The Afghan Scam

Somebody sort these out for me. Something smells a little "fishy".

"Afghanistan produces over 90% of the world's illicit supply of opiates, the key ingredient of heroin, and has produced more than 6,000 tonnes of opium a year since 2006."

Source: Asia Times

"Afghanistan's untapped mineral wealth is worth at least $3 trillion — triple a U.S. estimate, according to the government's top mining official, who is going to Britain next week to attract investors to mine one of the world's largest iron ore deposits in the war-torn nation. Geologists have known for decades that Afghanistan has vast deposits of iron, copper, cobalt, gold and other prized minerals, but a U.S. Department of Defense briefing this week put a startling, nearly $1 trillion price tag on the reserves. Minister of Mines Wahidullah Shahrani said Thursday that he's seen geological assessments and industry estimates that the minerals are worth at least $3 trillion."
Source: Associated Press, June 17, 2010

"June 2010 is now the most deadly month of the nine-year Afghanistan war, with more than 100 NATO troops killed. The sobering number comes amid growing debate over strict rules of engagement for US soldiers."

Source: Christian Science Monitor, June 29. 2010

Aligned with the announcement that more soldiers are dead we miraculously make a huge mineral discovery?? We've been in Afghanistan for years, but the opium crop is booming. Hmmmmmmmm.

Mexican Politics Goes To The Next Level

It appears that Mexican politics has moved to the next level.
"Mexican gubernatorial candidate Rodolfo Torre Cantu, the leading PRI candidate in Tamaulipas state, was gunned down Monday by suspected drug cartel hitmen. President Felipe Calderon says the drug lords are interfering with Mexico's election process. The leading candidate for governor of the northern Mexican state of Tamaulipas, Rodolfo Torre Cantu, was gunned down Monday in one of the highest profile assassinations since a presidential candidate was murdered in 1994."
Source: Christian Science Monitor

"The weakest fall first with more to follow. The onion gets peeled back one layer of a time."
Random Roving, March 6, 2009 - "Peeling Back The Onion"

Don't forget.  It has happened here.

The First Rat Jumps Off The Ship

It was only a matter of time for the rats to start jumping off of the ship.  It only makes sense for the budget director to leap first.  Geitner and Rahm-bo will be next. 

"Peter Orszag, White House budget director, yesterday became the first high-profile official to step down from office in Barack Obama's administration.  Mr Orszag, 41, whom the US president dubbed a "propeller-head" in reference to his geeky character, helped shepherd through last year's $787bn fiscal stimulus and played a vital role in negotiating the almost $1,000bn healthcare bill that was passed in March."
Source: Financial Times
Entire article:  http://www.ft.com/cms/s/0/2b39195e-7e60-11df-94a8-00144feabdc0.html

The Golden Cup And Handle

For you chart technicians, it appears that gold is providing another classic technical chart pattern.  This time it's the "cup and handle" formation that typically precedes a strong uptick.  Here's a comparison of the model to the gold ETF (GLD).  Gold should make another nice run in the short term.

GLD chart source: Bigcharts.com

Shadow Boxing The Facts

Shadow boxing is a technique that boxers use in training where they throw punches at the air. Its purpose is to increase muscle strength and to work on rhythm. Sometimes I wonder if the Fed isn't shadowboxing with the sheeple.

Shadowstats.com is a website dedicated to providing accurate data related to publically released government data. Over recent years, many metrics such as the consumer price index (CPI) and unemployment have had there definitions and formulas changed. This presents a great challenge when analyzing data on a historical basis. It's no longer "apples to apples". Often we like to compare a current cycle with one in the past. For instance, in the past two years, many have made comparisons to the Great Depression. If these metrics are not calculated the same way, then the comparisons are worthless.

Below are two graphs created by Shadowstats. Note the difference between accuracy and what is reported by the government and the media.

Note that real unemployment is much worse than being reported.

Note that the CPI formula was changed during Clinton's term.

As I always say, do your own research.

http://www.shadowstats.com/

The Slope of Hope

"Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished.  For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery.  Our name for this phase of the bear market is the 'Slope of Hope'."
Robert Prechter, June 2010

Technology Giveth, Technology Taketh Away

"Every day technology takes us further and further into uncharted depths, pushing the boundaries of what’s possible. Little, it seems, is beyond our reach. With all that we’ve accomplished, however, there’s a feeling we’ve built a civilization—a way of life—that is unsustainable."
Cris Sheridan, June 25, 2010

The entire article:
http://www.financialsense.com/editorials/sheridan/2010/0625.html

Historical Relationships and 1/3, 2/3's

"This will in turn then put the market at great risk of a far more devastating decline than most anyone anticipates. The bottom line is that the Phase II decline is lurking and there is analysis and there are tools to help understand how the setup is unfolding. Just as I warned about the decline into 2002, the extended 4-year cycle into the 2007 top and even the 2008 top in commodities, few listened but later wished they had. You have been warned!"
Tim Wood, CPA - June 25, 2010

Source: Financial Sense Online, Tim Wood, CPA
Ever since the rally out of the March 2009 low began, I have maintained that it has been a bear market rally. All the while, the politicians think that their printing spree, bailout plans and stimulus packages have put a bottom in the economy. I continue to hear the talking heads on "CNBS" cheering on the public, and in their eyes all they can see is the so-called "double dip" recession. I’m sorry folks, but this is not a double dip recession. According to my analysis we have entered a global debt crisis in association with K-wave winter. Besides the purging of debt from the system, a by-product of K-wave winter is that we have also entered global bear markets in stocks and commodities. Based on my analysis, the rallies that began in early 2009 have not been associated with a recovery, but rather a reprieve of the ongoing deflationary forces of K-wave winter.

In accordance with Dow theory, bull and bear markets are divided into three phases with each of these phases separated by important counter-trend moves. The counter-trend moves separating these phases are very deceiving because people perceive them as being a resumption of the previously established longer term move rather than a counter-trend move within the newly established trend.

In the current case, most people perceive the 2009 low as THE bottom and the advance that has followed the March 2009 low as being a resumption of the advance that carried the markets into the 2007 highs. Based on the ongoing evidence associated with my analysis, this is not true. According to my analysis, 2007 marked the top of the 33 year longer-term bull market that ran between 1974 and 2007. Also according to my research the rally that has followed the 2009 low has been the deceitful counter-trend move that will ultimately prove to separate Phase I from Phase II of the much longer-term secular bear market. Historically, Phase II declines are the most devastating and I see no evidence that this time will be any different. I have discovered a very specific "DNA Marker" that has been associated with every major stock market top since the inception of the Dow Jones Industrial Average in 1896. When all of the pieces of this DNA Marker are in place, the market will be at great risk of the resumption of the ongoing secular bear market and the decline into the Phase II low. Virtually no one understands the destruction that will follow in the wake of the Phase II decline. It is the reckoning of the seriousness of the situation associated with Phase II declines that make them so devastating.

As was seen during the Phase I decline, everyone will again turn to the government to "fix" the problem. Funny thing is, the government was instrumental in causing the problem in the first place. Furthermore, the appearance that the government created the bottom in 2009 is an elusion. The government does not know any more about fixing the economy than they do about fixing the oil leak in the Gulf. All the government can do is spend more money and create more red tape. The best thing that could happen would be for the government to stand back and let the free markets do what they will eventually do anyway. Based on the historical relationships between long-term secular bull and bear markets, the bear markets tend to run about one third the duration of the preceding bull market. Thus, with us less than 3 years from the 2007 high, this secular bear market has much further to run. Based on the historical relationships a bottom is not likely due until late in the current decade. For more on historical bull and bear market relationships please refer to the April 30th Market Observation.

From a Dow theory perspective, the bullish primary trend change associated with the bear market rally still remains intact. According to Dow theory, confirmation of a primary trend change requires a joint move above or below a previous secondary high or low point. This has not yet occurred. But, when it does and if the DNA Marker that I have identified at every major top since 1896 is also confirmed, then at that time the DNA Marker will serve to validate Dow theory. This will in turn then put the market at great risk of a far more devastating decline than most anyone anticipates. The bottom line is that the Phase II decline is lurking and there is analysis and there are tools to help understand how the setup is unfolding. Just as I warned about the decline into 2002, the extended 4-year cycle into the 2007 top and even the 2008 top in commodities, few listened but later wished they had. You have been warned!

A Pause For A Laugh

A pause from the serious for a laugh.

Drug Addict In Rehab

"Ambrose Evans Pritchard dedicated a piece yesterday to the collapse in M3 growth, something that hasn’t been seen in the US since the Great Depression. Monetarists the world around are frightened about this trend, and with good reason. US interest rates are already essentially zero. The massive monetary and fiscal stimulus has been epic in nature. And all this has still not prevented the actual textbook deflationary trend we now find ourselves in. "It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said. The major reason for this is that the banking system has severely curtailed its lending activities, which are largely (but not entirely) responsible for the growth in the money supply thanks to the money multiplier. One must ask how this is possible since essentially the banks have the Taxpayer Put in place where the US taxpayer is immediately hooked for any significant failure. For decades we have had an economy that relied on credit for its survival and now, like a drug addict in rehab, that credit is being limited. The result was fairly predictable. Given the massive debts in our system, there are two obvious choices. First, hyperinflate away the debt. However, that ultimately ends in the destruction of the currency and the end of the current fiat age. Secondly, we could default through deflation/devaluation, and try to, in effect, reset the system much like what happened in the 1930’s. The major difference between then and now is the relative financial position of both the nation and individuals. Both are considerably weakened as we approach this next phase in America’s existence. I’ve argued for the coordinated default/devaluation outcome for some time now. The collapse of M3 growth is one of the biggest factors on this side of the argument. The second is history. The US already has a rich experience in fiat money, dating back to before Lexington and Concord. We also have a rich history of defaults thanks to the over-issuance of fiat money. Granted, the defaults consisted of ceasing to redeem paper money for specie (Gold/Silver), but a default is a default. We are clearly out of control in terms of our debts, both internal and external, and don’t seem the least bit concerned about real generational or fiscal reform beyond traditional Washington lip service. The Fed has been largely ineffective at doing anything but fattening bank cash flows by squeezing savers and allowing banks to collect generous margins on the performing consumer loans they do have. The bailout money sits in bank coffers, withheld from an economy that now depends on loans for its very survival."

Source: http://www.marketoracle.co.uk/Article19843.html

Broker Confidence

I found it interesting today when I read an email from my brokerage firm stating the following:
"We currently require a minimum of $10,000 in marginable securities or cash in order to maintain uncovered equity options positions in your account, and $25,000 in order to maintain uncovered index options positions. Effective June 23, 2010, we are lowering the minimum equity requirement for maintaining either position to $5,000."

The "cheap credit monster" just won't die!  "Please, please go more in debt!  Take more risk!"

Strike Update

"Does the British Airways strike signal a 'change in trend'? The tea partiers probably think so. Stay tuned."
 Random Roving, March 27, 2010

Same Old Black Gold Story

This week President Obama made a case for focusing on an energy policy. Jon Stewart's research team did an amazing job with this one.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
An Energy-Independent Future
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

So we leave this video with how much confidence that our fearless leaders will solve the problem. It will take a major crisis much greater than this oil spill to "move this beast".

Woulda Coulda Gold Shoulda

The pre-blog "gold emails" from 2002/2003 are still looking mighty fine! I present these not to boast, but to say "it's still not too late!". When it hits $2000/ounce, you're going to say "Woulda Coulda Gold Shoulda!".

Emails from the pre-blog days.

The Breakup Of The Two Dynasties?

As usual, I'll stray from the typical "known" perspective of a recent event.  We all know that the BP oil spill is a tragedy of epic proportions.  We know that BP's CEO will be jobhunting soon (not really; he'll get a tremendous parachute; next thing to be mad at).  We all know that the politicians are seizing the moment.  Jindall won't leave the beach.  Nungesser has elevated his political ambition.  Obama is the fall guy (you know he blew up the levees).  Palin is paralyzed with her "drill baby drill" speech.  But, I digress.

One of the most interesting developments is the intense anger at BP because it is a British company.  I've heard so many sheeple proclaim "why is a foreign oil company drilling in our waters?".  Now you ask?  Because they and many others have been doing it for years.  We need them to because we need their investment capital. 

Could this event be the beginning of a rift with our "next of kin"?  Our co-invasion buddies?  Xenophobia against our native homeland?  During the contraction we herd with those like us and move away from those that are different.  Remember, keep an eye on the European Union.  It will come to a catastrophic conclusion.  Mark my words.