Wednesday, December 31, 2008

Happy New Years!

Another year has flown by and a new year is upon us. 2009 should be another wild ride!

It's 2009 and we have a lot to be thankful for:
-We have our health.
-God has taken good care of us.
-Our family is happy, safe, and well taken care of.
-We are employed.
-Our country hasn't been invaded by a more powerful country seeking our resources.
-We're not about to become the next president of the United States.
-We're not about to become the next Secretary of State of the United States.
-Our football team is rebuilding and will be back on top next year.
-Our country isn't experiencing riots.
-Our stock portfolio hasn't fallen 100%.
-George W. Bush is retiring.
-Gasoline is cheap.
-You still can walk in your grocery and buy food imported from all over the country and the world.
-You still have internet access.
-Brittany Spears is back at #1.
-The aliens are still only observing us.
-It's still not too late to get in shape.
-And last but not least: Bruce Springsteen and the E Street Band are not only about to release a new CD, but are performing at halftime at the Superbowl.

Since New Years is a good time to make predictions, I'll probably just review/revise mine from 10/1/08. I'm sticking with all of them, except my oil price prediction has already been proven wrong.

10/1/08 Predictions
· Oil: $150/barrel before $50/barrel WRONG
· Gold: $1500/ou before $500/ou
· Dow Jones Ind. Avg.: 5000 before 15000
· Next ten years will be the toughest we’ve ever experienced in our lifetime
· Next twenty much tougher than last twenty
· Next fifty much tougher than last fifty
· Military draft: within ten years, probably 5
· Brett Favre won’t be playing for the Jets next season
· Paris Hilton’s career tanks
· Saints win the Superbowl in 2010!!!
My one new prediction: Superbowl 2009 - The Manning Bowl - Peyton vs Eli

I believe that 2009 will be a very challenging year. I don't agree with the gurus that forecast a recession end by the third quarter of next year. Remember that those gurus just informed you that we've been in a recession for the past year. So much for proactive forecasting and timely notification. I think that we're in for a very long haul. A 26 year party requires a long hangover.

My recommendations for the new year:
-Take care of what is important first
-Prepare for all scenarios
-Think for yourself
-Read a lot from diverse sources
-Be aware of who's Kool-Aid you're drinking
-Turn off the TV
-Enjoy life
-Pray a lot!

For a laugh and summary of 2008:

Happy New Year to all!!!

Wednesday, December 24, 2008

A Christmas Sermon

From a sermon by Father David Kirk (1935-2007) - Founder of Emmaus Harlem

"Christmas is our feast. The time we remember Jesus, born homeless in a shelter in Bethlehem. The time of hope, of the birth of hope...the time we try once again to open our hearts, our lives, and let God be born in us. It's interesting: the Gospels begin with the Christmas story, the birth of Jesus, the power of God in a powerless little child, and ends the story with Emmaus: Jesus, on the road, incognito, a stranger, among his disciples.

What both stories tell us is that God inserted Himself into this tired struggle of humanity, among men and women struggling with the power of evil and despair. It is among us struggling people who form a story which God wants us to become a part of; and into this struggle God inserts Himself in Christ Jesus, becoming a brother, a fellow traveler with us. He walks with us. He joins us in our struggle, our hurts, our disappointments, listens to our stories and helps us realize that we are not walking in circles; we are not suffering without meaning; we are not alone in journey; that the God of love who gives us life is now with us - within us - at all times and in all places; so we never need feel lost, we can always trust that God walks with us.

Jesus listens to our stories and gives us hope; but so many of us...hide part of the story, cling to our aloneness; and when we do that we are not allowing God to touch us when we are lost in pain; we hide from one another those places deepest inside ourselves, where we are most in pain, where we are most confused, guilty, hurt. So Christmas is the time to commit ourselves to open up to one another and to God, and to allow God and divinity and hope and new life to be born in us.

It is night now and, in many ways, in America it is night. It is darkness. It was in the night when the angel told Mary that the Messiah, the Savior, would be born to her, a virgin - an impossible thing - and in the night when she gave birth in the shelter of a cave. How do we get out of this night, out of this darkness?

So tonight is the night to reach out and, in God, let love for each other be born; to think of any person among us we have judged, not accepted, even rejected, and build communion as a brother or sister.

When everything is dark, when we are surrounded by despairing forces, when we do not see exits from our troubles, then we can find peace and salvation in the remembered love of Jesus Christ, which is love made vulnerable through suffering, and teaches us that truth springs from patience, and patience from suffering."

Father David's ministry carries on today at Emmaus in Harlem. For more information or to make a donation:

Monday, December 22, 2008

Keeping the Faith

I'm sure everyone has seen a picture or video of this pooch, but here you go:

Lets let Faith gives us faith for a great 2009. She illustrates the fact that we have to "play the hand that we're dealt".

Sunday, December 21, 2008

Ron Paul on The Federal Reserve

"As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing."

"The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect."

"One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy."

"Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation."

"Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money,” as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable."

"The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do."

"Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money."
Ron Paul

Saturday, December 20, 2008

A Conversation Between Two of My Horsemen

This conversation took place in February 2003 on Jim Puplava's radio show, Financial Sense Newshour:

Jim Puplava: What are the possibilities that somehow they really get this wrong and we have hyperinflation? Do you think it is deflation first, then hyperinflation after that? Is there a possibility that we head straight to hyperinflation? In other words, if we look at Germany in the 1920s, did they experience deflation first, then hyperinflation after that?

Bob Prechter: What the German government was doing was printing bank notes, actual cash. What the Fed typically tries to do is to get people to borrow. I don’t think there is any chance that it is going to get people to borrow enough to overwhelm the deflationary forces. Borrowing is the problem, and credit is what is about to deflate. If they started printing bank notes, I think it would panic the credit markets. So I think we will get a deflation first. I think we will have a hyperinflation after the deflation, but that is not a monetary or market analytical conclusion. It is based on what I think is likely in politics... Our last national crisis, unlike Germany’s, was not inflation but deflation. The people who are running the Federal Reserve System are definitely afraid of deflation, because that is what brought on our Great Depression. It is very likely that they will turn on the monetary spigots and try like crazy to reverse the deflationary forces."

Amazing!! That was five and a half years ago. This week, the Federal Reserve pitched that exact plan. Buckle your chinstraps!

Friday, December 19, 2008

The Competitive Flat World

"What is thought to be a 'system' is after all, just conventional, and I do not see how one is supposed to divide up the world objectively so that one can make statements about parts."
Albert Einstein

The financial crisis has stimulated a lot of discussion about the interconnected world. The world that Tom Friedman describes as a "flat world". Some have presented theories that we're approaching a "one world order" and the potential of one world currency.

To date, all countries appear to be participants and very well synchronized in this crisis. Peter Schiff in his book, "Crash Proof", believes that not all countries will fair the same. While all currencies could sustain damage, some will do better than others. He believes that China will surface after the crisis as the most powerful economy in the world. He's not a strong believer in the future of the U.S. dollar.

Time will tell.

Thursday, December 18, 2008

The Honor System

This past weekend I ventured out to the little town of Smithville to a mountain biking park. I had read about it on the web and it seemed like a cool adventure. I arrived there Sunday around 1 p.m. and the parking lot was active with a dozen other cyclists gearing up. I saw a large sign that said "Sign In Here". I entered this little shack where a table had waiver forms and maps to the park. I signed the brief waiver and stood waiting for a staff person to appear to take my form and money. After ten minutes I walked outside to see if I could locate anyone. After concluding that the staff were busy elsewhere, I asked a fellow rider where they were. He said, "No one is here. It's the honor system. Just place your form and money in that metal box." I was a little surprised. I haven't heard those words "honor system" for quite some time. After putting my money in the box, I started to think how interesting that was. I did sign a waiver that said that they were not liable when I collide head on with a tree and break my neck. But, shouldn't someone be there to make sure I sign the form and that I am who I say I am? And shouldn't someone be there to make sure I pay? Well, I guess not. My "business" side of the brain thought what a risk that was this day and age with all of the "not my fault, your fault" litigation. The park has been operating for years. Maybe there's something to say for the honor system. Maybe in the rare occasion of an accident, participants in THIS system realize that accidents are accidents and that we are all personally responsible for our own actions. We don't need a ten page waiver form to define this for us. The honor system might just bring honor out in all of us.

Tuesday, December 16, 2008

The Risks of Skinny Dipping

"It's only when the tide goes out that you learn who's been swimming naked."
Warren Buffet

During the expansion, when credit is readily available, some companies and individuals stretch themselves too far to present a facade of success. Others use illegal tactics to obtain wealth. As the tide continues to lower, the skinny dippers get revealed.

This past week, we heard of another great Ponzi scheme. The lower tide revealed that Bernard Madoff scammed billions of dollars out of individuals, companies, and charitable organizations. It's reported that he provided constant positive results for decades. The most frustrating and concerning aspect of this discovery is that the SEC had investigated his business several times in the past and found no wrong doing. Madoff was a former chairman of the Nasdaq Stock Market.

"A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from the profit from any real business. It is named after Charles Ponzi.[1] A Ponzi scheme has similarities with a pyramid scheme though the two types of fraud are different." SOURCE: wikipedia

Charles Ponzi

Monday, December 15, 2008

Sunday, December 14, 2008

A Word From The Experts

Post-analysis is always very revealing. The lesson learned is that we all need to think for ourselves.

Political “Experts”
“The Federal government will not bail out lenders — because that would only make a recurrence of the problem more likely. And it is not the government’s job to bail out speculators, or those who made the decision to buy a home they knew they could never afford.” (George W. Bush, Sept 2007)

“These institutions [Fannie and Freddie] are fundamentally sound and strong. There is no reason for the kind of [stock market] reaction we’re getting.” (Christopher Dodd, Chair, Senate Banking Committee, Financial Post, July 12, 2008)

“Misery sells newspapers. Thank God the economy is not as bad as you read in the newspaper every day.” (Phil Gramm 7/10/08)

“I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing.” (Barney Frank regarding Fannie & Freddie, 2005)

“I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.” (Barney Frank regarding Fannie & Freddie, 2007)

Financial “Experts”
"Improvements in lending practices driven by information technology have enabled lenders to reach out to households with previously unrecognized borrowing capacities." (Alan Greenspan, October 2004)

“There is a chance that housing prices could fall, but its effect on the economy will be limited.” (Alan Greenspan, 2005)

"The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions .... Derivatives have permitted the unbundling of financial risks." (Alan Greenspan, May 2005)

“I suspect that we are coming to the end of the housing downturn, as applications for new mortgages, the most important series, have flattened out…I think that the worst of this may well be over.” (Alan Greenspan, October 1, 2006)

“The market impact of the U.S. subprime mortgage fallout is largely contained and that the global economy is as strong as it has been in decades.” (Henry Paulson, January 2007)

“All the signs I look at show the housing market is at or near the bottom. The U.S. economy is very healthy and robust.” (Henry Paulson, 4/20/07)

“I’m not interested in bailing out investors, lenders and speculators.” (Henry Paulson, 3/2/08)

“At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” (Ben Bernanke during Congressional Testimony 3/2007)

"We will follow developments in the subprime market closely. However, fundamental factors—including solid growth in incomes and relatively low mortgage rates—should ultimately support the demand for housing, and at this point, the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system." (Ben Bernanke, 6/5/07)

“It is not the responsibility of the Federal Reserve—nor would it be appropriate—to protect lenders and investors from the consequences of their financial decisions.” (Ben Bernanke, 10/15/07)

“Changes in financial markets, including those that are the subject of your conference, have improved the efficiency of financial intermediation and improved our confidence in the ability of markets to absorb stress. In financial systems around the world, the capital positions of banks have improved and capital markets are becoming deeper and playing a larger role in financial intermediation. Financial innovation has improved the capacity to measure and manage risk. Risk is spread more broadly across countries and institutions.” (Timothy Geithner, May 15, 2007)

Investment “Experts”
“The worst is over.” (Warren Buffett, on Bloomberg TV, May 3, 2008)

“Sometimes, we drink the kool-aid.”(Moody’s internal email)

“It could be structured by cows and we would rate it.” (S&P internal email)

“Let’s hope we are all wealthy and retired by the time this house of cards falters.” (S&P internal memo)

“Chairman Bernanke has succeeded; the economy has been positioned on a sustainable track for manageable expansion: A Goldilocks scenario that is neither too hot nor too cold.”(MikeThomson, Financial Post, April 25, 2007)

“And I believe there will be NO FALLOUT whatsoever beyond the funds, despite the innate desire by so many people to rumor and panic the marketplace.” (Jim Cramer regarding Bear Stearns, 6/22/07)

“I am indeed sticking my neck out right here, right now… declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15, and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside. My bottom call isn’t gutsy. I think it’s just a smart call that all the evidence points toward. Bye, bye bear market. Say hello to the bull and don’t let the door hit you on the way out.” (Jim Cramer, August 4, 2008 – market is down 28% since then)

“The stock market is cheap on a price-earnings basis, profits are fabulous, both here and abroad, stocks are a lovely place to be. I have no idea what the S&P will be ten days from now, but I am confident it will be a lot higher ten years from now, and for most Americans, that's what we need to think about. The subprime and private equity and hedge fund dogs may bark, but the stock market caravan moves on.” (Ben Stein, August 13, 2007 – market down 40% since then)

“The losses in the stock market since the highs of October 2007 are about 14 percent. This predicts — very roughly — a fall in corporate profits of roughly 14 percent. Yet there has never been a decline of quite that size for even one year in the postwar United States, and never more than two years of declining profits before they regained their previous peak.” (Ben Stein, January 27, 2008)

Corporate “Experts”
“We finished the year positioned better than ever to capitalize on the array of opportunities still emerging around the world as a result of what we believe are fundamental and long-term changes in how the global economy and capital markets are developing.” (Stanley O’Neal, former CEO of Merrill Lynch, January 2007)

"We deliberately raised more capital than we lost last year ... we believe that will allow us to not have to go back to the equity market in the foreseeable future." (John Thain, another former CEO of Merrill Lynch, April 8, 2008)

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” (Charles Prince, former CEO of Citigroup, July 2007)

But as I do reflect on it, and I do a lot, that nobody saw this coming. S&P and Moody's didn't see it coming, but they simply just downgrade bonds, they don't take hits. Bear Stearns certainly didn't see it coming. Merrill Lynch didn't see it coming. Nobody saw this coming. (Angelo Mozilo, former CEO of Countrywide Financial, July 2007 after he sold $138 million of stock)

I’m confident our company is in the right businesses for the long term and that our strategy of being in high growth businesses and markets, our laser focus on customer service, our expense discipline, and our commitment to strong credit risk management, will create value for our shareholders in the future. (KenThompson, former CEO of Wachovia, October 2007)

Source: James Quinn
Read the entire article at:

Saturday, December 13, 2008

The Saudi Oil Perspective

On December 7, 2008, I made a post discussing the recent swing in oil prices.
Here's the 60 Minutes segment addressing the topic:

Note that there are three parts.

Friday, December 12, 2008


One of Robert Prechter's main themes for the downward contraction is the escalation of social unrest. Along with this comes a power struggle between the government and the people.

"The Socialist opposition leader, George Papandreou, speaking after emergency talks with the prime minister, Costas Karamanlis, said Greeks had lost trust in the government after three days of disorder across the country, triggered when a schoolboy was shot dead by police.
"The country doesn't have a government to protect it," he said. "Citizens are experiencing a multiple crisis: a social crisis, a crisis of values. People have lost trust in the government." Karamanlis today began emergency talks with top politicians, urging them to unite against the face of civil unrest, as he struggles to reassert his authority. "We won't show any leniency," he said. "No one has the right to use this tragic incident as an excuse for acts of violence. At this critical time, the political world must unite to condemn those responsible for this disaster and isolate them." Source: The Guardian

"But the anti-government movement acquired new impetus following the fatal shooting by the police on Saturday of Alexandros Grigoropoulos, 15. While clashes between the police and students have been common in Greece for decades, the ferocity of the reaction to the boy’s death took the nation — and its crippled government — by surprise. Outrage over the death was widespread, fueled by what experts say is a growing frustration with unemployment and corruption in one of the European Union’s consistently underperforming economies, worsened by global recession." SOURCE: The New York Times

Congo, Zimbabwe, Thailand......As Americans, what should we prepare for?

Thursday, December 11, 2008

A Night In Atlantis

A few weeks ago in Dubai, Atlantis opened and a $20 million party was thrown to commemorate the grand opening of this $1 billion hotel. Massive fireworks and celebrities abound culminated the event. Suites in the hotel go for $35,000 per night. The project is part of a decade-long trillion dollar building boom in Dubai. 67% of Dubai's revenue is from tourism.
The Burj Dubai, the soon-to-be tallest building in the world, is under construction in Dubai. The Dubai financial markets, like many others, have lost 70% of their value since the summer. Robert Prechter's research illustrates that during major credit expansion periods, the tallest buildings "of their time" have been constructed. The Burj Dubai might be a great example of this phenomenom. Euphoria rules at the crest of the tidal wave.

Wednesday, December 10, 2008

Dancing Queen

My family attended a family wedding last weekend. We had the pleasure to spend some time with my wife's two great aunts. One is 90 and the other is 94. When the band at the reception started playing "Dancing Queen" both of them were on the dancefloor with three other generations dancing to this rediscovered hit. I once again was reminded why Tom Brokaw called them "the greatest generation". They survived The Great Depression, Hitler, the civil strife of the 60's, and many other challenges. And now in their 90's, they're dancing queens. I hope that our generation, when challenged, can still find time to dance.....especially with three generations in tow!

Tuesday, December 9, 2008

Gentleman, Scholar, and True Christian

Here's a great interview with a fine gentleman, scholar, and true Christian:

I bought this book authored by Templeton and really have found it to be an incredibly diverse source of great "life lessons". This past May we had several high school seniors graduating and I wish I had discovered this book before then and sent it as the gift.

Monday, December 8, 2008

What Can We Do To Change Them?

This morning I was watching "Face The Nation" with Bob Schieffer. During an interview with Tom Friedman discussing Pakistan, he stated "what can we do to change them?". That's a very interesting statement. When did we get put in charge of "changing" countries and cultures? Did they ask us to change them? When did we become so arrogant that we believe that everyone should be like us? Why do we always pick a "weak" country as our target for change? Why don't we enter the Congo right now and change them? Why don't we invade N. Korea and change them. How about Russia? The Congo, Bosnia, Rawanda, Zimbabwee, Myanmar, Somalia...that's where we could have implemented change. Not changing a culture, but changing a government and saving innocent people.

I had a conversation with a good friend a few weeks ago who has been travelling the world a lot lately. He reports that our arrogance has made us very unpopular. I don't think that that is new news to anyone, but shouldn't we stare into the mirror and ask ourselves the question "who put us in charge of the world?" I'm a very firm believer that we should wield our power to aid countries during major internal conflicts where millions of innocent people are being impacted. I'm not a supporter of invading countries for their resources under the veil of being a good Samaritan.

Sunday, December 7, 2008

Mr. Geologist, How Much Speculation Is In That $90 Oil Price?

I had the honor and privledge to sit at the same table as legendary GE CEO Jack Welch at a family wedding in November, 2007. Halfway through the meal without warning, Mr. Welch says "Mr. Geologist, how much speculation is in that $90 oil price?". I quickly responded "I don't know". He said "what do you mean you don't know?". I then realized that he probably wasn't used to that answer. I then quickly changed my answer to "$30". He said "that's what I thought."

Historically, I believe that there has been two factors controlling the price of oil: supply/demand and whatever OPEC wanted it to be. In recent years, I believe that a third factor has arisen and that is fear. The fear factor could include "peak oil", terrorism, and geopolitical conflict in oil prone regions. This factor can explain the rapid rise to $145 per barrel this year. Supply and demand hasn't changed that drastically to explain the rapid rise or rapid fall. Most OPEC companies desire oil to be above $70 per barrel, so some overpowering force has won. Most recently, the "sprint to cash" and deflationary fears could explain the capitulation in the price of oil along with all other commodities.

In the coming years, I believe that these fears, geopolitical events, and market dynamics will drive the price of oil to very high levels. In the meantime, lets hope that low gasoline prices don't encourage us to take our eye off of the ball regarding the long term underlying problem of overconsumption.

Friday, December 5, 2008

Darkness At Sundance

My post two days ago discussed the alignment of mass social mood and cultural trends such as movie themes. I picked up the USA Today at the airport yesterday and the headline in the LIFE section was "Sundance Lineup Basks In Life's Dark Places". The article stated "The comedies are dark, and the dramas are even darker at the annual showcase of low-budget moviemaking, which kicks off Jan. 15."

Keep shining the light my friends!!

Thursday, December 4, 2008

The Requirement of a Hangover

We've all had a good "night on the town". After the party, the inevitable hangover arrives. With the fun comes the pain. The U.S. economy has been partying since 1982. In 2000, I believe that we started a long hangover. The booze of the expansion era must now be purged during the contraction or hangover. Like a hangover, there are many theories on how to cure it. It is my belief that the Fed will only increase the headache.

The natural cure for the hangover.

Wednesday, December 3, 2008

Fear In The Film

Robert Prechter presents a case of the alignment of mass social mood with numerous cultural trends. One of his examples is the alignment of movie themes with the current mood. Here's an article of his on the subject.

Recently, we went to see the box office phenomenom "Twilight". The movie is a love story about a girl and her love for a vampire. It wasn't my kind of movie, but while sitting in the theatre I couldn't help from noticing the darkness of the film. The scenes were dark (vamps don't like light) and the vampire theme, by it's nature, was dark.

The Batman sequel, "The Dark Knight", is smashing box office records. It's been categorized as a psychological thriller. The word "dark" is even in the title. Ironically, Heath Ledger, who played the Joker committed suicide and Christian Bale, Batman, has been charged with assault on his mother and sister. Were they impacted by the darkness of their film?

A quick review of box office sales reveals that at the inflection point from expansion to contraction, the top films in 2001 were Harry Potter, Lord of The Rings, and Monsters Inc. While the scenes in Potter and Rings were very dark, at least the Monsters were cute in Monsters Inc. Ironically in 2000, the year of the dotcom crash, Mission Impossible II was the top grossing film.

So what's the point? Keep your radars on for clues regarding changes around you. How will they impact us? What influence will these films have on our children?

Tuesday, December 2, 2008

Election Day Winners

In my election day post, I noted that Sarah Palin and SNL were the big winners in the election. It was reported recently that Palin has signed on for a $7 million book deal.
"She's poised to make a ton of money."
Howard Rubenstein, New York's best-known public relations adviser

But I did forget one big winner, Joe The Plummer. He's negotiating his book deal.
"Everyone came at me to write a book. They had dollar signs in their eyes. '101 Things Joe the Plumber Knows' or some stupid s--- like that. Excuse me, I am sorry, you know I will get behind something solid, but I won't get behind fluff. I won't cash in, and when people do read the book they will figure out that I didn't cash in. At least I hope they figure that out."
Joe The Plummer

Only in America my friends!!

Monday, December 1, 2008

What Would Sam Say?

What a tragedy at the Walmart on Long Island on Black Friday, America's mega-shopping day. I couldn't help but think of the irony of a "mob" of shoppers stampeding a Walmart employee to his death. What would Sam Walton say if he were alive? Yes, it only happened at one retail store out of the thousands opened that day. But, I think it summarizes the state of our culture and country really well. A mob of shoppers who had stood in line for hours, charge the opening door of a store so that they can buy more things that they don't need apparently at a discounted price. The most shocking report from the scene was that shoppers were angry and despondent when it was announced over the loud speakers that the door was closing due to the death of the Walmart employee. Peter Schiff states that we've evolved from a "production" to a "consumption" country. This event on Black Friday couldn't sum it up better. As I've stated before, our country will be a better place after we deflate from the Super Size Me Era.

Sunday, November 30, 2008

Vladimir and Hugo

Russia continues to make strategic moves in the energy sector. Partnering with Chavez should be of concern to the U.S.

Russia, Venezuela to form 'strategic' oil alliance
Source: Oil & Gas Journal

Venezuelan President Hugo Chavez plans to enter into a strategic alliance with Russia aimed at developing his country's oil industry, according to a senior government minister. "It will be a strategic alliance between Petroleos de Venezuela SA (PDVSA) and an oil consortium of all the Russian firms, state and private, a large industrial conglomerate not just for production, but also for the entire matter of refining and industrialization," said Venezuela Energy Minister Rafael Ramirez.

A strategic cooperation agreement will be signed on Nov. 26 during Russian President Dmitriy Medvedev's visit to Caracas, Ramirez said, noting that Moscow also is pursuing a policy "of greater cooperation" with the Organization of Petroleum Exporting Countries. Earlier this month, Rosneft Chief Executive Officer Sergei Bogdanchikov said five of Russia's largest oil and gas firms each have taken a 20% stake in the national consortium formed to develop heavy oil fields in Venezuela's Orinoco River basin.

The consortium was registered on Oct. 8, Bogdanchikov said. In addition to Rosneft, the Russian group is comprised of Gazprom, Lukoil, TNK-BP, and Surgutneftegaz. PDVSA will have the controlling stake in the larger consortium announced by Ramirez, and the companies will complete formalities by next spring.

Russian Deputy Prime Minister Igor Sechin explained the rationale for the consortium with Venezuela. "The consortium derives from practical considerations: crude produced at certain Venezuelan blocs is heavy, and it is necessary to build refineries capable of making commercial oil," Sechin said. "Such refineries are rather expensive ($6-6.5 billion), and that is too much for one company."

Saturday, November 29, 2008

The Gurus on Bubblevision

This is a must watch! It really shows the hype delivered by the media. Note how Peter Schiff is abused by the other guests for his contrarian and unique opinion. The most fascinating is everyone's comments on the financial sector in 2007.

Advice: Turn off the tv and do your own research.

Friday, November 28, 2008

Iran Gets It

Source: Associated Press
Iran converts some reserves to gold
Published: November 15, 2008

TEHRAN, Iran: Iranian newspapers are quoting Mojtaba Hashemi Samareh, a top advisor to President Mahmoud Ahmadinejad, as saying the country has converted its financial reserves into gold. The papers did not specify how much of Iran's estimated $120 billion in reserves would actually be converted into gold.

The daily Jahan-e-Eghtesad, or Economy World, quoted Samareh on Saturday as saying the decision to buy gold was carried out on Ahmadinejad's order. The decision comes after a dramatic fall in oil prices. About 80 percent of Iran's foreign revenue comes from oil exports.

Thursday, November 27, 2008

Happy Thanksgiving

Thanksgiving is the one day of the year that we officially "give thanks". Obviously, we should do this on a daily basis, but the hectic pace of our lives sometimes takes precident. With the $7 billion Halloween holiday preceding it and the $474 billion Christmas holiday following it, Thanksgiving has somehow been lost in the shuffle. Christmas items now appear in the mall directly after Halloween. What happened to Thanksgiving? It's now reduced to a one hour feast.

Take some time over the holiday to give thanks and enjoy the great family time. Make sure to take a good nap after the power-meal. After I wake up from mine, the Christmas decorations magically appear!

Wednesday, November 26, 2008

The Media's Desire For An Uptrend

Take 5 minutes to watch this interview. I watched it live last week.
Forward to 1:50 on the video to listen to Peter Schiff. His perspective is intriguing, but more interesting to me is the mindsight and behavior of the panel at FastMoney. Note the facial expressions on the show's panel. They just don't want to hear anything that says stocks are going to decline. It shows how we've all been trained to says stocks, stocks, stocks. The media and these financial shows always want a rising market. Watch Cramer on Mad Money for one night. It's not entertainment when the market is cratering.

Tuesday, November 25, 2008

A Perspective On Financial Planners From

From Eric Janszen at

"As regular readers know, my background is in technology and finance, with experience as CEO of high technology companies and in venture capital management. It will not surprise readers to hear that many of my friends have similar backgrounds. You may wonder what they have made of my less than optimistic outlook on the US and global economy over the past several years. They had the option of hearing my opinions or the professional advice of an army of certified and well meaning financial planners and money managers, the vast majority of whom are trained to sell Wall Street’s main financial product: stocks. Armed with 'efficient market hypothesis' that claims that markets are all knowing and asset prices reflect all knowable information and charts and graphs that “prove” that buy-and-hold is the way to make money in the stock market, they carefully develop for their clients, my friends, portfolios heavy in stock assorted funds and indexes, various flavors of bonds, and perhaps a few commodity ETFs for the adventuresome. The mantra, delivered with the consistency of religious belief, is this: you cannot time the markets. Entrepreneurs are by nature optimistic, and busy, so they tend to go along with the traditional and rational sounding presentation of the official source for such opinion, a certified financial planner or money manager. Over the years, most of my friends have regarded my warnings about Wall Street and the stock market with skepticism, even amusement. Over the past few months, however, I have received calls and emails from friends I have not heard from in years. The tone is anything but humorous. The typical note goes like this: “I remember what you told me. I wanted to sell last year but my financial planner told me not to, that I can’t time the market. What should I do now?” Reminding my friends always that I am not a certified financial planner and cannot provide personal investment advice, I proceed to give my views on the markets and economy."

"That forecast back in 2001 was complicated by the housing bubble, the most idiotic and irresponsible act of government economic manipulation in world history and completely beyond me to predict. Not even in my darkest dreams did I think our Federal Reserve and banking regulators could be so stupid: bursting real estate bubbles bring down banking systems and economies. They did in the US in the 1870s and 1930s, in Japan since the 1990s, and many other nations as well. The US 2002 to 2006 housing bubble extended the tax cut, rate cut, dollar devaluation reflation boom by two of years longer than the 1930s version sans housing bubble. As you can see, that extension made the collapse we are seeing today considerably more severe. Now we have a post bubble reflation boom crashing around the fake boom created by the technology stock bubble- two crashes nested one within the other– thus the terrific cascading financial and economic collapse we see today. We wrote dozens of occasionally over-the-top, but always factual and data driven, warnings on since March 2006 to try to scare readers out of the stock market. As it turns out, we were able to determine and notify subscribers on Dec. 27, 2007 when the DJIA was trading at 13,365 that, if they were for some crazy reason still in the market, that was it: the last chance to get out. That forecast was informed primarily by two pieces of information. One, our research told us that US markets were likely to begin in 2008 to experience a bear market that more or less tracked the Nikkei during the first year of the Japanese debt deflation in 1990, off 40%."

"Yes, we know. “No one has a crystal ball” and “no one can foresee the future of the markets.” Is that what your financial planner told you? We hear that all of the time that no one can forecast the markets, certainly not to this degree of accuracy. But this forecast was uncomplicated if you understood the simple underlying dynamic: US households and businesses, and the government itself, had since 1980 built up too much debt. The rate of increase in debt was unsustainable.The credit bubble began in 1980 after the Fed raised short term interest rates to 19%. The 1975 to 1980 inflation that preceded that drastic action deflated all the debt in the economy, leaving US households and businesses with a clean slate. The “fat spread” between high but falling wholesale borrowing rates paid by banks and more gradual declines in rates paid by retail borrowers made lending very profitable and vastly expanded lending and, with it, increased debt. Once the fat spread effect ran out in the early 1990s, bank reserves rules were changed to extend the credit boom. Once those benefits ran out in the early 2000s, lower lending standards, low interest rates, and financially engineered debt products together enabled by newly deregulated debt markets, extended the credit boom for one final spurt of growth. At its height, the US credit machine was producing five dollars of new debt for every dollar of GDP growth, up from a ratio of one to one in the 1960s. The entire 27-year old edifice of debt came crashing down starting with the crash of the securitized debt market in Q1 2007. It was game over and 2008 was the first year of the American debt deflation. All credit bubbles end with a sudden withdrawal of purchasing power from the markets and economy that have become dependent on the massive flows of fresh credit. Debt deflations go on and on until the debt is deflated, one way or another, either by monetary deflation and debt defaults as in the 1930s or by monetary inflation as occurred between 1975 and 1980 in the US. The Japanese have since 1990 deflated debt the slow, hard way, siphoning off cash flow from households and businesses for nearly two decades to pay it all down, and in the process transferring mountains of private debt to the federal government through public spending programs. Our government is hoping to do that, too, except unlike Japan in 1990 our government is deeply in debt to foreign private and official lenders already. If somehow we manage to pay our debt down the hard way as Japan has over nearly two decades, what was Japan’s reward for toughing it out? The Nikkei is today at 8,273 after reaching 39,000 at the end of 1989, off 80% in nominal terms in 19 years. The first relevant fact in our Dec. 27, 2007 Debt Deflation Bear Market forecast was that the US is entering a debt deflation and that debt deflation is a bad investment environment for a buy-and-hold strategy. Two, contacts on Wall Street conveyed in many ways, some subtle and others not, that a last ditch effort was on to run up the market going into the end of the fiscal year in 2007 to collect the last bonuses that the current generation of bankers expected to see before Wall Street went down for the count in 2008. So much for efficient markets. Quite a few are unemployed now. Some of the analysts I know from Lehman landed at Barclays, a few bearish and therefore well-positioned hedge fund managers did well shorting stocks and are still active, and a few old contacts at JP Morgan and Goldman Sachs are still there, but I can’t imagine the industry will ever be the same. Huge imbalances in the US and global economy developed for over 30 years. Now they are rebalancing, as many non-mainstream economists have warned was certain to happen sooner or later, warnings which were argued as alarmist by mainstream economists. The global monetary system cobbled together in the 1970s after the US unilaterally abandoned Bretton Woods, and the unintended consequences of that -- the inflated purchasing power of the US dollar, buildup of gross external debt to 95% of GDP, and America's gigantic current account deficit -- started to come apart in 2007 following the crash of the securitized debt market, that followed the collapse of the housing bubble. It had to come apart anyway; the securitized bond market happened to be the proximate cause."

"Why did the credit markets crash? The credit market is best understood as a transactions network. One node or set of nodes crashes, and in the process transmit the information that caused the crash to other nodes. Entire sections of the network crash and become inoperative while others continue to function, which explains why credit continues to flow almost normally in some credit markets that function as more or less autonomous sub-networks. However, eventually the entire network may fail, with only a few isolated sub-networks functioning, and large sections of the US economy will devolve into operating on a cash-only transaction basis as has occurred in other instances of credit market breakdown in other places in the world."

"The stock market buy-and-hold era ended in 1998. In a world where the so-called business cycle is dominated by bubbles, inflation, crashes, deflation, recession, and reflations and all manner of government interference, stock market timing, and sector analysis, will continue to be the key to making money. In fact, across the broad stroke of American history, there is never a period when markets are not either largely or entirely influenced by the actions of government. For hundreds of years the US has either been at war, recovering from war, growing asset bubbles, crashing asset bubbles, recovering from asset bubbles, or mucking around with the monetary system–entering the gold standard, leaving the gold standard, entering into a new global monetary regime, leaving that regime– endlessly. How can markets possibly be efficient if they are perpetually driven by large-scale events produced by government policies? The idea is profoundly naive. On a final note, given what were to me and many others glaringly obvious risks with predictable outcomes for the stock market going back to 1998 when I got out of stocks and started, and the horrific advice that many certified financial planners have given their clients over the years, I wonder if the licensing of financial planners has operated for the last decade as a scheme to portray a unified Wall Street financial products sales force as an independent, disinterested, and expert -- and therefore unquestioned -- collection of investment professionals with only their clients’ best interests at heart. Except for the few renegade licensed financial planners who escape the indoctrination with an ounce of common sense, most doggedly stick to absurd investment theories like “efficient markets” that have no relevance in the real world, follow arbitrary portfolio balancing rules that just happen to favor a large stock market position no matter that a large cash position is warranted by clearly observable risks, and express antagonism toward asset classes such as precious metals that, unfortunately, have a legitimate place in the portfolio of any citizen of a government that has a printing press and knows how to use it, that is, all of them. The financial mayhem the majority of financially planners have unleashed upon the portfolios of millions of Americans over the past year informs my view that the entire financial planning licensing system should be abandoned and replaced with a simple referral system that qualifies financial planners entirely on performance based metrics, not abstract theory that favors one asset class over another. No one expects a perfect crystal ball, but going to cash to dodge a 40% correction in 2007 was not rocket science. All you had to do was look at all the debt: there was and is too much of it, and there is no way that the unwinding of all that debt can possibly be good for stocks. That’s just common sense."

"You can interpret this either as the bond market smelling a repeat of 1930s deflation or late 1970s inflation times two or three. Hoover or FDR? Pick your poison. I expect Hoover then FDR, disinflation then inflation ala late 1970s but more extreme, to deflate the debt. Will these market and economic anomalies diminish, the markets recover, and the economy return to normal within the timescale of the 50 or 60 year old buy-and-hold stock investor? Perhaps, but more likely a transformation of the entire structure of the global markets and economy is starting that will take decades to resolve. In my view, these historic events will next year be complicated by political responses to high unemployment globally, and it is reasonable to expect that some of these responses will not be entirely constructive."

"Last year we warned you of the start of the Debt Deflation Bear Market. It will continue in 2009 but with rallies driven by cycles of fiscal stimulus optimism and disappointment, fear of deflation and fear of inflation. For the next several years, economies and therefore markets will be largely driven by ebbs and flows of sentiment driven by government spending or expectations of government spending, as well as fears of unintended or intended consequences–inflation. Political confusion expressed as policy paralysis over the cause and cure for the root of the problem–the credit bubble debt overhang–will dominate the markets this coming year. "

The entire post is available at:

Monday, November 24, 2008

Jack Sparrow and The Oil Tanker

The character, Captain Jack Sparrow, brought back the image of the pirate to the silver screen. While a little bizarre and feminine, he still, along with his dark crew, reminded us of the old days when the thieves of the sea took whatever they wanted from the less protected.

It's interesting to read recent news stories of pirates seizing massive tankers off the eastern coast of Africa.

"Since January, at least 91 vessels have been attacked in the Gulf of Aden, an area of 1 million square miles (2.6 million square kilometers) flanked by Yemen and Somalia and leading to the Suez Canal. Since then, both Indian and British naval ships have engaged pirates in combat and French commandos freed two nationals held by hijackers." Source: Bloomberg

The pirates are feeling the effects of deflation. Yesterday, they reduced their ransom by 40%!
During the contraction phase of the cycle, the "have nots" will seek what they feel entitled to from the "haves". This will likely occur on all scales. As the mass social mood continues to shift down, what protective measures will be taken by governments and individuals to protect themselves?

Sunday, November 23, 2008

All Pro Dad

I was first exposed to the ALL PRO DAD organization a few years ago at the Colts preseason camp. Tony Dungy has been a great supporter of the organization. It focuses on the role of the father in the family.

They send weekly reminders on how to be a great dad. Sign up.
We can all use a reminder and utilize some new ideas.

Saturday, November 22, 2008

The Four Horsemen

I've added a new "virtual mentor" to my list, Peter Schiff. After reading his book, Crash Proof, reviewing his website, and watching several of his interviews, I'm convinced that this guy is on the mark. I just ordered his latest book. Here's an update on my four horsemen and their perspectives. The challenging part is that they all have different perspectives.

1) Jim Puplava: the Fed along with the new administration will print even more money in the years to come. This will lead to massive hyperinflation. He likes stocks next year for this reason, but believes that energy and commodities will rule in the future hyperinflated world.

2) Warren Buffet: Always buy value and don't worry about the rest. He's made some great deals lately and he's encouraging everyone to stay in stocks.

3) Robert Prechter: He's dancing in the street due to the fact that his deflationary prediction appears to be coming true. With everything declining, it appears very deflationary. He believes that the Dow is heading to 700.

4) Peter Schiff: He's extremely negative on the future of the U.S. dollar. He believes that the Chinese will send those dollars home soon. He likes high yielding stocks on foreign exchanges in country's with strong currencies. He suggests that these stocks be acquired in the foreign currency. When the dollar tanks, bring those dollars home and buy up everything.

Friday, November 21, 2008

Holy Mackerel!!

Yesterday illustrated a sprint to U.S. treasuries.
A timely scene from my favorite movie:

The Feds are ole man Potter!

Thursday, November 20, 2008

30 reasons for Great Depression #2 by 2011

My favorite cyclist shared this one with me. Remember, it's a collaborative effort!

By Paul B. Farrell, MarketWatch
Last update: 7:19 p.m. EST Nov. 17, 2008
30 'leading edge' indicators of the coming Great Depression 2

Every day there is more breaking news, proof Wall Street's greed is already back to "business as usual" and in denial, grabbing more and more from the new "Bailouts-R-Us" bonanza of free taxpayer cash and credits, like two-year-olds in a toy store at Christmas -- anything to boost earnings, profits and stock prices, and keep those bonuses and salaries flowing, anything to blow a new bubble.

Scan these 30 "leading indicators." Each problem has one or more possible solutions, but lacks unified political support. Time's running out. We're already at the edge. Add up the trillions in debt: Any collective solution will only compound our problems, because the cumulative debt will overwhelm us, make matters worse:

  1. America's credit rating may soon be downgraded below AAA
  2. Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"
  3. Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse
  4. King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets
  5. Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year
  6. AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers
  7. American Express joins Goldman, Morgan as bank holding firms, looking for Fed money
  8. Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states
  9. State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt
  10. State, municipal, corporate pensions lost hundreds of billions on derivative swaps
  11. Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up
  12. Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns
  13. Fed also plans to provide billions to $3.6 trillion money-market fund industry
  14. Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars
  15. Washington manipulating data: War not $600 billion but estimates actually $3 trillion
  16. Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs
  17. Commodities down, resource exporters and currencies dropping, triggering a global meltdown
  18. Big three automakers near bankruptcy; unions, workers, retirees will suffer
  19. Corporate bond market, both junk and top-rated, slumps more than 25%
  20. Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall
  21. Unemployment heading toward 8% plus; more 1930's photos of soup lines
  22. Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists
  23. China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai
  24. Despite global recession, U.S. trade deficit continues, now at $650 billion
  25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities
  26. Now 46 million uninsured as medical, drug costs explode
  27. New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt
  28. Outgoing leaders handicapping new administration with huge liabilities
  29. The "antitaxes" message is a new bubble, a new version of the American dream offering a free lunch, no sacrifices, exposing us to more false promises

Will the next meltdown, the third of the 21st Century, trigger a second Great Depression? Or will the 2007-08 crisis simply morph into a painful extension of today's mess to 2011 and beyond, with no new bull market, no economic recovery as our new president hopes?

Perhaps some of the first 29 problems may be solved separately, but collectively, after building on a failed ideology, they spell disaster. So listen closely to "leading indicator" No. 30:
At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.
He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

For the entire article:

Wednesday, November 19, 2008

The Patriot and The Restoration of Order

"Also, it is important not to confuse a desire not to go down with a sinking ship with patriotism. Such "patriots" who stand on the deck saluting the flag as the ship sinks will likely be of little assistance to other survivors left treading water. Only by attempting to position ourselves safely aboard sea-worthy lifeboats now will we be able to participate in any future rescue efforts. Protecting our wealth today should allow us to repatriate it tomorrow, thus enabling us to help rebuild a viable American economy."

"What nearly all politicians on both sides of the aisle fail to understand is that the current contraction and credit crunch is necessary to restore order to an economy that is horribly out of balance. Years of misguided fiscal and monetary policy and market-distorting regulations have resulted in reckless borrowing and spending on Main Street, pervasive gambling on Wall Street, and rampant fraud and corruption at every intersection. America’s borrow and spend economy, and the bloated service sector that evolved around it, must be allowed to topple, so that a more sustainable economy grounded in savings and production can rise in its place. Any government efforts to delay the adjustment and spare us the pain will backfire, turning this recession into an inflationary depression. Of broader concern however is the sharp turn in ideology, and what it means for the future of our nation. If this is a permanent shift, then America will lose any resemblance to the economic titan it was in the 20th Century. Our standard of living will decline sharply, our economy will be ravaged by inflation, tens of millions will be unemployed, more individual liberties will be surrendered, and rugged individualism will be supplanted by the nanny state. In short, Latin America may extend north to the Canadian border."

Peter Schiff, President Euro Pacific Capital, Author "Crash Proof" 11/17/08

His strategy:

His outlook:

U.S. Stocks

We believe that in general U.S. equities remain substantially over-valued, and that despite nominal new highs for some popular stock market averages, they remain in long-term secular bear markets when adjusted for inflation. As such we are bearish on the broad U.S. stock market, and only find value in certain carefully selected U.S. equities, generally those companies that are export oriented and/or commodities based, including mining and oil and gas.

U.S. Bonds

We believe that the U.S. bond market is in the process of forming a significant top, in what has been a major long-term bull market. Once completed, we expect bond prices to collapse. Given the highly unfavorable long-term risk reward situation, we recommend that investors maintain minimum exposure to any long-term debt instruments, be they treasury, municipal, or corporate. Those holding U.S. dollar denominated debt instruments should restrict ownership to only the highest quality, short-term maturities. Even those high income investors seeking tax-favored yields are cautioned that avoiding the inflation tax, which stealthily confiscates principal, is more important than avoiding taxes on mere income.

U.S. Residential Real Estate

If it looks like a bubble, walks like a bubble, and quacks like a bubble, it's a bubble. The combination of artificially low interest rates, foreign central bank intervention, an irresponsible Fed, excessive credit availability, the proliferation of low or no-down payment, adjustable-rate, interest-only, and negative-amortization mortgages, a can't-lose attitude among speculators, validated by ever rising "comps," the complete abandonment of lending standards, wide-spread corruption in the appraisal industry, rampant fraud among sub-prime lenders, and the moral hazards associated with loan originators re-selling loans to buyers of securitized products who perceive minimal risk and an implied government guarantee, has produced the "mother of all bubbles." When it finally bursts, it's not just real estate speculators and home owners who will suffer, but the entire U.S. economy, its banking and financial systems, and anyone with U.S. dollar denominated savings.

The U.S. Dollar

We believe the U.S. dollar is in a major long-term bear market, and as such recommend keeping exposure to the dollar at an absolute minimum. All long-term savings and investments should be denominated in select foreign currencies against which we believe the dollar is likely to fare the worst.


We believe that Gold is in the early stages of a new, secular bull market. Conservative investors are advised to have a portion of their savings allocated to physical bullion, while speculative investors are advised to own shares of carefully selected mining companies, both domestic and international.


Like gold, we believe that commodities in general are in the early stages of a new bull market, and that conservative and aggressive investors should seek out appropriate ways to gain exposure to this sector.

Foreign Stocks

We believe that unique opportunities exist in many carefully selected foreign equities, particularly those that have minimal exposure to the United States, and are in no way related to U.S consumers, financial services, or technology. Many foreign markets are counter-cyclical to the U.S., and have recently emerged from long-term bear markets. In many cases valuations are low, yields are high, and prospects for earnings growth are favorable.

Foreign Bonds

Given our bearish outlook for the dollar, bond investors should concentrate their holdings in instruments denominated in select foreign currencies. However, given our global outlook for higher interest rates and rising inflation, shorter maturities are preferable. However, given current U.S. tax law, we believe that those seeking conservative, income generating investments should concentrate on high dividend paying, carefully selected foreign property stocks, utilities, energy trusts, and natural resource based companies.

The U.S. Economy

We believe that the growing imbalances in the U.S. economy, its twin budget and current account deficits, its lack of domestic savings, and the erosion of its industrial base, have now reached a point where a severe recession, culminating in a substantial decline in the over-all American standard of living, is imminent. The Federal Reserve, Congress, and the President, for political expedience, are likely to continue seeking to delay this adjustment, unfortunately in ways which will exacerbate its severity, making the inevitable recession that much worse, and increasing the probability of a hyper-inflationary outcome, which would render the U.S. dollar, and all U.S. dollar denominated financial assets, practically worthless in terms of real purchasing power, potentially creating a situation of extreme financial, political, and social unrest.

The above forecasts are made with much regret, as we realize that they foretell significant hardships for millions of our fellow Americans. However, it is our mission to help spare as many of our countrymen as possible from suffering this fate. In fact, we feel that it is our patriotic duty to help as many Americans as possible to safely protect their wealth though the acquisition of foreign assets. It is only through such actions that at least some Americans will retain ownership of financial wealth which may be repatriated in the aftermath of the collapse.

We remain hopeful that dire economic conditions will at least create a climate in which America can finally return to her constitutional traditions of sound money and limited government, providing a foundation upon which a sounder economy can one day be rebuilt. If out of the ashes of this collapse, the spirits of our founding fathers can rise again, it may one day be possible for America to reclaim her former glory, and once again be that shining city of which Ronald Reagan so eloquently spoke.

In our opinion the U.S. economic ship of state is in danger of sinking. As the problems with her hull are structural, current efforts by government officials and central bankers to plug up the holes will make it difficult to keep her afloat. Though we remain hopeful that she may one day be returned to a sea-worthy condition, there is nothing collectively that we can do to alter her fate, or that of the millions of Americans ignorantly dancing the night away on her decks. However, individually we can take defensive action to protect ourselves and our families by getting off the ship. In our opinion the lifeboat of choice is a carefully selected portfolio of relatively conservative*, high-dividend paying, non-U.S. export dependent, foreign equities.
Such investments provide three potential sources of protection. 1. They pay good dividends, many of which qualify for the lower dividend tax currently in effect. 2. More importantly, as these dividends are paid in currencies other than the U.S. dollar, their value will rise as the dollar falls, as will the principal value of the underlying shares. 3. They provide the potential for true capital gains, as the shares themselves may appreciate in terms of their local currencies.


Tuesday, November 18, 2008

Puppy Love

Last Thursday my mother-in-law was rushed to the hospital via ambulance with chess pains. Thankfully cardiac issues were ruled out. She said that the pains began when she was reading my blog so today's post is focusing on a much lighter topic!!

On Saturday our new puppy was born on my son's 15th birthday. Here she is having her first meal a few minutes after birth.

This post should not be confused with the nursing kittens!

Monday, November 17, 2008

God, Faith, and Boudreaux

A good friend sent me a timely email speaking about how important faith in God is during trying times. We often focus on the challenges of the day and sometimes lose sight of the big picture. Despite the balance in our 401k's, everyone I know has their health, happiness, a job, and a great family. So all is good!

When I think of faith and the challenge of knowing when to "listen" and when to "act", I often think of my friend Boudreaux during Hurricane Katrina. Boudreaux lived down on the bayou in south Louisiana. As Katrina was approaching, his neighbors drove by and offered him a ride in their car to head north to higher ground. Boudreaux responded, "I don't need a ride. God will take care of me." The next day the flood waters rose quickly and Boudreaux had to climb to the roof to stay dry. A rescue boat came up to his house to rescue him but Boudreaux declined and said "I don't need a boat. God will take care of me." The water continued to rise and Boudreaux was sitting on the top of his chimney. A coast guard helicopter flew above and lowered a man down to save Boudreaux. Boudreaux told him "I go to church ever Sunday and pray to God every day. I don't need your help. God will save me". The helicopter reluctantly left and hours later Boudreaux drowned as the water rose above his chimney. As he awaited processing in Heaven, an angry Boudreaux asked to immediately speak to God. Moments later God appeared and asked Boudreaux what was so important. Boudreaux said "God, I went to church every Sunday and prayed to you every night. I told everyone that you would save me, but you did not." God looked at him and said "Boudreaux, what do you mean that I didn't try to save you. I sent a car, a boat, and a helicopter!"

One of life's great challenges is attempting to sort the balance of faith and action. When do you sit quietly, listen, and wait, and when do you take action?

Saturday, November 15, 2008

Martenson's Update on The Bailout

I've encouraged everyone to watch Chris Martenson's Crash Course at

Here's a recent article that he posted on providing details on the progress of the bailout.

Friday, November 14, 2008

The Grass Is Always Greener On The Other Teet

My wife and daughter have been fostering cats and kittens from the animal shelter lately and I've had the opportunity to observe these precious little creatures. One of the funniest things to spectate is when the mama lays down and the kittens bombard her in search of a teet full of milk. They look like kamikazi pilots diving over one another in search of their meal. While there are enough teets for each and every kitten, it's hilarious to watch one abort his/her teet and leep over their siblings to fight for one that is already taken. Then the one that gets pushed off has to aggressively seek a new teet. In the end, they all get fed, but during the process, each one at some point decides he has to search for a teet that might be better.

While on the subject of milking the system, I wasn't shocked yesterday when Hank Paulson announced a major shift in his bailout plan. He stated "the facts have changed". Really? What facts and how can the financial system change that fast in four weeks? The reality is, they are perplexed on how to catch the "falling arrow". Now the auto industry is searching for it's teet. How many teets do the Feds have? At some point, mama's going to say, I'm all out of milk! Then what?

I thought that it would be informative to pass along the list of banks that have announced participation in the Treasury program:

Citgroup $25 billion
Wells Fargo $25 billion
JPMorgan Chase $25 billion
Bank of America $15 billion
Merrill Lynch $10 billion
Goldman Sachs $10 billion
Morgan Stanley $10 billion
Bank of New York $3.0 billion
State Street $2.0 billion
TOTAL $125 billion

PNC $7.7 billion
Capital One $3.6 billion
SunTrust $3.5 billion
Regions Financial $3.5 billion
Fifth Third $3.4 billion
Key $2.5 billion
Comerica $2.25 billion
Northern Trust $1.5 billion
Huntington $1.4 billion
First Horizon $866 million
City National $395 million
Valley National $330 million
Washington Federal $230 million
First Niagara $186 million
TOTAL $31.36 billion

Thursday, November 13, 2008

Not Weel

Way back when in the college days, I was out on the town one night with my buddies in my hometown of New Orleans. It was late in the evening and we were exiting Pat O'Briens and as we were turning left and approaching Bourbon Street we came upon the famous fast food eatery, Takee Outee. Takee Outee was a tiny little Chinese takeout that was quite questionable in it's cleanliness, but at 2 a.m. the egg rolls were to die for. That evening I was needing a late night snack so I walked up to the counter and ordered one eggroll. The Chinese man behind the counter quickly said "no eggwoll". I said, "one eggroll". He again said "no eggwoll". I said "no I just want one eggroll". He emphatically said "no eggwoll". I pointed in the glass covered area at the last eggroll and said "I just want THAT eggroll!". He reached in the case and lifted the plastic eggroll up in my face and yelled "not weel". Reality quickly set in and I realized that I had been arguing with the man for two minutes trying to purchase a plastic eggroll. I concluded it was time to head to the house!

When I look at our current financial markets and our "super size me" lifestyle, I often think of the Chinese man at Takee Outee and think "not weel". For twenty six years, we've inflated the system with massive amounts of credit. All presidents since Reagan participated in the process. Are our big cars, big houses, big vacations, and big appetites real? The savings rate for the average American is below 0%. Now that eggroll is real. Our debt is real. When we fully grasp the reality of the situation and come to grips with our past credit-driven lifestyle, I wonder what our gameplan and mindset will be. It's time to pass on the eggroll and head to the house. How will we handle that long ride home??

Wednesday, November 12, 2008

Tuesday, November 11, 2008

Politics, Economics, and The Bull Trap

Here's a link to a very informative article that provides a thorough "data supported" explanation of where we are. The market indices and the underlying parameters appear to be in full alignment.

After Shocks from the October Meltdown
by Gary Dorsch, Editor, Global Market Trends, SirChartsAlot, Inc. November 7, 2008

While you're on Financial Sense Online, browse around and note the breadth of content on this website. Also checkout Jim Puplava's radio/internet broadcast

Monday, November 10, 2008

Crash Proof

My friend, Bubbaloo, turned me on to Peter Schiff, the author of the book, Crash Proof.

Checkout the video:

Buy the book:

Here's a great contrast of two views:

"The reader of this book faces a difficult task, one that will put him in such an extreme minority that he will feel isolated and unsupported. By selling all of your stocks, you will take the maverick road, and you will take it alone. I have no doubt that by the time this bull market is ending, our call for a huge crash and depression will be laughed off the street. Do not lose your perspective when the time comes. It will take great courage to make money during this bull market. However, it will take greater courage to get out near the top, because that's when the world will call you a damn fool for selling."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 217

Saturday, November 8, 2008

Be Careful What You Wish For

It's only been three days since the election and fireworks are popping on all fronts. The Democrats are euphoric, the Republicans angry, McCain and Palin camps are fighting, and the stock market returned to it's inevitable downward spiral.

I've had the opportunity the last few days to visit with members of both teams. The Democrats are just plain giddy over the "butt spanking" that they successfully delivered. After a close Gore loss and a Kerry defeat, it appears that there was some pent up frustration. My Republican friends are very angry and have declared an end to the world. Some have even defined the moment as biblical prophecy. I had the great pleasure to golf with my favorite registered Republican this week and his four favorite words were: Stalinist, Marxist, Socialist, and U.S.S.A.

It's amazing in only three days to see the "blame game" commence on all fronts. The Democrats are saying "you see I told you that the country wanted change". The McCain camp is firing shots at Sarah Palin. This one shocked me. Palin appeared to give it her best shot. She started the process off dealing with the fact that the whole world knew that her teenage daughter had just become pregnant. She weathered some bad interviews and most of all the brutal depiction on SNL. Great fun unless it's you. My favorite registered Republican told me yesterday that Bush was a great guy for extending an invitation to the Obamas to tour the White House. I say that it would be an honorable guesture for McCain to hold a press conference today and state his appreciation for Palin's effort. Lets all be honest. McCain was a washed up candidate and the Republicans should have been able to pitch a stronger, fresher candidate. To blame your VP partner is weak.

On the flip side, I say to my Democrat friends "be careful what you wish for". The Democrats have complete control over the near future. For that, they will be given complete credit for 100% of what happens. The Republicans are already blaming Obama for the stock market drops the last two days. Thats despite the fact that it's down 34% for the year under the Bush administration. The next four years will be very challenging on all fronts. As I've stated before, the economic cycle is must stronger than a political party or individual politicians. The psychology of the masses will drive the direction. I believe that the Democrats will be navigating the ship through major rogue waves. At the end of that process, the party will be in shambles. At that point, the masses will be disenchanted with both parties. At "the bottom", there will be a third party that finally gains some steam and becomes a viable competitor. That party will probably be somewhere in the middle.

Friday, November 7, 2008

Obama and The Hogs

On January 23, 1971, just four years after they drafted him, the New Orleans Saints traded Billy Kilmer to the Washington Redskins. As a Saints fan and Kilmer fan, I was torn. At age eight, I made the decision to start rooting for the Redskins as my "backup" team just in case the Saints didn't make the playoffs. Well, that turned out to be a great strategy!

In 1987, Doug Williams came off of the bench to replace Jay Schroeder at quarterback for the Redskins. That led to a playoff birth and a victory in Superbowl XXII. At that time, there was a lot of skepticism about black quarterbacks. Many thought that they were not smart enough. Doug Williams proceeded out on the field that day with a lot of pressure on his shoulders. Despite the fact that he underwent a six hour root canal the day prior, he performed off the charts. The Skins scored five touchdowns in the second quarter and finished with a convincing 42-10 rout of the Broncos. Doug Williams delivered and set the record straight.

Football is a sport that includes eleven teammates on the field at one time. One of the great strengths of the Redskins in that era was their coach, Joe Gibbs, and their offensive line appropriately nicknamed "The Hogs". The Hogs protected many Redskin quarterbacks through the years.

Barack Obama, our president elect, is faced with a similar scenario as Doug Williams. He carries a huge burden on his shoulders being the first black president. In January, he will enter the Superbowl as quarterback. His "root canal" will be the financial system and unrest in the Middle East. In the coming weeks, we will see who he selects to be his coach and Hogs. If I were him, I would pick some massive Hogs that can block and give him time to complete some passes. Start off slow in the first quarter, and then try to make some big plays in the second quarter. Doug Williams paved the way for Cunningham, Stewart, McNair, Culpepper, McNabb, Brooks, Vick, and Blake. Barack Obama now has the opportunity and challenge to pave the road to the future for many others.

P.S. After Joe Gibbs left the Redskins, I lost touch with the team and picked the Colts up as my new "backup" team when Jim Mora arrived. The later arrival of my fellow New Orleanian, Peyton Manning, sealed the deal. But remember I predict a Super Bowl victory for the Saints next season!

Thursday, November 6, 2008

The Death of Michael Crichton

I was shocked to read this morning of Michael Crichton's passing. I was not aware that he was battling cancer. Here's a nice article and audio from NPR:

I've read several of his books and his knowledge of science and technology is incredible. After reading "Jurassic Park" years ago, I was disappointed that his stimulating intertwining of science in the book didn't transpire to the silver screen. He presented a good, fair, and diverse perspective on the environment in "State of Fear". The end of the book contained a massive amount of references for further reading. "Next" presented a very scary view of the future of the biotech industry. Talking monkeys, yikes!!

His life story on Wiki:

We've lost a stimulating, intelligent, and insightful author and entreprenuer at too young of an age.

Wednesday, November 5, 2008

Congratulations Mr. Obama

It was predicted to be a historic night and that it was. The masses have spoken and they've spoken clearly. Barack Obama captured 52% of the popular vote and a staggering 67% of the electoral vote. As the cycle turns, the house gets cleaned. Most interesting to me is that 56% of women voted against Palin. Over 118 million people voted. That's double an American Idol vote!

It was exciting to witness history being made. Throughout most of the election process, race was not discussed greatly. Last night, it was obvious that many were excited that we finally elected a black person to the office of president. As a country, we should be proud of this moment. I believe that it has spoken volumes to the world.

I believe that Republicans have to admit the following: Obama is a very intelligent man. He ran an incredibly strategic campaign. He is an extremely eloquent speaker. He has inspired the masses. I've not seen rallies quite like the ones I saw last night. He has inspired Generation X. He has attracted people like Colin Powell and Warren Buffet so I expect that he'll build an impressive cabinet.

Mr. McCain gave a gracious speech and laid the groundwork for participation and cooperation.

Seeing live video from Harlem made me think about my late uncle, Father David Kirk, who marched with Dr. Martin Luther King in the 60's and spent 40 years in Harlem fighting for the homeless. He would be very proud today.

Mr. Obama has a challenging job ahead. This morning on CNN, one of the correspondents called it "the worst inbox in the world". Stay tuned, these are interesting times.

Source: CNN

Tuesday, November 4, 2008

An Election Day Reflection

The day has finally come. Two years and $2.5 billion later, we finally have out opportunity to cast our ballot. It seems that we've been in this process for ever! The experts predict that we will have a record turnout. Based on the timing in the economic cycle, that make a lot of sense. No matter the outcome, today proves to be historic.

Back in June at our annual beach trip, I predicted that Obama would win by 14%. That prediction was unanimously scoffed at and all stated that it will be a "photo finish" like Bush/Gore. My prediction then and now is that Obama will win by a landslide. I don't believe this because I think that he's the dominating candidate or necessarily the best candidate. I believe this because of the timing of the election with the economic cycle. As we entered the new millennium and the beginning of the "contraction" phase of the cycle, Bush took office. His approval ratings have consistently slid down to an all time low. In contractions, the mob becomes angry and fearful. Kings and presidents are thrown out of power during the contractions. The Republican party will suffer greatly during this election due to timing. The imperialistic occupation of Iraq has been cited as the explanation for the down trend in ratings, but ironically the conflict also aligns with the behavior "of the crowd" during the contraction phase.

The Obama landslide victory will reflect the significant shift in mass social mood from "happy and greedy" to "angry and fearful". The anger is focused on the Bush administration, yet the fear appears to be focused on the policies of a potential Obama administration. I believe that the anger will overpower the fear. When we're happy and greedy, we forgive a president for having sex with an intern in our country's White House. When we're happy and greedy, we typically re-elect the incumbent. John McCain is considered the incumbent. George Bush Sr. knows what happens when the tide shifts slightly off kilter. He still hasn't forgiven Greenspan for not printing more money to artificially stimulate the economy prior to his re-election bid. Greenspan made up for it during W's term.

Most concerning to me during this process, and mainly during the past six weeks, is the content of emails that I've received from my Republican friends. The fear mongering has been staggering. The most shocking have been those wrapping the election decision under the veil of Christianity. I believe that Jesus loves both candidates. The Republican party made the conscious decision to "go negative" instead of telling us why McCain was the right choice. During the Republican convention, all I heard were two things: "Vietnam POW" and "maverick".

The interesting question to ask on election day is: Should one vote for what they believe is best for themselves or for their country? For me personally, being a white upper middle class geologist in the petroleum industry, most would agree that I should vote Republican. The Republican Party states that they will keep my taxes low, keep illegal aliens from mowing my lawn, and they want to drill, drill, drill. Sounds like a simple decision. I actually believe that one should vote for what's best for the country as a whole. I firmly believe that one should assess the picture on a global scale. I also believe the "the chain is only as strong as the weakest link". If our "weakest link" gets weaker, it will affect all of us. So who is the best candidate for the country as a whole?

I don’t think it matters who the next president is. I know that 99% of you will disagree with this statement. I believe that he will be doomed by the economic cycle. The cycle is much greater than a president or a political party. The next president will time it horribly like Carter did, but much worse. He will be the fall guy. He will be worn down by the Middle East like LBJ was with Vietnam. Hopefully he won’t receive the fate of JFK. Yes, that sounds pessimistic, but history is very repetitive. Although Obama and Palin don’t have enough experience, especially for dealing with the rogue waves that lie ahead, I believe that both have great potential for a future moment in time. Obama has brought excitement and hope to the masses. I don’t ever recall seeing a 100,000 person rally for a presidential candidate. Palin has brought a freshness to the process and great hopes for future female candidates. McCain and Biden are career professional politicians and that’s not what the country needs. Bush’s term aligned with the “beginning of the end of the great expansion” and McCain can’t shake the Bush connection. I’m still trying to figure out if Obama is a Christian, Muslim, Arab, Kenyan, or terrorist?!?!

This morning I voted for Ron Paul as a "write in". I believe that our two parties are stuck in a state of significant paralysis. The rigidness and extreme perspectives are at a standoff. When this cycle finds a bottom in the coming years, it might be the opportunity for a third party to rise in power and stature. My vote can be easily cast as a wasted vote, but I truly believe that out of all of the candidates and through the entire process, Ron Paul was the only candidate that conveyed an honest and accurate understanding of the situation along with providing real, concrete solutions. He understands that a fiat system will ultimately come to a catastrophic ending. Someone in charge has to have a plan for this. Of course, I hope that I’m wrong. I’ve thoroughly enjoyed, and have been a full participant in the Supersize Me Era.

It's interesting to observe politics on the home front. My 14 year old son wants Obama, 12 year old daughter McCain, and my wife still was rooting for Hillary. How's that for diversity!

Now that the entire process is ending, I present my awards for the candidates:
-Best resume' for the job award: Mitt Romney
-Most bewildering strategy award: Rudy G
-The "What Was That" award: Fred Thompson
-The Bill Clinton award: John Edwards
-The Pitbull With Lipstick Award: I can't stand the Clintons, but I have to give it to Hillary. She's the only person that I've seen turn Bill O'Reilly into a teddy bear.
-The most sincere award: Three candidates conveyed honesty and sincerity to me throughout the process: Mike Huckabee, Barack Obama, and Ron Paul. How's that for a diverse group.
-The best speaker award: Barack Obama
-The Big Winner Award: Sarah Palin; she rocketed on the scene and will be a huge winner in defeat. She's given hope to all of the young ladies that want to seek leadership positions in the future.
-The live off the distant past award: John McCain; I respect the man greatly for his military service and incredible tenacity to survive a terrible situation, but you can't focus a campaign on your military story from 40 years ago.
-The best tag line award: I'm torn between "change" and "maverick"
-The financial guru award: Ron Paul; he has incredible knowledge about the world financial system and the challenges ahead. The media and the process marginalized him and will regret it in hindsight.
-The Most Diverse Candidate Award: Barack Obama; multi-racial, raised in Hawaii by white mother from Kansas and grandparents, Kenyan father, degrees from Columbia and Harvard
-The big big winner: Tina Fey and SNL!

Well, these are interesting times. This will be an interesting day, week, month, year, and decade.
Good luck to your team. Your input is always appreciated!
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