One of the problems that I have with the market topping here is that we have not seen a single Hindenburg Omen. I would expect to see atleast one before we top...so, this does leave the possibility of an A = C or one higher fib ratio for C to A type situation - possibly pointing to the 9,950 to 10,522 area on the Dow and 1,048, 1,090 to 1,158 on the SP500.
Gold is not cooperating. Pattern looks very much like danerics chart from last week. (Daneric's Elliott Waves) Break over 972 in Gold would be bad for the deflation trade. Best case scenario, in my opinion would be to get Peter Schiff and all the inflationists screaming victory if the trade seems to work even a little bit and then shock-the-monkey with the deflation trade. So, quick pop in Gold and then a drop. Deneric suggested that Gold could rally from this pattern even if the dollar is not cooperating or does not have a commensurate sell-off.
We have to watch the Dollar pattern closely - as it is potentially unfinished. And the wave structure is very sloppy. Sloppy patterns can be successful, and there are some good things about the dollar action here, so, if the dollar index breaks over the declining trendlines at 77.62 decisively - then this would be a go for the dollar. If the dollar fails here - it does not have much lower to go in my opinion...probably 77 to 76.5ish. (let's hope gold does not make it to 1085 if it does breakout though)
There were three very small moves in the McClellan Oscillator last week - all in a row...one small McClellan move usually indicates a big move is about to happen. At least one range day, but this is a little more abnormal so it could mean more. This is an argument that if we breakdown here, that its a serious breakdown. Otherwise, we could get a rally that's also a signifcant move.
Saturday, August 29, 2009
Is our deficit: Capitalist or socialist
This is an interesting way of presenting our deficit issue:
There are two ways deficits occur: One is capitalist, the other is socialist.
Capitalist deficits come from tax cuts or rebates, empowering households to decide how spending will occur, what items will be purchased, and it is a nice broad spending approach that is proven effective in growing the economy and restoring economic health to the nation. John Kennedy and Ronald Reagan, a democrat and a republican, both succeeded in bailing our nation out of nasty recessions with this policy.
Socialist deficits come from government borrowing and spending that targets specific objectives, usually tied to political ideology, that fail to all inclusively benefit households. Why is it important that deficits benefit households all inclusively? Because consumer spending accounts for 70 percent of GDP. Under socialism, government is saying they are all wise, and can better decide how money is spent, and who are the lucky select ones who get it, for society's good according to their will. It says the people cannot be trusted to make good decisions, that instead an all knowing, all powerful overseers are to be trusted in making good spending decisions of your money.thanks to: R. McHugh
More dollar "what-if" discussion, crash warning and recommendations
(this is a companion post to: The Future of the Dollar - the biggest short squeeze)
One of the other points I would like to make in regard to some of my earlier posts, is something that has grave impacts economically and for investors. People need to be very active in managing and understanding what is going on in order to protect themselves and understand the real impacts of a potential dollar rally on their purchasing power, assets and employment.
First and foremost, I would like you to take a close look at this dollar chart? Do you notice anything? Okay, look very carefully at the only significant dollar rally since the Fed has been responsible for the dollar?
Clearly debt pushing policies inflated asset values from 1913 to 1929. During this time dollar purchasing power declined markedly if you want to call 50% markedly. This was Fed engineered. There was a reason so many banks popped up during the 20's...and its the same reason that this century has been the era of the banking - so far - THE FED and its conflicts of interest...and fractional reserve lending. Fractional reserve lending is the manner in which 95% of the money in the world is created and the primary dilution factor for the dollar.
Now lets go back to my previous post, in which I refer to the dollar as a certificate representing the corporation of the United States of America. Well, the dollar IS the stock certificate of the United States...and that certificate is currently not an asset or value but an IOU.
The selling/issuing of dollars through credit (IOU's) - is a short sale that by implication will need to be covered. Its just the same as a short on Pets.com or AIG common shares or ES SP500 futures...the sale of these securities needs to be covered with the purchase of same to close the transaction.
Ron Paul has said it many times, the dollar reserve system has ended and the question is what is next. But the question is also how are all those short sales going to be closed...what kind of mess will that create?
We have appointed people to be responsible for our national value and stock certificates who are the equivalent of appointing a bunch of AIG shorts to run AIG. Additionally, you can tell that the Fed and it's governmental co-conspirators have done a terrible job...the chart says they did.
Why are they still employed? Normally you would try to cover your tracks or at least do a bad job not a catastrophic one if you were trying to steal from someone while smiling at them at the same time. This dollar chart is catastrophic.
Subsequent to the debt pushing of the 1913 to 1920's, when that debt became oversupplied and dollars to service the debt became scarce - as has happened now - we had the only rally in the dollar purchasing power of consequence in nearly 100 years. That rally for the dollar was the great credit contraction called the "Great Depression" - curiously, this was roughly a 27.2% rally (see: The Future of the Dollar - the biggest short squeeze EVER).
The the Fed used the depression to ensure that their goals would be achieved. The panic of those times led anyone who was scared to the conclusion that its beyond imagination the Fed could engineer such a condition. Worse yet, to be able to conceive that they, instead of attempting to fix the problem, would implement an agenda to make a much bigger one. So, fear led to more and more power which the Fed used to continue to expand its policies - ironically under the guise of preventing a depression which they engineered in the first place.
In achieving these objectives they did an excellent job. Is it any wonder that the SP500 bottomed at 666? I wonder?
Is it any wonder that your Dow Jones Industrials certificates are now worth less in purchasing power in real terms than at the peak of 1929?
So, where to from here? Well, that is a very good question. Look again closely at the dollar chart. Theoretically, the dollar is worth .04 cents. Under a reasonable scenario (but still a bad one), a short squeeze capitulation rally could take the dollar's purchasing power to between 15 to 30 cents...that could be a 750% increase in the purchasing power of the dollar. I am not going to go into details as to what that would do to the values of stocks, real-estate and other assets such as silver/other commodities.
Though I really hope to god that none of this happens...recognizing that it can happen - because it has happened before - is an important thing to do given where we stand currently.
There may be some further efforts to fuel a hyper-inflation story. If gold rallies for instance people will think that inflation is about to explode...but that rally will likely be short lived.
What to do:
Learn as much as you can.
Bernake - Hurray for the guy who has been wrong 90% of the time
Warren Buffett - the ultimate bull-market manifestation
One of the other points I would like to make in regard to some of my earlier posts, is something that has grave impacts economically and for investors. People need to be very active in managing and understanding what is going on in order to protect themselves and understand the real impacts of a potential dollar rally on their purchasing power, assets and employment.
First and foremost, I would like you to take a close look at this dollar chart? Do you notice anything? Okay, look very carefully at the only significant dollar rally since the Fed has been responsible for the dollar?
Clearly debt pushing policies inflated asset values from 1913 to 1929. During this time dollar purchasing power declined markedly if you want to call 50% markedly. This was Fed engineered. There was a reason so many banks popped up during the 20's...and its the same reason that this century has been the era of the banking - so far - THE FED and its conflicts of interest...and fractional reserve lending. Fractional reserve lending is the manner in which 95% of the money in the world is created and the primary dilution factor for the dollar.
Now lets go back to my previous post, in which I refer to the dollar as a certificate representing the corporation of the United States of America. Well, the dollar IS the stock certificate of the United States...and that certificate is currently not an asset or value but an IOU.
The selling/issuing of dollars through credit (IOU's) - is a short sale that by implication will need to be covered. Its just the same as a short on Pets.com or AIG common shares or ES SP500 futures...the sale of these securities needs to be covered with the purchase of same to close the transaction.
Ron Paul has said it many times, the dollar reserve system has ended and the question is what is next. But the question is also how are all those short sales going to be closed...what kind of mess will that create?
We have appointed people to be responsible for our national value and stock certificates who are the equivalent of appointing a bunch of AIG shorts to run AIG. Additionally, you can tell that the Fed and it's governmental co-conspirators have done a terrible job...the chart says they did.
Why are they still employed? Normally you would try to cover your tracks or at least do a bad job not a catastrophic one if you were trying to steal from someone while smiling at them at the same time. This dollar chart is catastrophic.
Subsequent to the debt pushing of the 1913 to 1920's, when that debt became oversupplied and dollars to service the debt became scarce - as has happened now - we had the only rally in the dollar purchasing power of consequence in nearly 100 years. That rally for the dollar was the great credit contraction called the "Great Depression" - curiously, this was roughly a 27.2% rally (see: The Future of the Dollar - the biggest short squeeze EVER).
The the Fed used the depression to ensure that their goals would be achieved. The panic of those times led anyone who was scared to the conclusion that its beyond imagination the Fed could engineer such a condition. Worse yet, to be able to conceive that they, instead of attempting to fix the problem, would implement an agenda to make a much bigger one. So, fear led to more and more power which the Fed used to continue to expand its policies - ironically under the guise of preventing a depression which they engineered in the first place.
In achieving these objectives they did an excellent job. Is it any wonder that the SP500 bottomed at 666? I wonder?
Is it any wonder that your Dow Jones Industrials certificates are now worth less in purchasing power in real terms than at the peak of 1929?
So, where to from here? Well, that is a very good question. Look again closely at the dollar chart. Theoretically, the dollar is worth .04 cents. Under a reasonable scenario (but still a bad one), a short squeeze capitulation rally could take the dollar's purchasing power to between 15 to 30 cents...that could be a 750% increase in the purchasing power of the dollar. I am not going to go into details as to what that would do to the values of stocks, real-estate and other assets such as silver/other commodities.
Though I really hope to god that none of this happens...recognizing that it can happen - because it has happened before - is an important thing to do given where we stand currently.
There may be some further efforts to fuel a hyper-inflation story. If gold rallies for instance people will think that inflation is about to explode...but that rally will likely be short lived.
What to do:
Learn as much as you can.
- Watch the dollar. If the dollar breaks out strongly...then we know a bad case or worst case scenario is playing out. For the scenario discussed here to not take place - the dollar MUST sell-off and remain weak. If that does not happen (I know i am repeating) things are going to get very bad.
- I recommend that you read the book Conquer the Crash - You Can Survive and Prosper in a Deflationary Depression by Robert Prechter.
- Subscribe to Elliotwave International: http://www.elliottwave.com/
- I also recommend that you evaluate and subscribe to a very good investment newsletter called BreakpointTrades.com. They have made amazing calls on the big and the short-term picture and really help you to put things in perspective. In a practical and easy to understand way. In addition, they have done a lot of work on mechanical/automated trading systems and have a lot of resources and guidance for this on the site.
- Also, Jim Shepherd is terrific and has a great advisory service and newsletter: The Shepherd Investment Strategist.
- Make a plan...do not trust the FDIC...they are the primary enabler of the debt pushers...I heard these two guys on CNBC discussing how "you should not even worry about the FDIC - its backed by the full faith of the US Government." That's called complacency...complacency and investing do not go together. If politicians were rational, we might not have to worry. But if politicians realize that they will be voted out of office for putting the US taxpaying on the hook for another trillion here and another trillion there...we can not be sure that the faith of the government will be there when its required. I know it seems improbable...but if you told me that we would put the supposedly smartest minds in fiance on the job of protecting our purchasing power, managing prices and protecting the dollar and they would run it into the ground by 96% - I would say that is improbable too.
- Watch this movie: The Money Masters and show it to people you care about. This movie was made in 1995 and given that is an even more astounding achievement. Absolutely everything that is discussed in this documentary is relevant to what is happening now. Also, go to the website http://www.secretofoz.com/ and buy the movie "The Secret of OZ" and please contribute to Bill's work.
- Watch this movie: Money as Debt. Show it to people you care about.
- Watch this movie by Arron Russo: America: Freedom to Fascism.
- Read blogs like Mike Shedlock's http://globaleconomicanalysis.blogspot.com/
- Help Ron Paul and Rand Paul defend the constitution and reign in the Fed
Bernake - Hurray for the guy who has been wrong 90% of the time
Warren Buffett - the ultimate bull-market manifestation
The Future of the Dollar - the biggest short squeeze EVER
Fibonacci is here to help us understand what may happen. 1.272 is a derivative fibonacci number that always seems to popup in natural series movements and is a common target for me in trading. As you can see in the charts below 27.2% is a good number to remember as a retracement target.
In this post I want to illustrate that nearly every major bankruptcy or insolvency was or is being preceded by a substantial rally. Even insolvent institutions like Bear Stearns, Fannie Mae, Sallie Mae and GE have reflex rallies tied with their final unwind.
The dollar is just the Corporation of the United States of America - why should it be any different. There is a huge short position on the dollar in the form or actual shorts and demand for dollars created by requests for return of borrowed ones. (just like the stock market version but executed differently)
- Debt satisfaction creates a demand for dollars.
- Demand for debt satisfaction creates a demand for dollars.
- Bankruptcy reduces the number of dollars available to use to satisfy debts.
- Asset deflation reduces the theoretical amount of dollars available to satisfy debts.
The huge reduction in dollars available to transact real value exchange creates an inflation of the value of the remaining dollars and a reduction in the value of assets that are valued against them...
I have included a projection of the dollar with regard to what i think is the most likely movement of the next few years. The scaling of time relative to the last 80 years is not accurate...but the concept and the target date of 2015 is reasonable.
Keep in mind that if the dollar short squeeze produces even a portion of this kind of reaction...we are looking at price s returning towards 1945 levels...Wasn't gas something like 20 cents a gallon then...just a wild guess.
In any event, the dollar can go to ZERO or very close in my opinion - but needs a huge short squeeze first. That means redeeming all the dollars people traded that they don't actually have - in the form of credits.
Please note that my projections are the green and red line on the dollar chart below.
Please note that my projections are the green and red line on the dollar chart below.
Check out these charts:
Friday, August 28, 2009
Tankers anyone?
China must be pushing the envelope if this email we received is true. They are building new factories, new office towers, in fact the government is threatening bankers with criminal prosecution if they do not loan money for projects. Keep in mind this means the creation of even more supply and manufacturing for a world that needs much much less - not more. But these jokers can't get through their heads that making a new factory no one needs is not a good use of capital.
But if things are so great over there...why are the oil tankers sitting full and loaded waiting for weeks in the harbor?
But if things are so great over there...why are the oil tankers sitting full and loaded waiting for weeks in the harbor?
Been interesting seeing how the talking heads are beginning to discuss the Baltic Dry Index. I am a Captain at Delta, and fly to Asia as part of my normal schedules. We are not carrying any cargo too or from Asia, and our planes were always full of "belly freight" up until this last Spring/Fall. In fact it is so severe, Northwest (Delta) is pulling out of the market as a dedicated freight carrier. Something they have done since 1947, all due to the reduction in cargo from Asia to the U.S. We recently pulled out of Guanzhou (70% of the production in the surrounding area used to go to Walmart) due to the drop off in freight shipments.
I should tell you about the ships sitting in harbors sometime. We see literally thousands sitting empty in ports or harbors everyday flying over Tokyo, Osaka, and Nagoya Japan and Shanghai, China. On the other hand we also see Hundreds of oil tankers sitting at anchor FULL, probably being used as storage. Appreciate your observations
thanks to http://breakpointtrades.comThanks,B
Market Observations
Today, we had the gap up reversal that I was looking for earlier in the week. The Russell 2000 which is the primary index that I trade closed down 10 points from the high - futures even more. The index is forming a rising wedge diagonal that could be getting very ripe for a breakout.
Also, last week we had 3 very shallow, small move McClellan oscillator days. That definitely portends a breakout of some sort. If its going to breakout over this divergence it seems like the stage could be set to try that...or a nasty selloff.
A break of the lower wedge trendline in the indexes in combination with a VIX index breakout will create a significant technical event. Markets fullfiled minimum ideal targets today...though there is divergence here on many indicators, there is also divergence occuring in the metals, currencies, BDI index and the Junk Bond index. Ironically, the gold and silver markets look like it would take only a little bit of panic or fear to get them to move against the expected patterns and make an upside push. If that were to be the case we could get a sell off in the market and then follow that with one last rally to take us to a retest or a new high. Additionally, that could also provide impetus for the dollar to have a pullback to the lower wedge targets that I was mentioning in my earlier posts (77ish). All in all a very interesting setup.
Ideal timing is for Sept 11 (poetic right?) for a market top and thus the end of primary wave 2. I would be happy with a top earlier since this rally is nuts - so I hope today is it. But they bottomed the SP futures at 666 - so given the minds behind all this ponzi scheme accounting and government by banking concepts - why not take the market up until 9-11? So, I am going to watch carefully even if they take it down hard next week to see if there are clues for a continued move up.
Though I am very encouraged finally based on today's action...(encouraged in this case means that the market may be setting up for a reversion to the more rational and understandable behavior - ie down). I am planning on being very careful until we get some definitive cooperation between the dollar, gold, silver, VIX and the indexes together.
One of the other problems that i have with the market topping here is that we have not seen a single hindenburg omen. I would expect to see atleast one before we top...so, this does leave the possibility of a A = C situation - possibly pointing to the 10,000 to 10,500 area on the dow and 1,100 to 1,125 on the SP500.
FDIC Problem List
Well there you have it the FDIC puts out their list of problem banks...with some 300 billion in assets...and you know what it reminds me of?
Answer:
The last time this did this when they down played the problem list by stating that it was 67 billion in total - and then one week later Indymac failed...that was 34 billion alone and was not on the list. Yet somehow magically it failed without anyone's knowledge. And Kudlow and CNBC and company etc all believe everything these guys say?
Do you?
So lets do the math they understated the list by 50 to 60% last time, which we know for sure...and they probably understated it this time by at least the same this time - so, its atleast 485 billion...atleast.
Answer:
The last time this did this when they down played the problem list by stating that it was 67 billion in total - and then one week later Indymac failed...that was 34 billion alone and was not on the list. Yet somehow magically it failed without anyone's knowledge. And Kudlow and CNBC and company etc all believe everything these guys say?
Do you?
So lets do the math they understated the list by 50 to 60% last time, which we know for sure...and they probably understated it this time by at least the same this time - so, its atleast 485 billion...atleast.
Market observations
The other day when i was talking about being prepared for a gap up and
immeadiate selling...WELL THIS IS IT.
immeadiate selling...WELL THIS IS IT.
New Deal Soaked the Rich, Middle Class, and Poor (again)
California Started the process of raising any tax it can find...now we have cap and trade...Coral Gables florida has a budget shortfall and they think they can raise real-estate taxes and other local taxes. This is an interesting quote:
-Jim Powell
-Jim Powell
The New Deal was paid for mainly by the middle class and the poor. This was because excise taxes were the biggest revenue generators for the federal government. They applied to beer, liquor, cigarettes, chewing gum and other cheap pleasures enjoyed disproportionately by the middle class and the poor. Until 1936, excise taxes generated more revenue than the federal personal income tax and the federal corporate income tax combined. Not until 1942 — in the middle of World War II — did the federal personal income tax become the biggest revenue generator for the federal government.
Bernake - victim of banking fraud?
No one is safe from identity theft, not even the chairman of the Federal Reserve.
Ben Bernanke's personal checking account became entangled in an elaborate identity-theft scheme after his wife Anna's purse was stolen last August at a Capitol Hill Starbucks. According to a District of Columbia police report, it contained her Social Security card, checkbook, credit cards and IDs.
It's not been revealed how much money was stolen from the Bernankes' account. But someone started cashing checks on their bank account just days after the purse was stolen from her chair. The thefts helped fuel an ongoing investigation into a sophisticated ring.
Ben Bernanke's personal checking account became entangled in an elaborate identity-theft scheme after his wife Anna's purse was stolen last August at a Capitol Hill Starbucks. According to a District of Columbia police report, it contained her Social Security card, checkbook, credit cards and IDs.
It's not been revealed how much money was stolen from the Bernankes' account. But someone started cashing checks on their bank account just days after the purse was stolen from her chair. The thefts helped fuel an ongoing investigation into a sophisticated ring.
And I thought Barny Frank was hopeless - apparently not
note: from 8/27/09: Frank is apparently NOT talking HR1207, but an overall regulation. I think Frank still did not make it to my approved list. As one of the strongest backers of FannieMae and Freddie Mac...its clear that he has some conflicts to overcome before I can relate to him.
Thursday, August 27, 2009
Market observations
Wednesday and Today resulted in small McClellan Oscillator changes - today's is -11, that suggest a trend or range day or two will occur starting tomorrow or Monday.
My concern was that a test of the lower wedge on the dollar could occur if the breakout was rejected...that seems likely at this point given that the market still sports the structure for wave 4 with a wave 5 up finish. As much as I would like to believe that the Euro's and Dollars crazy moves could somehow be capitulatory, they seem to fit with this market structure for the indexes at least for the short term. The dollar does not have much lower to go nor does it seem that the market has much higher to go...however, as my friend Mathew Fraily at Breakpoint Trades has been repeatedly pointing out...there is a thin zone above 1050 on the SPX...that could give us a blow off type move...something that is difficult to rationalize with the market being this overvalued and overextended. But perhaps its not out of context to recognize that there is this magnet to the 1044 to 1049 area...and with the McClellan suggesting a large range day move the possibility of some momentum up could be significant.
My concern was that a test of the lower wedge on the dollar could occur if the breakout was rejected...that seems likely at this point given that the market still sports the structure for wave 4 with a wave 5 up finish. As much as I would like to believe that the Euro's and Dollars crazy moves could somehow be capitulatory, they seem to fit with this market structure for the indexes at least for the short term. The dollar does not have much lower to go nor does it seem that the market has much higher to go...however, as my friend Mathew Fraily at Breakpoint Trades has been repeatedly pointing out...there is a thin zone above 1050 on the SPX...that could give us a blow off type move...something that is difficult to rationalize with the market being this overvalued and overextended. But perhaps its not out of context to recognize that there is this magnet to the 1044 to 1049 area...and with the McClellan suggesting a large range day move the possibility of some momentum up could be significant.
Dollar- Pattern still valid but probabilities shift
The dollar made it to the top of the wedge and was rejected - rather viciously this afternoon. This resulted a break of support at the wave 1 high for this wave at 78.42. Triggering a 78.38 stop. That break resulted in a volume move down just ticks above the previous lows at 77.87. Clearly this is creating a different pattern.
Critical for the dollar market tomorrow is the lower green trend line below. That may hold but it seems more likely that the dollar bottom will be carved out of lower prices. Most likely a falling wedge with targets in the 76.70 area if the trend line on chart 1 breaks.
Critical for the dollar market tomorrow is the lower green trend line below. That may hold but it seems more likely that the dollar bottom will be carved out of lower prices. Most likely a falling wedge with targets in the 76.70 area if the trend line on chart 1 breaks.
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