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

The world has officially lost its way…our 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:

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.

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:

• IceCap Asset Management: The Return Of The Dollar
• Guest Post: Is Gold Still The Answer For Investors?
• The Silver Bears Are Back With Part 8

Then consider the following chart:

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 ones...so, 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.

Kyle Bass is even more foolish than I thought..

This weekend, the EU and the IMF effectively went all?in with a bad hand in the highest stakes game of financial poker ever played with the world. We believe the agreement released was nothing more than a Potemkin agreement in order to placate bond investors. In the end (and there will be a reckoning for many countries) nations, including the United States, need to dramatically cut spending and get their fiscal balances in order. Unfortunately, our elected officials are on the hamster wheel of electoral cycles and are not able to make tough decisions like this as they would likely not be re?elected without a “sea change” in public opinion towards government spending and deficits. We are therefore on the path to significant currency devaluation around the world that will likely result in significant inflation. We increased our holdings of gold on Monday morning as well as taking other steps to position ourselves for the most likely outcome over the next few years. Interestingly enough, based upon the market reaction in the last 36 hours, it seems the law of diminishing returns applies to bailouts as well. - Kyle Bass 

"Buying gold is just buying a put on the idiocy of the political cycle. ... Capitalism without failure is like Christianity without Hell. You have to have atonement for ridiculous levels of spending both the US and Europe have gone through. The spending idiocy of the world is going to catch up to itself. And that's where we are today.” - Kyle Bass

Yes, VERY smart people can be quite foolish...

When someone misunderstands so fundamentally the rules of the game that they think they are able to rationally and intentionally position themselves precisely 100% in the wrong orientation with regard to a trade - it is truly spectacular. The ability for smart peopel to position themselves in this manner is usually attributable to a fundemental misunderstanding or incorrect premise. This does not mean all their trades will be wrong…hoever, if the fundemental understanding can be so signifcant - as is the case with Eric Sprott for example, the whole outcome and their process is likely to be effected. The situation has not materially changed over recent history…Silver is down not far from 50% from its highs while gold is up a little bit over the same timeframe and both are about to get toasted…fundemental misunderstandings have led to pyramiding and what will likely turn into catastophic bets on Silver and a just plain very bad ones (not to mention extremely popular) on gold. The reality right now is that people see hedges everywhere, but NONE of those hedges should be trusted…the safest trade is the risk trade…shorting Japan while being long tons of silver and gold is not my idea of a great hedge...

Kyle Bass has topped the impression that I had…while he clearly has some knowledge and facts behind his thesis, he seems definately seems to be in an egoist trade and more importantly misunderstands the results of the outcome. He obviously is in control of the world and has made his billions (many of which he is likely to lose by the way) and, it seems to me, has lost his passion for truth and integrity. Passion, truth and integrity might have actually had something to do with the reasons he was able to pull off his first success. Look, I see the same thing in my own activity, I am most likely to suffer volatility or losses after a very strong performance. In August and September, I made higher returns that most managers make in a few years or even a career…and that kind of success sets you up for complacency and in many cases failure. This is something, that as a manager, you have to be highly scared of. Money is powerful, it is a mirror and it can compel you do the exact wrong thing at the exact wrong time - simply because you think you have it to do it with and complacency to back it up. Kyle is coming off a massive and long-term trade in which the complacency high takes very long to dissipate. Paulson was too. As a manager, I am always the most scared after huge successes because that’s exactly when you can not and should not trust yourself…its at those times you need to be prepared for exactly the opposite of what your superficial emotions and ego tell you should and will happen. I can tell you now - these guys are immature, fickle and unprepared. Their trading books and reputations will be the victims of their ego and complacency.

Kyle may not have the commitment to hold his trade for the length of time required to make it profitable - which very well may be never but more than likely 5 to 6 years of devastating violence against it. During this time, his investors will abandon him, his followers will go from praising him to hating him and his AUM will follow a similar fate. The good news for Kyle is that some of his money will likely be held in some accounts somewhere that he will be able to squirrel away. I suspect, however, that Kyle will be one of those rags to riches to rags story's we see in the movies. He has married this trade and will hold it until its too late to liquidate…then he will hold until he is forced to let go - probably losing most of his fortune as he scrambled to double down. What is funny is that Tyler Durden of Zerohedge is so impressed with Kyles ridiculous and merit less anlaysis…Kyle is flat out wrong. If he is right about a few of the ideas that he speaks about,  should then be obvious that the result of less bailouts and more debt will be more and more aggressive asset sales. I am sorry to point out to all the Eric Sprott’s and Kyle Bass that Gold and Silver are a primarily holding of large banks and sovereign’s - they are assets and will be sold with abandon to cover margin calls…My long-term target for Silver remains in the single digits and when this comes to pass, as it most certainly will - the results of superficial and egoistic analysis will become apparent in many forms - sadly in the purchasing power of the investors that Mr. Bass trades and in the reputations of those who bet the farm on a stupid concept that everyone believes so publicly must go the way that it seems superficially it should go. We saw this recently with our Wall Street Journal Triangles and we continue to see it in huge malinvestments and misunderstandings like Kyle’s, Sprott’s, Paulson’s and many others.

My Posting Activity...

I have recently received some feedback complaining that some of my recent posts have a abundance of grammatical and spelling errors…it seems that the deduction of why is that I am just "another guy with a blog”. I do agree there are too many spelling and grammar errors but its not because of said reason. So, out of respect to all of the people who read my blog I wanted to publicly discuss the subject.

I would like to address this for several reasons…Firstly, because I would like to ask for your patience and understanding for my process which is less than optimal as I am not seeking to be a professional blogger like Mish Shedlock for instance. Secondly, because I often am aware that I make a lot of mistakes when building a post or establishing a theme. And finally because of that I want to remind you, as readers of my blog, that if you read a post with a lot of errors - I am often in some state of review…which usually tends to occur after I hit the post button! Like I said my process is not exactly optimal. I will usually correct most of my mistakes and update the post in a timely and subsequent review…and sometimes add clarifying content or charts. So, IF you see a post with a lot of errors it pays to reread it later since I will likely correct most things and may add some addition content or clarity.

I want to clarify, for the record, that I NEVER edit posts for content once I released the post. So, once I am finished with my basic review of it, if I think its final, I will not touch it again. Many bloggers make a habit of editing prior posts post history so that their assertions in those posts look better. I consider that highly disrespectful of the reader. I do not edit my posts for content post history and do not edit comments out either. In fact, I used to have comments live on this blog, but it was a nuisance to manage them - especially when one particular idiot spent all day spamming…so, I simply eliminated comments functionality. But for a journalistic integrity I think articles should not be changed nor should comments be selectively edited.

On another note, i am requesting your understanding, writing a blog is not my main career objective…I am generally focused on writing software for trading or the actual trading itself. Additionally, very often as in last night, I am attempting to put together a fairly complex theme which is a challenge in an of itself, becomes an article of roughly 1000 words and I am doing it late at night when I am prone to be tired but have some spare cycles I can use to write a post. As I recall, I am one of the only bloggers who is sharing the level of clarity of what is going on in our markets and financial system that I am - yesterday’s post as many important ones are was timely, illuminating and I think useful even with its spelling and grammar mistakes…I am also generally doing the posts when I can…which means I may be rushing. This creates a greater opportunity for me to make grammar and spelling mistakes. Additionally, my personal process sometimes means I hit the post button to get the post out faster than sooner…then take a break and come back and review the post for a decent run of grammar, punctuation and spelling. I am doing this work as I can, I am not getting paid and I am trying my best.

To put this in perspective, currently my trading systems are live and long nearly $1 billion notional of Dollar futures contracts not to mention the equity shorts and commodity shorts I am dealing with…no matter how you slice it that is where my focus is and it is a significant pressure…as I am up double digits for my funds so far this month - I think my  efforts need to remain prioritized as they are…which definitely leaves proofreading my blog as a significantly lower priority. As I do enjoy writing for the blog and have the impression that people find some of this work of use, I will endeavor to improve my process and posts. Thanks for your readership and feedback.

Try-Tri-Trianglulations, Rounded Tops and Waterfalls

It is highly unusual for us to get very high negative tick into the close…it usually leads to a nearly immediate reversal, however, there needs to be support and better yet confirmation for that to occur. The reality is that debt, currency markets and many indexes have no indication of any pending bounces and offer no confirmations other than for more weakness. Additionally, as I have said in previous posts…everyone and their brother is watching the bullish pennant continuation pattern - yes that Triangle. It certainly appears rather deformed on the Pit Sessions - to say the least…yes MUCH MORE LIKE A ROUNDED TOP, but WSJ left that option out because its not bullish I guess. Highly publicized patterns and consensus within the society (investors being a subset of society) or a community are VERY suspect. More over the Wall Street Journal has now gotten into the action of identifying the pattern…

So far, there seems little to support their thesis and quite a lot to support that the HEAVY down ticks hitting the close are a sign of the panic and desperation among the investment world to generate cash…I suspect that particular activity will become far to customary going forward. There is a very real potential that the heightened sense of desperation on these market participants will cause a market failure. It will not likely look pretty, to say the least, and I would think its possible to see double digit declines in a very short period of time.

The irony is that while Kyle Bass will be insured with his "put option against the idiocy of the political cycle"…he may find himself being unable to maintain/sustain his position over time and will end up being rewarded with significantly constrained purchasing power for his efforts - likely quite a bit more than his highly misinformed trade analysis may indicate. But, this is the pattern, Bass, Paulson and many others like them will reach the desperation phase and sell anything not glued down, even their most prized jewels, to generate cash. Central and Sovereign Banks and Commercial Banks will have to desperately sell anything not glued down because there is no escape from default for them. This means all that Gold in the Spanish, Greek, Belgium, Portugese, Irish and Italian vaults will have to be released on the open market much sooner and more desperately than anyone could imagine…and that gold will not likely protect you when this occurs…So, ultimately even the insurance it gives you may be of great value when you can hold it for the next 20 political cycles, however, like normal mortals there are practical elements to managing positions and assets - it will find a need to be liquefied most likely well before the insurance value has paid the cost of its carry.

Lest anyone think that the Fed and ECB can invent a miraculous plan by tomorrow morning to shock the markets…they need an event first in order to change rules or sell their unpopular transgressions of society’s rights under some cover. They need an EVENT in order to setup and then will proceed to market their reaction and subsequent plan. By the time that event has happened any plans they think they have now will likely need to change dramatically in addition to amounting to typical peashooter exercises. So, there is little likelihood that the Fed can really do anything miraculous in the very near term.

What you see going on around you is a contraction of credit money…the Fed/ECB can try to offset that with printing and monetization but they will simply be replacing a small piece of the credit destroyed by asset devaluation and credit defaults…their actions will fix nothing and very likely continue to make things worse - as their harebrained schemes have done over the last two years. Lastly, the dramatic constraints on available cash will tighten like a noose around the neck of its prisoner.

Anything that the supposed authorities do will most likely result in less available credit…and there is but one result from that in this extreme stress environment…strong demand for existing and available cash and very weak demand for ALL assets. So, whatever the Super Committee, BURNanke and TRICK-IT come up with will likely further intensify the stress we currently have by further constraining the flow of available CASH where they it is really needed and trapping it where it is not. This means DOLLAR/CASH up and ASSETS down in value. Since the EURO is not really proper cash don’t expect it to fare will against the dollar when there are very few choices left.

What people fail to understand is that in our system, the drug addiction is the credit based money amplification schema and the cure is not real assets or gold…but is something more akin to the relationship of heroin and methadone. In this case, the cure for credit based money is non-credit money. Translated that means - simple, pure fiat paper!

Kyle Bass: kettle calling the pot black

"The Profligate Idiots in Europe: They Have A German Pope And An Italian Central Banker” - Kyle Bass

The irony is that Kyle is totally off base with his concepts, his portfolio and his rhetoric very likely profligate himself - even though the leaders in Europe to happen to be fools. Kyle, however, is fresh off the success of a lifetime and fails to understand the issues we are facing…just like most of the successful PM’s out there is focused on Gold and Silver and so-called real assets. Kyle has bought 198,416 pounds of nickles, for Christ sake, because they have silver in them! Atleast, I would buy nickles because they have cash in them…but he has failed to study the problem and is simply hoping for a repeat of previous sucesses…The most obvious trade there is right now is buying REAL assets and Gold and Silver or Commodities. The inflation/real asset trade is not going to work.  Thank god I trade with systems…things are NOT as simple as Kyle would need them to be! In my opinion any PM who employ’s this ego driven trading idiom is a disaster waiting to happen.

It seems like Kyle is working on biting the dust just about as hard as Paulson…which given that Paulson is likely to be losing over 75% this year as per my previous forecasts quite a few months ago…is a pretty big dust bite. I think Kyle may fare better because he is actually smarter than Paulson and because it may take longer for him to cry wolf.

Past success is definitely not an indication of future returns - especially with regard to ego driven and highly misinformed trading and portfolio management.

The market problem is too many Fiat IOU’s...

The issue is that the global financial system has allowed great magnification of its money creation mechanisms to be directly translated into credit which is then spent as money. The problem IS NOT fiat money - its the credits that amplify the fiat money. For this reason we have too many assets and at way too high of prices with artificial demand impulses driving them. Therefore, this markets performance will not be based, in the near-term, on financial performance of a company or even a product or commodity - but the ability for people to obtain the currency and purchasing power with which to acquire said instrument.

In short, equity and commodity markets can idealize all that they want, but the trade in them will be governed by the root of our problem - access to currency and purchasing power.

At this time, people are still watching relatively deformed triangle patterns in very crappy looking equity market trading. Those patterns, in addition to being deformed are not correlated to anything remotely inverse in the dollar. The dollar setup is just plain bullish and the EURO is clearly in the midst of a large move down that is not likely to be interrupted by much…other than a Goldman Tax Short recommendation I guess.

I will post some charts, but its my recommendation that people trade with an edge towards the direction of the Dollar, Euro and Aussie Dollar.

from miami…"Give A Wall Street Banker Enough Rope and He Will Hang Himself"

You know things are not going well when you find effigies of bankers hanging from electric lines with nooses around their neck, entire murals painted on the walls of abandoned buildings and tent cities full of discontented people. Well, I figured there may be some interest in seeing what is happening here in Miami - and I am quite sure in many other places.

These are some pictures that I took today…

Tent City Downtown Miami Near the Court House

A mural of social discontent/class warfare triggered by irresponsible central planning and social engineering.

Mural and effigy (I had to rush to take the picture so my car is in it)

Bankers above…

CME - What and who is putting a gun to their heads...

The reality of life, especially corporate life, is that no one spends money unless there is something in it for them. Corporations either spend big money when its clear that they can make a lot or that they could lose a lot more if they did not spend preemptively. That appears the be the case with the CME which spent $300 million of their reserve fund designed for internal FCM obligation defaults to other FCM’s or risk entities. The CME has an obligation to its members NOT to their end clients. The posturing is that $300 million was offered to the MF Global Bankruptcy Trustee as a gesture of goodwill - a "helping hand" if you will. Nothing could possibly be further from the truth. NO ONE GIVES AWAY $300 MILLION DOLLARS TO BE HELPFUL OR NICE when they have ZERO obligation to do so…they only do it when there is some sort of a gun to their head…in this case, I am left wondering what is going on that could scare the CME so much? Obviously, it has to be something much bigger than $300 million, since that is what they are giving away without so much as getting any reward or upside. So, the R/R does not look good here - unless there is a far bigger problem lurking in the wings. What is it that is on the other side of this very generous and supremely nice/kind offer?

Well, I think we can see some of clues in the currencies. I am posting the Dollar index components chart which I have occasionally produced in the past and watch everyday. With the exception of the parallel upward trend channels drawn on the index itself, none of the labels or patterns have been substantially changed from how I placed them in June…things have played out rather well, indeed. Somewhere in these patterns there lies something that must be related to the issue that is scaring the CME so damned much…and this is likely why the Dollar index has such substantial targets.

See for youself…things do not look good for the inflationist currency debasement and real asset prophets. Sprott and Bass and most of the assorted gold and silver extremists will likely not enjoy what is about to happen. Mind you that in the beginning phases of these currency moves, Gold and Silver will likely be looked at a safe havens and may enjoy a brief throwover…until people are forced to look at them for what they are: assets that are collateral to be sold to service obligations elsewhere.

Party like its 2008...

Earlier in the year, I posted charts showing the major foreign indexes and the Nikkei…those patterns have played out to a tee…the US markets have been MUCH stronger and have had much more effort placed in the by our illustrious banking cartel leadership. That is about to change as their bullets have turnd from lead to rubber and now sand…

The interest that people have in the triangle that I posted about on Friday is very much like the head and shoulders pattern idenfied by CNBC and the general public in 2009…everyone sees this continuation pattern…but its most likely only going to occur in their imagination.

Earlier in the year I posted a buch of charts documenting the state of the European markets…I will be adding some more european charts to this post…but you may be interested in a look back...A rush out of risk leaves almost NO choices

I will be adding some more charts to this post, including one if the non- triangle pattern occuring in the nasdaq.

When the cat is away…BURNanke is in the fray

The reality is as we sit here assorted non Greek/Italian bond markets are imploding. The US bond market is closed and there are way less places to play in the markets today without that market open. Of course if you were a mentally challenged central banker you would prefer to try paint rosy pictures on days when there is less money in play - even while around you Rome burns…

Forex and Repo activity is signficantly reduced without active trades in the Bond markets to support…this makes Equities a fund place for Central Banksters to play when the cat’s not on duty and additionally, you have money flow in the markets chasing momentum that would normally be chasing bond momentum.

Meanwhile the dollar index is in a zigzag pullback and testing its support trend line off the highs as well as finding support at its 300 day MA.

Here are some charts…

With three wishes they could be rich…

...as long as they can put off paying for the Hamburgers until Tuesday.


The interesting thing about our markets is that this is the EXACT condition that is going on throughout the financial system. People are using short-term financing (usually through overnight repos) to pay for longer-term obligations and further their accounting control frauds - what’s more - they think that they can get rich doing it. The reality is that the managers who collect the bonuses or over-committed books, often do get rich, but their firms often also go broke and have the added benefit of making sure tax payers end up paying the bill - the result is that economy and financial system suffers. These are the exact conditions that brought down ponzi schemes like Bear Stearns and Lehman among a fair list of alternatives - short term credit covering huge losses has disappeared. Its gone. Financial managers usually seek to arb their risk…in my opinion any derivative/tertiary risk is actually greater than the source/natural risk since new risks are introduced that have not been accounted for. We are dealing with that now.

Banks and large investment firms have financed leveraged and losing positions in many asset classes through many techniques from their illustrious carry trades to the most common Repo trades. The window on these short cuts is now sealed and broken…yet they still hold the assets they are seeking to get rich with…but can not afford. Its not too far from the Wimpy situation - wanting to have a hamburger today and pay for it on Tuesday - only to be out gunned by sorcerers who think they can make money of a money losing deal if they can get their magic wishes…which they ironically don’t even know what to do with.

The other irony is that people who are embedded in the mix, are all clamoring to get into gold now that they feel like they can’t trust leveraged cash or assorted assets…the problem is they are really acting based on their three wishes and of course you can’t eat gold…nor may you be able to easily pay to eat with gold for some time to come…it just another asset the global overleveraged ponzi schemers will be required to sell before they implode. I see no good outcome for quite some time for any asset whose price was levitated by access to cheap short-term (or even long-term) credit based capital.

Good luck market…this is not going to go well…Ben, Tim and Trich and most of the big players are in some deep doodoo.