Saturday, November 13, 2010

Saturday Morning Cartoon

Very simple and straight forward explanation of Quantitative Easing.

Friday, November 12, 2010

Nassim Taleb: Bloomberg Interview

Going Full Circle: Looking Forward

The following graphic provides an excellent visual as to how the crisis will unfold over the next few years.  It will come in staggered stages, like continuous endless punches to the stomach, as our government will never allow insolvent or inefficient banks or companies to re-structure themselves into profitably and economically viable entities. 

The expense will continue to mount on the backs of the blind public until we reach the final currency crisis, which is pegged below in 2013 as Bretton Woods II.  (Bretton Woods I was when the US defaulted on its debt in 1971, and took the world off the gold standard.  Since that point we have had the first global fiat currency structure, meaning no currency around the world is backed by anything of value, and Central Banks have the ability to print endlessly.  This structure has brought a never ending stream of bubbles/crisis which will culminate in "the big one" sometime around 2013.The big one will materialize as the complete collapse of the dollar)

I agree with the chart and its timeline completely.  I see the commercial real estate collapse coming around 2012, just as the currency crisis is entering its final stage.  The goal at that point will be to begin selling your gold and silver to purchase commercial real estate assets.

I will be able to help readers and investors with the second portion of that process when the time comes.  I am working extremely hard today to prepare for that future tomorrow.  Until then, continue to accumulate precious metals and enjoy the show.

Californians Drinking Irish Beer

Most financial advisors today are telling their clients to invest in bonds because they are safe and that way they will not lose money in the "dangerous" stock market.

Most Americans think bonds are a risk free asset that just pays them a monthly interest payment.

The following chart shows the PIMCO Municipal Income Fund II.  Municipal bonds are state debt.  Most states are currently bankrupt and most bonds will go to zero if a bail out does not come soon.

The cliff dive to the left of the chart shows investors getting slaughtered in this fund.  Losing money.  Losing their retirement.  Enjoying the "safety."

The next chart shows PIMCO's California Municipal Income Fund II.  The slaughtering is a little more extreme. 

Much more pain ahead for the investors currently sitting in their "safe" bond funds.  Currently sitting in the greatest asset bubble ever seen, soon to explode around the world.

Stay tuned.

h/t Barry Ritholtz

Thursday, November 11, 2010

Record Insider Selling

Last week marked the all-time record high in a single week for the number of insider shares sold.  Insiders are corporate CEO's and executives who have a clear understanding of their company's future earnings and stock price direction.

There has never been a single week in history with more than $2 billion in net insider stock sales.

The total for last week?

$4.5 billion!

The following chart (look at 3rd one down, red line) shows the massive increase in net sales last week:

So with insiders selling stocks as much as possible, it must be the poor, average retail investor (401ks and IRAs) coming back into the market to take it to these new highs, right?


The following chart shows the recent and unprecedented 27 straight weeks of mutual fund outflows out of the stock market.  The average American has not been fooled by this phony stock market run because they live and breath every day in the current depression.  They understand the recent run makes no sense.

So if corporate insiders and the average investor are unloading stocks at record levels, who is buying?  Who is taking stock prices up day after day on this endless run?

It is the commercial banks.  The high frequency traders.  As I discussed in Understanding Quantitative Easing, they are taking the Fed's money and speculating in the market.  They are churning stocks. 

Is the Fed's $900 billion in printed money over the next 8 months enough to keep the market artificially propped up?  We'll have to wait and see, but I think it is very unlikely.

Remember, money does not have to stay in United States markets.  I am betting it will not, and it looks like every corporate insider in America agrees with me.

h/t Tyler Durden

CNBC Interview: Jeremy Grantham

Wednesday, November 10, 2010

What Happened To Silver?

What happened to the silver market yesterday?

The chart below shows the silver prices over the past decade.  You can clearly see the recent point when Bernanke gave his Jackson Hole speech letting the markets know that Quantitative Easing part II was coming.  This speech was at the end of August and the silver market since that point has been a rocket ship with no break.

That was until yesterday afternoon when the market fell close to $3.00 in just a few hours!  The reversal can be seen in the chart below:

The sell off was triggered by the CFTC announcing an increase in the margin requirements for silver from $5,000 to $6,500 per contract.  Purchasing an commodity on margin means that you are borrowing money to buy.  If you have purchased $100 million in silver on margin, and the margin requirements are raised from $5,000 to $6,500, then you have to come up with another $15 million in cash to keep your position.

Or you have to sell a MASSIVE amount of silver to keep your margins in balance.  And this is what happened yesterday.

This is standard procedure for the COMEX to raise the margin requirements based on specific guidelines that the exchange follows.  It is not part of some "conspiracy" which has been floating around the internet.

Pull backs are opportunities to add to positions.  Where will prices be tomorrow or 3 hours from now?  Hopefully much lower so we can purchase more.

Where will they be 2 years from now?

Much, much higher.

Tuesday, November 9, 2010

Mark Fisher On CNBC

Schiff vs. Prechter

The following is a radio interview hosted by Peter Schiff with guest Robert Prechter.  They discuss the topic of inflation vs. deflation.

Both these men are economic icons in my mind, and I follow both their work religiously.  To hear them battle back and forth in an open forum is pure bliss for me.

The following is the link to the radio show.  It starts about 20 minutes in and lasts about 30 minutes.

(Click On November 8th in the calendar when you reach the site) Enjoy.....

Schiff Vs. Prechter:  The Great Debate

Sunday, November 7, 2010

America Starves; Wall Street Collects

After jubilation around the country on election Tuesday and free money Wednesday (the QE2 announcement), on Friday it was back to normal economic data; the November jobs report.

The data showed the real unemployment rate (including those that have given up looking for work) held steady at 17%.  This number continues to hover just under 1930's depression levels.

In addition, the Department of Agriculture reported that as of August we had a new record for Americans collecting food stamps at 42.4 million.

This number is up 17% year over year, and is up 58.5% from August 2007.  The Wall Street Journal also added:

"Food stamps have become a lifeline for workers who have lost their jobs, particularly among the growing shares of unemployed Americans who have also exhausted their unemployment benefits.  Lines at grocers at midnight on the first of the month have signaled that, in many cases those benefits aren't tiding families over and they run out before their next check kicks in."

This is exactly what the CEO of Wal-Mart reported a month ago when in an interview he said that they see grocery sales skyrocket at 12:00 AM on the first day of the month.  This is when food stamp cards turn back on.

This program is the electronic version of bread lines that you saw in the black and white pictures during the great depression.  Even with the number of food stamps at record levels, they would be far higher without the addition of the Emergency Unemployment Benefits.

This program happens to be ending this month.  The department of labor has already sent a letter to Congress begging to have the program extended.  The letter included the following:

"With millions of Americans still looking for work, now is not the time to cut key safety net programs like Unemployment Insurance.  The Emergency Unemployment Compensation program is set to expire at the end of November.  If that happens, 2 million people will lose benefits in December and 6 million by the end of the year."

The food stamp and unemployment benefit programs are the two safety nets keeping our society in order. 

Earlier in the week I wrote Quantitative Easing Explained which shows how the program works.  Today I posted the chart of Year to Date Performance of asset classes around the world.

One of the biggest beneficiaries of the free money pouring into the system has been agriculture which has seen prices skyrocket over the past few months.  This has not yet been felt in the grocery store because there is a lag time in this process.

When these banks receive the $600 billion in free money, they have the ability to speculate in agriculture to ride the wave up taking prices higher along the way.  They will collect massive trading profits and add to their bonuses which are anticipated to come in at record levels again in 2010. (While bank shares have performed terribly recently)

The average benefit size per person on food stamps per month is $133.90 and per household it is $287.82.  This is already not enough to cover expenses, which can be seen by the lines at 12:00 AM on the first of the month.

Fortunately, most of these starving Americans cannot connect the dots between Quantitative Easing, bankers speculating, inflation, and record bonuses.

Unfortunately I can, and while the process benefits my portfolio, it breaks my heart to watch it take place. 

On a side note, Bank of America recently reported that it made a profit on every single trading day of last quarter.  Every.  Single.  Day.  For an average of over $50 million per day.  They made this profit trading/speculating/gambling with tax payer money.  They collect when the trades go well, we pay when they go bad.

Things could get very disorderly if and when Americans finally understand what is taking place.

Year To Date Performance

The following graph provides an excellent visual of the year to date performance of most assets around the world.  You can see the dominance of commodities over other assets (such as the DOW third from bottom).  Cotton has led the way, which means if you have some clothing shopping to do it may be a good time to take advantage of lower prices.

Is Obama A Keynesian?

Funnny video clip below.

For some help before watching, Keynesian is a reference to a certain economic belief that stems from John Maynard Keynes.  There is no country named Keynes.