Wave 2

"Wave 2 should regenerate substantial feelings of optimism. At its peak, the Fed will appear to have saved the banking system, and investors will be convinced that the bear market is behind us."
The Elliott Wave Theorist - April 18, 2009

For a technical perspective, review The Point of Recognition.

For a psychological perspective, review The Return To Normal.

"The door to the last great selling opportunity is wide open at the moment." Elliott Wave Theorist 8-27-09

Organized Chaos

I was working on the laptop out on the back patio today and noticed this excellent example of organized chaos. While the team appears in total chaos, they very efficiently achieving their objective of transporting a piece of dog food (100x their weight) across the patio (15 ft.) in ten minutes. Very impressive. I only witnessed one brawl between two ants. In true Darwinian fashion, the larger one took care of the smaller one. It must have been union versus non-union!

Wouldn't it be incredible if the Senate and Congress worked as efficiently as these little critters!!

Have The Sheeple Awoken?

The mass social mood continues to shift. Have the sheeple awoken? I argue that it's still just the nerdy white folk.

The Point of Recognition

"And this time there will be no mistake about the next wave down. It will be a "third of a third," also known as the point of recognition."

Elliott Wave International

What's Another 2 Trillion To The Great Grandchildren?

Was anybody surprised that we just mysteriously spent another $2 trillion. As my neighbor said last night, "we have now spent our great grandchildren's money!". There is no way for this to end pretty my friends.

The NY Times reports:
http://www.nytimes.com/2009/08/26/business/economy/26deficit.html?bl&ex=1251432000&en=7d1bba04578a733a&ei=5087%0A

The Bear Comparison

The summary below is sourced from Weiss Research Inc. It provides a nice comparison of our recent contraction to others in the pasts. Note the largest market correction and what event occurred to reverse it.

The Return to Normal?

Watching the news lately brought me back to this diagram. Are we at the "return to normal"?

Ron Paul On Free Markets

Congressman Ron Paul - "Texas Straight Talk" column (Paul's House of Representatives website 8/18/09):

"The free market is a naturally occurring phenomenon that can't be eliminated by governments, not even totalitarian ones like the former Soviet Union. It can be regulated, over-taxed and manipulated until it is driven underground. Lately it has been wrongly accused of doing so many things it just doesn't do, that are really the fault of crony corporatism and convoluted government policies that brought on the crisis. Too many people equate the free market with big business doing whatever it wants, but that is not the free market. Unconstitutional taxpayer funded bailouts are what allow giant corporations to run roughshod over the economy. The free market is what puts them out of business when they misbehave."

"The free market is you and your neighbors working hard to produce what you produce, and exchanging goods and services voluntarily, in mutually agreeable arrangements. The free market is about respecting property rights and contracts. It is not about building up oligarchs and monopolies and confiscatory tax theft - these are creatures of government."

"We must watch out when government comes up with interventionist solutions to interventionist problems. The root of our problems lie in interventionism. Trusting the free market is the solution."

Inflation, Deflation, or Goldilocks

This recent article in the WSJ presents a nice portfolio approach to the future potential economic outcomes.



Entire article:
http://www.careerjournal.com/article/SB124847825820080351.html


A prior rove on the topic:
http://randomroving.blogspot.com/2008/10/four-potential-outcomes.html

Inheritance and Borrowing

"We do not inherit the Earth from our ancestors, we borrow it from our children."
Native American Proverb

This concept can be translated down to our country. We do not inherit our country from our ancestors, we borrow it from our children. This puts our country's current fiscal situation in full perspective.

The Oracle, The Butterfly, and Greenback Omissions

The Oracle spreads some more wisdom:

"The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself."

"To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory."

"Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out."

Excerpt from Warren Buffet in the New York Times.
Full article:
http://www.nytimes.com/2009/08/19/opinion/19buffett.html

The Goal Of The Bullrider

I've had many conversations with the angry mob lately and I continue to use my analogy of the bullrider. I argue that the president can't control or change the cycle, dictators can't, and we as individuals can't. But, we can protect, plan, and adjust for the next phase of the cycle. We should focus on "staying on the bull" for the 8 seconds and give up on the dream of taming the bull and riding him for many minutes or hours. That is simply unrealistic. The bull is untrainable, and we're best focusing our energy and time on making the best of our 8 seconds of the ride. Turn off MSNBC and FOX, and focus on what makes you the best 8 second rider!

"No person or agency can manipulate the markets, at least not for more than a day or two." Robert Prechter
http://www.outlookprofit.com/article.aspx?261102

A Demonstration of Democracy

Back in February, I commented on this mad, mad, mad world. The anger continues to rise. So far, it's just the angry white nerdy guys (note the smile on his face).

This video sums up the current mood. The senator calmly says "we've just had a demonstration of democracy, okay." I feel much better now!
http://www.youtube.com/watch?v=rytLJWaJff8

First Iraq, then the bailout, then the 201k, then healthcare, and then?????

U.S. Fed Inc.

The recent news regarding the U.S. Postal Service makes one think really hard on whether we want the government controlling our medical sector. I surmise that the mail business is pretty straight forward. You are able the track the volume of mail being delivered which should then provide the ability to grow or contract the operation as needed and in a timely fashion. It's definitely not rocket science.

Fox news reports:
"Government budget woes, the efficiency of the Internet and the staggering volume of junk mail have rightfully buried the U.S. Postal Service, say environmental groups and budget analysts who call the mail delivery model built on the Pony Express no longer viable in the 21st century."

"Nearly 700 post offices around the country are scheduled for potential closure and consolidation by the independent Postal Regulatory Commission. In a document presented to a House subcommittee last week, the near-bankrupt U.S. Postal Service also called for reducing service from six to five days a week."

The Shipping Metric

I've never read or known much about the shipping business. Read the article in the link below and see a unique view of shipping as an economic metric:
http://www.elliottwave.com/freeupdates/archives/2009/07/30/Baltic-Dry-Index-Does-the-Rally-Mean--The-Worst-Is-Over-.aspx

Another Delayed Notification

I've commented a few times about the fact that the media reports on what "has" happened and rarely reports on what "might" happen in the future. I found it comical recently while reading the New York Times that they reported that virtually no jobs have been added on a rate of change basis in the private sector over the last 10-year period. They explain that the miniscule growth was related to government hiring. Now that the economy is "down the contraction road" they now report a metric that has had warning signs for 9 years and 364 days. Wouldn't it be helpful if a year ago they present these data and forecast that the trend might continue for another year? As Gerald Celente continues to state "why do we continue to listen to the same people that didn't warn us that this was coming?"

The article:
http://www.nytimes.com/2009/08/08/business/economy/08charts.html?hpw

The chart:
http://www.nytimes.com/imagepages/2009/08/07/business/20090808_CHARTS_GRAPHIC.html

All Jacked Up On Prozac

This news hit the press this week:
"Antidepressant use in the U.S. doubled from 1996 to 2005, according to a new report in the August issue of Archives of General Psychiatry. During that decade — the last period in which data were available — the percentage of Americans using antidepressants surged from less than 6% to more than 10%, or more than 27 million people." SOURCE: Time Magazine
http://www.time.com/time/health/article/0,8599,1914604,00.html

This statistic begs the question, if we are the world's greatest nation and we are living "the dream", then why is 10% of our population on anti-depressant drugs? I find this stat staggering, yet not surprising. I believe that during the Great Expansion (1982-2000), our populace was drunk on credit and in pursuit of material things. A shallow existence was not as fulfilling as we believed it to be. I'll restate one more time. This contraction is "good news". It will bring us back to deeper, less materialistic, more spiritual, and civic-minded human beings. You see, this is optimism!!!

The Goldman Bubble Machine

This article has been getting a lot of attention....a very interesting read.

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

Audit The Fed!

My presidential candidate is proposing some important legislation. From RonPaul.com:

Ron Paul’s bill to audit the Federal Reserve (HR 1207) now has 282 co-sponsors, and the numbers keep growing! HR 1207’s companion bill in the Senate, S 604, has already attracted 23 co-sponsors. This is history in the making, and victory is within reach. Imagine what will happen if HR 1207, The Federal Reserve Transparency Act, comes up for vote in Congress! With more than 64% of the House of Representatives already co-sponsoring this bill, it has real potential to pass — BUT only if we educate and rally the people to support it and get our Congresspeople to put it to vote and pass it.
http://www.ronpaul.com/on-the-issues/audit-the-federal-reserve-hr-1207/

The Sandcastle Contest and The Hurricane

My buddy JH and I were having a beer in the pool a couple of weeks ago and were having one of our "big picture" conversations. We both agreed that there is something "big" brewing out there, and all of this political bantering, chatter, and cat-fighting is so unproductive. After a couple beers and some good brainstorming, we conceived this analogy:

Right now we have the Republicans and Democrats standing on the beach arguing over who has built the best and prettiest sandcastle. Meanwhile, there is a huge hurricane approaching the shore, and neither is aware of that fact. Both will be consumed and devastated by the storm's destruction.

Some recommended weather forecasts:
"The Black Swan" by Nassem Taleb
"Age Of The Unthinkable" by Joshua Cooper Ramo

DJIA/Gold Ratio: EWI's View

I've provided several posts regarding the DJIA/Gold Ratio. Here is a nice summary of the last ten years and the unique perspective that this chart provides:

http://www.elliottwave.com/freeupdates/archives/2009/07/01/Dow-Jones-Industrial-Average-at-173-Not-if-but-Now.aspx

Oil and The Cedars of Lebanon

"Throughout antiquity the cedars of Lebanon were prized above all other trees. Their fine wood was strong, straight and wonderfully scented. It was always the first choice for any temple or palace, and top value in trade was paid for it. These trees helped give the Phoenicians a high place among other nations, and became the symbol by which they and their descendants were known."

"Ancient demand for cedar was raised to a fever pitch for a very significant reason. The two dominant civilizations at that time -- Egypt and Mesopotamia -- had virtually no wood at all. This was especially true in Egypt, where the pithy core of palm trees made them not very useful, and the only other substantial growth, the acacia tree, produced boards which were only about three feet long (one meter).

The Mesopotamians could float wood down the Tigris and Euphrates from mountains in the north (which would one day be Turkey). But the Egyptians were essentially dependent upon the Phoenicians for their precious cedar. Chapters 2 and 3 of Phoenicians: Lebanon's Epic Heritage uncovers how the highly-desired cedar tree became one of the centerpieces of life in Lebanon and across the Mediteranean."

"It should be mentioned that the mountains of Lebanon, with their snow-capped peaks, provided many other kinds of wood as well, including juniper, pine and oak. But the cedar was always the most treasured."

"Unfortunately, these magnificent stands of trees were heavily harvested in more recent times, with the British Railway virtually finishing them off in the head-long rush to lay track as fast as possible on wooden railroad ties.

Today, only a few stands of these trees-of-kings are left, with the most impressive groves being near Bcharré in the northern Lebanon mountains and the Chouf Reserve in the south. If you are in the neighborhood and feel like having an adventure, they can still be seen."

"The re-forestation projects are coming along, but at a painfully slow pace. Much more needs to be done to restore the stands of these tall, strong symbols of the Lebanese people."

source: http://www.phoenician.org/cedars_of_lebanon.htm

U2: Cedars of Lebanon

Now I’ve got a head like a lit cigarette

Unholy clouds reflecting in a minaret

You’re so high above me, higher than everyone

Where are you in the Cedars of Lebanon?

Choose your enemies carefully ‘cos they will define you

Make them interesting ‘cos in some ways they will mind you

They’re not there in the beginning but when your story ends

Gonna last with you longer than your friends

The Football Onion Core Is Yet To Peel Away

Just one day after I made my post regarding the demise of the Arena Football League, the NFL proves that the core of the onion is still untouched. Yesterday, it was announced that Eli Manning's new contract makes him the leagues top paid player. This would signify that the peak continues to climb and that the core is still protected by the "outer shell".

The LA Times reports:

"Eli Manning has agreed to a new six-year, $97-million contract extension with the New York Giants that will make him the highest-paid player in the NFL, with an average salary of roughly $15.3 million.A person close to the talks who asked not to be identified says Manning is guaranteed $35 million under the deal that will keep him with the Giants through the 2015 season."

The weakest fall first with more to follow. The onion gets peeled back one layer of a time.

3/6/09 Post

Words Of Wisdom

"Those who do not study history are doomed to repeat it."

George Santayana

"I know of no way of judging of the future but by the past."

Patrick Henry

"A page of history is worth a volume of logic."

Oliver Wendell Holmes Jr.

Arena Football: The Outer Layer of the Professional Sports Onion?

Could Arena Football represent the outer layer of the professional sports onion? It appears that the minor league of professional football is heading towards an abrupt conclusion.

The term "swelling" used below sums up the last twenty years of salary growth in all of professional sports. It appears that logarithmic growth might have reached its limit.....classic overshoot and collapse?

The AFL opted to suspend operations for the 2009 season December 15, promising to use the year off to resolve major financial problems. One of the big sticking points was swelling player salaries approved shortly after the AFL reached a television agreement with EPSN.

The Arena Football League is teetering on the brink of dissolution, an act that could come by the end of the week and would drag the Dragons down with it - largely against their will.
Since a group headed by Steve and Shanna Silva bought the team from Islanders owner Charles Wang last summer, it consistently has been among those hoping to keep the league afloat, even as a majority of owners voted to cancel the 2009 season and now prepares to file for Chapter 7 bankruptcy. The league and its players agreed on a new collective-bargaining agreement in March, but a majority of owners never could quite agree on a new business model.

Source:
http://www.chicagotribune.com/sports/football/rush/orl-sports-arena-football-league-folds,0,2068837.story

http://www.newsday.com/columnists/neil-best/arena-football-league-on-brink-of-folding-1.1346286

Peter Schiff Announces His Quest For The Senate

Peter Schiff has announced that he's running for Senate. This should be an interesting one to watch.
http://www.youtube.com/watch?v=BuAIinwcYk8

My posts relating to Schiff:
http://randomroving.blogspot.com/search?q=schiff

Willie, Mellen, Bob, and Me

I had the pleasure of attending a concert last night featuring three music legends: Bob Dylan, Willie Nelson, and John Mellencamp. Willie was up first. While not a Willie fan, I was incredibly impressed with the strength and crispness of his 77 year old voice. The crowd had its share of Willie fans. His ponytail looks over three feet long! He played a nice upbeat set.

John Mellencamp, one of my favorites, was up second. His oldies picked the crowd up. A nice acoustic set intertwined some old and some new. He debuted a new song, "Save Some Time To Dream" during the acoustic portion which was really good with a strong message.
Video clip of it: http://www.youtube.com/watch?v=e9ode0vDw5w

Big daddy Bob challenged the crowd with his aged, raspy voice that sometimes resembled a "frog in his throat". Most of his set was the more recent songs, but we had to miss the finale'. I'll be upset if I missed "Rolling Stone", "Watchtower", or "Blowin' In The Wind".

I can now tell the grandchildren someday that I saw Willie once, Dylan twice, and Mellencamp numerous times.

Buffet on CNBC

Warren Buffet made some interesting comments this week:

"The government is going to play an enormous factor in our confidence."

On unemployment:
"Its going to go higher. Going to go a fair amount higher. Five years from now it should be running fine but I wish it would happen faster."

On inflation:
"Its hard to tell how severe it could be. We are certainly doing things that could lead to a lot of inflation. The best asset during inflation is your earning power - your own talent. Make yourself more valuable. The second best asset is a good business that you may own yourself or through equities."

On leverage:
“Leverage is the only way a smart guy can go broke … You do smart things, you eventually get very rich. If you do smart things and use leverage and you do one wrong thing along the way, it could wipe you out, because anything times zero is zero. But it’s reinforcing when the people around you are doing it successfully, you’re doing it successfully, and it’s a lot like Cinderella at the ball. The guys look better all the time, the music sounds better, it’s more and more fun, you think, ‘Why the hell should I leave at a quarter to 12? I’ll leave at two minutes to 12.’ But the trouble is, there are no clocks on the wall. And everybody thinks they’re going to leave at two minutes to 12.”

The Black Gold Entitlement

I've had the conversation about oil and consumption with so many people and the majority appear to believe that we, as Americans, are entitled to all of the worlds resources because we are the greatest country on the planet. That perspective is leading us down a road to destruction and conflict.

Last Sunday night, I watched the 20/20 special titled "Over a Barrel, The Truth About Oil" that was hosted by Charlie Gibson on ABC. For the most part, it provided a fair assessment of the industry and our country's problems relating to the oil supply/demand equation.

I've not contributed much on this topic to date, but plan to in the future. Our overconsumption combined with our mentality of entitlement lead us down a dangerous path. T. Boone summed up my perspective very well.

"You are the problem. You America. You and I Charlie. That you're the problem because you're using 25% of the oil with 4% of the population. You're not entitled to that."
T. Boone Pickens

"Something has got to give."
Charlie Gibson

Part I of the special:
http://www.youtube.com/watch?v=mDTUB9o-t8w