"Here in 2010, a few late bloomers are making new all-time highs. I never thought the long term inflationary topping process would take this long, but it has. At each of these peaks, investors have focused on one area or another. Every time it’s happened, the area of focus has reversed trend, plummeting in price by 50% or more. This latest credit reflation is the weakest yet, so it hardly inspires confidence that today’s isolated bull markets will end any differently. Each time a bull market matures, investors are sure it can’t reverse. They said that about technology and internet stocks; they said it about real estate; they said it about oil. Now that a couple of markets are at all-time highs, we hear the same argument about them. This is natural, because investors always want to own markets that are way up. But investors in those previous booms are never going to get back to breakeven. Many of them were ruined."
Robert Prechter, Elliott Wave International
Friday, July 30, 2010
Wednesday, July 28, 2010
Gold & Kahunas
Gold took a major dive yesterday dropping $20/ounce. More importantly, the Gold ETF (GLD) broke through the base of the "handle" at $115/share that was presented in my post of June 29. Chart techies would say that the trend is likely to be down in the short term. For those with large kahunas, it might be a great buying opportunity!
Bernanke's 2012 Surprise
New Jersey Congressman Scott Garrett of the House Financial Services Committee asks Ben Bernanke some great questions. Start preparing for 2012 my friends.!
SCOTT GARRETT: You bought over a trillion dollars of GSE debt, and to that point, under normal circumstances, on the Fed’s balance sheet what you have on there are Treasuries, or if you had anything else on there, I assume you would have a repurchase agreement for those securities on your balance sheet. Now of course around two-thirds of that are in GSE debt.
BEN BERNANKE: Correct.
GARRETT: So right now, those are guaranteed – whether they’re sovereign debt or not, we don’t know – but they’re guaranteed by the U.S. government. But they’re only guaranteed to when? 2012, right? After that, Congress may in its wisdom make another decision, and at that point in time, you may be holding on your balance sheet – two thirds of your balance sheet – something that is not guaranteed by the Federal government. First of all, you don’t have a … do you have a repurchase agreement on those with anyone? No.
BERNANKE: I don’t know what you mean by a repurchase agreement. We own those securities.
GARRETT: You own those securities. Right. So there is no repurchase agreement outside to buy them back. You own them.
BERNANKE: Right.
GARRETT: So after 2012, if they’re no longer guaranteed, is it fair to say that you may at that point in time actually engage in fiscal policy, because you basically are creating money at that time? And I know that you’d agree that it would be an unconstitutional role for the Fed to engage in fiscal policy – so where will you be at 2012 if they had to take a haircut on those because they’re no longer guaranteed?
BERNANKE: Well, first from the government’s perspective, I, uh, such an act would, uh, there would, the Federal Reserve would lose money which the Treasury would gain. There would be no overall change to the position of the U.S. government. Secondly, the Federal Reserve act explicitly gives.
GARRETT: How would we be gaining? How is the Treasury gaining?
BERNANKE: Well, if there’s a bad mortgage and the Treasury.. it requires $10 to make it good, if the Treasury refuses to do that then the Fed loses $10, so one way or another the government’s going to lose $10. But I would just say two things, one is that I think, uh…
GARRETT: But if you didn’t purchase them in the first place, it would just be a total – then what would have occurred? There would not have been the creation of that $10. Now that you’ve purchased them, and in essence if we don’t back them up, then you will have created that additional $10.
BERNANKE: Well, I hope that doesn’t happen, because I think it’s very important for financial stability and confidence that we, that we guarantee…
GARRETT: Let’s play out that hypothetical that it does happen.
BERNANKE: Well, then the Fed would lose money there. But let me just point out that the Federal Reserve Act, that we did not invoke any emergency or unusual powers to buy those agencies. It is explicitly in the Federal Reserve Act that we can buy Treasuries or agency securities and so we did not do anything unusual there.
GARRETT: In what status were they when you bought them? Were they in conservatorship at that point?
BERNANKE: Um, yes.
GARRETT: Is it normal practice for the Fed to buy agency securities when they’re in conservatorship? Was that ever done before?
BERNANKE: It’s never been in conservatorship before.
GARRETT: Well, there you go. So the normal practice is not what was followed here. It just seems to me that we may have gone down a different road than we’ve ever gone down in U.S. history, where the Federal Reserve has engaged in buying a security, it’s not Treasury, it’s not guaranteed by the full faith and credit of the United States for its lifetime, nor is there any repurchase agreement from any other entity that you purchased – that you have a trade with an agreement with – and that the Fed in essence could have created money if the government does not guarantee them. At least, that could be the situation we could find ourselves in 2012.
SCOTT GARRETT: You bought over a trillion dollars of GSE debt, and to that point, under normal circumstances, on the Fed’s balance sheet what you have on there are Treasuries, or if you had anything else on there, I assume you would have a repurchase agreement for those securities on your balance sheet. Now of course around two-thirds of that are in GSE debt.
BEN BERNANKE: Correct.
GARRETT: So right now, those are guaranteed – whether they’re sovereign debt or not, we don’t know – but they’re guaranteed by the U.S. government. But they’re only guaranteed to when? 2012, right? After that, Congress may in its wisdom make another decision, and at that point in time, you may be holding on your balance sheet – two thirds of your balance sheet – something that is not guaranteed by the Federal government. First of all, you don’t have a … do you have a repurchase agreement on those with anyone? No.
BERNANKE: I don’t know what you mean by a repurchase agreement. We own those securities.
GARRETT: You own those securities. Right. So there is no repurchase agreement outside to buy them back. You own them.
BERNANKE: Right.
GARRETT: So after 2012, if they’re no longer guaranteed, is it fair to say that you may at that point in time actually engage in fiscal policy, because you basically are creating money at that time? And I know that you’d agree that it would be an unconstitutional role for the Fed to engage in fiscal policy – so where will you be at 2012 if they had to take a haircut on those because they’re no longer guaranteed?
BERNANKE: Well, first from the government’s perspective, I, uh, such an act would, uh, there would, the Federal Reserve would lose money which the Treasury would gain. There would be no overall change to the position of the U.S. government. Secondly, the Federal Reserve act explicitly gives.
GARRETT: How would we be gaining? How is the Treasury gaining?
BERNANKE: Well, if there’s a bad mortgage and the Treasury.. it requires $10 to make it good, if the Treasury refuses to do that then the Fed loses $10, so one way or another the government’s going to lose $10. But I would just say two things, one is that I think, uh…
GARRETT: But if you didn’t purchase them in the first place, it would just be a total – then what would have occurred? There would not have been the creation of that $10. Now that you’ve purchased them, and in essence if we don’t back them up, then you will have created that additional $10.
BERNANKE: Well, I hope that doesn’t happen, because I think it’s very important for financial stability and confidence that we, that we guarantee…
GARRETT: Let’s play out that hypothetical that it does happen.
BERNANKE: Well, then the Fed would lose money there. But let me just point out that the Federal Reserve Act, that we did not invoke any emergency or unusual powers to buy those agencies. It is explicitly in the Federal Reserve Act that we can buy Treasuries or agency securities and so we did not do anything unusual there.
GARRETT: In what status were they when you bought them? Were they in conservatorship at that point?
BERNANKE: Um, yes.
GARRETT: Is it normal practice for the Fed to buy agency securities when they’re in conservatorship? Was that ever done before?
BERNANKE: It’s never been in conservatorship before.
GARRETT: Well, there you go. So the normal practice is not what was followed here. It just seems to me that we may have gone down a different road than we’ve ever gone down in U.S. history, where the Federal Reserve has engaged in buying a security, it’s not Treasury, it’s not guaranteed by the full faith and credit of the United States for its lifetime, nor is there any repurchase agreement from any other entity that you purchased – that you have a trade with an agreement with – and that the Fed in essence could have created money if the government does not guarantee them. At least, that could be the situation we could find ourselves in 2012.
Tuesday, July 27, 2010
Deflationary Politics
My bro-in-law turned me onto this one. The day of the "drunken politicians" might be over for a long time. Deflationary politics is in full gear.
"City council members in the small California town of Bell -- where outrage over high salaries forced three officials to resign last week -- voted Monday night to slash their pay. And the mayor, who last week defended the salaries, said he would forgo a salary altogether and would not seek reelection. But the move was not enough to appease angry residents who demanded that the council members step down. 'You all need to go to jail,' a self-described underpaid teacher said at a contentious meeting Monday night. 'Shame on you. All of you.' When Councilwoman Teresa Jacobo said she will slash her salary but hold on to office, the crowd booed loudly and repeatedly. 'If you don't want to resign, we'll recall you,' said one man. The city council voted to reduce its pay to that of what one councilman, Lorenzo Veles, was being paid: $8,076 a year. Most of the other council members made nearly 10 times as much. The Bell salaries have provoked statewide anger at a time when California is grappling with a near $20 billion budget deficit. The median annual income of Bell -- which counted about 36,000 residents in the 2000 census -- is less than $35,000. Like Mayor Oscar Hernandez, another councilman George Mirabal said he will not seek reelection. Said the mayor in a statement: 'We must restore Bell's pride in our city and that requires a full, transparent, and deliberate review of the city's actions.' Last week, the city council accepted the resignations of City Manager Robert Rizzo, Assistant City Manager Angela Spaccia, and Police Chief Randy Adams, who reportedly had a combined salary of more than $1.6 million. Also on Monday, California Attorney General Jerry Brown, who is running for governor, said he subpoenaed hundreds of records from Bell as part of an investigation to determine whether civil or criminal action should be taken against any city leaders."
Source: CNN
The angry mob continues the lynchings.
"City council members in the small California town of Bell -- where outrage over high salaries forced three officials to resign last week -- voted Monday night to slash their pay. And the mayor, who last week defended the salaries, said he would forgo a salary altogether and would not seek reelection. But the move was not enough to appease angry residents who demanded that the council members step down. 'You all need to go to jail,' a self-described underpaid teacher said at a contentious meeting Monday night. 'Shame on you. All of you.' When Councilwoman Teresa Jacobo said she will slash her salary but hold on to office, the crowd booed loudly and repeatedly. 'If you don't want to resign, we'll recall you,' said one man. The city council voted to reduce its pay to that of what one councilman, Lorenzo Veles, was being paid: $8,076 a year. Most of the other council members made nearly 10 times as much. The Bell salaries have provoked statewide anger at a time when California is grappling with a near $20 billion budget deficit. The median annual income of Bell -- which counted about 36,000 residents in the 2000 census -- is less than $35,000. Like Mayor Oscar Hernandez, another councilman George Mirabal said he will not seek reelection. Said the mayor in a statement: 'We must restore Bell's pride in our city and that requires a full, transparent, and deliberate review of the city's actions.' Last week, the city council accepted the resignations of City Manager Robert Rizzo, Assistant City Manager Angela Spaccia, and Police Chief Randy Adams, who reportedly had a combined salary of more than $1.6 million. Also on Monday, California Attorney General Jerry Brown, who is running for governor, said he subpoenaed hundreds of records from Bell as part of an investigation to determine whether civil or criminal action should be taken against any city leaders."
Source: CNN
The angry mob continues the lynchings.
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| Mass Social Mood Model |
Monday, July 26, 2010
Burglars Catching The Trend
It appears that the "bad guys" are catching the trend.
"A New York man, who is facing a federal conspiracy charge for allegedly committing 37 gold-related burglaries in Northern Virginia last year, was sentenced Thursday to a year in jail for an incident in which he broke into a house, was confronted by a resident, fled and took nothing. Dagoberto Soto Ramirez, 27, was arrested along with his wife, Melinda Soto, 34, and a third New Yorker, Francisco Gray, 39, last November, and charged with a string of burglaries in Fairfax and Loudoun counties, all targeting Indian and South Asian residents who kept gold in their houses."
Source: Washington Post
"A New York man, who is facing a federal conspiracy charge for allegedly committing 37 gold-related burglaries in Northern Virginia last year, was sentenced Thursday to a year in jail for an incident in which he broke into a house, was confronted by a resident, fled and took nothing. Dagoberto Soto Ramirez, 27, was arrested along with his wife, Melinda Soto, 34, and a third New Yorker, Francisco Gray, 39, last November, and charged with a string of burglaries in Fairfax and Loudoun counties, all targeting Indian and South Asian residents who kept gold in their houses."
Source: Washington Post
Sunday, July 25, 2010
Calculating Machines
"Clearly, markets are not rational calculating machines as some professors would have us believe, but a herd of emotional participants."
Paul J Lamont, Lamont Trading Advisors, Inc.
Paul J Lamont, Lamont Trading Advisors, Inc.
Friday, July 23, 2010
The Great Falacy
"Investors should know that the market can render the central bank powerless. For instance, since 1999 Japan’s central bank has been purchasing financial assets with printed money to attempt to pump up their economy. But for ten years this quantitative easing policy has failed to lift Japan’s economy off the mat. Instead central banks’ power is derived from theatrics and sophistry."
Paul J Lamont, Lamont Trading Advisors, Inc
Paul J Lamont, Lamont Trading Advisors, Inc
Thursday, July 22, 2010
China's Oil Plan
While we continue to squabble in our country, China is on a "full court press" with their energy strategic plan.
"It’s a pretty safe bet that, as one of the world’s fastest growing economies, China needs a lot of energy. And with an oil appetite that grows by 7.5% each year, seven times faster than the U.S., the country’s reserves don’t even begin to compare to the consumption. But fuelling the blistering pace of its economy is China’s number one priority, and it is on a mission to lock down its energy interests all around the world. The emerging powerhouse has often felt that it was the last one onto the energy playing field with a lot of catching up to do. Today, Chinese national oil companies (NOCs) are setting up shop everywhere from the Middle East all the way to the oil sands of Canada, and they’re open for business. The three NOCs – CNPC/PetroChina, Sinopec and CNOOC Ltd – are slated to produce a record breaking one million barrels daily. That’s Australia’s daily fuel consumption! It isn’t just their oil production that’s going through the roof. Since 2009, China has committed nearly US$25 billion into corporate and asset acquisitions. China isn’t going it alone either, and fully realizes the importance of forging partnerships with other international oil companies to develop oil fields. And with Beijing firmly behind them, they’re only doubling their efforts this year. Chinese NOCs accounted for nearly 20% of all global deal values in the first quarter of 2010. This share will only get bigger as the year carries on and energy security continues to dominate the agenda. Armed with strong finances, an aggressive approach, and implicit government backing, Chinese companies are well placed to spearhead the nation’s mission of diversifying its international energy portfolio. The latest thing to catch their attention: the mysterious oil elephants of East Africa."
Marin Katusa
"It’s a pretty safe bet that, as one of the world’s fastest growing economies, China needs a lot of energy. And with an oil appetite that grows by 7.5% each year, seven times faster than the U.S., the country’s reserves don’t even begin to compare to the consumption. But fuelling the blistering pace of its economy is China’s number one priority, and it is on a mission to lock down its energy interests all around the world. The emerging powerhouse has often felt that it was the last one onto the energy playing field with a lot of catching up to do. Today, Chinese national oil companies (NOCs) are setting up shop everywhere from the Middle East all the way to the oil sands of Canada, and they’re open for business. The three NOCs – CNPC/PetroChina, Sinopec and CNOOC Ltd – are slated to produce a record breaking one million barrels daily. That’s Australia’s daily fuel consumption! It isn’t just their oil production that’s going through the roof. Since 2009, China has committed nearly US$25 billion into corporate and asset acquisitions. China isn’t going it alone either, and fully realizes the importance of forging partnerships with other international oil companies to develop oil fields. And with Beijing firmly behind them, they’re only doubling their efforts this year. Chinese NOCs accounted for nearly 20% of all global deal values in the first quarter of 2010. This share will only get bigger as the year carries on and energy security continues to dominate the agenda. Armed with strong finances, an aggressive approach, and implicit government backing, Chinese companies are well placed to spearhead the nation’s mission of diversifying its international energy portfolio. The latest thing to catch their attention: the mysterious oil elephants of East Africa."
Marin Katusa
Tuesday, July 20, 2010
Vaulting Past The Red Flags
"Actually, investors vaulted past the red flags in 2007-2008. What they ignore now is the train wreck itself."
Steve Hochberg, Elliott Wave International
Steve Hochberg, Elliott Wave International
Monday, July 19, 2010
A Twist On The Spill
I thought that this "larger view" perspective on the BP oil spill was interesting.
"The specifics of the disasters are, of course, unpredictable. But it's reasonable to expect an increasingly negative social mood to bring about a daisy chain of incompetent decision making, corner cutting and the willingness to assume bad risks which will result in tragic accidents. What may turn out to be the 'biggest environmental disaster the country has ever faced' fits perfectly with the resumption of the bear market that will end as the biggest in the lives of all who survive it."
Steve Hochberg, Elliott Wave International
"The specifics of the disasters are, of course, unpredictable. But it's reasonable to expect an increasingly negative social mood to bring about a daisy chain of incompetent decision making, corner cutting and the willingness to assume bad risks which will result in tragic accidents. What may turn out to be the 'biggest environmental disaster the country has ever faced' fits perfectly with the resumption of the bear market that will end as the biggest in the lives of all who survive it."
Steve Hochberg, Elliott Wave International
Sunday, July 18, 2010
Overconsumption and Debt
"After a period of overconsumption, Americans now see debt as the primary threat to their well-being."
NY Times
NY Times
Saturday, July 17, 2010
A Worldwide Spatial View of Debt
Casey Research just published this map. It brings new meaning to "being in the red"! Check out our friends in Japan. They're almost as high as Zimbabwe.
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| Add caption |
Friday, July 16, 2010
A Shift Toward The Big "D"
"In my October 2008 post, Four Potential Outcomes, I presented what I believed to be the four potential outcomes in the near future. Outcome #1, deflation, appears to have already swiftly occurred devasting asset prices in all sectors including commodities. The "missing piece" is that from an Austrian economics perspective, credit and money expansion need to deflate also. As we know, the opposite is occurring on a staggering level."
Random Roving, March 26, 2009
Well the chart below provides the "missing piece". Money supply is tanking rapidly. An Austrian economist would declare that deflation is here. That would mean a decline in the value of everything.
Random Roving, March 26, 2009
Well the chart below provides the "missing piece". Money supply is tanking rapidly. An Austrian economist would declare that deflation is here. That would mean a decline in the value of everything.
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| Source: Shadowstats.com |
Wednesday, July 14, 2010
Battling The Bands
It will be a telling next few days for the financial markets. An aggressive rally has brought the DJIA back bumping up against the upper band. Is it time for the next leg down? I think so.
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| Dow Jones Industrial Average (Last 6 months) |
"Here's a potential outcome (Dow peaking in the 10000-10500 range)."
Random Roving, September 16, 2009
Worse Than We Thought......Again
“The oil spill’s much worse than we ever thought,” Mr. Landrieu said. “The budget’s much worse, the dysfunction is much worse, the N.O.P.D. is much worse. But, you know, that’s why I signed up.”
Newly Elected New Orleans Mayor, Mitch Landrieu
Source: NY Times, July 13, 2010
"Headlines for two recent mega-events, BP's oil spill and Greece's meltdown, caught my eye. Initial reports both used the phrase "worse than we thought". I believe that this phrase will be used and over-used a lot in the coming years."
Random Roving, May 11, 2010
Newly Elected New Orleans Mayor, Mitch Landrieu
Source: NY Times, July 13, 2010
"Headlines for two recent mega-events, BP's oil spill and Greece's meltdown, caught my eye. Initial reports both used the phrase "worse than we thought". I believe that this phrase will be used and over-used a lot in the coming years."
Random Roving, May 11, 2010
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