Thursday, October 29, 2009

Last Call For Alcohol

After taking a roadtrip this past weekend to LSU with my kids, it brought back a lot of great college memories. Something about the smell of bourbon in Tiger Stadium triggered some flashbacks.

I compare our current economic times with a massive hangover. If there's one thing I learned after my 4.5 years at LSU, it is that a great party is always followed by a bad hangover. I would surmize that the "fun" and the "hangover" have a linear relationship. You can't just have the fun without the pain to follow. That's "natural law" of alcohol consumption.

We have to go back to 1982 to really understand when and how this party really started. Bartender Ronnie known by most bar patrons as "The Gipper" kicked the party off with a nice happy hour. Drinks were 2 for 1 and the party quickly kicked into high gear. Bar owner at the time, Mr. Volcker, loved the happy hour concept. Getting the patrons drunk early led to great revenues later in the evening.

When Ronnie announced that his time was up, the bar patrons asked for a bartender just like him. In steps George I who had all intentions of continuing the party. Unfortunately, the bar was sold just prior to Bush I starting his shift. Early in the bar ownership, Mr. Greenspan was more cautious with his drink specials. In 1987, a patron drove home drunk, crashed, and sued the bar.

Due to George's limitations, the bar patrons asked for a new bartender. In steps Bubba. He knew what the patrons liked. He restarted the cheap drinks and threw in a few dancing girls and free cigars. The party went into overdrive. Everyone was intoxicated and the drinks kept pouring and pouring. The law only allowed bartenders to serve for so many hours, so in steps new bartender George II.

At first, the patrons were cautious, but after seeing him beat up some unruly patrons, everyone got on board and the party continued. Bar fights started to breakout more often during George II's shift, but the alcohol kept flowing so the crowd continued to dance the night away. The bar ownership had changed one more time, but the new owner, Mr. Bernanke, promised that they were going to "party like it was 1999!". To deal with the fighting thugs, he just hired a bunch of massive bouncers to keep the crowd in line.

Some wise patrons decided that they had consumed enough for one night and they departed for home. The bar just didn't feel the same to them anymore. While they missed out on the wildest part of the night, they travelled home safely and quickly relaxed in the comfort of their home. George II, like Bubba, had to end his shift, but the remaining patrons were about to kick it up one more notch.

The new bartender, Barack, shows up and announces "tequila shots are 2 for 1 for the rest of the night!". Many hours into the partying, the patrons are so intoxicated they don't know right from left. Tequila is pouring everywhere and the bar is in high gear. Dancing and singing, the patrons don't want the night to end. Barry was so cool of a bartender, that he even drank beer with the patrons.

Without warning, the lights come on, and someone announces on the PA system, "last call for alcohol". There's a frenzy as everyone races to the bar to get one final round of tequila from Barack. Due to the limited time left, there is a lot of pushing and shoving. Everyone knows that all won't be able to sip one final round of tequila, salt, and lime. One patron yells, "one more body shot please!". The bar finally closes. Being daily savings time night, it was able to stay open one extra hour. One extra hour of tequila seemed like a great gift at 2 a.m.

At 3 a.m. the real partiers headed for their cars and the drunken ride home. Two were killed as they crashed head-on into a tree. Most were blessed to arrive home safely despite their inebriated condition. Sleep came and lasted well into the next morning.

As the bar patrons awoke, their head throbbed, and their muscles ached. Their mouths were so dry, they hardly could speak. They quickly questioned the decisions from the night before. One yelled "Why did we do those tequila shooters?". The other yelled back "Why did we do four rounds of those tequila shooters?". The third yelled "because it tasted good my friends!".

As the day wore on and the hangover continued, some started to get angry at the bartenders from the night prior. "They knew we were drunk. Why would they keep serving us?". Another stated "That last dude Barack should have never sold tequila shots 2 for 1. How could we pass on that?". "Yes, it's his fault one said to another. He just wanted to make the bar more money. He took advantage of us.".

Amazing to all, the same crew ventured into the same bar the next night. They didn't seek out the tequila, but they quickly shifted back into party mode. The weekend consisted of two nights, and they wanted to get their share.

So I ask, when will we hear "last call for alcohol!". Be proactive and head home from "the bar" early. Take some tylenol before bedtime and drink a lot of water! The party was fun and we all took part. Blaming the last bartender is cowardly and irresponsible. If you want to blame any, you have to blame them all. Remember, it all started at 2 for 1 happy hour. Don't blame the bartenders for your own decisions.

The Experts

I've been amused over the past few years when I hear everyone speak about global warming. It's amazing how many people with no training or real education on the subject have become well versed in the complex science of climatogy. Today we seem to have many new experts on our country's constitution, economics, and influenza. When I received this joke via email today, I thought, "yes, that sums it up for me!".

"A stranger was seated next to a little girl on the airplane. He turned to her and said, 'Let's talk. I've heard that flights go quicker if you strike up a conversation with your fellow passenger.' The little girl, who had just opened her book, closed it slowly and said to the stranger, 'What would you like to talk about?' 'Oh, I don't know,' said the stranger. 'How about nuclear power?' and he smiled. OK, ' she said. 'That could be an interesting topic. But let me ask you a question first. A horse, a cow, and a deer all eat the same stuff - grass. Yet, a deer excretes little pellets, while a cow turns out a flat patty, and a horse produces clumps of dried grass. Why do you suppose that is?' The stranger, visibly surprised by the little girl's intelligence, thinks about it and says, 'Hmmm, I have no idea.' To which the little girl replies, 'Do you really feel qualified to discuss nuclear power when you don't know crap?"
Source: Unknown

Wednesday, October 28, 2009

The Slice, The Grieses, and The Taco

Legendary NFL quarterback was suspended this week for his "taco" comment. I really think that we, as Americans, are a little too sensitive. I personally believe that ethnic food jokes are good fun. For years, being a Louisianian, I've had my crawfish called fish bait. We know the Scots love their haggis. The Texans love their barbeque. The yanks love their brats. The Irish love their potatoes. Blacks love their fried chicken. The Asians love their rice. The Italians love their pasta. This morning in Morocco, the wealthy might splurge on monkey brains! I consider it all fair game.

Hearing the Griese story makes me segue into a story of my own. It's 1975 and I'm 12 years old. My father and I are golfing at a lodge in North Carolina. We're on the 10th tee, I'm lining up my shot, and my father says "Don't worry about Bob Griese on the driving range". Bob along with his future NFL quarterback son, Brian, are hitting balls on the driving range. Immediately my brain starts repeating "don't slice, don't slice, don't slice". Well sometimes the brain forgets the DON'T part. Wouldn't you know that I hit a long slice heading straight for the future NFL hall of famer. My father yells out a loud "fore" and the Griese clan scatters. My dad drives the cart to the edge of the range and says "go get your ball". So to add to the humiliation, I have to go out on the range and search for my white ball amongst the hundred striped balls with Bob Griese himself looking on.

So what's the moral to these two stories? One, lets be able to laugh and laugh at ourselves. Two, focus, focus, focus. I think that teaching "focus" was my dad's intention with the teebox exercise. In these confusing times, keep your focus. Tell your brain to "hit the ball straight" instead of "don't slice"!

So Sane That It Seems Insane

"The neo-cons who dominated the administration of George W. Bush seized the 9/11 terrorist attack as a once in a lifetime opportunity to change the world. In doing so, they have used fear, visions of mushroom clouds, and promises of protection and safety to convince the American people to give up their few remaining civil liberties. The Patriot Act was rammed down our throats in the months following 9/11. Anyone who would vote against such a bill was branded un-patriotic. It passed the Senate by a vote of 98 to 1. It passed the House by 357 to 66. Only 3 Republicans voted against The Patriot Act. Three Republicans had the courage to stand up for the Constitution. Ron Paul, from Texas, was one of them. His belief cannot be any clearer: 'Everything we have done in response to the 9-11 attacks, from the Patriot Act to the war in Iraq, has reduced freedom in America.' The role of government is to protect American citizens’ privacy, not violate it. Since 9/11 all American citizens are considered suspect until proven otherwise by some bureaucratic thug in the Department of Homeland Security. The Eye (think Mordor) of the U.S. government is focused inwards towards its own citizens under the guise of protecting us from unknown bogeymen terrorists. We are no safer, with less freedom, and buried under more debt. Mr. Paul’s reasoning and adherence to the Constitution of the United States is so sane that it seems insane to the criminals running our asylum (aka government) today. We live in a bizzaro world where doing the opposite of what we should be doing is considered the right thing to do. Liberty is not some antiquated concept in the ether of history."
James Quinn

Tuesday, October 27, 2009

The Unobserved Secret

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose." John Maynard Keynes - 1920

Monday, October 26, 2009

Gold, Diamonds, And Picassos

From Richard Russell, editor of Dow Theory Letters, in remarks posted on his website on 10-31-08:

"As for gold, we don't hold gold in the hope of making a killing. We hold gold because gold is our safety net. The economic world is composed of debt and leverage. Even the US dollar is a product of debt. Only gold is pure wealth with no debt against it. Gold can't go bankrupt since it represents pure wealth. By the same token, diamonds represent wealth and Picassos represent wealth. The difference is that if you want to sell a diamond or a Picasso painting, there is no posted price for either. To sell a diamond or a Picasso, there's no bid or ask price -- you have to find an interested buyer."

Sunday, October 25, 2009

Words From a Wise and Brilliant Man

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria”
Sir John Templeton

Saturday, October 24, 2009

Chained To The Bleacher Seat

Chris Martenson just posted a really good article along with some excellent charts.

"One of my central contributions centers on the idea that it is our monetary system itself that is out of step with reality. Everything else we see around us economically is merely a symptom, while the cause of our current and future ills is the dependence of our monetary system on perpetual exponential growth. A profound and important set of conclusions immediately result from the acceptance of this argument."
Chris Martenson

The entire article:

Friday, October 23, 2009

Who's On First?

"The majority of Americans are oblivious to the Crisis that has already begun. They are distracted by their latest text message, shopping at the mall, worried about the next credit card bill, engrossed by the adventures of balloon boy, and trusting that their elected officials know what is best for them. What will blind side them is the depth and ferocity of the next stage in the Crisis. They will need to choose sides when the time comes."
James Quinn

The Golden Purchase

"However, if one considers that in 1932 and in 1980 one could indeed buy one Dow Jones Industrial Average with just one ounce of gold, then maybe my views are rather conservative. Possibly one will be able to buy, sometime in future, one Dow Jones with just half an ounce of gold!"
Marc Faber

Thursday, October 22, 2009

You Go Girl

This is a story that keeps getting better. Ms. Boyle beat my two favorites out.
Susan Boyle beats out U2, Springsteen to become Amazon’s biggest pre-sales seller of all time
By Niall O'Down
"I hate to say I told you so yet again – but Susan Boyle made me do it.
Take a bow one more time all the Susanites out there. You really deserve it. Amazingly, Susan Boyle just beat out
Bruce Springsteen, U2, the Dixie Chicks and Coldplay over at Amazon announced today that "I Dreamed a Dream" is the largest selling CD pre-order in the history of the music store."
Here is the list of the top 10 bestsellers:
Susan Boyle, "I Dreamed a Dream" (2009)
Norah Jones, "Not Too Late" (2007)
U2, "No Line on the Horizon" (2009)
Bruce Springsteen, "Magic" (2007)
Dixie Chicks, "Taking the Long Way" (2006)
Coldplay, "Viva La Vida" (2008)
U2, "How to Dismantle an Atomic Bomb" (2004)
David Cook, "David Cook" (2008)
Diana Krall, "Quiet Nights" (2009)
Clay Aiken, "A Thousand Different Ways" (2006)

You Shoulda Seen The Ice Sculptures

It seems so long ago back in the tech/dotcom boom. One of my favorite stories was told by my business partner at the time. Back in 2000, his wife worked for Enron. The night prior, he attended the Enron Christmas party in Houston. His memorable quote the next morning was, "you shoulda seen the ice sculptures!". He stated that the room was filled with mega ice sculptures. Melting ice might have been symbolic of what was to come.

Our company had two projects with Enron subsidiaries and it was interesting to watch the rapid ascent and subsequent collapse. It's always fascinating to see how a corporate culture adopts the attitude and personality of the leadership team. Enron was a very arrogant company even before they became famous for it. Drinking your own "Kool Aid" can be toxic. They were Houston's darling and even put their name on our new baseball stadium. All appeared to be well until their ultimate collapse.
Many other ice sculptures eventually melted too...Tyco, Worldcom. Why does collapse always seem to surprise us?

Wednesday, October 21, 2009

Early Warning Indicators

"Rising gold and oil prices are symptoms of the inflationary monetary and fiscal policies that have been implemented. These were without doubt global governments' absurd and counterproductive answers to the popped real estate bubble. The breakouts in gold and crude oil are like early warning indicators. And the commodity markets are clearly telling us that inflation will rise sooner rather than later and will become a major problem for the world economy. Fortunately as investors, we can turn that problem into a tremendous opportunity."
Claus Vogt, Weiss Research Inc.

The Chart Speaks Volumes

The Fed's money printing machine has been busy since the Reagan years, but all presidents since and including Clinton have kept it on constant "full throttle". The last year even makes the prior years look tame. This is a chart that won't show up on the evening news that's for sure.

Source: Weiss Research Inc.

Tuesday, October 20, 2009

Only In America

It's news stories like these that force me to continue to love the term "sheeple". How much more press are we going to give this one? Can't we refocus on Michael Jackson? Can you imagine the legal bills generated over these bazongas??

LOS ANGELES, California (CNN) -- "Miss California USA officials want Carrie Prejean to repay $5,200 they say she borrowed to have her breasts augmented last year. Carrie Prejean has been immersed in controversy since her response at the Miss USA pageant in April. The demand was a response to a lawsuit filed by Prejean in which she claimed pageant officials violated the former beauty queen's privacy by acknowledging to reporters that her breasts were fake. The truth about Prejean's breasts "ceased being private during the swimsuit competition of the nationally televised Miss USA pageant, in which Ms. Prejean walked the stage in a bikini," pageant lawyers said."
Source: CNN

Witches In Edinburgh

A few years ago, I had the exciting opportunity to travel to Edinburgh, Scotland for several business trips. It's one of my favorite cities in the world. My cousins, the Scots, are a great passionate people. Edinburgh is a great city with an incredible history. The castle towers over the city and shines brightly at night.

I was playing tourist one Saturday and took the tour of the castle. At one point on the tour, we were standing next to one of the walls looking over the edge and the tour guide stated "it was at this location over a ten year period that two hundred witches were thrown over the wall to their death in the bogg below." One of the tourists yelled "what happen to the witches after the tenth year?" The guide quickly responded "I guess that they all disappeared!"

It's interesting to watch "the shift" occur live. After crossing a significant inflection point in the year 2000, we have seen a downward trend in mass social mood. Aligned with this shift, we've seen many witch hunts. Suddenly there are witches everywhere! The SEC is chasing the bad guys. The CIA is chasing the bad guys. The U.S. military is chasing the bad guys. Right wing Christians are chasing the bad guys. The tea party protesters are chasing the bad guys. Rush, Sean, and Ann are chasing the bad guys. The amazing aspect is that when mass social mood is trending upward, the witches don't seem to be that bad. Ask Clinton, OJ, and Madoff about that.

If I could, I would ask the castle tour guide, where have all of these witches suddenly come from?

"Bear markets bring recrimimation. Practices that were routine during the bull market suddenly become vilified. We cannot say exactly who the culprits will be this time, but they will probably be some of the most successful and aggressive exploiters of the old uptrend. In the interest of justice, (and the enformcement of a whole new social mood), many will be punished. Investors are itching for a fight. Soon, charges of manipulation and the need for reform will be flooding out."
Robert Prechter, 2007 Elliott Wave Financial Forecast
"There is clearly more such mayhem to come, and Congress and financial authorities of every stripe are hard at work preparing the tar and feathers. A big bear market in social mood always attaches itself to the reputations of those who rose highest in the preceding advance."
Robert Prechter - January 2009

Monday, October 19, 2009

The Golden Printing Press

"So, if Mr. Bernanke does what he believes in - namely that asset deflation has to be avoided at all cost and, therefore, massively prints money, no matter where the Dow will be in future, at 36,000, 40,000, or at 100,000, as some pundits predicted in their in 1999 published books (of course shortly before the market tumbled), you will be able to buy the Dow with ounce of gold worth either $36,000, $40,000 or $100,000."
Marc Faber

Sunday, October 18, 2009

An Unsustainable Trajectory

"The legacy of the crisis is a high and rising debt trajectory that could become unsustainable without significant medium-term measures." The International Monetary Fund

Saturday, October 17, 2009

The Contrarian's Dilemma

"But contrarians usually don't take the easy route ... they're accustomed to swimming against the stream. And they rarely make friends by doing so. Instead they expose themselves to mockery when they're wrong and to wrath and envy when they are right. In fact, there's a risk with always being a contrarian. Contrarians may be early with their timing. For that, they will be laughed at. But they don't mind ... they know that they'll eventually be proven right. They know that imbalances and the madness of crowds can go on much longer than anyone can imagine ― so they wait for the unavoidable to happen. Hence contrarians need patience and discipline. They have to have the guts to try again and again to finally catch a major trend change." Claus Vogt

“First they ignore you, then they laugh at you, then they fight you, then you win.” Mahatma Ghandi

Friday, October 16, 2009

The Madness of Crowds

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

Thursday, October 15, 2009

An Interesting Question

"If we treat the credit doubling that occurred between 2000 and 2008 (from $26 to $52 trillion) as a normal bubble that will follow the same pattern of decline as numerous historical bubbles, then we might reasonably predict that some $26 trillion of debt will somehow "go away" over the next 6 years. This is indeed a massive black hole."
Chris Martenson

I once again turn to the theory of "mass social mood". U.S. debt rises from $26 to $52 trillion during the Bush administration and there are no tea parties. No protests. No communists nametags. No socialist remarks. No threats. No angry town halls. Isn't that interesting?

While the cycle "turned over" in the 1999-2000 timeframe, the "momentum of the mood" is just gaining steam. A few trillion of debt additions this year and the mob is seeking a lynching. Prior to the Obama administration taking office, the U.S. had $54 trillion of underfunded obligations. Why is Team Red just getting mad now? Why didn't they get mad at Bush? Why weren't Rush, Sean, and Ann lashing out at Bush for not dealing with this massive debt obligation? Why were they okay with increasing it by $26 trillion over 8 years?

A review:

The Completion of the Quad-fecta

Last night I completed the "quad-fecta" of my year of rock n' roll. Springsteen twice, Dave Matthews, John Mellencamp, and now U2. My favorite Irish quartet was in town and they delivered as always. U2's megastadium show was laced with hits and some good political topics. While the acoustics were challenged, the performance was solid as always.

I loved this lead in video played on the screen before "The Streets Have No Name".

The alien spacecraft looking stage put on quite the show.

The Consequences of Our Current Monetary Policy

"Now, you may think that I have become insane. That is partially true because I am convinced that the US Fed's monetary policies will lead to exponentially widening wealth inequity and impoverish the majority of US households, which will then lead to social strife, protectionism, war, and the breakdown of the capitalistic system."
Marc Faber

Wednesday, October 14, 2009

Martenson And The Next Leg Down

"I completely understand why our fiscal and monetary leaders would seek to hide the truth from us all. We live in an economy that is based on growth and debt - which means it is a Ponzi scheme - and there's nothing more important to such a system than faith and confidence. So economic propaganda is not just a noxious by-product spewed from our economic tailpipe; it is viewed by those in power as a form of fuel, a necessity for our peculiar economic engine. They may have a point."

"This week (ending 10/1/09), despite the massive run up in stock over the past few months, despite the outrageous amounts of bailout and stimulus money applied, despite every attempt to put a positive spin on things, jobs continued evaporating, auto sales slumped to multi-decade lows, bankruptcies soared 41% over the prior year, and tax receipts continued to slide. States such as California are sliding into fiscal chaos, and some, like Michigan and Alabama, are already there."

"We are about to enter another leg of the downturn, and this one will be even bumpier and more uncertain than the last."
Chris Martenson


I continue to encourage everyone to read Chris' CRASH COURSE:

Drinking The Toxic Brew

"The unwinding of the grotesque debt excesses of the past have only just begun. For the first time in the post-World War era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew."
David Rosenberg - Gluskin Sheff

Japan: A Leading Tremor?

Weiss Research reports:
"Since the middle of 2007, the yen has climbed:
-20 percent against the Chinese renminbi (or yuan),
-21 percent against the Singapore dollar,
-25 percent against the Thai baht,
-31 percent against the Indonesian rupiah,
-And 43 percent against the South Korean won.
That's a distinct position of weakness for the Japanese because it makes their exports significantly more expensive than their Asian competitors'. Of course, this is horrible news for an economy where exports make up 16 percent of total output! And even with improvements in the global economy, Japan's exports are still down 37 percent from this time a year ago. This is why Japan has experienced the worst contraction of all major economies and is expected to have the weakest recovery. And that's why there is speculation that Japan could return to recession — as soon as the fourth quarter of this year.

Japan led us into the booming 80's and the bust of 2000. Will they provide the next "leading tremor"?

Fortunately, their Finance Minister resembles the "Wise One".

Tuesday, October 13, 2009

Tug Of War

Jackson spent the weekend with his big brother Loegan and it was a battle of the "alpha males". When I took this photo, I couldn't help but think about the state of politics in our country. It has become outrageously polarized. A state of "them vs us" would never succeed in the business world. Why do we think that it will work for politics. It's a dog fight that doesn't appear to have an end in sight. In the end, we all lose. That's why I voted for Ron Paul. A third party with new ideas will seem really attractive as 2012 approaches.

Update On The Shiny Coin

"$1000/ounce appears to be the major psychological barrier. I believe that a breaking of this barrier will lead to much higher prices in a short period of time."
Gold at $1066 per ounce this morning....quite a bold run!

The Attack on The U.S. Dollar

“The costs of a dollar-dominated system to the world may have exceeded its benefits. The dollar should ... be replaced by a new global reserve currency.”

Zhou Xiaochuan - China’s Central Bank Governor

“Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability.”

Dr. Detlef Kotte - Director of the UN's Macroeconomics & Dev. Policy

Monday, October 12, 2009

Dead On and Dead Ahead

“This "head fake" presents the feeling that the bottom has been found and the upswing has returned. It is likely that in the coming six months, a rally will occur, the media will state ‘the stimulus is working’ and the herd will jump back in only to be hammered at the ultimate bottom.”
Random Roving – 2/28/09

The Switch Is On

"Since March of this year alone, the U.S. dollar has plunged 14% and the Reuters-CRB index — a measure of the price we pay for oil, gas, food and other major basic necessities of life — has surged 30%."
Martin Weiss - Weiss Research Inc.

Sunday, October 11, 2009


I have to agree with Team Red, that Obama-mania might be getting out of hand. How can the Nobel Peace Prize be awarded to a very inexperienced man holding the office of president for only nine months?

With a frame of reference of mass social mood, it does make a lot of sense. Early in the contraction phase, the dissatisfied voted for "change". The "euphoria" associated with that change will soon wear off and overwhelm the same herd that originally wanted the change. Stay tuned.

The World's Reserve Currency

“The U.S. dollar is and has been the world's reserve currency, the world's medium of exchange. That's in the process of changing."
Jim Rogers

Saturday, October 10, 2009

Legitimate Use of Violence

“Legitimate use of violence can only be that which is required in self-defense.”
Ron Paul

"Never swing first, but if he swings at you, knock his lights out."
Robert F. Barrell

"Humanity should question itself, once more, about the absurd and always unfair phenomenon of war, on whose stage of death and pain only remain standing the negotiating table that could and should have prevented it."
Pope John Paul II

Can our initial and continued efforts in Afghanistan be categorized as "self-defense"?
Can any of our efforts in Iraq be categorized as "self-defense"?
And now, Iran??

Friday, October 9, 2009

Paying The Piper

"I think that we're going to have to pay the piper. And I don't know when that is. But I would almost say we are going to pay the piper. And it's when and not if."
Julian Robertson, Tiger Management Corp. - CNBC Interview

Thursday, October 8, 2009

The Head Fake

As a young boy we had an empty lot two doors down that provided a field for many sporting activities. The lot owner didn't live in the neighborhood, but let us use it as long as we mowed and maintained it. Without any trees, it was the perfect football field. We even built a goal post out of 2x4's.

My dad used to throw passes to us for hours. My favorite pass route was the down-out-and-up. My dad used to emphasize that there were two keys to making it a success. First, you had to run a few successful "out routes" to get the cornerback's attention. Secondly, when running the "out and up" you had to make a strong "head fake" to "the out" to get the cornerback to come up and commit. Without the head fake, the corner would hang back in anticipation of the "up route".

Financial markets, especially in times like this, can present many "head fakes". These "false moves" can sucker in the best of us. With the Federal Reserve Bank manipulating the system, it is even more challenging. A review of the last two contraction cycles from the perspective of the DJIA/Gold Ratio reveal an interesting consistency. I call it the "head fake". The head fake is that uptick in the market that convinces everyone that the "bottom has been reached" and the "Kool Aid Bar" is back open for business. Let the party begin! But, history appears to show that that uptick is short lived and it "suckers in" the masses to buy back in just before it proceeds to its real final bottom. This is the stage when many get totally "wiped out". I believe that the head fake will come sometime within the next year. We may be there now. With the recent uptick, the media has quickly jumped on the "buy everything" mantra and the Democrats are starting to do a victory dance and state that the stimulus plan is working. This is another euphoric moment, but I believe that it will be shortlived. Keep your eyes open and lets see what transpires.

I once again provide an updated chart of the Dow Gold Ratio back to 1890. The creation of the Federal Reserve System in 1913 set off a wild rollercoaster ride. If the ratio aligns symmetrically, we have a ways to go to reach a ratio of 0.5-2.0. A ratio of 1.0 means that the Dow Jones Industrials equates to the price of one ounce of gold. The DJIA closed Friday at 9487. Gold is hovering around $1000 per ounce resulting in a ratio of 9.5. While it seems uncomprehensible that the two could come close to equating, we only have to look back over the last century to see that it occurred twice. Also note the head fakes in 1932 and 1976.

For a zoomed in look of the ratio (1980-Present), see the chart below. My October 1 post on "the rhyme" illustrates how the media along with the politico's, keep you heading for a big head fake.

Are we currently at the "head fake"? It's been an amazing run since March 6 and The Confession.

Wednesday, October 7, 2009

Changing of The Guard?

"This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves. The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states."
For the entire article:

The Glacial Destruction

"A contracting banking system is like a glacier - it destroys everything in it's path."
Elliott Wave International - 9/25/09

Tuesday, October 6, 2009

Jackson Says Gold is Golden

Jackson, my "golden" pup, says the "golden run" has begun. Buckle your seatbelts!!!

It rose over $1040/ounce today.


The Golden Breakout

It looks like gold is breaking out of it's $1000/ounce psychological barrier. Is this finally the next big leg up?


The Age of Thrift

"The age of thrift is here."
Indra Nooyi, CEO Pepsi Co.

Monday, October 5, 2009

Did We Just Confirm Adam & Eve's Great Grandchild?

"A research team led by Bay Area scientists has unveiled the oldest-known member of the human family tree: a 4.4 million-year-old female skeleton named 'Ardi,' who shares both chimp and modern human features. Believed to be capable of both climbing and walking, 'Ardi' reveals the early evolutionary steps that our ancestors took after we diverged from our common ancestor with chimpanzees. 'It's not a chimp. It's not a human. It shows us what we used to be,' said UC Berkeley paleoanthropologist Tim White, co-director of the research group that discovered and analyzed the fossils, which are described in a special issue of the Oct. 2 journal Science. 'It bridges a gap.'"

The article:

Sunday, October 4, 2009

The Flation Debate

Jim Puplava on his weekly radio show, Financial Sense Newshour, has hosted a debate on inflation/deflation over the past few weeks. It was really informative and included input from several diverse sources. Three of my four "horsemen" participated.

Check it out:

Saturday, October 3, 2009

Palin's Homerun

"The Big Winner Award: Sarah Palin; she rocketed on the scene and will be a huge winner in defeat."
Random Roving, Nov. 4, 2008 - Election Day Morning

"Publisher HarperCollins said Palin's memoir, titled 'Going Rogue: An American Life', would be published on November 17 after originally being scheduled for release in spring 2010. The book will have a large first printing of 1.5 million copies, according to a statement from HarperCollins, a unit of Rupert Murdoch's News Corp." Reuters

Sources say that she's inked a $7 million deal. Only in America!

Say It Isn't So?!

I was horribly disappointed to hear the news this week of David Letterman's affairs. I always felt that Dave was one of the good guys. Now I have to move him into the "snake charmers" category.

Why do men appear to lose restraint when they occupy the position of power?

Listening For Tremors

The geologic discipline of seismology understands the significance of warning signs. In that science, the word "tremor" is often used for the small quake or eruption that occurs before the "big one". In most cases, the masses are lulled to sleep by tremors and miss the warning sign of the larger event. It's similar to the car alarm going off in the mall parking lot. Does anyone turn their head anymore? Mt. St. Helens' eruption presents an interesting and informative story.

"The 1980 eruption of Mt. St. Helens is the most studied volcanic eruption of the twentieth century. Although most people were unaware of the potential for such a violent display of volcanism in the contiguous U.S., volcanologists were keenly aware of the potential danger. Months before it erupted, the U.S. Geological Survey (USGS) established a base of operations at Vancouver, Washington to monitor the volcano. On May 18, survey volcanologist David Johnston was camping on Coldwater Ridge, only a few miles north of Mt. St. Helens. The eruption occurred that morning. At 8:32 a.m., Johnston radioed the USGS base and exclaimed "Vancouver, Vancouver, this is it!" The ensuing volcanic blast devastated the northern flank of the volcano, killing Johnston and 56 other victims. At the same time, geologists Keith and Dorothy Stoffel were flying in a light plane only 400 meters above the summit of Mt. St. Helens. From their vantage point, they witnessed one of the largest landslides ever recorded in historic times. Seconds later, a massive explosion shot out the north side of the volcano, toward Coldwater Ridge and Spirit Lake. The explosion generated a billowing cloud with numerous lightning bolts thousands of meters high. The cloud began to expand rapidly toward their aircraft and appeared to be gaining on them, but by turning south they managed to outrun it and survive."

So I conclude with these questions: Who is your volcanologist? If he or she forgets to warn you of a tremor, how fast is your aircraft?

The entire story:

Friday, October 2, 2009

The Good Ole Days

"The 'good 'ol days' can't go on indefinitely. We've already spent it and gone through the 'good days.' The decade of 2010 might be called 'the reality decade' or the 'decade when America faced the math.' Could the US default on its debt the way it defaulted on gold transfer payments in 1971? Yes, it could. Could the dollar collapse prior to a debt default? Yes it could. If the dollar collapsed, where would safety lie? It would reside in items of intrinsic value such as real estate, gems and gold. Our irresponsible politicians plus the Federal Reserve and its 'counterfeit money' (I'm referring to the unconstitutional Federal Reserve Notes) have placed the nation on the edge of the cliff. Will we step back or will we go over? That's the great question of our future. Either way, the once-great American empire will lose its power and its fabulous standard of living. Did I say 'fabulous?' Yes, what I meant was -- fabulous in the eyes of the Chinese, the Indians and most Africans and Asians. Fabulous to half the population of the world, most of whom live in poverty or just above it."
Richard Russell, The Dow Theory Letters - 9/28/09

Thursday, October 1, 2009

Tremors Abound

Today the Associated Press reports:

"The Secret Service has determined that a juvenile was behind the online survey that asked whether people thought President Barack Obama should be assassinated, an agency spokesman said Thursday. No criminal charges will be filed against the juvenile or the juvenile's parents, spokesman Edwin Donovan said. Donovan would not identify the names of the child or parents or say where they are from. The poll, posted Saturday on Facebook, was taken off the popular social networking site quickly after company officials were alerted to its existence. But, like any threat against the president, Secret Service agents took no chances. The poll asked respondents "Should Obama be killed?" The choices: No, Maybe, Yes, and Yes if he cuts my health care."

"Obama has a bright future. I hope for his sake that he loses, because he will be the “fall guy” and historically during “inflection points” those presidents have been the recipients of bullets (Lincoln, McKinley, Kennedy, Reagan). The 'mob' has emerged and they’re seeking someone to lynch (ask Martha Stewart, George Bush, Jeff Emmelt, Ben Bernanke, and Brittany Spears)." Random Roving - June 30, 2008

Article source:

Can You Hear The Rhyme??

"History does not repeat itself, but it does rhyme." Mark Twain

Can you hear the rhyme???