The New Home Sand Pile

In "The Slope Of The Sand Pile" I elaborated on the steepness of curves prior to collapse.  The recent charts published on New Home Sales sure do look like the "same o same o". A very steep curve, anomalous to the prior history, ends in rapid collapse.

NEW HOME SALES

Kangaroo Court

"In times like these politics gets very crazy. The public forgets how misled and confused it is and develops vicious certainties that do not necessarily jibe with reality. The public becomes a mob and democracy turns into a kangaroo court, which is to say: a mockery of the rule of law. I suspect we'll see a correlation of turbulence in politics and markets as the weeks pound forward toward Halloween. By election day, democracy itself will be in disrepute and the streets will run with mad dogs. When this sucker goes down (to paraphrase a past president) it's going to be like a fire in a circus tent. Don't expect much from the clowns' bucket brigade. We'll be lucky if they don't toss gasoline into the grandstands."
James Kunstler, Author, "The Long Emergency"

Entire Article:
http://kunstler.com/blog/2010/08/the-queasy-season.html

The Power of The Limbic System

"The answer, of course, is that the bubble hijacked people's reasoning faculties. As Chapter 8 of 'The Wave Principle of Human Social Behavior' explains, this is how social mood works. The desires and despairs of the non-rational limbic system are always in control, but it takes the extreme behavior of a bubble and collapse to reveal the driving force that is social mood. Still in control, social mood is now inducing people to believe that the crash has come and gone."
Steve Hochberg, Elliott Wave International

Doom-Mongers

"Those who cautioned against rising debt levels were dismissed as doom-mongers; after all, asset prices were rising even faster, so balance-sheets looked healthy. And with the economy buoyant, debtors could afford to meet their interest payments without defaulting. In short, it paid to borrow and it paid to lend. Like alcohol, a debt boom tends to induce euphoria. Traders and investors saw the asset-price rises it brought with it as proof of their brilliance; central banks and governments thought that rising markets and higher tax revenues attested to the soundness of their policies. Debt increased at every level, from consumers to companies to banks to whole countries.  "
Source: The Economist

"This historic unfolding event can be examined and observed on many scales: individuals, cities, counties, states, regions, countries, and continents. The weakest stumble first."
Random Roving - February 3, 2009

A Change In Strategy

"There are two things that the past ten years should have made abundantly clear by now, which is that a buy and hold strategy (B&H) is a recipe for disaster in a secular bear market, and that one cannot ignore the message of the market when it is shouting at you. Knowing the investment climate is pivotal as investment approaches have different outcomes in different climates. A B&H approach is one of the best strategies to have during a secular bull market (think 1982-2000), while a trading/market timing strategy is a better approach during a secular bear market (2000-present). Given that we are still within the confines of a secular bear market where real stock prices peaked in 2000, secular bear market rules apply and risk management should become a top priority."
Chris Puplava
Source: http://financialsense.com/contributors/chris-puplava/when-the-market-speaks-listen


Remember the Dow/Gold Ratio???

The Evangelical Mob

"Neither Democrats nor Republicans can afford to ignore the antiestablishment fervor displayed Saturday during Beck's rally that took on the tone of an evangelical revival.  Billed as a nonpolitical event, it nevertheless was a clarifying moment for those curious as to what clout an anti-Washington sentiment could have on midterm congressional elections in November. The gathering was advertised as an opportunity to honor American troops. But it also illustrated voters' exasperation — and provided additional evidence that Democrats in power — as well as some incumbent Republicans — may pay the price when voters go to the polls."
Source: Associated Press

"The angry mob is seeking culprits. The game of politics is hot as ever. Rush Limbaugh has resurfaced as the Republican hero. Obama is now to blame for this whole crisis."
Random Roving, "The Blame Game", March 7, 2009

"During a descending mass social mood, people become angry and fearful."
Random Roving, "It's A Mad Mad Mad Mad World", February 27, 2009

Bunny Rabbits

"In time, however, the government is going to run out of bunnies… be careful."
Casey Research

The Loss of Confidence Part 2

"Public confidence in government is at one of the lowest points in a half century, according to a survey from the Pew Research Center. Nearly 8 in 10 Americans say they don't trust the federal government and have little faith it can solve America's ills, the survey found. The survey illustrates the ominous situation President Barack Obama and the Democratic Party face as they struggle to maintain their comfortable congressional majorities in this fall's elections. Midterm prospects are typically tough for the party in power. Add a toxic environment like this and lots of incumbent Democrats could be out of work." The Associated Press 4-19-10

The Mass Social Mood Model

"Politicians ratings will continue to fall aligning with a continued decline in mass social mood. Incumbents beware."
Random Roving - January 1, 2010

"When the tide is rising, we're happy participants, but when it lowers we seek someone other than ourselves to blame."
Random Roving - March 7, 2009

A Reaganite Departs The Herd

Finally a Reaganite breaks ranks and speaks about reality.

"If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice.  Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes. This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit — the combined shortfall on our trade in goods, services and income — has reached nearly $8 trillion. That’s borrowed prosperity on an epic scale. It is also an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves. Just let the free market set currency exchange rates, he said, and trade deficits will self-correct. It may be true that governments, because they intervene in foreign exchange markets, have never completely allowed their currencies to float freely. But that does not absolve Friedman’s $8 trillion error. Once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors. In fact, since chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure. When the dollar was tied to fixed exchange rates, politicians were willing to administer the needed castor oil, because the alternative was to make up for the trade shortfall by paying out reserves, and this would cause immediate economic pain — from high interest rates, for example. But now there is no discipline, only global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve. The second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40 percent of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts. In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration’s hastily prepared fiscal blueprint, however, was no match for the primordial forces — the welfare state and the warfare state — that drive the federal spending machine. Soon, the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget — entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans’ fiscal religion.  Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts. By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy. The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008. But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could never have survived, much less thrived, if their deposits had not been government-guaranteed and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets. The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever."

David Stockman, Director of the Office of Management and Budget under U.S. President Ronald Reagan.
Source: NY Times

The Journal Discovers The Swan

"After a decade-long bear market and two years of turmoil that saw the stock market plunge by 57%, investors are betting on still more financial pain in the months ahead.  Bond yields are near record lows. Gold continues to soar. And stocks are whipsawing as traders try to predict the direction of an economy that remains, in the words of Federal Reserve Chairman Ben Bernanke, 'unusually uncertain.' But not every investor is trembling with anxiety over the next financial blowup. Some are embracing the market's volatility—and constructing portfolios to profit from it.  A growing number of money managers and financial firms are rolling out investment products designed to exploit big declines known as 'black swan' events. Most of the products are geared toward institutional investors such as pension funds, endowments and high-net-worth families—but black-swan strategies are trickling down to Main Street as well. The term black swan was popularized in a 2007 best-selling book by author and investor Nassim Nicholas Taleb. It derives from the ancient belief, once widespread in the West, that all swans are white—a notion that was proven false when European explorers discovered black swans in Australia. The gist: Anything is possible. In fact, big surprises are more common than people think. In financial terms, a black swan usually results in drastic moves in the market—events such as the 1990 Iraqi invasion of Kuwait, the Sept. 11, 2001, terrorist attacks and the recent financial crisis. Statisticians call these events 'fat tails' (because they occur on the fringes, or tails, of a bell curve), while professional investors try to manage their 'tail risk.' The basic idea behind Mr. Taleb's black-swan strategy is to keep most of your money ultrasafe, and to bet a small portion—say 10%—on options contracts or other speculative bets whose prices will soar during a market panic."

"'The Black Swan' continues to be a hot 'buzzword' for the unpredictable rogue wave lurking out in the future."Random Roving, May 18, 2009

The Execution of Paul Revere

"In classical drama, as well as real life, the bearer of bad news is often executed, simply for having brought it."
John Hornig, Casey's Research

The Long Run

"The book Stocks for the Long Run was written by Jeremy Siegel in the mid-1990′s. The premise is that if you just buy and hold stocks over a 20 to 30 year period, you will always make money. This was exactly what the Wall Street witch doctors ordered. They pounded this message into the brains of every American incessantly in their advertising campaigns, literature and propaganda. It became an unquestioned truth. Just one problem. It isn’t the truth. Valuations matter. The Dow Jones was at the same level in 1982 as it was in 1966. On an inflation adjusted basis, the Dow did not get back to the 1966 level until 1990. That is 24 years of no return in the stock market. The American public ignored the true facts and piled into equities during the late 1990s. The result was one of the greatest examples of mass delusion in history. The internet bubble drove the NASDAQ market to a peak of 5,048 in March 2000. Today it sits at 2,180. Ten years after the bubble burst, the NASDAQ is still down 57% from its peak."
James Quinn, TheBurningPlatform.com

Left High and Wet

Today marks the five year anniversary of Hurricane Katrina.  In some ways, it seems like yesterday and sometimes is seems forever ago.  I recently made it halfway through Spike Lee's "When The Levees Broke".  Not that it was a bad documentary, but I just couldn't continue to watch the "replays" that brought back too many bad memories.  I also recently watched CNN's segment "New Orleans Rising" which profiled the story on the police shooting of the men on Danziger Bridge.

The most popular Katrina news item continues to be the failed levees and the belated response by the local and federal authorities.  No doubt, these were key points to be made in post-analysis.  I reflect back on the event and continue to be amazed at another aspect that doesn't get that much discussion.  I'm amazed how quickly "order" transpired into "chaos".  The assumption that the authorities (police, fire, medical) were there to assist you was a bad assumption.  Most interesting was the fact that so many police fled the city and left the people and their police teammates "high and wet".  The replay of the police station that hung the banner "Fort Apache" on their station in response to the "direct fire" that they were taking was interesting.  How does a police station all of a sudden become the target of snipers?  New Orleans became Iraq over a 24 hour period.

So my question is, how can a civil community become so uncivil so quickly?  How does order so quickly turn into chaos?  I once again become fascinated with the mass psychology of it.  The herd can change directions quickly.  What makes a police officer become a looter over a 24 hour period?  What turns a routine "beat" police officer into a "thug sniper" over a 24 hour period?  On another front, I've always been amazed at how riots break out.  Not the "justified" riots, but the Superbowl celebration type riots.  How does a group of young boys/men all of a sudden feel that looting and destroying public property becomes acceptable?  Better yet, why do it as a way to celebrate your team winning the Superbowl?  How did a group of young men decide to terrorize the city of New Orleans while it was defenseless?

I don't have any of the answers, but I do have concern for how the masses will handle the changing world ahead.

On a positive note, New Orleans appears to be on the mend.  A new honest motivated mayor, consistent tourism, 1111 restaurants, and a Super Bowl trophy makes for a good place.  Stay tuned.

The Derivative Dice

"Some government-run investment funds are recklessly rolling the dice by participating heavily in mania-era investment ploys. In Illinois, for instance, the state pension fund is using derivatives to 'recoup returns' and try and 'fix' a 60.9% underfunding."
Steve Hochberg, Elliott Wave International

"Every contraction cycle needs a culprit. Derivatives will be the blame for this one."
Random Roving, July 3, 2010

Sir John Templeton On Market Cycles

Sir John Templeton on market cycles:
• The market cycle starts in pessimism
• The market cycle rises on skepticism
• The market cycle matures on optimism
• The market cycle ends on euphoria

McCain's $20,000,000 Investment

I find it amazing that former presidential candidate and senior senator John McCain spent $20,000,000 in his primary race. All I can say is wow! I bet Ms. McCain is pissed that John keeps spending all of her money. Will the $20,000,000 investment be enough to buy an incumbent victory in November? I'm predicting that he'll have to pony up another $20,000,000 in DEFEAT.

Guidance From Our Leaders

Fear, Uncertainty, and Doubt

"Fear, uncertainty and doubt will remain as long as consumers and executives lack confidence in the economic outlook of the United States. The psychological affect of the FUD factor remains a major hurdle to overcome. So far, everyone fears the worst, is uncertain about the future and doubts much can be done to make the situation better. We are in for a slow growth economy for some time. As investors we need to adjust our sails to deal with these difficult conditions."
Hans Wagner, CEO, Trading Online Markets LLC

Mass Social Mood Model

China's On The Move

China's on the move:

• China overtakes Germany to become third-largest economy in the world
• China out-muscles the U.S. to become the largest market for passenger vehicles in the world
• China passes Germany to become the world’s largest exporter
• China powers past the U.S. to become the world’s largest energy user
• China blows by Japan to become the second-largest economy in the world

Source: Casey's Research

Gold Supply

" I think in order to properly characterize what’s happening in the industry, it's important to start from a big-picture perspective, which is that by and large the masses in this country are not involved in precious metals. In my experience, the move we've seen in gold over the last decade has primarily been from international investment – sovereign wealth funds in the Orient, petrodollars in the Middle East, India buying from the IMF, Russia and Japan accumulating, etc. If you factor in that very, very few people in this country have even held a gold coin – let alone own any gold, or understand the reasons to own it, or will even accept the arguments for owning it – I think the primary distinguishing characteristic of this market will be that people won’t be able to get product when they want it. The rising price in and of itself will not be the main hurdle. For the most part, people will overcome price, because they’ll want to own it. The real issue will be getting product in a timely fashion, and that will become difficult for the average American. People are afraid. They’re afraid of what's happening geopolitically, economically, fiscally, and want to hold on to their gold. As they should, because this is exactly the kind of circumstance gold is for. So I would argue that as gold and silver creep higher, there will be more and more buying and less and less selling. And less selling means less product for buyers. People are afraid. They’re afraid of what's happening geopolitically, economically, fiscally, and want to hold on to their gold. As they should, because this is exactly the kind of circumstance gold is for. So I would argue that as gold and silver creep higher, there will be more and more buying and less and less selling. And less selling means less product for buyers. Junk silver bags are becoming much harder to get. And I think the higher gold goes, the faster silver will disappear.Acquire as many gold and silver ounces as you can. In the end it’s not about price paid, it's about number of ounces. View the supply issue as critically as you would the price, because I believe that more than anything else, the lack of available supply will mark this industry."
Andy Schectman - Miles Franklin (Interview with Casey Research)

Our Legacy

I saw this quote on the All Pro Dad email distribution today.  Great stuff.

"What you do for yourself alone dies with you ... what you do for others and the world remains and is immortal."

National Character

"And in a way, I have my own thoughts about that because I’m basically a cheerful person, and in my own way I’m also an optimistic person. I’m not really a doomy-gloomy guy. And I would leave you with this thought: that the American people have historically been a generous, brave, forward looking, resourceful group, and we’ve shown great courage in the face of adversity before. I think we’ve become kind of a somewhat sloppy and complacent people in the last 25 years or so, but it doesn’t mean we can’t recover a lot of those virtues that are really part of the fiber of our national character. It’s still there and can still be recovered, and I think we’re going to be able to do that. It’s not going to be true for every place and everyone, but I think that’s going to help us a lot. So I have a lot of faith just in our national character, and the better angels of our nature, as Abraham Lincoln said.“
James Kunstler, "The Long Emergency"

It Only Takes Two To Contango

"People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. “The money has to go somewhere…It just moves from stocks to bonds to money funds... For every buyer, there is a seller, so the money just changes hands.” That is true of the money, but it’s not true of the values...For prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.  Anyone who watches the stock or commodity markets closely has seen this phenomenon on a small scale many times. Whenever a market “gaps” up or down on an opening, it simply registers a new value on the first trade, which can be conducted by as few as two people. It did not take everyone’s action to make it happen, just most people’s inaction on the other side.  A similar dynamic holds in the creation and destruction of credit. Let’s suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, “a million dollars,” and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one. When the lender calls in the debt and the borrower pays it, he gets back his million dollars. If the borrower can’t pay it, the value of the note goes to zero. Either way, the extra value disappears."
Vadim Pokhlebkin, Elliott Wave International


Entire article: http://www.elliottwave.com/freeupdates/archives/2010/08/16/Deflation-How-Does-It-Affect-Asset-Values.aspx

The New Great Game

"The 'great game' of the 19th and early 20th centuries involved Britain's attempt to keep other great powers from establishing a foothold in Central Asia that could threaten Britain's interest in India. The new 'great game' involves players such as Iran, Turkey, Russia, and the United States vying for influence over the Caspian region and its oil supplies. For the United States and European countries, Caspian oil presents an opportunity to tap a source of oil outside the often turbulent Middle East. The three main oil producing Caspian countries (Azerbaijan, Kazakhstan, and Turkmenistan) are landlocked and rely on neighboring countries for access to western markets through pipelines. This adds another aspect to the competition for economic and political dominance of the area. The actors are not only concerned with oil and gas production but also with the pipelines that deliver those resources to market."
Ghassan Abdallah

Remember the map:
http://randomroving.blogspot.com/2010/04/important-map.html

Congrats On The Kahunas

Congrats to those who had the kahunas to pick up the gold ETF ("GLD") at $113.  A nice $7 (6%) gain in three weeks.
http://randomroving.blogspot.com/2010/07/gold-kahunas.html

Gold ETF - Symbol GLD

Golden Bandits and Scammers

Two recent gold stories caught my eye this week. The bandits and scammers are "in the know" about the future of gold. Does rising theft and forgery indicate that the gold market is short on supply? I love the comment about traders getting greedy. That's never happened before!

"UAE gold investors are reported to have lost millions of dirhams after several tons of gold they imported from Africa was fake. Mohamad Shakarchi, managing director of Emirates Gold, told Emirates 24/7 the firm has stopped examining gold imports from Africa because of the high level of forgeries. 'We don’t have time to waste because most of these so called gold imports are fake. The traders got greedy. They thought they were getting gold at a discounted rate,' he told the website."
Source: ArabianBusiness.com

"Two thieves didn't have to scour a deserted island or the depths of the sea to to nab a gold bar. According to police, they stole the bar - which was recovered from a shipwreck of a Spanish galleon off the Florida Keys - from the case at a museum. The two bandits stole an 11-inch, 74.85-ounce gold bar worth an estimated $550,000 Wednesday from the Mel Fisher Maritime Museum in Key West, Fla., where it had been displayed for more than 20 years. Museum executive director Melissa Kendrick described the heist as 'a very quiet smash and grab,' according to Reuters."
Source: CBS News

You Are Here

Maybe it's the "geologist in me", but when I'm touring somewhere I always love the map with the "you are here" arrow. It quickly gives you a reference point and spatial context. Now sometimes on a long hike, I hate those maps because they quickly inform you that your current location is far from your ultimate destination!

I've presented the chart below several times. I was reviewing it again this morning and find the quotes from President Hoover so interesting. Was he in denial, dishonest, or a good leader attempting to keep the sheeple from stampeding. I don't know. I would guess that he was "in the know" and was attempting to stop the stampede. Unfortunately herding mammals move "in mass" and one individual usually can't stop the stampede.

I've annotated the chart with my own "you are here" arrow. I've referred to what I call the "head fake" before. On October 8, 2009 I made a detailed post on the topic and that prediction was dead on. The last market rally was exactly that. It lures us back it. The "Kool-Aid" was poured for one last drink. I believe that the final sprint has occurred.

Unfortunately for our 401-k's, but fortunately for mankind's future, I believe that we are in a downward slide until at least 2012. A likely bottom might even be in 2016. But, at the bottom, we experience our "great awakening". Stayed tuned mon amis.

The Power of Self-Motivation

"The great leaders of business, industry, and finance, and the great artists, poets, musicians and writers all became great because they developed the power of self-motivation."
Napoleon Hill

Bear Market Rally

"This bear market rally was indeed a huge affair. But still not out of the realms of former bear market rallies, which are mostly forgotten today. A prime example is the rally following the 1929 crash.  Stock prices rose more than 50 percent, and contemporary economists declared the crisis over. But the crash was only the prelude to the devastating bear market that got going after the bear market rally of early 1930."

 Claus Vogt, Weiss Research

Running On Fumes

"Here are some truths which I believe to be self-evident: that the USA has been running on fumes since the beginning of the 21st century. That you can't get something for nothing, and attempts to do so always end in tears. That massive expenditures of energy produce equivalent globs of entropy - which you can translate to "bad ju-ju" or the tendency of whatever can go wrong to go wrong. That because we're unwilling to re-scale and reform the things we do, nature is about to do it for us. That America has transformed itself from a nation of earnest, muscular, upright citizens to a land of overfed barbarous morons ruled by grifters. That what has been economics is about to turn dangerously political.  The greatest loss of the last decade was not in 401-Ks or manufacturing jobs or foreclosed houses, but the rule of law. Without genuine rule of law, anything goes and nothing matters. As a consequence of that, finally, everything goes. The rule of law is what kept foreigners buying our debt all these years (the fumes we've been running on). They kept buying because they believed, when all was said and done, that Americans would enforce contracts and regulate behavior in the direction of fair dealing - not for its own sake but because it made things work better. But when the rule of law goes here, the rest of the world will notice its absence. They'll stop believing in our money and our future. They'll cash out and we'll wash out. Then, as human tribes are wont, they may just turn around and kick our ass because we're down."
James Kunstler, Author, "The Long Emergency"

Entire Article:
http://kunstler.com/blog/2010/08/the-queasy-season.html

Kuntsler's What Is It

"A number of things are going on in our society that can be described with precision. We've generated too many future claims on wealth that does not exist and has poor prospects of ever being generated. That's what unpayable debt is. We have such a mighty mountain of it that the Federal Reserve can "create" new digital dollars until the cows come home (and learn how to play chamber music), but they will never create enough new money to outpace the disappearance of existing notional money in the form of welshed-on loans. Hence, money will continue to disappear out of the economic system indefinitely, citizens will grow poorer steadily, companies will go out of business, and governments at all levels will not have money to do what they have been organized to do. This compressive deflationary collapse is not the kind of cyclical "downturn" that we are familiar with during the two-hundred-year-long adventure with industrial expansion - that is, the kind of cyclical downturn caused by the usual exhalations of markets attempting to adjust the flows of supply and demand. This is a structural implosion of markets that have been functionally destroyed by pervasive fraud and swindling in the absence of real productive activity."
James Kunster, "What Is it"

Huxley On Technology

"Technological progress has merely provided us with more efficient means for going backwards."
Aldous Huxley

Sir John Templeton On Success

I loved his book "Laws Of Life" so much that I sent it to my 2009 high school graduates for their gift.  I hope they read it some day.
http://www.amazon.com/Worldwide-Laws-Life-Spiritual-Principles/dp/1890151157/ref=sr_1_11?ie=UTF8&s=books&qid=1281642020&sr=8-11

Mass Delusion

"It appears that mass delusion has replaced baseball as the national past-time in America. In the space of the last 15 years the American public have fallen for the three whopper delusions:
1.Buy stocks for the long run
2.Homes are always a great investment
3.Globalization will benefit all Americans"
James Quinn, TheBurningPlatform.com

Weiss Research and The Double Dip

Weiss Research presents six reasons that they believe that a double-dip recession is hitting the U.S.:
-First, the economic rebound since March 2009 was bought with unprecedented fiscal and monetary stimulus. There has not been a real, market-generated recovery.
-Second, despite the huge sums of taxpayer money and serial bailouts, the rebound is the weakest on record.
-Third, at least 80 percent of this huge stimulus program has been used up. There isn't much left to keep the economic engines running.
-Fourth, aside from government debt, the wheels of credit creation are still sputtering. And that's a problem, since former recoveries have always been driven by credit growth.  Last week's employment report spells bad news for retailers.
-Fifth, the labor market is still in dire straits — and so is consumer spending. Friday's disappointing payroll report is a very strong hint that the labor market is again deteriorating. Following the ECRI data, this is not surprising. Historically, there has been a strong correlation between the ECRI weekly index and payroll numbers. Furthermore, I expect much weaker employment reports in the weeks and months to come.
-Sixth, the housing mess has not been cleaned up yet. I expect another huge wave of mortgage debt defaults, leading to another round of falling home prices and problems for the banking sector.

http://www.weissgroupinc.com/research/index.html

Dow Gold Ratio Update

I've presented numerous posts with details on the Dow/Gold Ratio.  The trend of this ratio is very clear.  Don't fight the cycle.

Historical Dow Jones / Gold Ratio (Source: intelligentbear.com

Dow Jones / Gold Ratio (Source: intelligentbear.com

The Fear Of Not Being Part Of The Herd

“Of course, we doubt if many public prescriptions are really intended to solve problems. People certainly believe they are when they propose them. But, like so much of what goes on in a public spectacle, its favorite slogans, too, are delusional – more in the nature of placebos than propositions. People repeat them like Hail Marys because it makes them feel better. Most of our beliefs about the economy – and everything else – are of this nature. They are forms of self medication, superstitious lip service we pay to the powers of the dark, like touching wood….or throwing salt over your shoulder. “Stocks for the long run,” “Globalization is good.” We repeat slogans to ourselves, because everyone else does. It is not so much bad luck we want to avoid as being on our own. Why it is that losing your life savings should be less painful if you have lost it in the company of one million other losers, we don’t know. But mankind is first of all a herd animal and fears nothing more than not being part of the herd.”

Bill Bonner and Lila Rajiva, "Mobs, Messiahs, and Markets"

Same Topic, Different Mood

Dr. Laura Schlessinger announced on Larry King last night that she's ending her radio show.  This was preceded by a recent conversation on her show with a caller where she repeatedly used the term "nigger".  She appeared to be making the point that no one should use the demeaning term....black or white. 

This reminded me of the battle between Oprah and Ludacris in 2006 on the same topic.  For years, Bill Cosby has made strong statements about black men using the term to reference themselves.  Oprah and Cosby didn't receive backlash except from the hip-hop community.  Dr. Laura appears to be in the bullseye from many fronts.

Could this be "the same thing, but amongst a different mood"?

Humor And The Heartland Theory

Humor with regards to the Heartland Theory.

JCM Is Back

Mellencamp goes back to some core acoustic!
"After a year of waiting since first announcing the project, John's 26th release, No Better Than This, is in stores TODAY Tuesday, August 17th! Click HERE to learn all about the album."
 
http://www.mellencamp.com/

Apartheid On The Border

"How blind we are to arbitrary Nation-State; in S. Africa they removed apartheid; in the U.S. you see a version at the border Tijuana-San Diego."
Nassim Taleb, Author & Trader ("Fooled By Randomness", "The Black Swan")

The Feel Of The Market

The feel of the market!

Quinn On Housing

"The truth is that millions of irrationally exuberant people bought houses they couldn’t afford, using “creative” mortgage products, and then borrowed against the inflated value of these houses so they could live the good life. They rolled craps and now need to accept the consequences. These worthless government programs have cost taxpayers $100 billion and just postponed the ultimate bottom for housing."
James Quinn, The Burning Platform

The Great Maestro On Tax Cuts

There's nothing more humorous than to hear The Great Maestro continue to tell us what the problems are...... that he orchestrated over 18 years.

"'I'm in favor of tax cuts, but not with borrowed money,' Mr. Greenspan, 84, said Friday in a telephone interview. 'Our choices right now are not between good and better; they're between bad and worse. The problem we now face is the most extraordinary financial crisis that I have ever seen or read about.'"
Alan Greenspan

Source: NY Times

The Keynesian Endpoint

The new hot topic appears to be the extension of the Bush tax cuts.  "Puppet Palin" is pitching it hard.

"Since Keynesian economics is no longer relevant, some are now arguing that tax cuts will save the day. Two of the academic studies we reviewed suggest that tax relief is a much stronger stimulus to the economy than government spending, and under normal circumstances this is probably true. But we are not in a normal economic environment. Even if the tax cuts implemented by George Bush in 2006 are extended by the next Congress, the US will still face the ‘Keynesian Endpoint’. A Government Accountability Office (GAO) report published in January 2010 states the following: “In our Alternative simulation, which assumes expiring tax provisions are extended through 2020 and revenue is held constant at the 40-year historical average; roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020.”12 Extending tax cuts won’t solve anything."
Eric Sprott & David Franklin, Sprott Asset Management

The entire article:
http://www.sprott.com/Docs/MarketsataGlance/07_10%20Fooled%20by%20Stimulus.pdf

Upping The Shorts

That's "up" in the shorts, not "taking it" in the shorts.  At least not for now. This morning I added to the "short" position and acquired some more QID and SKF.  It should be a wild week in the markets.

Darwin On Change

"It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change."
Charles Darwin

It Sure Does Rhyme

“History Does Not Repeat Itself, But. It Sure Does Rhyme” Mark Twain

If you believe the correlation above, then October could be the beginning of the "next leg down".

Unsustainable Consumption Habits And Hot Potatoes

This is sourced from a comment on a post from "The Burning Platform" website. I believe that this guy nailed it:

"The government has issued trillions of dollars in new debt in the attempt to sustain the previous misallocation of capital – trying to prevent bad loans from failing; to keep elevated home prices from adjusting to normal levels relative to income; to maintain unsustainable consumption habits; and to subsidize purchases of autos, homes and other big-ticket items that have weak intrinsic demand because people already have too much debt. Huge chunks of national savings that should have been available for productive economic activity have been diverted in an effort to maintain an inefficient status quo. We now have corporations sitting on a mountain of what seems to be “cash.” But in fact, they are not holding cash. They are holding a pile of government debt that was issued during this crisis, which somebody has to hold until the debt is retired. Corporations just happen to be “it” in this game of hot potato. Bernanke and Geithner have done nothing but incur public losses in order to defend private interests. This is not skilled leadership – it is misappropriation. Moreover, we’ve failed to address the underlying problems – the need to ultimately restructure debt obligations so that they are in line with the cash flows available to pay them; But we have had such an EXCESSIVE misallocation of capital the last 2 decades that just lowering some homedebtors principal is NOT the solution. Why? Cuz we have no industrial growth and everything is being outsourced. We as a nation should put aggressive policies in place to deter excessive spending and promote savings......make interest expense a less tax favored line item. And stop the fraudulent propping up of the housng market and excessive tax subsidies to housing. Misallocation to Housing has squandered our country's assets. Spending and massive debt acumulation does not build prosperity."
The Hammer

A Sandy Update

"Four states -- California, Florida, Nevada and Arizona -- accounted for all top 20 metro foreclosure rates."
Source: Sacromento Business Journal, July 29, 2010

"Things built on 'sand' will continue to struggle: California, Dubai, Arizona, Florida, and Las Vegas. Golf courses and cities are not naturally aligned with the habitat of a desert."
Random Roving, January 1, 2010

A Backlashing

A consistent backlash that I hear is "you've been saying the market is going to crash forever!".  Or "You keep telling me to sell all of my stocks and buy gold".  Actually, since May 2000, I've been saying "shift out of stocks and into commodities with a specific focus on gold and oil".  This chart sums of the last ten years.  Remember, the "boiling frog" doesn't feel the slow increasing heat.

S&P500 vs Gold

The historical chart of the Dow Jones Gold Ratio defines the inflection points very well.

Hook Ya And Cook Ya

"Some of the strongest days in a bear-market bounce occur near the end of the move. It's the 'hook' that keeps investors 'hoping' that a new bull phase is underway. Now, any of these triple-digit days could be a reason for optimism about the market. Together, they could be a reason for investors to jump in or stay in. On the other hand, several rally sessions near the end of a bear market rally can potentially 'hook ya' and then 'cook ya.'"
Source: Elliott Wave International

More Mortgage Facts

"Believers in the fledgling recovery are ignoring some key facts. There are already 11 million homeowners underwater on their mortgages. As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process. This “shadow inventory” was up 30% from a year earlier.  At the current rate of sales, it would take banks nine years to clear this inventory. They are likely to increase the rate of sales as inventory continues to pile up. This will compel prices to go lower. Prices would fall even if a tsunami of Option ARM and Alt-A resets weren’t hurtling down the track – but they are. Beginning in June, a surge in resets will begin and not subside until late 2012. These liar loans were riddled with fraud, and the vast majority of these mortgagees will default after the reset. A surge in foreclosures is just over the horizon. Reversion to the mean cannot be circumvented. It can be delayed, but it will not be denied. "
James Quinn, The Burning Platform

"Casey Research presents the chart below. It confirms that we are in a "default lull" of the adjustable rate mortgages (ARM's). April 2010 will kick off the next round of chaos. June 2011 could be the peak. Buckle your chinstraps!"
Random Roving, February 14, 2010

Shiller On The Housing Situation

“Recent polls show that economic forecasters are largely bullish about the housing market for the next year or two. But one wonders about the basis for such a positive forecast. Momentum may be on the forecasts’ side. But until there is evidence that the fundamental thinking about housing has shifted in an optimistic direction, we cannot trust that momentum to continue.”
Dr. Robert Shiller, Yale University (Case-Shiller Index)

Source: theburningplatform.com

Entire article:
http://theburningplatform.com/blog/2010/08/01/john-paulson-will-be-wrong-this-time-featured-article/#more-4507

Sharks & Political Blood

"Congressman Charles Rangel is still negotiating Friday to prevent an embarrassing public trial on ethics charges, but Republicans are wasting no time making it difficult for him. The sharks are in the water, and they smell blood. That's why a group of Harlem civic leaders are demanding a criminal probe of the ethically wounded congressman, CBS station WCBS-TV reports."
Source: CBS

"Politicians ratings will continue to fall aligning with a continued decline in mass social mood. Incumbents beware."
Random Roving - January 1, 2010

Schiff Gets Spanked

Peter Schiff's first attempt at politics came up way short.  Ms. McMahon's $30 million budget was too much to compete with it appears.  Fortunately, he can now get back to educating the masses on the state of the markets.

"Linda McMahon, former chief executive officer of World Wrestling Entertainment Inc., won the Republican U.S. Senate nomination in Connecticut. She will now face Democrat Richard Blumenthal in November's election.  Ms. McMahon, 61, defeated Peter Schiff, president of Westport, Connecticut-based Euro Pacific Capital Inc., and former U.S. Representative Rob Simmons, in yesterday's primary.  With about 90% of the vote counted, Ms. McMahon had 49% of the vote. Mr. Schiff, who garnered national attention for predicting the 2008 market meltdown and subsequent recession, received 23% of the vote. Mr. Simmons received 28%, according to the Associated Press.  Although Mr. Schiff came in last, he did better than expected. A poll earlier in the week showed the asset manager receiving barely 15% of the vote."
Source: Investment News

Schiff & Weiss

Some excerpts from a great interview of Peter Schiff with Martin Weiss:
"Let me first tell you what I think should have happened: A healthy cleansing of the economic system — an opportunity for the country to greatly reduce its huge debt burden. No matter how painful that might have been in the short term, it would have been the right thing for our country. But the politicians didn't want that to happen. Instead, they did whatever they could to postpone the pain; and in the process, they have now done far more damage to our country than we would have seen otherwise. They are continually acting in their own self-interests, but against the national interest."

"The government's Herculean efforts to counter the collapse of 2008 merely postponed the inevitable and compounded the problem. Result: The next crisis is likely to be WORSE than the last crisis would have been had they simply allowed it to happen."

"We're going to see a huge contraction in GDP regardless of what we do. Our economy is more than 70 percent consumption, and we're consuming too much. That's part of the problem. We have to consume less so we can start saving more. We have to transition from (a) a bubble economy based on excessive consumer credit and spending to (b) a stable, vibrant economy based on under-consumption, savings, capital investment, and production. That transition is going to necessitate a large, one-time downward adjustment in our GDP. Then we can right the ship. Then we can get out of this hole and start building the economy back up again. But the government refuses to allow this to happen, and therein lies our biggest problem."

"In real terms, especially in terms of gold, GDP is still going to plunge. Certainly in terms of our standard of living and quality of life, Americans are going to see a huge decline. No doubt about it! It's the inevitable result of years of reckless indulgences that cannot be undone. What's worse is that, instead of transitioning to a more wholesome economy based on savings and investment, we seem to be transitioning from a market-based economy to a centrally-planned economy, and that's a prescription for disaster."

"I am not sure about the precise magnitude, but the initial contraction would have been much greater had the government not intervened. Still, all the government really accomplished was to delay the pain. And I repeat: Precisely because of what the government has done, the ultimate decline in the economy is going to be MUCH worse than it would have been without the government's 'help.'"

"There are no more new rabbits. Just more of the same old bunnies that they keep multiplying — like printing more money. In fact, one of the last remaining hawks on the Federal Open Market Committee just came out yesterday and said the Fed needs to buy more Treasuries and more mortgages — more "quantitative easing." That's just a fancy way of saying they want more inflation ... which, of course, we need like a hole in the head."

"The value of the dollar is going to implode. That is the next big bubble to burst — the U.S. dollar and U.S. government bonds. In other words, the next crisis will be a currency crisis and a sovereign debt crisis! It's coming to the United States, and there's no escaping it."

"Instead, we need savings. We need under-consumption. We need capital investment and production. But every time consumers put their credit cards away and stop shopping, the politicians want to stimulate them more. It's as if every time a drunk stops drinking and starts to sober up, the politicians try to shove more alcohol down his throat. So I'm not confident there's going to be much opposition to government stimulus from a bunch of people in Congress who don't understand the first thing about economics, who have swallowed the Keynesian nonsense hook, line and sinker."

"I think the government's going to continue to throw gasoline on the fire they lit. That's all they know. They want to keep us spending. They want to keep asset prices from falling. They want to keep insolvent institutions afloat. And the only way to do that is to keep printing money because the politicians who are there don't want to face the music. They don't want to admit how severe the problems are — that they themselves are at the root of those problems, and that the solutions require less government. Instead, they want to play Santa Claus. And they want to vilify the market, vilify capitalism, and vilify the greed on Wall Street. But that isn't the cause of our problems — it's the greed in Washington, the greed for power. It's their subsidies and regulations that removed the fear and allowed private sector greed to run unchecked. And now they refuse to acknowledge the damage they've done to this economy."

Forget about "double dip." I do not believe the recession ever ended. In fact, I think we are in the early stages of a depression. True, GDP grew in the last few quarters, but none of that growth was real. It simply resulted from spending more borrowed money, which we now have to repay. If you net the debt out of the growth, we didn't really grow at all. We simply dug ourselves into a deeper hole. The most disturbing aspect of Friday's GDP numbers was the ballooning trade deficit. In fact, the trade deficit subtracted more from GDP in the second quarter than in any equivalent period since the early 1980s. And this is a time when our trade deficit should be shrinking! This is a time when we need to be exporting more and importing less. Instead, we're continuing to charge even more consumption on our national "credit card," and the entire country is going deeper into debt. The imbalances are getting wider, not narrower; we're in deeper trouble than we were before."

"Moreover, any extra economic activity was an illusion — the spending of borrowed money. And because we spent so much money to inflate our GDP, the economy must contract by that much more in the future as we repay those debts with interest."

"You can't put out a fire with gasoline, and if you decide to pour on even more, it's only going to give you a bigger fire. We are never going to have a sustainable recovery until we allow market forces to restructure our economy. And we can't do that until the government stops stimulating. We can't save money if we keep spending; we can't be productive if the government continues undermining our productivity. We need resources to invest in our future, but the government is taking them all. Plus, the government is encumbering the economy with more burdensome rules and regulations that prevent its restructuring and that make it less efficient. So it doesn't matter how much money they print — it's just pieces of paper. Yes, we can spend it for a while, but only as long as China, Japan, Germany and others keep taking it. Look. Last year, nobody was worried about Greece. They were just as indebted as they were this year, but nobody seemed to care. Then, suddenly the Greek crisis popped out of nowhere. Similarly, right now, it seems as though no one cares how much debt America has. But one day soon, they are going to care, and when they do, we're going to know it — big time!"

"Back then, people didn't care that dot.coms had no earnings ... until one day they woke up. They didn't care that subprime borrowers couldn't repay their mortgages ... until one day it hit them. Bubbles go on for a while, and then, all of a sudden, they burst. People behave irrationally for while, but sooner or later reality always rears its head. And in this case, I think it will be a lot sooner than just about anyone thinks."

"It could be the mother of all bubbles — especially if you consider the Treasury bubble and the dollar bubble as one in the same. I do. Because, from my perspective, the only thing worse than owning a dollar is owning the promise to be paid a dollar 30 years in the future!"

"They're going to continue stimulating, and sooner or later the bottom's going to drop out of the U.S. dollar. We could even begin to see a currency crisis before this year is out. Already, the dollar has now lost value for seven consecutive weeks. We don't know if its current downward momentum will accelerate or not. But right now, the dollar index is in the low 80s. If it cracks below 70, you can expect a free-fall. And when that happens, we'll start to see big increases in prices for things like food and energy, which will hurt a lot of Americans — both employed and unemployed alike. Worse, if the government prints more money — supposedly to help people better afford the higher prices — they will merely drive prices even higher. Or they might even impose price controls, which would create shortages and a different kind of disaster."

"They have built an economy that rests on the shaky foundation of low interest rates. They want interest rates to stay low indefinitely to prop up the housing market, to prop up the banks, and to prop up the federal government. But what if interest rates were to rise? Then, real estate prices would plunge further, financial institutions that got bailed out would fail again, and the Federal government would have to default on its debt — overtly or through deliberately created inflation. So the Fed MUST keep interest rates low or the foundation caves in, and entire house-of-cards economy falls apart."

"We have a shortage of savings in this country. Many of your readers want conservative investments with a decent yield. But there are none to be found. You can't put your money in a bank and receive a decent return — let alone after inflation and taxes are taken into consideration. You can't get better yields without exposing yourself to real dangers. How is anyone going to save money in this situation? So we need an interest rate that will balance this out. We need to encourage savings and discourage borrowing. Instead, borrowing is being massively stimulated, particularly for consumption and speculation."

"Moreover, I'm the last person to want bad times. If you could give me a time machine, I'd gladly go back to earlier decades and do everything in my power to make today's era a better time for us all. But now it's too late. Now your choices are: Do you want the government to just numb the pain again? Or do you want it to fix the problem this time?"

An Update On The Headfake

On February 28, 2009, I made a post about the "head fake".  The timing of the call for the rally was quite good....three days prior.  The "head fake" could be approaching the end.  In Elliott Wave terms, the "C wave" is upon us.  From now to November should be a rocky road.  The election "hocus pocus" could present some facades and confusion.  Stay focused on the data.

Dow Jones Industrial Average (2006-2010)

Tech vs Big Bad Governments

I find these two "tech battles" interesting in the context of "mass social mood".

"The makers of the BlackBerry were looking into the possibility of using servers in Saudi Arabia on Friday to avert a threatened ban on its Messenger services by Saudi government, which wants access to its encrypted network, a source said on Friday."
Source: Reuters

"Google Inc. reported Thursday that its Web search, mobile and advertising services in China had been blocked.  It was unclear if the services had been temporarily disrupted or if they were being blocked by the Chinese government."
Source: LA Times

Being Vs Having

At mass this weekend, our deacon made reference to a writing of Pope John Paul II where he emphasized "being" vs "having". These approaches or mindsets might align well with the concept of cycles. The expansion cycle is a time where the masses focus on "having", while the contraction commences with a shift towards "being". I'm constantly assaulted for being a pessimist and "gloom n' doomer" for my economic outlook, but I continue to emphasize that the contraction cycle will bring many great things. A shift to "being" from "having" will be good for all. A mindset of "supersize me" evolving towards "we" and "us" will be a good thing. Less of "having" and more of "being" will be a welcomed shift. Keep your eyes open and ears to the ground. A transition is rapidly occurring.

A nice article on the subject:
http://www.acton.org/publications/randl/rl_article_321.php

Congratulations Mr. Slater

I congratulate Stephen Slater, the JetBlue flight attendant, who made an abrupt and unique departure from his plane this week.  I congratulate him not for his specific actions, but more for not taking the angry approach that some seem to be taking lately on their co-workers in the workplace.  Instead of taking a gun to work, he chose a spontaneous exit with a beer in hand.  The angry mob is made up of angry individuals.  It's up to each individual to "deal" with their specific situation in an appropriate manner.  Mr. Slater will be job hunting and might spend some time in the "slammer", but at least there won't be any funerals this week.  And, he brought a chuckle to many.  As Johnny Paycheck famously said "take this job and shove it".

http://www.cbsnews.com/stories/2010/08/11/earlyshow/main6763004.shtml

The Boys Are Back

Now's here's some good news!!

"Ready to rock? Van Halen is planning a comeback.  The band is back in the studio with original singer David Lee Roth, with an album slated for next year."
Source: USA Today

Peter Schiff On Gold

"In short, the dollar is closer than ever to collapse and there is no other national currency ready to take its place. I believe the world may soon discover that there is no better alternative than history's proven money - gold.  Some of you might be familiar with these arguments, and say they are old hat. The same Wall Street analysts who missed the dot-com bubble and the real estate bubble are now warning that gold has already had its run up and is way overvalued. However, they were making this same argument back in 2006, with gold at $600/oz.  Meanwhile, in April of that year, I wrote a commentary with a few personal observations: none of my mining stocks had split, precious metals investors were not rubbing shoulders with real estate moguls or dot-com millionaires, and I was still running my gold investment division with only one employee. On TV, Flip That House wasn't followed by Deal That Gold. My taxi driver wasn't offering me hot bullion tips. In fact, nine out of ten people you stopped on the street couldn't even tell you the current price of gold within $200! And that's still the case today.  I continue to recommend that investors hold five to ten percent of their wealth in physical precious metals. Aside from the likelihood that gold and silver will rise in price, precious metals offer timeless benefits, such as financial privacy, elimination of counter-party risk (if you store them yourself), as well as protection from government confiscation, onerous securities regulation, and punitive tax rates."
Peter Schiff, EuroPacific Capital

The Controversial Mosque

This one keeps heating up in perfect alignment with the xenophobic behavior that accompanies the downward trend in mass social mood. We were once a country that believed in freedom of speech and religion. We're rapidly becoming "the pot that called the kettle black". If 15 crazy cajuns flew a plane into two buildings in New York, would we ban Cajun restaurants from within two blocks of the crash site?

"The controversy involves a proposed Islamic center slated to be built where a vacant clothing store now sits, just two blocks from the World Trade Center site. The Cordoba Initiative, a group that says it aims to promote positive interaction between the Muslim world and the West, plans to build a 13-story community center, including a mosque, on Park Place in Lower Manhattan."
Source: PBS

"As the controversy brewing around the construction of a new mosque in New York, within the shadow of Ground Zero (the site of the 9/11 terrorist attacks) reaches a fever pitch, several important principles are quickly being set aside. It can be tempting to sympathize with those that see in this a symbol of Islamic victory, analogous to the raising of the American flag on Mount Suribachi following the Battle for Iwo Jima. However, even if the imam leading the construction initiative were to pronounce it confirmation of conquered territory (a hypothetically offensive declaration to be sure), such alarming words would still offer no legitimate reason to restrict the construction of the mosque in question. The very nature of religious freedom means that some can perform practices that suit them well, though it offend others in the process. In addition, the speech of the imam, though objectionable to a certain cross section of society, is as protected under the 1st Amendment as is his right to gather with those of like faith in the new building. Though some may bristle at the notion of accommodating this Muslim house of worship, it remains imperative to remember that religious freedom must not be selectively applied. Those protections afforded one religion must be afforded to all. For this reason, whatever restrictions those who object may want to impose upon the Muslim faith in this instance can be easily imposed upon their own religion as well. Whether or not a Christian or Jew may object on principle may be a heart felt and important issue to them, but should remain legally irrelevant. The same city council that tells the imam, "No. You may not build your gathering place here," also is wrongly empowered to tell the pastor or rabbi the same thing."
Source: The Examiner

"The mob will get even more angry. Xenophobia will continue to increase. Muslims and Mexicans will continue to be the easy targets. Which group or culture is next?"
Random Roving - January 1, 2010

Matthew Simmons Dies At 67

I was shocked to hear that "energy guru" Matthew Simmons died today. I had just listened to a lengthy interview of his on Friday and read several articles about him this weekend. He was very vocal on the "peak oil" topic and always provided very "data driven" presentations. I read many of his presentations over the years. He will be missed.

NY Times biography:
http://dealbook.blogs.nytimes.com/2010/08/09/matthew-simmons-noted-energy-banker-dies-at-67/

RR links:
http://randomroving.blogspot.com/2003/04/future-of-oil-patch.html

http://randomroving.blogspot.com/2004/07/coming-energy-crunch-and-hubberts-peak.html

Peak Oil Curve - Hubberts Peak

The Attack On Yellow

It will be interesting to see if the downward "draft" of mass social mood takes down cycling champion, Lance Armstrong.  Tiger might say that "the draft" makes everyone vulnerable.

"The seven-time Tour de France champion's imprint on Austin is unmistakable: from the city's Lance Armstrong Bikeway and a chain of gyms that bear his moniker to his work as a cancer survivor through his foundation and activism at the Capitol.  Now Austin's top sports celebrity will wage another battle as a federal investigation has intensified in recent months to pull in key figures from cycling and beyond to investigate allegations of doping.  The risks for the iconic figure, who's become one of the most highly paid athletes in the country, couldn't be bigger."
Source: American Statesman

The Great Abundance

I haven't shared a Peggy Noonan article in quite a while due to WSJ's decision to make it available only to subscribers.  It appears that "the ban" has been lifted.  An interesting recent article that I spotted on Twitter.

"Parents now fear something has stopped. They think they lived through the great abundance, a time of historic growth in wealth and material enjoyment. They got it, and they enjoyed it, and their kids did, too: a lot of toys in that age, a lot of Xboxes and iPhones. (Who is the most self-punishing person in America right now? The person who didn't do well during the abundance.) But they look around, follow the political stories and debates, and deep down they think their children will live in a more limited country, that jobs won't be made at a great enough pace, that taxes—too many people in the cart, not enough pulling it—will dishearten them, that the effects of 30 years of a low, sad culture will leave the whole country messed up. And then there is the world: nuts with nukes, etc. Optimists think that if we manage to turn a few things around, their kids may have it . . . almost as good. The country they inherit may be . . . almost as good. And it's kind of a shock to think like this; pessimism isn't in our DNA. But it isn't pessimism, really, it's a kind of tough knowingness, combined, in most cases, with a daily, personal commitment to keep plugging.  They don't seem to know or have a sense of the mood of the country."
Entire Article http://online.wsj.com/article/SB10001424052748703748904575411713335505250.html

Emmitt's Wisdom

"Never let others define yourself.  You define yourself."
Emmitt Smith (this weekend at the Hall of Fame induction ceremony)

A good watch:
http://sports.espn.go.com/dallas/nfl/columns/story?columnist=watkins_calvin&id=5446289

Rats Fleeing The Ship

Another rat has fled the ship.
"Christina Romer, chair of the White House Council of Economic Advisers, has resigned her post to return to her old job as an economics professor at the University of California at Berkeley, the White House said Thursday."
Source: Washington Post

"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."
Random Roving, June 30, 2010

Tools For Sharing

Checkout the new buttons below for sharing posts.  Spread the word!

The King Saves For The Grandchildren

Will this be the trigger for the next major "leg up" in oil prices?
"The monarch told Saudi scholars studying in Washington that he had ordered all oil exploration to cease 'in order to keep the earth’s wealth for our sons and grandsons.'"
Source: State-owned Saudi News Agency

The Ten Year Slope

"One of the most interesting things about the coming decline will be its initial slide down the slope of hope. The past ten years have seen an unprecedented sustaining of optimism in the face of deteriorating financial market and monetary conditions and a deteriorating economy. Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished."
Robert Prechter, Elliott Wave International

The Quasi Maestro

The Great Maestro speaks again.  He might have coined another new economic term, "quasi recession".

"The dollar traded near its weakest since November against the yen on signs the U.S. recovery is losing momentum and after Former Federal Reserve Chairman Alan Greenspan said the slowdown feels like a 'quasi recession.' The U.S. economy might contract again if home prices decline, Greenspan said in an interview on NBC’s 'Meet the Press' yesterday. 'We’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi- recession,' he said."

Source: Bloomberg