Saturday, October 24, 2009

Peter Schiff - "Get out of the US dollar"

Peter is fundamentally correct, of course. Timing is always an issue, however, and his “red alert” causes my contrarian red alert to sound. Math is a funny thing, when too many people are thinking the same thing, the math gets crowded and a reversal is usually not too far away, witness the descending wedge I pointed out earlier in the dollar. Yes, that wedge can break the wrong way, and if it does, then Peter’s advice is good. If it doesn’t, then Peter’s advice is simply early.

Heeding his warning is the right thing to do regardless UNLESS, like he says, religion is suddenly found (unlikely). How will you know? You will see banks forced to mark to market, to clear out the debts, and you will see the government shrink, bringing the deficits back in line. Those actions are the only way to save our dollar, and likely the only way to ultimately save our entire political and economic systems.

Peter Schiff issues a Red Alert: "Get out of the US dollar"

Debt Pusher-in-Chief…

Your weekly “radio” address from our Debt Pusher-in-Chief...

"Must get credit flowing," this time to those innovating small businesses. Sounds good, looks good, is completely ignorant of the math and what’s happening to our economy while listening to advisors and central bankers who are literally insane.

Innovation, the American way, does NOT come from debt pushing. It comes from capital formation that follows the fair and consistent application of the rule of law. Skirting bankruptcy laws to funnel dollars to the banks is NOT following the rule of law.

The people of America are saturated with debt. The banks of America are saturated with debt and toxic derivatives that are being hidden and marked to Enron like fantasy. The governments, on every level, are saturated with debt. All that debt is owed by the same 306 million people whose incomes cannot possibly pay it back, ever. Yet, our Pusher-in-Chief is not working to clear the debt, no, he wants to add to it. INSANE, quite literally.

Small businesses in this country cannot compete. They have been decimated by the oligarchs who run our money system, our media, our military industrial complex, and by political extension of falsely created dollars, our entire country. “Free trade” wasn’t free. It made the oligarchs rich and destroyed small business as the machinery of productivity was shifted overseas.

Making fiat DEBT available to small businesses is NOT going to revive small businesses or innovation.

Innovation, the American way, does NOT come from standardized testing. Forcing the next Benjamin Franklin or Thomas Edison to be whisked back and forth from one “soccer mom” event to the next and then have to be forced to sit through endless test taking coaching sessions is simply a waste of everyone’s time and efforts. Plus, all those who are gifted in a subject are forced to tolerate those who are not as they must endure the blathering of people whose talents lie elsewhere. Each brain is wired differently and that is a gift. We are all individuals with different and special talents. Teaching everyone Asian style, to become human robot calculators, is a colossal bad idea, a mistake with huge implications. Think about the innovations of the industrial age and now the technological age. America, with 5% of the world’s population holds the vast majority of the world’s patents. Why, and is that trend still in place?


It’s because we used to have an education system that allowed kids time to think and promoted creativity and individualism, not rote regurgitation of some moron’s “ideal” robotron American who can barely pronounce “Constitution” much less understand how money is created in our system of debt pushers. It provided time to find out who they are and to seek out and become proficient in the things that interest them, usually the things where their talents lie. Mix that specialization in with a little creativity, money, and the rule of law, and the next thing you know you have DERIVATIVES! LOL, just kidding, that’s how true innovation came about, Ben Franklin, Thomas Edison, Henry Ford, and even Bill Gates did not spend their days in school studying for and taking standardized (bastardized) tests.

And the capital was there for them, it came in ways that processed RISK. Today’s system is all about ignoring risk so that the creators of paper can profit, regardless of the cost of failure.

Derivatives are the result of the people allowing the bankers to take over our country and political system. The insanity of those preaching Keynes is right there on grandiose, mass psychosis display for everyone to see – you need only look at the charts of debt versus income to know that the debt pushers’ days are numbered.

Friday, October 23, 2009

Techicals Update…

Just a few observations I want to make before the close going into the weekend...

Sentiment is very, very bearish on the dollar, and an important development just transpired when Lazard just moved to change their funds from trading in dollars to Pounds Sterling. A move that throws the middle finger to Bernanke and to the U.S. dollar, more funds may follow.

Lazard Asset Management Fund Dumps The Dollar

This is a pretty hazardous gambit, actually, when you consider that just this morning Britain saw further deterioration in growth and admit that more quantitative easing (printing) may (will) be necessary (foolishly).

The technicals for the dollar are in an important place. The dollar has been forming a normally bullish descending wedge that concurs with the bearish rising wedge in the equity indices. Those patterns are all near completion:

Note that on the SPX that the rising wedge is terminal right on the bear market downtrend line. That line has so far proved to be resistance.

Odds are very high that those wedges will break in the traditional, opposite trend direction, meaning dollar higher and equities down. The next highest odds would be to see the very worst case and that would be a falling dollar alongside falling equities – that would not be good, it would be a disaster, and moves like Lazard’s make it a higher probability than before. The lowest odds are that they would both break in the opposite direction expected, something that concerns me for no other reason than they are so obvious and that so many people see them. Truly a place to be careful.

Another pattern to watch is a rising wedge in long term bonds. The long end of the curve is forming a rising wedge and /ZB is now challenging the bottom of that wedge as I charted in this morning’s update.

Oil broke out above $80 causing the Point & Figure diagram to issue a $115 a barrel price target! Again, we all better hope that doesn’t really happen. These charts are often right and should not be ignored, however, they are not always right and I would be very careful being long commodities here, especially if the dollar does rise and break that upper wedge boundary.

Today’s action by the wave count is close to ending the middle stroke of an abc move. There should be one more wave higher by the most likely count (with small subwaves). However, there are HUGE cracks and divergences developing in the markets. The divergences are historic in size, volume being the most noticeable.

Another standout are the Transports. They have retreated strongly from their recent intraday highs after BARELY making new highs. Unless there is a very strong bounce this afternoon, the weekly candle on the Transports is going to be a bearish engulfing candle. Below is a 3 month weekly and one month daily chart of the Transports.

You can see in the Transports that we have a fresh sell signal on the daily and are likely to close below the 50dma, just above the rising wedge bottom boundary, again, unless a late day large bounce occurs.

Of course the entire market is dramatically overbought and overpriced. Earnings are touted as being strong and “much better than expected.” That is mostly hype and ignores the historic collapse in revenues across the board. There are many signs indicating that credit is still tightening, another credit freeze is certainly NOT off the table and is, in fact, a high odds likelihood from my perspective.

Bottom line is that by the wave count there is likely to be another push higher, but the cracks are mounting and that last wave does not have to occur… that is why we use other indicators such as trendlines to tell us when direction has changed.

I hope everyone has a great weekend, it’s looking like the media and financial industry are selling a bunch of pretty maids, all lined up in a row…

The Eagles – Pretty Maids all in a Row:

Morning Update/ Market Thread 10/23

Good Morning,

Equity futures are higher this morning, especially the NDX following a truly good report from Amazon who is increasing market share, and despite their third quarterly sales drop, Microsoft “beat” and shares jumped across the spectrum:

The dollar is actually up overnight… why? This would be why:

BOE More Likely to Expand Bond Purchases on GDP Slump

Oct. 23 (Bloomberg) -- Britain’s failure to escape the worst recession since World War II may force the Bank of England to increase its bond-purchase plan next month, economists said.

Seven months after Governor Mervyn King’s central bank started a 175 billion-pound ($287 billion) program to rescue the economy, the Office for National Statistics said today gross domestic product unexpectedly shrank 0.4 percent in the third quarter. None of the 33 economists surveyed by Bloomberg predicted a contraction.

“Having pumped in so much money and still seeing a decline in GDP is damaging from a perspective of confidence and expectations for recovery,” said Stephen King, chief global economist at HSBC Holdings Plc, in an interview with Bloomberg Television today. “They’ll be thinking very hard about whether to extend quantitative easing. They need to do something to show they care about the economy.”

That’s the problem with stimulus and printing in a nutshell. It gets bigger and bigger until doing it more hurts the economy. The world has reached that point. The sane thing to do is to stop the printing and reign in government by shrinking it dramatically. The odds of that are low, so look for QE to accelerate and for the world’s economic problems to accelerate right along with.

Although the dollar is up, bonds are down. Below is a daily chart of the long bond futures, /ZB. It’s movements are similar to TLT, reflecting activity on the long end of the interest rate curve. On this chart, and in bonds in general, lower prices equal higher interest rates. Note the decline from the peak at the end of ’08. That was the collapse of the parabolic curve, and prices returned to the base of the last parabolic rise. They have been consolidating in a rising wedge pattern, but with the current action prices are falling below the lower trendline. This could usher in a large move in bonds towards higher rates. Fools will believe this to be a sign of strength in the economy, but those who recognize the extreme levels of debt and know math will know that higher rates will drag the economy further into trouble. TLT has yet to break lower, but I’ll be watching and will let you know.

Oil is flat while gold is zooming on the news out of Britain, reaching $1,069 an ounce in the premarket.

No economic data this morning, but existing home sales come out at 10 Eastern.

As I watch earnings season unfold, I am astounded at the disconnect I see from the media and the games being played with company’s reports. A never ending parade of estimate “beats” and yet all I see are HISTORIC collapses in revenue. Yes, I do see a lot of ONE TIME cost cutting measures and that is great, but it is not repeatable, and the consumer is NOT recovering. I read my former Airline’s report yesterday and see yet more and more HUGE “one time” write downs. Each and every quarter these huge write downs appear yet they do not affect “operating earnings,” LOL! This is like my family never planning on having any non-recurring expenses, you know, like having to call a plumber or fix a broken car – nope, never happens and boy do I wish that I could report that those “one time” expenses don’t affect the bottom line – they do. And yet as the size and number of these “one time” expenses grow, a pure accounting gimmick, more and more analysts are buying into the “operating” P/E numbers that are now so disconnected from reality as to be a complete and total joke.

And as Wall Street complains and whines that they “won’t be able to keep their best people with pay cuts forced upon them,” WHAAAA, they turn around and RAPE the consumer, the very same ones, who through no choice of their own, were forced to bail out these bankrupt bastards. Denninger posted a notice one of his readers received from Citi Bank raising their interest rate to 30%!! The Mafioso would blush at 30%! And yet, our government is bailing out firms who do this instead of rewriting USURY laws that absolutely should prevent that type of abuse. Your government is not just asleep at the switch, they are complicit in a crime against humanity, right here in our own country:

Denninger in his article, Recovery? How, Given THIS? does the math and shows the impact on consumer spending that actions like this have.

Again, I restate my call to boycott the large banks – all of them. This country can certainly survive, and in fact THRIVE, without these big banks, they are not too big to fail, they are too big to allow them to control our money system and to control our entire political structure.

The media, on occasion, lets out little hints at the crimes being perpetrated, they are failing to do the job, again conflicts of interest are everywhere, they have permeated the fabric of our culture. What follows is a link to a story from CNN showing how little pieces of reality sneak out on occasion:

5 evil things credit card companies can (still) do

Credit card companies are socking it to consumers left and right.

They're hiking interest rates to as much as 36% and doubling minimum monthly payments, frustrating customers who are already cash-strapped and credit-crunched.

In an effort to curb these abusive practices, President Obama signed into law a credit card reform act in May that's rolling out in three parts over 12 months.

At the same time, credit card companies have been hard at work coming up with new ways to boost profits while sidestepping the reforms.

"Card issuers are making sure they can make up the lost money in new ways," said Bill Hardekopf of, a research company funded by a commercial debt collector.

The first part of the law, which took effect in August, requires banks to give customers more notice ahead of major changes to their accounts, like rate hikes. Starting in February, limits will be imposed on when issuers can raise rates on existing card balances, and on new cards. In August 2010 some credit card penalty fees will be will reined in.

But no legislation can fully shield consumers from the credit card industry's ongoing efforts to boost the bottom line.

The worst part? "All of these hikes are taking place simply because they can," Hardekopf said.

Did you see that? 36%!

Oh really? " legislation can fully shield consumers..." BULL, usury laws and limits on leverage can definately protect the consumer and our entire system. The law recently passed does NOTHING. Of course those prior protections were killed by the industry who has taken over our money system.

Killing the concept of usury back in the early ‘80s allowed rates higher than 12% and that GREATLY accelerated the bad math of debt. It never should have happened and we desperately need to replace those laws as well as the Glass-Stiegel limits on leverage. Of course doing those two things would be a great start, but I must admit there is a side of me that doesn’t want to see them as I would rather see the entire system implode (it’s well on its way) so that we can properly start over, and properly identify the real roots of the problems – so far the media and the politicians are STILL not discussing the ROOTS.

Eagles – Heart of the Matter:

Thursday, October 22, 2009

November Monetary Trends…

This is the first issue in quite some time that has been updated in its entirety to the same date, in this case all the charts are current through 10/20/09.

Most of the old trends, that I have pointed out many times, are still in place. An exception would be the money supply charts that are expressed in “percent change at an annual RATE.” Those have been trending downwards, but have reversed and are moving upwards again, at least for now. These “annual rate” charts are more sensitive to turns as they multiply short term moves into annualized rates:

The year over year trends, however are that the money supply growth rates are still slowing. Not negative, but slowing:

None of that money has a chance if velocity remains in the gutter, and it is. For inflation to really pick up, velocity needs to improve. How can it with the populace still debt saturated and incomes depressed? When money comes in, it must pay over inflated mortgages, over inflated rents, and usurious rates on maxed out credit cards. When and how does that change? Does printing money and giving it to the banks change that? Of course not, only a FOOL or a ROBBER would believe or tell you otherwise:

Consumer credit, total bank credit, and loans and leases are all deeply in negative territory with well established trends downwards that have not changed as I also showed in yesterday’s Fed Chart Update:

And to all those who talk about the “modern” trumped up “operating” earnings, please remember that history is not kind to those who try to spin black into white. This Price to Earnings chart is the real deal, the one that compares apples to apples, and even it is artificially low as mark-to-fantasy cannot be reverse accounted out of the system entirely, thus earnings are overstated compared to real world prices and to real world cash flows.

The “law” that always wins is the law of math… immutable as the law of gravity or the laws of physics.

The Clash – I Fought the Law:

Senator Gregg: U.S. could be on path to a 'banana republic'

Could be?

Gregg: U.S. could be on path to a 'banana republic' situation

WASHINGTON (CNN) – A leading fiscal mind on Capitol Hill and a one-time Obama Cabinet pick sounded the alarm Sunday over the projected long-term financial challenges the country faces.

“This deficit is driven by us,” New Hampshire Republican Sen. Judd Gregg candidly said Sunday on CNN’s State of the Union when asked about the federal government’s projected $1.42 trillion operating deficit for the 2009 fiscal year.

“You talk about systemic risk. The systemic risk today is the Congress of the United States,“ the Ranking Republican on the Senate Budget Committee told CNN Chief National Correspondent John King, “that we’re creating these massive debts which we’re passing on to our children. We’re going to undermine fundamentally the quality of life for our children by doing this.”

“Now you can’t blame that on [former President] George [W.] Bush,” Greg said, noting that using the Obama administration’s projections the budget deficit for the next ten years is $1 trillion per year. And Gregg said that during the same ten-year period, public debt as a percentage of gross domestic product would increase from 40 percent - which Gregg called “tolerable but still too high” - up to 80 percent.

The figures, Gregg told King, “mean we’re basically on the path to a banana-republic-type of financial situation in this country. And you just can’t do that. You can’t keep running these [federal] programs out [into the future] and not paying for them. And you can’t keep throwing debt on top of debt.”
“Standards of living will drop if we keep this up,” Gregg also said.

After repeated promises from the White House that the final health care reform bill will be deficit neutral, Gregg said a Democratic plan to avoid otherwise automatic Medicare cuts without having a funding source for the projected expense of $250 billion over the next decade was “gamesmanship.”

Asked about criticism leveled Sunday by former Republican-turned-Democrat Sen. Arlen Specter of Pennsylvania that Republicans were being obstructionist in the health care reform debate, Gregg replied, “Well, I suppose he has to call us something now that he’s left the party.”

Responding to the Democratic charge that the GOP is “the party of ‘no,’” Gregg pointed to Republican health care reform proposals including his own and another co-sponsored by Republican Sens. Tom Coburn and Sen. Richard Burr, as well as a bipartisan proposal put forward by Sens. Ron Wyden (D-OR) and Robert Bennett (R-UT).”

He’s absolutely right about the fact that the shell game is being played, but he isn’t acknowledging his own part in the game! Supports sending more troops to Afghanistan, payments for which are off balance sheet. Supports “paying for” extended benefits, but are they really “paid for” when there are huge deficits in other areas? It’s all a shell game, a paper chase.

Our nation needs a party that knows how to say “NO!” That’s called being an adult, when the children are always asking for candy, a GOOD parent knows how to say NO. Our government has grown out-of-control as there is no adult supervision to be found. Again, it can all be traced back to finances… SEPARATE CORPORATIONS AND THEIR MONEY FROM STATE!

Morning Update/ Market Thread 10/22

Good Morning,

Equity futures are up very slightly just prior to the open, here’s the DOW and S&P futures showing the plunge yesterday afternoon along with the overnight action:

The dollar is up slightly but not as high as it was overnight, bonds are down, oil is up slightly and gold is down slightly.

The FHFA House Price Index was released this morning, it showed that the U.S. index dropped 3.6% in August… the price drop below peak is not substantiated by Case-Schiller data which shows that the overall drop has been far greater than this report’s 10.7% - this data is based upon “purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.” There you go, no wonder they are bankrupt.
U.S. home prices fell 0.3 percent in August on a seasonally adjusted basis, according to the Federal Housing Finance Agency's monthly House Price Index. The previously reported 0.3 percent increase in July was unrevised. On a year-on-year basis, the House Price Index fell 3.6 percent in August, compared to down 4.2 percent in July. The U.S. index is 10.7 percent below its April 2007 peak.

The “leading” indicators (what were they saying prior to the plunge in ’07?) rose 1%...
The index of leading economic indicators jumped 1.0 percent in September for the sixth gain in a row in what the report says is consistent with developing recovery. The largest contributor in September was the rate spread between the federal funds rate, which is very low, and the 10-year Treasury note which actually dipped a little in the month. Though the spread contributed a little less in September than it did in August, it's still signaling economic strength -- that is demand for long-term debt. The second biggest contributor was consumer expectations, which may or may not continue to contribute to strength given weakness in the mid-month Reuters/University of Michigan consumer sentiment report. Improvement in jobless claims, stock prices, and a little less responsiveness for supplier deliveries were also positives. On the negative side was a decrease in the manufacturing workweek and a dip in building permits. The coincident index, which will be used to formally judge when the recovery took hold, was unchanged in September. This index first showed an increase in July then in August, both at 0.1 percent gains.

This indicator is simply dangerous and shows how backwards thinking has become. A rise in demand for debt is a good thing by this indicator, and yet it was too much leverage and debt that led us into the crash and current condition. Yet another example of Economic Mass Psychosis. This “leading” indicator will simply lead the sheeple to the next slaughter.

Weekly initial unemployment claims jumped back to the 531,000 level for the past week, higher than expected. Here’s Econoday:
Initial jobless claims edged higher in the Oct. 17 week, up 11,000 to a higher-than-expected level of 531,000 (prior week revised higher from 514,000). But the four-week average continues to move lower, down for the seventh week in a row to 532,250 for a decrease of about 20,000 from month-ago levels, a decrease that points to improvement for the October employment report.

Continuing claims, down 98,000 in data for the Oct. 10 week to 5.923 million, are roughly 100,000 below month-ago levels. But the indication from this reading is difficult to assess, reflecting an uncertain combination of new hiring together with the expiration of benefits. Those receiving extended benefits fell more than 16,000 to nearly 465,000 while those receiving emergency compensation rose nearly 41,000 to 3.391 million (data for these readings is for the Oct. 3 week).

There was very little initial reaction to today's results though commodities and stocks did tick lower. Next reading on the jobs market will be Tuesday's consumer confidence report from the Conference Board which includes assessments of current conditions in the labor market along with consumer assessments of future conditions.

And here’s a big part of the reason the numbers don’t appear to be getting worse… in fact they are, you now have thousands of people falling off the backside of their benefits they’ve been unemployed for so long.

Losing their lifeline - 7,000 a day

As the Senate debates whether to extend unemployment benefits, more than 200,000 jobless Americans are set to see their checks stop in October.

NEW YORK ( -- Another day, another 7,000 people run out of unemployment benefits.

One month after the House passed a bill extending unemployment benefits, the issue is still being debated in the Senate.

Democratic leaders in the Senate introduced a bill two weeks ago to lengthen benefits in all states by 14 weeks. Those that live in states with unemployment greater than 8.5% would receive an additional six weeks.

Senate Republicans, who twice objected to swift passage of the bill by unanimous consent, want to add several amendments. Their requests include paying for the increased benefits with stimulus funds rather than by extending a longstanding federal unemployment tax through June 2011.

While leaders in both parties are trying to negotiate a compromise, Senate Democrats Wednesday evening took a step to limit the debate on the bill and bring it to the floor as early as the end of next week. If it passes, the Senate legislation must then be reconciled with the House version, which extends benefits by 13 weeks for those living in high-unemployment states.

Meanwhile, the bickering has cost people like Crystal Jordan of Dolton, Ill., their benefits. The single mother of three ran out in late September.

She is one of the 1.3 million people set to lose their benefits before year's end if Congress doesn't act, according to the National Employment Law Project, an advocacy group. In October alone, more than 200,000 people will fall off the rolls.

Lawmakers twice lengthened the time people can receive checks to as much as 79 weeks, depending on the state.

That’s 50,000 a week that are falling off the rolls, as they said, more than 200,000 a month… month after month.

While forever unemployment benefits certainly won’t help America in the long run, what’s more egregious is the trillions stolen from those same people to prop up the banks so that they can pay out their bonuses. Socialism, yes, but the socialism is favoring the bankers as their bailouts have been magnitudes of times greater sums of money than are paid out to the unemployed. It’s sickening, all of it.

Two days ago Karl Denninger suggested that people should boycott the large banks and move their money to smaller local banks and credit unions. Yesterday, Dylan Ratigan said the same. Today I’m also joining their camp in suggesting that a great way to pressure what’s happening is to pressure these large financial institutions by withdrawing your support and business, a boycott. The banks leverage your money, so simply don’t let them. They are using that leverage to buy and influence the political system of the United States.

They are using that money to subvert YOUR Constitution, and trust me on this, your way of life is going to be dramatically altered in the future by their greed and hubris clearly on display in public with statements like, “Pay inequality helps everyone,” made by a Goldman Sachs international advisor, Brian Griffiths. Why it’s their bonus money that will “help to stimulate the economy,” and don’t you know that’s a good thing, but that they need to keep up appearances by donating a goodly portion of YOUR stolen money to charity?! This type of thing needed to stop a long, long time ago. It’s now completely out of control and its taking our country into places that have the potential to get very dark very quickly. Simply refuse to do business with these mobsters.

Okay, we are in the middle of earnings season and what’s happening? Well, Apple is still doing well, we’ve heard some hopeful future looking statements from some of the other tech companies, but in reality sales and revenue figures are down hugely when compared to last year at this time, and last year was already bad at this time. We learned that eBay revenues are down, and we’ve learned that some of the banks are taking advantage of taxpayer stolen funds to manipulate the markets and to reinstate mark-to-fantasy to create ungodly “earnings” on paper, but those earnings are FALSE, they are as real as Alice in Wonderland.

And the media is playing up the positive, that is, after all, where all their ad revenue comes from, isn’t it? So, as CWB points out, when you go to Bloomberg you see a great big overnight headline that says, "China GDP expands 8.9%," and buried in very little print you find earnings reported overnight mostly in Europe:

"Ericcson's profit falls 74%"
"Pernod Ricard sales fall 6.3%"
"Praktiker profit tumbles 65%"
"Logitech profit slumps 71%"
"Japanese exports fall 30.7%"
"Ebay's quarterly earnings fall"

And when you read articles on earnings in the U.S., if you want to know the year over year percentage drops you better have a calculator handy as they are large and the people writing those reports will not even mention those figures, much less calculate them out for presentation. When you do it’s simply ugly. And all you really need to know is right there, “Japanese exports fell 30.7%.”
TOKYO (MarketWatch) -- Japan's exports fell 30.7% in September, compared with a year ago, as shipments to the U.S. fell by 34.1%, data from the Ministry of Finance showed Thursday. The fall in total exports came in worse than the median market forecast for a 29.9% fall and marked a third-straight monthly decline, according to Reuters. Imports slipped by 36.9%.

And what time of year is it? Oh yeah, it’s the time of year that Japan and other nations are usually exporting their goods to the U.S. for the Christmas season. How’s that going to look this year? Evidently terrific, if you work at Goldman whose very existence is only due to the taxpayer robbery they executed last year and is still ongoing.

I know, you WANT to be positive. You are sick and tired of reading the negative, and yet it is negative! Our country IS at an inflection point and we are headed in a very, very dangerous direction. Our economy is NOT recovering in the real world, only in the mark-to-fantasy world. The endless stimulus is NOT making things better, it is the very CAUSE of ALL our economic problems – they are getting worse quickly!

The market has never been so disconnected from reality, so overpriced. This is NOT a new economic miracle anymore than the tech bubble was a new paradigm for the stock market, anymore than the credit bubble of the late ‘20s was that lead to the Great Depression and Black Thursday, now exactly 80 years ago TODAY.

And just as a little reminder of how fast the markets can turn, yesterday in the last hour of trading the markets gave back every nickel of advancements in more than the prior WEEK. One week of gains gone in one hour, that’s how fast it can happen. The disconnected gains are going to be washed away, the markets always, always return to historical norms, the only alternative is that they simply cease to function.

So, was yesterday the turning point? Well, we did produce a new high prior to the plunge and we have yet to break beneath the prior wave, so all the old information and wave counts are still in play. It does, in my mind however, increase the odds that we may have put in a top. That has yet to be seen. It did break the latest wave’s uptrend line, but it has not broken any key levels. A break below about the 1,050 level would pierce the bottom boundary of that textbook rising wedge, that is what I’m watching and waiting for:

Note, too, that we do now have fresh sell signals on the daily stochastics. Support is at 1,061, with the 1,090 pivot now overhead once again. Tony Calero believes the wave count may have ended yesterday, but notes that it can extend. Both he and McHugh note and are watching that bottom trend line of the rising wedge and are using that as a point of demarcation for the beginning of the larger wave C down. That makes the 1,050 level now very important, I doubt it will go down quietly.

Frankly, I think the populace has been treating the bankers and politicians just a little too nicely… it’s time to stop being so gooey, to man up and stop taking the usurious abuse!

Lovin' Spoonful - "You Didn't Have To Be So Nice" 1965:

Wednesday, October 21, 2009

80th Anniversary of the Black Thursday Crash…

Jesse just posted a terrific 53 minute video on the crash, the 80th anniversary which is tomorrow…

The Great Crash of 1929: Remembering the 80th Anniversary of Black Thursday

The similarities between then and now are startling. Amazing how people forget the lessons. Talk of a new economic era currently have me on high alert for the beginning of the next leg down.

Please take the time to learn a little about the history - Nothing but blue skies, from now on…

David Tice on King World News…

David Tice understands the problems very well. He is forecasting very low numbers in the stock market and thinks that the time is very near. I agree (ht Comrade).

mp3 LINK: David Tice – King World News…

Gerald Celente's Latest...

Celente obviously knows math and sees the same charts I do...

Dylan Ratigan Giving it to Goldman Again...

It seems that Dylan caught my drift on statements from a Goldman big-wig. Yes, giving away STOLEN money is not charity.

Dylan also gives it again to the Chamber of Commerce.

Like Karl Denninger, he is calling for a big bank boycott. He is calling for three actions:
1. Move your money to a small bank or credit union.
2. Use cash, not credit cards.
3. Contact your Lawmakers.

Will it work? No, the math underlying our economy is too bad for it to work. Those banks are going to fail, they have already failed. Their actions are those of desperation, just like their mark to fantasy “profits,” that even a two year old can see through.

The Math Manifests Itself in the Charts…

Sorry, but the American capital system is dead. Not dying, dead… sorry, it’s all over, the only part of it left is watching the show land on the rocks.

How did it get that way? Did you view FRONTLINE: The Warning? Bad math that was created and supported by fraud and deception in the shadow banking world. That world is still being hidden and supported today in an attempt to breathe never ending life into an impossible math situation. It was allowed to happen because those creating the false money were, and are, handing it out to politicians (babies) like candy. It will not succeed and has, in fact, already failed as it was always destined to.

Here’s someone who understands the bad math. His article is a great and simple read:
Greater Depression for U.S. Rebuts 'Recovery' Talk.
Jeff Nielson is correct, the math doesn’t work and all that’s left is the when.

And we can see the bad math manifesting itself in the charts. It’s not a pleasant thing to watch, really… a disgusting reality that can only be ignored for so long.

You want to see some bad math? Here it is:

Federal Receipts:

Federal Outlays:

Federal Deficit:

The nation’s debts are clearly experiencing a parabolic phase of exponential growth. All parabolic phases end in collapse as this one will too – it is very close to the end, and when it does end, ALL the markets will come tumbling down. They will tumble because the CONFIDENCE in your government will fail, and the confidence will fail because the math fails.

Good luck dismissing those charts or downplaying their importance – I’ll gladly debate anyone who wants to take the opposite position. While the bad math is quite apparent in those charts, the printing press is attempting to mask it over, and the dollar simply ratchets lower and lower destroying YOUR productive efforts. And so you will see this bad math manifest itself not only in the charts, but in the real world too. That’s why unemployment is skyrocketing with real unemployment now greater than 20% and a manufacturing employment that is smaller than it was prior to WWII.

To all the idiots who Obama has surrounded himself with (Larry Summers, Tim Geithner, Ben Bernanke, etc.), all I can say is that your days in office are numbered and there is a very special place in history reserved for all of you.

Where else has the fraud and deception of the shadow banking system manifested itself? Just about everywhere, let’s start with the banking system that believes it’s above the law, above math, and above common sense morals and ethics:

Get a load of what is happening to TOTAL BANK CREDIT, or as the chart states, Bank Credit of all Commercial Banks:

Yes, that is happening right now while the markets go higher, while the “experts” declare an end to the “recession.” Good luck with that, someone is ignoring reality, guess who it is...

The chart of Total Loans and Leases is just as bad:

But it’s not just credit that’s down, loans and INVESTMENTS at commercial banks are also now negative year over year:

And the lifeblood of our economy, small businesses, are being choked off from credit as well. Here are business loans, aka “Commercial and Industrial Loans at All Commercial Banks:”

Total Small Time Deposits are also negative:

And look at the plunge in non-Financial Commercial Paper, that would be commercial loans by NON-FINANCIAL companies – you know, REAL COMPANIES that actually produce a good or service for society – how quaint:

Of course the Treasury, aka “the Reserve Bank,” has grown their balance sheet in an attempt to mask over the collapse of the exponential bad math:

Their attempts to pump money and hide bad debts has resulted in the crash of the money multiplier which counters their efforts to “stimulate” the economy:

As the effects of the bad math manifest themselves through the banking system and through government, the real economy is simply whipsawed by their foolishness and game playing. The housing market, international trade, manufacturing… all are just along for the ride, that would include you:

Housing Permits:

Housing Starts:



Trade Balance:

Durable Manufacturing:

Capacity Utilization:

Retail and Food Service Sales:

Total Business Inventories:

And they are telling you that the “recession” is over? Uhhh, okay. They would mostly be the same people who see inflation. Unfortunately, they are the ones looking in the rear view mirror. Inflation is much, much different than a LOSS OF CONFIDENCE IN GOVERNMENT AND OUR MONEY SYSTEM. Inflation is an increase in the total supply of money and credit. What is currently happening is NOT inflation. Why is almost everybody WRONG? Because they do not see the destruction of CREDIT that is VASTLY larger than the attempts to print money. Take another look at the banking industry charts above. Yes, the money supply charts are up big time and they are in fact destroying our currency, but what is happening in TOTAL is that the supply of money and credit are falling. That has manifested itself in the PPI and CPI data, as trumped up as it is. The Fed reports PPI numbers all through the supply chain… none of them are positive with the exception of finished goods when BOTH food and energy are removed and it’s still pointed straight down. Keep in mind that finished goods are LAST in the supply chain and that raw materials are FIRST and thus still must work their way into finished goods and finally to the consumer (crude in these charts does not mean oil, it means Unrefined, again at the beginning of the supply chain). Here’s a sampling:

PPI Crude Energy Materials:

PPI Crude Foodstuff and Feedstuff:

PPI Crude Materials for Further Processing

PPI Industrial Commodities:

PPI All Commodities:

PPI Consumer Goods Excluding Food:

PPI Intermediate Energy Goods:

PPI Finished Energy Goods:

PPI Finished Goods:

PPI Finished Consumer Goods:

CPI all items minus Food:

Commodity inflation? Where? The only place you’ll find it is in gold and silver… both are not rising due to inflation, they are rising due to a loss of confidence in your government and in your money system. Yes, your politicians and bankers can and probably will destroy your money via the printing press, for that to happen, however, the printing must exceed the destruction of credit and we simply are not there YET.

I hope that you’re mad as hell, you should be. The markets are rising simply on pure speculation, that would include the current bounce in oil – demand for oil is still falling and raw crude oil is still oversupplied (in the short term). Deleveraging will continue, the fraud in the banking industry will also undoubtedly continue, but the math is the ultimate limiter – future income cannot possibly service the debt. Not at zero interest and certainly not at any interest rate that’s higher. Thinking otherwise is pure fantasy. Get ready if you are not already, the disconnect is historic, the divergences are historic, all that’s left is the landing, I hope you have good shoes on! Oh, and go long duct tape, the future need will be great:

Lovin' Spoonful - Summer In The City

Is anybody paying attention?


This is a terrific program, one that should be shared by everyone...
"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

And guess what? It’s still being hidden… (ht Davos,Joh, and others)

Morning Update/ Market Thread 10/21

Good Morning,

Equity futures are down slightly this morning following more weak housing data and a slew of earnings reports:

The dollar is down slightly as are bonds, oil and gold are down as well.

The MBA Purchase Application “report” came in at down 7.6% for the week and that follows a 5% drop the week prior. Don’t know what to make of these reports, they are hiding the data from us and percentage moves on a weekly basis tell us NOTHING. Yet another report that belongs in the waste basket. Seriously, our system is degenerating very quickly… I was certainly HOPING that Obama would have a spine and fix some of the B.S., but unfortunately, he is proving to be working in concert as a part of the problem. Here’s Econoday’s report on Purchase Applications:

Housing data may be taking a turn for the worse. MBA's purchase application index has been moving backward the last two weeks, down a steep 7.6 percent in the Oct. 16 week. The unadjusted index, reflecting the Columbus Day holiday, fell 16.7 percent. The refinance index also fell in the week, down an adjusted 16.8 percent. Mortgage rates all moved higher including for 30-year fixed loans which rose 5 basis points to 5.07 percent. Existing home sales, to be released Friday, will offer the next look at the housing sector.

What I do know is that when large percentage moves week after week are not a good sign for the housing market.

Wells Fargo joined the other criminal institutions in reporting RECORD profits of over $3 billion for the quarter, twice what it “made” last year!! Want to know how they did it? Here’s what CNN says:

Despite facing an ongoing recession and related loan losses, the San Francisco-based bank said its third-quarter results were lifted by strong performances in its mortgage lending business and other divisions.

They made it in their mortgage lending business! “Strong performances,” too! That’s funny, how do you imagine, with the housing and mortgage business at depression levels that they manage to make record profits? Uh, huh, you know how… with a pencil, some paper, and a complicit government, that’s how.

And John Mack over at Morgan Stanley is wisely hitting the road before the pitchforks come out. Let’s read how their quarter went:

NEW YORK (Fortune) -- Morgan Stanley posted its first quarterly profit in a year.

The New York-based investment firm said Wednesday it earned $757 million, or 38 cents a share, for the third quarter. That's down sharply from the year-ago profit of $7.7 billion, or $7.38 a share. But it was much better than the 30 cents per share profit that analysts surveyed by Thomson Reuters were expecting.

Revenue fell to $8.7 billion from $18 billion a year earlier. Revenue at the global wealth management unit nearly doubled, to $3 billion, but revenue at the institutional securities business plunged 69% to $5 billion.

Revenue fell to $8.7 billion from $18 billion a year earlier? Are you kidding me? That’s a one year plunge in total revenue of 52%!!! In other words, MS is less than half the size it was a year earlier. John, John, John… it’s a good thing you’re leaving, you should have known how “strong” the mortgage business was and you should have been more busy marking your mortgage “assets” to your own model. See ya!

While WFC is faking $3 billion gains on paper, over in the real world, Boeing wrote off $3.5 billion in losses taking a $1.5 billion loss for the quarter. Now, for all you pencil necks who call that a “one time charge” and subsequently don’t count it against your price to earnings ratios, well, all I can say is that you are about to be taught yet another lesson in historical valuations and what happens to those who rely on Enron type accounting to make the world look a little more rosy than it actually is.

Yahoo, a fraction of its former self, managed to beat lowered expectation by posting a 15 cents a share profit over estimates of 13 cents.

Futures fell below the 1,090 pivot, but the SPX is right on it. Support below that is at 1,061, and overhead is at 1,107. Most of the indices are approaching new sell signals on the daily stochastics, but they would be working against the still bullish Elliott Wave count. The short term stochastics are all in the middle with the 60 and 30 minute stochs sitting on buy signals. I still would not be fighting the EW count, not if you respect your account, as we are still, by my count, in wave 3 up of c. Yes, we're getting close, but we are not there yet and as long as we are allowing companies to make up their own fantasy earnings, based upon fantasy dollars, then we shouldn't be standing infront of their trumped up runaway train until we are certain the train has been derailed - and it will be, it's only a matter of time.

We are truly a mark-to-fantasy nation, I can only laugh (and cry) at the audacity of firms like Buffet’s Wells Fargo. Truly “magical” if you believe in such fiction… It'll just blow your mind!

Lovin' Spoonful - Do You Believe In Magic: