and tell me who the account should be set up for and I will send them a Christmasy welcome.  Unlike some people, I like Christmas and I'm not going to bother with "Happy Holidays."

Read and Save

If the holidays find you poorer than you wish, you might want to pick up a copy of "How to Live on $10,000 a year or less" at www.peoplenomic.com/bookstore.htm.

Friday Dec 16, 2006

Current Account Improves (or does it?)

Kind of hard to believe, but that's what's being touted this morning. However, the goods and component (not the accounting stuff) increased nearly $10-billion in the quarter.

The U.S. current-account deficit--the combined balances on trade in goods and services, income, and net unilateral current transfers--decreased to $195.8 billion (preliminary) in the third quarter of 2005 from $197.8 billion (revised) in the second quarter. The decrease was more than accounted for by a decrease in net outflows for unilateral current transfers, a shift to a surplus on income from a deficit, and an increase in the surplus on services. In contrast, the deficit on goods increased.

Goods and services

The deficit on goods and services increased to $182.8 billion in the third quarter from $173.6 billion in the second.  [emphasis added - GU]

Goods

The deficit on goods increased to $197.9 billion in the third quarter from $186.9 billion in the second.

Goods exports increased to $225.2 billion from $223.5 billion. Automotive vehicles, engines, and parts, capital goods, and consumer goods more than accounted for the increase. Foods, feeds, and beverages decreased.

Goods imports increased to $423.2 billion from $410.5 billion. Petroleum and petroleum products accounted for eighty percent of the increase, and automotive vehicles, engines, and parts accounted for nearly all of the remainder.

Services

The surplus on services increased to $15.1 billion in the third quarter from $13.3 billion in the second.

Services receipts increased to $95.5 billion from $93.7 billion. The increase was mostly attributable to increases in “other” private services (such as business, professional, and technical services, insurance services, and financial services), in transfers under U.S. military agency sales contracts, and in “other” transportation (such as freight and port services). In contrast, both travel and passenger fares decreased.

Services payments were virtually unchanged at $80.4 billion. Decreases in travel and in passenger fares were offset by increases in other services categories, particularly in “other” private services.

Income

The balance on income shifted to a surplus of $0.5 billion in the third quarter from a deficit of $1.5 billion in the second.

Investment income

Income receipts on U.S.-owned assets abroad increased to $118.0 billion from $110.4 billion. The increase was accounted for by increases in “other” private receipts (which consists of interest and dividends) and in direct investment receipts.

Income payments on foreign-owned assets in the United States increased to $115.9 billion from $110.5 billion. Increases in “other” private payments (which consists of interest and dividends) and in U.S. Government payments (which consists of interest) were partly offset by a decrease in direct investment payments.

Compensation of employees

Receipts for compensation of U.S. workers abroad were virtually unchanged at $0.8 billion, and payments for compensation of foreign workers in the United States edged up to $2.3 billion from $2.2 billion.

Unilateral current transfers

Unilateral current transfers were net outflows of $13.5 billion in the third quarter, down from net outflows of $22.6 billion in the second; the decrease was more than accounted for by a decrease in “private remittances and other transfers.” The decrease in this category mostly resulted from unusually large claims received by U.S. companies from foreign insurance companies as a result of the extensive damage caused by hurricanes Katrina and Rita.

Capital and Financial Account

Capital Account

Capital account transactions were net outflows of $0.3 billion in the third quarter, unchanged from the second quarter.

Financial Account

Net recorded financial inflows--net acquisitions by foreign residents of assets in the United States less net acquisitions by U.S. residents of assets abroad--were $272.9 billion in the third quarter, up from $150.6 billion in the second. Financial outflows for U.S.-owned assets abroad slowed, and financial inflows for foreign-owned assets in the United States picked up.

U.S.-owned assets abroad

U.S.-owned assets abroad increased $124.0 billion in the third quarter, following an increase of $225.2 billion in the second.

U.S. claims on foreigners reported by U.S. banks increased $107.9 billion in the third quarter, following an increase of $171.0 billion in the second.

Net U.S. purchases of foreign securities were $34.0 billion in the third quarter, down from $42.0 billion in the second. Net U.S. purchases of foreign stocks were $34.6 billion, up from $23.9 billion. Transactions in foreign bonds shifted to net U.S. sales of $0.7 billion from net U.S. purchases of $18.1 billion.

Net financial flows for U.S. direct investment abroad shifted to net inflows of $27.1 billion in the third quarter from net outflows of $21.4 billion in the second. Reinvested earnings shifted to an inflow of $27.2 billion from an outflow of $16.0 billion, largely reflecting the drawdown of cumulative reinvested earnings in affiliates abroad to support the increased distribution of earnings to parents in the United States. Most of this drawdown was in response to the tax incentives provided by the American Jobs Creation Act of 2004. In addition, net equity capital outflows decreased, and net intercompany debt inflows increased.

U.S. official reserve assets decreased $4.8 billion in the third quarter, in contrast to an increase of $0.8 billion in the second.

Foreign-owned assets in the United States

Foreign-owned assets in the United States increased $396.9 billion in the third quarter, following an increase of $375.8 billion in the second.

U.S. liabilities to foreigners reported by U.S. banks increased $88.7 billion in the third quarter, following an increase of $149.1 billion in the second.

Net foreign purchases of U.S. Treasury securities were $40.9 billion in the third quarter, up from $9.9 billion in the second.

Net foreign purchases of U.S. securities other than U.S. Treasury securities were a record $160.7 billion in the third quarter, up from $114.1 billion in the second. Net foreign purchases of U.S. stocks were $26.6 billion, up from $13.7 billion. Net foreign purchases of U.S. corporate bonds were $99.5 billion, up from $80.0 billion. Net foreign purchases of federally sponsored agency bonds were $34.5 billion, up from $20.4 billion.

Net financial inflows for foreign direct investment in the United States were $38.8 billion in the third quarter, up from $14.5 billion in the second. A shift to net inflows on intercompany debt from net outflows and an increase in net equity capital inflows were partly offset by a decrease in reinvested earnings.

Foreign official assets in the United States increased $38.4 billion in the third quarter, following an increase of $82.6 billion in the second.

Net U.S. currency shipments to foreigners were $4.7 billion in the third quarter, up from $4.5 billion in the second.

The statistical discrepancy--errors and omissions in recorded transactions--was a negative $76.8 billion in the third quarter, compared with a positive $47.5 billion in the second.

In the third quarter, the U.S. dollar appreciated 1 percent on a trade-weighted quarterly average basis against a group of 7 major currencies.

Gold Outlook

As usual, you can pick your expected outcome and find a news story to justify the trading position.  No reason today should be any different to the gold buyers.  On the one hand, there's a 10-hour old story (at press time here) suggesting that gold will cruise below $500 for a while.  But on the other hand, at two hours before press time,  there's a report that the price is going up.  If you're looking for clues for how to make money, surfing the financial headlines is about the worst possible place.  The best place, in my experience, is looking at fundament changes in life (like that airport traffic battle) can yield more profitable insights.

Speaking of the inflation/deflation outlook, another email from my friend Jas Jain on the subject is worth reading:

There Is No Such Thing as Hyper-Deflation And Deflation Is Self-Correcting!

My reply to the assertion that “deflation is worse than inflation” (see appended excerpts) got quite a few responses. There are at least four persons named George on my private list and I heard from two of them.

One George, an e-friend for many years, thinks that we may have hyper-deflation (“banks get scared …they stop lending”). There is no such animal, George B., and the world, especially, the US, can use some scared bankers. The second George, with whom I have the pleasure of having frequent dinner conversations, is a pilot (he just finished building his own plane likes of which I have never seen) and one day we were just talking what if there are too many drunken pilots. His response was quick and brief: The problem is self-correcting. What he meant, as he elaborated, was that over time enough of drunken pilots will be dead and we wouldn’t have the problem of having too many drunken pilots. George I., a clear thinker, can drink, but he is a very sober pilot.

Just like the problem of too many drunken pilots is self-correcting, so is the problem of deflation, i.e., when deflation becomes economically injurious it will get killed and thinned. We can all agree that it is lot easier to reduce or kill production, and thus limit the supply, than to increase production, or supply. The clearest case in point is crude oil as well as refined gasoline and heating oil, where it is very difficult to increase supply over a relatively short period of time, or even over a longer period for that matter. As prices fall to the point that the production is not profitable there are two ways that business people, including farmers, have dealt with the problem – limit the production, or destroy part of the production (both these were used in Brazil when the coffee production was so high that one would lose money by selling coffee beans at the market price). I have never read a case of hyper-deflation.

We all know areas of the economy where we have incessant deflation, e.g., computers, but it is not economically injurious to anyone except those businesses that can’t compete. The problem of excess supply, e.g., memory chips, gets corrected by normal market forces, but the problem is never the falling prices, which is the norm. Therefore, deflation by itself is never a problem and where deflation leads to economic problems it gets corrected one way or another over a reasonable period of time. People would refuse to produce and sell below a certain level of profitability and so the prices cannot fall, or keep falling, below a certain level that allows some minimal profits for all involved, including labor. Yes, there would be some period of pain while the adjustments take place but it will not go on for too long, or get out-of-control, as the term hyper-deflation is meant to suggest.

Long periods of “price stability,” Greenspan’s favorite term, necessitate some years of deflation to counter some years of inflation. In that sense deflation, even when it is injurious to the economy over short-term, as sustained inflation certainly is, is a part of corrective mechanism and nothing to fear, or fight. To fight deflation at all costs is idiotic because it disables a very important economic function, one of adjustment. It is like disabling the brakes in a vehicle.

Inflated egos of central bankers are self-reinforcing!

Jas

Last Minute Approaches

Here we go - meandering through the headlines as we mosey into the final stretch of Christmas madness - and the shopping season winds up to what seemed like fevered pitch at the local Box-Mart store yesterday.  According to one article, 39% of men and 21% of women do their shopping between now and you-know-when.  We noticed that Freedom Financial Network is offering advise to people on how to avoid debt during the season - a fine thing if you can manage it.

No doubt the popularity of price comparison web sites will help this year.  If you haven't tried Goggle's "Froogle.com" site, it's where I found two items yesterday (an oiler/filter for the air compressor and a new dual-handset cordless phone).  Not especially "Christmasy" but practical, for sure.

The trend toward online shopping is getting legs in rural Texas as much as anywhere. On my outing yesterday I saw two FedEx trucks and bumped in to our local UPS driver at the "get ready for winter BBQ'ing propane dispensary."  That truck count may seem ho-hum in the urban setting, but that's probably close to10% of the vehicles on the 20-minutes drive from our place to town.  I notice that Experian (you remember the name from credit reports?) is buying PriceGrabber.com for $485-million. More business for the delivery outfits.

Interestingly, while I was renting a hair cut, some of the locals were bemoaning the traffic in Tyler, Texas (the big city up the road 40 miles from us).  "The traffic is every bit as bad as L.A. with all the folks moving there," one person remarked. Thanks to the internet, the relatively cheap price of land when we moved here, and the lack of ice storms like the one that hit the Carolinas and Georgia this week, Tyler's population seems booming (with resulting impacts) and our own assessed property valuation is up 30% in two years.  Holiday travel is predicted nationally to rise a modest 1.7% this year. 

Speaking of transportation, if you're young, now is as good a time as any to watch how airports evolve over time.  Most big cities have several airports - and eventually one becomes dominant.  I saw that in the marketing battle between Seattle-Tacoma airport versus Boeing Field.  And we're seeing it play out in a couple of Texas markets today - Love Field in Dallas versus DFW, and in Houston where Intercontinental and Hobby occasionally vie for business. Love field is picking up some American traffic at the expense of DFW.  This won't impact traffic much this year, but over coming years it will modify traffic both on the ground and in the sky.  If you're thinking of a first-time home, proximity to freeways and airports is always something to consider.

Shopping in New York will perhaps see only a small impact as the transit workers there are going with a partial strike plan in order to make their point without crippling the city. For now.

In terms of investing?  I'd have to guess that the good news about oil prices (dropping despite the cold) and the release of some inflation fears from that CPI number out yesterday will kick the market in the pants today.  Maybe even so far as another test of the 11,000 barrier. Maybe the "Santa Claus Rally" will get going in earnest today.

Cloning Debate

Is the research data on cloning real or something else?  A big debate rages about a South Korean's research.

Iraq Elections

Although it will take some time for the votes to be counted, Iraq holding elections is a big step - and no doubt the fact that they were held at all is a credit to the Bush administration.  The questions is whether, as the outcome clarifies, how the elected government of the country will act on questions such as the relationship between the Sunnis and Shiites.  That's when we find out what the future of democracy will be in the region...

Perhaps the fact that voting shaped up order is why George Bush could be accommodative with John McCain on the torture ban.

There are problems aplenty to deal with.  For one thing, communications and training of local authorities are so bad that one-legged terrorist leader Abu Musab al-Zarqawi was captured and released because he wasn't recognized!

Russian Nuke Plant Accident

An explosion at a smelter that apparently serves the Leningrad nuclear power plant has killed at least one person. No release of radioactivity is reported, however.

Hospital Fire

Around 40 dead as fire swept through a hospital in China.

Thursday, Dec 15, 2005

CPI Deflation Arrives

My friend Jas Jain and I have been going back and forth on whether huge deflation will arrive, or whether we will have one last bout of inflation before things turn south and the second leg down of the Second Great Depression gets underway.  I think we agree that we already saw the first major down leg as the NASDAQ/Internet Bubble fell apart and wiped out more than a trillion dollars of paper "wealth."  Jas has been arguing that prices of everything, but especially real estate will be coming down dramatically and perhaps in a major visible way before the end of 2006.

His case is bolstered this morning by the government's release of the Cost of Living Index which shows that deflation - not inflation arrived last month  The index dropped an amazing 0.8%.  Here are the highlights:

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.8 percent in November, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The November level of 197.6 (1982-84=100) was 3.5 percent higher than in November 2004.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) decreased 0.9 percent in November, prior to seasonal adjustment. The November level of 193.4 was 3.5 percent higher than in November 2004.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) decreased 0.5 percent in November on a not seasonally adjusted basis. The November level of 114.4 (December 1999=100) was 2.8 percent higher than in November 2004. Please note that the indexes for the post-2003 period are subject to revision.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U decreased 0.6 percent in November, its largest decline since a 0.9 drop in July 1949. The index for energy declined for the second consecutive month, down a record 8.0 percent in November. Within energy, a 15.2 percent decrease in the index for petroleum-based energy more than offset a 2.1 percent increase in the index for energy services. The index for food rose 0.3 percent in November, the same as in each of the preceding two months. The index for all items less food and energy rose 0.2 percent in November, the same as in October, after registering increases of 0.1 percent in each of the preceding five months. Shelter costs rose 0.3 percent in November, largely as a result of a 1.3 percent increase in the index for lodging away from home, and accounted for over half of the advance in the index for all items less food and energy.

During the first 11 months of 2005, the CPI-U rose at a 3.8 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 3.3 percent for all of 2004. The index for energy, which increased 16.6 percent in 2004, advanced at a 21.7 percent SAAR in the first 11 months of 2005. Petroleum-based energy costs increased at a 22.0 percent annual rate and charges for energy services rose at a 21.3 percent annual rate. The food index has increased at a 2.4 percent rate thus far in 2005, following a 2.7 percent rise for all of 2004. Excluding food and energy, the CPI-U advanced at a 2.1 percent SAAR in the first 11 months of 2005 after advancing 2.2 percent in 2004.

 

The food and beverages index rose 0.3 percent in November. The index for food at home also increased 0.3 percent, the same as in each of the preceding two months. While the overall increases were the same, the composition was markedly different in November. The index for fruits and vegetables, which advanced sharply in September and October, decreased 0.2 percent in November. Declines in the indexes for fresh vegetables and for processed fruits and vegetables--down 0.8 and 0.2 percent, respectively-- more than offset a 0.5 percent increase in the index for fresh fruits. The index for other food at home, which increased 0.4 percent in October, declined 0.3 percent in November. The indexes for meats, poultry, fish, and eggs, for nonalcoholic beverages, and for dairy products each turned up in November. The index for meats, poultry, fish, and eggs increased 0.7 percent after declining 0.2 percent in October. The indexes for meats, for poultry, and for fish and seafood rose 0.8, 0.6, and 1.0 percent, respectively, while the index for eggs declined 1.9 percent. The index for nonalcoholic beverages, which declined 0.1 percent in October, rose 0.8 percent in November, reflecting an upturn in prices for carbonated drinks. The index for dairy products rose 0.9 percent, following no change in October. The index for cereals and bakery products rose 0.2 percent, following a 0.6 percent increase in October. The other two components of the food and beverage index--food away from home and alcoholic beverages--each increased 0.2 percent.

 

The index for housing rose 0.5 percent in November, following an increase of 0.9 percent in October. . Shelter costs rose 0.3 percent in November. The index for lodging away from home increased 1.3 percent, following a 3.5 percent advance in October. (Prior to seasonal adjustment, charges for lodging away from home declined 3.5 percent.) The indexes for rent and owners' equivalent rent each increased 0.2 percent. (Prior to seasonal adjustment, the indexes for rent and owners' equivalent rent increased 0.3 and 0.2 percent, respectively.) The index for fuels and utilities registered its fifth consecutive increase of more than one percent--up 1.4 percent in November. A 3.8 percent increase in the index for electricity more than offset declines in the indexes for fuel oil and natural gas--down 6.1 and 0.5 percent, respectively. (Prior to seasonal adjustment, the index for natural gas increased 2.7 percent in November.) During the last 12 months, charges for natural gas have risen 36.1 percent, fuel oil prices 26.5 percent, and charges for electricity 11.4 percent. The index for household furnishings and operations increased 0.2 percent in November, the same as in October.

A couple of points:  First, if deflation has won a round here, then that would easily explain why the price of gold took such a hit this week, down nearly $26 at one point.  Secondly, if I were not locked into a real estate deal that I had to close on in order to have a place to live, I'm not sure that waiting on buying might not make sense.  If real estate prices ease, and if the Fed stops raising or has to lower rates, then you can pencil out the implications for the housing market.

Housing deflation is not massive or pervasive.  Yes, prices are down in some markets, but up in others.  Still, one might argue that the housing bubble has been blown up about as far as it's ever going to get, until "Helicopter Ben" and his friends can figure out how to build some inflationary pressure into this economy.  If they can't, then I owe Jas a bottle of wine for calling the return of deflation correctly.

Although E & I are shopping for a freezer, the CPI figures out today don't make me want to rush out and drop depreciating (due to inflation) cash.  This is the biggest price drop in 56 years.

Event Watch

"It doesn't necessarily work like that..." was how Cliff explained about the "shift of events" that is going on now.  While I have been looking for a single event (and still will be through this evening) the creator of the web bot runs says the change period we're in doesn't linguistically look like a tipping point so much as a general change of course.  As you may recall, tipping points (singular events) are where the technology seems to score highest, picking out in advance significant emotional aspects of things like the 9/11 attacks, the Sumatra earthquake, Northeast power outage, the Columbia disaster, and so forth.  But absent a clear event (like the hit with the petroleum storage yard mess outside of London, the change in this period could be like the wounding of a thousand cuts - small things, but piling up so fast as to make our heads spin and give the same linguistic results.

That said, there are several candidates that could  be future foretelling events - that is indicators of much more to come between now and the first of March.

• Perhaps the biggest (and most likely) candidate has to do with the Iraq War.  George Bush admitted on Wednesday that yes, some of the intelligence was faulty, but defended the decision to get involved in the ground war which has killed more than 2,000 US servicepersons and who knows how many Iraqis. While the Iraqis are voting this morning (supported by large numbers of expatriates voting) the outcome could be contentious later in the week as the results become known.  It's possible that the country could devolve into a civil war, despite the best US efforts to the contrary, and should that happen between now and March, it would certainly mesmerize American television audiences to the kind of levels that would fit the linguistic shifts. To his credit, Bush is up a bit in the polls, 41% versus an earlier 37% but as I read it, the gain is something on the order of the combined margins of error which typically run +/-3%. 

• Another possibility is that earth changes are getting underway in a serious way. You may have noticed the coverage of the Taum Sauk Dam bursting in Missouri, resulting in a huge flood that followed exceptional rain. Reportedly a 1.9 magnitude earthquake accompanied the event, but while the words "New Madrid" might come to mind, there's no clear indication whether the quake caused the dam to fail, or more likely (if I were guessing) the quake was a result of that many gallons of water, each weighing eight pounds, going on walkabout. On the 13th, don't forget we had a 6.7 quake in Afghanistan, too.

• These points aside, my leading candidate for the "events" is the change going on in global financial markets.  Perhaps driven by my preoccupation with such matters, I note that the largest ever US trade deficit was booked on Wednesday the 14th, the price of gold and silver took a decent sized hammering, and the Dow managed to post a gain.  The dollar dropped a bit, but not nearly as much as one could expect given our dopamine addiction to spending more than we have. This is all very contrary behavior, except if one says the word of the Fed drives all.  The central banksters dropped the word "accommodative" from the language of the FOMC statement.

So, with these three possibility still front and center, I expect one of them will turn out to be right, in that it may occupy our attention massively through the end of February - or we could get something big in the next day or two which would have the same kind of "long ringing" effect in the public mind.  Me?  I'm still watching the news tickers.

Patriot Games

The house has passed legislation which would extend 16 provisions of the so-called "Patriot" Act.  The showdown is likely to come in the Senate where a filibuster is possible - to be waged by folks who understand that the weakening of our Constitutional rights is enormous under the Act. My concern is that the government has the ability to hold people incommunicado without counsel just on the charge - not even reviewed by a court - that a person (perhaps you?) are a "terrorist."  The danger is clear, but most workaday people don't stop to think that rights are always taken from those least willing or least able to defend them.  We saw it in pre WW II Germany, we've seen how Native people were rounded up and shuttled off to reservations, and unless we all stand up for everyone's rights, eventually, all rights are lost.

Speaking of Rights

The Muslim American Society notes that the government may be spying on anti-war groups and persons.  Wouldn't surprise us a bit.

Leave the Driving to Whom?

Not a very convenient time of the year for a transit strike in NYC, but it looks like a distinct possibility tomorrow.

Why Bother with Evidence?

We notice that George Bush says he doesn't think Tom DeLay is guilty of money laundering charges pending in here in Texas.  Perhaps so, but we'll just let the wheels of justice turn and not take sides.

Wednesday Dec 14, 2005

Ouch! Trade Figures Sour

Just out from the Commerce Department, the latest on the balance of payments deficit.  Watch this one because the consensus was that the number would shrink - not rise as it did - so this could be a real negative for the market today.  Especially when you consider petroleum accounted for another billion or so of the gap.

Goods and Services

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total October exports of $107.5 billion and imports of $176.4 billion resulted in a goods and services deficit of $68.9 billion, $2.9 billion more than the $66.0 billion in September, revised. October exports were $1.8 billion more than September exports of $105.8 billion. October imports were $4.7 billion more than September imports of $171.8 billion.

In October, the goods deficit increased $2.6 billion from September to $73.9 billion, and the services surplus decreased $0.3 billion to $5.0 billion. Exports of goods increased $1.8 billion to $75.2 billion, and imports of goods increased $4.3 billion to $149.1 billion. Exports of services were virtually unchanged at $32.3 billion, and imports of services increased $0.3 billion to $27.3 billion.

In October, the goods and services deficit was up $13.3 billion from October 2004. Exports were up $9.0 billion, or 9.2 percent, and imports were up $22.3 billion, or 14.5 percent.

Goods

The September to October change in exports of goods reflected increases in capital goods ($1.8 billion); foods, feeds, and beverages ($0.2 billion); automotive vehicles, parts, and engines ($0.2 billion); industrial supplies and materials ($0.1 billion); and other goods ($0.1 billion). A decrease occurred in consumer goods ($0.6 billion).

The September to October change in imports of goods reflected increases in industrial supplies and materials ($3.5 billion); automotive vehicles, parts, and engines ($0.8 billion); and consumer goods ($0.4 billion). Decreases occurred in foods, feeds, and beverages ($0.2 billion); other goods ($0.1 billion); and capital goods ($0.1 billion).

The October 2004 to October 2005 change in exports of goods reflected increases in capital goods ($2.8 billion); industrial supplies and materials ($1.1 billion); automotive vehicles, parts, and engines ($0.7 billion); other goods ($0.7 billion); consumer goods ($0.5 billion); and foods, feeds, and beverages ($0.3 billion).

The October 2004 to October 2005 change in imports of goods reflected increases in industrial supplies and materials ($12.5 billion); consumer goods ($3.0 billion); capital goods ($2.3 billion); automotive vehicles, parts, and engines ($1.4 billion); other goods ($0.6 billion); and foods, feeds, and beverages ($0.5 billion).

Services

Services exports were virtually unchanged from September to October. Decreases in travel and transfers under U.S. military sales contracts were mostly offset by increases in other private services (which includes items such as business, professional, and technical services, insurance services, and financial services) and royalties and license fees. Changes in other categories of services exports were small.

Services imports increased $0.3 billion from September to October. The increase was mostly accounted for by increases in other transportation (which includes freight and port services) and other private services. Changes in other categories of services imports were small.

From October 2004 to October 2005, services exports increased $3.0 billion. The largest increases were in other private services ($0.9 billion), travel ($0.8 billion), and other transportation ($0.5 billion).

From October 2004 to October 2005, services imports increased $1.9 billion. The largest increases were in other private services ($0.9 billion), other transportation ($0.6 billion), and travel ($0.2 billion).

Goods and Services Moving Average

For the three months ending in October, exports of goods and services averaged $107.2 billion, while imports of goods and services averaged $171.8 billion, resulting in an average trade deficit of $64.6 billion. For the three months ending in September, the average trade deficit was $60.9 billion, reflecting average exports of $106.9 billion and average imports of $167.9 billion.

Selected Not Seasonally Adjusted Goods Details

The October figures showed surpluses, in billions of dollars, with Singapore $0.7 (for September $0.5), Australia $0.7 ($0.7), Hong Kong $0.3 ($0.5), and Egypt $0.1 (virtually zero). Deficits were recorded, in billions of dollars, with China $20.5 ($20.1), Europe $14.5 ($12.0), the European Union $12.1 ($10.1), OPEC $9.4 ($9.1), Canada $8.1 ($7.4), Japan $7.4 ($6.4), Mexico $4.8 ($4.3), Taiwan $1.3 ($1.3), Korea $1.2 ($1.2), and Brazil $1.0 ($0.7).

Advanced technology products (ATP) exports were $18.8 billion in October and imports were $23.8 billion, resulting in a deficit of $4.9 billion. October exports were $1.8 billion more than the $17.1 billion in September, while imports were $1.1 billion more than the $22.6 billion in September.

Revisions

Goods carry-over in October was $0.2 billion (0.3 percent) for exports and $1.7 billion (1.1 percent) for imports. For September, revised export carry-over was $0.1 billion (0.1 percent), revised down from $0.2 billion (0.3 percent). For September, revised import carry-over was $0.2 billion (0.1 percent), revised down from $1.2 billion (0.8 percent).

I have to tell you, I am not surprised.  We had huge imports of petroleum products and the hurricane damage in the Gulf weighed - why conventional economists would forecast an improvement in the balance of trade just stuns me. Petroleum imports accounted for $11.1 billion compared with last month's $10.2 billion.  We expect petroleum imports will be up again in November as so much of the Golf of Mexico production was impeded.

Gold: Relative Values

The Federal Reserve on Tuesday did the expected, increasing their key rates by 25-basis points - which is 0.25% if you're not into bankster-speak.

A couple of things are going on as a result.  First, the stock market had a fine pop upwards when the "accommodative stance" language was dropped from the Fed's comments.  At the same time, the Dow posted a gain of nearly 56 points, but judging by the futures this morning, the markey seems poised to give back about half of that gain early today.

We also note that the price of gold (and silver) has been falling since hitting new multi-year highs.  Elaine and I are cautiously looking for buying opportunities here.  I was seriously thinking about wading in to more silver around $9.00, but E's sense was that things had some too far, too fast, and that we should wait.  Who's to argue with a woman's intuition?  Sometimes it pays to listen!

Several readers have asked me what I would do now.  The answer is the same as last week.  Our personal portfolio continues to be 75/25 precious metals to cash and we don't see any change in that (although remember, this is not an investment recommendation!).

The reasoning goes something like this:  We are in a period when the forces of inflation - namely the Fed which wants to do everything it can in order to keep financial assets from losing "paper" value - are working overtime in order to continue the global reliance on "manufacturing paper debt" which is the one area that America dominates in global trade.  The forces of pernicious deflation are everywhere, however.  There is so much excess capacity and cheap labor (WTO fears to the contrary aside) that deflation looms with every ship that arrives from overseas with cheap goods for the US market.

Why silver and gold?  We know that gold, just based on its 1980 peak which was near $850 just using the official CPI figures (calculator in the left column) coupld support a $2,000 price.  But what most people don't know are some of the stories about how much gold would buy in the deflationary First Great Depression in the 1930's.  A San Francisco hotel for a one ounce gold piece.  A brand new Bentley for a single goldpiece.  5,400 acres of good land in California for four ounces.

When I combine the reports that gold is trading around $750 - $800 in China's interior, I can only come to one conclusion:  Things may hold their value better than paper here at some point.  As paper unwinds (whether in an inflationary or deflationary manner) the name of the game is to hold things that can produce value in a money-tight world.  Hence, a home with a good-sized vegetable garden will have more value than one without.  A home with a well (and manual or solar pumping system) will be more valuable than a home that relies on "government" controlled water.  And so forth.

While it's always interesting to watch the moves in the market, the key for me has been to observe the ratio of "how many beers for an hour's work at minimum wage" ratio.  Traditional economists don't look at such down-scale metrics. But to me they are everything.  You can calculate the spread yourself.  If you take $100 and put it in the bank today in an FDIC insured account, what will you be paid as interest?  Odds are it will be around $1%.  Now, go to the official CPI sources over at www.bls.gov and see what inflation has been running:  Better than 4% on a trailing twelve Month (TTM) basis. 

This means that if you took the money out of the bank a year from now, you would have lost 3% of your purchasing power because the dollars have been watered down and you'd been a fool to save your Federal Reserve Notes (FeRN's) under such conditions.  And that, in a nutshell, is why we have elected to keep cash in our accounts, but only enough to take advantage of serious deals that would come along with any financial displacement (collapse).  Things like a new car, a tractor, anything that is a means of production at the personal level - that's what's on our shopping list - just like the tools we have acquired because they are at historically cheap levels.

BTW, I have asked my pal the Gold Trader to write up a weekly column - he's pondering a sort of weekly wrap up and eye of what's ahead.  If he goes for it, it might become a regular Monday morning feature.

Patriot Act  - Slowing

It looks like concerns over civil rights (remember them?) may slow down the Bush administration's plan to whip up support and pass an extension of the Act in rubber-stamp fashion.  We'll say it again - we've got plenty of laws in the US - what's needed is more good police work - so if someone wanted to really protect the country, they wouldn't come up with a cockamamie scheme to limit purchases of cold medicines to fight meth labs - they would prosecute the folks who brew up such chemicals from hell and do something about "revolving doors" at the courthouses across the country. But to stick such things in the "Patriot" Act?  Gimme a break.

Speaking of surveillance of people - the British press is making a big deal about about the potential of some new Microsoft software to be used for tracking. I have to admit mixed feelings: part of me says "I don't have anything to fear because I don't break laws..."  But the other part of me fears Napoleonic justice (guilty till proven otherwise) which seems to run square into the intent of the Constitution.

Rice on Saddam Trial

Claiming the world has "shirked its responsibility"  to help prosecute Saddam Hussein, SecState Rice is commenting on the lack of global cheerleading for the Iraq trial.  She's also saying that the elections this week will yield the most democratic government in the entire Middle East.  Wonder if they know the outcome in advance?

The problems of the elections continue including murder of Sunni candidates. Claims and denials of forged ballots.  Why maybe the SecState is right - the place is sounding more and more like a "democracy" - perhaps patterned after...ah...Florida?

Meanwhile, the probe of whether the US put detainees (read: prisoners) in Europe or overflew European airspace apparently has legs.  Good LA Times coverage.

Iran's Move Israel Remarks

We're watching the fallout from the remarks of Iran's leadership about Israel - and in particular the claimed that the holocaust was "invented" to justify putting the Jewish homeland in the Middle East. As we see it, the Iranian leaders are just inviting the much rumored Israeli attack on their nuclear facilities much sooner than March of next year.  If Iran really wants to open it's oil bourse in 2006, we have to wonder how many of the global players would show up to trade oil for Euros if the country gets embroiled in a military conflict?  Our guess is: none.

December 13, 2005

So?

Fed meeting.

For immediate release

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-1/4 percent.

Despite elevated energy prices and hurricane-related disruptions, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures.

The Committee judges that some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.

In a related action, the Board of Governors unanimously approved a 25-basis point increase in the discount rate to 5-1/4 percent.

Bye Al.  Hide the ink bottles. Paper, too, if you don't mind.  And say, if I was blowing up the monetary base by 7% annualized, I guess I would do away with that darned telltale M-3 index, too.

Fed Daze

The US Federal Reserve is meeting today and it seems like all eyes are on the Fed looking for some kind of indicator about how they will deal with the inflation issue.  At the heart of things, it looks like the Fed will have to raise their key rate a quarter point, because countries other than the US are demanding higher "rent" on funds they are buying in order to keep our spending spree going.

Also related to this is my friend the Gold Trader in L.A. who reports the hot rumor running around this morning is that the recent move in gold (it's still over $525 as I write this) has been driven by Russia.  The rumor is that Russia loaned central banks 377-tons of metal and now they want it back.  The problem is that China wants gold, too.  Remember, I told you last week that China was sending buyers to India to buy 24K flake and other gold at much higher than world "spot" prices and that gold was selling in rural China for what would be around $800 in US dollars.

Now, how do we play this one?  I don't.  Normally, when the Fed decision comes out, there's a short tick in the direction the market is going to go, a recovery to the price prior to the announcement so the big boyz can load up short or long, and then the real action gets underway.  I've seen it take a half hour or so to get rolling.  So in terms of watching the market today, I'd be looking for the little tick, a move back to neutral, and then a big move.  Not a recommendation, mind you, it's just sort of fun to watch the mechanics of the market at work. If you're not sitting in front of a level three terminal, winning it like trying to catch falling knives.

WTO WTF

The World Trade Organization is opening talks in Hong Kong with the usual protestations about how the group is nothing but an arm of corporate colonialism.  Blah, blah, blah...

The real story, as we understand it is that the WTO is getting nations to pledge their citizens to pay off country's national debt.  So in other words, you've been pledged as chattel (slave is more accurate) to the WTO members. Technically I suppose there's nothing but  the threat civil war stopping the US government from sending its citizens on demand to WTO creditor countries. 

Say, you don't think this all ties back to the tougher bankruptcy laws so you?  Remember this when we start seeing the gun control issue popping up next February/March.  It will start as handguns, but you know the agenda here...

The WTO - as we have explained many times - is where nations go to talk free trade but they never get around to the concept of purchasing power parity.  This concept is quite simple.  It says that if you're a machinist, you ought to be paid to live at the same standard of living as machinists in other countries.  If that means in Norway, you can work 26-hours a week and drive a Volvo and own a home, then in India, you ought to be able to drive a car and own a home, too.

The whole game, of course, is not to allow workers to make the same for similar kinds of work.  Why if that were the case, we wouldn't have seen the wholesale corporate job-jacking to the Third World.  Call technical support, lately?  You've more likely to get the Philippines or India than Indiana or North Carolina.

Thus, our simple maxim:  There is no FREE trade.  It's simply a workout of competing complex systems as corporations eat their young - and lately, they are trying to round up as many new victims...I mean WTO member countries - as they can to become the new fodder for corporate bottom lines.

Naturally, all good capitalists will tell you what a service they are doing by bringing a higher standard of living to the Third World.  But what they don't tell you is how in countries like Argentina, while one hand was giving out money to save them, the other hand was stealing national ownership of things like public utilities including power and water.  But such is the turmoil of the times and our lack of high integrity leaders.  Corporatists, having beaten the union movement into submission and having stolen many of their pension plans for good measure, can't afford it any other way, so deal with it. 

Say, should we go on to something else?  Does this level of awareness make you uncomfortable? Howzabout...

Racial Troubles in Oz

For a second night, there was racial trouble in Australia. This surge in gang violence was not unanticipated.  You'll note that last week I was prepping you for discussions of "gangs" this week by focusing our weekly www.peoplenomics.com report on "The Gangs in Your Future" which was posted for subscribers on Sunday (not entirely coincidentally, around the time the first skirmishes were occurring.

A number of Australian readers have offered up their ideas on what's going on:

"George…very, very doubtful if there is any ‘outside’ influence on the current trouble in my home town, Sydney. What happened was, about two weeks ago some load mouthed Muslim boys got into a fracas at Cronulla Beach with the Life Savers. In Australia, the Life Savers at the beach are the boss. If they say ‘don’t swim there’, you don’t; if they say,’you can’t do X on the beach’ you can’t. That is the social norm at Australian beaches, and has been followed by all for a 100 years The Life Savers were not in their little uniforms..words were exchanged..punch up followed. About a dozen Muslims onto 2 Life Savers.

This event follows years of very offensive behaviour at the beach (popular with Muslim families who come, by train, from their suburbs about twenty miles away). The Muslim youth are increasingly out of kilter with Australian social mores and norms. They are not popular, as a group. Even my own extended family, young and old all deeply left wing to a man and a woman, think that the Muslims ‘are the pits’. Many of the Muslim youth act in ways that the Australian mainstream find deeply offensive. As is to be expected, the social explosion occurred.

It is not a race matter, because Islam is not a race. Watts was a race riot. Cronulla is a social collision; a clash of mores. Doesn’t involve al Qaeda.

It is a struggle between Muslims who think they do not need to conform to local social mores and the long established Australians who say that they must conform. All other migrant groups in Australia do conform. 25% of australia’s population was born out of Australia. 5 million out of 20 million. Only the Muslims are causing waves. Australians are unhappy.

As expected, the Muslims do not know when to stop. Last night about 40 car loads of Muslim youth attacked a few suburbs and trashed cars a la Paris; no fires, though. Common sense will tell you how the general public is reacting to this behaviour by Muslim youth.

Australia has taken in just over 6 million migrants since WW2. Muslims are the only ones to cause trouble and fight their host population. If the voters were allowed to vote on it, 80% of Australians would vote to exclude Muslims from migrating to Australia. It won’t come to that, but that is real public sentiment on this matter."

The claim that "Muslims are the only ones.." sounds a bit pejorative, but that's a Sydney resident's view, and one to consider...

Tookie Dies

Overnight, likely while you were sleeping, Crips leader Stanley "Tookie" Williams was executed by lethal injection in California. There were a lot of pleas for his sentence to be stayed, but he did kill four people back in 1979.  All of his anti-gang work, while admirable, is probably no consolation to the family of his victims.

Texas Gerrymandering

Yes, the fine Texas game of move the political boundaries around in order to assure republican victories in the future is headed for the Supreme Court.  While it's a good show of process, when we have a court populated with Dick Cheney's duck hunting buddy and the the same folks that have abused eminent domain in the interest of corporate profits, we don't hold much hope that the court will do anything more than rubber stamp the republican agenda on this one.

Maybe It Wasn't "Latitude"

A reader on the outskirts of London who lives near the Hemel Hempstead petroleum storage facility that has been going up in smoke since Sunday morning has been following the web bot predictions, and was especially interested in the web bot's phraseology  around 30 degrees "latitude"...

"Just a wild thought: I live about 20 miles from the Hemel Oil blasts. I heard the initial blast, and could see the smoke, although it was moving south, and I live north east. The temperature at the time would have been around 30 degrees Fahrenheit, even if it is not 30 degrees latitude. My uncle lives in Hemel Hempstead, and I rang him as soon as I heard on the news where it was, and he seemed OK, but he rang later and said it smelled awful.

Hmmm...have to admit I hadn't thought of that.  But for us, the key thing is that we've been expecting some kind of energy storage yard explosion/fire since before the October 29th ALTA posting and sure enough, we got it in spades.  By the way, fire fighters are making good progress on getting the darned fire put out.

Geysers Before Quakes

I can't tell you how many people sent me a link to the reports out of Oklahoma that geysers orf water and gas were gushing up around Kingfisher.

Now, in case you're completely brain dead (or just totally spent from Christmas shopping madness) here's the thesis around here:  Before a major series of earthquakes, we get reports of odd smells popping up.  We had them in the month preceding the Pakistan Quake October 8th and they were a kind of worldwide event.  Had bad smells reported in Europe and the USA.

So, with the geysers being reported in Oklahoma, we are not surprised by the number of  magnitude 6+ earthquakes that have started popping off.  Hindu Kush yesterday and Fiji got a 6.6 today.  Get it?  Land movement releases pressures, land slips, quakes are the result.

Monday, Dec 12, 2005

Standing By for an Event

With the explosions and continuing fire at the British petroleum depot, (see our Sunday coverage)some frightening prospects are coming to mind about the web bot "hot date" of December 14 (late) shading into the 15th.  As one reader noticed, the price of gold seems to be headed toward the moon, her ears are ringing, and the Global Consciousness Project (go to the Princeton site and click ""realtime display") has been ringing a large number of "gongs".

Oil and Terror?

Although British officials have been denying the possibility of terror - and dismissing reports of a low-flying plane in the vicinity of the tanks literally within minutes, the timing of the explosion and fire is almost too coincidental with an al Qaida call 4-days ago for al Qaida operatives to strike oil infrastructure.  The Vancouver Sun's coverage is good. 

Something you might brace yourself for - at least something which would not be out of the realm of possibilities - would be the forward looking web bot project output which curiously was quick specific about latitude:

Within the 'fire' aspect, its supporting aspect/attribute set goes to the idea of 'sun fire {at the} 30/thirty latitude attaches to fuel source, direct and indirect burn alters ground/earth'.

We make Hemel Hempstead as 51.75 N by 0.728 W (or thereabouts).  So if by Thursday night, we saw a major oil/energy attack on the West much closer to 30 N, we would not be surprised.  As we have mentioned before when looking at the output of the data mining project, this kind of latitude would first enter the US at about El Paso and extend across the southern part of the US down in the oil and gas areas of Texas and Louisiana. For this reason (and driven a bit by the incredible prices for natural gas lately) something as ghastly as an attack on natural gas infrastructure before Thursday night is one of our worse fears. 

Still, we can only hope that Homeland Security is all over this.

Gold

The other big story of the morning is what the precious metals are doing in the preopen.  You'll see that gold has been up as high as $541 and silver has touched $9.26 making our July discussion of why Elaine and I were buying silver one of the best ever investment decisions. I ran out our annual rate of return since we bought gold in 2001 right after 9/11 when we got the picture of how future developments might work out.  Since that time, I'm pleased to report that with today's trading, the price has more than doubled and our annual rate of return is somewhere north of 18.5% compounded annually.  Not bad, I reckon, and if you've parallel traded my personal holdings I expect you'll have a Merry Christmas, too.

The question on everyone's mind this morning seems to be "Is gold going up because of terrorism fears, or is there something else driving it?"  A damn fine question.  My other reader sent along a curious analysis from a friend which deserves some consideration:

i"'ve been thinking about your gold question a little more. besides what i stated earlier, there seems to be one other factor that the american media is ignoring/understating. and as soon as i mention it to you, you'll most likely understand the implications.

just take a look at the japanese yen chart. and with that notice that the most consistent strength in gold on a 24 hour basis for that last two months has been on the TOCOM exchange in japan. i think the japanese are very concerned with what is happening in the world economy as seen from their eyes, through the eyes of what the yen is telling them. it seems like every dip in gold has been bought the most by the japanese. they are WORRIED!

the funds and analysts that continue to call for a top/correction in gold do not understand this perspective. hence, until the japanese reach a level where they tone down their buying, gold will continue to make new highs on ever increasing open interest, etc...."

The most conspiracy-minded of readers might put it together this way:  Gold is moving up because something more is likely to happen, and while their are American trading partners who see the cracks beginning in the paper foundation of America's financial empire, it's necessary to have some proximate cause to blame, such as al Qaida, in order to give the existing wealth holders (the super rich) the best possible chance of surviving an economic meltdown with their fortunes intact.  But, we don't buy into such thinking, however appealing and logical it might appear.  We just watch and make moves as events move us.

Event Drivers: Fed and Iraq Elections

Usually, we don't see such a clustering of major news events this close to Christmas.  Generally, buy now (poor pun, sorry) we would be seeing a bit of exuberance creep in and the market firming.  Yet that isn't on the horizon yet.  And although the market is a tad above year ago levels today, to borrow an industry phrase "past performance is not guarantee of future returns."  No kidding.

Specifically, looking at the Fed Meeting, our friends at BullNotBull send this along:

Hi George,

With the Fed meeting coming up on Tuesday, I put together my thoughts on where the market may be headed. Greenspan is on the way out, and wants to preserve his legacy, and the good memories of the glory years of the mid-90's, when the dollar was strong and the market was rockin'! My best guess for the market on Tuesday - Inflation be damned - party like its 1999!

http://www.bullnotbull.com/archive/market-12132005.htm

Also, got a lot of great memories, comments & insights on those gold charts I published last week. Really worth the time to read through:

http://www.bullnotbull.com/archive/gold-comments-1.html 

Thanks George! Take care & good luck for a good week!

News Driver #2 is what happens with the elections in Iraq. Early voting is now underway.  Of course, it's a foregone conclusion what will happen.  Such is the nature of wired elections, huh?

Shades of France in Oz

We're not picking up too much on mainstream media, but in Sydney, there was an outbreak of racial/religious violence this weekend that left about 30-people injured and sounds to us like an Australian mini-version of the recent rioting in France.  Here's the question: Is any of this tied in with/orchestrated by al Qaida elements?  Not much about that angle, but think about it for a minute.  If you were in a "war with the infidels" and "crusaders" wouldn't you be trying to foment radial strike while attacking high value economic targets?  Just seems coincidental and you know what I think about coincidences.

I mention this because (coincidentally?)  French authorities raided homes and internet cafes this morning to round up 22 people suspected of planning terror attacks.

Quake and Roll

Big quake in New Guinea this morning, but no injuries reported.  Remember, earth changes, including another tsunami are linguistically in the outlook for this period.  Might be an echo of the tsunami event last year, but given the nature of the software filtering, it's not likely.  More quakes to come, in our "waiting for it" department.

Beef to Japan

We see that the Japanese government may soon allow the import of US beef again.  As you might recall, the Japanese halted beef imports from the US after a single case of mad cow disease was found.  Interestingly, the prion caused disease was only found in one animal in the US while something like 21 were discovered by the Japanese.  The difference?  The Japanese have a 100% inspection program.  The US Department of Agriculture's program is hit-and-miss.  Don't look, don't find, I guess.

Speaking of which:  If you want great Kobe beef in Texas, we have a local spot that features Wagyu cattle.  I think Panama found a steak and eggs breakfast with the high end beef.  I want to say it was around $60...

Israel at the Ready

When we read reports that Israel has ordered units to be ready to strike at Iran in March of 2006, we take such things with a grain of salt.  Israel has what is arguably one of the world's finest military operations.  Getting read to strike at Iran would likely be something that could be done on five-minutes notice.  Open contingency plan 207 and go...

Gambling

My buddy the gold trader (from Refco or whatever it is) went to Mainstream Station in Las Vegas this weekend. He turned a $20 into $300 at Shark Frenzy - a video game.  You'd think that being up $8K on dollar shorts and up $4k on precious metals longs, he wouldn't need to drive 250 miles to keep the buzz on during the weekend.  But you know how these Type A traders are...

Around Here

It was a modestly productive weekend.  Got some more framing up on the side of the shop, did some welding and fixed the muffler on the standby diesel generator.  Had my Bailey's French Toast for breakfast on Sunday and we went on a delightful walk through our park-like woods last night.  I'm slowly coming to the idea that I might need a tractor in order to whack down the southwest corner of the property.  We're thinking that for now, the best use of the land might be as a tree farm, and we will be scheduling a chat with the Texas Department of Forestry to learn more about such things. 

Sunday, Dec. 11, 2005

British Explosions: Web Bot Hit

First reports out this morning indicate that the massive series of explosions at an oil storage depot near London was not the work of terrorists.    It's fairly close to the Dec. 14th web bot "hot date" and although there's reportedly no impact on aviation yet, we have to wonder is other such events might be in our future.  So, we've got a close watch on this one. For now, however, this seems passably close to the web bot ALTA 106-2 data series posted for www.halfpasthuman.com subscribers on October 29, 2005:

"Terra - Transformation Through Brief Fire"

 

"Coincident with, or rather temporally close to the December 3rd through 14th period which begins the emotional release period downward slide, we have a few Terra lexical sets which are headed by the aspect of 'transformation'. To further illustrate, the set, with its primary attribute group goes to the image of 'earth transformed through fire'. Within the 'fire' aspect, its supporting aspect/attribute set goes to the idea of 'sun fire {at the} 30/thirty latitude attaches to fuel source, direct and indirect burn alters ground/earth'. Further down in the supporting set we note that this incident of 'alteration of the landscape by fire' is also supported with 'light {from the} fire radiates over the mountain' and ' a long line is locked up, bereft of use'. This and other references to 'long straight sighting' and 'far distant healthy rumbling, dead silent' give rise to the idea of a fire that affects a large pipeline of some very volatile fuel. The 'transforming of the ground' from this fire is supported by lexical sets which go to the idea of a 'brief fire', but one whose intensity is seen as 'melting houses', and 'burning channels' in the earth."

(posted with exclusive permission from www.halfpasthuman.com )

OK, close enough for us.

Climate: Hot Death

Echoing our concerns that the world's governments are doing a fine job of talking about climate change without substantial reform of policies, Australia's Environment Minister says the world could be in for a "hot death" if more isn't done faster.

Poland Probe Prisons

Despite lobbying by the US, it looks like Poland will have another look at allegations that the CIA or other US agencies used prisons in that country to torture people suspected of knowing about terrorist operations.

Israel: No Strikes for Now

Israel's government says it is not planning to take military action against Iran, despite suggestions that the country was planning just such operations.  Meantime, Iran says it's shocked by world reaction to their suggestions that Israel be moved to Europe.

News from Elliott Wave International

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George Ure, The People's Economist