Replaying 1929: Business, Financial, and earth change news

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Ben, Hank, and Super Glue: IndyMac Fails

Looks like the failure of IndyMac Bank - the second largest US bank failure in history, fulfills the linguistic expectation of a major bankruptcy this summer.  OK, the 'release period' July 3-8 was a disappointment - although the release of Ingrid Betancourt was noticeable.  The 'big earthquake' didn't appear in the release period, but that's still on for the western US between now and September 21/fall equinox.  But the 'big stuff' will likely come later in the year from October 7 (or thereabouts) on and in mid December with another quake around then. And a market collapse into 2009 - at least linguistically.

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Not that the IndyMac seizure is the biggest story of the week - there's a lot more going on, including $147+ oil.  While George Bush is asking for quick action on expanded drilling in the Alaska Wildlife Refuge, the Russians are gearing up to grab what they can in the Arctic.

 

The Dow lost 128 points on Friday, after earlier in the session weakly dropping below Robin Landry's line-in-the-sand at 10,984 before rallying back to a less grim close.  The ending at 11,100.54 compares with the week ago close of 11,288.53, although that's only 188 points, and on a percentage basis, the real damage to your retirement account was done earlier in the year, anyway.

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The BIG story that came out after the close (at least I didn't hear about it during trading) was that federal regulators have shut down mortgage lender IndyMac.; and the Office of Thrift Supervision has stepped in along with the FDIC to try and keep depositors near whole.

 

Earlier in the day's session, there had been rumors that the Fed was going to allow Fannie and Freddie to amble up to the Fed's discount window and borrow freely.  Which, of course, they denied  although it sure sounds like a rumor/denial move to help in 'maintaining financial stability' regardless of the issue we've pointed out here - Isn't this price fixing/ rigging markets?

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When you look at the facts, however, there may be some good news for the hard-hit 401(k) holder in all this.  Robin Landry noted late Friday that his short-term indicators have turned positive, and barring another round of mortgage market meltdown mania, we might now be set up for a decent rally next week, which could get us into a late summer bounce several hundred points (or more) higher than here.

 

It will all boil down to the matter of the weekend meetings which are almost certainly going on this weekend between various regulator-types and the Freddie and Fannie management.  I doubt many of the upper echelon there will be out on the golf course this weekend.

 

The best outcome would be a replay of the Bear Stearns situation.  What that would imply would be a lot of hard work over the weekend, and then a "surprise" announcement on Monday that an answer to the crisis is at hand, and then a fine rally of the markets next week.

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Underlying all this is the issue of whether the GSE's in question are solvent, or not.  Although former St. Louis Fed President William Poole is repeating the mainstream mantra about to big to fail, earlier in the week he was reportedly questioning their solvency.

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The way I've got it figured, if we don't get the "surprise" on Monday with a report that the financial super glue has been found and it's dried the requisite 10-seconds to hold things together for another month or three, the market could easily drop another 500 points.  Surprise in the works?  (Bear with us)  I'd almost bet on it. 

 

Is the present situation being used by the Fed and Treasury to expand and enhance their power-grab to remove independent regulator agencies from their grandiose "financial stability at all costs" direction?  Headlines like "Will Bernanke doom the SEC" are floating about, so at least I'm not the only one raising the issue.

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America, former the Land of the Free, is presently America, the Land of the Indebted.  And we're exporting that as best we can: Don't know if you've heard, but some big American companies have set up Big Business in the Green Zone in Iraq where they sell everything from cars on down to load debts onto our troops, a practice that I'd have to file under predatory retailing.

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The headline today that the "Fed to Bar Loan Penalties that Deter Refinancing, Person Says" goes to the idea that the Fed and Treasury are not looking at the problem from the Main Street perspective yet.  Instead of ending the underlying practice of selling people larger and more expensive homes than they can afford, the banksters are just trying to do their damnedest to make they are kept whole. 

 

Record foreclosure rate?  Oh well...  Ure's Axio9m?

"You're not to big to fail.  Only Banks are.  You lose."

Well, you're only one voter, anyway.  Banks give more money to CONgress than almost anyone, although the battle for 1st place with real estate interests, pharmaceutical companies and such is close and played out constantly by the 'K Street" gang & lobbyists.

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The Senate has passed a Home Loan Aid Bill, but let me see.  The program is voluntary and no one is talking about what happened to the provisions buried in the earlier versions of the bill that required reporting to the feds of virtually all personal financial financial transactions, such as your bankcard dealings, which we have to assume is because the press for digidollars is still on full steam ahead. 

 

Which in turn likely means...

 

Housing crisis, or not, the same tired solution is is in play - a devaluation of the dollar.  With pennies now worth more than its face value, the Cape May Herald reports "Farewell to the Penny" is likely just ahead.

 

What no one in the MainStreamMedia as the fortitude to report is that our currency has been systematically stripped of its purchasing power through a deliberate inflation policy, which has forced a couple of generations into the belief (based on economic fact) that the only way to really get ahead in inflationary times was to borrow and use leverage to maintain (or even build) personal wealth.  Instead, we get "strong dollar policy" coverage in its stead.

 

What no one bothered to say is that periodically, reduced inflation and a lack of a vital new industry of some sort, forces the economy into contraction.  We'd already be in a formal recession, except that the money-printers are going at it fast enough to make it appear that we're not in a recession. 

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Yes, we're the world leaders in financial products, but is manufacturing bundled debt a sustainable business model for a country?  LOL.  Tell me about the Weimar Republic, or more recently, Zimbabwe?  Just think how their 355,000 percent inflation would bail out the home values here, huh? 

 

Example:  If we 'go Zimbabwe', our little spread in East Texas would be worth...uh... $5.3 billion. "Course a gallon of gas would be $14,200, but who cares as long as the bank balance sheets don't go negative?  It's always the sheets for consumers, right?

 

This weekend, be scanning the television and sniff the air carefully.  I'm pretty sure you'll catch the occasional whiff of super glue.  A surprise in the pro-open hours of Monday and a barn burner rally would be just dandy.  Got change for a $200,000 bill?

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The report this week in the CSM about a "New Worker Perk: Help Buying a Home" pushes us ever so much closure to corporate feudalism.  "I owe my soul to the company store" said Tennessee Ernie Ford in the song "16 tons."  "Wipe that look off your face, corpserf!"

 

Near Miss 2

Sounds like 'roll the dice' flying into JFK this week - as a second near-miss/ almost midair collision has been reported.

 

Techie Troubles

I'd give the headline an 'A' for creativity:  "iPocalypse?  Snag turns iPhones into 'Bricks'.  Creativity! 

 

Tech Troubles, II

A computer has been human experts at poker.  So, what does a computer do with more chips, I wonder?

 

The Runs: The Non-Runner

The headline "Lieberman dismisses GOP Veep Speculation" prompts a cynical thought:  Who asked?

 

They Have a Dream?

"Civil rights leader's children battle each other over estates" says The Smoking Gun.

 

Pet Food

"Beijing takes dog of off the menu for Olympics."  So, how's the stir-fried rat today?

 

Passings:

"Greatest Surgeon of the 20th Century dies".

 

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Coping:  Balancing Checkbooks

A reader joked in passing this morning in an email that she enjoyed this site, but still had trouble balancing her checkbook.  "You do what?" I wondered?  Free advice followed:

"Say, on this checkbook matter, I used to spend hours and hours getting everything right to the gnat’s (pardon this) *ss every month.

But it ate time, and there was no real reason for it.

I figured, why should I go through all the pain and aggravation, right?

So I put a couple of hundred extra dollars in the checking account, and figured “to hell with it.”

About twice a week (or before I buy something big) I just look at my online balance – which you have to do weekly anyway to make sure you aren’t being screwed on charges -  and that’s it. The bank keeps the balance, and as long as the check amounts match, I figure I’m golden.

So what do I do for my business accounting?

About once every six months or so, I download the whole check registry into QuickBooks, put in notes – so I can allocate the income or expense to my various classes (accountingese for a group – like my farm-related, my web site related, my consulting client 1, consulting client 2, etc) and that’s it.

I got better things to do than go through all the hassle of finding a missing penny or two. In fact, in many banks and financial institutions, they don’t even care to balance to the penny – the time isn’t worth it. Close to a nickel or dime- paying someone (by the time you count everything) $13 an hour to chase a penny is nuts, yah? How many minutes does it take before the return on time spent becomes a negative value?

So, thanks for bringing it up – I will be sure and include the in this morning’s report in the ‘snip and save’ section – because while it may be rewarding to balance to the penny every time, I got a lot more important things than chasing pennies around on my LOSTD (list of stuff to do, LOL).

Which reminds me - today's report is short & to the point - so I can go mow the yard, unload a pickup full of glass for the greenhouse before it gets too hot..99 in today's forecast here...so check in Monday morning...

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send snip and save items to george@ure.net

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Around the Ranch: 5-Watt Miracle

Not that you care about the Morse Preservation Society's Summer Sprint series, if you're not a ham radio operator, but there's a tremendous amount of  personal satisfaction in challenging yourself if you're a ham to see how really good / efficient you can be.

 

So in three hours of operating in the contest last night, I managed to have contact with four different countries.

 

"What's so special about that?" you're wondering.  US and Canada are 'givens'.

 

Well, I did it with 5-watts of transmitter output.  To give you an idea of how little power that is, think of it in terms of one Christmas tree light (big one, not small) or a multi-cell MagLite flashlight and being able to get a conversation going far away with that kind of power is sport..

 

People with CB radios like to work 'skip' and brag about making across the country on 5-watts, but hams invented that art.  And with five watts a good operator with decent conditions can do very well.  Last night's contest was far from good conditions - the band was noisy, still...

 

The two contacts I'm most proud of at EU1DR (Minsk City region of Belarus) andYN4SU in Nicaragua.

 

Not bad for a flashlight's worth of power, huh? Amazing what Morse code can still do.  I mean besides being faster than texting, as was demonstrated on a Jay Leno show in 2006 LOL.

 

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"Live on $10,000" Updated

There's now a single-page website devoted to my little ebook "How to Live on $10,000 a year (or less) at www.liveontenthousand.com.  Yep - still possible.  I also took a bit of additional material that was pertinent from recent issues of Peoplenomics and included them.  The whole thing runs about 65 pages, but it gives you a vision of how to not only live on the aforementioned dollar amount, but also how to migrate up the economic foodchain if you make a little more than that and do some active savings...  Click here for the page with more details on it.

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

 

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Friday July 11, 2008

Special Update

' Line in the Sand' Breached By Dow 

The Dow has just had a momentary breach of Robin Landry's 'line in the sand at 10,984.  You can watch the chart through the day over at Yahoo Finance.  But, the bottom line is that if the penetration continues very long, then it sets up Landry's next targets: 10,700 and then a goal line fight at 10,000 and 9,700 before a trip to 7,400 shows up.  The breach was only momentary, but we will watch to see if 10,984 can be defended through the close.  I wouldn't bet on it.

 

Hegel Would Be Proud

Before we launch in to the delayed Balance of Trade report out this morning, there's something much larger to worry about - and I think you'll agree after reading that it's something which should be a huge concern to every American.

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If you are trying to figure out what has been going on this week, what with the market tanking, and then the Paulson & Bernanke Show on Capitol Hill this week, a short read of the influence of Georg Wilhelm Friedrich Hegel's life and works may prove instructive. His most famous contribution to the 'art of thinking' was to popularize the Hegelian Dialectic.  Although the Wikipedia entry notes that "This article may be too technical for a general audience", the fact that you're reading this site has already separated you from the sheep, so fear not.  You can handle it.

 

What's the point?   First, "The Hegelian dialectic means simply 'thesis, antithesis, and synthesis'; propose an answer, it's opposite, and combine for a better answer - that's the theory of it.  The second part of the axiom is that in public "People don't generally ask questions that they don't already have an answer for..."

 

Now let's apply this to the markets in trouble: "Oh what are we to do?" (thesis). And, "More control by the Fed and Treasury is needed" (antithesis), the answer presented in this morning's headlines is that "Fannie, Freddie are too big to fail, lawmakers say".

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It seems like only a few minutes ago (although it was years), that conservatives came to Washington promising to restore free market capitalism.  But since arriving, besides setting off record spending on defense, moving our sons and daughters into other people's countries, and reaping the resulting sky-high prices for their pals in the Oil Patch and cronies in the Defense Industries, there's been growing mass-marketing of the concept "Too Big To Fail" meme.

 

The Constitutionally impaired seem to have forgotten that laissez-faire capitalism means (pick your favorite here) 'let alone', 'let pass', or my favorite: 'hands off" - Just let the markets do what they will.  Interventionist/regulated market supporters seem well-intended at the start of interventions, but it's like pregnancy.  A little time goes by before you figure out how seriously you were screwed.

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The Federal Reserve has dropped any pretense of supporting 'free markets' (the honest capitalist thing to do) and is instead off promoting "financial stability'.  Knowing, of course, full well, that with your 401(k) account taking year-to-date that you'll wrap your arms around their "solution" which (look surprised here) is more power for them.

 

Bad companies?  Greedy managers?  Crooked deals?  Wink, wink, nod, nod.  It's OK - they're too big to fail - and you'll back them up if they whack your 401(k) then bait and switch you into surrendering your liberty along with your money.

 

Quite a script for a revolution by those in power, huh?

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We can thank Columbus for making the Western World big, and blame Boeing and Intel & Cisco for making it small again.  As it has shrunk, and the body count of inhabitants gone up -- thank the Green Revolution for the overpopulation issues of today -- humans have been confronted by trans-national problems. 

 

The price of oil today as gone back to near $146.  OPEC is stomping its feet and warning that the oil weapon will be used if the West picks a fight with Iran.  Trans-national problems are our addiction that holds us hostage.  To Iran for oil, to Afghanistan for smack. And then to India and China for most everything else.

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The somewhat direct control of government set out by the Framers in the Constitution is being systematically taken apart. A revolution, if you will.  I'm still wondering if that's a good thing, or bad, so I sit here in the outback of Eat Texas looking at the problem this way and that.

 

But the evidence of that a bureaucratic coup d'état is well underway continues to mount. Is this one side of the 'revolution' meme that keeps popping into predictive linguistic modelspace?

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I think it started in the 1960's really, and even before that, when the notion of 'administrative law' came into full bloom.  That set a cornerstone which acted as a foundational element.

 

Fast forward to present times and 'administrative law' set the dangerous precedent that was seized upon and expanded into "Executive Orders" - an extra-Constitutional concept that says the Executive Branch can blow off the Legislative and Judicial branches of the three-legged concept of checks and balances almost any time it wants, by declaring a 'national emergency'.

 

The growth of Executive Orders has been unchecked, and you'll note that in the Paulson remarks, there was reference to Executive Order as a reason to consolidate power. 

"In addition to these longer term restructuring plans, Paulson also spoke about near-term steps that need to be taken, including, “formalizing the current informal coordination among U.S. Financial regulators by amending and enhancing the Executive Order which created the President's Working Group on Financial Markets and, while retaining state- level regulation of mortgage origination practices, creating a new federal-level commission, the Mortgage Origination Commission to establish minimum standard for, among other things,, personal conduct and disciplinary history, minimum educational requirements, testing criteria and procedures, and appropriate licensing revocation standards.”

On the one hand, failure of bankrupt institutions probably would cause financial disruption, true that.  But, on the other, the very notion that some companies are too big to fail means a person would be a damn fool to invest in anything that didn't line up for one of these 'free pass' government guarantee programs.

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But it gets better - doesn't it always?

 

No doubt noticing that the President has managed to  either 'become a more effective leader' or has simply thrown out the Constitutional protections (and we thank heavens habeas corpus is back), governors are not lining up to use 'executive orders'.

 

In Massachusetts, for example "Governor Patrick signs 'New Americans' Executive order". Or, how about this one out of Pennsylvania?  "Governor Rendell Issues Executive Order regarding Pennsylvania Health Care Cost Containment Council"  How about this one?  In Maryland Governor

"O'Malley signed an executive order yesterday to establish a statewide communications system that will allow law enforcement and public safety personnel from different state, county and municipal agencies to use one emergency radio system. Incompatible radios from different city and county emergency responders hampered rescue attempts after the 9/11 attacks, and creating a uniform system has been a major focus of homeland security efforts ever since."

New York Governor David Patterson signed an Executive Order last month 'creating more opportunities for minority and women owned businesses."

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Are you starting to catch what a software developer would call a 'design pattern' here? 

 

Supporters of the executive power grab suggest that Article II, Section 1 of the Constitution is the basis for presidential Executive Orders.  However, let's read the Constitution in the clear light of morning with a fresh cup of coffee, shall we?  Click to Article II, Section 3 of the Constitution where I have highlighted the justification given for 'Executive Orders' in bold in the Presidential powers section:

"Measures as he shall judge necessary and expedient; he may, on extraordinary Occasions, convene both Houses, or either of them, and in Case of Disagreement between them, with Respect to the Time of Adjournment, he may adjourn them to such Time as he shall think proper; he shall receive Ambassadors and other public Ministers; he shall take Care that the Laws be faithfully executed, and shall Commission all the Officers of the United States."

Now, I don't know about you, but I don't see anything there that says the President gets to make up his own laws as he goes along.  THAT power rests with Congress.  nevertheless, those who support the continuous expansion of executive powers point to that simple directive to ensure that "Laws be faithfully executed" and have spun up a whole Second Government around it.

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So the design pattern is what?  Take one set of laws - those enacted directly by representatives of The People and subjugate them to the made up laws that are administrative laws or executive orders.

 

"Aw, come on George, you're way off base on this one..." 

 

Am I?  Go ask people who had their homes invaded and legally owned guns swept up by private security forces during Katrina/Rita, or those subjected to government overstepping in more recent events.

 

The design pattern of this revolution is simple:  Use extraordinary circumstances, or items that are common sense, and declare the use of the 'new powers'.  First thing you know, there's a history of their use.  Which in law, embeds them into the legal doctrine of the country.

 

Laissez faire capitalism?  Not in America, not any more.  Not with headlines like "U.S. Weighs Takeover of Two Mortgage Giants." Things have gotten too big to fail because we're all afraid to face the natural fallout of excessive greed and clouded judgment.

 

The dictatorship of the PowersThatBe is here.  Next stop: One World Government, and as www.spp.gov shows, that's just a few more Executive Orders away.  Make up a crisis and people will welcome dictatorship, especially if it promises to save your 401(k). 

 

Hegel would be proud.  Washington, Franklin, Hancock, and the rest?  Disgraced.  But they aren't part of the crowd down on Wall Street that's running this coup.  They're not around to make campaign contributions and get their boys appointed to run things.

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"Bush signs new rules on government wiretapping"  Quick, look surprised.  More in the 'snip & save section' below...

 

Imbalance of Trade

Latest from the Census Bureau was accompanied by the dollar dropping to 0.63 Euro and a nearly $15 spike in gold.  Gee, why do you think that might be?  Let's read and find out...

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total May exports of $157.5 billion and imports of $217.3 billion resulted in a goods and services deficit of $59.8 billion, down from $60.5 billion in April, revised. May exports were $1.4 billion more than April exports of $156.2 billion. May imports were $0.7 billion more than April imports of $216.7 billion.

 

In May, the goods deficit decreased $0.5 billion from April to $72.5 billion, and the services surplus increased $0.2 billion to $12.7 billion. Exports of goods increased $0.8 billion to $110.8 billion, and imports of goods increased $0.3 billion to $183.3 billion. Exports of services increased $0.6 billion to $46.7 billion, and imports of services increased $0.4 billion to $34.0 billion.

 

In May, the goods and services deficit increased $0.4 billion from May 2007. Exports were up $23.9 billion, or 17.8 percent, and imports were up $24.2 billion, or 12.5 percent.

The silver lining to the weak dollar is more exports perhaps.  In a land where folks are being foreclosed on, government is reaching further into our lives and such, this seems like a scant silver lining, but any port in a storm, eh?

 

Not an Accident?

Remember in yesterday's column I wondered whether Jesse Jackson's comments about Obama were 'accidental' or part of what astroecon guy Bob Hitt might call an emotional letting off steam move (so the emotional pressure wouldn't bleed into the markets)?  Well, two things to check out this morning.  1) NY Post's Charles Hurt doesn't think it was accidental and 2) the market rallied yesterday some 81 points.  Connected?  You're welcome to guess...

 

FCC Gets it Right!

Hallelujah!  "FCC Chief says Comcast violate Internet rules: FCC Chairman to recommend sanctions against Comcast for blocking internet traffic."

 

Run-Up to War: Practice Runs

Headline out of the J-Post this morning:  "Israeli warplanes practice in Iraq".

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that multiple missile picture that made the rounds this week was apparently 'PhotoShop'ed.

 

Fire Help

California is asking for Federal Troops to battle fires.  Out of Iraq and 'stan into fire fighting for rotated troops?  Say, that's kinda rotation...

 

Gangstah Island

Remember the old song lyrics "26-miles across the sea, Santa Catalina is a waiting for me"? Gangstah island now, bro  So much for moats working, huh?

 

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Coping: It's all about Freedom

The online edition of ABC Nightline is worth watching - it's about how the NSA/government wiretapping became public. 

 

Bond Entry Timing Mark?

"Monetarists warn of crunch across Atlantic economies"

 

Rob Checks In

Rob?  Who's Rob?  Oh, he's the guy that developed the Indiana Jones Index.  Just sent in this:

Just took a look at 'shortage' 39,442. Food riot & food shortage are about the same as they have been for some time.

I'm on Maui today, been here since yesterday. Oh wow, $10 for a gallon of milk and $4 for a loaf of cheap bread but no shortages <g>.

We'll be right over...warm up the Gulfstream, would yah?

 

Greenhouse Designs

Coming in from all over:

I know you have materials collected already, but I thought you should see this. This is 3/4 poly-pipe over 5/8 rebar. PVC will react with poly greenhouse film. This also is classed as a temporary structure, so it can't be taxed! I've made step by step pics. This is 40x17.

I have double layer poly inflated with a small squirrel cage fan, which gives good insulation."

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Thursday July 10, 2008

Do or Die Thursday

After the Dow closed down more than 236 points Wednesday, I called broker/friend Robin Landry (email: rlandry@allegiance.tv ) to see what his thought were.  Mine had already gone in a decidedly negative direction when it occurred to me that 164 points down from the Wednesday close and we might get into "free fall' territory.  Remember that today: down 164 on the Dow and the woes begin.

 

So, how does Landry view it?

"With this recent decline testing the lows again, it increases the possibility that the current decline is extending. Consequently, we may be in 'crash mode'.

 

I have been expecting a rally from somewhere in this area to complete at least a small '4 up' (in Elliott) but the rally Tuesday being completely retraced Wednesday leads me to believe that the odds of a 'crash' are growing.

 

My line in the sand is still the 10,984 level.  However, the action on Wednesday begins to really put the likelihood of that 10,984 holding and not being violated at less than 10% - which thus raises my concern and the alarm bells.

 

In a market when the buy signals continuously fail, it indicates the Bear Market is continuing its downward course., which is what we have now."

So, with this sobering 10% odds of holding popping into view, the obvious next questions is, "If we penetrate your 10,984 level in a meaningful way (a day or so) then how far is "down"?

"Well, if we break that, really the next support is approximately 10,700.  And depending on how the indicators are looking at that time, we should get a rally.  however, if the indicator that I use have set a new low by then, there is no more support until 10,000."

OK, what happens if Dow 10,000 is broached?

"If 10,000 fails your last line in the sand is the low of 2004, which was at 9,700."

And after that?

"7,400."

 

"I suspect that if the 10,700 breaks, there will be a rush for the doors so fast that the market will go straight to 7,400.  Then I think we will see a rally of at least a thousand points.  However, if it's from 7,400, it won't be much consolation if you rode the market down.

 

The indicators that I look at, and some of the reports I get from other services are telling me that the market is more oversold now than it has been since the lows in 2002.  Some of the indicators are at lows oversold that have never been seen before.

 

It appears to me that we are in area that what normally works in giving good signals are breaking down.

 

That is what I have often referred to as the investors view changing from the 'glass is half full to now 'half empty'.  

 

Once that happens, and people really pull in their horns even more, it's like a snowball rolling down the mountain and gather more snow as it rolls.  The further down it rolls, the bigger it gets, and the lower the odds of anything stopping it until it reaches the bottom.

 

It appears to me we are now at that place.  And the old saying, it's always darkest before dawn, is where we're at, but how far down is  the end of the tunnel before the light shows? 

Do I think we will get 7,400 in a down Thursday, down Friday, Crash Monday, Bounce Tuesday kind of thing?  I sure hope not - I would never wish further erosion of your life savings on anyone - but 10,700 and a hell of a rally starting Tuesday might make technical sense. 

 

Chief time monk Cliff at HalfPastHuman doesn't see the kind of emotional impact and carry values that would likely accompany a Dow 7,400 till fall.  It's that kind of level that comes along in the market destruction which seems to be painted for October of this year and through the winter of 2008/2009. 

 

As far as what that may be like think about this: Emotionally, just as we had about six days of gut wrenching emotions/charged humans in the wake of 9/11, whatever is coming this fall looks like 3-4 months of that kind of emotional 'release'.  So, we might as well start wrapping our heads around that possibility now so as not to be shocked into inaction by the enormity of what's coming.

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Stocks seemed to be headed for a higher open but the real issue is likely to be later in the session where the question "Is this anything but a 'dead cat bounce' open will be definitively answered.

 

One Less Pressure, Ben

The Bank of England this morning left their key interest rate unchanged at 5%.  Seems like everyone is using the phrase "between a rock and a hard place" lately. No, not just because it's a kick-ass Rolling Stones song...bad guess.   Extra homework for you.

 

Bye-Bye Steaks?

A new type of CJD has been discovered in the US.  A couple of days later than the predictive linguistics would have placed it, but this looks like it could get some linguistic 'fills' on linguistics not met in the forecast we were allowed to share last week.  (click here and scroll down to the July 3rd post). 

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This weekend we should get the first posting from the latest predictive linguistics run.  I should mention it is $240 for first-timers and then $70 per run thereafter...

 

The Runs:  Are They Nuts?

Headline says it all: "Jesse Jackson says he wants to cut Obama's 'Nuts Out'.  Play nice, please..

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Remember Bob Hitt ( www.astroecon.com  )has a theory that when markets are in trouble emotional energy has to go somewhere.  Say, you don't suppose this...nah...couldn't be...could it?

 

What Housing Crisis?

"US foreclosure filings surge 53% in June".  Oh THAT housing crisis that isn't going away for a couple of years...

 

Rants and Counter-Rants

Iran has done more test firing of missiles in the Persian Gulf.  (Where our informed sources note the US has pulled its aircraft carriers out...which is interesting in itself)

.

This got Condi Rice, who's in Russia's back yard (Georgia) to make headlines with "Rice warns Iran that US will defend Israel."  No, that's nothing new - it's the umpteenth time she's said as much.  BUT the important thing to note is where she was when she said it.  One might almost make our a "We'll let you have Georgia for your proxy and we'll keep Israel as ours" between the lines.  Or, maybe that's giving everyone too much credit for deep-thinking.

 

Shrinking Global Problems

"Psychiatrists have detects the first case of "climate change delusion."  An inconvenient report, to be sure.

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Before you make up your mind on 'global warming' go read up on a scientifically-based topic called "Urban heat islands."  The theory is really simple: Big cities cause 'heat islands' because they absorb a lot more energy from the sun than does a nice forest or plain.  Ergo, cities have gotten hotter as they have gotten bigger.

 

Even here in East Texas, the local fire department weather station runs as much as 6-degrees hotter than the official airport temperature, and that's in a county with fewer people than a big apartment complex in LA, LOL.  Too much real critical thinking for this hour?  'Scuse me...

 

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Coping: Kudos to Trader Jim

When he's not a Chicago Treasury-Arb whiz, Jim Goulding's book about periodic long-term shifts in how the world works is just a fine thing.  "Winter is Coming" is the title and an abstract can be found FREE Here.  Review from a reader:

"Hey just a quick note to say THANK YOU for turning my daughter and I on to the book yesterday. (Winter) What else ya got???? I swear that was the best book I have read in a long time. I can't wait to lay my hands on the books he referenced."

WOT Crazy Spending

If you had any doubts after reading yesterday's comments that what the globe lacks is a new 'got to have it' product which everyone will need, otherwise the economy is toast, and it proves why the War on Terror is an economic necessity, try this on for size:

 

"Big Brother' governments costs us (in the UK) £20-billion"

 

There, feel better?  And we're outspending 'em. No: You're not crazy.  The world is.  Relax.  Being a good person doesn't have to pay off in this lifetime...just keep investing for the next...that's the only account that will transfer with you, best I've figured from the readings.

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Send snip and save notes to george@ure.net

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Around the Ranch, I: Clear as...er....Glass?

I've told you many times that I believe that if you put out a 'vibe'/meme/prayer/energy, at some point the Universe will respond in one way or another to it.  So, for the past couple of months, I have had a couple of late summer/early fall projects in mind.  One of these is building a decent greenhouse.

 

I don't know if you look at www.craigslist.org everyday, but it's a fine way to invest a few minutes and my morning wander usually includes a check of farm/ag products that are for sale, 'free' things people are giving away. Last year, for example, there was a 22' round above ground swimming pool, used just one year and in good condition listed.  I was the second call on that one, though.  Then I look at boats (a trailerable sailboat is of interest with the global coastal event in 2009 on the horizon) and then there's always a selection of tools and what-have-yours.  A 4X4 ATV that needs work ($50 bucks, 100 miles away) would be cool for fence line work, that sort of thing.

 

So I spied this listing for "Glass - 200 pieces" and called on it thinking this might be the answer to the greenhouse glazing question.  Sure enough, a hundred dollars later, the back of my pickup was loaded with well over 200 sheets of double-strength safety glass, each about 16 by 22 3/4" in size.  Weighs over a half ton and stacked, it's a pile about 2 1/2 feet high.

 

Next stop on the 3-seasons greenhouse (fall, winter, spring) will be design and placement.  The fellow across the road tells me that for framing, I should plan on using hickory because of its dimension stability.  "Won't twist on you like redwood or other woods.  That's why hickory is used for axe handles and garden tools.  We used it on our greenhouses when I was young.  The only problem with hickory is that you have to drill it, rather than hammer and nails because it splits so easy."

 

Who knew?  Turns out that while hickory for such things as a greenhouse frame might be insanely expensive 'up North", there's reportedly a fellow with a small private saw mill near Bradford, TX, who cuts local hickory, downed by wind and whatever.  The helpful neighbor figures he'd be the source.  I reckon on some 2 X 3's out of hickory, run over a dado blade on the table saw, and I should have first-class greenhouse parts.

 

If I use sunk-in 8-foot fence poles (4-5" diameter) for the corners, PVC semi-circles for the roof with greenhouse cloth over (or corrugated Lexan - jury's out on this part) and then glass for the sidewalls (to get maximum light transmission in winter), I may be able to get a decent greenhouse up for under $1,000 which would be 10' X 25' or so. 

 

No doubt, with a little scrounging, you could come up with a grander scheme than mine.  With food prices continuing to escalate (seems like daily) anything that moves you in the direction of food independence with maybe a little left over to sell or share, seems like a slightly better use of time than paying another $50 a month for premium TV channels and parking your butt on the couch.  But, hey, that's your call.

 

Around the Ranch, II: Stereo Tuning and Standing Waves

One other topic to pass along, since I happened to be hot and (slightly) sweaty last night while working on the phasing of the speakers for my home office stereo/home studio that I use for voiceover work once in a while.  I discovered that my room has a significant low frequency standing wave at one particular low frequency.

 

How do I know?  There's a passage in a song (played a reasonably high volume) where I can feel a distinct "puffs" of air on my right arm and on the back of the neck.  It's repeatable event - about 1:36 into this particular piece of music.

 

If you're trying to build the 'perfect' home theater, one of the real 'grown up' audio engineering room tuning techniques is to set up an audio generator, crank up the power, and either set off a smoky highway flare (not recommended) or use a stage smoke generator'.  As the room is swept at different frequencies, by shining beams of a flashlight this way and that, you can often see standing waves develop at particular frequencies.  (Use plenty of ventilation!).

 

Another approach involves the use of pink noise and a meter, but it's way less fun - you fire up pink noise, move the meter through the usual listening areas, and there's your frequency response results.  Boring....at least compared to smoke, flashlights, and an audio generator.

 

The reason this is important is that big standing waves mean the room's frequency response is uneven, and that in turn, means when you're doing a mix of multi-track music, the settings for EQ'ing this channel or that, are likely to be off.  Not because you have a what audio engineers call a 'tin ear' necessarily but because you can get led astray by room resonances.

 

Fortunately, there are several solutions.  The cheapest is not to venture in to the world of music mixing in the multi-track setting.  Just buy the CD's, wear good headphones (I'm partial to Sennheisers) , and let it go at that, letting whoever engineered the session you happen to like use their settings.  The next layer up the food chain is buying a bunch of furniture moving pads, or stapling egg crates to the walls.  Anything to break up standing waves and limit reflection and refraction of the sounds.

 

The correct answer is to go hire a first-class audio engineering firm to design your home studio for you (no parallel walls, and all kinds of tricks including sound-rated glass, sound boots for the air conditioning ducts - the whole deal.  No budget for such a design?  No worries...

 

One step down from this is a trip to Auralex, which makes great sound conditioning/absorbing/control products.

 

Fortunately, if you live in the city, such design considerations are probably overkill.  On the other hand, if you have a nice old set of four of the old big Bose speakers and a couple of hundred watts that you can drive to full output without someone calling a SWAT Team in, then it's worth considering.

 

Remind me one of these days to finish writing my ebook on how to design and build your own home recording studio.  It's one of those projects I haven't had time to finish, although the web site got started.  Maybe I'll finish it this fall...

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Speaking of sound (pun intended).  One of these days, I've got to get around to putting the audio upgrade into one of my shortwave monitoring receivers, a Yaesu FRG-100.  While it may sound extreme, if you are a Morse Cade aficionado, you'll often notice that some frequencies (or notes) sound much better than others.

 

Again, just like our standing wave with a bass passage in a song, room resonances can wreak havoc with trying to copy code. 

 

Turns out that it's not ALL room 'bounce' (which can make some notes easy to 'copy' while others sound mushy.  Nope.  It's the components used by the manufacturer that can be at fault.

 

If you happen to have a Yaesu FRG-100, for example, you can pick up a kit from  Kiwa Electronics to rework the audio section of the radio to improve the intelligibility by replacing components that are non-linear with upgraded parts (mostly capacitors) that can make a difference in how the radio 'sounds'.

 

Kiwa's story on how they developed the shortwave receiver audio upgrades is a worthwhile read because even if you don't happen to be a shortwave buff, the same applies to many radios, and to a lesser extent, televisions.  Their receiver improvement section is a good read, too.  There, feel smarter today?

 

How did I get onto the discussion of sound this morning?  Oh...uh... let me think.... 

 

Around the Ranch, III: Code of Honor

Tomorrow night is a four-hour CW (Morse code contest) - one of the few that I try to get involved with.  It's called the Summer Sprint (contest rules here) and it's put on by "FISTS" - the International Morse Preservation Society.  My membership number is 13106...work you in the contest?

 

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Wednesday July 9, 2008

Waiting for the Last Train Out

A number of readers, whose predictions over the years have been far better than most, have sent in quiet signals from the sidelines that "Pssttt...the bottom is in...one last up move is straight ahead..." and no, I would not be surprised for a moment.  From here to a good 'bounce high" in August/September would be nothing short of expected. 

 

No, this is not financial advice, and no, don't put any money on this, but let's consider it as a possibility.  What are some of the factors that could drive such an eventuality?

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The Federal Reserve's Consumer Debt report (they call it Consumer Credit, but on the human being side of the ledger, it's an accounting of debt) it out for the most recent month.  You're welcome to click here and read the report for yourself, but the highlight of it, especially if you are a real newbie to the fine sport of Fed Watching, goes something like this:

 

There are three main numbers I look for in the report:  The first is the current annualized rate of increase of ALL consumer debt.  Top line of the first table says Consumer Debt is still going up at an annualized rate of 3.6%.

 

Lines two and three of the report show the two KINDS of debt measured.  Line 2 of the report shows the annual rate of increase in "revolving debt" (like credit cards and such.  This is presently going UP at a 7.1% annualized rate.

 

The third line of the report shows non-revolving debt.  This is where you'd lump in mortgages payments of all stripes.  It's going up, but only at a 1.6% annualized rate.  You can thank the high foreclosure rate, resetting mortgages and a lot of folks who have been itching to write you a NINJA loan three years ago, have sudden discovered their family history includes "Scrooge" in it somewhere.

 

This report, perhaps more than any other, can give the aware observer  a simple guide to what's happening in the economy.  The Fed number (+3.6% in aggregate, annualized) is slower than the last Consumer Price Index report (May 08) which showed a year-on-year general price increase of 4.2%.

 

Prices up 4.2% versus spending going up at a 3.6% rate...why that's the formula for a slowing economy.  Simple enough.  We're a genius, between us.

 

Moreover, the 7.1% increase in revolving debt means the 'daily bread" and the 'measure of oil' are going up significantly faster than housing prices which aren't keeping up with general inflation (BLS CPI 'core rate').

 

But is there deflation?  Nope. So I sent a "What say?" note to my deflationist pal Jas Jain:

"Hi Jas!

Well, consumer credit is still growing… any remarks for tomorrow’s column? Revolving consumer debt going up at 7.1% rate annualized – amazing! -- George"

To which Jas replied:

You are a wondrous man, George Ure.

The non-revolving consumer credit, 65% bigger, is growing at only 1.6%.

So, why do you pick and choose the less important, or smaller, number?

Regardless, the biggest and far more important number is the mortgage credit. People are very impatient about various lags in the economy and it takes up to three years for the negative force (housing bust, in this case) to filter to the last of the areas that kept the economy up.

I have two factors for you to estimate the future direction of consumer debt -- falling home prices and falling employment.

Peak Debt (Total Household Debt) is almost here. I can smell it.

Please remember that inflation is primarily a debt (consumer and Federal) phenomenon. Peak Debt would coincide with falling inflation rate and when debt starts to fall more than the increase in Federal debt deflation would already be here. Patience, my friend, patience. Best regards, as always, Jas   jas_jain@hotmail.com

The scary thing is that Jas an I actually agree on the broad brush of things.  Jas has moved into bonds already (and has some damn fine gains), while I still have my gold coin and my silver coin.  However, if we get this one more bounce (as I think we will) then we may come to a time by late summer where selling gold and silver and moving into bonds would make sense.

 

No, this is not cast in stone, but a jump in the gold price to $1,650, or silver to $40, would be enough to sorely tempt me in that direction.  Remember that I moved into gold before 9/11 when the price was under $275 an ounce, and silver in 2005 at around $7.00 an ounce, and I told you at the time.

 

There's an eerie historical echo to what's going on now with the pre-crash period of 1928 and 1929.  A check of "A History of the Federal Reserve: 1913-1951, pages 233,234" tells us that...

"Nevertheless, the annual rate of change [of the monetary base] remained between March 1928 to August 1928.  Long-term rates remained unchanged from the fall of 1928, but rates for new stock exchange loans increased almost three percentage points (to 8.9%) between August and December, the highest rate since 1920. "

We then read in the literature how in general, the Fed policies in 1928 and 1929 were deflationary in nature (raising rates) and that helped to set the stage for the [first so far, but wait a year] Great Depression.

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Now let's fast-forward to today.  We're hearing persistent talk now that the Fed may be raising rates in the near future.  Most would agree that by doing so, the Fed will be putting the brakes on the economy by discouraging investment.  But wait!  We're already in a slowing economy.  We need to ask, why would they embark on a policy of further slowing?

 

Part of the answer is 'oil' and part is 'commodities.'  I'd be ready to experience a sort of temporally displaced Fed response, such that instead of experiencing an increase in stock loan rates that the 'modern' Fed in present times will seek to push speculators out of oil and other commodities, while at the same time being forced to raise rates because we're such a huge debtor nation.

 

My sense is that this could mean another wave of foreclosures washing through the economy.

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One reason is that the Wall Street types, in some cases, don't see the gravity of the mortgage crisis.  A 6 1/2% loan is a 6 1/2% loan when you're bundling up debt.

 

Or, is it?

 

The point the Street has a hard time swallowing/believing is that rate resets in the first few years of a mortgage compound on top of initial loan tease rates that allowed people to buy half million dollar homes for under $1,000 a month.  How so?  Homebuilder buy-downs and low property  tax impounds because in many cases, new homes were built on land previously assessed only on bare land pricing; it takes time for assessments to catch up.

 

But, once the new home valuation works through the system (a year or three later) and the buy-down of initial lending rates is passed, then the reality of  6 1/2% interest on a half million dollar loan starts to work its way toward the homeowner's checkbook.

 

That first-year interest buy-down might reduce the effective rate for the first year or two to 1%, which pencils  to simple interest of $5,000 a year, and on a monthly payment the "I" part of "P&I" is tiny...just $416 monthly.  Can anyone be surprised that so many people swallowed the bait on this?

 

We're now in the period where the 'interest chickens' are coming home to roost.  People are awakening to the ugly reality that simple interest of 6.5% on a half million dollar debt is $32,500 per year and....oh-oh, that pencils out to $2,708 per month of interest.

 

And you were wondering where the mortgage crisis came from?  This clear enough, for yah?

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The inflation/deflation discussion doesn't stop there.  My friend Rick Ackerman  ("Rick's Picks" and if you want to learn a great trading technique, take his "Hidden Pivots" course - remind me to ask when it will be taught again...) sent along this to Jas and me under the Subj: line "George: You must have missed this one...":

Hoisington Investment Management is out with a sledgehammer rebuke to all of the whack-jobs who still haven't figured out that, compared to the deflationary destruction of paper "wealth" that has been going on, CPI inflation barely rates discussion.

 

The full version of the report is linked, but here's an excerpt to give you the flavor of it:

 

"The seemingly large gain in GDP pales in comparison to the loss in wealth, which GDP does not capture. Over the past fiscal year, holdings in the stock market, as measured by the Wilshire 5000 Stock Index, lost more than $2.1 trillion. Simultaneously, the 15.3% contraction in the Case Shiller Home Price Index suggests the wealth loss in value of household residences was a staggering $3.1 trillion. Without including the negative wealth impact for declining prices of automobiles and other durables the total wealth loss was approximately $5.2 trillion. Obviously, the sum of dollars being erased from our economic system has overwhelmed the amount of dollars being increased by inflation by a factor of more than 14 to one."

Yeah, no arguing that the housing collapse is a wildly deflationary, BUT I continue holding to the hope  that at some point, commodity margin rates will be jacked up, the oil price will fall down to $120 (or lower), the stock market will soar one more time so we'll all get a clean exit opportunity just as the Fed has pushed up interest rates a bit so we can lock in a higher bond return.

 

That could come shortly, as explained in an exchange with a good trader/reader who figures a low is in an we're in 'bounce mode':

G:> No chance this collapse part would come around end of Sept to the 7th > of oct rang and fulfill the mother of all crashes meme, would > it...(the right answer is No!)

 

Reader: "If the retrace rally lasts from .382 to .618 the time of the decline, which is a reasonable assumption, then it should end no later than late July/early August. What this means, I'm sorry to report, is that the answer isn't no."

While we've got the chance of hyperinflation in food going, and while the Fed seems to be at least entertaining a rate hike, seems to me like one strategy to follow would be a 'split bet' with some portion in inflation outcome winners like gold, and some portion in  deflation winners like bonds.

 

The discussion has me eyeing opening a TreasuryDirect account.  Haven't done it yet, but end of July/Early August is coming up pretty quick...and I'm scouring the web for gold charts, like this one, to get a sense of whether gold could 'break trend'.

 

The idea is not to make a pile of money (although that would be fine ;-)) It's to preserve the fruits of 59 years of living...

 

Out of inflation's grasp?  Not when the "Fed may give Wall Street more time to tap emergency fund". 

 

Saved By War?

A printing press will only get you so far.  America - and the whole world for that matter - has a serious and more fundamental economic problem that no one writes about. 

 

It goes something like this:  In order to have a growing economy, once people have 3,000 calories a day to eat, and a roof overhead, they need to be actively engaged in the economy in order to pump up the wealth of the ruling class.  Or, a little more bluntly, the rulers can't leech if we've all been bled dry. 

 

In case you haven't noticed lately, we're desperately short of a breakthrough consumer technology that has lots of sizzle factor and plenty of "I've gotta get me one of those new xxx things so I can keep up with my neighbor..."  Got a Beemer, a Bowflex, and a Big Screen?  Now what?

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We've pretty well hit the 'feature' exhaustion wall of cell phones, for example.  They're now taking pictures, surfing the net, playing music, and I hear, making hot dogs.

 

Ditto the problem with HDTV.    We've seen 720i replaced with  720p, and then 1080i with 1080p and at least for now, that looks like where that technology grinds to a near halt.

 

About all that's left to dial in better would be LCD brightness & contrast ratios, refresh times, and a few other nits, but is George the Cheap really going to pop a grand (or more) for 2 milliseconds shaved off screen refresh time?  OMG you're kidding, right?  Sober up!  This is a work day.  George The Cheap doesn't even have 720P yet.  The old TeeVee still works, so does the old car...

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OK, so quick: What's the easiest thing to get ramped up in a hurry, lacks accountability, and is infinitely expandable in order to keep people busy?

 

WAR! 

 

With this in mind, we can now get on with our daily chore os slippin and slidin' through the morning headlines to see what fits.

 

Ah, here we go:

 

"Russia threatens military response to US missile defence deal"

 

Perfect.  Just friggin' perfect.

 

But wait! Why would we see Russia tensions splashed in the headlines now of all times?  Ha!  It gets even more obvious as we dig deeper into the headlines:  "Iraq insists on withdrawal timetable for US troops."

 

How could they???!!!  Those upstart 'free' people couldn't be trying to kick US out, could they?  "Pentagon chief downplays Iraqi calls for withdrawal".  Whew!

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Hmmm...hold on a minute.  Are you noticing a design pattern here?  Well, if there were, then we might expect to see a scaling up operations in the other wars and near-wars... 

 

Aha!  "Iran tests missiles amid tensions with US, Israel" - I'm figuring late summer for this to go hot. The PowersThatBe will need something to act as a distraction from what in a worst case could be foreclosed and hungry people rioting or demanding massive change (sans the current set of PowersThatBe) in America.  Can't have that, nossir...

 

Not that the US is not alone in this need to keep the economy going.  You could read some of the same motivations/design patterns into headlines line "Georgian and separatists forces in  armed clash" and "Russia calls Georgia a risk to regional security."

 

My bet?  Rising commodity margin requirements to drive out evil speculators, and war talk and then some limited lobbing in order ratchet up the defense stocks one mo' time...

 

Markets Out to Launch

While oil is rebounding this morning on Iranian missile launches, the Street seems rather more taken by Alcoa earnings.  Pinch me.

 

Seems a Bit High Department

"Congressional Performance" falls to since digit approval ratings.

 

'Playing' Mugabe

Just because the inflation rate in Zimbabwe is running several thousand percent (it's the latest incarnation of the Weimar Republic), doesn't mean that Robert Mugabe's rule, attained in a Florida-like spectacle) can't be put to some good use.  After all, he did anger a bunch of globalist bankers when he told the world's paper peddlers to take a hike.

 

Curiously, a linguistics term is also linked to Zimbabwe now in an op-ed piece in the local press there: "Inflation and the Diaspora..."

 

That 'don't play the global banker's game' attitude is probably why we're reading headlines like "G-8's powerful voice' decries Mugabe regime." Even more fitting (referring to the 'need of war' comments previous) this also could help build those war-making/war marketing tensions between the US and Russia as we read that "Russia may veto Mugabe sanctions."

 

I don't suppose I need to say it again, do I?  Perfect.  Just friggin' perfect.

 

Mugabe's going to try and pour a little oil on the water, and headlines that "Mugabe 'ready for unity government" go to that idea.  But the banker's got his number because Mugabe wouldn't hand over control of his nation's resources in return for loans secured by national assets that presently belong to the people.  So, best I can figure, it's just a matter of time.

 

On Tap

Beer?  Oh, it's been running in the mid 90's around here in East Texas, so a cold one would be fine, later on in the day.  But before we get to Bud Miller time, there's crude inventories coming out today - which I guess (and it's only that) will show people aren't driving as much/using as much gas, so we should see inventory build.  Drive down oil, drive up stocks, would be an interesting speculation if I were still so inclined/obsessed.

 

A buddy of mine called on our Chicago Carrera driver hotline  Monday to ask "Where is everyone?" around the Loop.  That way all over...traffic seems down.  Elaine's son who drives a truck in the Seattle area reports the same thing...generally less traffic.  Even daughter Allison's squeeze, who's a serous bike rider/crotch-rocket pilot, has mentioned it.

 

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Coping: Another View Ahead

Besides the usual cast of characters around here, I've been blessed with Jim Goulding's expertise.  His website is an absolute goldmine of things to think about when you step back and look at the long-term direction of the economy.  It's not too often that Jim updates his 'predictions' page, but he has this week, and it's a dandy read:

"For the first time since I began predicting the rise in the DJIA, I’m very nervous. Before, I could state without a doubt, that the DJIA was going higher. However, as I wrote in my last update, the closer we get to the crash, the harder it is to predict. So, I must look at some of my original thoughts about what moves the markets, what I’ve learned in the last six-years, and the triggers that send our economy into 80-year cycles.

Personally, I’ve been struggling emotionally with the downturn in the economy because I know that, August 2007, was the beginning of what I call the 3-year warning (more on that later). The point is that I’ve written several times that regardless of where the DJIA is, in late 2008, I really have to think about getting out of the market. Said differently, if the DJIA doesn’t hit 35k and it’s late 2008, forget about the 35k prediction and take things as they come…look at getting out. I’ll cover the ‘why’ in this update. Lastly, when I say I’m struggling emotionally, I mean it. This is so depressing. I never wanted the prediction of the economy crashing to come true, yet, it is. I think of all the people (99%) in this country (and around the world) who don’t have a clue that they are about to get hit by an 80-year economic tsunami. In America, most think they’ll be bailed out. Not this time.

Let’s get to the analytics and put emotions away. Let’s go back to some of my original conclusions about what leads the economy to an 80-year crash. (By the way, this is a macro-science. It may be 80 years, it may be 85. That’s what makes it so difficult to nail-it as its happening.)

The single largest catalyst for the US economy moving into an 80-year cycle (massive slowing, crash, whatever you want to call it) is the line-up of the generations. That ‘line-up’ took place in 2003 (see my free book, Winter is Coming, chapter 3, for further explanation). So, I can conclude, that catalyst is in place.

Another catalyst is an economic event that hits the economy hard but doesn’t push it into a depression. Something similar to the 1926 Florida real estate crash, or, the August 2007 subprime crash. The similarities between the crashes and the era are very similar. What’s on everyone’s mind now, in 2008, is “was the August 2007 crash the beginning of the meltdown?” That’s the same thing folks were asking in 1926. The answer is…’Yes it is the beginning, but there’s still time to get out on a rally, like there was in 1926, 1927, and 1928, before the larger problems set into the economy. What I know right now is that the August 2007 subprime crash is a catalyst, and that catalyst is in place.

Go read Jim's book "Winter is Coming."  A last fake out inflation surge, and then a deflationary collapse - not the stuff to be taken lightly, but if your financial advisor doesn't have a plan for both eventualities, you might want to buy some broader advise.

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Send Snip and Save ideas to george@ure.net

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Tuesday July 8, 2008

A Word About Your Bottom

OK, here we are, morning of July 8, a date that was popping out of the predictive linguistics and the astroecon work as potentially significant -- at least short-term.  As events have turned out, the price of gold has taken a good 'thwacking', no doubt because of the happy-talk around the G8 meeting, which we'll get to in a moment, as well as reports that GM may be close to a 'break-through on an electric car', so maybe that part of the Dow will not be wiped from the books just year.

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The arrival of the Chevy Volt in showrooms in September can be interpreted two ways.  On the one hand, it's a darned good thing that the engineers actually have something that might make sense - we'll have a better handle on what when final specs come out.  OR, the other way to interpret it is that the Volt is a sideshow to change the focus away from the underlying financial condition of GM.  I don't particularly much care, one way or the other, although I've been in the market for a 40-50 MPH American-made car for what seems like forever.  (More on hybrids in this morning's Coping section below.)

 

The timing also likely a response to the recent increases in the price of oil, although oil (not to mention gold and silver, and a host of other commodities) have fallen while the G8 is underway and the world waits for more about the Iranian nuclear stand-off.

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But, GM and Oil are not the whole story, by any stretch, as we survey the economy and wonder just what lays ahead. 

 

There's a very interesting technical problem which my friend Robin Landry pointed out in a Monday chat.  We've still got a major line in the sand at Dow 10,984 to deal with. 

 

On the docket today, we've got an Uncle Ben speech coming up, the G8 endorsing cutting emissions by half by 2050 (if there's anyone left, by then, but you go first) and Siemens whacking 16,750 jobs.

 

The futures opening lower should not come as a surprise, but we may see that 'line in the sand' tested.

 

The confusing part, as Landry explains, is that if you look at a picture of the Dow (click here for a one year chart), it looks like the January low was higher than the March low.  "But it's not," explained Landry.  "Look at the intraday numbers."

 

Sure enough, the January low was 11,508.74 and the March low was 11,650.44.

 

A quick study of Landry's remarks shows that in Elliott wave terms, the conclusion of the first leg down from the October '07 all time high (ATH) concluded 1 down.  That being the case, the 'bounce' was from the January low to the Feb highs for an 'a' , down to the March lows for a 'b', and then completing 'c' with the May peak. 

 

What we've been going through, he says is another 'one down" and because we have taken out the January 11,508.764 low.

 

So what does this portend for Landry's Dow 10,984 line in the sand?  Not a happy picture if the current decline is anything like 'normal'.

 

The top of the market, in October of 2007 on a closing basis seems to be around 14,164. while the January low was about 11,971.  Call it 2,193 points.

 

Next, we would multiply that times 1.618 (a reasonable Fibonacci multiplier, and common in third-leg moves.  That gives us 3,548.  We tuck that away as a possible target for the end of the third wave down.

 

But from where?  The Wave 2 bounce high. May 19, 13,028.

 

Then we subtract our 3,548 from that peak, and guess (it's only that and THIS IS NOT TRADING ADVICE) that the low for the present move could reasonably be in the 9,479 range.

 

But that's when the technical problems really begin.  Because if we get down that low, we will have taken out support at 10,984 (which could be toast this week anyway), and the support at 10,000 could be gone shortly, not to mention the support at 9,700, although that seems like it would have a decent chance of holding.

 

In any event, if I were still playing with paper assets, which I'm not, a move down to 9,700 should lead to a late summer rally to the 11,229 area before the collapse to the 7,400 area (or lower) in the Mother of All Crashes in October.

 

Linguistically, that one looks dodgy as hell, though, because things just keep sliding until well into 2009 and then we get a global coastal event.

 

There, how does your bottom feel now?

 

Speaking of the GCE

Say, I know you're skeptical of the long term linguistic stuff (at least you should be as it's not an 'anointed branch of science".  BUT, did you happen to catch the New Scientist article that says "Greenland meltwater will take slow wave around globe..."

 

Pencil it in on your calendar for Q2 '09 on the present timeline...  Got a garden above the new high tide line to come?  Well, how about designing a floating garden, then?

 

Two-Faced Leaders Department

Ah, the more things change, the more they stay the same, eh?  Two prime examples of how people in power often forget that actions speak louder than words include the report that "US exports to Iran increase in Bush years: US Export to Iran increase even as Bush talked tough on sanctions/"

 

Then we have Bush's cross-pond pal Gordon (sell gold at the bottom) Brown, who just this weekend was chastising regular Brits for "wasting food" and then this poor excuse for a leader has an "eight-course  dinner before food crisis talks"

 

Not that I'm the only one pointing out these stories, but somehow on the MSM (MainStreamMedia), the stories are kept separated, because as we all remember from back in the day when I was teaching a broadcast journalism internship (CMU 367), stories presented in semi-random fashion is 'defensible', but presenting a couple of stories that are related and show stupidity/arrogance/distain for humans/elitist behavior, are not necessarily commentary.  I'd offer that it's contextually accurate reporting of a larger story.  Pass me the goose liver pâté' would you?

 

A similarly incensed UK reader also sees through the (pardon this, it's early) "Brown stuff":

"Today Gordon Brown came out and blamed our shrinking household budgets on waste and too much spending. This is like smacking someone in the mouth with a baseball bat and then blaming their broken teeth on the fact they weren't wearing a sports mouth guard ! The guy has absolutely no credibility whatsoever, which is exactly how things are supposed to be :)

I also think this may be of interest you. I don't know if it is present in the US, but there is a charity in the UK called "Common Purpose" which is having a bit of light shone on it....

Always ready to take the bait, especially when an organization talks about what sounds like it could be interpreted power grabbing, we went off looking for headlines about the outfit.  Sure enough, there's a recent report headlined "Is 'Common Purpose' controlling Britain?"

 

But wait!  Common Purpose is a charity.  We read on and discover on their website that:

"Common Purpose programmes produce people who lead beyond their authority and can produce change beyond their direct circle of control."

Teaching people to "lead beyond their authority"?  Hmmm...not sure I'm comfortable with that.

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This brings up an interesting point, I've been pondering of late:  Don't know if you've noticed, but there seem to be growing numbers of 'one-worlder' kind of groups that are trying to cut their own bigger slice of 'influence pie" as global problems cross borders. 

 

Next time you read about the uber-rich gathering at Davos, a thinking person might justifiably wonder what those build-a-burger types are talking about behind their closed doors that's so secret that their proceedings aren't shared globally.  Makes me wonder.

 

Holding of secret meetings, secretly moving money around and influencing things behind the scenes, trying to manipulate the outcome of future news events beyond government inspection/control as well as public access - well, that could be interpreted as terrorism.  Soft terrorism, but the 't' word nonetheless.

 

Makes you wonder if the battle's not already lost: We live in a country where police agencies spy of peaceniks, but those upper-crust secret societies.  The get a pass.  Yet in some cases they actively promote their vision of a future which runs directly contrary to a clear read of the Constitution.  It's usually for some partisan/industrial purpose like tearing down our borders, restricting our housing, and making self-sufficiency unattainable for millions. 

 

Land of equality?  Get a grip.  You need to reread George Orwell's Animal House.  "All animals are equal, but some animals are more equal than others..."   Armed with lots of money and powerful these influence groups are above suspicion or inspection and as I see it, they are likely every bit as dangerous as hard terrorism  in that underlying their "lofty" goals are more power for them and less for us the people. 

 

Hard tribute under hard terrorism  is 'believe as I do, or die'.  Soft tribute under soft terrorism is 'pay us this portion on all your labors' and 'taxes' on all your hard-earned property, or we'll take it all back. 

 

In the end, it's all submission to power.  Just one sort is sanctioned, the other not. Like making explosives is illegal, yet patenting Life itself...well...that's OK, as long as you pay royalties.  Another word for 'tribute'.

 

Bye Bye Middle Class

An MSNBC video essay worth clicking through.

 

Deaths in Flu Test

This is kinda scary - giving homeless people an experimental bird flu vaccine and then having people die?  Not  here, but in Poland...

 

 

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Coping: Milling About

I've become very fond lately of working in metal.  A reader sends this along:

"George love the site. I am a machinist-tool maker and cnc programmer here in south Florida.

Since I cut my teeth for several years on Bridgeports and Warner Swayse mills and lathes I loved seeing you doing your own metal work .

IMPRESSIVE. How about a picture on the final product.

Also you might want to look at www.mscdirect.com  for some of your tool needs.

I hope that you also have a Machinist Handbook in the latest edition this is the best price for it I could find.

Keep it comin' Bro,,,,,you are the man.

A nice 'little' 2,704 page reference book for the shop.  While you're there, the "machine Shop Training Course" (Vols 1&2) by Jones is good, not to mention Machine Shop Trade Secrets by Harvey.

 

I will have to shoot more pictures around the shop one of these days...

 

Profitable Prius

Here's a great email since we've been talking about gas mileage (or the lack thereof) lately:

:"Hi George,

Thought you would like to know.............I bought a Prius in '05 for pick-up and delivery in my business. I paid $22,000 for it then, everyone said I was nuts. Well I got a phone call from my salesman the other day asking me to come in and see what I could do with the Prius for a trade in. I was intrigued, as I thought the Toyota folks could pretty much write their own ticket for these cars. So, I went in just for giggles. The jokers offered me $21,435 plus a pro-rated refund of the extra warranties I had. That was even before I chose a new vehicle. I didn't do it but, man is this a crazy time or what? I have had absolutely no problems with the car and except for oil changes no maintenance expenses. Basically, with savings on gas and maintenance over my previous vehicle, I have driven the last three years for free."

Yeah...it's all good.  I advised my younger sister to get one a long while back...

"Did I ever say thank you thank you thank you for suggesting I look into getting a Prius when I asked for your brotherly advice almost five years ago? I still love my little car. Thank you thank you thank you."

It's cool - it's what the brother does...call's 'em like he sees 'um.  What's the plural of Prius, by the way, Prii?

Future Jobs

Simple answer here:

"I read the site every day and love all the great info, when I talk about it with friends and family, they all have no idea how bad things might get. If things get as bad as they might, what employment fields will be safe? Just curious to get your take on things in the labor market."

As I explained to Peoplenomics subscribers last week, you really need three levels of skill.  Think of it as a high level skill which will be in demand as long as operating systems are up, a second-level skill set that would be in demand in the middle to late 1800's, and a low level skill like foraging/food gathering.

 

Alternative Retirement Plan Ready?

Yep, sorry about the losses in your 401(k) and all, but I told you it was coming long ago and that getting into sustainable farm/ranch/homesteading was a hedge, right?  Now comes this CNN report "Pension Plans suffer huge losses".

 

If the MOAC's happens in October, then your pension fund could fall by another 34% from where it is now, or likely more, especially if the fund holds any liar's paper in a failed attempt to 'juice' performance.  And that's if Dow 7,400 holds this fall, which I sure as heck wouldn't bet on.

 

Foxes Demand Chicken House Duty

Yet another reader worries about the moves to get independent regulators out of the financial markets and replace them with the money printers....

 

Coming up is a July 10 presentation where the Fed and Treasury will make the case for their agencies being allowed a massive power-grab.  In the words of a reader:

"We are about to lose some freedoms, if we do not respond very quickly. I believe in prayer. We can influence the outcome of the following takeover if we pray and if we immediately contact our senators and representatives to let them know we oppose it. "

A good summary of the power grab/ "overhaul" is in a USA Today article from earlier this year.

 

That said, it may be too late.  A memorandum of understanding between the Fed and the SEC was signed yesterday and got little attention:

"Securities and Exchange Commission Chairman Christopher Cox and Board of Governors of the Federal Reserve System Chairman Ben Bernanke today signed a memorandum of understanding (MOU) between the two agencies that will deepen their information sharing and cooperation, permitting both agencies to better perform their responsibilities.

Under the MOU between the two agencies, the SEC and the Board would share information and cooperate across a number of important areas of common interest, including anti-money laundering, bank brokerage activities under the Gramm-Leach-Bliley Act, clearance and settlement in the banking and securities industries, and the regulation of transfer agents. The MOU specifically covers bank holding companies and so-called Consolidated Supervised Entities that own securities firms. It builds on and formalizes the long-standing cooperative arrangements between the SEC and the Board, as well as the more recent cooperation on matters including banking and investment banking capital and liquidity following the Board's emergency opening of credit facilities to primary dealers.

"I am pleased with this agreement," said Federal Reserve Board Chairman Ben Bernanke. "It formalizes and strengthens the ongoing cooperation between our two agencies to enhance the stability of the financial system. I look forward to continuing this productive collaboration with Chairman Cox and his staff."

"This agreement represents a valuable coordination of the roles of the SEC and the Fed in our capital markets," said SEC Chairman Cox. "Years ago, when the dividing lines between commercial and investment banking were bright, the high level of coordination we are establishing today was not a priority for the U.S. government. But today, the interconnectedness of mortgage and lending markets, credit derivatives, securitizations, and counterparty relationships requires the U.S. government to adopt a more coherent and coordinated approach. Just as with our similar arrangement with the CFTC, this agreement will permit the expanded sharing of information on a confidential basis, and help ensure that regulated entities receive a coherent message from Uncle Sam. This is smart government. We look forward to enhancing our collaborative relationship with the Fed within the formal framework covered by the agreement."

The MOU will improve the ability of the SEC to perform its role as primary supervisor of Consolidated Supervised Entities and Primary Dealers, and improve the ability of the Federal Reserve to perform its role in overseeing the stability of the financial system. The importance of this deepened cooperation is highlighted by the recent stress in the financial markets affecting commercial and investment banks, as well as many other market participants.

The SEC recently entered into a similar MOU with the Commodity Futures Trading Commission. An agreement between the SEC and the Department of Labor is anticipated later this summer."

In a nutshell (or is that a nut house?) here's what's going on as I see it:

• Government is now in the business of maintaining 'financial order' in markets.  Ergo, the link up between the money printers and the stock monitors.

• The bottom line of this seems likely to be perpetuating badly run companies that are too big to fail because they could cause systemic risk.  That would be where to pour your money - if you can figure out who's on St. Ben's and St. Hank's "they will be saved" list.

• The flip side is that the markets become (more so than now) totally rigged.  Of course you knew that, right?

Simple enough, huh?  Trade accordingly.

 

Oh, and if you try to exit the game of stocks by rolling into Treasury TIPS don't reflect true inflation rates say critics. 

 

Well, duh!  That's because the government 'rolls it's own' to some extent with the numbers, which is why food prices go up 50% and military retirement and social security go up how much?

 

And you wonder why I have this "No Incumbents!" mentality going?  I'm planning to write in Jesse Ventura for President in November.  The corpgov candidates should just go meet up at the local IHOP - which is where all the waffling belongs, does it not?

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Send Snip and Save notes to george@ure.net

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Monday July 7, 2008

LHC: Pop-up Thermometers, and a 61st Anniversary

Maybe it comes from reading the predictive linguistics, or maybe it's because as a kid I was always fascinated with science fiction (a fine starting point for economics), but whatever the reason, I've got a pet theory that I'm going to share with you that makes for interesting speculation and an amusing way to start a post-holiday Monday.

 

As you know, the Large Hadron Collider is about to be turned on at CERN, perhaps even this week.  If you look at the schedule, today scientists should be tuning the cryogenics of the world's biggest linear accelerator.  Think really, really big magnets.

 

Officially, LHC's position is that its operation will pose no danger to the planet.  You're supposed to be comforted when you read that the LHC's Safety Assessment Group says "It's safe":

"LSAG reaffirms and extends the conclusions of the 2003 report that LHC collisions present no danger and that there are no reasons for concern. Whatever the LHC will do, Nature has already done many times over during the lifetime of the Earth and other astronomical bodies. The LSAG report has been reviewed and endorsed by CERN’s Scientific Policy Committee, a group of external scientists that advises CERN’s governing body, its Council."

Honestly, I'm not at all worried about the safety of the LHC - but something else is bothering me; think really really big magnetics.

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Unless you've read a fair bit about UFO's, you may not realize that in 1952 there was a huge swarm of UFO's around major world capitols, including Washington D.C.  This incident describers in some detail at Wikipedia (link) involved seven UFO's, radar tracking, and hundreds of observers, if not thousands. 

 

If you're familiar with the Kenneth Arnold case, where a pilot near Mount Rainer in Washington State observed nine UFO's in a sort of 'follow the leader' formation, you're may recall the event was June 24, 1947.

 

There are a few folks who wonder if there isn't some link between the first use of atomic weapons at the end of WW II, or the ground level test at Bikini Atoll just one year earlier than the Arnold siting , June 30, 1946.  The curious thing about the Bikini Atoll test (at least to me) was the comment "Break-holding before a Blast - Could It Split The Earth?"  That seems to have a strange ring or resonance to the current worries about the operation of the Large Hadron Collider.

 

In fact, so strong is the resonance, that "The Spoof" begins this morning with the headline "Large Hadron Collider switched on - doomsday imminent".

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The timing between atomic tests and large scale UFO tests is interesting.  We know from an uptick in reports about UFO siting prior to some big terrestrial events that UFO sighting seem to pop up both before and after what are significant earth changes.

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Returning to the 1952 mass sighting then, we note that about four months after the mass viewing in 1952 DC, the 10.4 megaton device ("Mike") was exploded at Eniwetok Atoll.

 

The Arnold siting was just about a year after the first underground test at Bikini on June 30, 1946.  It was 10 months before additional testing at Eniwetok.

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Now we zip forward to 2008 and wonder if the LHC operation this summer could be another magnetic version of a "pop-up thermometer" (like the kind you get in prepared frozen turkeys) which could be noticed by the whatevers.  It's been just shy of five months since the Stephenville Texas sightings in January of this year.

 

Once the LHC is ramped up, one of the least surprising side-effects may be reports of news/additional/mass UFO sightings. 

 

My 'pet theory' on all this goes to the idea that whenever there is a 'sharp rap' on the earth - whether it's caused by atomic tests, or whether caused by a big earthquake, that somehow draws the attention of UFO's.  Bang the earth's magnetic field and you get inter-dimensional house guests.  So, with the LHC's magnetics.....And a number of Catholic readers have sent along the latest "Emergency Transmission from Medjugorje", which seems of curious timing.

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Strange phenomena may be more closely linked with strong magnetics that is commonly thought. 

For example, some people have reported encounters with apparitions at or just after MRI's (strong magnetic fields are used).  OK, an artifact of stress and magnetics on the brain, you're thinking?  Well, consider the article from the 2004 Radiology Today Vol. 5 No. 21 Page 22 titled "Magnetic Contamination:  The Ghost of MRI Past." Goes just a bit beyond strange...

 

I didn't mention that thanks to the Bloch and Purcell breakthrough, MRI was just ramping up in 1946-1947, did I?

 

Then there's the Philadelphia Experiment and its use of ultra-strong magnetics that may have warped time/space if you believe the legend.  Or was it just 'legend"?

 

Magnetic changes accompany earthquakes...simple enough science, but the magnetic connection sneaks through the headlines: "An enormous number of UFO sightings before Tsunami and earthquake in South and Southeast Asia - were they trying to warn?" wonders an India Daily story from December 2004. But, that's not the  only case.  "Lights in the Sky during the (8.0 August 15, 2007) Earthquake in Peru" says another source. 

 

In the past month, there has been an uptick in sightings in the UK.  Precursor to the firing of the LHC?  Time will tell...as it always does.  Until I see a lot more data, it's too early to tell...at least from the vantage point of today.  But you do remember today is the 61st anniversary of Roswell, right?

 

If buying GM stock lately isn't gamble enough, how about a little side bet that the LHC's massively powerful magnetics trigger a huge wave of UFO sighting and reports later on this summer? 

 

The Lady Seems to Fit

Ingrid Betancourt, conveniently released during the 'release period' reported by the time monks, will be honored with the French Legion of Honor on Bastille day - the biggest national holiday in France, one week from today. So is she the uniting female personality who is supposed to emerge from the highlands of South/Central America around this timeframe?  Likely, as the linguistics match 82/84%.  So we expect Betancourt to go widely global in the MSM at an almost Princess Diana kind of level.

 

The Runs: Budget-Minded McCain

We'll just file this in our huge "promises we've heard before" file:  "McCain promises to balance budget". Light one of those up for me, wouldja?  Seems I've heard this tune before....

 

While the US MSM (MainStreamMedia) seems content to rewrite press releases without calling BS on the candidates which are doing more flip-flops than a runaway  555 timer chip,  the BBC calmly headlines how the "US candidates practise their U-turns."

 

Contributed Analysis

Problems for Permabulls

My friend Bob Bronson (Bob@Bronsons.com ), from back in the days of the Longwave group at the University of Colorado's Center for a Sustainable Future (circa mid 1990's) sent along this really worthwhile analysis with permission to share:

"Another permabull story is emerging, which alone should be enough to convince you that the bear market they’re trying to rationalize is not nearly over.

It goes something like this.

Yeah, well, the stock market decline may have crossed over 20%, which means (we missed) it’s a bear market, BUT since the average bear market decline has only been about 30% it’s time (again) to anticipate a bottom.

Well, there have been 28 declines getter than 20% since 1870, and their median has been 35.7%, which is about twice 20% on a compounded basis. (the log of 1-0.357 divided by the log of 1-0.200 equals 1.98)

That means the bear market decline so far is really has only been half of such average bear markets. Of course, the second half of those declines have much more negatively impacting fundamentals with many times more associated investor pessimism as does the first half.

But there’s more with this kind of “expect the average” reasoning.

When the stock market declines 35.7%, which our work shows it surely will, then this “expect the average” reasoning would suggest a 46.9% decline, since that is the median of the 14 greater than 35.7%-sized previous declines since 1870. A 35.7% decline is equivalent to 2.84 compounded 20% declines.

And when the stock market decline reaches 46.9%, which our work shows it likely will, then expectations should be for a 49.2% decline, which is the median of the six greater than 46.9%-sized previous declines since 1870. A 49.2% decline is equivalent to 3.04 compounded 20% declines.

And when the stock market decline reaches 49.2%, which our work also suggests it likely will, then expectations should be for a 50.5% decline, which is the median of the three greater than 49.2%-sized declines. A 50.5% decline is equivalent to 3.15 compounded 20% declines.

The final extension of such “expect the average” is that when the stock market decline reaches 50.5% , which not-so-coincidently was the previous bear market decline from 3/24/00 through 10/10/02, the expectation then should be for the only larger decline since 1870: the 86.0% second downleg in the Great Depression Supercycle Bear Market from 4/17/30 to 7/8/32. Surely the mood of “irrational complacency” will succumb before then.

So the question is at what point will the majority of permabulls stop extending this “expect the average” reasoning to continue rationalizing no panic selling and looking for a near-term bottom like they are today? Although inevitable time-extending rallies will prolong false hopes, we expect they will abandon it before the stock market declines a second compounded 20%, or a cumulative 36% decline (1 minus 0.8 times 0.8).

Our work suggests the current 20% decline is only about the first third of the second downleg in what we call the Supercycle Bear Market, the “irrationally exuberant” echo-mania bust, which we fundamentally and technically quantify as an eventually deflationary economic Supercycle Bear Market Period.

In order to technically “base” and accommodate fundamental aftershocks from the current recession becoming very long and thus ultimately severe, we expect the Supercycle Bear Market Period will probably persist several years longer than the Supercycle Bear Market itself –probably through about Oct 2014. During the interim we expect the Supercycle Bear Market will most likely eventually decline at least a 50%. See the chart below.

The irony of permabulls currently “expecting the average” so they can rationalize continuing to look for a near-term bottom is that by extension it also logically suggests the bear market decline is only one-third complete, as we’ve continually expected and noted in my email to you last Monday.

So, while the markets bounce along (with some rallying expected early this week, seems under the noise, we could be doing a 'replay of 1891-1896'.  Fine analysis.

 

How Broke, Did You Say?

Financial market losses could top $1.6 trillion dollars says a Swiss paper.  Ah, so this is what the gnomes read on weekends... The Boson Globe says "Investor anxiety builds as retirement nest eggs show new cracks."

 

If you were thinking about flying to Vegas to try 'double or nothing' on your retirement account, note that "Down and Out in Vegas" has expanded its meaning of late.

 

Salmonella Debate

Now that the US says that jalapeño peppers will be investigated as a possible source of food chain salmonella contamination, "Mexico says no signs of salmonella in any produce."  I expect this to calm down in the MSM because questioning anything coming in from Mexico on all those trucks is definitely not PC or supportive of the NAU movement...

 

On the Docket

The Consumer Debt report (misnamed deliberately as the Consumer Credit report, to keep economics confusing and deter straight thinking) is due out from the Fed tomorrow.  If it's up, that'd be a good thing, because that would argue for an inflationary workout to the present direction of things - which would mean a huge run up in commodities and hard assets yet to come. 

 

Then on Friday we get the Balance of Trade report.  It's not a matter of whether we are going in a hole there, it's just how much overtime are the backhoes putting in digging this month.

 

Mongolia Calming

Despite the recent news reports, our correspondent dispatched to Mongolia says things are now 'chillin':

"All well in UB. Don't let news worry you - one block in size, a few hours in length, three buildings damaged. Most Mongols are appalled - unprecedented that such demonstration would turn ugly. Thugs from the slums on too much cheap vodka fired things up. Ah, well. Zaa,"

We'll remind him to go easy on the fermented milk, now that the state of emergency has been lifted.

 

Food Forethought

The UK is declaring a war on food waste.  One reason?  Spiraling food prices.

 

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Coping: Moving Margin Requirements?

One of the questions I raised for Peoplenomics readers this week was whether we'd see an increase in margin requirements in petroleum commodity trading, as one way to chill down soaring oil prices.  That brought up this email:

"Hello George,

Guess you may be right about the potential change in the margin requirement. Looks more and more likely there will be a "surprise" change in the margin requirements for oil and probably other energy and food commodities (ala the Hunt brothers). The technicals are in place for the greatest effect, leaving only the "uninformed" speculators and pension funds left to hold the bag and get wiped out during this leg. Oil will drop $25-$50, the stock market will violently rally, inflation will be declared whipped so interest rates can be dropped again and Israel can get back to preparing to bomb Iran by this fall.

Your unemployment article was ok, but if starts to get that bad, most people will seriously have to consider communal living with relatives, friends, or tent cities in moderate climates. At the current natural gas prices assuming it does not go up further, the heating bill will nearly double this upcoming winter from last year. Electricity prices will also go up due to no new coal plants and the use of natural gas to meet demand, but their will be a lag prices do to regulation, the electric utility may go bankrupt before being allowed by regulators to charge the new higher rates leading to potential rationing and rolling blackouts late this year."

Getting Away

An Oregon man has completed a 200 mile balloon flight from Oregon to Idaho in his lawn chair.

And you thought your holiday weekend was fun?

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Send snip and save contributions to george@ure.net

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