Madagascar

Like myself, I would bet that when you hear the name of the country, Madagascar, you instantly think of the DreamWorks movie with a bunch of silly animals. Reading in the news today about riots in Madagascar, I came to realize that I don't know anything about this country. I would assume that since it's never in the news, it must be a nice peaceful little country. I usually think of the country when playing the game of RISK with my son. It's that little isolated country that you have to waste troops on.

Like my post on Greece a few weeks ago, these "uprisings" are a great testament to Prechter's theory of the shift in mass social mood. The herd, when they feel they're not getting what is due to them, start to stampede. We saw this in 1991 on Rodney King Day. An uprising triggered by an event much smaller than the "issue at hand". Greece was triggered by the shooting of a young boy. The Madagascar "trigger" was the turning off of a radio station. Result, 43 lost their lives.

From the BBC:

"Mr. Rajoelina has called for further street protests on Saturday against the "dictatorship" of Mr Ravalomanana. The violence began on Monday, after tens of thousands of people took part in an opposition protest. A small group attacked the headquarters of the state TV and radio stations and later looted shops belonging to President Ravalomanana."

To prove Madagascar's anonymity, the "Google elves" return results mostly about the movie and not the country. Wikipedia actually has to state that the entry is about the country and not the movie.

The question is, will we start to see uprising in the U.S. and how might that impact us?

Working On A Dream

It sometimes seems like yesterday when my sister invited me in 1980 to roadtrip to Baton Rouge on a school night to see Bruce Springsteen & The E Street Band play live. After four hours, Big E, Monkey, and I exited the Deaf Dome exhausted. Unfortunately, this was my first concert and I later found out that all rockers don't play for four hours.

At 58, Bruce seems like he's just gaining momentum. He made a strong endorsement for Barack Obama and played many benefits last year. He, along with just about every other star, performed for the inaugural celebration.

Today he released his 16th record, "Working On A Dream". The first listen sure sounds good, but then again, I'm very biased. He delivered "The Rising" right after 9/11. This upbeat record has been released at a good time. Enjoy! And don't forget to watch the Superbowl halftime show. I guarantee that there won't be any wardrobe malfunctions!!

Cold and Hot

I often find microcosms great places to learn and to understand the larger picture. A microcosm, like a fractal, provides a smaller scale of the larger structure. Fractals, being self affine, provide the opportunity to observe and understand a structure on any scale.

Recent developments in Iceland and Zimbabwe provide "microcosm opportunities" that could guide us for the future. Iceland, a country of 300,000, appears to be suffering the financial crisis on an extreme level. The Prime Minister just terminated his entire cabinet. The commerce minister also resigned. Our country appears to believe that the politicians can save us while history will prove that Iceland is leading the "politician exodus". A mob of 7000 people protested in front of the parliament building calling for the government to step down.

Zimbabwe is experiencing 11,200,000% inflation, the highest in the world. No, I didn't accidentally type too many zeros. Can you imagine what a meal costs there now? Basic necessities to live? A loaf of bread costs 1.6 trillion Zimbabwe dollars up from 200,000. Political chaos continues to reign.


Iceland

http://www.cnn.com/2009/WORLD/europe/01/26/iceland.government/



Zimbabwe

http://edition.cnn.com/2008/BUSINESS/08/19/zimbabwe.inflation/index.html

http://www.reuters.com/article/latestCrisis/idUSLQ010015

Houston We Have A P.R. Problem

Yesterday I was privledged to be invited to my favorite Republican's birthday party that included a private four hour VIP tour of NASA. I was embarassed to admit at the beginning of the tour that while living in Houston for 23 years, I had never toured NASA. Yesterday's tour was just incredible. We toured all of the training facilities and actually observed a crew in training for their May 12 trip to repair the Hubble Telescope. The crew was submerged in the pool in a zero gravity environment actually working on a replica of the telescope. A second crew is preparing for their February 12 trip to the space station. It was very encouraging to hear about the significant collaboration going on with numerous countries on the space station progress.


The science at each stop was so impressive. The highlight was sitting in the chairs in the original Mission Control room where those famous words were heard over the desk speaker from Apollo 13, "Hey, we've got a problem here." We sat in the current Mission Control and watched the crew land the shuttle in a simulation in preparation for February 12th's mission.

It became obvious during the tour that our citizens have taken these great accomplishments for granted. I can't say that I've watched a "lift off" in years. Of course, we all remember the tragedies of Columbia and Challenger, but what about the great accomplishments over the past two decades.

Our tour guide said "NASA never has been good about promoting itself. We just focus on getting the job done." Maybe we should blame the media, but really we all should take an interest in it and promote science to our children. Our tour guide stated that a permanent station on the moon with rotating crews is within the next decade. He said that the U.S., Russia, China, Japan, and India are racing to the moon for Helium-3. It is believed to be a potential fuel.

NASA has a new fan and I look forward to our progress.

Helium-3
http://www.wired.com/science/space/news/2006/12/72276

The next mission in February:
http://www.nasa.gov/mission_pages/shuttle/shuttlemissions/sts119/index.html

Hubble Telescope news:
http://hubble.nasa.gov/news/latest.php

Jim Rogers On Commodities

Jim Rogers has long been a commodities bull. I've enjoyed reading two of his books on the subject matter. He compares the recent commodity correction to the 1987 stock crash. He describes it as a correction in an overall bull market.

"Everything is in a period of forced liquidation, so everything is going down with no regards to the fundamentals." Jim Rogers

An informative interview:
http://www.youtube.com/watch?v=Kggi97JFulE&feature=related

A Contrast In Character

Last week presented two unique aviation events illustrating a great contrast in character. The first event consisted of Marcus Schrenker attempting to fake his death so that he could flee personal, financial, and legal troubles. The coward leaps from his plane without any concern for what might happen to the unpiloted plane or for the people he left behind.

In great contrast, Captain Chesley "Sully" Sullenberger courageously and precisely landed his Airbus A320 with 151 people on board in the Hudson River. The man executed the landing perfectly and to everyone's amazement not a single person perished. After everyone was evacuated, he walked the aisles twice to make sure that the plane was empty. This man's courage and expertise instantly elevated him to hero. These are the kind of people our media should spend more time on. This is the type of person that we should give book deals to.

The interesting question is: what led one to be a coward and the other to be courageous?

Excitement About The Excitement

It was amazing to see the masses of people all over our nation's capital today to celebrate and be a part of the inauguration of our new president, Barack Hussein Obama. As a non-partisan American, I felt a sincere excitement about the excitement. It is an important time for our citizens to feel confident, excited, and full of hope. I believe that an important message was sent to our nation and to the rest of the world today. We showed the best part of who we are. We're a country where anyone can succeed if they want to. Having the inauguration the day after Martin Luther King day is very symbolic. I wish the President success, safety, and the support of our nation.

The road ahead will be challenging and our new president was very frank and direct about that again today. Can you imagine the agenda for his staff meeting tomorrow:
-Hillary's confirmation, TARP #1, TARP #2, TARP #3, Iraq, Israel/Gaza, Pakistan, Afghanistan, The Congo, Russian gas exports

I can't even imagine the weight that is placed upon the shoulders of our president. Hopefully the unity that was displayed today can carry on beyond tomorrow morning. It will be a tough road ahead and a full court press will be required by all.

Mexico and The Great American Experiment

Source: El Paso Times 1/13/09

"Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats.
The command's "Joint Operating Environment (JOE 2008)" report, which contains projections of global threats and potential next wars, puts Pakistan on the same level as Mexico. "In terms of worse-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico.

"The Mexican possibility may seem less likely, but the government, its politicians, police and judicial infrastructure are all under sustained assault and press by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."

The U.S. Joint Forces Command, based in Norfolk, Va., is one of the Defense Departments combat commands that includes members of the different military service branches, active and reserves, as well as civilian and contract employees. One of its key roles is to help transform the U.S. military's capabilities.

In the foreword, Marine Gen. J.N. Mattis, the USJFC commander, said "Predictions about the future are always risky ... Regardless, if we do not try to forecast the future, there is no doubt that we will be caught off guard as we strive to protect this experiment in democracy that we call America."

http://www.elpasotimes.com/newupdated/ci_11444354

Prechter's Post-Analysis

In this week's Elliott Wave International's publication, Robert Prechter provided a review of some of his prior forecasts:

• "Stocks, oil, metals, commodities and many foreign currencies all sport recent 90%+ bullish sentiment readings. Extreme optimism toward so many markets implies that a collective tumble could happen at any time". NOVEMBER 2007
• "Contraction is on its way, and if 'Conquer the Crash' is correct, it will be the harshest downturn in memory for everyone under the age of 80." DECEMBER 2007
• "In 'C' waves the news and the market are fully compatible: the trend is down, and news is bad. So we forecast a dramatic increase in the frequency and severity of bad news over the course of wave 'C'."
• "Many emerging market indexes will likely plunge even more dramatically than the U.S. stock market." FEBRUARY 2008
• "The real estate collapse is spreading. The commercial market is looking more and more like the residential market everyday." FEBRUARY 2008
• "Banks are hoarding cash and for good reason. The economy will tank, and consumers and business alike will have even more reasons not to lend or borrow. Like any law of nature, there's no stopping it now." APRIL 2008
• "A 'C' wave decline provides no place to hide except cash." MARCH 2007
• "The fundamental effects that result from it are way too serious to go unrecognized by the public. But critical elements of the old delusion remain. Even though every financial mania in history has been followed by a commensurate bust, authorities and many economists continually state that the strength of the collapse was completely unforeseeable. Even in the midst of a two-and-a-half year credit market seizure, we read that the collapse was a total surprise." JANUARY 2009

"The psychological foundation of liquidity is confidence. We cannot stress this point strongly enough. When investors are optimistic, confidence remains high and liquidity expands. When this optimism goes away, the spigot will run dry. The psychological foundation for the asset boom, a rise in social mood, has slipped away. As confidence continues to wane, the resulting destruction mounts. It may seem strange that even as the fundamental changes dig in, people cannot see what is before their very eyes. Of course, this is how the progression toward a pessimistic extreme has to happen. The untold story of 2008 is that it is just the opening salvo." Robert Prechter

Jim Rogers On China

Commodities guru, Jim Rogers, has been a big fan of China for a long time. Here's his view on the state of the country:

http://www.youtube.com/watch?v=O04V5j7ZQuA&feature=related

Prechter On Deflation

"In deflation, however, things depreciate and cash grows more precious relative to houses as well as everything else, because just about everything else is falling in value. Deflation will intensify because government and the Fed cannot force people to borrow and spend when their mindset is against it." Robert Prechter - January 2009

OMG

My kids continue to educate me on the texting lingo and acronyms. Most know that OMG stands for "Oh My God" or as a female teenager might say "Oh Mya Gahhawd".

I was watching George Stephanopolous interview Barack Obama this past weekend. Stephanopolous ask "during the briefings over the past few weeks, was there anything that surprised you?". Obama replied "George you know that that's confidential information!". I would have loved to have been a "fly on the wall" during the Pentagon briefings. Can't you picture Barack saying "OMG!". If he still was able to use his Blackberry, he would probably have texted his friends "OMG, you won't believe the mess we're in! We're never leaving the Middle East!".

We take for granted that what's on the evening news is really what is going on around the world. After watching a few Tom Clancy movies, you have to think that maybe we don't know a whole lot of the real facts. Maybe there are a few covert operations and assasinations of key players around the world. My guess is that President Elect Obama now has more of a clear picture of the trouble ahead and the complexities involved.

Is Cash King?

Robert Prechter recently writes some interesting thoughts about cash:
"Is cash a bubble? The answer is no. There are some important distinctions that explain why. For one thing, a bubble requires an over-extension of credit to purchase investments for profit, and there's no way to borrow your way to a big position in cash. If there were, it wouldn't be cash. So, by definition, cash is not exposed to the margin calls and forced selling that create the stunning bust of every bubble. Another reason that cash cannot be the focus of a bubble is that people don't buy it hoping to resell it to someone else at a higher price. They buy it because they think it is worth exactly what it is. Cash is about keeping what you have; a bubble is about getting rich. The rush for cash is the boom in conservatism forecasted in 'Conquer The Crash'; it should persist for years, just like the mania that preceded it."
Robert Prechter - January 2009

Poetic Pirate Justice

The oil tanker pirating ended in poetic justice:

"The body of a Somali pirate who drowned just after receiving part of a ransom washed ashore with more than $150,000 in cash, a resident of Xarardheere, a coastal town, said Sunday.
Five pirates drowned Friday when their small boat capsized after they received a reported $3 million ransom for releasing a Saudi oil tanker. Omar Abdi Hassan, the resident, said that one of the bodies had been found on a beach near Xarardheere and that his relatives were searching for the other four pirates. “One of them was discovered, and they are still looking for the other ones,” he said. “He had $153,000 in a plastic bag in his pocket.” The United States Navy released photographs of a package dropped with a parachute onto the deck of the Sirius Star, the Saudi oil tanker, and said the item was likely to be the ransom delivery. But five of the dozens of pirates who had hijacked the tanker drowned when their small boat capsized as they returned to shore in rough weather. Three other pirates survived but lost their share of the ransom."

A Big Loss For The NFL

I was disappointed to hear yesterday that Tony Dungy decided to retire from NFL coaching. Not just because I'm a Colts fan, but more because he's one of the "good guys". The man has displayed incredible grace through victory, defeat, and the tragic loss of a child. The Minneapolis Star Tribune described him as "uncommon decency". It's rare to see him lose his cool on the sideline. The Colts and the NFL have suffered a great loss. The good news is that he hopes to work with children in some way. In a prior post, I noted his efforts with the All Pro Dad organization. Check it out.
http://www.allprodad.com/
If you haven't read his book, "Quiet Strength", it's a nice read. He has a new book coming out in February, "Uncommon: Finding Your Path To Significance".
http://www.amazon.com/Uncommon-Finding-Your-Path-Significance/dp/1414326815/ref=pd_bbs_sr_4?ie=UTF8&s=books&qid=1231864457&sr=8-4

Good luck Coach Dungy!

MY DAUGHTER AND NEPHEW WITH COACH D

Drunk on Kool-Aid

"The mushroom cloud never forms until the mania is over because people are too mesmerized by the boom to see even the most blatant abuse in their quest for 'easy money' ".

Robert Prechter - January 2009

I read this last week in a report and it rang so true. Every day on the news we see reports from within the "mushroom cloud". Everyone now has a theory on why and how, but 99% didn't see it coming. The "blatant abuse" has evolved during the entire expansion phase. The Madoff scam is a classic example. It didn't happen yesterday and it wasn't fallout from the mortgage crisis. It was one small piece of an overall cycle. Regulation is always laxed during the expansion. The SEC investigated Madoff during the expansion, but the hammer doesn't fall until the contraction phase gains momentum.

The cycle vibrates along and the herding mammals align in perfect synchronization. These unfolding events are the "flip side" of the last 26 years of excess. The mob's anger continues to grow as their long buzz wears off. For details, keep your eyes on Israel/Gaza, India/Pakistan, Greece, Russia/former Republics, Zimbabwee, and the Congo. When will N. Ireland reignite? That Christian struggle has always baffled me. Keep your ears on the ground and your eyes on the road!

Trend Forecasting Guru

JD turned me on to this trend prognosticator, Gerald Celente. Here's what he thinks:

"When people lose everything, and they have nothing to lose, they lose it."

' "The “Panic of ‘08” will be followed by “The Collapse of ‘09.” In 2008, when the world’s largest financial firms and equity markets crumbled, Wall Street’s woes preoccupied the media. In 2009, the focus will broaden to include a range of calamities that will leave no sector unscathed.'

"Setting aside the only major question that remains unanswered (when, or if, Obama makes Supreme Court selections, will they reflect the liberal beliefs of his supporters?), we see nothing coming from his administration that can prevent The Collapse of ’09, the Greatest Depression or the brewing Revolution. From these macro-developments, a number of other significant trends — some promising, some foreboding — will emerge, accelerate and intensify.

"It’s unprecedented. There is nothing like it in the history of the United States. No week goes by without the Government buying into or buying up another failing “too big to fail” using taxpayer money. In the process, a super-race of corporate giants is being created that will be declared “too big to tumble.” It is a matter of historical fact: When people are homeless, helpless, desperate, jobless and hungry, sooner or later they will rebel. And it won’t be any different in America."

"Like it or not, Americans are going on a diet: a spending diet and a food diet. Staying fit and living frugally was a mainstay of pre-World War II America, and it will be a major defining trend of 21st century America....."

"To cope with food shortages and food rationing during World War II, masses of people planted “Victory Gardens.” As America moves into the Greatest Depression, the need to put food on the table will again oblige people to grow their own....."

"To keep local, state and federal governments running, and to finance stimulus packages and bailout programs, politicians will put the squeeze on the already squeezed. The biggest squeeze: property taxes. Historically, empires crash when taxes are raised beyond the capacity to pay....."

"During the grim times of the Great Depression, arts and entertainment flourished, and with the repeal of Prohibition the good times rolled … and they’ll roll again. Lifting spirits, and drinking them, will be big businesses and major pastimes for both down-and-outs and the Uptown crowd during the Greatest Depression.....

"As the economy and the country unravel — closely following our forecast schedule — there is not a single major mitigating factor to forestall, much less reverse the process. Following the commercial real estate and retail cave-ins: College. Most will downsize, many will fail....."

His website:
http://www.trendsresearch.com/index.htm

Watch this video:

http://www.youtube.com/watch?v=kjvbm3pOYFo

Fear of The Unknown

Last night my daughter and I were watching a TV show where they were reenacting an event where a sailboat had sunk off the coast in the Atlantic and three people were stranded for five days in a dingy. During their floating nightmare, their fear of the ocean's subsurface grew by the day. Not being able to see clearly what lay below continued to work on their psyche and fear began to overcome them. About the third day sharks began to bump up against the bottom of the dingy and at that point, they became prepared for death. The fear of the ocean, I believe, is related to the fact that we can't see what lies below. Years ago I learned to scuba dive and that experience really illustrated to me that the ocean is actually amazingly peaceful. Seeing a shark while diving does not create that much anxiety because you are under the water and part of the environment. The unknown is usually more fearful than the known.

This recent economic contraction has created fear in the minds of many. The fear is rooted in the fact that the future is unknown. The future is always unknown. Not being able to "see below the ocean's surface" is the source of the anxiety. Of course, it someone lost their job, that is a direct event that should cause anxiety. Like the scuba diver, dive into the ocean and see all that is below and it won't be as fearful. When you see a "shark", you'll know that it's a shark, and you can calmly swim away from it.

Yesterday, a friend visited my office and told me that when he was leaving his office moments prior, a fellow employee had just leaped to his death off of the parking garage. Don't fear the sharks, put on your scuba gear and swim side by side with them.

Schiff's Greatest Hits Video

A nice summary of Peter Schiff's perspective:
http://www.youtube.com/watch?v=vweLBpE4mso&NR=1

You have to love his metaphors!

Danielle Park

The internet presents such an incredible research tool and information source. I recently listened to this interview on Puplava's radio show. Danielle Park is the author of the book, "Juggling Dynamite". I just bought a copy after hearing her interview.

Listen to the interview here:
http://www.financialsense.com/Experts/2008/Park.html

She presents a very interesting "frame of reference" for investment cyles:
http://www.venablepark.com/documents/EmotionalCycle.pdf

A very impressive presentation:
http://www.youtube.com/watch?v=j7uK-B6x0a0

Her blog:
http://www.jugglingdynamite.com/

Her website:
http://www.venablepark.com/index.html

Let me know what you think POST SOME COMMENTS :)

The Loss of Perspective

I was troubled as I read the front page of the Wall Street Journal this morning. Two of the major stories were about CEO's that took their lives this week in response to their company's troubled finances. The article reported that 74 year old Adolf Merckle, who was worth $9.2 billion last year, took his life. His family stated "The distress to firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to act, broke the passionate family businessman, and he ended his life." The article stated that he was one of Germany's wealthiest people and considered a "savvy" investor by the financial community.

Similarly Steven Good, a 52 year old Chicago CEO of one of the nation's largest real estate auction firms, died of a self inflected shotgun wound and was found in his Jaguar. Interestingly, both men inherited the family business from their fathers. Is it pride, depression, or something else?

The moral of the story is that our society has lost its focus on what is important. During the expansion phase, we evolve toward materialism and put less emphasis on what is most important: God, our faith, family, friends, and enjoying life. The good news is that we're in transition "back to basics".

Beware of the Zombies

I remember as a kid watching the movie "The Night of The Living Dead". It might still be the best zombie movie ever. Last year, at my daughter's request, I watched it with her. Not quite the special effects and gore of today's horror movies (e.g. Saw et al), but for the vintage, it sure was enough to scare a ten year old.

I recently read an article on financialsense.com by Tony Allison that used the term "zombie" for dead companies. What a great metaphor for our three big auto companies. By metaphor, we have to ask the question "why keep these dead bodies alive?". A true capitalistic system is Darwinian in nature. Poorly managed, unsuccessful companies should be allowed to fail. Let the venture capital world fund a new company, with a young, creative management team. Let these new companies hire the best employees from the deceased Big Three. Start some new auto companies without the union contracts and without the legacy and baggage. Our politicians have basically made the decision to fund negative cashflow. Let the inevitable occur and let nature run its course.