Saturday, November 21, 2009

The Still Report – Video Response to Amazon’s Ban of The Secret of Oz

Well, here we are, still no apology from Amazon regarding their inappropriate ban of this movie. Bill is not so unwise as to fail to take advantage of their transgression.

So, we do a little digging. Who is Amazon’s CEO Jeff Bezos? Turns out that prior to founding Amazon he helped to develop “cloud” quant computing techniques for a $250 billion hedge fund, and then went on to become V.P. at Banker’s Trust, a company on the leading edge of financial engineering in credit derivatives. Banker’s trust’s actions at the time later led to charges of fraud and a guilty plea to fraud charges from the State of New York.

According to the Wikipedia entry on Banker’s Trust:
Under the management of Charlie Sanford, Bankers Trust became a leader in the nascent derivatives business in the early 1990s. Having de-emphasized traditional loans in favor of trading, the bank became an acknowledged leader in risk management. Lacking the boardroom contacts of its larger rivals, notably J. P. Morgan, BT attempted to make a virtue of necessity by specializing in trading and in product innovation.

Despite all its prowess in managing the risks in the trading room, the bank suffered irreparable reputational damage in early 1994, when some complex derivative transactions caused large losses for some major corporate clients. Two of these - Gibson Greetings and Procter & Gamble (P&G) - successfully sued BT, asserting that they had not been informed of or [in the latter case] had been unable to understand the risks involved. The bank's row with P&G made the front page of major US magazines. This was worsened when several Bankers Trust bankers were caught on tape remarking that their client [Gibson Greetings] would not be able to understand what they were doing.

Bruce J. Kingdon, the head of the bank's Corporate Trust and Agency group spearheaded the fraud and entered into a guilty plea in the US District Court for the Southern District of New York and was sentenced to community service. Certain of his subordinates were thereafter barred forever by the SEC from working in the securities markets.

Community service! My, that’s hard time. Subordinates barred by the SEC? I wonder how come they didn’t get the Martin Armstrong routine? Hmmm.

So, is this all just an honest mistake, a misunderstanding? Well, Amazon has the opportunity to do the right thing. What say we help guide them in making the right decision, unlike the decisions that were made in regards to computer trading and derivatives of which Bezos was an engineer!

December Monetary Trends…

Don’t have time to break this apart this weekend, but there are some changes to pay attention to - is that a H&S top in the Adjusted Monetary Base? CPI and PPI are coming up slightly, but still negative, while the monetary aggregates and base money are falling in their percentage growth. That may seem like a reasonable balancing act, but watch the velocity (still low) and look at all the credit destruction that’s occurring to consumer credit and to commercial loans. P/E ratios are still at stratospheric heights. Still not seeing a picture of health, that’s for sure, and I would not say that I’m even seeing improving trends.

Friday, November 20, 2009


Food, Inc. Trailer:

This is another MUST WATCH movie. What is shocking is not just the way our food is handled and mishandled today, it’s how CORPORATIONS AND THEIR MONEY CONTROL POLITICIANS AND JUDGES to create a food system that is, well, as crazy as our debt backed money system. It is dysfunction... it is a symptom of an underlying disease.

But guess what? Both it and our flawed money share a common root cause from my point of view. When you watch Food, Inc., you’ll see a giant PROBLEM. But then when you watch The Secret of Oz, you’ll start to see a giant solution. And when you really start to see how the world is revolving around central banker debt money, then you will begin to see what we can accomplish by changing the flaws behind our money system and by surgically separating corporations and their money from our government.

This film is out on DVD, you can get it from any of your regular movie sources. Please take the time to sit down with your spouse or someone close and watch it. You will be incensed, but you will also be educated and see the need to find meaningful solutions. Those solutions will not be found by either corporations or your government. Those solutions will come by separating corporations FROM our government and by returning to a sound money system.



“The Secret of Oz.”
by Bill Still

The Secret of Oz Banned on Amazon


For more info contact:

Still Productions

Bill Still

The Secret of Oz Banned on Amazon

After being on for only three days, the new film on the economy, "The Secret of Oz" has been banned by

"You may no longer sell on our site," said in an email to Still Productions at noon today.

"This came completely out of the blue without warning, and without any shred of legitimate cause," said Director Bill Still.'s email cites "performance" issues. "We took this action because your selling performance has fallen below our standards." It referred Still to their "Customer Experience Metrics" page to see what the problem was, but a check of that page showed no performance issues whatsoever. See screenshot below.

Still has appealed the ban. Amazon says they usually respond within 24 hours to appeals.

This is no joke. Mr. Still had his movie listed on Amazon for 3 days before they pulled it. Below is the full text of Amazon's letter:
"Hello from

"This is an auto-generated message to let you know that we have blocked your seller account and removed your listings. You may no longer sell on our site. We took this action because your selling performance has fallen below our performance standards. If you still have items to ship, you are required to take appropriate steps to resolve your pending sales. Your Seller Account will remain accessible and you are encouraged to refund or ship pending orders.

"If you wish to appeal this decision you may do so by following the instructions in Your Seller Account at []. An appeal should include a clear plan of action that addresses all reasons for failure to perform; including but not limited to your inventory management methods, your fulfillment practices, and customer service improvements. Appeal requests are usually responded to within 24 hours.

"Your Customer Experience Metrics and goals are published daily for your review here []. Reviewing them may help you understand where your selling performance has fallen short of our standards. You can also review the performance related notifications we have sent you in the past here []."

Mr. Still then went to Amazon's site to discover that, indeed, all his "performance metrics" were perfect, having never failed to deliver a movie the same day or any other issues whatsoever - as you can see in the screen shot above.

I would appreciate the widest possible dissemination on this as this movie is too important to the future of Americans, and their understanding of our money system, to lose. Please pass it along to other bloggers and to any media outlets you know.

Although wide dissemination through Amazon was the goal, The Secret of Oz can still be purchased from Bill's site via PayPal:

“The Secret of Oz.”

Related or not, we also learned that this moving is now being discussed in "higher circles" at the very time that the Fed's opacity is under attack. Note the Oz analogy now coming into use:

Coincidentally, this action by Amazon follows the movie's first "rejection" from a film festival after being screened in 9 film festivals and winning multiple awards:

Just this past week, the Peak City Film Festival in Apex, NC, a suburb of Raleigh, NC, rejected the film after first accepting it. The film festival is going on this weekend, here's how they phrased their rejection:
Dear Producer,

Your entry in the Peak City Film Festival has passed through our jury process, but regretfully, will not be screened. Our judges have determined your entry did not meet the criteria for a completely family-friendly production due to certain elements of language or actions, regardless of how small...

I've seen the film twice, there is no language or action in the film that is not family appropriate, the Wizard of Oz movie itself would be less family appropriate.

I sincerely don't know if these things are connected, but this film deserves the widest possible dissemination. Nothing short of our nation's and children's futures may depend on the spark it hopefully ignites.

Thank you,

Nathan Martin

The TRUTH about 2X, 3X, and 4X ETFs…

BETTING the market using these vehicles is DANGEROUS. You should consider them worse than going to Vegas and betting on red – seriously, they are not worth the risk unless you REALLY, being serious with yourself, know what you are doing. If you do, then you know to use these only for VERY SHORT time frames, here’s why…

Let’s use SRS, the 2X inverse of IYR, the commercial real estate fund as an example. Let’s say that two years ago you thought that commercial real estate was a disaster waiting to happen and so you decided to use SRS to bet against it. Well, if you bet against IYR you were 100% right, but if you used SRS to do it you went BROKE in the long run. Yes, some people made money on the WILD swings, but most gave it right back. Huge swings occur because of the math of compounding DAILY numbers... So that, you may be up over a few days, but then it corrects 5%, and then another 5%, and then another... but you would not have lost 15%, you would have lost WAY more than that because the numbers compound. Also, these ETFs have HUGE fees and "slippage" that KILL their performance over time. You WILL lose if you gamble with them too much.

Below is IYR with an SRS overlay, 2 years. Note that at the beginning of the chart that IYR is at $170 and that SRS is at $100. If you bet against IYR using SRS and held, you would have gotten the direction correct as IYR is now worth only $42, A HUGE 75% PLUNGE, and YET your "investment" in SRS is only worth $8.92!!! That means that despite being RIGHT, you LOST 91% of your investment!!!

I'm WARNING everyone here about these, they are the house and they are going to rob you blind, get it?

Now then, if you wish to bet against the market using single inverse ETF's, that's great, but again, they are not LONG term, buy and hold instruments. The inverse relationship will NOT be one to one over the long term, so that if the market moves down 20% over 4 months, you will likely NOT make 20%. You must know how these things work if you are going to gamble with them.

Also, if you're betting on a market meltdown, be aware that these are derivatives and that at some point there may very likely be counterparty issues.

There are certain times and applications where they are appropriate for the right people. They are not for everybody, please be careful.

Morning Update/ Market Thread 11/20

Good Morning,

Equity futures are down once again this morning, making lower lows than yesterday. There is what appears to be a Head & Shoulders top formation forming which you can see in the /ES chart below, the neckline is the double red lines (about 1,086). If that’s the formation that’s occurring, the left shoulder took four days to form, so the right shoulder may take that long (1 day already), or it could break at anytime – the markets like symmetry, however:

The dollar is up sharply overnight, breaking out of the top of its descending wedge. That is a huge sign, but I will not be surprised by a retest. Bonds are close to flat, while both oil and gold are down.

The market is talking to us here. Importantly, very short term treasury rates moved down to basically zero yesterday. Below is a three month chart of the IRX… the last time we were here was last September, the 17th, to be exact. That was followed in the days immediately behind by the largest plunge of the year. What this shows is that money is seeking safety, a shelter as a storm approaches:

There are other signs of stress… The Ted spread, for example, is climbing. But last fall we had other clear warning signs that are not in place now, like a Hindenberg Omen. That means the character of this fall may be different. Instead of a cliff like crash, this decline may be more of a slow grind. The clues signaling an outright crash are not there other than this move in the IRX. Usually a crash is preceded by very divergent breadth or it can be preceded by another market dislocation, like a large move down in the dollar. The dollar bouncing is a sign that the market is under control for now, but is correcting.

The last wave up could be over, but it has not been eliminated yet and won’t be until we start making lower lows. It sure looks like a good start to wave C down, but we’ve been fooled before, and thus the market makes us cautious. But there’s no need to get in front of what will be a very large move. The market moves in waves and playing wave 1 is usually a risky proposition because wave 2’s usually retrace deeply. Yes, there is the occasion where the market doesn’t offer a great “in,” but you can make an in at almost any time if you use stops correctly and know the pivot points and key levels.

Speaking of pivots, we are currently now beneath the 1,090 pivot. The next lower one is at 1,061, but the 38.2% retrace is at 1,081, the 50 dma is at 1,070, and so on. If 1,090 breaks on the upside, then 1,101 will act as resistance and after that would be the 1,107 pivot point.

There are no economic data releases today, by the way, but keep in mind that today is options expiration.

Want to see a glimpse into the future? Okay, below is a video showing protestors at University of California locations not happy about the state jacking up tuition 32% this winter and ANOTHER 32% next spring. Obviously the state is broke, as in bankrupt. They cannot raise taxes anymore, so they are resorting to moves like this:

CNN – California Tuition up 32% now, another 32% later:

Link: University of California students protest 32 percent tuition increase...

Let’s face it, colleges were in a bubble and this is the beginning of that bubble popping. Education is great, but the money must come from a PRODUCTIVE society. We can’t send everyone to college and then have our largest product be credit derivatives! That is not an economy, it is a recipe for disaster. So, look for more drastic measures and what will follow will be more protests. Will they stay peaceful? How extreme will it get? Stay tuned, we’re going to find out.

Hey, this is how people pay the price for supporting a government that is out of control and failed to rein in our financial system. Here's what's happening here in Seattle, yet another SYMPTOM of our debt backed, must get credit flowing, money system:
Seattle’s power price jolt

For Mark Lindberg, president of equipment manufacturer Young Corp., the 13.8 percent hike in Seattle electricity rates “couldn’t come at a worse time.”

Lindberg’s South Seattle company, which makes specialized attachments for heavy equipment, already has cut its work force from 45 to 35 during the recession, and slashed production in half.

“We’re struggling to get orders in the market and cut costs where we can,” he said, “and now this is going to make it that much more difficult to hold onto customers who have other options with foundries around the country and around the world.”

Welcome to a debt based, never ending growth world. How we lookin?

Thursday, November 19, 2009

Soc Gen – Boxing in the Worst-Case Debt Scenario…

“Protecting Yourself Against Economic Collapse…”

Okay, below is their entire 68 page document that reads, well, frankly like a horror show. And you know what, it’s the closest thing I’ve seen to the truth in a long time that comes from a commercial bank. Of course this is their worst-case scenario, not their favored one. Well, I don’t think anyone favors economic collapse, except when it can potentially bring down the oligarchs who brought the debt slavery to the world… yeah, on the other hand maybe it will be cheered!

Of course one must be careful what one asks for! Kind of like attacking Afghanistan or Iraq without a real plan or exit strategy – you know, minor details like once you remove Saddam, what type of government follows? Or what do you win in Afghanistan, what does that look like, Americans with pots full of poppies? What the hell is the point already, Osama got away, it is WE who are breeding future terrorists for export, do we plan on being there forever?

But I digress, we are talking about economic collapse, SURELY, these misguided and insanely thought out war policies have nothing to do with economic collapse! Right?

But that’s NOT why I’m showing you their report. No, I’m showing it because as bearish as this paper is, and it is bearish, the writers of this paper unwittingly provide several great examples of BOXING the Bearish issues in. This is one of the oligarch’s favorite strategies… they surround and confuse the real issues by supporting both Republicans and Democrats. They prefer our money be backed by DEBT so that they can skim every transaction and charge the people interest on the money that rightfully belongs to the people, not a few private individuals. And while they prefer our money be backed by debt, it doesn’t really matter if it’s backed by gold, they’ll control and manipulate that too, although it’s not their ideal situation… no, no, their ideal situation is a one world currency and a globe full of people who are indebted to THEM, and a world full of countries whose people and natural resources THEY can control. Thus, the issue of money is likewise BOXED IN – Debt backed currency/ Gold backed currency.

Now SocGen is doing the boxing… economic collapse via inflation or deflation? Solutions to the debt problem... BIG BOXES, let’s take a look and see if that’s really all the options available, shall we?

This first chart should terrify you, its household debt to GDP going back before the Great Depression. You’ll note that just prior to the Great Depression that household debt levels equaled about 60% of GDP. In 2007, at the start of this Depression, our debt level was TWICE that, at 120% of GDP.

Now, GDP is NOT calculated today like it was back then... today’s GDP number is VASTLY OVERSTATED. That means that our household debt to GDP is vastly UNDERSTATED. If GDP is 40% overvalued, like I think it is, then REAL household debt to GDP is something more on the order of 200% or more of GDP, or more than three times levels prior to the Great Depression. Guess what, that is just the tip of the iceberg as all levels of our “modern” day society are equally or worse as saturated with debt. And we haven’t even begun to talk about derivatives – but then again, SocGen’s “worst-case” scenario hasn’t mentioned any of that either!

But what really got me on this path of boxes is their following very pretty and even mesmerizing chart of possible “Debt Reduction Options.” Here we find four quadrants of “options…” Inflation (what all the goldbugs think will happen), Default (what history shows always happens), Economic reform (Ooo, what’s that?), or Ta Da, there’s Innovation and Growth via “GREEN Investing.” Which would you choose? Of course the only option they can see for economic reform is reducing State employees.

THAT is what I call thinking inside the box. None of it really sounds that appealing, of course, but don’t you feel just a little bit more attracted to the green color in the upper right? Are these really the only possible outcomes? How about out and out capital flight? How about another world war? How about following all out collapse we get fascism? Is there not ANYTHING else that could be attempted? How about bailing out the people? I know, that’s not in a banker’s vocabulary, and it’s not inside their box either. How about monetary AND political reform centered around a money system owned and controlled by the people that is not backed by debt or gold and yet can keep inflation completely under control? Is that possible? No, no, that is WAY too far outside of any box they have ever seen… entirely impossible they would say. And I would say that not only is it entirely possible, it’s absolutely doable and the way to go if done properly with clear objectives.

But this paper isn’t about that, I simply wanted to show you how the issues are being boxed. By the way, their worst-case scenario as I read it is kind of my “muddle-through” scenario Japan style. These guys don’t even know how to imagine worst-case. No imagination, that’s why they and their outcomes and solutions are stuck inside of central banker boxes.

But wait! They’re not all about boxes, they know how to encircle the issues too! Speaking of economic reform they encircle what they see as the 4 ways to lower public debt…

Woohoo! Let’s see, to them the 4 possible ways to reform economics are; Raise Taxes, Devalue Currency, Reduce Expenditures, and Privatize… or some combination of the four! Oh boy, I can tell you’re getting truly hopeful about our future now knowing that we have such creative people behind our economy.

Tell you what… I may be just a dreamer, but I think there are plenty of solutions that sound much better than those, but you definitely won’t find anything good in that circle other than reducing expenditures… that sounds good, but it’s not going to solve the problems that PLAGUE us once and for all. Monetary reform means understanding that “It’s not WHAT backs your money, it’s WHO controls its QUANTITY.” When you begin to contemplate that, THEN you will be thinking outside of central banker boxes. That’s where I’m headed, I think you’ll find that freedom is much closer to you when your money doesn’t come into being as an interest bearing instrument of debt. But that’s just me, and I’m sure the central bankers won’t agree.

Martin Armstrong – A Forecast for Real Estate…

This is a very interesting paper as well. Here Martin shows the following model for real estate, a peak in 2007, a bounce in 2012 to a secondary lower peak in 2015 and then it continues on down into the year 2033. That just would not be pretty for mid-life or older adults today, but I am certainly not one to dispel that notion.

I am going to be a little critical of Martin here in other areas. First of all, he’s flat out arrogant at times, this is one of those times. Truthfully, I am cautious when I hear people who think they are the brightest ones on the planet. No doubt he is bright, but to think you’re the brightest usually means that you are missing something vitally important. While I don’t claim to be the brightest, what I have begun to figure out is that our debt crisis is one of the structure of our currency. Reading Armstrong I get the sense, most of the time, that he does not understand that fully. What he does understand strongly is the value of the rule of law, he understands capital flows, and he understands cycles and the lack of science and understanding in economics in general.

But when you really investigate the MATH of debt and follow how it comes about, the glaring flaw is right there. Debt backed money. Alexander Hamilton was no hero for our country, he and his central bank idea began the concept of debt enslavement in America. Armstrong speaks of thinking outside the box, but I have yet to hear him stumble upon the answer... YET, he serendipitously does so when he closes this paper with the following:
“Without a slow burn and a monetization of the whole national debt and a truly restructuring of government, we will most like(ly) implode and then hopefully we will be able to create a novus ordo seclorum minus the whole Marx stuff.”

And on that point he is exactly correct. Let's think outside the gold standard and debt backed fractional reserve BOX. Bill Still’s line “It’s not WHAT backs our money, but WHO controls the QUANTITY” is exactly correct. But how can that be done? Politicians can’t be trusted to control themselves for sure, on that I definitely agree. I also agree that WHEN the debt is monetized that there must be a restructuring of government.

The two, monetary reform and political reform, MUST happen together in order to create a sustainable and prosperous future.

If you want Martin’s forecast for real estate, here it is. If you still own a bunch of real estate, you aren’t going to like it - 26 years of contraction.

Martin Armstong - Capital Flight

Interesting paper. Subtitled, "The USA Has Lost its Stature as the Financial Capitol of the World," Martin discusses the possibility of capital simply fleeing this country, which it already has been doing. That, of course, is what all the factories in China are all about. But it runs deeper than that, for sure, so Martin once again touches on his own situation (hey, you would too), and goes lighter on the history and more into analysis of different markets.

He discusses and charts IYR, the commercial real estate fund (I published a chart in my newsletter calling the top when it happened) and talks about real estate in general, then moves onto the financials via XLF, discusses and plots the new bull market in unemployment (lol), and finally he discusses Emerging Markets that have been the recipients of the capital that’s been fleeing. In other words, we crank out dollars and derivatives and our money is used throughout the world in productive efforts, but not here. Is that a bubble? Read on…

Welcome to the Show for Public Consumption…

Geithner is now under attack. But do not be fooled, he is but a pawn and can be sacrificed if need be for the show. No real and meaningful change will occur until the flaws underlying our PRIVATELY controlled, interest bearing debt backed, fractional reserve money is fixed.

More people, however, are beginning to follow the money. When you do, you will always wind up at the same place… guess where that is?

Steve Keen on the Depression…

Australian, Steve Keen, is indeed a pretty sharp guy. This is the most lucid video I have seen in quite some time. Here he explains the difference between Keynes, Friedman, and Minsky and why the people who got it right understood Minsky’s arguments.

Steve Keen – 31 minutes:
Please follow link... embedding only allows autoplay, so please visit -
Steve Keen on the Depression...

Here is the section from my book about bubbles according to Minsky’s 7 bubble stages:

…it was Hyman Minsky who accurately described the seven bubble stages (the following excerpt is from my book Flight to Financial Freedom – Fasten Your Finances, written during 2005/2006):

The late Hyman Minsky, Ph.D., was a famous economist who taught for Washington University’s Economics department for more than 25 years prior to his death in 1996. He studied recurring instability of markets and developed the idea that there are seven stages in any economic bubble:

Stage One – Disturbance:
Every financial bubble begins with a disturbance. It could be the invention of a new technology, such as the Internet. It may be a shift in laws or economic policy. The creation of ERISA or unexpected reductions of interest rates are examples. No matter what the cause, the outlook changes for one sector of the economy.

Stage Two – Expansion/Prices Start to Increase:
Following the disturbance, prices in that sector start to rise. Initially, the increase is barely noticed. Usually, these higher prices reflect some underlying improvement in fundamentals. As the price increases gain momentum, more people start to notice.

Stage Three – Euphoria/Easy Credit:
Increasing prices do not, by themselves, create a bubble. Every financial bubble needs fuel; cheap and easy credit is, in most cases, that fuel. Without it, there can’t be speculation. Without it, the consequences of the disturbance die down and the sector returns to a normal state within the bounds of “historical” ratios or measurements. When a bubble starts, that sector is inundated by outsiders; people who normally would not be there. Without cheap and easy credit, the outsiders can’t participate.

The rise in cheap and easy credit is often associated with financial innovation. Many times, a new way of financing is developed that does not reflect the risk involved. In 1929, stock prices were propelled into the stratosphere with the ability to trade via a margin account. Housing prices today skyrocketed as interest-only, variable rate, and reverse amortization mortgages emerged as a viable means for financing overpriced real estate purchases. The latest financing strategy is 40, or even 50 year mortgages.

Stage Four – Over-trading/Prices Reach a Peak:
As the effects of cheap and easy credit digs deeper, the market begins to accelerate. Overtrading lifts up volumes and spot shortages emerge. Prices start to zoom, and easy profits are made. This brings in more outsiders, and prices run out of control. This is the point that amateurs, the foolish, the greedy, and the desperate enter the market. Just as a fire is fed by more fuel, a financial bubble needs cheap and easy credit and more outsiders.

Stage Five – Market Reversal/Insider Profit Taking:
Some wise voices will stand up and say that the bubble can no longer continue. They argue that long run fundamentals, the ratios and measurements, defy sound economic practices. In the bubble, these arguments disappear within one over-riding fact – the price is still rising. The voices of the wise are ignored by the greedy who justify the now insane prices with the euphoric claim that the world has fundamentally changed and this new world means higher prices. Then along comes the cruelest lie of them all, “There will most likely be a ‘soft’ landing!”

Stage Five is where the real estate industry is today [2005/2006]. This stage can be cruel, as the very people who shouldn’t be buying are. They are the ones who will be hurt the most. The true professionals have found their ‘greater fool’ and are well on their way to the next ‘hot’ sector, like the transition from real estate to commodities now.Those who did not enter the market are caught in a dilemma. They know that they have missed the beginning of the bubble (gold, silver, and oil today [2005/2006]). They are bombarded daily with stories of easy riches and friends who are amassing great wealth. The strong will not enter at stage five and reconcile themselves to the missed opportunity. The ‘fool’ may even realize that prices can’t keep rising forever… however, they just can’t act on their knowledge. Everything appears safe as long as they quit at least one day before the bubble bursts. The weak provide the final fuel for the fire and eventually get burned late in stage six or seven.

Stage Six – Financial Crisis/Panic:
A bubble requires many people who believe in a bright future, and so long as the euphoria continues, the bubble is sustained. Just as the euphoria takes hold of the outsiders, the insiders remember what’s real. They lose their faith and begin to sneak out the exit. They understand their segment, and they recognize that it has all gone too far. The savvy are long gone, while those who understand the possible outcome begin to slowly cash out. Typically, the insiders try to sneak away unnoticed, and sometimes they get away without notice. Whether the outsiders see the insiders leave or not, insider profit taking signals the beginning of the end (remember who has sold their rental properties?).

Stage seven – Revulsion/Lender of Last Resort:
Sometimes, panic of the insiders infects the outsiders. Other times, it is the end of cheap and easy credit or some unanticipated piece of news. But whatever it is, euphoria is replaced with revulsion. The building is on fire and everyone starts to run for the door. Outsiders start to sell, but there are no buyers. Panic sets in, prices start to tumble downwards, credit dries up, and losses start to accumulate.

This is where you may see the “lender of last resort” who is usually the government. The government, although they were talking up a soft landing, are now forced to step in to prevent the crises from spreading to other sectors. Ironically, this is where the savvy investor who profited before, really profits now. With government backing, they are asked to step in and return “normalcy” to a now damaged sector.

The government’s attempt to “put out the fire” usually works. However, the conditions into and beyond the year 2010 will require oceans of water that the government does not posses. You must be ready!

Morning Update/ Market Thread 11/19

Good Morning,

Equity futures fell substantially overnight bringing the S&P futures back below 1,100 and is hovering in that area now. This is key support being bullish above and bearish below:

The dollar ran right up to the top of its descending wedge and was turned down right on it. This wedge is getting very close to completion, it is going to have to break one way or the other. It’s very interesting that we have spent this much time in the 75 area and is has not yet fallen. Bonds are rising, that is normally an indication that money is flowing from stocks and into bonds. Both oil and gold are down and both have returned back inside their respective formations.

Once again, weekly jobless claims remain stubbornly above 500k, this week coming in at 505,000. Last week was first reported at 502,000, but this week that figure was revised upwards to 505k as well, meaning that this week is likely higher than last week, unlike the cheerleading found here by Econoday:
Initial jobless claims didn't break through 500,000 but the report is still favorable. Initial claims were unchanged in the Nov. 14 week at 505,000 (prior week revised 3,000 higher). The four-average fell 6,500 to 514,000, down for a convincing 11th straight week. Continuing claims, down 39,000 to 5.611 million in the Nov. 7 week, extended what is an even longer run. The expiration of benefits, however, cloud the significance of this reading. Benefits were extended to more than 17,000 to 540,000, with 3.6 million receiving emergency compensation, up 100,000 (both Oct. 31 week). The unemployment rate for insured employees is unchanged at 4.3 percent. This rate has been coming down, in contrast to the overall unemployment which of course is now in double digits at 10.2 percent. Commodities and stocks moved higher in reaction to the report, one which will boost confidence that the layoff cycle, that is payroll contraction, is in fact winding down.

Uh, huh, “The expiration of benefits, however, cloud the significance…” Cloud is a great word, because that’s the one appropriate word to use for government statistics. Want a piece of what’s really happening? Here you go, despite a 14 week extension of unemployment benefits, if Congress does not act to extend them again before Christmas break, instantly 1 million people will have their benefits cut off. That’s 1 million! That’s a pretty sizable chunk of Americans and stopping that money would not be a good thing for the economy, and especially for those who cannot find jobs.
Jobless Benefits Will Expire Unless Congress Acts

About one million laid-off workers will see their unemployment benefits end in January unless Congress acts quickly to renew existing federally paid extensions, according to a new survey and legislators and state officials.

The record extension of emergency benefits that was signed into law on Nov. 6 was widely praised as a lifeline for hundreds of thousands of Americans who had spent a year or more in fruitless searches for jobs.
The new law provided up to 14 weeks of federally paid aid to unemployed people who had exhausted existing state and federal limits, benefits that already lasted up to 79 weeks in many states. And for the majority of states with particularly high unemployment, it added six more weeks of payments, bringing the potential total to 99 weeks.

But many legislators, state aid officials and struggling workers apparently failed to read the fine print. The added federal benefits were built on a series of previous extensions that are slated to end on Dec. 31, unless Congress renews these programs. People who lost their jobs after July 1 of this year, for example, would receive no federal extensions once their customary six months of state aid ran out.

While discussions have started, Congress is not yet considering a specific proposal. And unless it acts before the Christmas break, officials warn, the extensions will end. If Congress, now caught up in the health care overhaul, delays action until next year, millions would face gaps in aid that many thought would be automatic.

“There are six people looking for every available job, and these payments are enabling people to pay their mortgages and put food on the table,” said Representative Jim McDermott, Democrat of Washington, who championed the Nov. 6 law and hopes to light a new fire under Congress.

“It’s a horribly complicated system, and most people didn’t pay attention,” Mr. McDermott said. He and Congressional staff members said that while they believed an extension would eventually pass with broad support, action in the next few weeks is by no means certain. Renewing all federally paid extended benefits for 2010 would cost about $80 billion, Mr. McDermott said.

Nancy E. Dunphy, deputy commissioner for employment security with the New York State Department of Labor, said that officials in New York and other states “were taken by surprise by this.”

“It makes no sense,” Ms. Dunphy said. “You had the president and others saying that the intent was to add 20 weeks of benefits, and now we have this glitch.”

For people suffering long-term unemployment, a gap of several weeks in aid — let alone a premature, permanent end — can be cataclysmic. Alexandra Jarrin, 48, was laid off in March 2008 from her job in New York as a director of client services. As she searched widely for a job, moving back and forth between New York and Tennessee, she received aid of more than $400 a week that, she said, just barely “kept my head at the waterline.”

But her extensions ran out early last month and in subsequent weeks, as Congress deliberated, her life fell apart. She has just started receiving what will be 14 extra weeks of aid under the new law, but faces eviction from her apartment in Brentwood, Tenn. “There’s no way I can recover now, I’m too far behind,” she said.

In ordinary times, unemployed workers in most states receive 26 weeks of benefits, averaging just over $300 a week, paid from state insurance funds. Many find jobs before exhausting the aid, but unemployment has been particularly tenacious in the current recession and recovery. Under temporary measures, workers are currently eligible for a series of federally paid extensions, awarded in stages often lasting 13 or 14 weeks at a time.

Some nine million people now receive unemployment benefits, five million on the initial state programs and four million through federal extensions.

Without renewal of the programs for 2010, at the turn of the year recipients will continue receiving benefits to the end of their current stage but will no longer jump to the next stage. Thus Ms. Jarrin, if she fails to find work, will finish out the new 14-week period but will not receive the additional six weeks that Congress promised. She said she had sent out 2,000 résumés and had only a handful of interviews, without success.

According to projections released Wednesday by the National Employment Law Project, an advocacy group that worked with state officials to develop the numbers, 474,111 unemployed workers will exhaust their state benefits in January and, in the absence of Congressional action, not receive any extensions.
An additional 581,000 workers will see their federal benefits end in January, the study said.

Ms. Dunphy of New York said that without a federal renewal, 685,000 New Yorkers would not receive expected benefits in 2010. While economic growth has resumed, economists say that job growth will be sluggish, with high unemployment, now at 10.2 percent, persisting through most of the coming year.

In addition to renewing the benefit extension, Congress must decide whether to extend aid for Cobra health insurance payments for the unemployed, a tax break on unemployment payments and a $25 a week increase in benefits, all adopted in the stimulus act in early 2009.

Did you catch that? Nine million are now receiving unemployment, no wonder the trust funds is absolutely broke.

Of course I believe that the oligarchs WILL get an extension passed. Why? Because they can just print the money with no effort on their part and it will placate the people with corn syrup a little bit longer, thus delaying their day of reckoning. If you think I’m joking about that, you would be wrong.

The “leading” indicators and the Philly Fed Survey come out at 10 Eastern. The leading indicator is a JOKE, but is highly respected by knuckleheads everywhere. If you can believe this, the stock market is a large component of the index, thus when the market does a bear market bounce, this indicator goes up, the knuckleheads think P/E’s above 130 are good and convince themselves that it’s not really that high, and look at those leading indicators, and the circle inside of Wonderland continues. I have no idea how the rest of it is going to turn out, so be ready for anything when it does. Personally, I would love to see a dramatic rise here into options expiration tomorrow, but I’m pretty sure that’s not going to happen, but it could, a lot of people are looking for at least 1,120 here. On the other hand, if this indicator disappoints, look out below.

But the false bull market is running out of steam and out of time. The market has been playing that rising wedge and it is getting very near completion. Below is a 9 month chart of the DOW showing the wedge clearly and how near we are to being out of time. The dollar has the opposite wedge, it too, is running out of time. Note the historic divergence in volume – historic. Note the obvious and huge divergence in RSI. Are the “playas” using this TA against us? Well, this pattern is very obvious, EVERYONE knows its there and that does make for an interesting situation, but if it were going to behave differently, why hasn’t it morphed into some other pattern and why is it sticking to rising wedge script so well? It IS going to break, an overthrow of the top is also typical, so don’t get excited if we run higher.

Two other charts are diverging dramatically from the rest of the market, showing a distinctive lack of breadth. Namely the Russel small caps and the financials are laggers. Below is a chart of each, note that neither has made a new high, and that the RUT has made an M double top that is playing similarly to a head and shoulders:

Note the highlighted candle on the XLF mid-October. In fact, that timeframe is pretty close to what I see as an “internal” high. The only real market progress is due to the devaluing of the dollar and market internals are diverging from price. By the way, when priced in gold, this B wave rally actually has not happened at all! That’s right, stocks have continued straight on down when priced in gold. Interesting.

Where are we in the Elliott Wave count? The primary count has us in the final wave c up. This wave can extend or truncate. It should have 5 subwaves and if McHugh is correct, the sideways action of the past couple days should be wave ii or wave 2 of the final 5. Again, not all 5 waves have to happen, this could have already topped, or it may run higher.

Yesterday the VIX diverged against prices by falling nearly 3%. This is nothing but extreme complacency in my opinion. Normally you would look at that as a bullish short term divergence, but when we reach extremes, it can also be a sign that a turn is at hand due to the psychology of everyone believing the market is heading higher. Of course the VIX is not as powerful a tool as it once was. That’s because the options it measures are no longer the only way to play against the market. A ton of money now plays in the ETF space and in futures, and the VIX does not measure their impact. In fact, the entire market really doesn’t do what it was intended to do (provide a market for capital to be fairly priced and distributed to private companies), instead it has literally been turned into the banker’s casino. This casino is what almost everyone has been forced to base their retirements on. Not the productive efforts of the nation, no, now our futures are all based on the ability of the casino to create never ending growth for the oligarchs. How’s your 401K looking? Rally helping it out? Who do you think is being helped more?

The dollar has turned down one more time from the upper boundary of its descending wedge, the game continues for now.

Alan Parsons Project – Games People Play:

Wednesday, November 18, 2009

Representative Grayson Attempts to Rein in Fed…

Notice the reaction of the “crowd.” I believe it was Barney Frank who could only respond by taking a donut break and I’m sure to call his central banking pals to figure out ways to “off” Mr. Grayson.

Hmmm, I can just imagine the conversation… “What shall it be, Mr. Dimon, hookers?"

“No, no, that wouldn’t work, and besides we used that one last time. Call the boys at the IRS and see what they can trump up… By the way, Barney, your latest ‘contribution’ is in the mail.”

Rep. Alan Grayson attempts to Rein in the Fed's Unlimited Lending to Foreign Banks:

Bill Still on the Economy and JPMorgan…

This week Bill talks about JPMorgan’s role in the current banking crisis as well as Morgan’s role in the banking panic of 1907. Bill is thankfully attempting to shift the focus on the root of our problems, I hope everyone understands that. What is happening in gold and the dollar are simply SYMPTOMS of the real problem. The real problem is that private banks control a debt based fractional reserve dollar system.

Bill put in a lot of work to bring us this report, thank you Bill, you are a great American, one who is willing to stand up and tell the truth. We all need to get behind the truth tellers and tell the central bankers to pound sand. Yes, they are going to attack us and our efforts, but WE are BIGGER than they are and we DO control our own destiny, they do NOT control ours!

“It’s not WHAT backs the money, it’s WHO controls it’s QUANTITY!”

The Still Report - Nov. 16, 2009:

Glenn Beck explaining Debt and the Currency Carry Trade…

I have to give another hat tip to Karl Denninger for posting the following videos. Glenn Beck has been painted as a radical lately, that’s exactly what happens to people who simply tell the truth about the establishment.

In these videos, however, he is telling the truth with math. Exponential math is what you are seeing in his first demonstration. In fact, only pointing out our current account deficit is being far too kind, in my opinion. Our real debts, of course, are many times that. Well worth the time to view this series, well done Glenn.

Now, in terms of a new currency, yes, one is coming. Hopefully it will indeed be a new world order, but hopefully NOT one that the current oligarchs envision. Radical? We’ll see.

Yves Lamoureux Projecting Possible Unemployment Scenarios…

Yves does a terrific job of tying UNEMPLOYMENT TO DEBT. That’s right, as debt goes up, unemployment goes up, or employment goes down. This is a huge flaw in the thinking of the deficit spending crowd and is actually a phenomena of our interest bearing debt backed money system. Spend and pretend, spend and pretend.

Yves goes on to project three possible scenarios. Keep in mind that his figures are in terms of modern day BLS U3 BS. U6 unemployment, of course, is already 17.5%, more than 7% higher than U3. Thus, his case 3 scenario of 15% unemployment would equate to about 22% or more in U6, the measurement most like how it was measured during the Great Depression. Personally, I think his case 3 scenario is a shoe-in, and my case 4 would be more like 18% U3 and 25%+ U6. It may not get there in a straight line, but until and unless our money system is fundamentally fixed, each future cycle will produce higher highs.

Thanks for sharing with us, Yves!
Projecting Possible Unemployment Scenarios…

Most participants these days should take the “thinking outside the box” more seriously. With this in mind, I have studied the behavior of default rates and high yield spreads. In doing so, I also discovered that the general YoY growth in the GDP was mainly going down. The resulting effect on unemployment should then be obvious.

I show in the first graph the result of higher debt having a diminishing effect on labor. You notice that like a weaker GDP trend would suggest, the rate in unemployment shows higher peaks from the 1950’s onward. It would not be surprising that we exceeds the 1985 peak close to 11%.

The graph of unemployment with the default rates is meant to show that the rate of unemployment will continue upward for some time once default rates have peaked. You will see this in the 1980-1984 period, the 1990-1994 period and lastly the period of 2000-2004. These are times very similar in each starts of decades, coincidence?

The basic assumption generated with this study results in a rate of ascent in the rate of unemployment once high yield default rates peaks. I will have applied an average of these three periods discussed going forward in our three base cases.

This rate of ascent is shown in the graph with the subsequent higher unemployment rate. It does carry upward for some time and will lag the turning point of the high yield default rate peak.

Lastly we provide an overview of my unemployment projections based on three scenarios. The base case number one takes the view that high yield default rates are peaking and will start to drop from this level now. The rate of unemployment ranges from 10% to 11.5% with this given scenario. In the base case number two, I am using a composite of both peaks in 1991 and 2002 to suggest that default rates may carry upward one percent more. The resulting effect on unemployment targets will range from 11% to 13.5%. In our final analysis base case number three will use the peak at 13% in default rates established in 1991. Unemployment rates in this scenario show a range of 12.5% and 15% before possibly peaking.

In exploring various thesis, I seldom have a psychological prejudice. I suggest people doing pseudo-finance do the same.

- Yves Lamoureux, Investment Advisor , Blackmont Capital inc.

The opinions contained in this report are those of the author and are not necessarily those of Blackmont Capital Inc.. Every effort has been made to ensure that the contents of this document have been compiled or derived from sources believed to be reliable and contains information and opinions which are accurate and complete. However, neither the author nor BCI makes any representation or warranty, expressed or implied, in respect thereof, or takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. BCI is an independently owned subsidiary of CIFinancial. CI Financial is a Canadian owned diversified wealth management firm, publicly traded on the TSX under the symbol CIX. Blackmont Capital Inc. is a member of CIPF and IIROC.

Chris Martenson on Energy and Peak Oil...

Interesting talk by Chris, about 10 minutes long.

Marc Faber on the Economy and Gold…

“Gold will not fall beneath $1,000 an ounce… probably ever again.”

Ever is a long time, Marc.

My opinion is that if we get another round of stimulus or more money printing that the markets will become disorderly. The more they fight the needed corrections, the more volatility we will see.

Marc Faber (Part I - 6:20)

Marc Faber (Part II - 6:20)

Morning Update/ Market Thread 11/18

Good Morning,

The equity indices spent the overnight hours doing their usual ramp job trying to push over the 1,107 pivot on no volume. Then this morning’s economic releases caused a sharp spike back down into that pivot where the sellers ran right back into Goldman’s computers to find support at the pivot, but it did not hold for long:

The dollar, having risen the past two days to the top of its descending wedge, and diverging from equities, is back down to the 75 area again, but now bouncing on the data. Bonds are flat but moved up strongly the past two days, again, diverging from equities. Both oil and gold are higher, both are now right on the upper trendline of their respective formations – that means they either turn here or break out higher, as in this morning – I vote turn down here, but we’ll see what Goldman’s computers say.

The MBA Purchase Applications Index fell yet again following last week’s huge 11.7% plunge. This week it fell “only” 4.7%... what a disaster.
The government's extension of buyer credits hasn't started a rush in the housing sector. MBA's purchase index sank steeply again, down 4.7 percent in the Nov. 13 week for what the report said is the worst reading since 1997. Refinance applications, which have been soaring, edged back 1.4 percent. Rates are at rock bottom, down 7 basis points in the week at an average 4.83 percent for 30-year loans. Housing starts will be posted at 8:30 a.m. ET.

Housing starts fell sharply, the impetus for the morning equity fall back. Starts fell from last month’s 590,000 all the way back to 529,000, a HUGE 10.6% plunge:
Housing activity unexpectedly fell back in October, calling into question the strength of housing recovery. Housing starts in October dropped 10.6 percent, following a revised 1.9 percent gain the month before. October's 0.529 million unit pace of new home groundbreaking came in much lower than the consensus forecast for 0.600 million unit and was down 30.7 percent on a year-ago basis. The decline was led by a 34.6 percent plunge in multifamily starts but the single-family component also slipped-by 6.8 percent.

By region, the October drop in starts was led by an 18.8 percent fall in the Northeast. Other Census regions also declined: the Midwest, down 10.6 percent; the South, down 9.6; and the West, down 8.5 percent.

Homebuilders appear to be cautious about upcoming new home sales as housing permits in October dropped 4.0 percent after dipping 0.9 percent the month before. October's pace of 0.552 million units annualized was down 24.3 percent on a year-ago basis.

October's starts numbers were disappointing and likely reflect concern by homebuilders about the housing market once the first-time homebuyer tax credit was expected to expire at the end of November. That credit has been extended and expanded and we may see some pickup in coming months in the single-family component. Weakness in the multifamily component will still be affected by high vacancy rates but this component is volatile.

On the release, equity futures slipped as Treasury yields mostly firmed (but as a result of higher CPI inflation announced at the same time).

And speaking of housing, you know what’s worse than this chart showing that we have a whole ‘nother round of pain to come?

How about this release from the FHFA:
Values Have Dropped Only 25% of the Fall Needed to Reach Trend

The total projected fall from the Federal Housing Finance Agency (FHFA) “All Transactions Index”, which begins in 1975, shows a peak-to-trend fall of 27%. Since prices are 6% lower by this measure, prices must still fall an additional 23% from today for prices to revert to trend.

How do you think banks and the GSE’s fare if housing falls 3 more times as much as it has already? Of course that’s impossible in some areas, and their report shows only a 6% decrease which is obviously low compared to other studies, but the risk is still very much to the downside as many of the basic ratios are still out of whack on a national level – things like rents to ownership costs with standard financing.

Since I’m talking about real estate, want to see what the future has in store for much of America? How’s this… The Silverdome Stadium in Pontiac, Michigan, was put on the auction block:
Pontiac Silverdome Absolute Auction - Outstanding Investment Opportunity

...To walk into the huge structure that is the Silverdome can still take your breath away. With a seating capacity of 80,311, its still one of the largest in the world. The Silverdome was home to the National Football League’s Detroit Lions, the National Basketball Association’s Detroit Pistons and the United States Football League’s Michigan Panthers. It has seen major events such as Super Bowl 16 and the 1994 FIFA World Cup.

This stadium was built in 1975 at a cost of $55.7 million. Selling price? $583,000!!! That’s far less than the last home I owned. Is it a bargain? Do you have the money to replace the roof? How about to heat it and to otherwise maintain it?

Reminds me completely of the fall of Rome. Here in Seattle, we tore down a perfectly good King dome before it was even paid for, the debt still hangs around. We built for more than $400 million (that’s nearly half a billion) Qwest field for the Seahawks who couldn’t share with the Seattle Mariners. The Mariners spent another half billion building theirs after the voters voted down helping to pay for it. How did they finance it? Government officials simply took lottery money (supposed to go to schools) and created new taxes, thus bypassing the will of the voters.

By the way, I think it’s important to know how you are being manipulated… the Wikipedia entries on all of Seattle’s stadiums were obviously written by the team’s marketing departments. They fail to talk about these issues and put a positive spin on how the financing came about, also completely ignoring issues like the Mariners $100 million cost overrun and the fact that it’s STILL in the courts trying to decide who is responsible to pay for it.

But that’s not all we have in Seattle, oh no. We have the Key Arena that used to house the now defunct Seattle Sonics. True, it is aging, but it was renovated in 1995 costing the city of Seattle more than $75 million. Then there’s the University of Washington’s Husky Stadium, a huge open air stadium on Lake Washington. The school wants to renovate and expand in a project costing another $300 million. Fortunately, they are currently having trouble getting the funds, but are still trying. I hope they fail, and I hope they concentrate on what schools are all about. This sports team mania is way out of control, far beyond what is proper for society, a huge misallocation of resources.

The CPI number is rising, but is still negative year over year by .2%, an increase from -1.3 yoy last month. This is mostly due to an easier yoy comparison. Month over month, the headline CPI rose .3%, greater than the expected .2%. Here’s Econoday:
Consumer price inflation was warmer than expected. Headline consumer price inflation firmed to a 0.3 percent boost after rising 0.2 percent the month before. The market had forecast a 0.2 percent gain. Core CPI inflation was unchanged with a 0.2 percent increase and was above consensus expectations for a 0.1 percent rise. But some of core strength appears to be temporary.

First, boosting the headline number was a 1.5 percent jump in energy prices after a 0.6 percent rise in September. Gasoline was up 1.6 percent, following a 1.0 percent increase. Food price inflation was restrained in October with a 0.1 percent rise, following a 0.1 percent dip the month before.

The core rate was driven up by vehicle prices for the most part. According to the BLS, the indexes for used cars and trucks and for new vehicles both rose sharply and together they accounted for over 90 percent of the increase in the index for all items less food and energy. The index for new & used vehicles jumped 1.7 percent after a 0.5 percent rise in September. The indexes for airline fares and medical care also increased, by 1.7 percent and 0.4 percent, respectively. Indicating softness in the underlying trend for the core, the shelter index was unchanged and the indexes for apparel and recreation declined.

Year-on-year, headline inflation increased to minus 0.2 percent (seasonally adjusted) from down 1.3 percent in September. The core rate was firmed to up 1.7 percent in October from up 1.5 percent in September. On an unadjusted year-ago basis, the headline number was down 0.2 percent in October while the core was up 1.7 percent.

Overall, inflation outside of energy likely is not accelerating but neither is it as subdued as the Fed probably prefers. Treasury yields generally firmed on the news despite lower housing starts announced at the same time.

I still view this number as pretty tame month over month, especially considering the increase in energy over the past 8 months. Should energy fall back down CPI and PPI are going to descend rapidy.

Yesterdays extremely low volume ramp contained several short term divergences in addition to creating several small hammers that are potential signs of reversal (need confirmation). The divergences yesterday included; the percent of stocks over the 5dma diverged bearishly downwards, decliners outnumbered advancers, the McClelland Oscillator fell, and the number of new highs fell sharply. These, and the action of the dollar and bonds is screaming for a top.

Yet, price just doesn’t want to give in. Could it be that the “investment banks” with their computers are such a large percentage of the market that they have created an entirely artificial market? Have all the real owners sold already and now it’s largely just the banks, quants, and hedge funds swapping electrons? Hmmm… it’s true that the sellers have not come out in enough force to swamp and to overwhelm their games. I still believe that’s coming.

Some will say that TA no longer works and that they are, in fact, turning TA against real people in order to steal their money. That may very well be partially true. That’s one of the reasons that I am not playing in their casino right now. Take a look at the volume pattern on the chart of the Transports below over the last sell off and the current ramp. Where’s the volume?

That’s a classic sign, ignore at your own peril. Several technicians are calling that closing high DOW theory reconfirmation of a buy signal, and yet it did not make a new intraday high, only a closing high.

The other very large divergences are still in place, I strongly urge everyone to consider just how risk filled this paper and electronic ramp job is. To be bearish is one thing, but if there’s anything I’ve learned over the years, it’s that you do not have to be in the market all the time! I’ve been completely on the sidelines and still am. Why fight a trend, wait for it to break – it will. The market is crazy, the bankers and the idiots running our government are literally insane. You know the saying is “don’t fight the Fed.” But the truth is that the Fed is not omnipotent, they are the crazy ones, they are fighting a losing battle against exponential math. The math is going to win, it’s even going to win against manipulations and computers, debt is the wall.

Kansas – The Wall:

Tuesday, November 17, 2009

Gerald Celente on King World News…

Another powerful interview by Celente, one that I hadn't heard before until Denninger just posted it, but was recorded on September 25th. Celente calls a crook a crook. I agree that the stock market has degenerated into nothing but a casino and a way to siphon off America’s money. Retirement based on self-directed 401K’s? Riiiight…

Mp3 LINK: King World News – Gerald Celente Interview

Morning Update/ Market Thread 11/17

Good Morning,

Equity futures are down a little despite a large rise in the dollar overnight – here is the overnight action in the /YM and /ES (DOW and S&P):

The dollar moved up considerably overnight, so far the move down in equities does not match the move. Every time I’ve seen this recently they catch back up together during the morning, either the dollar comes back down, or equities do. Below is a chart showing the dollar futures. Note the descending wedge, the dollar, while it broke support yesterday is still inside of that wedge, and that wedge is still very much in play in the indices as a rising wedge:

Bonds are a bit of an enigma here. Yesterday they moved in the exact opposite direction one would expect for a rise in equities, and it was a very large move. This, too, is a disconnect and I’m wondering why I’m seeing these now? Again, something needs to get in synch, gee, I wonder what it’s going to be?

Both oil and gold are down this morning. Yesterday was a big day for both gold and silver. There is a rising expanding megaphone in gold, it overthrew the top yesterday, but is now well back inside, it is visible on the 30 and 60 minute time frames. This is a short term pattern, probably indicating a short term pull back is near. That pattern, when broken to the downside will usually return to its base, or about the $1,080 level which is a key support level for gold. Again, if it does pull back, it is probably a smaller wave within a larger wave up.

As I did my evening studying last night, I felt a sense of elation from nearly everyone with yesterday’s new highs. While I don’t see that in the put/call ratios, the VIX did make what could be a hammer bottom yesterday, that would need to be confirmed by the VIX moving higher today. Yes, all of the sudden being bearish is “idiotic” and “it’s the price, stupid” seem to be the themes. Most who talk that way, of course, are not the professionals, in fact, more and more professionals are coming out on the bearish side. People talking that way, though, tells me that indeed a top is getting very near.

Yesterday, the DOW closed right up against the upper boundary of the rising wedge AND up against the far boundary of the bear market downtrend line which is very close to a 50% retrace of the entire bear market. That makes this location pretty stiff resistance for the DOW. The Transports made a new closing high yesterday, and that has the DOW Theory people shouting that the secondary trend is now bullish again, reconfirming the primary bullish trend. I personally don’t buy that interpretation, while the closing position is most important, I don’t interpret DOW Theory until BOTH the closing and intraday high or low has been exceeded. It has yet to exceed that intraday high.

The Goldman ICSC and Redbook both show roughly 2% yoy gains in sales that are disconnected from sales tax data and again I have no respect for either of these statistics. The ICSC shows -.1% week to week.

The very important PPI reading came in lower than expected. Year over year shows a decrease of 1.9%, but that is a large improvement over last month’s yoy negative 4.7%, again the comparisons are much easier now for the yoy data. Month over Month the total PPI rose .3% which was less than the consensus for .5% growth. Here’s Econoday’s report, note the large and unexpected drop at the core level and how cash for clunkers is still messing with economic readings, as is the speculation in commodities:
Higher oil prices boosted the headline PPI but the big story is a sharp decline in the core PPI. The overall PPI increased 0.3 percent in October after dropping 0.6 percent the month before. The rebound in October lower than the consensus forecast for a 0.5 percent boost. The increase in the latest month was led a 1.6 percent boost in energy and a 1.6 percent rise also for food. But at the core level, the PPI rate unexpectedly dropped 0.6, following a 0.1 percent dip in September. The market had expected a 0.1 percent gain for September. The fall at the core level was due mainly to declines in prices for light trucks and passenger cars. The Bureau of Labor Statistics indicated that the core would have been up 0.1 percent in October.

Turning to some component detail, the October rise in energy prices was led by gasoline which rose 1.9 percent after declining 5.4 percent the month before.

The core rate was pulled down primarily by 5.2 percent drop in light truck prices and a 0.5 percent decline in prices for passenger cars.

For the overall PPI, the year-on-year rate rose to minus 1.9 percent from minus 4.7 percent in August (seasonally adjusted). The core rate year-ago pace eased to up 0.7 percent from up 1.8 percent the prior month. On a not seasonally adjusted basis, the year-ago decrease for the headline PPI was 1.9 percent while the core was up 0.7 percent.

While finished goods prices were soft at the core level, inflation pressures firmed at earlier stages of production. In October, prices received by manufacturers of intermediate goods moved up 0.3 percent and the crude goods index increased 5.4 percent.

Overall, inflation pressures are mixed with end demand keeping most prices soft for core finished goods but food, energy and commodities are maintaining upward pressures. Treasury yields eased just after release of today's report.

I am really seeing the ying and yang of this market in that report. It’s a tug-of-war between speculative hot money and the forces of deflation. Take away that hot money, and deflation will definitely reassert herself. That’s because our economy is based almost entirely on paper fluff. The cleansing forces of deflation have not done their job, the vast majority of work is still ahead in most areas.

Industrial Production figures in October were a big miss, coming in with a .1% rise while .4% was expected. Here’s Econoday:
In October, the industrial sector remained in recovery mode, but slipped to a slower pace. Manufacturing actually edged down. Overall industrial production in October edged up 0.1 percent, following a revised 0.6 percent increase the prior month. October's gain came in below the market forecast for a 0.4 percent rise. However, the manufacturing component declined 0.1 percent, following a revised 0.8 percent jump in September. In the latest month, utilities output rebounded 1.6 percent while mining output dipped 0.2 percent.

Within manufacturing, durables fell 0.4 percent after jumping 1.1 percent in September. Motor vehicles and parts slipped 1.7 percent in October after an 8.1 percent boost the prior month. Nondurables advanced 0.2 percent in the latest month, following a 0.7 percent increase in September.

Compared to recent months, the change in auto output had a modest effect on the broad aggregates. By special category, overall production excluding motor vehicles was up 0.4 percent for October while manufacturing ex-motor vehicles was down 0.1 percent.

Overall capacity utilization in October continued its rise from the historical set in June, posting a gain to 70.7 percent from 70.5 percent in September. The October number matched the consensus forecast.

On a year-on-year basis, industrial production in October slipped to minus 7.1 percent from down 6.0 percent the month before.

Basically, the recovery continues but likely with a choppy trend. While there is much news yet to come, the initial numbers for the fourth quarter suggest a slower growth rate than in the third quarter.

Again, note the still very large year over year negative numbers and a utilization rate that, while off the bottom, is near historic lows.

Now let’s talk about the TIC data (Treasury International Capital)… The Treasury has stopped putting their press release that contains the chart in .pdf form. This month the HTML table is completely blurred. While I can retrieve individual country data, I do not trust that data entirely as it does not jive with other reports.

Then, the Treasury added a cute little note to the bottom of their press release stating that they are adding more banks to this data and that it will affect the data. This actually began last month and I missed it then, but is this change responsible for the somewhat more positive numbers we see the past two months? I don’t know, I can’t tell and do not have access to the information. Once again, changes are made that make comparables not possible. At any rate, this report is better than the previous and while we’ve had many this year that show negative TIC flows, this one shows a net foreign purchase of $40.7 billion. Here’s Econoday:
Foreign demand for U.S. financial assets remains light but is up in the latest data. Net foreign purchases of U.S. long-term securities rose a respectable $40.7 billion in September. Domestic securities purchased by foreigners rose a net $55.7 billion, offset by $15.0 billion in net foreign securities purchased by U.S. residents. Private purchases, at a net $44.8 billion, were up from the prior two months, while official purchases, at a net $10.9 billion, were a little lower. U.S. equities are in demand, with foreign purchases up a net $15.7 billion. Demand for long-term Treasuries was also very strong, up a net $44.4 billion. China, which is voicing concern over the decline in the dollar, is not increasing its holdings of U.S. Treasuries which are steady at $798.9 billion, still little changed since May. Holdings in Japan have been on the rise, up more than $20 billion in September to $751.5 billion. China and Japan -- are by far -- the two largest holders of U.S. Treasuries. The decline in the dollar has not helped demand for U.S. financial assets where foreign inflows, before last year's credit collapse, would often exceed $100 billion.

Below is the verbiage contained within the release along with their note on changes. I guess when we see the revised data for the previous reports we can compare data to see how large the effect is, but I have not seen the past revisions yet. The table in this report is too blurry to read, here is a link to the report – October TIC Data.

Why, when they make changes like that, do they not list out the effect is has on past and current data? Because then you could make historical comparisons. Perhaps I’ve become too cynical about the data, truly I don’t know what to believe anymore, almost none of it seems real to me, and there’s far too much of it for one person to unwind it all. Even John Williams only tracks and unwinds the data on a few government statistics and look at the differences in his calculations versus government reports. Do I believe that foreigners are buying up that much of our debt in reality, or is it all a central banker game? I’m leaning towards game…

The Animals - The House of the Rising Sun (1964):