Saturday, November 26, 2011

Black Friday…Black Monday…either way the Jig is up!

The world has officially lost its wayour leaders must be convinced the solution to unwanted pregnancy is more pregnancy, since they clearly operate under the assumption that the solution to too much debt is more debt. To wit, in Greece a new fad has been emerging for those with too little money, medical care, drugs and hope whereby they distort use the concept of social welfare to the point that they willingly seek to infect themselves which HIV in order to obtain more of money, medical care, drugs and hope from a broke government no less. We are witnessing the perversion of society by unsound money.

What I expect to hear is more desperate ideas postured as solutions to our woes, both financial and social. The reality, however, is quite different to what our leaders are apparently perceiving. They may actually feel like they are giving critical life support to the patient…however, the reality is that all these fools are trying to do is resuscitate the addict by injecting more heroin. The inevitable result is that the patient will drown, overdose or simply fail to respond at all, given the very advanced progression of the addiction. We will hear about Sarkozy and Merkel coming up with something, the ECB another, the Fed yet another and the IMF something even more exotic. However, no treatment can really be effective for a dying addict under the supervision of his drug dealer. Especially, when the dealer is desperately trying to keep his addict alive only that he may extract the last bit of money and energy from him when he survives.

IT IS TOO LATE…any postive reactive pops to these harebrained schemes will be extremely short lived…as our fearless leaders are now the equivalent of people with sticks swiming with 20+ foot hungry sharks with very large teeth. They can make a lot of noise, but their shouts are hollow, their sticks are weak and their bones are brittle.

Germany can not get any more credit…it has already reduced itself to the equivalent of its patients by diving into well over 300% debt to GDP when you look past all their fuzzy accounting. Germany is broke, France is even more broke, England is broke - the biggest economic powers that were believed to be solvent have been destroyed from within by their catastrophic leadership. They are NOW finished. Completely finished. Things are bout to get VERY ugly for them…and THEY are supposed to bail out the ECB and weak members?

Anyone who wants to believe in the myth of China is free to do so to their own peril. Spain, Ireland, Belgium, Greece, Hungary, Yugoslavia, Ukraine, Poland and nearly all the remaining countries near the borders of continental Europe are TOTALLY insolvent and the whole system is supported by lies backed by accounting fraud. Yet we are certainly not told this in the news. Instead the mighty Germans, French and the European Council have been desperately struggling to convince anyone who will listen, not so much that they are solvent, but that their member banks are fine and in a manageable condition. They are telling the story much too often and much too loudly to be believed. All of this effort that has been forthcoming over the last years from France and Germany, not to mention the ECB, has been specifically designed to hide the absolutely horrid condition of their commercial banks and financial infrastructure and the failure of their regulation and policies.

It is the same everywhere, none of the leadership want to let their rich friends drown in their own waste. They are constantly trying to clean it up at the expense of their constituents and countries assets. This is also just what has been happening in the US as well, however, the US situation is far more managable. Leverage via direct money amplification, however, was not possible for the Europeans, so they imported vast amounts indirect money amplification via exotic products and financial engineering. They ate it up like Piranhas attacking their prey. The European banks did not even look at what they were eating…they just gorged themselves seeking the panacea of maximum money amplification.

Any further efforts by these idiot drug pushers are likely to continue with the same results. Giving Italy 600 billion Euros, at this point, after they have been forced to issue large amounts of debt at above 6 to 7% is simply ridiculous and will fix nothing. These guys are burning the money before it even hits the ground after being dropped from the helicopter. The more money they throw at the problem, the greater the greater panic they will create. Italy will still have to come up with 40 billion euros a year on the new heroin, in addition to all the very expensive heroin they previous bought. There is no masking that interest rates are going MUCH higher for nearly everything, with the likely exception of US Treasury bonds. There is NOTHING that Lagarde, Barosso, Van Rumpoy, BURNanke, Merkel, Sarkozy or anyone else can do about that. And that will imminently create the condition where the patient either dies from its overdose or resorts to methadone treatment and seeks out anti-leverage currency rather than credits.

To the Merkel, Sarkosy, Barosso, Van Rumpoy, Bernanke, Summers, Bush and Obama team, I complement you for your absolute professionalism and extreme skill with which you have been totally inept and destructive. I will not shed one tear or waste one sympathetic thought on you as you acquire your just place in the dustbin of history…which can not happen fast enough in my opinion.

Feeding the beast what has made him sick will satiate it for a moment and certainly kill it in another.

Ron Paul speaks - listening?

My view is that people are about to start listening…when the results of inept leadership are spread all over their lives in the form of a blown up economy, lost jobs and an unstable banking system…people will start demanding the truth rather than BS from the rest of these rediculous politicitans. Below is a eerily similar analysis from the UK at the ECB as to Ron Paul’s:

Thursday, November 24, 2011

Our system is based on destruction not creation…what’s next?

The movements in the markets are simply a fractal extrapolating the momentum from its source. For roughly 30 years or so the world has been in an accelerated growth cycle. This growth would seemingly be creative and based on creation of new products, capabilities and/or services. In reality the growth has occurred based on a very large and subtle undercurrent of destruction. It is based on a grand financial engineering experiment which is now in its last phases and infecting as many as it can with its disease.

Sustainability and balance has not been the focus, rather exponential growth has been the myopic goal…and there is but one result from long-term exponential growth - DESTRUCTION. You can see it in our world now every day, we have come up with more and more creative ways to destroy the quality of our life than ever before. As a result, our growth has fittingly occurred with an under pinning of imperialism, militarism, financial warfare (via credit and other products) - all essentially destructive mediums used for the expansion of an exponential growth financial engineering experiment - nuclear power and derivatives are just a few examples of the tools of this agenda.

Even though during this time, Apple created the iphone, totally new platforms for computing and we build vehicles to travel to the edge of the our solar system among many other tremendous accomplishments, we created these accomplishments on the back of the earth and shoulders of the masses. Essentially rather than contributing to the earth and to people in general, we have instead chosen to steal from both. That condition manifests itself right now in the markets, most market activity is NOT people managing profits it is from people forcibly managing destruction of their wealth.

Given that this is the case, what can expect right now? From my point of view, the strongest part of the destruction is about to begin. The dollar rally is in its infancy and everyone is already calling tops and trying to re short and re short it. Same for the EURO in reverse. This type of activity is just one of the symptoms of our destructive global activity and will fuel futher destruction. The reality is that the forcible management of portfolios via the destruction of them has only just begun. Ironically, the panic will get much stronger as the destruction continues to grow - even more ironically doing so in "exponential" fashion. So, I am expecting a VERY VERY strong move up on the dollar. Of course, that will most likely ravage the asset markets and slam the debt markets too.

But there we go, the fearless leaders do not know what else to do and are essentially watching from the sidelines until the destruction has taken its course…then maybe they will come up with something. The one thing can be sure of, is that any idiot like BURNanke and Barrosso who think that they can solve over leverage with more leverage will only come up with more and more destructive ideas.

More to come…regardless of the state of things I do think that the unwind of the power forces behind these destructive agendas will create new possibilities to create a much better and more sustainable world. In that spirit and with hopes that we get opportunity sooner rather than later, I wish everyone a healthy and happy thanksgiving.

Wednesday, November 23, 2011

Anti Dollar Propogandists scream loudly and Dollar reacts accordingly...

The dollar is making new swing highs on this move up and will count as "broken out" if it can close at or above current prices as I expect it will. The rhetoric and the ridiculous amount of misunderstanding about how the financial system works continues, with the blatant and simplistic view that "precious metals are the only real money” rationalizations for Gold @ $10,000. Accordingly, you can imagine how the dollar market feels about the loudly voiced commentary talking its badly positioned book. The dollar, of course, reacts by going up and it is going to continue to do so - destroying populists, simpletons and fools who practice the art of trading based on misinterpretation and fundamentals. The reality is also that if one were to get this absolutely essential part of the equation wrong there will likely not be enough compensation for that complacent error in other positions to make up for the oversight. Sure, French bonds yields may go through the roof and that is good if you are short the bonds - but if you get the dollar wrong you most likely have a lot of other stuff wrong and the results will show it. Rarely if ever will the simplistic dollar/gold/silver propaganda touted by so many from the Basses to the Paulsons to the Ice Crap Asset Management and the Durden result in the trades they are looking for…many of whom are beginning to remind me of the Whitney Tilson that Zerohedge so publicly disparaging.

I suggest a look at the ZeroHedge Gold propaganda and the Gold and Silver Bears (as invented by Turd Ferguson) poppycock that is being bantered about over there. Hey when your name is Turd Furgeson - should it be surprising if you promote ideas of similar nature?

Consider the following articles:

Then consider the following chart:

Sunday, November 20, 2011

What if the super committee is not so super…or committed?

Well, this is an interesting question…right? If the US can not cut the budget then the dollar will be toast - right? Just Slammed? If the world sees the US get another downgrade, the dollar will be even more toastier. Right? (grammatical error intended BTW)

The interesting thing about this, is that Kyle Bass (and apparently his staff), Paulson (and his staff), Sprott and many others like them are waiting breathlessly for this day because its the day that proves that fiat money is dead. Its the day that will set the trend of gold and silver back on the path to the stratosphere. Its the event that will prove the dollar is not worth the paper its not printed on. Right? Those 200,000 pounds of nickles that Bass has been accumulating will increase in value very rapidly as their silver component goes through the roof…Right? …and Sprott the genius charlatan will be gleefully toasting because his physical silver position will be so perfectly positioned, right? Its the day that will send rates through the roof…right?

Wrong. From my perspective, if the rating agencies do downgrade the dollar that’s just fine for the dollar. If the super committee fails to cut or come to a consensus, that’s just cool too. If they do come to a consensus…its fine for the dollar too. If pretty much anything happens here - which includes nothing, the result will be a stronger dollar. I know its totally counter intuitive, should’nt a downgrade of the US be a downgrade of the dollar and spell destruction for the currency? The difference is that a downgrade of the dollar and cuts by the super committee equal less currency and less money amplification via credit creation. There is but one result from that equation: less dollars equals more valuable and scarce dollars. When you add to that equation that a downgrade of the dollar IS ALSO ESSENTIALLY A DOWNGRADE of every corporation (not to mention country) in the world - certainly in the U.S.. Who is worse off, them or the government? So, the result will create an aversion to corporate debt, municipal debt and other sovereign debt and an attraction to US debt. Anyway you cut it, the dollar will fall in supply because the FED and the government are trapped - not to mention that they have millions of people ready to burn down any building where decisions to spend people's future earnings on interest payments and bailouts to banks and other special interests are made. This is why the FDIC will not honor its agreements they way people expect them to…they will be unable to do so. They can do nothing. The FED can essentially only watch relatively helplessly, with their credibility totally shattered and their power dissipating faster than a Perrier water in the Sahara - until they can build some cover with which to dive in and bailout their buddies and play poker with their politician enablers again. This will be no easy task, nor will it happen quickly.

I love it, most everyone who believes that sound currency is equal to an asset backed currency or that precious metals are insulation against political, policy and monetary instability is setup to play the dollar collapse on precisely what is happening here…trouble is - they will be totally wrong. The next question is, if they are totally wrong about this…what might be happening with their other faulty analyses - say perhaps Japanese or other bonds in nations that can actually print money? The results might just NOT be what are expected either.

Too Big to Fail...Too Little to Save...Too Small to for Accounting Control Fraud. The next MF Global Awaits...

There you have it, Mr, BURNanke has presided over an era where precisely the opposite of everything he says is what it does, precisely the opposite of everything he and his minions predict happens and precisely the opposite of what is marketed to the public is actually done.

The single biggest result out of the crash of 2008 was that it was deemed publicly that no institution could be allowed to become too big to fail. Yet lets look at what happened...nearly every large institution got bigger and the financial industry went on a consolidation binge. It is no coincidence that this occurred since, while the BURNanke guy was trumpeting the exact opposite publicly, he was making sure that there were very accomodative rules and regulations in place to allow the insolvency of institutions to hidden behind the single largest occurrence of accounting control fraud in history - dwarfing 2008 by comparison. If one just wants to see it in living proof, then all one needs to do is go a few BURNanke town hall meetings back, at which time, he proudly asserted that American institutions had very little risk and exposure the the European sovereign debt debacle. I accused him of deliberately lying...I think that it is patently clear that the guy had to know that using exotic insurance and leverage schemes the banks have a ton of exposure and now they have way more to worry about than just exposure to declining prices. They have to worry about how they are going to continue perpetrating there accounting fraud sham without getting caught and destabilising the entire system. What is happening now is that the accounting fraud is now actually causing the perpetrators not to trade with each other because they know everyone else is lying about their books just like they are.

JP MOREgan and Goldman TAX are the prime risks of this condition and they are both insolvent by the way...BAC and many others are already toast and they are having a lot of trouble moving what assets they have left that look like they have any value around to make their books look remotely solvent. Goldman and JP have, however, directly attempted to interfere with regulation and government to such a degree that they think they can always come up with a way to coverup nasty business deals with officially sanctioned accounting frauds. They have made the most use of the rules that allow them to maintain significantly higher leverage ratios than they report and marks that make their books look far more solvent than they actually are. Given the disaster we went through in 2008 why would it be desirable for us to do 2008 at 10x now?

The real question is if institutions were too big to fail in 2008 why were they allowed directly under BURNanke's supervision to become so much bigger and systematically imperative and risky? I think the answer is quite simple. It is much easier to commit subterfuge and obfuscation based accounting control frauds at a few institutions with large and complex books and portfolios than at thousands of small, BURNanke and officials have deliberately and by specific design created a framework which is designed to allow solvency to be visible without actually truly being existing. Remember, that the Fed essentially not that long ago reduced the reserve requirement fro banks to 1%. That is truly stunning when you think about it...if we all wanted our money from the bank that only 1% of it really exists in reserve. That would be shocking enough that no reasonable businessman would ever seek to run his business that way and would immediately shut it down. But that is the least of it. 1% is not low enough for the banks or the Fed so they have come up with more money amplification scams via all sorts of crazy products and techniques to reduce the actual amount of money on reserve to way less than the 1% they are supposed to have and which is woefully insufficient to inspire confidence when stress is introduced into the system. So, here we are again solving the problem of too much debt with more debt. This is exactly like the heroin addiction that I have previously mentioned. A heroin addict first attempts to solve his need by using more than he did before and repeats the pattern over and over until he either dies via overdose or checks into rehab for anti-heroin heroin - namely methadone. We are at that stage with our money amplification addiction, overdose or rehab and the requirement for both is anti-amplified money money - pure and simple fiat cash - unleveraged! Think about that for a minute. This essentially means that banks need to get to 70 to 80+% in reserve. This likely means that assets need to fall in similar fashion to this reserve level rising in order to cure the patient. In this case, the global financial system.

I think that its very important to understand that the entire financial system is connected by two core themes: very high performance incentive based compensation and the tentacles of massive leverage that underpins the banking activity and miraculous revenue streams that banks have been pursuing. The result of this type or arrangement is that bankers have the capability to generate significant payouts with other peoples money - namely the backstop of public option.

Good ole Lloyd is doing god’s work by getting ready to pass off his losses to US and Jamie Diamondust is doing the same. These guys have both made tons of money running organizations built completely on a foundation of deception and accounting fraud. We are about to see just the extent of it as JPM and Goldman have to start to factor in the counter party into all their insurance scams and their short premium books.

MF Global was no accident and the implications are clear as I presented in my CME post. Someone is and was holding a gun to the CME's head and their actions have been clearly motivated by the fact that the problems going on are systemic. Thus these problems create a quandary when trying to figure out how to respond to them. The reality, however, is probable that MF Global is not an isolated situation and that rampant pledging of client assets as collateral is embedded and hiding in the system. As people return to the theme of being more interested in the return of their money than the return on their money they will chase US Treasuries into negative yield. We can certainly expect the stress of that pressure to force these assorted ponzi schemes out into the open.

Lest you think this whole process has to take a long time to play out...I would prefer that you see it as a light switch. The switch has flickered and will likely be turned off imminently. That is the liquidity and money amplification switch - when that is off - its game over. It will be fast. You will find the whole financial system breaks and suddenly rules you expected to be followed will be reinvented before your eyes. You will see this in many terrible ways - like for example when you attempt to go Bank of America and withdraw cash or wire money.

My recommendation, the one I have given to all my clients and friends and I have done myself, is to take plenty of cash out of the bank NOW and keep it somewhere safe...which in this case is anywhere but a bank. A safety deposit box is usually at a bank and a bank is not a safe place for your money at this time. If exogenous stresses occur (and they should be expecting them) you will see Banks closed or schedules and rules changed to try to slow the progression of the death by overdose that the financial system is in the troughs of.

Also, as an interesting side effect to all these assorted issues…if any of this does come to pass, many people will be caught unprepared, they will take that to the voting booths with them and as I have indicated previously, in the case of a financial calamity, Ron Paul stands highly increased odds of being elected president…I see no reason that the scenerio and outcome has changed.
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