World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.
Just want to point out that the DOW has broken support on the P&F chart and has produced a target of 8,400. The rest of the indices have NOT broken down yet.
I also note that the dollar index is making an interesting formation on the P&F chart, almost looks like a triangle. Up or down, that is the question… the target is now down, but if equities do what I think they will, the dollar could very well break this to the up side.
Lastly here is a candlestick chart of the VIX that clearly shows a broken trendline after finding support in the mid 30’s like I said it would here VIX Analysis. The P&F, however, does not show this as a breakout, target is still 20, and you can see that when you look at the P&F it looks even less bullish.
Looks like a depression to these men. Remember, in the past several months there have already been many high profile suicides world wide. Here at the two latest:
Billionaire Merckle Killed Himself Before Breakup of His Empire
By Aaron Kirchfeld, Jann Bettinga and Caroline Hyde
Jan. 7 (Bloomberg) -- German billionaire Adolf Merckle, whose family holding company amassed about 5 billion euros ($6.7 billion) in debt, committed suicide as bankers proceeded with a plan to start breaking up his business empire.
A bridge loan to the family is in place and Merckle’s death on Jan. 5 won’t affect that funding, three people with direct knowledge of the loan said. They declined to be identified as they’re not authorized to comment. A condition is that banks will take over the Merckles’ majority stake in HeidelbergCement AG, the largest of the family assets, and sell the drugmaker Ratiopharm GmbH, two of the people said.
Merckle, whose estimated $9.2 billion fortune put him 94th on Forbes’s list of the world’s richest people, committed suicide by stepping in front of a train, “broken” as his business empire crumbled under the growing burden of debt, his family said. He had been negotiating emergency financing after the value of his HeidelbergCement stock plunged and bets on Volkswagen AG soured, leaving his companies short of cash.
“Merckle didn’t have any more options to turn around his companies,” said Stefan Mueller, managing partner at Proprietary Partners AG in Frankfurt. “This is very tragic.”
CHICAGO, Illinois (CNN) -- One of Chicago's most well-known real estate moguls appears to have shot himself to death, police said.
Steven Good was found dead of an apparent self-inflicted gunshot Monday, police said. The body of Steven L. Good was found in his Jaguar on Monday. The car was spotted in a parking lot of a wildlife preserve in Kane County, Illinois, just outside Chicago, authorities said. No note was found, and police say they do not know how long the 52-year-old had been in the vehicle.
Good was the chairman and chief executive officer of Sheldon Good & Co., a major U.S. real estate auction company.
The death comes amid great turmoil in the country's real estate industry. In his role as chairman of the Realtors Commercial Alliance Committee, Good commented on tough conditions last month at a business conference.
On a memorial blog set up by the Chicago Association of Realtors, for which Good once served as president, friends and colleagues described him as a gregarious man with a big personality. He was a savvy businessman who built his company into a major national real estate company that did deals with Donald Trump, they said.
No disrespect intended, this is a serious tragedy. No one should be put in the position of self despair over the failings of leadership and a broken monetary system. It’s of our own invention, after all, let’s fix it!
It’s been a while since I’ve “seen” a day as clearly as I saw this one, both with the overall market and with the plays I had going, like HOG.
The DOW finished down 245 points (2.7%), the SPX finished down 3% with the /ES pinging right off the 900 level, the NDX finished down 2.8%, and the RUT lead the way again while losing 3.4%.
Fundamentally it would seem that everyone is worried about jobs. The weekly update comes tomorrow and the monthly on Friday. Now that the ADP report has scared everyone, this COULD turn into a BUY the news event?
So much for DOW 9,000! Is the selling done for now? That sure is a monster red candlestick, it closed just a whisker below last Friday’s open basically engulfing the past three days, and note the HIGHER VOLUME on the day. Volume confirms price, and look at the daily stochastic and RSI roll over out of oversold:
Basically the same picture on the SPX, but it did manage to close above last Friday’s open. It landed right in that 900 area which is strong support, so I would expect at least some retrace tomorrow, probably before resuming the move lower. The 890 area would seem a likely destination if this is a wave ‘b’ retrace, that would be the 61.8 retrace and it’s at the 50 day moving average. Break 890 and we’re probably doing something other than wave ‘b’ of wave ‘c’, but a move down to 870 wouldn’t be out of the question either.
The XLF was a disaster, losing 5.2% and rejecting solidly beneath the 50 day. No way the market’s moving higher unless the XLF can get above, and stay above the 50dma. I note that today was on slightly lighter volume here. (I also note that the DIA and SPY were also down on lighter volume).
Here’s another one to watch, the transports. It lost over 4% today on higher volume and looking like there’s lots of room below:
TLT is an enigma, but it’s looking very much like the classic bubble formation “3 peaks and a domed house.” Google it to learn more (basically the right side will initially mirror the left but then turn into a parabolic collapse). If that’s what’s happening, we should make a right shoulder here for a couple more days and then move lower. If you remember, I got short very near the top, but stepped out of that position. I plan on re-entering soon, probably early next week. The “boys” (and I mean that as in children) over at the Fed had better hope that’s not what’s happening, because if it is, money is not leaving bonds just to be hanging out in equities, it’s getting the hell out of the way of the insanity at the Treasury department. And if that’s what’s happening, we’ll be watching rates go up and equities will eventually take the next leg down. That IS EXACTLY what happened during the great depression which Bernanke is trying so desperately to avoid and is so unwittingly helping to create.
Let’s look at HOG once again. I played that about as perfect as can be… scaled into it and was the low buyer right at $20 yesterday, then I sold the second 1/3 of my position exactly on the 61.8% retrace line. I sold the first 1/3 for a 59% gain, and the second for 100% gain. The third, and some, is on the house. That’s what I try to do every time, but it certainly doesn’t always work as well. Mid day it began to ramp and I was pretty sure the 50% retrace line would hold the advance and it did, subsequently collapsing down to the 61.8% level. It may rebound some tomorrow, we’ll see, but the easy money has been made for now.
The short term oscillators say that some rebound is possible tomorrow, it should be an interesting end of week. Overall I’m still thinking this is NOT the start of a major leg down, but it sure could be, and that’s why I did not go long at 900 today, although I know a lot of people did.
Hey, keep the big debt picture and math in the forefront of your mind. If you went long yesterday, your fiat dollars are going…
We are arriving at an area of strong support with the DOW off 235 points and the S&P beneath 910, down 2.7%.
The 50% fib is at 900 and there is a lot of volume support in this region. Also, the 60 and 30 minute oscillators are oversold and likely to produce buy signals soon (although they can remain oversold).
HOG has found support in the $17.40 area, I was hoping it would continue down, but being down 12% already on the day, no need to be a HOG! I’m watching closely and will probably sell just a little more of my position if we get to around $17.20, but want to hold on to some incase the fireworks continue. This was a good play, and I would stick with it longer except I’m not sure the entire tide is going to continue to go out here and now. I do, however, want to keep some of the position on in case the tide does want to go out further.
Here's the 30 minute SPX chart, looks like we're gunning for 900, but getting oversold on the stochastic:
I also note that the DAILY stochastic has turned down out of overbought and has a loooongggg way to go (but can always turn back up).
My, oh my, how fast the numbers grow. Rember, this is first a BUDGET number, and it is an ESTIMATE. It will have NOTHING to do with reality. Our government who mandates that your business use GAAP accounting, refuses to use it themselves. The real deficit for next year? Multiple trillions, count on it.
WASHINGTON (AP) -- Congressional estimators are projecting an unparalleled budget deficit of $1.2 trillion for the 2009 budget year.
A top congressional aide briefed on the estimate says the Congressional Budget Office also sees a $703 billion deficit for 2010.
The dismal figures come a day after President-elect Barack Obama warned of trillion-dollar deficits for years to come.
CBO's figures don't account for the huge economic stimulus bill that Obama is expected to propose soon to try to jolt the economy. Obama officials say the stimulus measure will blend tax cuts with big new spending programs and could cost up to $775 billion over the next few years.
WaMu (now JPM - the epicenter of leverage and bad derivatives) is desperately trying to blow ever larger bubbles. Remember that JPM has received government money, your money, to buy BSC and they are exchanging BILLIONS of their shit for Treasury money, AND they are guaranteed taking a ton of TARP money, NOW they are doing shit like this through what was WaMu. This should make every American angry beyond belief:
Below is an actual example of a recent WaMu loan mod with a 5-year $1 million bullet payment. This mod takes exotic lending to level I have never witnessed in my 20-years of mortgage banking. This makes a Pay Option ARM looks safe and cozy — and puh-lease do not tell me this is great because it frees him up to spend money into the economy.
Banks offering and borrowers actively accepting this style loan mod will guaranty that the housing crisis stays will us for a long time to come. This borrower will lose his home in 5-years, I have no doubt. That is of course unless his house price goes up 100% AND great, low rate super jumbo money returns to the market so he can refi out of it - then again, many lenders won’t even refi a loan that has had a previous loan mod done.
Property Value: $800k
Note amount: $1 million plus deferred interest
New Mod amount: $1.053 million
First TWO years rate/payment: 1% and $878
Third year rate/payment: 3% and $2633
Forth year rate/payment: 5% and $4389
FIFTH YEAR PAYMENT - THE BULLET: ALL OUTSTANDING BALANCE DUE AND PAYABLE
All rights to future predatory lending claims waived.
And you thought that SANITY had returned to lending? Ha!
Normally I don’t put up earnings reports, but this one is very significant in that it shows just how fast and deep the global slowdown is. A 23% drop is sales is something worse than a slowdown, it’s horrific. Its impact on a company can be extremely damaging, and not just on that company, but on the entire supply chain as it ripples.
When I was flying as a captain in the airlines, I was forced to take a 33% paycut (an early victim of deflationary forces) and I can tell you that when moves on that scale hit, you must react quickly – as I did, so that you don’t bleed your finances away. The very first victim is new money for investment. That’s what you are seeing on a global scale, don’t think for a second that the largest bubble in the history of mankind can be unwound in a little over a year, it cannot. Also don’t believe that all the monetary stimulus can overcome the power of the unwind, it can’t.
Yes, at some point the adjustments will be made, THEN what the government is doing will NAIL the value of your money – not good. None of this would have happened if the stimulus game had never been started. And even that statement isn’t entirely true, as our debt based money system promotes unsustainable math.
Intel Fourth-Quarter Sales Drop 23%, Missing Forecast
By Ian King
Jan. 7 (Bloomberg) -- Intel Corp., the world’s largest chipmaker, said fourth-quarter sales dropped 23 percent, missing a forecast that it cut by $1 billion less than two months ago and sending the stock down 6.5 percent.
Revenue was $8.2 billion in the period, down from $10.7 billion in the same quarter a year earlier, the Santa Clara, California-based company said today in a statement. In November, Intel predicted that sales would be about $9 billion, compared with an earlier prediction of at least $10.1 billion.
Intel, whose chips run about 80 percent of the world’s personal computers, is losing orders as PC makers curb production. Chief Executive Officer Paul Otellini, 58, has said he expects the current U.S. recession to be the worst of his lifetime.
“The whole supply chain is down 20 percent to 30 percent,” said Doug Freedman, an analyst at Broadpoint AmTech in San Francisco. He had predicted that Intel would report sales of $8.27 billion for the quarter. Computer makers “didn’t build anything -- they shut down their factories.”
Okay, since I’ve been talking up this HOG trade, here’s a couple of charts. On the left is the daily and on the right is the 30 minute version:
This is really a classic setup and I’ve been showing it just for that reason. Note on the daily the outside hammer that was above the upper Bollinger band. That’s the kind of entry that will make you money, and I should have taken a larger position, but was playing small, oh well, profit is profit, and I sold about 1/3 of my position this morning at $18 and still have the rest for now.
If you look at the 30 minute version, I have drawn in some Fibonacci retracement levels and you can see that the 50% level is at $17.73… that’s why I took partial profits at $18, and I’ll be looking to take some more if we make it to the 61.8% level. I’ll probably keep some of the position for a little longer, just in case the sell off gets legs. Remember that in general you want to cut your losses early and ride your winners. Playing with options is difficult, it is my experience that I’ll have long stretches where I’m just treading water and then the profits come in a short time period. That was definitely true last year, a good year overall, but streaky, and difficult for those who may have joined the fun a little late.
Anyway, I see that the DOW is now off about 175, and the SPX is down more than 2%, back into the 914 range. I see support in the 905/900 area and will be watching there closely.
The 30 minute fast is now oversold, the slow is about half way there.
On the SPX, the 38.2 retrace is at 910 and the 50% is at 900. Here’s chart:
Futures are down significantly this morning, the DOW is off about 100 points, but the S&P is down even more on a percentage basis. That RSI divergence I showed yesterday was prescient and it was not a small divergence either.
The media is blaming more layoff announcements yesterday which was followed by a very bad employment outlook by ADP (a prior and future short target). Meredith Whitney over at Oppenheimer also had a few choice words about banks needing to raise still more capital, and then there’s Intel missing forecast on revenue and Time Warner taking write downs. Not a great fundamental picture, is it? It’s only going to get worse and we’re just getting to another earnings season.
So, today’s action indeed makes yesterday’s move look like a failed 5th attempt higher and this may be the start of wave ‘b’ down of wave ‘c’ up, of the larger wave ‘B’ up/sideways. That does leave at least one more wave up coming, so I think getting bet the farm short on this move would be a mistake, however, it is possible that count is not correct and we just head on down, but that’s not my most likely scenario now. In fact, the 900 to 905 area should offer strong support here. If we break that, then it could be something more.
Keep an eye on the short term stochastic, the 30 minute fast is already approaching oversold, and the 60 minute is already half way there.
I note that HOG has broken its uptrend line, and is down 10% from its high of $20 which is where I added to my short position. I’ll be watching that play and will let you know when I exit.
GLD is down a little after a big comeback yesterday.
Jan. 7 (Bloomberg) -- The dollar rose for a sixth day against the yen, the longest run of gains in two years, after General Motors Corp. said rescue loans already pledged by the government should ensure the biggest U.S. automaker’s survival.
…Don't give me that do goody good bullllllshit!
Do people really believe such drivel? The dollar certainly didn’t rise today because we went further in debt bailing out a company that has no future! How do they get away with writing such stuff, anyway? No wonder Americans don’t know their butts from a hole in the ground when it comes to how money works!
Pink Floyd, Money:
Money, so they say, is the ROOT of all evil tooooday! (See, even Roger Waters can correctly identify the root of the problem – it's a monetary phenomena. LOL!)
That’s another sobering headline that pretty much says it all. Chrysler is owned by a hedge fund, Cerberus. They are a “private” company, after all, and claim that they owe no one the reporting regiment required by public companies! And our elected officials seem to agree, they certainly have not required otherwise. Oh, but the Treasury is requiring them to report to them, they just won’t make them public, just like they won’t tell us how the TARP money is being spent, all the while talking up the importance of transparency.
It amazes me that hardly a handful of Americans are being vocal about this. Frankly, I’m not only sick and tired of seeing this type of bull, I’m tired of talking about it as I’ve been doing for the past 4 years now – but I won’t back down! The math will ultimately do the talking, these latest two headlines go hand in hand. No, Mr. Obama, we won’t have trillion dollar deficits “for years,” our system doesn’t have “years.”
That headline tells the entire story, so I won’t post the rest of the article, it’s just more B.S. anyway. Well, at least he admits it. Perhaps that’s like saying, “I’m an alcoholic” – and that’s the first step, right?
In this case, though, Obama’s admission isn’t that he or our nation has a problem… no, Obama is only admitting that our nation has a symptom. According to Obama and the same old cast of characters he is surrounding himself with, the problem is that the economy is slowing. Their solution? Stimulus, stimulus, and finally – more stimulus.
Well, I have a news flash for Obama… we won’t be running trillion dollar deficits “for years.” No, exponential math is nearing the end of the line. He can try to keep exponential math going for a while, but he will not succeed, as DEBT has saturated the government, our economy, and the entire globe. To keep this level of debt growth going, the people who possess debt must be able to take on and service still more. Can we? I say no, we can’t. Obama is about to get a lesson in math, I believe.
He is not asking the right questions and, unfortunately, he is not surrounding himself with people who represent true change.
Well, as I stated in my last update, the volume didn’t support that last run up and it was taken back. The 927 area in the S&P, however, provided strong support all day and did not give up the fight.
For the day, the DOW gained 62 points (.7%), the S&P gained .8%, the NDX gained almost 1%, and the RUT was the strongest, gaining 1.9%.
I note that the DOW managed to close above 9,000 (9,015), but I also note that the futures (/YM) did not and that there is a pretty large difference between the two, about 50 points – with the /YM closing at 8,967. Volume on today’s advance wound up being lighter than on yesterday’s decline as you can see in the one month DOW chart below. Both the DIA and SPY produced higher volume spinners, so volume was heavier elsewhere. Also note the very oversold stochastic and the already rolling over RSI:
Internally advancers outnumbered declining issues by nearly 4 to 1 on the NYSE and about 3 to 1 on the NDX. I also note that this is the first time in a LONG time that we have new 52 week highs (9 issues) exceeding new 52 week lows (6 issues) on the NYSE.
I still think this is a dangerous market to be playing in. The market obviously wants to run higher but that darn reality keeps getting in the way, as do the short term technicals. The indices have run up into their upper Bollingers and are now slowly tilting them up, opening the gap.
Today’s move higher may not have satisfied the small movement on the McClelland Oscillator’s call for a large price movement. If anything today’s action was more spring winding. Now I don’t like any of the short term counts I was using and again think this market is just waiting for a triggering event to come along. It’s true, like Mish points out, that bearish turns often happen on GOOD news and thus the market may remain in fantasy land until Obama’s inauguration or until his stimulus plans are approved.
IYR managed to mount an advance today, finishing up 5.5%, and that drove SRS to less than the $50 mark. I think it’s getting very close to time to start adding SRS, especially if it makes it down in the mid to lower $40 range which it may (I have not added it yet).
That’s about all I have to say, other than I do see a new and small potential inverse H&S on the DOW. The chart below shows this with a neckline at about 9,075. The other indices do not have this clean of a pattern, it’s obviously some type of a flat. At any rate, if this breaks higher the upside target would be about 9,250ish. Since I don’t see this on the other indices, I discount it pretty severely.
If you’re a bull, that RSI divergence should bother you. And here’s another chart that should bother you… the XLF threw a spinner at the 50 day average and failed, AGAIN. Now the stochs are just about overbought here too. Note that the volume has been steadily coming up, but that it’s very low still overall:
Oh, here’s how HOG finished on the daily candlestick… another doji above the upper Bollinger. Too bad it didn’t close at $20, that would have been a clean potential reversal hammer. That HOG is overbought, and today’s volume is slightly less... we’ll see, maybe big pigs can fly? I’ll probably stop out a little over $20 if it wants to run, that’s one of the dangers of taking a poke at a play prior to the trend line breaking - it will break eventually, that’s for certain.
Interesting market today, to say the least. I am picking up a negative divergence on the RSI mainly on the 20 minute timeframe of all the indices, especially the NDX. Here’s a chart of the SPX, blue arrows showing this:
Short term oscillators are once again approaching overbought levels… I still see a mixed picture, however. I do see some formations that look outright bullish and if the VIX breaks down to the next lower level, we could see more upside despite the divergences I'm now seeing. I also am seeing a volume pattern that does not support this afternoon's advance.
I did short HOG this morning and it ran higher, up to $20 and I added a little to it there (very small play) based on the candlestick it is producing. If it closes here or higher it will be a clear air hammer above the upper Bollinger – sorry, the odds don’t favor that continuing, despite the momentum that has shot this hog up over 80% since the end of November.
A lot of hubbub at HOG today, they announced their CEO is leaving and they also announced that they are “standing behind” their low end product by “guaranteeing” that you can trade it UP within one year for what you paid for it.
That should tell you what concerns them, it’s falling prices for their used HOGS (overproduced). That’s DEFLATION at work and they are trying to resist. They will lose that battle as the demographics and collapsing shadow banking system will ensure it.
Here’s an interesting chart of the Diamonds (DIA) which is the DOW ETF. This chart is a 60 day, 60 minute chart. Note the dark blue triangle that I drew a LONG time ago and how this morning’s spike higher threw a pin right into it and it was rejected there. That’s interesting as the SPY has already broken above that same line and the actual DOW index itself is still below it. The point here is that there’s still resistance in these areas.
The SPX has filled its gap from this morning and we’re otherwise still stuck in yesterday’s range. The short term oscillators are all over the place, I don’t see a clear direction from there. The 920 area is still providing support, but if 915ish were to fall there’s still the pivot at 912 and more support in the 900/905 area. Very congested chart, sideways patterns are like that…
Now we’re at a place where the direction for the next couple of days will be established. The markets fell back into the wave 4 flat after producing what looks like a double top on the DOW and possibly a failed 5th wave. Caution is advised here, however, as the markets could simply hang sideways and chop around until more of the overbought condition is worked off.
I think you still need to be cautious here either way and I note that the indices are all still higher except for the AMEX and Utilities.
I also note that the IRX (3 month t-bills) is higher than the zero where it has been. Below is a P&F chart showing a target that’s still higher (of course anything is higher than zero and that target is still WAY low):
Here’s a chart of the XLF… it’s up for the day, but note that it pinned the 50 day moving average and pulled back:
I also note that IYR and all the CRE companies are lagging.
At any rate, the rest of the day should be interesting, I don’t have large positions on anything but am still short a few select issues.
The markets were spiking into the top of the hour, then data released as follows:
The Redbook showed same store sales for last week were down strongly, minus 1.3%, and that conflicts with earlier ISCS data, this report is much weaker.
Non-manufacturing ISM was 40.6 in December, up from 37.3, and in line with forecasts.
Factory orders in November fell twice as much as forecast, falling 2.4% during the month.
Home sales plunged more than expected in November, again, falling another 4% when a drop of only .7% was forecast.
See, the surprise was to the down side. When the market begins to overextend, some piece of reality always seems to get in the way, but in this case it’s mainly technical.
Below is a TOS chart that shows DOW futures on the left and S&P futures on the right. Note the sharp reversal right on the release of all that data. It’ll be interesting to see what the rest of the day brings, I did get a little bit short a couple of issues on this morning’s spike, HOG being one, we’ll see how that works out…
The VIX had fallen down to 37, but has jumped right back to 40. The bond market continues its correction, and gold is lower.
Futures are up this morning with the DOW up about 40 points and the S&P up about 7.
The ICSC store sales for last week came in a little better than expected, only being down .8% year over year for that week, which showed that the post holiday shopping was actually a little stronger, relatively speaking, than the pre-holiday weeks.
A lot of data comes out at 10:00 Eastern today, Factory orders, non-manufacturing ISM, and pending home sales. Tomorrow’s data is very light, but we get weekly unemployment on Thursday, and then we get the more important (but very inaccurate) monthly figures of the employment report. I just don’t see how there can be anything good there.
In the news, more, more, and still more stimulus, always more stimulus – and Obama is certainly jumping to take the lead in this role. Too bad, I had hope, but his actions are simply making the math that much worse. Toyota announced they are going to shut their factories down for an 11 day hiatus, Cigna is going to slash 1,100 workers, Logitech is going to slash 15% of its workforce, but don’t despair if you are looking for work, the FBI is looking to hire some 3,000 new workers! Hmmm, we already have more than 50% of the workforce working either directly or indirectly for the government, and don’t get me started on Freedom versus Security: My MONEY 'tis to thee....
Okay, the technicals were talking to me yesterday when I noticed that the sideways action looked more like wave 4 than a ‘b’ wave correction. If so, it means that wave 5 up is next, and here we are with a higher open. And, yesterday’s up/down action produced a small movement on the McClelland oscillator which means a large movement is coming either today or tomorrow. It doesn’t tell us which direction, however, and keep in mind that there’s data coming out a half hour after the open.
If wave 5 up is about to happen, it’s probably going to be a significant little rally. I don’t know how far it will go, but the upside is limited by a couple of things. First of all, we are already up into the upper Bollinger band. Yes, movement higher will force that band up and out of the way, but having money on something that’s outside of the Bollinger is not for me, in fact my best contrarian plays come from that situation. I’ll be looking to get short on the top of wave 5.
Another limit to the rally is the stochastic. The fast is already overbought, needing only the slow to join it. Yesterday’s action on the RUT seemed to be limited by both these things, and it produced a hanging-man candlestick in protest.
So, if there is a surprise, it will be to the downside as it seems to me that too many people are bullish for the underlying fundamentals. I’m not going to short yet, but we’re getting closer. Take another look at the HOG chart in yesterday’s end of day report… you can see that the end of November rally produced 4 up days, then it moved sideways, then it produced 4 up days. We’re getting close to being symmetrical time-wise. Same with the major indices, here’s the last two months on the DOW… note that the late November rally produced 5 up days, then a large sell off. We’re getting close to being symmetrical time-wise there too.
By the way, Harley just announced this morning that their CEO is going to retire in ’09 and their stock shot up nearly a buck in the pre-market – see, that’s the type of short entry I look for – above the Bollinger, WAY above the Bollinger, time for a nibble there.
So, my best Elliott Wave count is that we need wave 5 up to finish wave ‘a’ up of ‘c’ up of wave ‘B’. Once wave 5 up completes, I would expect a wave ‘b’ down that will be followed by another wave up. That should be just enough to convince more people to toss their fiat money into the game to be sent back to the ether from which it came!
Ha, ha… it sounds like Jim Kuntsler isn’t really going to miss George W. all that much! Me neither… and he deserves every word of it and some. I think he’s being polite, my version wouldn’t be suitable for reading by anyone under age 21!
A prankish fate put George W. Bush in the oval office to keep America stupid. The nation was far from ready to see where it was going in the 21st century, and he was just the figure to keep it that way, with his void of curiosity, his allergy to reading, and his panderings to wealth-worshipping, Ponzi-loving, science-hating Jesus cultists. He goes out of office broadly regarded as an object of horror and loathing while the nation, now facing wholesale bankruptcy, struggles to imagine a plausible future, like someone who has just awakened from a cheap red wine drunk into the grip of a vicious hangover.
GWB was reputed to be an appealing personality off-camera, relaxed among his cohorts, full of fun, warmth, jokes, and nicknames. He was not quite as bad on-stage as his critics complained -- his natural obtuseness sometimes came off as candor -- but he was programmed by handlers with a range of poor locutions that eventually amounted to a world-view. For instance, the idiotic "war on terror," which served mainly to portray our adversaries as abstractions. His insistence on the term "victory" when speaking of our situation in Iraq actually fooled even his worst critics into thinking we were engaged in a "war," when for years it has been more accurately an awkward and lethal occupation.
I never believed that GWB actually tricked the nation on the "weapons of mass destruction" rationale for invading Iraq. Rather, the nation fooled itself into thinking that the war, in the first place, was anything but an act of vengeance for the gross injury of 9/11. After a couple of years, the public adopted the stupid narrative that they were "lied to," rather than recognizing the difficult truth that 9/11 had to be answered with lethal force, that international hostilities are far from wholly rational, and that Saddam Hussein got whacked because he was the Arab head-of-state who was the best candidate for getting whacked. A nation in thrall to psychotherapy, and self-esteem building programs, and the "win-win" bullshit of business Babbitry, couldn't imagine a tragic dilemma when one was staring them in the face.
GWB won reelection in 2004 -- running against the weak John Kerry, "a haircut in search of a brain," as Kevin Phillips put it so memorably, who was not smart enough to pander successfully (though he tried) to the dominant, Jesus-soaked Nascar fans who inhabit the Moron Crescent that runs from West Virginia south through Dixie and then west into Idaho. GWB was still riding pretty high when Hurricane Katrina slammed into the swamps and beaches east of Lake Ponchartrain, and the president failed to direct anybody to so much as air-drop bottled drinking water for survivors dying on rooftops and highway overpasses in New Orleans. The Left, once again, adopted an idiotic narrative to explain the event -- that Bush acted to punish African-Americans -- when plain incompetence combined with grandiose expectations for a televised happy ending to instead produce tragedy.
The fiasco in New Orleans was matched by the apparent failure to police Iraq back to stability, making the whole project appear feckless and futile, and GWB began his long swoon into discredit. But two other conditions were intensifying in the background, one the consequence of the other: peak oil and peak credit. As the primary resource of industrial capitalism reached its all-time production peak in 2005, the managers of the US economy allowed borrowing-from-the-future to replace productive activity as the basis for everyday life.
GWB barely acknowledged this compound problem. He asserted that America was addicted to oil, but he failed to take the idea a step further and say that our vaunted "way-of-life" could no longer be taken for granted. If anything, he endorsed the popular idea that a suburban lifestyle and WalMart consumerism was a Jesus-driven entitlement, and his circle in governance did everything possible to replace the industrial economy with an economy based on suburban land development and credit card spending -- which was enabled by fantastic experiments in finance that proved to be nothing more than an impenetrable web of swindles.
Those swindles began to unwind in 2007 and they now threaten to sink the USA as a viable enterprise. Their exact extent and nature still remain obscure, like the algorithms used to engineer the "alphabet soup" of fraudulent securities and recondite derivatives. In this stupendous failure, GWB is joined by his cohorts and minions in Republican polity, whose flamboyant misfeasance continues to make the credit blow-up worse by the minute. He leaves his successor, Mr. Obama, a predicament so dismal that the secession crisis of 1860 begins to look like a mere procedural quarrel in comparison. And despite the temporary crash of oil prices, the peak oil problem still looms very large in the background and has barely begun to work its hoodoo on what's left of the US economy.
The same prankish fate that elevated GWB may end up excusing or papering over his current ill-standing. Decades from now he might be remembered as the last national leader who presided over an orderly transition of power in a cohering federal system. The fickle public that longs for the last symbolic photo op, when Mr. Obama waves at the helicopter bearing GWB into the Texas gloaming, may soon turn on the new president for failing to return them to the Blue Light Special nirvana of days gone by.
To me, GWB will remain the perfect representative of his time, place, and culture. During his years in Washington, America became a nation of clowns posturing in cowboy hats, bethinking ourselves righteous agents of Jesus in a Las Vegas of the spirit, where wishing was enough to get something for nothing, where "mistakes were made," but everybody was excused from the consequences of bad choices. The break from that mentality will be very severe, and we may look back in twelve months and wonder how we ever fell for the whole package. The answering of that question will occupy historians for ages to come.
The oscillators finally exerted their influence, but so too did wave ‘c’ up… Let’s not forget the January effect – you know, as goes January, so goes the year. The month is just getting started and when the math is working against you, in the long run it’s the math that usually wins!
For the day the DOW gave back 81 points (.9%), the S&P was off .5%, the NDX gave back only .1%, and the RUT gave back .16%.
The media, of course, will not cite overbought oscillators as the reason for the decline, the reason du jour seems to be auto sales which were bad and Chrysler was the worse of the worse. The December figures were not as catastrophic as expected, but for the year, they were the lowest sales figures since 1992. Are you ready for your home’s value to go back to 1992? You should be.
As I stated in the last update, today’s action appears to be more of a sideways move which would more closely resemble a wave 4, and thus we may be about to experience another wave higher. There are forces working against this, so let’s look at the charts:
Sometimes it’s helpful to look at individual issues that may show what’s happening more clearly than even the index charts. Below is a 6 month daily of Harley Davidson (HOG). Notice how the steep sell off terminated in a ‘V’ bottom in late November (V bottoms are almost never bottoms that hold). From late November, we see wave ‘a’ up, then some sideways action (wave ‘b’), and now wave ‘c’. And there it hangs, a potential reversal candlestick that is above the upper Bollinger band and a daily stochastic that is buried in overbought territory. Yes, it is above the 50 day moving average, and yes, the recent volume has been getting stronger on the rally, BUT compare this rally’s volume to the volume of the ‘a’ wave rally in late November… hmmm. Do we see that same pattern anywhere else? Sure, the XLF looks just like it, only weaker, as does IYR, and many others. I just like the way HOG looks, it looks clean and paints a pretty clear picture. I would contend that HOG is a also a good fundamental representation of our entire economy – a half assed poorly engineered product, over marketed as being cool, sold on credit mainly to those who cannot afford such inflated prices, sold to bubble proportions and now that everyone has one, you may find it difficult to get rid of :
Next we have a one month view of the DOW. Note the overbought daily stochastic and how last Friday’s close above the upper Bollinger didn’t hold – they almost never do, and here we are back below 9,000 again. Slightly higher volume on the down day too, remember that volume confirms price, but we were expecting the volume to start picking up, weren’t we?
Next is a one month daily of the SPX. Today’s candlestick is a near perfect example of a “spinner.” Spinners are a marker of indecision. In this case it resulted in basically a sideways move that got it back beneath the upper Bollinger. Again, the stochastic is overbought, and the chart pattern resembles that of HOG.
So, are we going to rally to the moon or would I short HOG here. Well, the moon is definitely out of the question, but shorting HOG, and every chart that looks like it is not, but I’m not there yet. We still have the weekly stochastic on buy signals and not overbought yet, and the daily slow stochastic indicators are not fully there yet either. There are select issues that I would short, and am short, but I’ll wait to cover those until we have the entire market headed in the same direction again – that’s when the most money can be made.
Nate
PS - to all you Harley owners, YES, I am biased, see photo below – lol, now there’s a REAL bike (okay, I'm a sucker for a Harley too, just NOT the leather chaps - what the heck is with that anyway, some sort of a cowboy fantasy?)!
First, looking at today’s action this looks more like a wave 4’s sideways action. Below is my 5 minute DOW chart, and you can see that I have re-labeled the high point as the top of wave 3 and today’s action as wave 4. If that’s correct, we are just starting wave 5 up, or may produce more sideways action until it's ready to run.
I’m not convinced yet that this is correct, but I have exited my short position and am neutral. I really don’t want to try to play a 5th wave long here, I’d rather wait for it to end and catch ‘b’ short, then flip and catch the next long entry point after that.
The Daily charts are starting to look overbought as all the indices now have fast stochastic indicators way high in the overbought territory. Note on this SPX daily chart that the stochastic is overbought, it is above the upper Bollinger, and if it were to close here is what looks like a hammer (I won’t get excited about that unless it does close like that). I also note that the SPX just exceeded its previous high.
The 60 minute stochastic is still overbought as it has been for quite some time.
Not much of a sell off, that’s saying that there is more to wave ‘c’ up once the oscillators are satisfied.
Below is a 5 day, 5 minute chart of the DOW. Note the 4 day uptrend channel and how we broke beneath it, regained it, and broke again. Here I’ve labeled a very simple Elliott Wave count. I expect that once wave ‘c’ completes here we will probably head higher. I’m not sure what level this count is on, it could be that what I have labeled as 5 is really 3, we won’t know until later – that’s one of the problems with EW, it’s sometimes very difficult to know exactly what comes next, but the count will be more obvious in hind sight. Again, because I’m not certain, I keep my plays small here.
Next is a 20 day, 30 minute chart of the DOW. Note that the fast stochastic is heading for, but has not reached oversold, which is my sell my short signal. It’s possible that it never reaches oversold, and it’s also possible that once it does that there’s more decline still to come. My philosophy here is to attempt to cream the middle of the move, if possible, this doesn’t look like it’s going to be that much of a move and we’re in an intermediate up trend. I also note that the 60 minute stochastic is barely out of overbought and that both slow indicators have a long ways to go.
Finally, here’s a 10 minute chart of the SPX which is more bullish looking than the DOW. Note the uptrend line has not been broken and that the 10 minute fast stochastic has made a complete round trip to the bottom already this morning.
Gold and silver are getting killed on a stronger dollar, the NDX and RUT are both down less than .5%, and do not look that bearish either.
Bonds are continuing their correction, that indicates that money is flowing out which could be helping equities.
The VIX opened up pretty strong, made a run at 40, but was stopped cold there and sank back down, now at about 39. As I mentioned in my VIX analysis article, VIX Analysis, I thought it would find support in the mid 30’s and so far it has for now.
Overall fairly bullish looking to me, as I’ve been typing the SPX just turned positive again. I don’t see us taking off like a rocket, but the more these oscillators work off overbought, the more likely a run higher becomes, but again, if you look at the 60 minute slow stochastic, it’s tired and needs a rest!
Welcome to the real start of the trading New Year! I expect volumes to be increasing this week over last.
Futures are down this morning, with the DOW off about 100 points and the SPX looks like it will open down about 14 handles.
This morning we get two economic reports. The first is auto sales. Please see the chart below, last updated in December as this morning’s data is not available yet. Note the bars which are total sales and how precipitously they have fallen. It’s hard to get inflation out of sales like that!
Next is a chart of construction spending which also comes out later this morning, but you can clearly see the trend from this chart (again, you will not see inflation here). Note that this chart is in percentages and remember that percentages compound on each other:
Tomorrow is Factory orders, Non-manufacturing ISM, and Pending home sales.
Steve Jobs, CEO of Apple, says that his weight loss is due to a hormone imbalance. Believe him? I hate to say it, but if you hold Apple stock at this juncture, you are almost literally gambling on Jobs life (not to mention that over indebted Americans will keep buying over-priced electronic gadgets they don’t need).
Obama is pushing for a direct $300 billion stimulus via tax cuts. While this IS a step better than GIVING money to the banks, it nonetheless does not and will not help the math situation. In fact, the latest headlines all say that Obama want to cut taxes (nation’s income) and increase stimulus (spending). That’s a very simple math equation that drives another nail in our economic coffin.
From a technical perspective, I believe we probably finished 5 waves up last Friday and we are now correcting that move a little. Remember, I took a small short position right at the close on Friday, and I’m going to cash that in once the 30 minute stochastic fast reaches oversold. That was not meant to be a long term play at all.
We closed Friday with the 60, 30, and 10 minute stochastic in overbought territory. Again, for me, once the 30 reaches oversold, I’m out, and then am going to look to take a long entry. That, too, will be a short term play when I do it as the daily stochastic is approaching overbought. And, there’s a possibility that the rally does not continue. Remember, I do not like playing counter trend moves in general, and the trend is still down despite the 3 months of sideways action we’ve encountered.
I would look for support here in the 918 area, which we already hit and bounced off of, and next would be the 912 pivot. If that gets blown, and it may not, the next pivot down is at 848 but I doubt this makes it that far and there are a lot of potential support points prior to that, like 905, 900, and about every 5 points on down. So, I do not expect a huge move down, this looks to me more like a correction, probably a wave ‘b’ correction that follows wave ‘a’ up of ‘c’ up. A 23.6% correction of the move is at 917 which we already reached, a 38.2% correction is at 905 (a likely destination), or the 50% is at 896.
20 day, 20 minute chart below, note the overbought stochastic and Fibonacci retracement levels.
Little bit of a rally just prior to the open, best of luck to your day, I’ll have more later.
Looters have taken over America's Treasury. The executives who successfully ransacked their own banks, investment funds and insurance companies have set their eyes on Obama's stimulus. Tragically, the architects of the current economic fiasco have been placed in charge of America's recovery.
President Obama has made an enormous mistake. Instead of cracking down on serial looters and complicit regulators, he wants to guarantee the financial sector's obligations, which are several times larger than America's economy. This is a Ponzi scheme far beyond Bernie Madoff's imagination. Simply put: The government is breaking the rules of capitalism to reward the most reckless capitalists. Such is not the "creative destruction" Schumpeter hailed.
Is it unfair to criticize President Obama before he and his experienced team have a chance to enact new laws and regulations? For guidance on this question, let's turn to the father of capitalism, Adam Smith. Here's how Smith concludes Wealth of Nations, Book I:
Quote: “The proposal of any new law or regulation of commerce which comes from this order [the capitalists], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
Consider Obama's Economic Czar, Larry Summers, who comes fresh from heading a highly secretive hedge fund. As Clinton's Secretary of the Treasury, Summers championed the repeal of the Glass-Steagall Act, which led directly to the excessive risk-taking by newly enlarged financial entities deemed too big to fail when they failed. Additionally Summers and Robert Rubin lobbied intensely for legislation signed by Bill Clinton that forbid government oversight of derivatives, the toxic instruments that have poisoned balance sheets around the world. Summers' former deputy Tim Geithner, the new Secretary of the Treasury, has supervised more recent rip-offs. He bears significant responsibility for the Lehman Brothers' catastrophe and for the flawed Fannie Mae, Bear Stearns and AIG bailouts. At Geithner's confirmation hearing, he must be asked repeatedly why the looters were rewarded and why plans giving taxpayers more equity were rejected.
Sherlock Holmes was once famously asked by a Scotland Yard detective: "Is there any other point to which you would wish to draw my attention?" Holmes: "To the curious incident of the dog in the night-time." Detective: "The dog did nothing in the night-time." Holmes: "That was the curious incident."
Why haven't America's economists barked timely alarms? Are they blinded by their faith in markets? Perhaps the old saying should be reworked: In America, those who can, loot. Those who can't, teach wealth-friendly philosophies masquerading as hard science. In their mind-set, fraud is the province of Bernie Madoff, not Robert Rubin.
But what could be more criminal than Rubin's former employees, Hank Paulson and Tim Geithner, awarding the sweetest of all bailout deals to Citi, where Rubin sits as a highly-paid senior counselor and director. Throughout his career Rubin has pushed for more complex risk instruments and less government regulation. How stupid does the quintessential Wall Street/Washington wise man think people are when he claims never to have heard of Citi's most toxic assets? And to brag that he's been "very involved" at Citi, but blames the company's excessive risk-taking on a presentation made one day by an outside consultant? After confessing such failures of oversight, an honest man would have resigned his posts.
Yet it's not only Rubin's acolytes who are pushing Obama's recovery plan. Experts from both parties have also endorsed it. The only catch? These are the same experts who were blind-sided by the mortgage security frauds that led to the credit freeze that triggered the de-leveraging that's plunged the world close to a Depression.
Does all this sound like a simple-minded diatribe? Perhaps it is. But when analyzing America's financiers, a simple-minded (as opposed to a naïve) approach may be best. For example, Hank Paulson, Ben Bernanke and Tim Geithner thought that the banks they generously recapitalized with the taxpayers' money would begin lending again. Instead the banks used the bailout cash to buy other banks, issue dividends or simply profit on Treasury spreads - i.e., to make what bookies call their juice.
It's altogether possible that Barack Obama's recovery plan will bless sweetheart deals and generate enough public debt to destroy global confidence in our government's bonds. Foreigners, who own about half of all Treasuries, could stop funding America's deficit-driven recovery plan. During Obama's administration, the dollar might lose its reserve-currency premium.
Would all Americans then suffer equally? No. Those likely to profit most from Obama's stimulus before we go bust are his political allies, and especially his big donors. That's the nature of the doling-out beast. To minimize corruption, Obama must pro-actively prevent Chicago-style swindles. E.g., who owns the real estate adjacent to the infrastructure the government will build? What specific penalties will be incorporated into Obama's recovery plan to punish politically-connected profiteers?
If a spiraling out-of-control stimulus seems as if it's undermining the full faith and credit of the U.S. government, Obama's biggest donors will hedge their personal risk by parking some of their capital abroad. Have they've done so already? A senator should ask prospective nominees this question at their confirmation hearings.
Obama could be a different kind of president. His broad base of financial support ensures he won't lack funds for a reelection run. The dark side of Obama's presidency, however, is likely to come less from ethical failings than from his fondness for compromise.
You can't compromise with America's looters. They're too opportunistic. The economics team Obama assembled betrays his respect for elites and a caution that may doom his presidency. A bolder politician would stimulate the economy and simultaneously expose the moral violations at the core of our economic predicament. Leaders who sent the cops home need to be shamed, not promoted. Financiers who misled investors should be prosecuted, not bailed out. Attorney General nominee Eric Holder, the man who pardoned Marc Rich, doesn't seem likely to take up these tasks.
On Inauguration Day, President Obama will surely deliver an inspirational address. But the confidence he inspires will be worthless until he calls out and cuts off the thieves.
Bullard: Inflation target would aid deflation fight Sat Jan 3, 2009 6:19pm EST
SAN FRANCISCO (Reuters) - Federal Reserve Bank of St Louis President James Bullard said on Saturday that an explicit inflation target would help policy-makers prevent either deflation or inflation from taking hold in the United States.
"An inflation target would help focus expectations," he told a panel discussion during the annual meeting of the American Economic Association.
Bullard said that with Fed interest rates nearly at zero, an inflation target would also help send signals to the private sector that would normally be communicated by changes in official borrowing costs.
"Maybe now would be a particularly good time to do that because you have this possibility of expectations drifting off to deflation or a lot of inflation. ... I think it would help," said Bullard, who is not a voting member of the Fed's interest rate-setting committee this year.
(Reporting by Alister Bull, editing by Leslie Adler)
And San Francisco Fed’s Yellen joins the clueless “stimulus chorus:”
Fed’s Yellen Supports ‘Substantial’ Economic Stimulus By Vivien Lou Chen
Jan. 4 (Bloomberg) -- The U.S. economy faces a “serious risk” of stagnating for an extended period of time and “it’s worth pulling out all the stops” on fiscal stimulus, said Federal Reserve Bank of San Francisco President Janet Yellen.
“The current downturn is likely to be far longer and deeper than the ‘garden-variety’ recession,” Yellen said in the text of a speech today in San Francisco. “If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now.”
So, now we have two other members of the fed who do not understand history, economics, or math.
Hey, if I can’t make the Fed go away, then perhaps we can require that they at least learn a little math from the good Professor Bartlett: Spend some Time with the Good Dr. Bartlett…
Okay, I know it’s not exactly conventional to combine music with economics, but hey, I like it and if you don’t – well, don’t click the play button!
Sorry, St. Louis, there are no “inspiring” songs that I could find that would be fun to twist and weave into my anti-fed theme. While I didn’t find anything cool for St. Louis, I did find a guitar and vocal I like for San Francisco – enjoy:
And, if Bullard ever wants to visit the Fed’s Janet Yellen in San Francisco… be sure to wear some flowers in your hair!
Chicago Fed president Charles Evans says that without stimulus there is little hope of 'mitigating the losses in jobs and output.' Last Updated: January 3, 2009: 6:51 PM ET
SAN FRANCISCO (Reuters) -- The Federal Reserve's new lending programs should help cushion the impact of the year-old U.S. recession but a large traditional fiscal stimulus plan is also needed, a top Fed policy-maker said Saturday.
"We expect large amounts of more traditional types of fiscal stimulus to increase aggregate demand. I believe a big stimulus is appropriate," said Charles Evans, president of the Chicago Federal Reserve Bank.
A year into the recession, the U.S. jobless rate appears on pace to exceed 8% in 2009, Evans said in remarks to the American Social Sciences Association meeting in San Francisco, noting that many non-financial industries face the risk of "long-term structural impairment."
In November, the jobless rate was 6.7%.
Without the Fed's series of moves to help unfreeze credit markets and cut official interest rates to the bone, "the downturn -- and its costs to society -- would be even more severe than what we are currently facing," said Evans, who is a voting member of the policy-setting Federal Open Market Committee in 2009.
Since the financial market crisis erupted, the Fed has created several new programs aimed at bypassing the traditional banking system and smashing through the credit-market logjam, including the direct purchase of mortgage-backed securities.
With the Fed holding down the monetary policy aspect of the equation, Evans said similarly aggressive actions are needed on the fiscal side to shore up the economy. "Since most economic forecasters envision the current downturn as rivaling the deep recessions of 1974-75 and 1981-85, I think these fiscal programs must be large in order to be effective and to instill badly needed confidence," he said.
President-elect Barack Obama has said that signing a major economic stimulus package will be his first priority when he takes office on Jan. 20, with a goal of creating 3 million jobs over two years.
Evans said the Fed will be increasing its nontraditional policies further now that the federal funds rate, its traditional tool to influence economic growth, has been cut to almost zero, in a reference to the "quantitative easing" measures taken by the central bank recently.
"We are faced with the challenge of calibrating these unfamiliar policies and, in the future, determining the appropriate time and methods for winding them down," he said. Evans also said the market crisis that erupted in 2007 showed huge holes in financial regulation.
"Significant weaknesses have been revealed in our system of financial regulation. ... These failures call for a reassessment of the roles of market discipline and our regulatory structures," he said
Many of the Fed's moves have been done on the fly in response to "emerging distress," and the central bank must do a better job communicating its motives to the public, Evans said.
"In a complex and dynamic environment, the public needs effective and transparent communications. As our lending facilities and other policy responses continue to evolve, this is a daunting task," he said. "We should strive to do more."
Let me ask again, are there any adults left? Here’s a voting member of the Fed who simply does not understand how we got to where we are and he certainly does NOT understand the ramifications of his actions. In fact, it appears that understanding history or basic economics is a DISQUALIFIER for working at the Fed!
“…I think these fiscal programs must be large in order to be effective and to instill badly needed confidence," he said.” Oh, really? From my perspective, what the Fed is doing is destroying not only the confidence in the system, but they are destroying the underlying math - Death by Numbers.
“Evans said the Fed will be increasing its nontraditional policies further now that the federal funds rate, its traditional tool to influence economic growth, has been cut to almost zero, in a reference to the ‘quantitative easing’ measures taken by the central bank recently.” Oh really? Has anybody or any country ever become wealthy by printing money (My MONEY 'tis to thee...)?
And this is the statement that just pisses me off to no end, “In a complex and dynamic environment, the public needs effective and transparent communications. As our lending facilities and other policy responses continue to evolve, this is a daunting task,’ he said. ‘We should strive to do more.’” Once again, they are taking simple problems (too much debt already) and obscuring them with words like “complex” and “dynamic” while they claim to be working towards TRANSPARENCY. How can these clowns even say that with a straight face? Bloomberg and Fox News have filed lawsuits just to try to find out who is on the receiving end of our taxpayer money handouts, and it is THEM who refuse!
But we know why they are playing this game! The truth is that ALL the large financial institutions are INSOLVENT if forced to expose their true holdings. They all overleveraged beyond belief, JPM being the epicenter of the black hole. And remember, that the Federal Banking system is really not Federal at all – it’s private. These people at the Fed, Paulson especially, came from this private system and they are still working for IT, not for US. They are still in process of the greatest heist and Ponzi scheme in the history of mankind and they are trying to perpetuate the illusion at least until they can exit.
So, either Charles Evans is complicit, or he is simply naïve beyond belief.
Seriously, Does Anyfed in Chicago Really Know What Time it is?
The National Bureau of Economic Research has officially confirmed what everyone already knew: The U.S. economy has been in recession for many months. The question now is whether anything constructive can be done about it.
Historically there have been two very different public policy responses to a serious economic slowdown. The first—laissez-faire—is simply to allow market prices to adjust to the new economic reality. Since most economic slumps are caused by a decline in demand associated with the bursting of a credit/money bubble, prices tend to adjust downward fairly rapidly. We have seen some of this in the current crisis with real estate, stock and commodity prices (especially crude oil) falling dramatically. This falling price process tends to “clear out” the malinvestments of the credit boom and eventually sets the stage for a sustainable economic recovery.
This price adjustment process, though efficient, is painful. And the larger the initial credit bubble the larger and more painful the collapse. Many thousands of homes go into foreclosure, banks and hedge funds fail, capital goods industries are especially hard hit, and the recession normally lasts between 11 and 14 months. Lower interest rates and modest unemployment benefits tend to ease the economic hardships somewhat. We have had 10 recessions since 1948 and managed to survive them all.
An alternative policy approach, which is being tried this time, is to treat the recession with almost unprecedented doses of government intervention. In this scenario, the Treasury and the Federal Reserve engage in policies aimed at “reflating” the bursting credit bubble. The Fed lowers interest rates dramatically and inflates the money supply by purchasing government and even commercial debt. And the Treasury gets the legal authority to spend upwards of $700 billion to bail out Fannie and Freddie, commercial banks, investment banks, insurance companies, and any other private firms too big to fail.
So far, at least, the results of this approach are not promising. The final public policy shoe to fall early next year will probably be massive public works programs (infrastructure spending) to create “jobs.” The President-elect Obama economic team and economist Paul Krugman have already gone on record as favoring such a proposal. They also seem to support another, bigger, round of so-called “stimulus” spending by consumers funded by tax rebates. But will any of this shorten the recession? A decent argument can be made that all of these public policy responses will only make things worse and prolong the slump.
The longest recession in modern times is the one that began in 1929. It lasted a full 43 months and was quickly followed by the 1937 recession that lasted another 13 months. Almost one half of the months between 1929 and 1939 were recessionary. And between 1929 and 1939, the average yearly unemployment rate in the U.S. was a staggering 16.9%.
Though Presidents Hoover and FDR unbalanced the federal budget, created the Reconstruction Finance Corporation (to bail out banks and businesses), enacted the National Industrial Recovery Act, engaged in massive public works projects (WPA), and inflated the money supply sharply after 1934, nothing really worked. After 10 years of political and economic unrest and uncertainty, the unemployment rate was still 17.2% on the eve of our entry into WW2.
Laissez-faire economic ideas (deregulation, tax cuts) are currently out of favor but the fact remains that the Krugman and Keynesian policies of bailouts, deficit financing, and public works have never really worked. They didn’t work in the U.S. in the 1930’s; they didn’t work in the 1990’s in Japan.
They don’t work because they prop up unsustainable investments in the private sector rather than clear the way for new entrepreneurship. And they don’t work because government central planning is hopelessly naïve (they even have trouble mailing out rebate checks). Sometimes in economics (as in medicine) doing “nothing” (allowing the system to heal itself) works better than drugs with nasty side effects or bureaucratic attempts at reconstructive surgery.
Dominick T. Armentano is professor emeritus in economics at the University of Hartford (Connecticut) and a research fellow at The Independent Institute in Oakland, Calif. He is author of Antitrust & Monopoly (Independent Institute, 1998).
Good 10 minute video that clearly explains our REPUBLIC within the possible political spectrum - another must view:
What it does not address, however, is how our republic has morphed into a government that is now controlled by money and the few who control it – Oligarchy.
President-elect says he wants to double renewable energy production, rebuild roads and schools and cut taxes. Next step: Consulting with Congress.
By Jeanne Sahadi, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- President-elect Barack Obama on Saturday offered the most detailed statement yet of his economic recovery plan, sketching out broad-based spending proposals and tax incentives aimed at reviving an economy mired in recession.
In his weekly radio and video address describing what he called the American Recovery and Reinvestment Plan, Obama spelled out five main goals. He said his plan proposes to:
• double renewable energy production and make public buildings more energy efficient;
• rebuild crumbling roads, bridges and schools;
• computerize the health care system
• modernize classrooms, labs and libraries;
• and provide tax breaks to American workers.
"Economists from across the political spectrum agree that if we don't act swiftly and boldly, we could see a much deeper economic downturn," Obama said. "That's why we need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term."
The main goal of his plan: to create 3 million new jobs. Most would come from the private sector, he said.
As Obama prepares to take office on Jan. 20, the country faces a series of severe economic and political challenges.
Nearly 2 million jobs were lost in the first 11 months of 2008 - the final government reading on the employment picture will be released on Friday - and the economy has stagnated. Investors suffered the worst year in stocks since the Great Depression, and foreclosures are rising while housing values are declining at record paces.
Virtually every state is facing a budget shortfall, forcing many to make plans to cut back on critical services and raise taxes. To that end, Obama's advisers and lawmakers have said they expect his legislation to provide increased aid to states to pay for Medicaid, as well as a boost to unemployment benefits and food stamps. However, he didn't mention it in his address on Saturday.
Obama's video address did not attach an estimated price tag to his proposal, but his advisers have said publicly they expect the size of the spending package to range between $675 billion and $775 billion.
This is a fine example of less than honest and sub-elementary school level thinking on two fronts:
The first is in the area of basic math. If our problem is that we are too much in debt and don’t have enough money, how does spending more while cutting taxes help that situation, exactly?
Ha, ha – that’s right, we’re going to “stimulate” our way out debt! Ho, ho, hardy, har, har – that’s a good one. Look, substitute the word “tax” with the word “income” and you can see that spending more while at the same time cutting your income – while at the same time being up to your eyeballs in debt just isn’t going work out well, math wise. The math underlying our entire economy simply doesn’t work any longer as I spelled out here When the Math No Longer Works..., and here Death by Numbers.
The second failure in being honest is this; if a “civilian” company is started solely to help accomplish the above items for the government using taxpayer dollars, are those jobs that are “created” really private sector jobs?
So everyone knows where this “money” will come from, right? The now proverbial printing presses – that’s correct!
Is it possible to print our way to prosperity? How’s that worked out in the past? Uh, huh… that’s what I thought.
Money for Nothin’ – get your chicks for free?
Naw, the Obama administration are the new “Sultans of Swing!”
Dire Straits - Sultans of Swing:
For those into the weekend music, here’s a terrific classical guitar version by Mark Knopfler:
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