Peter Schiff Is At It Again

And he is right...again. Listen carefully...

Don't Be A Fool

http://www.cnbc.com/id/40781343

No One Knows How Deep The Holes Are

"No one knows how deep the holes are."

Gov. Chris Christie may handle his stress by eating...but...who am I to judge...sometimes I do too, and I think he should run for President. He is willing to say the politically incorrect things that need to be said if our country is to avoid bankruptcy!

Sell most of your municipal bonds...keep only the ones in the upper midwest (with the exception of MN & WI) ND, SD, and Nebraska are your best bets.

You have heard it before... the financial pundits tell you there is no cause for concern.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
CNBC Financial Advice
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog</a> The Daily Show on Facebook

Whitney points out that muni's are held in "huge numbers" by the big banks.

You could listen to her, who put her life on the line to tell the truth...or you could listen to this guy...
http://online.wsj.com/article/SB10001424052748704073804576023673176220648.html?mod=WSJ_hpp_sections_personalfinance

You make the choice...but be careful! No one knows how deep the holes are.

Financials In Trouble?

Taleb Was On "Surveillance" Today

What a strange Universe we live in. As soon as I finished the previous post, I realized Taleb was on Bloomberg TV. He was speaking with Tom Keene, host of "Surveillance". I cannot find the video yet, but when I do I will post it. It is so strange that even though I have never read any of his books, (I plan to read them all!) whenever I hear him speak I am amazed how much we think alike.

I know he has been highly criticized by the press for being arrogant, but I find him quite humble and the press quite stupid.

He is not arrogant. He seems to realize that his insights are nothing more than glimpses in to the nature of reality and tries to reflect this in his writing. He doesn't think he is "special", he is simply aware that he has learned to use his mind as a tool to pursue truth.

He also seems very aware of all human beings (including himself) problems with perception. We all see the world through our conditioned minds and in the framework or ideology we have adopted. This tends to cut us off from the "truth" and narrow our view of the world. We try to fit the world into our framework, rather than see it as it truly is.

I believe Einstein, Da Vinci, Jesus, Galileo, and many others before us were able to connect to these truths. Perhaps great men sometimes mistake their insights as their "own", but in reality, truth exists independently of perception, and finding it is like somewhat like surfing. The surfer doesn't make the wave, he just rides it. He knows he couldn't take the ride without the wave.

I believe great insight is like this. You don't own it, or possess it. It isn't "of you". You just tap into it. This is one reason I don't like to write when I am not feeling tapped in to the truth.

Anyway, it is strange that Taleb's insights feel so familiar to me. Perhaps I have tapped into some of the same truths he has, for no particular reason other than those truths exist out in the Universe. They are available to everyone.

I have been getting very beat up by the market lately, and feeling a little down about it. Reading a quote from one of Taleb's books (in a Bloomberg article by Mark Gilbert) made me feel a bit better about my positions:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aum_MAReDqI8&refer=home

The article was from 4/20/2007. The DOW was trading around 13,000 and all the pundits were screaming that "subprime" was contained.

My favorite line:

'"A thousand days cannot prove you right, but one day can prove you to be wrong," writes Taleb. "I am not urging you to stop being a fool. Just be a fool in the right places."'

I wonder if this journalist, Gilbert, changed his view of Taleb's writing as "arrogant" after Lehman collapsed?

Taleb Is At It Again

I am very fond of Taleb, and have referenced his interviews in the past. He seems to be a great thinker that has a genius-like ability to see the whole.

http://www.cnbc.com/id/40716007

I agree with him. I may not use the word "evil", but he is correct that we are living in a world where both big business and big government are corrupt, and are to blame for many of societies ills.

I can't wait to read his books.

QE2 Working?

Is QE2 working? If its intended purpose was to drive up interest rates and create an unsustainable bubble in the stock market to induce the illusion of wealth, then, yes, it is.

I continue to look at this rally as unsustainable. As an investor and a trader I would avoid both stocks and bonds, and remain in cash until we see a major correction of 15% or more.

For traders willing to take on lots of risk, I would short the S&P, with an emphasis on financials.

I continue to accumulate out of the money put options with multiple expiration dates on GMCR, NFLX, CRM, and am looking into shorting CAT, LULU, PSUN, and CMG.

The largest head and shoulders top in history is still forming (above image)...almost complete. 11,500 on the DOW is the peak of the right shoulder. The DOW is at 11,488 as I write this. Be careful!

Smooth Move Obama

Ironically, the Republicans may have just ensured Obama's re-election and made two terms a virtual certainty for him.

Arrogance knows no bounds, and the arrogance of politicians who win elections may be the worst kind.

Republicans: By extending the Bush tax cuts for everyone, you have spit in the face of average Americans. If we were not in a huge fiscal hole I would not say this. However, we are in a huge fiscal hole. The American people voted out incumbents because they didn't like the direction the country was moving in. They want Washington to show some fiscal responsibility. They want their children and grandchildren to grow up in a decent world. If the U.S. defaults on its obligations this will not be the case. To get out of the fiscal hole we are in we need compromise. Spending must be cut. The Bush tax cuts must be allowed to expire on those earning $250,000+.

Both things must happen. When Republicans start saying $250,000+ is hardship territory and even people with income of this magnitude are "struggling" in the midst of the worst Recession this country has seen since the Great Depression and at a time when our Government could be facing bankruptcy, they are asking for nothing short of a revolution.


You think the Tea party was angry? Keep it up, Republicans, and you will see how angry people can be. Tax breaks for the rich is not what the election was about.

So you see, Obama's move was brilliant. By giving the Republicans what they wanted, he can blame whatever happens now on them. In addition, when it is time for needed budget cuts, he can remind his constituents of how the Republicans were for extending tax cuts to the rich. And believe me, for 95% of Americans, $250,000+ per year is rich. If they are struggling it is because they over extended themselves, not because they didn't have enough income.

Let It Be

Eckert Tolle, one of my favorite writers and spiritual teachers, points out that the nature of the Universe consists of both expansion and contraction.

We are born, we grow up. We age, we die. The tide goes out and comes in. At the most basic level, we breath in (expansion), we breath out (contraction).

Can you imagine breathing in and then holding your breath forever? What would the result be? Physical death.

Humans by nature resist the contraction phase of just about everything. For some reason we think we should always be expanding. We believe we should do more, be more, have more, create more.

Can you imagine how the contraction phase of any natural process creates room for the new? The tide cleans the beach. The forest fire creates a clearing that allows a new plant species to emerge. Even catastrophic events (from our perspective contractions) can make way for tremendous progress. The suffering endured during these times in whatever form makes way for something new and different to emerge.

Let me frame this in terms of the economy, because by now I am sure you know where I am going with this story.

Our society (government, citizens, etc.) is operating under the collective belief that only economic growth is desirable. In its view, contraction, or recession, is always bad. There is very little deeper questioning about what kind of growth is desirable, and little or no distinction made between healthy and dysfunctional growth.

A child outgrowing their clothes and moving on to the next size is a healthy expansion. My weight going from 130 to 150 is definitely not. Cancer is expansion of cells that is so rapid it sometimes can't be stopped, until the supporting organism perishes.

In my view, the debt and consumption driven growth supported by greed and an insatiable desire for more that we have seen over the past 20 years or so is a bit like a cancer of the economy. The clearing out that was supposed to happen (if the government had not bailed out failed banks and corporations) was a natural clearing mechanism that would have cured the system of its cancer, making room for new, healthy growth. This growth would have been (and still can be) an opportunity for real capitalists to take advantage of the opportunities that arise when the game is no longer rigged.

The powers that be (namely the congress, FED, Treasury, and giant financial institutions) made sure the needed contraction didn't happen. They fail to understand that Main Street would survive without Wall Street in its current form. Main Street would survive without an intrusive, parental government. The very cause of Main Streets' problems swooped in as the "savior", obscuring the fact that the "savior" was the cause of all this distress in the first place.

Bad things shouldn't happen. People shouldn't be unemployed...ever. Economies should always grow, regardless of the source or nature of that growth. The sun should always shine. The tide should never come in. You shouldn't ever have to breath out.

Really? Because the fact is that bad things do happen. People are unemployed. Economies do contract. We have cloudy days, and dark nights. The tide comes in and you have to breath out.

Does this mean our government shouldn't help those that can't help themselves in times of need? Of course not. But it certainly will not be able to perform that function if it bankrupts itself trying to make sure our economy permanently expands.

Taleb

Taleb is a very wise man. Listen to him:

Wall Street Doesn't Care

And they are not embarrassed to tell you they don't.
http://www.cnbc.com/id/40491033

Bulls Are Running

I have repeatedly said "has nothing fundamental has changed" since the Lehman brothers collapse and the subsequent recession and bailouts.

That was not entirely true. Obviously, Government involvement with the large investment and commercial banks is at an all time high. Our government is lending their wealthy players your tax money at nearly 0%, and encouraging them to gamble with it in the stock market. This is a change; not for the better.

Where is all that liquidity, that money, the Fed has pumped into the system? I'll tell you where: in the stock market and the bond market. Both of these markets are bubbles. Stocks are valued as if we are not only going to have a HUGE recovery, but as if growth going forward will be 4-8%. This is ridiculous. Corporate profits are reflecting massive cost cuts during the recession combined with price stability or inflation. This is not sustainable.

Have you seen the rise of the thrift store? Have you notices how average Americans are sick of paying too much for their food and clothing? I know I am. I run in middle to upper middle class circles and nearly everyone I know is either under a great deal of financial stress, or they are extremely cash strapped trying to pay off debt accumulated during the boom.

And don't give me the story that the Chinese consumer is going to save the world. This is just another illusion fat cats on Wall Street float so they can get richer trading overvalued stocks with your tax money. What a load! Really?

What is the primary driver of Chinese growth? Western consumption! They are growing because we have an insatiable appetite for loads of plastic crap and cheap clothing that looks expensive. Chinese per capita GDP in 2009 was $3,700 according to CIA World Factbook.
$3,700. The U.S. per capita GDP was $46,300 (same source). China ranked lower than Iran and Algeria. I know...they have soooo many people.

So let's see...the West is going to pull out of this mess by growing industry and exporting to the rest of the world. By that logic, we would have to be able to manufacture stuff that Chinese people could afford. Too be competitive, we would have to make our products cheaper than theirs! Can you imagine all the high paying jobs this will create?

So, the China story is fiction. Pure fiction, designed to line the pockets of Wall Street bankers with your money. They will once again destroy the value of your 401 (k) with their arrogant government subsidized irresponsible speculation.

So sad. This is what happens when you have a corrupt central banking system. We need nothing short of a financial revolution to save this country.

But the market is up today! NFLX is trading at 75.5X earnings. Green Mountain Coffee Roasters (still under investigation for irregular accounting practices) is trading at 58X earnings and a Goldman Sachs party boy got kicked out of his $30,000/mo Manhattan apartment complex for partying too hard. It's a MAD MAD world we live in.

PBS had a great special about the recession the other day:


Did you see that guys flat screen? Did you see the booze stash behind him while he was sitting on this leather couch? No seriously, I feel bad for the guy. I would rather see unemployment benefits extended and mortgage debt forgiven for the middle class than slick Wall Street traders profiting from government favors. But you know, our government has to have its priorities.

All I can say is: if the Fed keeps up this kind of behavior and the public ever catches on, there will be a revolution in this country.

One More Reason To Avoid Stocks

As if you needed another one!

http://www.cnbc.com/id/40416734

Connecting

There are times when I am able to connect to some source that is not of me. Perhaps this is Spirit, perhaps it is...well, it is whatever you wish to call it.

It is in these times when I am able to post insightful, inspired posts.

Right now, for me, is not one of those times.

I am just not feelin' it.

There are other blogs out there that will share information with you endlessly. Their opinions abound.

I want my posts to be from the heart, the Soul, the Source. Many of them are. However, tonight I find I just do not have inspiration.

Come back please...because I know Inspiration will.

Another War?

This Korean conflict could prove to be very disruptive. The U.S. simply cannot afford another war. On the other hand, we cannot abandon our ally.

Could this be an orchestrated attempt to draw the U.S. into yet another war? If so, is it possibly an attempt to draw our attention away from Afghanistan? Could the Koreans and Al-Qaeda be forming an unholy alliance?

I mean, who would of thought the Nazi's would have partnered with the Japanese?

Scary. I certainly hope we are not headed for WW III.

If China gets upset with us we are in real trouble:

http://online.wsj.com/article/SB10001424052748704008704575638420698918004.html?mod=WSJ_hp_LEFTTopStories

Did The Stimulus Work?

The Wall Street Journal has an excellent collection of charts available this morning.
http://www.marketwatch.com/story/in-charts-cpi-foreclosures-retail-sales-2010-11-19?pagenumber=1
Although I am very critical, and morally and philosophically opposed to the FED's intervention in our economy, I must admit, that their easy money policies appear to have affected the
unemployment rate.

Initial Claims

Declining Job Losses

As you can see, initial jobless claims have fallen dramatically, but they are not back to pre-recession levels. Even though a lot of people are still not finding work, companies are not laying a lot of people off either. This is evident in the "Declining Job Losses" chart.

We can conclude that hiring has not picked up dramatically, but the pace of layoffs has declined dramatically.

Needless to say, I am very surprised with the retail sales numbers. My guess is that they are reflecting the increase in CPI. Consumers are not really buying more stuff, they are just paying more for the stuff they buy. This shows up in the bottom line as increased profits, because the retailers have cut costs dramatically. Due to rising commodity prices, retailers are successfully passing on increased food and energy costs to the consumer. The consumer NEEDS to eat and drive.

Take a look at the CPI and CORE CPI chart:

Notice the big spike in CPI from the March 2009 bottom. Also, notice that CORE CPI, which excludes food and energy has been steadily declining since the beginning of the recession. CPI is actually heading back down again.

PPI is telling a different story. It has fallen off a cliff, again. Chart number 2 from the article shows it is below its worst level of the recession.

The FED has engineered a scenario where companies can profit handily. Their costs (PPI) are falling due to deflation. At the same time, they are successfully passing price increases on to the consumer, because the pace of layoffs has stabilized. This is unsustainable. Why?

Consumers simply have too much debt to be able to be absorb the rising food and energy cost for long. Corporations can only increase prices so much until the higher prices have a significant impact on aggregate demand.

When revenue decreases because deflation and falling demand take their toll, corporations will begin to cut jobs again. Our FED needs to let prices fall. Lower prices will stimulate demand.
Let the tide come in. It will clean off the beach and make room for real value to be created.

Let it be....or we very well might destroy our country, by bankrupting it.

So, did the stimulus work?

NO, it jus delayed the inevitable, while increasing the costs to the middle class along the way.

This Is Our Ally?

Unbelievable!

To the Liberals in this country: be careful who you call extremists. Don't use the word so lightly.

Living Economic History

The biggest head and shoulders top of all time is still forming. Right shoulder almost complete? Only time will tell...

I have talked about this before. Right shoulder could take another year to form before big crash...or it could happen any day.
http://econmom.blogspot.com/2010/02/15-year-head-and-shoulders-top.html

Read this if you want to know where we are headed:

http://www.marketwatch.com/story/the-housing-crisis-in-1933-and-today-2010-10-15

Squeezed

Middle class America is in an economic vice. Are you feeling squeezed? Virtually everyone I know is.

The Federal Reserve Banks attempts to stop deflation are not working. Deflation is still rampant. Almost any asset regular people own is falling in value. Your house, your cars, your 401k plan have all fallen dramatically in value over the past two and one half years. (If you own gold, you have done well, but what middle class family do you know that owns gold?)

So, your assets are falling in value. This is painful, unsettling and anxiety producing. Nearly one in five of us middle class has lost a job, or is underemployed. Even if you still have a job, your wages have likely been frozen, bonuses reduced or eliminated altogether, and your spouse may have had to take a low paying job to make up for lost income.

Simultaneously, thanks to our friends at the FED, food and energy costs are up. Your grocery store trip that used to cost $170 for two weeks for a family of four in now over $200. You spend $200 per month on gas instead of $120. Your heating and cooling bills are going up. So are your taxes, if the Bush tax cuts are not extended. The things you must pay for: food, heat, taxes, etc are getting more expensive.
http://www.cnbc.com/id/40132000

Maybe, after losing a job, you started shopping at WalMart instead of Target or Byerly's. Well, this is what you get for trying to be responsible:
http://www.cnbc.com/id/40135092

We are being squeezed. No wonder it hurts. The FED has decided to try to "fix" the economy at the expense of the middle class. Wall Street bankers and commodities traders are getting richer speculating with free cash from the government. Their irresponsible speculation is making it harder to feed your kids.

The middle class is this country is being robbed by the FED and by our government. We are paying for the bankers tax breaks and the loafers welfare.

We have both inflation and deflation, and the middle class is suffering the downsides of both.

So if you are feeling squeezed, there is a rational explanation. The powers that be just don't want you to understand it, because you may start a revolution.

I mean what if we all just stopped paying our mortgages at once? What if there was a movement to have the money spent on TARP and the auto company bailouts distributed evenly amongst every American taxpayer? (No, if you didn't have a tax liability, you wouldn't get any!) What if we all just refused to pay our mortgages until our principal was reduced by the lender to give us 20% of the equity back in our homes? (based on today's appraisal numbers)

I tell you what would happen...almost all the large financial institutions would fail. Many companies would fail. Things would get worse. Unemployment would rise dramatically. It would be very ugly. There might even be politcal upheaval and social unrest.

I am afraid that course of action is not wise. So, we will toil away. We will endure the squeeze. We will bail out the greedy and the lazy.

It would be sweet though, if just for a second, to see the look of panic on the faces of politicians and central bankers when they realized the American middle class had figured out the game and decided they didn't want to play any more.

Grantham On The Market

I concur, but I think the next crash will come sooner than he does. In addition, note his view on bonds. He believes they are more overvalued than stocks. If you are retired you should not own stocks or bonds right now. Especially bonds. They are in a huge bubble. Stick to cash, so you will have money to take advantage of falling asset prices. If you don't have cash when the implosion happens, you will not be able to take advantage.



http://www.cnbc.com/id/40115265

Hyperinflationary Depression?

I fear I may have underestimated Ben Bernanke's willingness to destroy the dollar. Ever since I started blogging, I have said we are facing a deflationary depression, rather than a deep recession, followed by a period of inflation. The debt hole is just so big, and the velocity of money so low, that I figured the Fed would have time to change course once a recovery began.

I still lean toward the above view. However, recent events, namely QE2, and China's poor reponse to it, have raised doubts in my mind.

You see, if China starts dumping US Treasuries, we may be in trouble. We may be headed for a Weimar Germany type situation, where we have hyperinflation in the midst a depression.

This scenario will still be terrible for stocks, perhaps worse. The thing that would change would be interest rates. They would skyrocket.

I need to do more research on the subject.

I will post more on this later, and provide greater analysis and detail.

Euphoria On Wall Street

I am still short, and will take this rally as an opportunity to buy more put options on several overvalued stocks. (If their prices come down, which so far, they haven't.)

Traders and big banks are buying stocks because they have nowhere else to put their money.

This is not a good reason to buy stocks. The FED is trying to reflate the world. But all their bubble blowing will be in vain, because stock market bubbles do not stimulate demand.

I know it is very difficult to not jump on the bandwagon, but if you can refrain, you will be glad you didn't join the party.

While others are suffering from a terrible hangover, you will have enough cash to make real, solid investments that pay you cash. You will be able to buy assets like real estate and large dividend paying blue chip stocks. The party crowd won't, because they will have lost their gains...again.

Remember your buddies bragging about all the money they were making in Tech stocks that you thought were too risky? Remember what happened to their retirement funds when the tech bubble burst? Do not chase returns. It is the sure way to financial ruin.

In order to believe in the stock market rally we are seeing you must believe at least a few of the following:

1) Value can be created by devaluing currency.

2) Current debt levels are sustainable, for financial institutions, households, and other corporations.

3) Our Federal Debt can be reduced without a period of economic contraction.

4) Average consumers are not tapped out, they are ready to spend again.

5) The FED inflating stock prices will cause no long term damage to our economy.

6) Corporations and consumers will do well in an inflationary environment.

7) Corporations will make more money as the world's financial system implodes.

Unless Bernanke is mad, he would not have authorized QE2. I am assuming he is not crazy, and his intention is not to destroy our economy. Therefore, he must think DEFLATION, not INFLATION, is taking hold of the economy.

What he is doing is like maxing out your credit cards to do a major remodel so your neighbors will think you are rich even though you just lost your job and are deeply in debt.

This is what he is doing to our country. I don't even think he realizes it. I think he believes he is doing the right thing. I think he believes he can stop a depression from happening. He is wrong. I just hope the unintentional damage he does in the process won't destroy this country I love.

What Are The Voters Trying To Say?

That is what Judy Woodruff asked on "The News Hour" on PBS tonight.

I am not trying to be crude, but I am going to be.... prepare yourself.

Because I am going to be crude. Sometimes crude is necessary.

Judy, the voter's are saying: "____-you!"

Sorry. Obama acted like an arrogant power hungry tyrant who thought he was voted in because the voters wanted a quasi-socialist state. THEY DON'T.

Independents who voted for Obama (NOT ME) wanted CHANGE. They were sick of the BIG BANKS getting bailed out by the little guy. They knew the Bush-Paulson -Bernanke-Geitner deal was evil and they wanted something different. They wanted someone who told the truth...they didn't get it. They wanted INTEGRITY, they didn't get it. They just got more TARP, more BAILOUTS, MORE GEITNER, MORE BERNANKE.

They got an opportunistic Socialist that thinks BIG GOVERNMENT is the answer to EVERYTHING! They got a control freak who wants to impose his taxes and his vision of "change" on them. They didn't like it.

Stay out of my pocketbook. Stay out of my business. Stay out of my bedroom. Maybe then, I will consider funding your escapades. Maybe...probably not.

This is what Independent thinkers and young voters are trying to tell you politicians. Ignore us at your own job loss.

http://www.cnbc.com/id/39965179

And Judy, with the utmost respect...dig deeper. I like you. Alot better than Maria Bartiromo. You are a free thinker. DIG DEEPER!

Nothing Has Changed

Bernanke's bid to inflate the stock market will fail. In the short run, it may stop a freefall, as he is obviously determined to flood the market with liquidity and make anyone sitting in cash feel foolish.
But one man does not a market make, and illusions are just that, illusions.

The election was a positive. Enough fiscal conservatives were elected to the house that someone may actually try to stopped the crazed FRB.

More later...

Tolle On The Economic Downturn

I have repeatedly written that I was against the bailouts, against the stimulus, etc, etc. Perhaps saying I was for letting the downturn be as it was, and is, would have been a better way to phrase it.

This is a non-partisan position. I simply believe that economic downturns serve a purpose in the universe (they are learning tools for this world). They are similar to the tides of the ocean. Business cycles exist for a reason, and fighting them by trying to control them only delays and intensifies the final correction.

This is why I am a proponent of freedom and free markets. I still believe the "capitalism" that so many democrats see as unfair to the poor, isn't capitalism at all. When corporations and financial institutions are bailed out at taxpayer cost with the justification that if they weren't, we simply wouldn't be able to handle the consequences is ego talk.

It is arrogance at its worst. Politicians defend their behavior by saying things like, "I would have voted against the bailout, but I just couldn't let that happen. We would have been thrown in to the next Great Depression and the financial system would have collapsed!" I say...BS. Do they see themselves as more powerful than the laws of the Universe?

Main street will not die without Wall Street. Innovation, entreprenueurship, and invention will survive the next Great Depression. Hardship, though painful, is sometimes necessary to push us forward as human beings. Anyway, it is what it is. We are in a painful economic downturn, let's quit pretending we are not, or the fall will be much more painful in the end.

One of my favorite books in Eckart Tolle's "The Power Of Now". I actually found a clip where Tolle is talking about the economy. I couldn't agree with him more. You will have to browse through the videos at the bottom of the clips to find the one called, "The Current Economy".

http://www.eckharttolletv.com/eckharttolle.com

Seeking Happiness From Others....

Is futile. An "other" can be a person, a place, or a thing. Happiness, peace, comes from within. When you seek outside yourSelf you shall not find.

I forget this often, and fall from grace. Luckily, I ususally remember it quickly, and return to center.

Giving and receiving are one, in truth.

What you seek from the other...give him...and it shall return to you.

What you seek to find...give.

The things you think you need to make you complete...give them away.

If a thief breaks in to your house and wants your TV, make sure you give him your DVD player too.
For wanting is the root of suffering.

Your purpose on this Earth is to end suffering and love the other.

Inflation Expectations Fuel Optimism?

http://www.marketwatch.com/story/brynjolfsson-bets-on-inflation-2000-gold-2010-10-20
Who am I? Not on a spiritual level, but in this world. I am a mother of two with a degree in economics and an MBA. I have a very small tax preparation and consulting business and am planning on sitting for the CPA exam within the year.

However, I am no Einstein. I have no PHD in economics. I do not work for the FED, and I have spent most of my adult life raising children and running a household.

But I am smart enough to know this:

In order to believe that you can beat deflation with cheap money, and not destroy value in the process, you must not understand how wealth is created. So, it follows logically that he really believes he is doing the right thing by flooding the system with money and credit, and that he thinks the cure for deflation is inflation. He must think he can bring about growth through currency manipulation. He is mistaken.

It seems many on Wall Street agree with him and also believe the remedy for deflation is quantitative easing. It is not.

They fail to realize that rising prices won't stimulate demand, but will depress it even further.

Printing money does not create jobs, it devalues currency, destroys wealth, reduces purchasing power, and is the way many great civilizations have come to an end.

If the FED goes ahead with QE2 there will be so many distortions in our economy that it will become pointless to analyze it. We will end up with a hyperinflation depression, similar to Weimar Germany's pre-WWII episode.

I was naive enough, and hopeful enough to believe that if QE1 didn't work, the FED would change course and accept that we needed to go through a period of asset price deflation in order to bring the economy back in to balance.

Apparently, since this would mean the end of many powerful banks and bankers, the FED does not have the integrity, or the guts to do the right thing.

I will be voting for anyone who stringently opposes QE2 and proposes a change of leadership at the FED. Bernanke and his followers need to be ousted immediately if we are to save this country from economic ruin.

Something Smells....

Saudi Arabia...Reaaaaaaaaaaaaaaallllllllly?

Think about it...

Our Economy Has Been Doped

When I say "doped" I am referring to the kind of doping that goes on in sports. Athletes call the dope "performance enhancing" drugs.

Here is the analogy: The economy is the athlete, cheap credit and money are the performance enhancing drugs, and the FOMC at the Federal Reserve is the corrupt physician who keeps prescribing the dope.

The doping of our economy began with the creation of the Federal Reserve system in 1913. At first, it didn't take much dope to keep things running. At times, cooler heads prevailed and they kept the amount of dope in the system to a minimum to avoid side effects. Eventually though, addiction took hold, and they needed to add more and more dope to get the same high.

Natural economic downtrends became "problems" that could be fixed with a little more dope.

The new problem is that the dope isn't working anymore. The system is rejecting it. The FOMC's solution seems to be to up the dose.

Like a retired athlete suffering from crippling arthritis after years of stellar performance, our economy has entered a period of unavoidable decline.

It appears to many that excessive liquidity and cheap credit are helping. In fact, they are destroying value and slowly killing our economy.

The only way out of this mess is for our Government to become fiscally responsible and cut spending drastically. The budget must be balanced. Taxes should be held where they are for the time being and then, when the debt is paid down to a sustainable level, the whole tax system should be scrapped. We need a tax system supports savings and investment, not one that encourages debt and consumption.

All Federal subsidies in any form to financial institutions must be ended immediately. Only depositors should be made whole through FDIC when institutions fail, no money should go to "counterparties". Any TARP money that is left should be returned directly to the taxpayers, and divided equally among them in proportion to their prior year tax liability. If you had no tax liability in the years TARP was active, you should get nothing.

Our country can avoid so much pain and turmoil if we do this now, otherwise it will be a very painful bottom to endure.

Bernanke's Shoes

You couldn't pay me enough to be in Bernanke's shoes. He has such a mess on his hands that cleaning it up is impossible. He is going to oversee the biggest economic disaster in U. S. history and he will have no one to blame but his predecessors and the very institution he runs. On second thought, he could blame Keynes.

In the past, I have said Deflation is the biggest threat we are facing. I still believe this is true. However, I am becoming concerned about the dollar. We simply cannot afford QE 2 (a second round of quantitative easing), but the Fed seems hell bent on making it happen.

If the Fed pursues aggressive QE 2, instead of making financial institutions book their losses and forgive massive amounts of consumer debt, we are headed for a period of massive deflation in most asset classes (like real estate, stocks, & bonds), and hyperinflation in others (like food, fuel and medicine). This toxic combination will be deadly to our entire system.

There is no way out for Bernanke. He must allow the Depression he so greatly fears to happen, or the U.S. will end up like Argentina.

Another "Flash Crash" Coming?

If you read this blog at all you already know what I think. Obviously, I agree with this guy.

http://www.cnbc.com/id/39610987

By the way, those of you who think I should be presenting "both sides", that is not what this blog is about. I write it to present my point of view. If you want objectivity, look somewhere else.

Story Stocks Falling Apart

The so called "story stocks" that I talked about a few weeks back are falling apart. Today CRM is taking a big hit. This signals to me that correction isn't far away.

Also, take a look at PCLN, GMCR, NFLX, etc. They will lead the market down.

Win Some, Lose Some

I like the winning part. On September 15th I posted this:
http://econmom.blogspot.com/2010_09_12_archive.html

Today in the WSJ:
http://www.marketwatch.com/story/green-mountains-accounting-creates-a-stir-2010-10-01?pagenumber=1

Sweet.

GMCR!

Didn't I tell you something smelled at GMCR? I don't know for sure, but the chart felt all wrong. I own put options! Ha!
http://www.cnbc.com/id/39407087

Tepper Rally Temporary

I pointed out a few posts ago that I disagreed with Tepper's take on the markets and the economy.

http://econmom.blogspot.com/2010/09/still-in-range.html

Here are a few economists that agree:

http://www.cnbc.com/id/39384933/


http://globaleconomicanalysis.blogspot.com/2010/09/sure-thing.html

Under A Minnesota Sky

Under a Minnesota sky I breathe the air tonight.

Under a Minnesota sky I greet the oak grove that remains.

Under a Minneaota sky the invasive vines stake their claim and the forest yerns for its domain.

Under a Minnesota sky I smell the smoke of a deciduous fire.

The red fox and racoon watch from the bush, and we wonder if I belong under their Minnesota sky.

Under a Minnestoa sky I grasp the collison of the forest and the fire of the world.

My daughter breaks the silence...under a Minnesota sky; I wash her beautiful hair.

Under the Minnesota sky I love, I live, I am.

Still In A Range...

But man, the bulls are making a good run at it. I am still looking at the market as being in a 25+ year cycle. The end of this cycle will illustrate all the flaws of Keynesian economics. I hope Keynesians can't stay irrational longer than I can stay short.

11,200 or so on the DOW is the top of this range. The right shoulder is still forming on the biggest head and shoulders top in recorded economic history. (How exciting for geeks like me!)

Even though helicopter Ben would like you to take on lots of debt and spend, spend, spend, so he can hold on to his failing economic theory, he can't change nature. We are in the Keynesian endgame.

Don't let the financial media fool you.

By the way, the media's reson for todays market rally? Some popular hedge fund guy (who believes inflation, not deflation is our biggest problem, said to buy, buy, buy. Gee I wonder why?)

He doesn't want to fight the FED? So, if he is right, economies and stock markets have no underlying value and are completely driven by government policies. Any time something goes down, the government can just prop it up, and the fundamentals don't matter.

Gee, that worked out well for the Soviets.

Value does matter. Stock prices eventually, not at any given moment on time, reflect the ability of a company to generate wealth, and value for its shareholders. In Tepper's view, company values are a derivative of government policy. My God, if they are we have REALLY gotten away from Capitalism, and things are much worse than I thought, economically speaking.

GOVERNMENTS DON'T CREATE WEALTH, THEY ALLOCATE IT! THEY DEVALUE CURRENCIES! THEY TYPICALLY DESTROY VALUE!(obviously not in all cases) Any "value" the government adds to the stock market is just another form of asset inflation. When this becomes clear market will sell off, in a massive way.

Think The Housing Market Has Bottomed?...Think Again

Housing has not bottomed.

Really? What else is there to say.

Unions?

The Daily Show tells it like it is...again.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Working Stiffed
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

WalMart! Huh!

Deflation 101

I was shopping with a friend the other day and she inadvertently gave me a little lesson in deflation I would like to share.

Deflation: A general decline in prices, often caused by a reduction in the supply of money or credit.
or: A reduction in the level of NATIONAL INCOME and output, usually accompanied by a fall in the general price level.

Now, the following tale is only about one transaction, and I am aware that deflation is defined as a general fall in prices across the entire economy, but I still feel it offers a clear illustration of what deflation looks like in everyday life.

My friend and I were at Barnes and Noble. I was looking for a copy of a Harry Potter book my daughter needed for free reading time at school. It didn't take me long to find it. It was $9.99.
I bought the book and began looking for my friend, as she was browsing in a different part of the store. She walked up to me with a "used" copy of the book she had just found on the other side of the store. It looked exactly like the new book I had just purchased. The difference: it was $3. So, being a rational human (most of the time), I immediately returned the $10 book and purchased the $3 book. I then thanked my friend for saving me $7. That, my friends, is very rapid, deflation.

It is happening all across the country. Retailers are being forced to slash prices to sell their oversupply of goods. Why? There is too much "stuff" out there, and not enough demand. Because of high household debt burdens, unemployment, and increased savings, people are much more price sensitive than they were during the boom. Consequently, retailers have to lower prices to get people to buy anything. Once people realize they have been paying way too much for things, they stop paying too much.

Have you noticed the rise of the thrift store? This is also a result of deflation.

So, perhaps we should look at who will survive. Will it be Barnes & Noble, Amazon, Borders, or Half Price Books? Due to the rise of e-books, there is probably only room for one in the space.
If you can pick the winner and short the losers, you will make a lot of money.

How about OfficeMax, Staples and Office Depot? Again, only one will survive, pick the winner and get paid.

Walgreens, CVS, Rite Aid....I could go on and on.

Circuit City lost out to Best Buy. Linen's and Things lost out to Bed Bath and Beyond.

Don't deny deflation, don't fear it. Profit from it.

Critical Week

Yes, I am still short...and right now it hurts. However, I have not changed my opinion about the stock market. As a matter of fact, I am more bearish now than ever. I am not suggesting the average investor short stocks. This is a very risky strategy. But unless you have a 20+ year time horizon, you should avoid them altogether, at least for now. After the next downturn, you will be able to buy some large blue chip dividend paying stocks VERY cheap.

I have no doubt that this rally is being driven by traders and the same very large banks that were bailed out by us, the taxpayers.

The stocks that are dragging the indexes up are trading at very high multiples. Salesforce.com (CRM) is an example. Also, look into GMCR, NFLX, PCLN, and SHLD.

The headline reason for today's rally? Home builder sentiment is better than expected. Seriously? I mean, home builders feel better about things, so that means you should by stocks. A few components driving the Dow: Home Depot (16.4 p/e), Alcoa (39.69 p/e), CAT (p/e 29.3).

Oh, and the NBER (National Bureau of Economic Research) says the Recession is over...so it must be.

This is a very important week for traders. I believe market direction will change dramatically in the next few days.

Obvious Short*

This is what the 10-yr chart of GMCR looks like:

Now, look at the chart of the long China ETF, FXI, just prior to its demise in Nov 2007:

I didn't short China then, though I did a bit later, soon enough to take some advantage of the fall.

My point is this:

Every once in a while, there are some obvious bubble/story stocks out there that are easy shorts and GMCR is one of them.

http://money.cnn.com/2009/06/03/pf/green_mountain_coffee_stock.fortune/index.htm

There was an article in the WSJ:

http://online.wsj.com/article/SB10001424052748703376504575491253935081606.html

They bought another coffee company to sell off its assets and use the proceeds from those assets to pay off their own debts. Would a truly healthy company need to do such a thing? In addition, could they do it if their stock was not trading at a totally unrealistic price based on valuation?

It reminds me of the Qwest acquisition of US West at the height of the tech bubble.
The acquirer, who knows its earnings are unsustainable, has an astronomical P/E (GMCR trades at 54.8 times earnings), and has too much debt, buys a profitable, boring, low P/E company and saddles it with debt only to sell its assets to service that debt at a later date. This is parasitic behavior, and perhaps it is the only way GMCR will survive.


Now, I am not saying they sell a bad product. On the contrary. I am just saying their stock and, hence their company is extremely overvalued. I also see their product being a victim of the deflationary recession we are in. I mean, who is going to buy these overpriced machines that only make one cup of coffee at a time? From what I can tell they retail from between $100 and $200. I can get a pretty good coffee maker that makes 12 cups at Target for $36. Oh, I know, they are stylish. They look cool and expensive, like something you don't really need, but want. Not a good place to be as the consumer pulls back.

In my humble opinion, if sales don't fall at GMCR due to the recession, it should be trading at about $9 a share. I am looking to buy put options today.

When the market corrects, it will.

*As always, trade at your own risk. Shorting stocks can result in large losses if you don't know what you are doing, and sometimes does even if you do.

Jobs Data

Tomorrow's jobs data is crucial for the markets in the short term. We are also approaching options expiration (Friday). Should be interesting.

Rally on Election Hopes?

This rally is unsustainable. The market may not be rational, but it eventually self corrects.

I know we hope that a change in government will fix things, but it won't. This Depression is A-political.

This is just a technical bounce. If you are a trader you already missed the move, don't chase it.

Steve Keen

Thanks to an old friend from high school (thanks John!), I have found another source of great economic information. This is not easy, as much that is out there is very "surface" and many economists that are in the employ of large financial institutions or the government have a vested interest in not digging deeper, especially if the truth that lies underneath the headlines is hard to stomach.

Mr. Keen seems an exception to this. He has done rigorous analysis on the very questions I have been pondering, such as how GDP has been debt driven for the past decade or so, and what the effects of that on future growth (or contraction in this case) will be.

One of the things I do on this blog is try to make economics understandable to the regular person out there, so I tend to use simpler language and not too much empirical data.

However, if you want the data to back up what I have been saying...you can get it on Keen's site.

http://www.debtdeflation.com/blogs


Happy reading!

I Love Art Cashin

Not LOVE, love, like I love my husband, I mean I love watching him on CNBC.

He is so classy, but doesn't act arrogant like so many of the younger, "slick" traders who haven't been through near what he has.

Also, he is right often, and this clip is no exception. (although I would say 10-15 years, not 7) He is able to see the big picture, and is refreshingly honest.

Rise of Religious Extremeism?

I have been very critical of radical, or extremist Islam. I am going to rant a bit here, but first read this:

http://www.cnn.com/2010/US/09/07/florida.quran.burning/index.html?hpt=T2

Burning the Koran is a TERRIBLE idea. It is hateful, wrong, and just plain stupid. Why on Earth would anyone do such a thing?

Hating others only increases the hate in the world.

You do not fight hate with hate. Extremist "Christians" are just as crazy as extremist Muslims. By extremist I mean those who interpret religious text literally and use the words they find in these text to justify violence against others.

I mean really, at this stage in human evolution haven't we figured out that physically harming our fellow man is wrong?

Are these the same "Christians" that justify beating their children with the "spare the rod spoil the child" thing?

Maybe the reason they are not taking a reasoned approach to countering the ideas of Islamic extremists is that they have much in common. I mean, they both justify violence and hateful acts based on the ancient texts they read. They both think their way is the only way, and envision a world in which everybody believes and does exactly the same things they do.

Do they have a first amendment right to burn whatever they want? Absolutely. Does this make it right? Absolutely not. Sounds like a debate over a certain building being erected in lower Manhattan, doesn't it?

Is There A God? Hawking Says No.

"I am that I am." - Jesus. "Before Abraham was, I am." - Jesus

When Jesus speaks of his Father, we automatically assume there must me a Creator.

But is there one Creator? Or many?

Are we all Creators?

Is it possible that the above words of Jesus pointed to the truth that time and existence are relative, that existence just exists, and it is the acceptance of this truth that brings peace to the human mind? I mean, clearly Jesus was not born before Abraham. Perhaps existence, on the energetic level is eternal.

Einstein pointed out that matter can neither be destroyed or created, it can only change form. If this is true, than who could have "created" the matter of the Universe. Perhaps it just is.

Hawking says the Universe was created spontaneously, and has no creator.

http://online.wsj.com/article/SB10001424052748704206804575467921609024244.html?mod=WSJ_hpp_MIDDLETopStories

He is basically saying the Universe just exists. Actually, many do. It is that it is, and that is enough.

Is it the Human mind that requires a concept of time? A beginning and and end? A creator and destroyers?

Quite possibly.

I mean really, everything is relative, including time and space.

Is the whole idea of God a creation of the human mind? A desperate attempt to bring meaning to existence, beyond that which exists in the present moment?

My God is the energy of Love. My God is the Life Force that dances in the winds of the Universe. I have no need to know who or what created that energy. I know it is eternal, and peace lies inside it.

May the Force be with you.

Danger Ahead?

I should say, DANGER AHEAD!

http://www.cnbc.com/id/38989636

I am so sick of the financial news pundits, I almost can't watch anymore. Any economist that sees what is happening in the economy is labeled a doom and gloomer.

Look people, it is what it is. They are just trying to give you an accurate read on our situation.

Also, this crap about economic pessimism being a self fulfilling prophecy is just that...crap. People either have money to spend and invest, or they don't. Right now, they don't. And if they do, they are not going to invest until they see a hell of a good investment. These are tough to find in a deflationary environment.

So, if you want to take the advice of the financial news pundits instead of the world's most respected economists, go ahead.

Buy stocks hand over fist. Rack up some credit card debt. Spend, spend, spend. Because that is what we need....more debt to keep this economy going!

But if you want the correct advice...stay in cash until the market has a big fall. Then you will have massive, real investment opportunities. If you are caught without a pile of cash as this depression evolves, you will regret it.

Rally On Bernanke?

http://www.cnbc.com/id/38879706

What else is he going to say?

'Hey folks, this is the Keynesian end game and the very institution which I run is impotent. Sorry, there is nothing I can do and you must feel the pain and get through the coming depression.

And, by the way, if I do too much, it won't help anyway and it will bankrupt us.'

I don't think so.

Roubini Delivers Some Morning Cheer

Drink up...he is right. Again.

Davis Rosenberg Sees Depression Ahead

Here is a clip to watch, the interesting part is about 7 minutes in, so forward to it and don't waste your time with the rest of it.




I have posted interviews with Mr. Rosenberg before, because our views are very similar.

This is a blog, you know, I feel no journalistic responsibility to be fair and balanced...at all.

Notice how at the end how the other commentators on the show almost apologizes for Mr. Rosenberg's "depressing" view.

This really bugs me. He is doing not being "depressing", he is simply pointing out facts to an audience that is in complete denial.

Denial will not help you. It is like a drug. It will make you fell better for a few minutes, or hours, but it can't save you from reality.

We must accept what is coming, prepare for it, deal with it, and find innovative ways to prosper within it.

A protracted period of falling prices (a depression)is the only thing that will "heal" this overstimulated, over consuming economy we live in. It is a healthy correction.

We must accept it, learn from it, and evolve accordingly.

My Best Friend

We lost Dana, our black Labrador retriever this past Saturday. She had been with us for 15 wonderful years. I am so thankful for that.

I know everyone thinks their dog is the best. I am no exception. To me, Dana was the best.

I have not yet recovered from the loss, and just feel a huge gaping hole sucking me into it.

I know this will pass. Right now it is terrible.

I love you Dana...will miss you forever.

No Right To A Job

Lady, there is no right to a job in the constitution.

"...like I read the constitution." Yeah, right. You might want to study a little harder.

How easy is it to become a citizen? My God, we are in trouble if we don't stand up to this kind of thinking.

You have a right to be a Muslim and practice your religion on your own time, the constitution frees you from religious persecution, it DOES NOT give you the right to use the court system to expropriate funds from your employer. Having a required work uniform is standard practice in many industries. It can hardly be considered persecution! If you don't like the rules there, quit! You have no right to wear your hijab to work if it is against company policy.

YOU HAVE NO RIGHT TO A JOB - ANYWHERE!

She even feels she should be getting paid on the days she doesn't show up! Unbelievable.

http://www.cnn.com/video/#/video/us/2010/08/21/nr.muslim.woman.disney.cnn?hpt=T2

The Blue Collar Heros Know What's Right

Of course the constitution supports the rights of the owners of the land who want to build a mosque near ground zero.

However, there is a difference between allowing the mosque's construction and supporting it.

As a matter of fact, Americans have every right to condemn it, and they should.

Thank God for hard working New York construction workers.

These guys should run for President. They would of handle this issue better than our current one did.



"They simply don't want to be a part of it."

It's nice to see some men with...well, you fill in the blank.

Daryl Guppy

We are back at very critical technical levels. Mr. Guppy is one of my favorite technical analysts, and of course, I agree with his opinion.

Out Of Body Experience

Ever since my 20- yr high school reunion, I have been having a hard time. Weird, isn't it? I mean, I had a great time.
It is just that I feel like by brain has reverted to that of my 18 year old self.

Honestly, I have these moments when I read my own blog and I think, "Who wrote that?" That woman has insight. She is wicked smart. And then I think. "Holy shit, it's me."

I forget that I am smart.

The only solace I can find is the "New Age" spiritual teaching I am drawn to.

I feel my personality and body are just a shell. The real me is in here...but sometimes the experience of being in this body, in this life, is just so powerful...I get lost.

It reminds me of a song...


Ok , the video is really weird (and meaningless)...but the reason I like the song is that it speaks to the fallen nature and potential redemtion of us all.

Whatever I am going through I am sure there is a reason for it.

Why China Won't Save The Global Economy

There are those who believe Chinese growth will save the world from a double dip recession. It won't.

http://www.cnbc.com/id/38720752

The Chinese economy is a centrally planned economy bred by government control. It IS NOT free by any means. The government "promotes" growth by giving breaks and subsidies to companies, and then confiscating any amount of profit they want.

Chinese leaders still believe in totalitarian ideals. Their shift to what they call capitalism, which is a bastardization of the word, reminds me more of pre-World War II fascist Italy.

Centrally planned economies always falter. Whether the "plan" is communism or some hybrid capitalistic-fasco- monster, which the Chinese economy is.

Economies need a base of moral capitalism bred and legally supported by enlightened ideas like those of our constitution to flourish.

China will not save us. China is going to crash, probably before we do.

Great Conversation

I will comment on this later - but for now, just watch. Aayan Hirsi Ali and Irshad Manji are probably the best hope Islam has. Both of these women are extremely brave. Though they have different religious beliefs, I believe both of their approaches should be used to help bring about peace.

http://www.cnn.com/video/#/video/podcasts/fareedzakaria/site/2010/08/15/gps.podcast.08.15.cnn?iref=allsearch

Their conversation is about halfway through the program.

I will try to post a video containing only their conversation later, when I can find it.

Though I am not a huge Zakaria fan, he did very well to have these two women on and ask the questions he did.