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  • QC #254, February 22, 2013 319 comments
    Feb 21, 2013 10:19 AM

    A reminder to all to take advantage of the Political QC for those topics...

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  • Peter Schiff report from yesterday.

    21 Feb 2013, 10:40 AM Reply Like
  • Gold and Silver NOT plunging today. I think the price decline slowing is because we are real close to Contract expiration on Monday. Price manipulation is slowing as a result.

    21 Feb 2013, 10:42 AM Reply Like
  • PM manipulations in charts. From ZH. This is also a pep talk for those with weak hands.

    21 Feb 2013, 10:45 AM Reply Like
  • From a link with in the link above. Hold Fast on gold and silver. Another bit of motivation. Been a while since I saw this movie.

    21 Feb 2013, 10:56 AM Reply Like
  • SLW 32.98 + .79
    KGC 7.66 + .22
    21 Feb 2013, 11:08 AM Reply Like
  • Good moves WT -- they're still riding up!
    21 Feb 2013, 11:14 AM Reply Like
  • Mercy-
    After watching my hedge insurance PUTS being eaten away it is gratifying to see some positives. Closed out WDR for a 40% gain and lost my nerve on CPST for a quick gain of 16%.
    21 Feb 2013, 11:29 AM Reply Like
  • I see a weak uptrend today for SAND as well... SAND sold off to what I view as a strongly oversold condition (to verify the current share price, Gold should be trading for about $1250). As a streamer, however, shares often trade at prices where someone is heavily speculating that precious metals will drop even lower (than $1250, for instance) in the near to mid term.


    Therefore I view the selloff and the current mild stability as a potential buy, particularly for those seeking to initiate a position.


    I am of course Long SAND and their warrants.
    21 Feb 2013, 12:16 PM Reply Like
  • Thanks, TB-


    Looks good.


    21 Feb 2013, 01:11 PM Reply Like
  • I am wondering if the margin reduction in PM's just a short while back was to get some weak hands to overextend just a bit and then when the attack on price started they could count on those folks to jump into the life boat right at the git go to help drive the price down. Sorry copper colander might be to close to my head.
    21 Feb 2013, 12:15 PM Reply Like
  • This is from Bullard at the Fed in his presentation today:


    In sum:
     2012 policy was characterized by a relatively weak “Operation
    Twist” program combined with somewhat counterproductive
    date-based forward guidance.
     2013 is characterized by a relatively potent open-ended outright
    asset purchase program combined with more effective
    threshold-based forward guidance.


    In sum:
    Everything we did in 2012 policy did not work. We talked big but carried a little tiny "operation twist" stick.


    In 2013 We have decided to flip the strategy. We will carry a massive $85B a month bond buying stick and talk about how little we need to use it, because everything is going so well.


    A much more effective manipulation tool.
    21 Feb 2013, 01:13 PM Reply Like
  • Jak-
    Thanks for the update. Are they still targeting 6.5% unemployment as a cutoff?


    21 Feb 2013, 01:25 PM Reply Like
  • Depends which fed member you talk to. Yellen, the vice chair, said last week 6.5% is just a marker to re-evaluate the program, while Bullard, the more hawkish fed member, thinks 6.5% is the definite cut-off for easy money policies.


    Today Bullard said he see 6.5% by June 2014 and they could begin tapering off QE this year. Williams, another fed official, just said the program will last through the second half of 2013 and that unemployment is far too low and asset purchases must continue.


    I think Bullard's name says it all (Bullsh!#, I think he is one of the Fed officials who believes he can convince the market it is doing fine by saying they could end the asset purchases at anytime, all the while printing $85B a month. What they have created with this latest QE they will have to continue for a long time or the facade will crash, because no underlying economic data is improving.
    21 Feb 2013, 01:40 PM Reply Like
  • "Depends which fed member you talk to."


    Coordinated obfuscation is the goal.
    21 Feb 2013, 01:47 PM Reply Like
  • Fascinating observation by Albert Sung:



    I wonder what it means, when you put it together with Germany and Venezuela demanding return of their stockpiles.
    21 Feb 2013, 02:36 PM Reply Like
  • SM-
    Try this-
    Germany and Venezuela both see a continual dramatic debasement in the $ so it will not be THE reserve currency any longer.
    Perhaps the yuan will play a part as a reserve currency. Possibly the creditor nations will no longer permit payment in $ but will accept 'scrip' backed w/gold? It sounds bizarre to me but I don't have any other ideas.


    21 Feb 2013, 03:10 PM Reply Like
  • The EU wants a believable currency that doesn't require actual assets to back it up. So far, the USD is filling that bill. The FED is being very helpful :-(


    But the "dollar solution" does, or soon will, require everyone to nod and wink. Other nations may prefer not to wink if it is THEIR economy at risk.


    Gold looks better each month. Not short term, of course. No one can beat the traders at their game.
    21 Feb 2013, 04:02 PM Reply Like
  • SHB: If I had only listened to myself when three days ago I saw that 13 year, long term triple top; should have then felt comfortable shorting the S&P. Rats!
    21 Feb 2013, 04:09 PM Reply Like
  • Allow me to propose a possibility that requires TWO layers of copper in the copper colander. Link below is a law suit filed here in the united states in federal court that essentially is an attempt to get gold back from the Federal reserve that was given to them during 1934 brenton woods agreement.



    This is most likely the Fed confiscating the instruments that were supposed to be used to pledge for the gold and must be returned to receive the gold back. No bond, no gold.




    Plaintiff Neil Keenan claims he was entrusted in 2009 with the financial instruments -- which included U.S. Federal Reserve notes worth $124.5 billion, two Japanese government bonds with a combined face value of $19 billion, and one U.S. "Kennedy" bond with a face value of $1 billion -- by an entity called the Dragon Family, which is a group of several wealthy and secretive Asian families.


    "The Dragon family abstains from public view and knowledge, but, upon information and belief, acts for the good and better benefit of the world in constant coordination with higher levels of global financial organizations, in particular, the Federal Reserve System," Keenan claims.


    "During the course of its existence over the last century, the Dragon family has accumulated great wealth by having provided the Federal Reserve Bank and the United States Government with asset assignments of gold and silver via certain accounts held in Switzerland, for which it has received consideration in the form of a variety of Notes, Bonds and Certificates such as those described ... that are an obligation of the Federal Reserve System."


    Keenan says that with accrued interest the instruments are now worth more than $1 trillion. He says the family designated him as its principal in an effort to select certain registered and authorized Private Placement Investment Programs (PPPs) for the benefit of unspecified global humanitarian efforts.


    In his remarkable complaint, Keenan claims that the U.S. government [received] enormous amounts of money -- delivered in gold and other precious metals -- from the Dragon Family many years ago, and that the money was placed into the Federal Reserve System for the benefit and underwriting support of the dollar, "which was to become and currently remains the global reserve currency"....


    The complaint alleges a complicated history with many moving parts and scores of internationally known and unknown characters, the sum of which is that Keenan claims he was entrusted with billions of dollars in bonds by the Dragon Family....


    [These instruments were then stolen as two Japanese agents attempted to cross the border from Italy into Switzerland with them, contained in the suitcase you see in the image at the top of this article.] (stolen by the italian authorities, Doubleguns clarification)


    [Keenan] claims that as the conspiracy continued to unfold, various high level officials repeatedly offered him a bribe of $100 million to "release" the instruments without disclosing their theft to the Dragon family, and to allow the instruments to be converted to a so-called UN "Sovereign Program" wholly under the auspices, protection and umbrella of the sovereign immunity enjoyed by the defendants.


    Other defendants include UN General Secretary Ban Ki-Moon, Former Italian Prime Minister Silvio Berlusconi, Giancarlo Bruno, who is identified as head of the banking industry for the World Economic Forum, Italy's ambassador to the UN Cesare Maria Ragaflini, Ray C. Dam, president of the Office of International Treasury Control, and David A. Sale, the deputy chief of the council for the cabinet of the OITC. (notice they are defendents on the law suit documents in previous link-doubleguns notes)


    Keenan seeks the return of the stolen instruments, punitive damages and court costs on multiple claims of fraud, breach of contract and violation of international law.


    He is represented by William H. Mulligan Jr., with Bleakley, Platt & Schmidt of White Plains, N.Y.


    Interested? I encourage you to visit Courthouse News Service, as McCue does a great job of summarizing the rest of the case. This is just an overview.




    Courthouse News Service didn't quite have the stomach to quote one of the most interesting paragraphs in the entire complaint... but I do. This is where the whole story really started taking shape for me:
    Upon information and belief, these Bonds [held by the Dragon Family] have values ranging in the many Thousands of Trillions of United States Dollars, a relatively small portion of which is involved in the claims giving rise to this action.


    Each of these currencies, such as the DFFI [Dragon Family Financial Instruments] involved in this action, was and remains duly registered within the Federal Reserve System -- and are directly verifiable by the Federal Reserve through its efficient verification system and screening process.


    Thousands of trillions of dollars? You have GOT to be kidding me! As soon as I read that, I had to know more... because I had enough information to be convinced that this was not a spurious lawsuit. I immediately lined up an interview with Fulford to clear this up.


    The bottom line is that the Dragon Family intended for these bonds to be stolen. They represented only a small percentage of the overall asset base... all of which is clandestinely registered within the Federal Reserve and the Bank of International Settlements!


    Fulford gave an introduction to the story in this interview -- and I then found out much, much more as time went on.


    This was an elaborate sting operation that has brought us to where we are today -- where a vast international alliance of 117 countries now has a legal way to end the financial tyranny of the Old World Order.


    Before you go any further here is a quote from President Woodrow


    “Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something.


    “They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.”


    Below is the link to the overall conspiracy that will take many hours if not days to read and travel the links etc...And I find so much of it confounding and unbelievable but I not longer dismiss these things off hand. I just tighten down the chin strap on the copper colander and hang on.

    21 Feb 2013, 04:41 PM Reply Like
  • Yes, I have heard this one before.


    LOL, I lump it in with the comet people who drank the koolaid in hopes that their souls would depart with the aliens in their cometary chariot...


    Even for a professional fantasy and science fiction practicioner, this sort of thing requires the suspension of too much belief. There are conspiracy theories that are crazy, and then you have conspiracy theories FOR the crazy...
    21 Feb 2013, 05:40 PM Reply Like
  • It is the lawsuit that makes it impossible to entirely dismiss this simply as crazy ramblings. The first link above.


    The bonds are the next issue, we have all seen them in the news that is the next piece of evidence that baffles me into ensuring chin strap on colander is tightened down.


    From there it goes astronomical. Tight chin strap required for sure.
    21 Feb 2013, 06:28 PM Reply Like
  • Gold and silver bounce back as we get closer to contract expirations on Monday. Surprised to see the move so early but nothing should surprise any more. Only the manipulators actually can call the shots very well.
    21 Feb 2013, 05:02 PM Reply Like
  • Interesting analysis of the fed's quandry by Mohamed El-Erian of Pimco in the Financial Times.



    21 Feb 2013, 05:53 PM Reply Like
  • Nice article, thank you
    21 Feb 2013, 06:11 PM Reply Like
  • Guns...anyone: Have we heard anything lately about Basel III? I recall gold going to a first tier asset was delayed, pushed back from being implemented Jan. 1.


    Wondering if the manipulators are pushing gold down to take advantage of when Basel III does get implemented.
    21 Feb 2013, 07:20 PM Reply Like
  • Mayascribe: is it possible the banks are doing it? Buy low, get it on their books and then let it appreciate.


    Viola! Capital requirements met.


    21 Feb 2013, 07:23 PM Reply Like
  • Yes HTL -- that old mark-to-market hat trick can do wonders for a balance sheet.
    21 Feb 2013, 07:26 PM Reply Like
  • Mercy: It's even better when they just tell their trading desks to trade the hello out of them. Just work the futures contracts all day long and get whatever "market" price you desire.


    Since so many banks have been reducing their "excess" reserves, IIRC, over the last months, they have lots of trading capital available now. Not for constructive loans, of course.


    21 Feb 2013, 07:34 PM Reply Like
  • MJ: Especially if you are allowed to chose WHAT you get to mark to market.


    What are a trillion dollars of defaulted home mortgage paper worth? Face value, of course! If you are the right entity.
    22 Feb 2013, 12:35 AM Reply Like
  • So true HTL and SH. The cat and mouse game never ends -- it just carries more smoke and mirrors!
    22 Feb 2013, 05:05 AM Reply Like
  • Maya it has to be coordinated with Dodd-Frank banking bill and that has things......well screwed up to say the least. Dodd-Frank isnt even finalized and there are parts they want to delay or remove from it....soooooo.
    22 Feb 2013, 08:55 AM Reply Like
  • Sequester IMO will get a deal, and I think this is why, but it's a shame they can't do what is good for us.
    22 Feb 2013, 07:23 AM Reply Like
  • I am thinking we will not get a sequester deal, but Bernanke has his bazooka in place to stave off a really, really bad crash over the political wrangling over the next couple months, the problem is it will cost him a lot of rounds. In fact he has been using it the past couple weeks to keep yields down and the market propped.


    The senate had a plan to stem off the sequester last week. It was something like half revenue raises and the other half spending cuts. What has happened with that? Have they voted on it?


    The republicans have the upper hand this round, while they don't like spending cuts to the military at least they get some spending cuts. They will wait for the senate to do something and they will watch as the Senate and White House fall all over each other unable to pass a bill.
    22 Feb 2013, 09:45 AM Reply Like
  • Jak, this spending cut is from the last debt ceiling increase well over 1 year ago. They should not negotiate ANYTHING, and let it go into effect, but that is not going to happen. Both party's do not want to lose anything from their shopping list. If it goes into effect they will negotiate something soon to replace it. Now where is the spending cuts we should have gotten from this last debt ceiling increase? Zilch, nada, nothing.


    Washington got that one right past us. Both party's mind you did that. ( insert choice 4 letter words here)
    22 Feb 2013, 09:53 AM Reply Like
  • LT, that is more propaganda by the lobbyists, politicians, their lap dogs and the media. Sequester is a decrease in the increase of spending. If we froze the budgets at their current level there would be no actual cut in spending but it would be worse than the sequestration.


    Final tally on this sequestration is that the cut actually comes out to be a $110 billion spending increase over the 10 year period.



    Mention that to your congressman and see the response.


    Will jobs be lost? Yep!! They have been counting on the EXTRA money and now they will not get it. It will have an impact but they are giving the most horrible of scenarios they can come up with to panic us.


    Do we need to control spending? Yep!! Are we going to see congress do that with out this sequestration? Nope!!


    86% of the Americans agree we need to cut the spending, so here it is.
    22 Feb 2013, 10:13 AM Reply Like
  • I am not a Farrell fan, but this scenario is real.....the only thing he left out was lack of "demand", and one that stimulus and the capitalistic formulas won't solve...which is due to the changing demograhics of aging baby boomers, increased low paying immigration jobs, and student loan debt holding youth back from excessive spending.


    I see this as a real drag on the growth going forward for at least a generation no matter what stimulus is done with the exception of labor rates doubling.
    22 Feb 2013, 10:08 AM Reply Like
  • LT I hope the youth do not get into excessive spending. I think you ment spending in general. LOL
    22 Feb 2013, 12:46 PM Reply Like
  • I meant that they can not spend because they don't have the money/wages/credit & resources to spend. Therefore muted demand.
    22 Feb 2013, 12:47 PM Reply Like
  • Forgot to mention Sequestration will probably push the market down so there is another reason it scares Washington and the elites and those that are putting out the scare messages. Financially speaking the VIX could be a good bet if it goes through, until they come up with a replacement program. You know congress.
    22 Feb 2013, 12:49 PM Reply Like
  • The impact will indeed be more emotional than real. In light of what the Fed is doing, Sequestration is peanuts. It will mean less Fed notes being put out, but it will not cause the gloom and doom Obama is selling it as.


    The problem with spending cuts is that it does reduce the amount of Fed notes put into circulation. That does put pressure on GDP and that will drive emotion in the markets. The good thing with gov spending cuts is that it stops redirecting human endeavor into less productive activities. So over time, the capitalist system will kick back in to direct that spending (human endeavors) into more productivity via innovation and start to put people back to work thus giving them income. When people have income that they have faith in, then they start spending again. Then you get real increases in demand created by capitalism not phony temporary ones created by gov coercion (central planning, stimulus, Keynes, etc). In such environments you want immigrants. They come here, start off at low wages, then create capital by saving and learning, and then move on to higher wages (either for them or their children).


    The problem with spending cuts is that you need an enlightened populace that understands the short term pain that would be needed to suffer to achieve long term gains. We certainly do not have such a culture, so it will never occur. You hear them say things like "fill in the caps left by capitalism". Such unenlightened comments show the poor education to which the populace has been subjected.


    As such, the Sequester will be more fear mongering than reality. The Fed will probably heal any damage to risk asset prices that get brought on by emotionalism.
    22 Feb 2013, 01:06 PM Reply Like
  • dg, sequestration most definitely will cause the mkt. to go down, another reason why I think the pol;s cave and do a short extension.
    22 Feb 2013, 12:54 PM Reply Like
  • And then another and another and.....There is not a finer example of can kicking available it seems.
    22 Feb 2013, 01:41 PM Reply Like
  • See how effective the gloom and doom is.
    22 Feb 2013, 01:49 PM Reply Like
  • If risk assets are your appetite, the Fed's got your back.

    22 Feb 2013, 01:51 PM Reply Like
  • JH-
    They do as long as you are a Fat-Cat banker that declares itself too important to fail- including the all important bonuses for the most important fatties that are far too important to lose.


    After all, they put together the guts of what the bubble was all about.


    22 Feb 2013, 02:58 PM Reply Like
  • WT


    Sure, that's why Morgan and Rockefeller wanted Aldrich to use the gov to cartelize the system. They couldn't achieve the results you outlined otherwise.


    What I was getting at, is that as long as the Fed is growing its balance sheet at a rate that leads to net Fed note creation, we will have Fed notes to bid up asset prices. Fiscal policy is working against that, but it looks like the Fed is going to win.
    22 Feb 2013, 03:14 PM Reply Like
  • WT: Not to mention financing their favorite pols in the next election!
    22 Feb 2013, 03:28 PM Reply Like
  • JH-


    Right on point- Getting harder to break even let alone beat this game.


    22 Feb 2013, 03:29 PM Reply Like
  • Watch for Congress to quietly "forgive" the massive student loan debt. Basically, anyone not having a job paying enough will be able to "reduce and/or defer" their loan repayment. Add in a nice 4-10% inflation and it is the same as just wiping off the debt over about 10 years. It's just taxpayer money and fiat money printing, after all.


    "Aren't we great for giving those poor young people, who only wanted an education, a chance to recover? "


    Fedgov wants those 20-something will GOOD credit so they can buy and pump up the eroding economy.


    Just more vote buying and "fixing" really bad government decisions.
    22 Feb 2013, 03:27 PM Reply Like
  • SH-


    That whole program, well intended as it is, is so pathetically easy to abuse, and that is more the norm than the exception. I'm all for improving the education levels in this country but to finance 10 year degree programs that should have been four years and grant degrees to those that don't even have the basic concepts of communication in their heads is just wrong.


    I have two kids that are dedicated teachers doing a great job that made it a priority to pay off their loans on time. And that was no easy task.


    Most state universities and colleges are a fantastic bargain to begin with. They wouldn't be without huge taxpayer funded subsidies.
    Forgiving the loans would be disheartening to say the least, especially when so many others did pay them off.


    22 Feb 2013, 08:36 PM Reply Like
  • A quote from Doug Casey, as printed in this weeks "The Leather Apron".


    "On the other hand, it appears that half the people in the US, and even more in some other places, chronically consume more than they produce. Their numbers are growing, they seem to feel more entitled than ever, they control the political systems of the world, and they’re becoming bolder and more strident. Furthermore, the type of sociopaths that are attracted to government appear to have reached a critical mass. They’ve long controlled the school systems, which serve to indoctrinate kids with destructive ideas. In addition, governments seem to have co-opted many or most of the advances in technology—drones, military robots, surveillance cameras everywhere, massive communications monitoring—and this impresses me as quite destructive."


    I don't think I could have said it better. Yes, we have a problem.
    22 Feb 2013, 06:51 PM Reply Like
  • Corporate debt increase that no one talks about....IMO, this has been a concern of mine for the past few years, especially 2012 when corp's borrowed money to pay extravagant dividends to beat taxes...borrowing money to pay a dividend is not going to work out well in the end.


    While you here, read the article on "Broken Capitalism" of it have merit.
    23 Feb 2013, 06:55 AM Reply Like
  • Here's a picture of perfectly functioning socialism.

    23 Feb 2013, 09:06 AM Reply Like
  • Capitalism is about protecting people from stealing. Anything else is a system about subjecting people to stealing. To get away with this you need a fraud. The fraud is that the stealing will be good for them. People shouldn't confuse the coercive state we now have as anything close to a capitalist system wherein people are protected from stealing by the gov. The system we have now is a system where the gov is used as the source of theft, and the fraud for perpetuating this theft is the "common good". Its an old bromide.


    The world has probably never seen a system that is purely capitalistic where voluntary cooperation is the only means by which people can interact. The US came relatively close, but it still had its legacies from the heavily taxed and regulated economies of Europe. There was the European import of slavery, railroad subsidies, steamboat subsidies, the Banking Acts of the 1860s, the OCC, LM Shaw using the Treasury as a CB in 1905 which led to the Panic of 1907, then Morgan and Rockefeller using the gov to cartelize the markets, the so called Progressives (they were really Coercives), the Fed causing the stock market crash of 1929, Hoover and FDR causing the Great Depression, Eisenhower building the Interstates and destroying small towns all across the US, and it goes on and on.


    The idea that the US has had capitalism all this time, and therefore that it is broken, is like saying Tiger Woods was faithful to his wife and it is marriage that is broken.
    23 Feb 2013, 09:49 AM Reply Like
  • NK is no more a picture of perfectly functioning socialism than Bernie Madoff is a picture of perfectly functioning capitalism.
    23 Feb 2013, 10:41 AM Reply Like
  • Well ultimately there can be no perfectly socialist society. They would all die off in rather quick order. Even in N Korea the capitalism has to be underground in "black" markets for people to be able to live. That's why Kim Jong Un had to reset their currency a few years ago (one mighty wave of inflation) to wipe out people's savings from the black markets.


    What's also funny is that every time the Austrians would destroy Marx's theories, you would always hear, "well that's not really what Marx was saying". The same thing is happening here. When the real life results of coercive societies (socialism and communism are the same thing - coercion based), you always hear, "well that's not what we intended as an outcome". Instead we are always told about this elusive utopia that will someday be achieved if we can just finally get the right people in charge, like in the movie "Dave".
    23 Feb 2013, 11:17 AM Reply Like
  • Many, many years ago I was assigned to produce a 'White Paper' on the subject of socialism, what constituted it and whether or not it could survive, and if so cite an example that demonstrated the efficacy of such a society. Early on in my effort I decided that government itself was a socialist concept, existing for the common good, protecting the weak from the bullies as it were and seeing to it that those without would survive.


    Lo and behold I found a socialist society that had thrived for well over 900 years with little disruption or rebellion. These folks elected leadership and assigned committees to carry out the mission of the group, whatever that was. They had courts and punishment that dealt with transgressors in an even handed fashion. the "wealth" such as it was was distributed or if possible stored if there was an excess.


    Originally the nation was centered in New York state west of the Hudson and through the Finger Lakes district. Being an imperialist society they expanded west and south to eventually occupy most of the northeast, and from what is now Virginia all the way north into Canada and west through current Ohio. They thrived and grew right up until the Mayflower landed and whose passengers began immediately to dispossess the grand Iroquois nation that occupied that land, consisting of six plus major tribes and dozens of smaller ones. Estimates are all over the map but probably average around 30,000 at its peak. Currently there are around 80,000 Iroquois with most living in Ontario and Quebec, Canada- Most of the rest in New York and Wisconsin.


    The anthropologists speculate on how they would have fared without the visitors from Europe setting up housekeeping on their turf back in the 1600s.


    23 Feb 2013, 03:52 PM Reply Like
  • The problem is that labels such as "socialist", "capitalist", "communist", etc carry such relative meanings to people. This is why we get in these debates about so and so being socialist and saying, "see how bad off they are" and someone else saying, "well that's not socialist". The second person thinks "socialism" is Star Trek, and everyone lives in a world of immense wealth where you get to do whatever you want and people take care of you and nobody ever has any incentives to abuse the system because everyone has become the new socialist man.


    So everyone winds up arguing about systems that have different definitions that mean different things to everyone arguing about them.


    For me, I just dumped all that, and decided to look at the world from just what I observe everyday. The main goal of all humans is to survive. To survive they will either steal or produce, it just depends on which one costs less. Stealing is based on coercion and production is based on voluntary cooperation. When people are stealing, they can't be producing. Thus a market polluted with coercion is a market that has less production. When people are producing they can't be stealing (coercing), thus the market is free of coercion (a free market) and the economy grows.


    Since no one can force anyone to do anything, all human relationships must be voluntary. As such, all transactions occur in a system where people learn to make each other better off. This produces a system of incentives, where survival via productivity is enhanced by figuring out that you can make yourself a valuable trading partner if you can find ways to make other people's lives better.


    As such, the more coercion that is introduced into the market, the lower the standard of living that that market will produce. The less coercion, then the higher the standard of living it will produce. From this reasoning we draw the only logical role of gov. We use gov to create free markets by having the gov make stealing expensive. To do this, the gov is given the grant of coercion, but since coercion makes stealing expensive, we limit gov to make sure that grant of coercion isn't used by the people in gov to make stealing cheap for them.


    Gov then is assigned the task of defining property and then protecting that property. People then find themselves in a market where they can only survive by producing and engaging in trade that makes both parties better off. When gov tells people what to do with their property by what price to charge or what standards to use in production, what you really have done is insert coercion into the market. That insertion creates the economic incentives of diffuse costs and concentrated benefits. That means that it becomes worth someone's while to capture that gov force, and then use it to start stealing. Like writing regulations that put your competitors out of business.


    This is why a "socialist" state will become N Korea and not Star Trek. In order to create this "socialist" utopia, a minority of people must be given license to use coercion to force people into the "vision". The hope is that their good intentions won't let them be corrupted, but of course for that to be the case, they would need not to be human (see Madison's argument). But by giving the minority the right to use coercion to fulfill the "vision", all that happens is the creation of the economics of concentrated benefits and diffuse costs, the incentives then arise to use the gov coercion for stealing, and the "vision" turns into a nightmare.
    23 Feb 2013, 04:46 PM Reply Like
  • Hoop,


    If you are not already familiar with Barry Loberfeld, I can highly recommend the following. Your arguments remind me of his:



    I read this several years ago and the following passage has stuck in my mind to this day:


    <<When a principle or premise defends one's case, it is affirmed; when it doesn't, it's denied. Think about these two statements:


    a) Individuals have the right to engage in consensual private behavior even if it can harm them.


    b) The government has the duty to stop individuals from engaging in consensual private behavior that can harm them.


    So, which does our "liberal" believe in? Well, if the issue's smoking, the second. But if it's "sodomy," then the first. And the "conservative"? Just the reverse. What prevails is a now-you-see-it-now you don't commitment to any tenet. Moral integrity falls to personal prejudice, and hypocrisy becomes the standard of "social democracy.">>
    23 Feb 2013, 05:37 PM Reply Like
  • Pretty interesting Smaturin I was just talking about that phenomenon.


    I think the trouble comes from the denial that there is an absolute truth. I think people want to live in a world that allows everyone to be right from their own perspective, which denies their being a truth.
    23 Feb 2013, 08:08 PM Reply Like
  • "The government has the duty to stop individuals from engaging in consensual private behavior that can harm them."


    And what is never discussed about this, is the cost. The gov can ban things from ownership that don't have wide market demand. For instance, the gov doesn't have much of a problem banning a person from owning a nuclear weapon. The reason for this, is virtually no individual has the desire to spend $100s of millions on a 1 time weapon that just sits around and will probably never be used. Now contrast that with religion or drugs. Look at the cost to gov to try and ban certain types of drugs or religions. It requires wars and massive jails. It requires inquisitions and a police state that must constantly spy on people and enlist neighbors to spy on neighbors. The cost is immense, and can even lead to the collapse of the country.


    What is never discussed is the difference between what gov CAN do, and what we WISH it could do.


    Gov can only do what the people can give it power to do. Having gov get rid of things that can harm us, assumes we know exactly what all those things are. The way we know what all those things are, is via nature's pricing mechanism. As such, to have gov get rid of all the things that can hurt us would require the populace to be able to grant to the gov superior or omniscient price knowledge. Of course, if the populace already had superior price knowledge, why then would they need to grant it to the gov, so the gov could give it right back to them?


    Logically, the only thing the populace can grant a gov is what the populace already has. The populace already has the ability to use force, thus the populace can grant the gov the use of force. The reason they do this is because force is the basis for stealing. To stop stealing an individual has to use force against the force used for stealing. Now you have two individuals that are not using their time for production, and your economy suffers. So the populace creates a gov by giving it a grant of force. A perfectly functioning gov would be known by markets that were free of force, hence free markets.


    Now think about the theft transaction. Force is used to transfer wealth. One person gets richer, and the other person gets poorer. In other words, one person inflates and another deflates. The source of inflation is not money, but gov money because its foundation is force. The right amount of money is a price issue, and since the gov cannot be granted superior price knowledge, the gov's grant of force has now become the source of the theft. Wealth is being transferred, because the point of wealth is the ability to consume, so the gov money via its price fixing made possible by its grant of force transfers the ability to consume.


    Now we arrive at how you use this information, not just for ranting (although that is a lot of fun), but for investment analysis.


    The gov's power to transfer wealth (steal) via its grant of force is what is responsible for the business cycle. By transferring wealth it inflates one group while deflating another group, just like what you would find in any theft transaction. This reality is never going to change, so what we have to do is find some way to protect ourselves. They way to do this is first to accept that this is what is happening, and then you can begin to see the wealth transfer patterns.


    Monetary policy basically transfers wealth to the financial markets via the banks, and fiscal policy can also transfer wealth to the financial markets but it can also transfer wealth within the financial markets by targeting specific industries over others (something the Fed can't do). So by studying the interplay between fiscal and monetary policy, you can begin to get some idea of the direction of equities markets and interest rates.


    Explaining how you do this is the subject of a much longer post, and if you follow what I write, you will begin to see how I analyze this. For 2013 at least, this interplay will tend to support risk-on. So I could see 1600 on the S&P by year end, and maybe 2.30 on the 10yr. 2014 is going to see some changes in the macro picture via Obamacare and Dodd Frank, thus risk-off becomes a greater possibility (back to 1400 on the S&P and 1.50 on the 10 yr). The question then will be if the Fed can respond strong enough to get the risk-on trade working again? We will have to analyze that when we get there.
    24 Feb 2013, 07:39 AM Reply Like
  • Guys, I am removing the QC from my list. Just too much gov't & fed bashing with very little investment conversation.


    TB, thanks for running the APC's, I will catch you on the REE group.
    23 Feb 2013, 07:55 PM Reply Like
  • Translation--I dont like anything that challenges my confirmation bias. Look at all the anti-freedom stuff this guy has posted and then thinks no one should challenge it.
    23 Feb 2013, 09:20 PM Reply Like
  • I like the gold miners over the next few weeks at least. GDX is at it lowest point since summer of 2009. It is a bit contrarian play since a lot of goldbugs as well as non-gold folks don't like the miners.


    Compared to GLD GDX is at its widest separation, I think, ever. I expect gold to get off its haunches this week, and I expect it to be very volatile (I discovered Steven Cohen's SAC capital hedge took "straddle" positions in gold which I think plays spikes up or down. I think Pualson's play in GLD will ultimately be successful.


    I expect inflation to start showing up mid-year or even next month, but our economy will not have "recovered" which will put the Fed in a pickle and investors in a quandary, they will go to gold. Higher taxes and oil as well as budget wrangling in dc will soon take its toll on the market and I believe it will happen well before summer although i guess it possible we hit new all time highs before it does. A recession close to it pace growth but we will only have a smallish 5-7% correction before most recognize we are in a recession more officially. I don't think it will be an all out crash mainly b/c we have the fed backstopping fear. We get a recovery from the correction but then head into a slow steady bear market until the real economy stands up which may be a year or much longer.


    My thoughts for now. I love reading the QC and don't have any problems skipping over comments I don't care about or don't agree with no matter how many of them there are (unless it is investment related and i feel i have something to counterpoint with). Stay nearby LT.
    23 Feb 2013, 08:36 PM Reply Like
  • "I expect inflation to start showing up mid-year or even next month,"


    Perhaps, but it won't last long. First lets remember that the definitions of inflation may not necessarily be the right ones. However, in the conventional sense, CPI is basically a measure of daily consumables. People will tend to bid up these assets when they feel comfortable about their future income prospects. People feel comfortable about their future income prospects when they have a job they have faith in. So one way to keep CPI assets from inflating is make people afraid about their future income prospects. The way to do that is to make them fearful about their jobs.


    Obamacare and Dodd Frank and taxes on the rich will do just that. It will put pressure on the employment situation, and as long as people are afraid about their incomes, they won't have a tendency to inflate CPI assets. They will choose savings assets, like FDIC insured deposits (banks and thus bonds) and equities (looking for yield).


    So if the CPI does tick up, it won't be by much, and 2014 has the possibility of knocking it back down again. As such, the asset classes that will be inflated will be equities and bonds. In other words people are going to continue to bid up savings assets and not readily consumables.


    This can go on for a long time. As long as fiscal policy continues to incrementally destroy productivity, we can limp along like this for decades. I would not be surprised that within the next 10 yrs if the US 10 yr is still at 2% and the S&P is still at 1500. We might have boughts of going to 1600 or even 1700, but if fiscal policy keeps eroding productivity, we could wind up in the current range for a very long time. Take a look at the S&P since 1950. In 2000 the S&P was in the 1500 range. 13 yrs later and that's where we are still. There were ups and downs, but the interplay of fiscal and monetary policy has kept us stuck in the ditch.
    24 Feb 2013, 07:51 AM Reply Like
  • JHooper: "fiscal policy keeps eroding productivity, we could wind up in the current range for a very long time. Take a look at the S&P since 1950. In 2000 the S&P was in the 1500 range. 13 yrs later and that's where we are still. There were ups and downs, but the interplay of fiscal and monetary policy has kept us stuck in the ditch".


    Actually, if we used purchasing power, maybe "constant dollars", the ditch is getting deeper. 1500 now is not what it was in 2000, which is not what it was in 1950, which ...


    So while it appears we are "treading water", we are actually drowning, incrementally.


    24 Feb 2013, 07:57 AM Reply Like
  • Good point. I was just illustrating, how the interplay of fiscal and monetary policy can affect asset prices.


    If you think about it, any gov action that is not part of its legitimate mission of "making stealing expensive" is just a price control or in other words a consumption subsidy. Since our income is based on our technological level, its our technology that determines our ability to consume and thereby our standard of living.


    A gov action to fix prices raises our cost of production without a concomitant increase in our technological capacity. Since we are used to a current standard of living, we tend to want to keep consuming at that level. The result is we start burning through our aggregate capital, and since we measure our economy based on spending (GDP) and not some measure of aggregate capital, we don't know overall aggregate capital is shrinking so we can keep our consuming at levels we have grown accustomed to.


    What also happens is that technology still tends to grow. Capitalism is actually quite hard to kill. What you can wind up with is gov price fixing increasing at the same level your technology is increasing. Thus you wind up treading water. Of course what you can also get (and basically what I think you just described) is a slow erosion of the standard of living via gov price fixing ever so slowly increasing faster than technology. Of course gov price fixing can grow much faster than technology. In that case though the erosion to the standard of living becomes very obvious and so does the wealth transfer, and that's when you tend to get social unrest.
    24 Feb 2013, 08:15 AM Reply Like
  • HTL-
    Good points and quite accurate IMHO.
    If the government is indeed arranging purchases in order to negate market efficiencies we, individual investors are pretty much in the dark as to educated investment choices.
    The 'experts' in the field have more or less agreed that growth in this country will be limited to 2 or 2-1/2% per year for (some say) 10 years.
    The only exceptions will be 'growth' through mergers and acquisitions.


    In reading your's, and jhooper's and Tripleblack's postings that follow (all which I fully agree with) doesn't leave a whole lot to consider with the exception of resource situations and aforementioned mergers and such.


    My question to any that would respond is what kind of growth can we expect going forward from any quarter that would produce a std of living improvement over the same time?


    24 Feb 2013, 11:18 AM Reply Like
  • Short to medium term, overall in the US? No such thing can happen. Only if the powers can actually accomplish the task of balancing the country on the head of a pin (we have a better chance that the planet will be destroyed by evil fairies) could some tiny overall improvement occur.


    Longer term, things like transformative technological discovery (room termperaure superconductors, cold fusion, etc) may occur. We have seen this sort of fortuitous occurance in past history, for instance, the development of improved crops and farming techniques which just barely headed off global starvation (so far). The chance of this happening over the next few years is, imo, virtually nill, but as you stretch the timeline out over the decades, the odds improve. These sorts of developments, however, tend to occur as a result of an environment where rewards flowing from success provide a powerful incentive to search. As most of the world becomes subsumed into a profoundly federalized crony capitalist/socialist system, the innovators will probably become nothing more than slightly more intelligent cogs in the same amorphous government lab. Humans, particularly extremely bright ones, will recognize futility when they see it, and shift their focus to some other goal. Though we will never know it, we may already have most of our current crop of transcendental geniuses quietly focused on enjoying a comfortable existance and home life instead of pushing their talents to the wall to achieve individual greatness.


    As Albert Einstein so famously pointed out when people were impressed with him, "...I was just a clerk in an office". Had that job been as secure and comfortable as such jobs are nowadays, one wonders if he would ever have bothered...
    24 Feb 2013, 12:21 PM Reply Like
  • TB: +1


    Only a change in our government actions, forced upon them by a few but vocal minority, will have any chance of turning the ship to a successful direction that frees individuals and business to become the engines of prosperity that are possible.


    Even with that, an unlimited federal revenue stream will support the continued accretion of power at the federal level. Whether the revenues be from taxation or illicit FRNs makes no difference. This may prevent any change in the foreseeable future.


    OTOH, if one of those meteorites ...


    24 Feb 2013, 01:26 PM Reply Like
  • +another one on that TB. Eloquently said.
    24 Feb 2013, 02:01 PM Reply Like
  • Worthy exposition jhoop, especially if "aggregate capital" is taken to include national human capital and character, which we have been taking one heck of a blowtorch to since at least the great society but especially lately...
    24 Feb 2013, 02:02 PM Reply Like
  • Hoops, I am starting to see more evidence of what you describe. How inflation will not show up because the basket of goods used in calculating CPI is geared toward the lower income...who don't have jobs. Kind of hard to drive up prices on those goods that have less demand. I will keep those things in mind going forward on my investment ideas.
    24 Feb 2013, 02:06 PM Reply Like
  • jakurtz


    The other factor to consider is the US dollar being the reserve currency. This allows the US to export inflation. Also, combine with this the fact that the mercantilist nations have trapped themselves into buying our notes to manipulate their exchange rates, and what you have is a prescription of ready demand of our notes. Now, granted, we could eventually loose that if we went nuts with our fiscal and monetary policy, but the course we are on, we probably have a while before another reserve currency takes over. All that demand for our notes (both Treas and FRN) means the circumstances are set up to keep rates and inflation low for a long time.


    Another way I look at this is from the perspective of what drives interest rates. An interest rate is just the price for capital. If we suddenly had more economic opportunities than we had capital (a good problem to have) then interest rates would go up. The other reason interest rates go up is because of credit risk. Since the US has a baked in the cake (at least for a while) demand for our notes, the US doesn't have a credit risk problem. Even though we are running up massive debt, the US is still the largest consumer market in the world, and you can still buy a lot of neat things with US dollars. We are basically the highest deck on the sinking ship. As such, neither of the reasons for higher interest rates exist for the US.


    Another thing...


    The US has several factors that are different now that what existed in the 70s and the early 80s. Take a look at the S&P and the 10 yr yield since 1950. The charts track each other until 1980. Then they diverge. The reason for this is China was emerging from the really dark years under Mao and Japan was emerging as an exporter supported by mercantilism. Look at what happens to the 10yr yield from 1980 forward. It keeps falling. If you look at a listing of the largest Treas holders, China and Japan top the list. The 1970s and early 80s didn't have this factor. Also, look at unemployment losses from 1970 forward. The biggest hits were less than 2 million up and until 2008 and 2009. In 2008 and 2009 we lost almost 9 million jobs. In the 70s we couldn't export inflation like we can now because of all the demand for our notes from the mercantilist nations and we didn't have such massive job losses. Thus, whenever the Fed printed back in the 70s and early 80s, it resulted in people bidding up CPI assets. Now that the Fed is printing, people are bidding up savings assets like equities which pushes up their price, and bonds which pushes down their yields.


    We will need major macro changes for these variables to change, but we seem to be in a Hoover/FDR phase. Those two created a malaise that lasted 15 years.
    24 Feb 2013, 04:09 PM Reply Like
  • One other factor to consider as a backdrop is the role played for dollars in trading between nations (the reserve currency aspect). This in effect places much of the world's resources (oil, gold, you name it) in the position of supporting the $. A warning signal that things are getting (more) scary would be when oil, for instance, no longer trades in dollars (true, some countries have tried to trade in other currencies, Iran and Venezuela, for instance)...
    24 Feb 2013, 05:37 PM Reply Like
  • In terms of investment strategy, I suspect one thing this group can agree upon is that our current situation does not contain the seeds for an outright turnaround, but is instead fiercely focused upon attempting to remain poised atop the head of a pin. Zero sum thinking from within a purely defensive bunker mentality makes this an exceptionally challenging investment climate.


    We often hear the old saying that " can't fight the Fed", but every such idea should impell us to look for the other side of the coin, ie, what is it that the FED cannot fight? Lamentably that leads to various visions of armaggedon, which may be entertaining for SyFy channel B movies, but unpallateable as an investment thesis...


    My recent epiphany has been to originate a search for interesting resource investments by a process of elimination. Each nominated investment must successfully pass through a screen comprised of political/geopolitical risk factors. I find that the remaining list is reduced by 80-95% (depending upon the resource examined) by this first cut. Follow up with traditional due diligence for each of the remaining investments, and more than half of the remaining can be rejected, narrowing the list to the remaining 1 or 2%.


    However, this is a BEST case for this method. In a distressing number of resources I studied, one quickly rejected 100% of the available investments in an entire commodity or sector. To follow this set of rules, one would have to be willing to demark large swathes of the global economy as "uninvestible". There are other problems, such as individual views of "good" political environments vs "bad". Places where miners have the potential of creating rich profits without excessive government interferrance may also be rife with corrupt practices (including accounting irregularities which can rob a hopeful investor). Others will test one's moral compass, as it becomes clear that the most investible choice may also be the most likely environmental trespasser in the group.


    So, there is a potential methodology here, but it must be customized by each individual to serve them.
    24 Feb 2013, 08:20 AM Reply Like
  • A related comment to trip's11283, above.


    Look in areas that are somewhat immune to government coercion.
    Not easy, I recognize. As a possible example; generating power with locally produced biogas is mostly immune to coercion. Not because the fedgov wouldn't LIKE to tax it, but because the visibility of the enterprise is very low. Setting up a community with integrated waste processing and consuming the electricity within that community is "low observable". But NOT invisible. It would also depend on the folks involved having enough sense to not blab to others about their "tax free electricity".


    I am sure there are other examples, but they all seem to require keeping the activity in some way invisible to the taxing/coercive power of the fedgov. The power to tax is about as "force intensive" as you can get without troops and deadly weapons. Stealth may be the only effective small scale weapon against an ever increasing fedgov reach for new revenue, as more people opt out of existing taxed enterprises. How much of your utilities payments goes to taxes, social welfare and low productivity featherbed jobs therein?
    24 Feb 2013, 01:38 PM Reply Like
  • "There are other problems, such as individual views of "good" political environments vs "bad". "


    One pattern that arises from history where gov coercion exists in markets is that volume is necessary to deal with the additional fixed costs imposed by gov regulation. Gov price fixing means an arbitrary increase of fixed costs.


    To overcome the additional arbitrary fixed costs a business will need volume. This is a classic outcome of gov coerced markets. The rich will get richer and the poor will get poorer. Big companies will get bigger and small companies will go away. They have to. It makes more sense to have one compliance department that can handle the combined assets of two different companies, then to have two compliance departments roughly the same size in two different companies.


    You see this pattern in banking. Years ago we had about 35,000 banks. Just within the last 10 years or so, we had about 11,000 banks. The number of banks keeps shrinking because the arbitrary fixed costs of gov regulation creates the economics for economies of scale. The predictions are that in a few years the number of banks will be closer to 3,500. If you look at Europe there are no community banks.


    The point of gov regulation was never to protect the consumer. That's just the con job sold to the public to let the big players cartelize the system by regulating their competitors out of business.


    So the strategy here to protect yourself is to start thinking about who these survivors will be. Warren Buffet invests in Wells Fargo and Bank of America. Buffet is the classic cartel advocate. He praises gov, pleads for more taxes (that he will never pay), pushes for estate taxes that force the sale of assets that he can pick up at a discount, and thus he gives us some idea of who he thinks the survivors will be based on who will prosper in the growing environment of political favoritism. We have to do the same thing. We have to look for these types of survivors, because life will go on. People will eat, need clothes, shelter, and want to have some fun. The world will not end and it won't be Mad Max. What you will have is the perpetual mediocre lifestyle of the average European. However, the people that realize that this is happening have an advantage. They basically find a way to invest in the ruling elite and become a second estate of sorts.


    We have to realize that if more gov regulations lead to more cartelization, then someone is going to come out on top. Its no longer just fundamentals that drive price, though that still is important, but realize that gov regulations favor size. So we have to factor that in and think about who seems to be in the best position to take advantage of the political system.


    Its like finding a way to invest in the aristocracy of Europe during the age of absolutism. Call it the Superiors and Preferred (S&P) index. I see it as using the lessons of history as a way to protect yourself.
    24 Feb 2013, 06:06 PM Reply Like
  • Hi


    I just stopped in to say hello as Interesting Times mentioned this site as a way to talk about ideas and people are friendly. Being new i will just read a while before i post..


    Just one question as i followed the articles on the commodities. Does anyone see gold dropping alot? or silver? Say gold to 1k and silver to 22 dollars?


    I do not think it's possible, but looking for others unbiased opinions.


    24 Feb 2013, 03:04 PM Reply Like
  • If you click my name and consult my profile, you will find my comment stream, which includes a number of comments on this topic. Each comment leads to a blog (many of them Concentrators like this one and its 253 prior versions, plus others on other investment topics, plus a political arena). You can click on the box near the top of each blog that will allow you "To track new comments", then you can follow those threads. It is also possible to "Follow" those whose comments, blogs and articles you wish to track.


    A summary of my personal position:


    I believe that Gold (like any commodity, but particularly one so heavily manipulated) COULD be driven to very low price levels for a brief period of time, but that those prices are really not sustainable. Historic prices reflected a global economy which is dead as the dinosaur, one in which third world sources featured sweatshop labor costs, zero environmental rules, and rich new finds with very high value deposits. Now we see places like Chile, Mexico and China rapidly ratcheting up labor costs - enforcing environmental rules with real teeth - and the life of mine gauges of some of the world's best gold fields edging down toward "empty".


    No mine can continue to operate once the price for their product drops below their production cost, and the average for the entire industry is already somewhere around $900 or more. But like all averages, there will be many mines which have production costs higher than that, so they will quickly disappear as the price ceiling drops.


    The demand structure (which is grossly detached from the manipulated pricing structure) sees huge inflows to both traditionaly strong buyers (central bankers, India, the Middle East, and SouthEast Asia) and China. Despite being a premier gold producer, China is now importing large quantities, with no end in sight.


    I will be surprised to see the gold price hit $1250, even though some equities (like SAND, one of my favorite streamers) are already being priced as if gold's spot price was there.


    Silver is a very different story, and is the poster child of manipulated markets. For a long time I have been pointing toward a long sojourn around and below $28, which I would view as fulfilled at this point. Prices could spike down a great deal, it all depends upon what the manipulators who control silver want, and that is not currently clear (it took me over 6 months to identify $28 as in intermediate goal). Overall I believe we will see a deep down spike (and yes, the current state of affairs COULD be that, though I suspect not) which will be severe but short-lived, sustained just long enough for the insiders (which may well include a number of nation states / central banks) to sweep up the little retail investors at a steal of a price.


    In the end only those with nerves of steel will last through the process.
    24 Feb 2013, 03:40 PM Reply Like
  • Thank you for your opinion..
    24 Feb 2013, 04:38 PM Reply Like
  • This is what I mean by malaise. Life goes on, but it struggles to create the sort of dynamic increases in our standard of living that we could otherwise have. Basically, fiscal and monetary policy are at odds.


    "Compiled from 85 data sources, the CFNAI index indicates economic activity is sporadic, with minimal inflationary pressures. As we wrote in last week’s weekly, recent economic reports tell conflicting stories, which may frustrate investors and policy makers. But the main theme in Q1 is that the payroll tax increase has stalled the economy, at least for now. "

    25 Feb 2013, 11:02 AM Reply Like
  • I think the price of gold and silver will climb from here till possibly mid March. Expect it to stabilize then and drift around now that contract expiration has hit today. Do not know what levels down we will test this summer starting late April through late July or Aug. This is just based upon the past performance all averaged around in my head.


    1k gold and 22 silver would be extreme but the manipulators know where they are going we do not. I dont think they want to push it down so far that everyone panics and the Indians and Chinese buy it all. Just a thought but maybe as TB said they do it so they can buy it all. There is no rule of law with the margin calls or size of contract positions etc.... so they can essentially get away with anything as we have repeatedly seen.
    25 Feb 2013, 01:08 PM Reply Like
  • This is the type of thing that will add to unemployment, and unemployment means people will tend to favor savings assets and not CPI assets. Again, more reasons to expect inflation to be held down and interest rates and equity prices. In other words - malaise.


    I guess it would also mean keeping gold prices down too, as gold is often used as an insurance policy against inflation

    25 Feb 2013, 01:41 PM Reply Like
  • This is a great example of how Euroscares can cause capital flight to the US and push down our interest rates. (10 yr at 1.88 so far). Its the same thing that happens with labor. In the 1880s and 1890s, the highly taxed and regulated economies of Europe caused such a poor labor market, that it created a labor flight to the US. In this case wage rates get pushed down. Capital flight does the same thing. The additional supply of capital, like labor, pushes down yields on bonds.

    25 Feb 2013, 02:13 PM Reply Like
  • The 10 year rate just blows my mind. The market has become paranoid schizophrenic as well as manipulated. I assume the manipulation has caused the fear that lead to the paranoia which created the schizophrenia but I am afraid to commit to that theory.
    25 Feb 2013, 03:22 PM Reply Like
  • DG


    I think today may be a wake up call for many!!


    Thanks for you comment, appreciate it..
    25 Feb 2013, 04:59 PM Reply Like
  • 22 September 2013, German election cycle. Based on todays thriller I think that will be an auspicious day for sure. Unless of course we have had a tempest break out of the tea pot prior to that day or things change in Deutschland for the better, soon, one would imagine, or hope at least.


    I am beginning to think I am standing in a line for a really frightening roller coaster ride and wondering.......
    25 Feb 2013, 05:51 PM Reply Like
  • Sequestering the Sequestration...



    A quote that jumped out at me:


    "On some level, investors have been conditioned not to get scared out of the market by the maddening games of budget chicken in D.C."


    Nor should we react in any other way. Our Federal spending is grossly overweight, and trimming less than half of one percent of the budget (and the budget STILL allows for a high rate of net growth in government) should be cause for alarm because its too LITTLE, not too much.


    "Unlike the debt ceiling measure or the failure to pass the bank-bailout bill the first time around in 2008, sequestration holds no chance of sudden, deep financial-market disruption or forced selling."


    An interview with the new Sec. Def. keeps resonating in my mind like a bad limerick selling something...


    He answered a quick offhand question about Sequestration with (from memory here) a lamentation that, just as the WO has been screaming, it will be "draconian". Why, he is looking to have to layoff almost 400 civilian employees at the Department of Defense if the sequestration goes into effect.


    400. No kidding.


    "Perhaps, at minimum, the market is suggesting there's no need to get worried until the run-up to a potential government shutdown, or yet another debt-ceiling argument in the summer."


    Laying off 400 surplus civilian subs at the DOD is going to shut down the guvmint? Really?


    "There are offsets to the fiscal headwinds


    "Though less dramatic than the widely watched federal budget showdown, state and local governments were reducing outlays and payrolls substantially for most of the economic recovery that began in mid-2009. By some measures, this state and local fiscal drag amounted to 0.4% of national GDP in 2010 and 2011, and somewhat less last year. True, the sequester will pressure state budgets anew. But more broadly, the public sector outside of Washington is about to stop restraining the economy for the first time since the recession."


    Some common sense...


    "Residential fixed investment – the building of homes – should rise by more than half the amount the sequester will withhold from the economy, as just one example."


    Wow, is the MSM actually talking (however reluctantly) about the parasitic effect of the bloated government tick latched onto our collective necks?


    25 Feb 2013, 06:16 PM Reply Like
  • TB, it appears denial of press access to the golf outing with Tiger Woods had "screwing the pooch" overtones.
    25 Feb 2013, 06:28 PM Reply Like
  • I was shocked to hear todays volume was triple what Friday's was. I am old school so i think a correction might be coming. Does anyone disagree and i would appreciate the reasons why?


    25 Feb 2013, 08:15 PM Reply Like
  • I tend to disagree, at least for 2013. The Fed is still growing its balance sheet by $85 billion each month. That's a huge consumption subsidy for the markets. I think it will create a floor, and any pullbacks will probably be healed. However, I was thinking we might get to 1600 on the S&P, but every time we start heading towards 1550, something seems to happen to create the risk-off trade.
    26 Feb 2013, 06:43 AM Reply Like
  • Balancing on the head of a pin...


    The Fed has the power to accomplish this much, though they are not known as a particularly "nimble" organization. More likely to use a sledge hammer every time, even though they have many other tools in their box... So we may see the longest and flatest trading channel in history.


    The problem is finding the exceptions to the general rule, when it comes to American equities and commodities. Personally I consider the American markets a dark and gloomy place to invest right now. High dividend stocks like PSEC are about all I have in my portfolio these days, and few of those.
    26 Feb 2013, 07:54 AM Reply Like
  • GS cut gold to 1600/oz for 2013. I don't care if they get the price forecast right or wrong for the time frame but I found their reasons for the cut so comical i thought i would post a link to it here.

    26 Feb 2013, 08:22 AM Reply Like
  • I agree with Tripleback on the US markets. It is being manipulated to a degree that makes an intelligent investor very nervous.


    Those on fixed income are backed into a corner when it comes to choices for income producing investments. Managed bond funds have gravitated towards hi-yield issues in order to bolster returns- Not a comforting situation. Obviously treasuries will be kept to the floor for at least through next year. I have found that emerging market debt is a better return possibility. The risk is BETTER in EM bonds since they are held to higher standards than those for mature countries. Since they are perceived to be riskier (not) they yield better.


    As to equities we must remember that that lowering tide will take most boats with it, even emerging markets equities. I have maintained a portion of assets in US dividend growth stocks that have been returning (as a group) in excess of 10%. I am afraid that they also will be subject to that ebbing tide. I am hedged quite well with put options for the three major markets in place


    I have to thank Jon Springer who brought my attention to 'Frontier' countries and their equity markets. His reports on Sri Lanka and Mongolia are intriguing indeed. Such vehicles may be real opportunities in bad world market environments.


    Commodities are a different breed of cat responding mostly to economic demand although the manipulators often have their way and create ups and downs where there shouldn't be any. Tripleblack pointed me in this direction and I have made some toe-in-the-water investments here.


    I'm of an age where starting another business is one possibility but not very appealing to me. I've relied on trading for income for quite a while and believe that the nimble still have opportunity there.


    I am long SLV, WITE, SAND, SLW, KGC and several emerging market ETFs- both equity and income.
    I am short with Puts in Dow Jones, S&P and Nasdaq.


    26 Feb 2013, 08:44 AM Reply Like
  • WT,


    Regarding those put hedges, doesn't this force you to try and time things pretty closely?
    How do you know when to close them out?
    26 Feb 2013, 09:09 AM Reply Like
  • Tampat-


    I buy the PUTS in maturities out at least six months at purchase and about 5% out-of-the-money. I've been eaten away by the market gains over the last few months but days like yesterday give some satisfaction. Since I look at them as 'insurance' I will probably close them out two months prior to expire and renew. I had good fortune with QQQ when Apple was doing its swan song.
    I had some VIX options but closed them out at a loss back in December. I think they are a sellers delight for the most part.


    Hope this helps-


    26 Feb 2013, 09:17 AM Reply Like
  • Thanks WT.
    I have tried that in the past but mostly seem to always get the timing wrong and get tired of losing on the puts, but I understand the insurance aspect.
    The only time it did well for me was during the 2008-2009 downfall. I was stunned at how high and how fast the puts rose in value, the toughest part was recognizing when the bottom was in.
    26 Feb 2013, 09:59 AM Reply Like
  • Contract expiration over gold/silver up. I finally got one right or wasnt out manuvered by some manipulator....or are they just waiting, giggling and laughing.
    26 Feb 2013, 06:41 PM Reply Like
  • DG-
    Like regression to the mean?
    The mean eventually win over time no matter what?


    At least you got a few moments of satisfaction!


    26 Feb 2013, 08:02 PM Reply Like
  • Here's a possible scenario. Italy goes for more instability. So in the name of ending "austerity", spending goes up and then they fall for the "well, we will just raise taxes to pay for it" line, and the result is capital flees the country. Their deficits start to grow, the yields on their bonds start to climb back to 6% or 7% for their 10 yr, and then the ECB comes out with another program (LTRO or some other such thing), which basically guarantees their bonds, the interest gets cut in half, and all those that seemed like idiots buying at 6% get huge gains and then look like masterminds.


    The other thing that might occur is what we saw pre LTRO, where capital flight from Europe pushed yields on Treas down even as equities were going up. Typically yields on treas go up as equities go up, becuase capital is being attracted to equities and bonds have to attract it back by yield. However, if a flight to quality from Europe is occuring, bond yields won't go up even though equities are. You see a bit of that today. Equities are rallying, and the 10 yr has been flirting with resistance at 1.80 (down from the mid 2s).

    27 Feb 2013, 09:32 AM Reply Like
  • Pretty soon we will be at .1% interest for the 10 yr just like Japan. Could be deja vu all over again.


    27 Feb 2013, 10:31 AM Reply Like
  • Too early to call for a new start of momentum, thus this still suggests malaise.

    27 Feb 2013, 10:07 AM Reply Like
  • The problem would seem to be that Italy is simply too large to manage as they have managed Greece...


    I have been studying the various scenarios, and I now believe that we may see a "reset" to an earlier plan which was examined pre-EU:


    1. Allow the southern arc (old term for the ne'er do wells that border on the Med) economies to leave the EZ, revert to their old currencies, and then default on them.


    2. Restructure the remaining EZ into the core for the US of E, with full fiscal union.


    3. Come to the rescue of the PIIGS after they have shed most of their debt and destroyed their currency. As members of the US of E, they would lose the last shreds of sovereignty, and be no more masters of their own fate than, say, Mississippi.


    This would replicate the American War Between the States, without nearly as much bloodshed.


    Föderalisierung ueber alles.
    27 Feb 2013, 10:37 AM Reply Like
  • trip: That could make sense. But I see a big problem. Actually, two problems. The UK will not merge into any EU super-government and give up the Pound. Second, France isn't that far from being another "Mediterranean border country" itself. It should start becoming a noticable drag on the EZ sometime next year, is my best guess. Will Germany be the wide shoulders? Or will they blow off the whole EZ thing as a bad idea? Government change in Germany is necessary for that change in direction, but I imagine. the average German citizen should be ready for that change by the 2013 national election. Especially if their GDP falls.


    None of it looks good from where I stand. So, when will the US markets notice the continuing downward EZ spiral and crash again? Third quarter of 2013? Second?
    27 Feb 2013, 04:54 PM Reply Like
  • Not surprised that the UK won't give up the pound to join a new EZ (aka, US of E)... They didn't the last time around, either. I would suspect that, at least at first, the US of E will tolerate this, extending the same exceptions already baked in for the UK. France, LOL, IS another Med border country... But it has a much larger economy and some aces (high quality nuclear power grid, still undamaged by renewable contamination of the common grid) that Germany and the other norrthern tier states need. France is, as usual, its own worst enemy, but unlike the PIIGS its problems are more amenable to the medicine which a quick submergence in a US of E with stern German financial standards would bring.


    I'm not predicting WHEN this takes place, but the upcoming German elections in September will really have little bearing on this. BOTH sides in Germany want a US of E (only the very conservative and nationalistic Bavarians disagree, and they are a minority splinter party).


    One thing which I still think will happen is a weakening of the Euro, ratcheting back to parity with the US$. This will be viewed as a PLUS by some players in the US, but equities that need to export to the EU will be hurt.


    I believe an important metric when this gets rolling will be the persistent gap between WTI and Brent oil. As the Euro sinks, this will at first widen even further (absurd gaps could occur short term), and be ascerbated by a strengthening American export presence in oil and LNG... But then I believe the 2 standards will start to pull much closer, helping Europe with the transition (and it may be a political advantage for the new US of E elites running things).


    I believe we could, indeed, see another Euro crisis start up toward the end of this year, perhaps Q3, but more likely Q4.
    27 Feb 2013, 05:42 PM Reply Like
  • TB-
    If Merkel remains in power the leadership will be there for a US of E, but I don't think it would include the Scandinavians who seem to be doing just fine, thank you very much. The Eastern European group would add to the positives but the Med crew could be the stopper. The others might not want them in the nest, at least until the current mess is cleared up.


    I just can't see the Brits joining in either for reasons mentioned, unless they can cut a deal for German LNG.


    28 Feb 2013, 03:44 PM Reply Like
  • The Scandinavians will go along with a Federalized EU (ie, US of E) for the same reasons they went along with the EU. The US of E iteration of the EU will be designed to "fix" the mistakes which crept into the alliance from the beginning. All along the Eu could only go one of two diametrically opposed directions: Either into a tightly fused Federalized US of E, or into a chaotic and fantastically costly breakup. The Europeans are so world weary that they simply don't have the energy and moral vision to shed blood for something as ephemeral (to them) as a slightly more firm national identity...


    But I could be wrong. Maybe more of them are willing to lay the groundwork for a fresh slate of future regional conflicts on their own borders than I think.
    2 Mar 2013, 03:10 PM Reply Like
  • The question might be whether the marginal players- Ireland, the Balkans, Eastern Europe will have to have faith in the entity. Rethinking my comment earlier the Scandinavians are probably essential to the success of the project. The others would look to the Germans and the North countries to provide the strength. Will the Med countries gain entry- I suppose that would be based on their particular circumstance. The Germans will have veto power.
    4 Mar 2013, 08:34 AM Reply Like
  • Their problems will only get worse.
    4 Mar 2013, 10:23 AM Reply Like
  • Financial Times- Bill Gross rates currency trade standouts.



    27 Feb 2013, 02:12 PM Reply Like
  • I thought this article outlined well the potential risks coming down the road from the bloated Fed balance sheet which has little accountability for asset value fluctuations. A trend up in interest rates will create a mark-to-market loss on the Fed's long term security holdings, but since they don't have to report it -- who cares? [sarc]


    "The potential losses are unprecedented in the Fed’s 100- year history ... The Fed doesn’t mark its portfolio to market, and its losses may be only a fraction of MSCI’s totals because the central bank could hold the bulk of its assets to maturity. The central bank cannot go bankrupt and can continue to operate with losses on its books. 'The political backlash could be particularly acute given that a good portion of the funds that would otherwise be remitted to the Treasury would be transferred to large financial institutions in the form of interest paid on reserves' ..."


    Sounds like pure magic for the TBTF while taxpayers continue to foot the bill.
    27 Feb 2013, 02:39 PM Reply Like
  • One reason I have been predicting for a long time that the Fed would soon stop paying interest on those reserves...
    27 Feb 2013, 02:55 PM Reply Like
  • MJ-


    Is this a great country, or what?


    27 Feb 2013, 03:12 PM Reply Like
  • I still think they should be *charging* them interest on *excess* reserves. But, IIRC, it's a little late as reserves have been declining.


    27 Feb 2013, 03:33 PM Reply Like
  • The Fed pays its "profits" to the treasury. Profits is a strange word to use, because profits are just wages for owners. We often hear that the Fed is not part of the gov, and that it is just a "private" organization that is "independent". Well, if that were true then why are the "profits" paid to the treasury? Typically, Fed notes going into the treasury are considered taxes. So if the Fed is delivering Fed notes into the Treasury (who is not supposed to be their owner), then instead of calling that profit, shouldn't it be called taxes. Of course if it were, the public might start to catch on what a central bank is really all about.


    At any rate, the Fed delivers is "profit" to the Treas. So they earn more on their assets than what they pay on their liabilities. If they did have to keep paying interest on reserves, and they had to keep paying higher rates, then eventually the negative spread would eat them up. So even if they stop paying interest, if they sold, they would have to sell at a loss if rates got away from them. The loss would eat up their profits from the spread, and they would have nothing to deliver to the Treas.


    Now here is the trick. They have a loss, and if the loss was greater than their equity, they would have no place to put it, except as an asset. They would basically book the loss as an asset on their balance sheet. The asset is basically a "receivable" from the Treas. In theory this "asset" would just keep building up, until at some time in the future the Fed started making a profit again, and then what would happen is that they just start chewing away at that "asset" until it is gone. Then they would start making "profit" again and start delivering that to the Treas.


    What I love is booking the loss as an asset. In a way you can do this with an NOL. If you can substantiate enough income, you can book a loss as a deferred tax asset, which is sort of like the Fed's possible "due from US Treas", which is what a deferred tax asset is.
    27 Feb 2013, 04:01 PM Reply Like
  • Data from EconIntersect:


    Insider buying dropped again with insiders purchasing $14.89 million of their stock last week compared to $27.62 million in the week prior. Selling jumped sharply with insiders selling $3.46 billion of stock last week compared to $1.29 billion in the week prior.


    Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 232.51. In other words, insiders sold almost 233 times as much stock as they purchased. After going up for 5 weeks in a row, this is the highest the ratio has ever been since we started computing it in June 2010.




    In spite of this amazing data...all time DOW highs coming tomorrow, Friday?
    27 Feb 2013, 03:04 PM Reply Like
  • All those Bernanke Bucks being put to work in between the sheets support mode?


    27 Feb 2013, 03:10 PM Reply Like
  • MS-
    Is there somewhere a count of how many companies total, or even better how many shares per company (net)? I know that that data probably exists, I just don't know if it is readily available?
    That would be a great statistic.


    27 Feb 2013, 04:11 PM Reply Like
  • WT: I know this isn't the exact answer you're looking for, but it might be a start:

    27 Feb 2013, 04:22 PM Reply Like
  • MS
    That is a big help. I wonder if the lock-up releases play a large part in the sales. I'll do some digging on that


    27 Feb 2013, 05:21 PM Reply Like
  • Forgotten but not over. Fukushima is still spewing radiation and now they can not find the radioactive fuel rods. THIER MISSING!!! Which only means they have left the containment vessel apparently at reactors 1, 2 and 3. THIS IS NOT GOOD!!!



    "After drilling a hole in the containment vessel of Fukushima reactor 2, Tepco cannot find the fuel.
    As AP notes:The steam-blurred photos taken by remote control Thursday found none of the reactor’s melted fuel."


    I recall noting just a few days after this started that since they could not get the pressure up in the reactors it could only mean that the containment vessels were breached. Now nearly 2 years later there is evidence.
    27 Feb 2013, 03:32 PM Reply Like
  • (CPST): Thanks to gene_genome at InverstorsHub for the post.


    Near-term dilution is off the table. Fits with the 19(?) quarters of improving metrics.



    27 Feb 2013, 04:13 PM Reply Like



    27 Feb 2013, 04:17 PM Reply Like
  • This could have an impact on your oil and gas plays. I know it will have an impact on OHIO.


    Kasich’s Severance Tax Increase - A View from the Keystone State


    Pennsylvania Coalition for Responsible Government


    As Ohio considers drastically increasing its severance tax on oil and gas production, the citizens and legislators of the Buckeye state would be well advised to take a look at their neighbors’ experience to the east.


    In February of 2011, Pennsylvania enacted a new and financially burdensome “impact fee” on horizontally drilled wells. The operator of each well drilled pays an initial fee of $40,000 to $60,000 and then decreasing payments over the next 15 years. The total cost of the impact fee for each well ranges in a sliding scale (depending on gas pricing) from $190,000 to $355,000 per well. This adds approximately 5% to 10% to the entire cost of the drilling and completion of a well.


    In the run up to his gubernatorial election in 2010, Tom Corbett (R) promised not to raise taxes, and the above listed “impact fee” was a convenient way to gain additional revenue while not technically breaking his no tax increase pledge.


    Simple economics demand that if you tax something, you get less of it, and that has proved to be the case in Pennsylvania. Some areas of Pennsylvania are extraordinarily productive from the Marcellus Shale and drilling has continued unabated in these areas that are called the Marcellus “core” areas of northeast and southwest PA. Portions of Pennsylvania outside of these “core” areas have poorer reservoir development and are marginally economic due to a combination of lower production rates, low gas prices and the costly impact fee.


    This “double whammy” of significant additional costs and declining natural gas pricing caused most companies in the non-core areas to shut down drilling operations beginning in mid-2011. Overall, Pennsylvania saw its drilling rig count decrease significantly since the imposition of the Impact Fee. Since companies contract rigs on a long term basis and make decisions on permitting, drilling and completion long in advance of the actual drilling, the drop in drilling rigs in the Keystone state began to be felt about 9 months after the fee was imposed. The drilling rig count rose steadily from 2008 through 2011 and has since seen a nearly 50% decline.


    Just as Pennsylvania saw a drop in drilling after the enactment of an impact fee, so too will Kasich’s proposed severance tax have a negative impact in the non-core areas of the Utica Shale in Ohio. Although we have seen reports of truly astounding production rates of oil and gas in the core area of the Utica, the Utica Shale will NOT have those production rates throughout the entire play. It is likely that large areas will be marginally economic, just like the other shale plays such as the Barnett, Eagle Ford and Marcellus. It is in these marginally economic areas that the Kasich severance tax will cause companies to decide not to drill and thus deprive large numbers of Ohio’s citizens from exploiting their private property rights beneath their property and the income that would accrue to them.


    It appears that Governor Kasich wants to kill the goose before it has had opportunities to lay very many golden eggs.
    27 Feb 2013, 05:46 PM Reply Like
  • Thanks, DG. I've been following this for some time. The Pittsbugh Post Gazette has been doing a great job covering the newly implemented fees. After Corbitt raised those licensing fees, many riggers moved out of the state and began drilling the Utica shales, in north east and eastern Ohio.


    What's not mentioned is that Corbitt is using these new fees in part to bankroll a fund for cleaning up after disasters, and to hire more on sight inspectors.


    I park that in the "yeah...right" category.


    Looks like Kasich is following the same (stupid) thinking.


    27 Feb 2013, 05:58 PM Reply Like
  • I can't help but wonder if the governors of Ohio and Pennsylvania are taxing the shale drilling because they think the populace view that industry as "dirty and nasty" and deserving of taxation. That is, it is a politically "free" tax.


    Taxing and then using the money to "inspect and protect" sounds like excellent political theater. Who knows, the money may actually go to hiring knowledgeable inspectors and water sampling labs and etc.


    Or it may go to "friends of the governor" as swill in the trough.


    Then again, northern pols could be more honest and straightforward then the Texas variety. <snark>


    (thanks, MJ, I like your "snark" so much I am adopting it ;-)
    28 Feb 2013, 01:11 AM Reply Like
  • SH,
    I use [sarc] sometimes as a coping mechanism for the distress I feel when I see the long term strength of this country being traded off for political/economic short term gain. My patriotism runs deep as an immigrant who owes everything to the US -- but I wonder whether generations to come will view us as we view today the Roman Empire or the British Empire. We won't be around when the kicked can hits a brick wall, however, so who cares right? [there's that sarc again] :)
    28 Feb 2013, 06:17 AM Reply Like
  • Ehh, sarc, snark, it's all the same thing, man!


    Who was it that originally used that line? With different first two words, of course.
    2 Mar 2013, 05:12 PM Reply Like
  • Off topic -- but beautiful 5 minutes of history long forgotten by many. Pan Am's luxury Pacific Clipper took A "Long Way Home" after the attack at Pearl Harbor.


    Good reminder that life (or the market) as we know it can all change in a split second:
    28 Feb 2013, 07:06 AM Reply Like
  • Mercy, nice story clip.
    28 Feb 2013, 01:06 PM Reply Like
  • I am a huge fan of the Clipper... thanks for that link.
    28 Feb 2013, 01:24 PM Reply Like
  • absolutely fantastic MJ... sincerest thanks for that... One of my favorite aircraft of all time...I have a large framed BW poster print of a clipper flying by the statue of liberty, had it above my mantle for several years... such an inspiring and iconic image, but I did not know the backstory... might have been taken of the very same flight... anyway, just marvelous. Someday would be so cool to see a modern fleet of similar aircraft plying the worlds oceans...maybe the hybrid airship ideas will develop in that direction.. anyway, thanks again.
    28 Feb 2013, 02:42 PM Reply Like
  • Those crew members should have received Congressional Medals of Honor!


    28 Feb 2013, 02:50 PM Reply Like
  • Clean coal created at OSU in ohio. This could be a game changer. Notice that he is considering creating a company. No name yet.

    28 Feb 2013, 12:57 PM Reply Like
  • DG: That's really encouraging!


    I hope they continue to do the research and succeed.


    28 Feb 2013, 01:36 PM Reply Like
  • Feb 2013 sees largest demand ever for silver at 3.37 oz's.

    28 Feb 2013, 01:09 PM Reply Like
  • 3.37 million oz's. Small typo there.
    28 Feb 2013, 01:29 PM Reply Like
  • Gold demand for 2012 beat 2011 in both tonnage and value.

    28 Feb 2013, 01:18 PM Reply Like
  • More shades of Gresham's Law.

    28 Feb 2013, 05:11 PM Reply Like
  • JH-
    Now we know why they pulled their gold back in house.
    Methinks a run may be in the offing?


    28 Feb 2013, 10:34 PM Reply Like
  • I posted that Argentina story yesterday on the EU concentrator...


    Several SA authors believe its a near-certain Argentina default (again). I agree. They will also try the same remedies, but this time limit their offerings to their home market in Argentina.


    The US and New York keep insisting on their odd fixation on some weird concept called "...the rule of law".
    1 Mar 2013, 09:29 AM Reply Like
  • "I posted that Argentina story yesterday on the EU concentrator..."


    Its impossible to be TB with up-to-date info.
    1 Mar 2013, 10:07 AM Reply Like
  • Good article of scope by SA author Stephan Dube "Shale Gas Revolution: Top Promising LNG Export Investments"
    28 Feb 2013, 07:45 PM Reply Like
  • Since I have discussed this one in the past on the QC -- wanted to give those interested a heads up that my confidence in Atlantic Power (AT) management was completely jolted last night.


    After management represented repeatedly that current contract locks would support the current dividend through 2016 -- a sudden 60%+ dividend cut is not acceptable to me with any ex post facto explanations. The general sequestration panic I expect over the next few days is influencing my sell timing -- but I just wanted to give you a heads up that I am closing this position. It was one of my few long term holds during which I had great returns. But, my low cost basis is not enough to avoid booking a loss in this sale transaction. Getting more convinced every day that short term trading is the only game in town for me. One broker reported last night that RIGHT BEFORE the earnings wire release -- many bids got pulled off at the last minute in after hours trading. No insider trading I am sure [sarc]. Now down 36% in extended hours since yesterday's close. Here's a discussion thread also:
    1 Mar 2013, 09:17 AM Reply Like
  • Left Thursday night for a little R&R in the wine country. Just catching up with the Insta. Re AT...
    Even the best analysis can be be for naught when our DD is stymied by outright fraud, deception and opacity.
    Even the once-best like AT can take us for a ride.
    Ouch. We can "hope" for a rebound but as Jesse Livermore warned nearly 100 years ago, "When I have to depend upon hope in a trade I get out."
    I'm out of AT and will re-deploy the diminished capital where it stands a far better chance of growing than it does in AT.
    4 Mar 2013, 01:13 PM Reply Like
  • MJ-


    Insider trading? Nah-


    They were just the clients the company was looking out for.


    I think that you are correct. Investing just supports the Fat Cats who are the parasites of the investing world. We are simply the source of their bonuses.


    Believe nothing- Trust no one and be a nimble trader.


    Hope you were able to get out in the extended trading window.


    1 Mar 2013, 09:29 AM Reply Like
  • Yes WT -- and my tin foil hat is starting to look bigger than HTL's! LOL
    1 Mar 2013, 09:48 AM Reply Like
  • Love it!


    1 Mar 2013, 10:23 AM Reply Like
  • "Personal income plunged 3.6% in January, the biggest drop in 20 years, which is more than both the -2.4% consensus forecast and the 2.6% increase in December, in part because income was lifted in November and December by people taking what would normally be first-quarter compensation before the tax hike. Consumption rose 0.2% in January despite the drop in income because spending in January was supported by income received last year. Prospects for continued consumption growth, at least in the next few months, are dimming, as previewed in a spate of recent earnings warnings from retailers and restaurants."


    "The fact that income fell the most in 20 years in January is a reminder that the press is being played by the President. Today’s sequester is a big deal – the federal government almost never cuts spending – but the tax increase on January 1 is having a far bigger economic impact, especially since there has been no income growth even before taxes for months outside of the artificial, pay-it-forward increases in November and December. But you would never know it was a big deal from reading the papers. "

    1 Mar 2013, 10:28 AM Reply Like
  • The Fed's have NOT "cut spending", assuming sequestration occurs...


    They will cut the rate of growth in spending a tiny slice.


    When the MSM gets it right one day, it will be the miracle of the age.
    1 Mar 2013, 10:36 AM Reply Like
  • "They will cut the rate of growth in spending a tiny slice."


    We may see a bit of fear play for the next few days or so. Then when the sky doesn't fall, they will realize the Fed is still growing its balance sheet by $85 billion a month. That support will then embolden people to attempt to bid up equities yet again.

    1 Mar 2013, 10:53 AM Reply Like
  • Agree JH. But I think the media smoke and mirrors will dissipate fast when folks see their work hours reduced and their government employed neighbors out of a job, and government contracting companies reducing guidance. I don't think euphoria is likely to grow deep roots, although more can kicking will likely surface.
    1 Mar 2013, 10:54 AM Reply Like
  • "when folks see their work hours reduced and their government employed neighbors out of a job, and government contracting companies reducing guidance"


    That's the tough part. You have to wait for the public spending to be replaced by private spending. Eventually that public spending would be replaced by private spending, and then the private work hours replace public work hours, gov employment gets supplanted by private employment, and gov contracting gets replaced by private contracting.


    But during that reset period you have to be ready to endure the moaning. That's why, if you really wanted to shorten that period, what you would do is reduce expropriation taxes (income taxes) and make them far less complicated, and severly reduce the power of the regulatory agencies. By doing all this, the costs of private production would fall dramatically, private investing would grow as ROI grew due to the lower fixed costs made possible by lower regulations and expropriation taxes, and then employment, income, and private consumption would pick up.


    The shouts of joy from those who standard of living begins to drastcially improve will start to drown out those still complaining about loosing their gov spending.


    Given all that though, sequester is still peanuts compared to what the Fed is doing. So even though there will be some pressure on economic data, the Fed is providing strong support. We may not get a run up to 1600 on the S&P, but I don't think we drop below 1500 either.


    2014 is when that will have to be reassessed. There are LARGE macro changes on tap, and that has the potential to severly undermine the Fed's ability to get asset prices bid up.
    1 Mar 2013, 11:12 AM Reply Like
  • MSM won't get it right until they call the Presidential fear pedaling for what it is and points out the virtual promise to make negative economic effects as bad as possible in conspicuous, high profile areas/functions. Release of detained illegal/undocumented aliens shows the mind set.
    1 Mar 2013, 05:05 PM Reply Like
  • What if the pain they are intentionally inflicting on as many Americans as possible doesn't materialize or is not as bad as they have assured us it will be? What if allot of what they are meting out shows up in Democrat districts heavily reliant upon government operations like Virginia? They have embarked on a course that is very dangerous for them and could have consequences far different than they anticipate. Stopped out of Bonal International (BONL) @ $1.30 for a small loss. Sakari Resources ADR was acquired and liquidated for a small loss. Dividends make them about break even over the duration of the position.
    4 Mar 2013, 10:35 AM Reply Like
  • Background: I own quite a bit of Eaton corp. stock, ETN, after working there for 12 years (80s and 90s) and getting good 401k matching as stock.


    The pps of ETN has about doubled since its low of last year. Almost a straight line increase since. DOUBLED! For a big industrial stock that makes lots of "stuff" for other companies to use in their products.


    Why? Yes, they have good management and yes, they have a decent PE. Good dividend for that stock class, too. But has their "value" really increased that much? Was it "fear and loathing" that pushed down the stock last year or some circumstance that increased it so much the last 6-8 months? Aren't they exposed to the EZ mess? Yes. Slowing US growth? Yes.


    Someone(s) is buying this stock at a relatively high price and hasn't paused for months as the price doubled. Are Mutual Funds buying to fatten their portfolios as "investment advisors" sell equity dividend yielding funds to interest rate shocked retirees?


    TFH pulled down snugly over bald spot ;-)


    WTF? Comments?
    1 Mar 2013, 12:47 PM Reply Like
  • SH-
    Eaton is a solid dividend stock that increases its dividend regularly, and has done so for many, many years.
    Its dividend growth rate is over 12% annually.
    The P/E is around 13 and the growth rate of the stock is almost 13% with a projected growth rate of over 7% for the next several years.
    The current policy is to return over 45% of their cash to the stockholders. Their exposure to Europe adds a level of insulation to the US investing conundrum and their management is quite adept. You will likely continue to see growth in dividends as well as stock price in the future, as you would expect with periodic interruptions primarily due to an inept government and world class greedy Fat Cats.


    You are fortunate to be holding the stock, IMHO-


    1 Mar 2013, 02:26 PM Reply Like
  • Thanks for the response, wind.


    I'm just nervous when a stock performs like ETN did over a short period. Doubling in 6 months when there is no "early 2009" market disaster just isn't normal.
    1 Mar 2013, 03:08 PM Reply Like
  • SH-
    I should have added-
    This stock is a good candidate for covered call writing. Since you already hold a bunch you could probably increase your return by 10-15%.


    1 Mar 2013, 03:12 PM Reply Like
  • SB-
    They went through a merger with an Irish company not too long ago that many said was just a gambit to reduce their taxes. I had sold mine before that so I didn't pay much attention but that could have contributed to the share increase.


    If it has you nervous consider putting a stop in place with enough spread to allow for short term "noise".


    1 Mar 2013, 03:23 PM Reply Like
  • SH, I view Eaton (which I have used some of their automotive products in the past) as a relatively quiet corporation sitting on a mountain of intellectual property, some of which is about to seque from niche player to mainstream hero...


    This would explain the accumulation by some large players.


    The world is changing, however, to a place where IP is just another word for property which has not been appropriated by a rapacious nation state "yet". The question is not IF this will happen, only when.


    If you are overweight and sitting on large paper gains, some re-balancing might be in order...
    1 Mar 2013, 07:16 PM Reply Like
  • trip, I have sold CALLS on a substantial portion of my ETN holdings this year and late last. Mostly as a hedge against a sharp pullback. So far all I have done is give up paper gains :-(


    Twice before I have sold large percentages of my holdings as the market, and Eaton, approached what I thought was a frothy top. Both times I bought it back much cheaper within 2 years.


    Long term it does continue to perform well. Management continues to impress me. I'm just thinking this might be another frothy time. The sharp rise this time may be a stretch for a "safe dividend" by investors who are retired or near retirement and want safety. My experience is there is no such thing short term.


    BTW, the PE shown on Yahoo Financial is 18. That is a bit high for an industrial, even Eaton.
    1 Mar 2013, 11:25 PM Reply Like
  • SH-
    ETN recently became an Irish company as you no doubt know since shareholders were sent a bundle of stuff. This probably bodes well. the dividend is $1.68 $ annually, a 10.5% increase and is taxable to Ireland unless you are a US resident.


    The entire dividend I believe is considered a return of capital- A result of the reorganization.


    I wish I had kept mine but never cry over making a handsome profit!


    2 Mar 2013, 12:01 PM Reply Like
  • wind: "...but never cry over making a handsome profit!"


    amen, brother!


    I admit I didn't know all of the implications of the "change of residence" for Eaton. I just figured the management know what they were doing. We will find out soon enough. But yes, that is a significant event that could be responsible for some of the run-up in pps.
    2 Mar 2013, 01:22 PM Reply Like
  • Credit Suisse analysis on ETN today rates it an outperform with an estimate that share price will increase by $10 pps. It's copyrighted material so I won't post it here, ETN appears very solid going into 2015.
    4 Mar 2013, 11:22 AM Reply Like
  • Welcome back, OG!
    4 Mar 2013, 11:39 AM Reply Like
  • Ditto!
    4 Mar 2013, 11:40 AM Reply Like
  • Hi OG. Nice to see you back.
    4 Mar 2013, 08:00 PM Reply Like
  • Thanks for the warm welcome, cyber buds.
    5 Mar 2013, 10:20 AM Reply Like
  • "The ISM manufacturing index rose from 53.1 to 54.2 in February, which is the highest since the index hit 55.8 in June 2011. Production rose to 57.6 (highest since Apr ’12), New orders rose to 57.8 (highest since Apr ’11) and the backlog of orders rose to 55.0 (highest since Apr ’11). ISM Chairman Bradley Holcomb said “everything is pointing in the right direction” for “a great start” to 2013. He said companies are not concerned about the sequester (aside from defense companies, of course) and they are not concerned about price increases."




    "How to reconcile a recovery in manufacturing with stunning weakness in personal income and nascent weakness in consumption? The most likely explanation is business confidence is strong because business leaders were assured the tax hikes were no big deal and most know firsthand their companies will not be affected by the sequester. They are making goods and stocking shelves in anticipation of faster economic growth. But consumers are already cutting back. January sales were supported by gift cards and were weak anyway. December sales will be weaker still if corporate guidance is to be trusted. Based on Q1 reports to date, the likely result is a GDP growth rate that is boosted by unwanted inventory growth in Q1, which means Q2 could be very weak indeed."
    1 Mar 2013, 02:31 PM Reply Like
  • I believe #2 is closer to being correct.
    1 Mar 2013, 07:18 PM Reply Like
  • Also this morning, construction spending unexpectedly fell 2.1% in January, after a 1.1% rise in December.


    Weakness in nonresidential construction may correspond to the anticipated end of tax breaks at the end of the year. But business investment in structures was already very weak in the last three quarter of 2012. The January construction report suggests further weakness this year.
    1 Mar 2013, 02:32 PM Reply Like
  • Hoop-


    It's such a cloudy scenario-


    Little 'official' inflation-
    Little consumer debt other than the housing debacle-
    Stocks offer much higher dividend income than fixed inc.-
    Corporations are flush with cash-
    Interest rates on borrowing are ridiculously low-


    I guess that if the little investor wants to get some income the market is their only option.


    I wait with everyone else and scratch my head waiting for that ephemeral pullback and wondering how much of those Bernanke bucks are really supporting Mr. Market and will continue to do so.


    Maybe we're just too smart for our own good?


    2 Mar 2013, 12:16 PM Reply Like
  • Yeah, its a hard call. A central bank is a consumption subsidy the same way Medicare is a consumption subsidy. They enter the market in different ways, but their effect is the same. They both rely on the gov's power of coercion to distort the equilibrium created based on voluntary demand and supply that results in capital erosion. On a balance sheet, when capital shrinks, assets shrink. In other words the balance sheet recedes and we call this situation a recession.


    However, our technology improves all the time even with the gov coercive distortions (it could improve even more without the distortions) so as long as the gov distortions don't get too far away from our ability to pay for the distortions, the inflated asset prices can be sustained. (This is actually known as the Tyrants Paradox)


    Here's one way it could work out. Gov distortions via Obamacare, Dodd Frank, the progressive income tax becoming even more progressive, etc could slowly outpace our ability to pay for those distortions. In which case a pullback in the S&P to 1400 might be countermanded by increased consumption subsidies from the Fed and we get back to 1500, but it doesn't last and we settle back to 1400. This cycle continues and you find yourself in a slow death spiral, where the fiscal distortions slightly overwhelm the monetary distortions and the result is the growth of technology can't pay for either of them.


    Another scenario is where technology grows slightly faster than the distortions, and then if a pullback occurs to 1400, the Fed can get it back to 1500 and it keeps going to 1600.


    We can also get a scenario where they equal each other and we get a pullback to 1450 and the Fed gets it back to 1550. Then it settles back to 1500 and we stay that way for several years (2013 so far is a good example of this).


    Now the really, really hard part is determining which scenario we are facing. Economic data is one way to tell. If the charts are all slowly trending down, and we are seeing more and more fiscal distortions like income taxes doubling, then we can have confidence the trend will keep going down.


    My view of the charts is malaise. Good data is constantly being offset by bad data. The charts are only slightly trending up, but the uptrend is very small. This should continue through 2013. 2014 is when things are scheduled to change. So pullbacks in 2013, I think can be repaired by the Fed. So in that case you would buy the dips.


    2014 is really going to be tough to tell. If 2014 winds up with the slow death spiral, then in theory you would want to liquidate equities and move to bonds. Thus when risk-off appears and you bought bonds at the peak rates before the risk-off flight to quality appears, then those higher yields will give you nice gains on the downturn. The other strategy would be to just focus on the equity winners, which will be the ones that can crawl to the top of the heap created by regulations and ones that can keep paying nice dividends even though their stock prices is falling due to the overall risk-off trade occurring.


    As I said, recognizing the landscape is critical. We have to watch the news for large macro changes, like Obamacare, Dodd Frank, QE, and then watch the economic data to see if technology is growing faster than the gov distortions can put the brakes on it.
    2 Mar 2013, 01:12 PM Reply Like
  • Hoop-


    You present a really interesting take on matters- Hope I'll be able to spot those changes when they come.


    2 Mar 2013, 01:59 PM Reply Like
  • If I can, I will communicate what my perceptions are and when I see things about to change. You can assign to them the value you think they are worth.


    I always comment for my benefit. I use it as a way to think out loud. Others respond to that, and sometimes their comments cause me to change my thinking because they offer something I didn't think about.
    2 Mar 2013, 02:06 PM Reply Like
  • jhooper: Very interesting comment.


    It would make a good short article with a little polishing and maybe a bit of expansion and citations.


    We are NOT in normal times. Just the Fed actions of recent memory make it an "exciting" time. I know I need all the help I can get in understanding what is going on.
    2 Mar 2013, 05:06 PM Reply Like
  • "We are NOT in normal times."


    You know, it just hit me. To some extent we are in normal times. These bubbles caused by gov coercion have been going on for thousand of years. In the recent history of the US you can typically look at some big trend in asset prices that is followed by a recession and then look a few years before the cycle to some gov policy that caused it.


    A great example is LM Shaw in 1905. He was using the US Treas to mimic a central bank. He was increasing the number of institutions for Fed deposits (growing the banking sector and thus credit), he was buying US bonds from banks (QE), and he eliminated the reserve requirement thus mimicing ZIRP. Then you had the panic of 1907. Of course we never hear about Shaw. All we hear is that the free market can't be trusted. Of course the gov intervention by Shaw simply meant that no free market existed. What you had was gov subsidizing consumption, distorting the market, running up asset prices, and when people finally figure out the PV of future cash flows don't justify the asset values, then nature forces the balance sheet correction.


    I've been working on a theory that a free market doesn't have a business cycle. In a free market, which is a coercion free market, price sensitivity would have the society always at the outer most limits of the production possibilities frontier. Individual industries would come and go, but the overall market would keep going up and interest rates would huver around 6% to 7% all the time. What we have interpreted as the business cycle are these periods of gov intervention of inflation via consumption subsidy, capital erosion, and then the laws of physics forcing a recession to make us pay for our mistake.


    My aim has been to try and find a good way to measure this, and find signals that will show the correction is coming. In 2006 the Fed made another classic mistake by misinterpreting inflation, and started to raise rates. That was a major pullback of the Fed's consumption subsidy and should have been a signal that the recession was coming. BB basically destroyed a bunch of Fed notes, and without those Fed notes in existence, they couldn't be used to bid up asset prices, so the prices fell.


    My hope is to one day get some others that understand my theory the way I do and can help me watch the data for signals and can help me refine what data I watch for a more comprehensive set of signals.
    2 Mar 2013, 06:27 PM Reply Like


    Speaking of measuring the effect of different stimuli I came across this little pastime gauge that varies risks to the market based upon varying conditions that the reader wishes to input. I would hope that an article by the designer would pop up somewhere.



    Have Fun


    2 Mar 2013, 08:59 PM Reply Like
  • "can crawl to the top of the heap created by regulations "


    Here's an example of someone I think can crawl to the top of the heap.



    Regulations are taxes, and taxes are fixed costs. The only way to overcome fixed costs is with volume. So, you need a platform with a skill set that can create that volume to take advantage of the subsidies regulations provide for large companies to become larger. In my opinion Wells is an example of this.
    3 Mar 2013, 12:54 PM Reply Like
  • I agree. I picked them as the winner from that pack soon after the meltdown...
    3 Mar 2013, 01:05 PM Reply Like
  • "I've been working on a theory that a free market doesn't have a business cycle. In a free market, which is a coercion free market, price sensitivity would have the society always at the outer most limits of the production possibilities frontier."


    I don't think your suggested theory is worth the electrons/paper required to present it. Business cycles will exist in any system which allows markets to decide where, how much, and what is produced unless one extinguishes changes in taste, differences of opinion, and mass psychology.
    3 Mar 2013, 08:07 PM Reply Like
  • Changing tastes won't explain system wide collapses. Only gov coercion can. Since we've never had a free market your claim can't be substantiated.
    3 Mar 2013, 08:45 PM Reply Like
  • Here are examples of other people expressing (though in not so many words) that regulations are taxes.




    In the end, any gov involvement in the markets, for things it cannot regulate, are just price fixing. Price fixing is what distorts the markets and means either a bubble is being created, or the bubble that was created is about to be popped.


    You could do similar articles on Dodd Frank, but whether you are talking about Obamacare or Dodd Frank, they are both just price fixing. Since the Fed has been working hard to get equities and bond prices bid up, the extra fixed costs via the price fixing from Obamacare and Dodd Frank, could bring those prices back down.


    Be warned though, even if they do, the Fed could pull them back up. Then we have to decide if we are on the verge of a downard spiral or malaise. Hopefully the economic data will give us a clue.
    4 Mar 2013, 09:14 AM Reply Like
  • :-) Part of the question revolves around what one considers "system wide" and which "system" one is concerned with. One also probably needs to regard technological innovation and "changing tastes" as synonymous. They are functional equivalents in many respects.


    4 Mar 2013, 03:21 PM Reply Like
  • considers "system wide"


    Indeed. Would system-wide be greater than 65% or 75%, etc? There are alot of assumptions because we can't measure all the data. Its like saying we know what inflation is, but to really know means measuring every single transaction in the currency.


    What got me thinking along these lines is something I read about Mises a while back. He got to wondering why business people who were experts in their field relative to the rest of the population would all make the same mistake at the exact same time. Then I heard John Allison remark that the problem with gov regulations is not that they cause people to make mistakes, but that they cause everyone to make the exact same mistake at the exact same time.


    If you've ever had a chance to interact with gov regulators, you notice that its their incentive structures that cause them to create these market distortions. The main incentive structure for a gov regulator is convenience. The backstop of all their decisions is the threat of gov coercion. As such, their mistakes have to get really bad before the public forces the mistakes to stop. Thus, it is easier to just write a rule that covers everyone equally the same. After all why give up your weekends and holidays to come up with specific rules for specific entities within an industry if your mistake in not doing so won't cause you any problems for years.


    So the gov regulator via the politician is basically given a price fixing power that can be the wrong price and thus a subsidy and thus an incentive for everyone to rush into that asset class for a long time. This makes that asset class only appear to be rising in value just like it would if its real productivity were going up thus justifying its increase.


    However, in a free market, a market free of coercion, the propensity of the mistake to grow to the same level as it could with gov regulation is far smaller. Without the gov's access to coercion to cover the mistake and thus allow convenience to be the driver of decisions and not real productivity (solving the consumers problems), the incentives simply do not exist to cause a system-wide build up and collapse.


    However, now we are back to what "system-wide" means. We are also faced with the problem that a theoretical free market would be a world wide market that is totally free of coercion. This is something that has never existed, thus we can't say that a free market leads to business cycles. What we have had are markets polluted with coercion. So on one front we could say that we have had business cycles in markets that aren't free. Granted we don't know that a free market would not have business cycles, but it is not necessarily logical that they would given that a market free of coercion can only operate when both parties are made richer via tansactions becuase they must learn faster than they would if they had access to coercion.


    At any rate, our current market is hardly a free market. It is very polluted with coercion. That means asset bubbles and pops. Looking for the mechanisms and policies that cause the bubble and then the pop is one way to protect yourself from them.
    4 Mar 2013, 04:08 PM Reply Like
  • Whiskey Galore! Party going on in Scotland!


    Oops! TGIF story, well, stories of the week. Chivas plant accidently flushed thousands of gallons of whiskey into the local sewer.


    And elsewhere in Scotland, on the very same day...a beer lorry crashed, scattering thousands of bottles and cans of lager; helpers eager to assist with the cleanup!

    1 Mar 2013, 04:05 PM Reply Like
  • Chivas plant accidently flushed thousands of gallons of whiskey into the local sewer.


    Translation: There was a discrepancy of several thousand gallons of Chivas on hand and there is possibly an audit taking place soon.
    1 Mar 2013, 08:58 PM Reply Like
  • Maya,
    Could have a lot of boiler makers on a Friday night.
    1 Mar 2013, 06:57 PM Reply Like
  • Hmmm. Scotch boilermakers-
    The spirits of Chivas past would probably come after you!
    2 Mar 2013, 12:05 PM Reply Like
  • WT,
    By Saturday morning for sure.
    2 Mar 2013, 02:25 PM Reply Like
  • Steve Funk just published a very nice article about the car company we dare not name. He is not a fan, although he claims he doesn't "hate the company". Apparently his first article.

    2 Mar 2013, 04:57 PM Reply Like
  • I was hoping to get your guys' thoughts on this article comparing the Fed's policies and the results of the 70's to today. A lot of data accompanies the article.
    (As someone who wasn't born yet, I would like to get experienced folks' thoughts)


    "Investing In 2013 remember 1977" --
    3 Mar 2013, 02:21 PM Reply Like
  • jakurtz,


    I'm not convinced the correlations are that relevant. The 70's were different, and of course the govt's debt was nowhere near what it is today and thats going to be a big problem to deal with. Comparing markets then to now doesn't really give one much insight to what will happen, but thats just my opinion, fwiw.
    3 Mar 2013, 04:59 PM Reply Like
  • Thank you all for your thoughts. I know history does not repeat but just wanted to see how well this one may rhyme. On the interest rates the author points out the fed kept them below inflation, so not as low as now but in relation to inflation the same. Don't know if that makes a difference in the potential outcomes. Interesting stuff.
    3 Mar 2013, 08:34 PM Reply Like


    What i do see repeating is people just buying stocks to be involved in the frenzy..Do we have a correction coming?
    3 Mar 2013, 09:28 PM Reply Like
  • Declining breadth - defined by the percentage of S&P 500 stocks trading above their 50-day moving average - is flashing a warning, writes The Fat Pitch. In late January, both the index and the breadth measure were rising, but the S&P since has made new highs while breadth has dropped off. This sort of divergence doesn't last for long and tends to be resolved by a 5-10% decline in stocks.


    Did i just answer my own question anyone??
    3 Mar 2013, 09:36 PM Reply Like
  • PC,


    We should have a correction, but I'm not sure how much TPTB are willing to use to try and control it. It seems the markets aren't allowed to correct more than a % or 2 now. I think an orderly pullback, not a crash, back to the 200 day MA would actually be healthy.
    I think it will take a trigger to set things off and the most likely one may be something in Europe that does it. I think they are hanging on by a thread and if something panics the markets it could get ugly.


    If something causes a downdraft it will be a good test for the Feds to see what they come up with to turn it around.
    4 Mar 2013, 06:21 AM Reply Like
  • I suspect we may be seeing a shift away from macro market corrections (where virtually all stocks in all sectors move together) toward sector movements. This would also go along with the narrowing breadth of the macro market, ie, recognize that fewer stocks (located in clumps of sectors) are moving up, while a small majority of stocks in other sectors move down. The other factor to consider along with this examination might be the fact that HFT quantmonkies now utterly dominate trading volume, representing about 70% of the market...


    Over the long term, the HFT's will tend to move with the pods of whales, and their methods of late have been highly concentrated by sector, with many examples where they leave a sector together (along with their HFT henchmen) and we see a sector rotation - a very marked and strong sector rotation.


    It may be possible to get ahead of the whales, assuming we can locate where they are now, and where they are going.


    I believe we will see strong (20-30% or more) drops in some sectors while others soar, whether the overall average for the market does indeed correct (which would be a 10%+ drop) or not.
    4 Mar 2013, 07:58 AM Reply Like
  • There was no appreciable QE going on then. Let alone the infinite QE we have in place now.
    5 Mar 2013, 02:43 PM Reply Like
  • Just wait until the QE punch bowl goes away!
    5 Mar 2013, 02:46 PM Reply Like
  • jakurtz-


    I agree with tampat on that.


    Troops in Vietnam into '74, guns and butter expenses, interest rates rocketing up to 20% for short term money loans ( I was a small business then that got a lot smaller), inflation horrendous at 19%, Nixon moving the greenback off the gold standard, devaluing the dollar and to top it off Saudi oil running from $4 bucks a barrel to $30, gasoline going from 32 cents to over a dollar. Carter took a lot of the heat for all that but it really just landed in his lap on 20 January, 1977.


    That was the most bizarre economic time in history for me.
    You might make statistical comparisons but the real world events aren't even in the same categories.
    3 Mar 2013, 05:58 PM Reply Like
  • WWT: They only reason I remember it strongly is that I locked in two CDs for four years - one at 10% and one at 10.5% with my credit union where I worked. Later all the New Yawkers gained new respect for me when we were cashing them in - theirs were at much lower (~7%?) rates.


    Oh! Almost forgot - I remember the gas crunch too - in the middle of Kansas on a trip. Waiting overnight until Sunday A.M. for the only station for miles with gas to open.


    I'm glad I wasn't anywhere near investing then - my ignorance was even greater then than now. And now it's still pretty impressive, to me.


    3 Mar 2013, 06:08 PM Reply Like
  • HTL-




    I would remember that as well. 10.5 CDs!


    I was never smart enough to own one, plugging all my dough into a construction company.


    5 Year CDs now at around 90bp to 1.2%. Hard to live on that return.


    3 Mar 2013, 06:25 PM Reply Like
  • Yep. My wife is risk averse. So I told her to take only short-term CDs. She may suffer some fraction of a percent now, but I think her ability to roll them, in the future, to what I think will be higher rates will benefit.


    I'd bet your construction investment paid better than any CDs back then.


    4 Mar 2013, 06:31 AM Reply Like
  • HTL-


    "I'd bet your construction investment paid better than any CDs back then."


    Well, starting a construction company in 1973 turned out to be a not auspicious time to be building houses. I had enough capital to build a few houses and then had to go to the well. The short term interest rates killed me. Before the economic crunch I had houses sold that were a month prior to completion. Life was good.


    The very last house I sold (1976) was on the market for 14 months. I even had to pay school taxes on it for two years. Times got lean real quick with short term interest rates pushing 20%.


    Life in the business world can be a sobering experience indeed.


    4 Mar 2013, 09:09 AM Reply Like
  • WWT: Yikes! I hope that you were fortunate enough to come out relatively unscathed.


    4 Mar 2013, 10:00 AM Reply Like
  • HTL-


    No one got hurt. Sold the last of the property right after the last house and ended up after all was said and done with a few bucks to the good. Folded the corporation and got into something predictable like investment trading and trust fund management.


    4 Mar 2013, 10:07 AM Reply Like
  • WWT: "predictable like investment trading and trust fund management"


    I had to chuckle.


    4 Mar 2013, 10:26 AM Reply Like
  • Recall three years ago when it seemed every energy bear out there was claiming peek oil was very soon coming?


    In Australia, it looks like $20T worth of oil has been recently discovered:



    And yet, this doesn't mean the price of refined oil or petrol of various forms will decline, because globally, there is not enough refinery capacity to refine all the new sources of oil being produced.


    For the foreseeable future, oil will still rule the world. But the metrics of how best to invest in the black gold have changed, dramatically.


    As will the geopolitics of oil.
    3 Mar 2013, 10:06 PM Reply Like
  • I will never forget when the Shah of Iran, Mohammad Reza Pahlavi was overthrown and came to the US in 1979.
    His comment after getting off the plane (paraphrased) was-


    'How can the world be so intent on just burning up for fuel the most wonderful lubricant that exists?'


    I believe oil will eventually return to that purpose.
    4 Mar 2013, 09:19 AM Reply Like
  • (CPST): Since I try to be "fair and balanced", for your consideration, "I Told You So: These 5 Stocks Have More Downside Than Upside"


    It's the 5th stock discussed.



    4 Mar 2013, 07:23 AM Reply Like
  • HTL-


    CPST was a quick trade in and out for me- a five day turnaround with a nice return.


    I went over that article and note that Bry-Cem has me paying attention. I looked to the first he wrote (see link) and saw that the author feels that Bry-Cem is the best of breed for the production, transportation and drilling end of natural resources. After reading through the earlier analysis I feel this may warrant attention.



    Thanks HTL!


    4 Mar 2013, 09:38 AM Reply Like
  • Saw this graphic in passing and think it may be of value. It portrays the breadth of the S&P showing the numbers of S&P components above/below the 50% line. The breadth has been steadily declining indicating a probable correction.


    See what you think-



    4 Mar 2013, 10:55 AM Reply Like
  • WWT: Click weekly and it's even more revealing, as to pattrns that may repeat.


    The rising lows does suggest, however, that the subsequent retraces may not be as deep.


    4 Mar 2013, 11:00 AM Reply Like
  • This tracks well with my view of a concerted effort to balance our economy (and markets) on the head of a pin. A narrowing trading channel overall, and support from the Fed, combined with my earlier commentary about the behavior of whales and HFT's, explains what we are seeing in modern/current terms which may, indeed, deviate from historic analysis when conditions were very different.
    4 Mar 2013, 11:44 AM Reply Like
  • Here's a headscratcher derivative of that chart:



    Seasonality? Sell in May, buy in October?
    4 Mar 2013, 11:45 AM Reply Like
  • A free market stock market doesn't appear to be the critter we're dealing with for sure.


    It looks to me like the S&P on training wheels with the fed as one wheel and dividend seekers as the other wheel and large boxes of nice fluffy sand on either side should the training wheels fail.


    The HFTs are happy since they can make money on a nickel spread. The pension fund portfolio managers may have their shorts in a bunch, however since they are all hard pressed to meet the actuarial funding requirements- usually between 6 and 8-1/2 %. They have a couple of years on average to meet their requirements though.


    4 Mar 2013, 01:24 PM Reply Like
  • SM-
    Too bad the outliers on that scatter plot are not identified. It would be interesting to see if their moves were attributable to sector boundaries.


    Tripleblack had an interesting comment on possible sector behavior about ten posts prior.


    4 Mar 2013, 02:53 PM Reply Like
  • (CPST): Article interviewing DJ on Capstone site: "Title: Microturbines Gaining Wider Foothold as Drivers for Compression".


    4 page pdf download.



    4 Mar 2013, 01:33 PM Reply Like
  • More of what we have been seeing. Will the gov shutdown talks wind up scaring anyone this time around, or all we all numb now?

    4 Mar 2013, 04:34 PM Reply Like
  • NFP is expected to be around 170k.
    4 Mar 2013, 04:56 PM Reply Like
  • This non-event sequestration will dampen much of the concern that the public might have had prior to the Chicken Little tour.
    5 Mar 2013, 02:51 PM Reply Like
  • Seems CNBC's producers are focusing a lot of time today on the Chinese potential real estate bubble.


    Last night, I watched 60 Minutes' Leslie Stall visit China. We're all aware that there are vast tracks of both commercial and residential real estate lying unoccupied throughout China.


    But what blew me away was when Leslie said, "There are miles, and miles, and miles...and miles of real estate laying empty."


    The accompanying video was astounding, far more than I ever realized. A "Manhattan-sized" project of skyscrapers, many built higher than most Manhattan skyscrapers, has been halted. The steel and cement structures look like monstrous-sized skeletons of steel beam and grey cement. Cranes everywhere, but none moving.


    The feeling of watching Leslie stand before these monoliths was almost terrifying, like some sort of post electric magnetic pulse sci-fi thriller.


    There are many, many cities vacant. The idea was to employ millions of workers, to boost GNP. But now, these workers, some making only $2.00/day, are returning to their villages, where there they are being forced to move, because way out in the middle of agricultural areas, the villages are being moved for more "urbanization," if one could call it that.


    The show featured one shopping mall, and the facade storefronts were all covered with plastic signs of KFC, Adidas, Nike, StarBucks, and many, many upscale retailers, like Coach, and Hermes.


    Yet none of these demised premises have been leased. None. The signs are there to make it appear what it would look like if the mall was occupied.


    Before this weekend's announcement, the Chinese middle class was investing their grandparents savings, their parents savings, and "mortgaging" their children's endowments, all to invest in real estate. It's not uncommon for one Chinese family to own 10 "rental units" of which none are occupied. The game is the bubble. Many of these vacant properties have gone up in value 100 - 400%, with no end of the bubble in sight.


    During any given day, packed bus loads of people arrive at these modern day ghost cities, eager to buy anything they can, because they believe they will make their fortunes in real estate, as most Chinese are unable to invest in anything but real estate.


    Seems this Insta is trying to forecast the next black swan. I believe the Chinese real estate bubble is top dog candidate that could throw the whole world back into a recession.
    4 Mar 2013, 05:18 PM Reply Like
  • Thanks maya. I think I will try to watch that 60 minutes onDemand tonight, sounds like a good one. China took pretty big steps to try to curb the real estate bubble, I think they may be getting scared. In a Forbes article I read the Peoples Bank of China was directing the people "to buy gold on the dips", this as well as the possible introduction of a gold etf it seems like they are trying to direct peoples investments into PM's and away from real estate.



    Apple tanking the way it is is all we need to know about where the global economy is headed. I like TB's visual of the economy trying to be balanced on the tip of a pin. Today Yellen, the vice chair of the fed, was far from suggesting to slowdown QE's and I am starting to think they will be more likely to increase it to keep the market propped up before things start reflecting Apple and China's reality.
    4 Mar 2013, 05:47 PM Reply Like
  • Maya, I watched the same 60mins piece and agree with your impressions. It was kind of a wow, just wow, experience. I don't know enough to know how truly representative what they were showing really is, but it seems hard for that much video to lie.. All I can conclude at this point is that it's not going to end well, or at least that there's going to be a lot tears on the way to some future state of rational resolution. But clearly what was presented last night was not sustainable. it was surreal, and something is going to give. I also thought it remarkable that the very prominent woman in the immediately preceding piece totally called out the Chinese system for rampant pervasive corruption, *and* stated that what the Chinese people overwhelmingly want above all else, beyond more and better food, clothing, and shelter, is more DEMOCRACY. I thought that was stunning. She certainly picked a big stage to make such a statement to a major western television audience, and she is not a minor figure. Got to think that's going to make some waves...
    4 Mar 2013, 06:25 PM Reply Like
  • jakurtz: Definitely suggest for you and all to watch the episode. I left out a lot Stall covered, including the story of one amazing female real estate billionaire. What a woman! Who also believes that within 20 years, China will be a full blown democracy.


    Stall also will introduce you to another Chinese real estate magnate, who basically guaranteed that the real estate bubble will pop, and the result will be widespread population unrest.


    Stall didn't cover the implications, but if China has to start raising capital, that would likely mean China would start selling US and Japan debt, thereby raising interest rates, which would spiral US and Japan's cost of debt upward.


    Further, global demand for commodities would also fall. China has been largely responsible for what also may turn out to be a bubble in commodities. Fortunately, the rest of the third and second world is growing up, too.


    But all in all, the potential is not a good scenario, and one I will be tracking closely, as much as opaque China will allow.
    4 Mar 2013, 06:25 PM Reply Like
  • China stopped buying US debt almost 2 years ago. Completely. I believe that since that time they have been selling debt. At the same time, I think they HAVE continued to buy Japanese debt, in an effort to fight the BOJ's efforts to lower the value of the yen. This effort has been successful thus far, and the BOJ's efforts have been fruitless. This has geopolitical value for China, since they are still wrapping up their plan to force Japanese companies to move their key R&D facilities and most advanced factories to China. I believe they are CLOSE to calling this plan "done", at which time we should see an abrupt (and potentially strong) drop in the value of the yen.


    China will, however, probably take that opportunity to simultaneously move their dollar peg lower to compensate, so investing in the yuan in the assumption that a 100y/$ exchange rate would be good for the currency trade could be a big mistake. I consider this a wildly speculative and dangerous investment strategy...


    The viewpoint that a retrenching China will be terrible for the currently flush resource economies (Canada, South America, South Africa, but particularly Australia) is spot on. Notice that Australia's currency has abruptly become weak, an early sign that they are in trouble, when a major resource exporter's strong currency loses so much ground to the thoroughly bastardized American Federal Reserve notes.


    China has been aggressively stockpiling key industrial/social resources, from mountains of copper to basic grains and rare metals. They see what is coming.


    As for what effect a slow-growing (5-7% perhaps) China might have on a global basis...


    Resource economies will feel the pinch first (has already started), and discover once again the truism that its a LOT easier to find another supply source rather than a replacement for lost demand. Too many major companies are now operating hand-to-mouth, and the pain when it comes will be a bolt out of the blue for most folks.


    Oddly enough, I see the Chinese as being ultimately successful at cooling off their bubbles and moving smoothly to their new plan. Internal disruption and civil unrest WILL occur, but they will use their accumulated financial resources and stockpiled materials to soften the blow.


    I see the impact on the resource exporters as harsh, as they too have to abruptly and severely cut their exchange rates in an attempt to compensate for the downdraft. Australia's highly paid workforce (simple truck drivers routinely earn about $150,000 a year working for the mines) could go from low unemployment to very high unemployment overnight. Having skated past the bulk of the last great recession, they will lead the way into the next one, following closely in the wake of the stalled China.


    Europe, already weak as a kitten from its long death spiral struggle with a failed EZ experiment, will get the final push needed to coalesce around a fiscal union which will form the core for the US of E. Even so, the final dose of painful recession will cut deep. Money printing of the Euro will see it's value crash as well.


    The United States, in the meantime, will keep trying to balance on the head of a pin, and MIGHT succeed long enough to make it through the worst of the new Great Recession. Unlike economies like China, the EU, and the resource countries, the US exports relatively little. We will see virtually no growth, and persistant high unemployment and poor job formation, but could very well skirt the edge of recession without dropping in... So long as the rest of the world avoids total chaos.
    5 Mar 2013, 08:16 AM Reply Like
  • TB: "... Too many major companies are now operating hand-to-mouth"


    Safe to assume that China will be snapping up many of these companies in resource-rich areas that have hinged their whole future on China activity?


    I can see companies like Lynas, e.g., being at risk due to the delays they've suffered and the high invested value. Of course, the Aussies might nix such, but ...


    5 Mar 2013, 08:26 AM Reply Like
  • "the US exports relatively little."


    Are you of the opinion that a country has to have exports in order to grow?
    5 Mar 2013, 08:45 AM Reply Like
  • China would love to buy Lynas (they tried to but were blocked by the Australian government). Canada blocked the sale of GWM to MCP, once, then again when GS tried to buy it.


    I would expect these barriers to persist (NAFTA, the one way screen door...).
    5 Mar 2013, 08:53 AM Reply Like
  • JH's query: No.


    A more complete answer would require a huge comment...
    5 Mar 2013, 09:39 AM Reply Like
  • Think about this. If all the other countries in the world were 10X taxed and regulated as much as the US. As such, the only industries they had were exports or raw materials because nothing more than the most basic of shelter, food, and clothing made economic sense to produce.


    The US would have far more imports than exports but would also have far more growth and a much higher standard of living. The lack of gov imposed fixed costs made producing in the US far more price sensitive than anywhere else in the world. They would be too poor to buy any of our fancy electronics, but their exports would give them enough to grow some of the most basic food and build only but the most basic shelter.


    Looking at this way, measuring exports isn't really the goal. I see that as a mercantilist approach. The goal is a very high standard of living, and for that you just need productivity that is always increasing in efficiency. So you could have a country with an economy that imports far more than its exports and still have a higher standard of living than countries that export more than the import. For a while there would be lots and lots of jobs, however on a very long term horizon, the jobs would start to go away as automation replaced most of the heavy lifting, but that wouldn't be a bad thing. It would just mean that the US had enough capital to afford what all humans long for, which is working less and having more.


    The best measure for how well an economy is going to do is how sensitive is its markets to prices. Sensitivity to prices is the result of not having access to coercion. So the markets with the least coercion, whether private or public, will be the markets that produce the highest standards of living.
    5 Mar 2013, 09:43 AM Reply Like
  • A very Randian scenario, JH...


    In a market largely protected from coercion one could, indeed, see an efficiency gap such as you propose. Oddly enough, only with the active protection of a powerful government can a market aspire to "freedom".


    Just as we see with many balances in nature ("good" cholesterol vs "bad" cholesterol, etc), the need for a market to be rid of "bad coercion" requires "good coercion".


    I have had long debates on this topic in the past. Many view a "free market" as essentially lawless, when the opposite is the truth...


    Of course, then we come to "good law" and "bad law".
    5 Mar 2013, 09:48 AM Reply Like
  • What is "freedom"?
    5 Mar 2013, 10:14 AM Reply Like
  • Who is John Galt?
    5 Mar 2013, 10:35 AM Reply Like
  • I was curious about your definition.


    To me the only logical meaning of freedom is freedom from coercion. The sham that is trying to be sold with "free market" is that you are free to do whatever you want. Well my freedom to do whatever I want would mean I would be free to coerce someone else, which would take away things that they wanted to do, like consume the assets they created.


    As such, the only logical understanding of freedom is to be free from people coercing you.


    This is vital for markets, because a market that is free from coercion is the most price sensitive market, because the only choice for interaction is voluntary. That means I will only engage in actions that make me better off, so transacting means both parties get better off. This destroys the other lie about free markets that claims the rich get richer and the poor get poorer. That can only happen in the theft transaction, and a theft transaction rests on the foundation of coercion. So, whenever we see the rich getting richer and the poor getting poorer, that doesn't mean the free market is growing, it means the coercion market is growing.


    So the way we can look at the economy to determine it direction is if we can tell if the coercion market is growing or if the free market is growing. If the coercion market is growing, then you are going to have bigger and bigger bubbles followed by bigger and bigger busts that result in wealth being transferred from the general populace to special interest (the rich get richer and the poor get poorer). If the free market is growing, then productivity is growing, and general wealth, not specific wealth is growing.


    The S&P can go up under both scenarios, its just that the first one can lead to the death spiral and the second winds up being the one where it can sustainably go up for a long time. They can also both be going on at the same time, and its why I say if you only had a free market, you would no longer see business cycles, but its the coercion transferring wealth that causes the booms and busts and if we find a way to better guage that, we can better determine the direction of the markets (and hopefully find better ways to protect ourselves).
    5 Mar 2013, 12:13 PM Reply Like
  • "If the free market is growing, then productivity is growing, and general wealth, not specific wealth is growing."


    I think our founders might have used the words "common wealth" versus "sovereign wealth."


    What has become of our commonwealth?
    5 Mar 2013, 12:43 PM Reply Like
  • "What has become of our commonwealth? "


    The people have been duped into believing that specific benefit is common benefit, because the specific benefit makes those benefitting feel good, so then you should feel good too. So if you are made a slave and the benefit of your labor is taken from you and given to someone else, then you benefit too because you should feel good that the slave owner feels good.


    Its quite the racket.
    5 Mar 2013, 12:48 PM Reply Like