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Weekend
Reading
I'm not usually a
pimp for other financial writers, but every good rule is made to
be broken and this weekend, I would draw your attention to "The
Day After Tomorrow - Part 3 - The Great Unraveling" over at
Jim Puplava's Financial Sense Online web site. But this is a
real gem, and sounds so much like the scenarios I've been
outlining over at our subscription side,
www.peoplenomics.com,
that it really deserves a thoughtful read. Especially if
you think the housing bubble will last forever.
This weekend, our
Peoplenomics.com
report is focused on "The Mistletoe Problem: Interest and
Parasitic Economics."
Subscriptions
are a modest $30 a year and our renewal rate approaches 100%
so we reckon there's value in the reports.
Terror
Suspects Caught
The British have now
rounded up
four suspects in connection with the recent terror bombings
and attempts in the UK.
Number to
Worry
We received a note from our
colleague Jas Jain warning that the flattening of the yield
curve is about to ensure that the US slips into a recession next
year - one that Jas rightly worries will bring a bust of the
Housing Bubble and the onset of the Second Great Depression with
it, something we have seen in the cards for a long time...
"10-Year/2-year Spread Hit a
New Low of 22 Basis Points (0.22%)
Intraday. It closed at 25 basis points. Every week it has
been making new lows; previous lows were 28 and 34. The
magic number is 20, below which the probability of a
recession within the next 12 months gets to 50%.
Of course, as usual, economists know better than the
markets. Therefore, we will not have a recession. If it were
up to economists' predictions we will never have a
recession."
Jas was also kind enough to offer
my son, the Whine Merchant, some advice on unloading the $500
bottle of wine he's got up on eBay:
"I don't know if your son is a
professional wine merchant for expensive wines, but if he
waits till 2007-8 he might be lucky to sell it for $20.
Collectibles would take a huge hit, easily 90-95%, in the
Greater Depression. The clock is ticking. The Housing Bubble
is the last stand."
We certainly see this in the cards,
and when it all comes along, we expect to be focused on
scratching out a living on our ranch in East Texas. I
don't know if I mentioned, but we recently tried to acquire a 16
acre piece of land next to ours for what we thought was a very
fair price of $26,000 on a 20% down contract at 6% interest.
That was turned down by the owner, who wanted more. What's
interesting is how the Universe is once again taking care of us
economically - we look for gold to jump to the $500 level by the
end of the year (if not much sooner), for silver to head north
of $10, and by the time 2008 gets here, we figure the price of
the land we'd been eyeing might have dropped from a perceived
value of $30,000 or thereabouts to a more reasonable $3,000 if
the Housing bubble let's go completely.
Yellen About
Housing
While the big picture view of monetary policy is often
telegraphed by the members of the Federal Reserve, there's often
a lot to be gleaned from reading what regional Fed presidents
are saying when they mount the bully pulpit in front of
heartland America business leaders. Such was the case this
week when Janet Yellen, President and CEO of the San Francisco
Fed met with community business leaders in Portland.
Some
highlights:
"Increases in the federal funds rate typically lead to
increases in longer-term interest rates. But, as we all
know, long-term rates have actually fallen as the FOMC has
raised short-term rates. For example, the benchmark ten-year
Treasury rate is down by more than ½ percentage point since
the funds rate started heading up in the middle of last
year. This is the basis for what Chairman Greenspan has
called the bond rate “conundrum” that has commanded so much
attention recently.
There is a debate about how to interpret the decline in
longer term yields and it essentially boils down to whether
the surprising behavior of long rates is due to various
“special factors” operating independently of the current
business cycle or instead augurs bad economic news on the
horizon. If special factors are holding down long term
yields, then the total amount of stimulus to spending from
interest rates is currently greater than would be surmised
on the basis of the current federal funds rate. In effect,
unusually low long-term bond rates are now providing extra
stimulus to offset the drags I described. A number of
“special factors” might be at work to flatten the yield
curve. One possibility is that low bond rates reflect a drop
in risk premiums because inflation has become better
anchored and the volatility of the real economy has fallen.
But let me also note that other factors would seem to work
in the opposite direction—for example, our large and growing
federal budget and trade imbalances could be raising risk
premiums.
Another possibility is that low long-term rates reflect
unusually strong demand for long-term securities, for
example, by pension funds seeking to improve the match
between the durations of their assets and liabilities, by
holders of mortgage-backed securities seeking to maintain
the durations of their portfolios, or by foreign central
banks that have been acquiring dollars. China may have been
playing an especially large role, as its central bank has
intervened in foreign exchange markets to peg the renminbi
at a low level against the dollar. Of course, last week the
People’s Bank of China announced that it had revalued the
renminbi against the dollar by 2.1 percent, with the stated
intention of managing the renminbi’s exchange value against
an unspecified currency basket. This is not a large
revaluation, but some observers think that it is the
beginning of a much bigger move over time. If this is the
case, we may gain a better understanding of the impact, if
any, that Chinese exchange rate policy has had on U.S. bond
rates.
An alternative to “special factors” as an explanation for
the low level of long-term yields is the possibility that
the flat yield curve reflects the market’s assessment that
bad news is on the horizon. In other words, investors may
expect only modest increases in the funds rate in the future
because they think that the drags I’ve described will keep
demand on the weak side for some time to come.
We probably won’t know the most important sources of this
“conundrum” until more time passes, but the causes of the
conundrum do matter to monetary policy. If the first class
of explanations turns out to be correct, the federal funds
rate probably needs to be somewhat higher than would
otherwise be appropriate to offset the additional stimulus
due to the flat yield curve. If the latter explanation fits
the bill, and the market is correct that the drags going
forward will be unusually strong, a somewhat easier policy
may be appropriate.
Housing
Whatever the source of the conundrum, clearly low
long-term rates have contributed to the continuing boom in
the housing market. The share of residential investment in
GDP is now at its highest level in decades. The question on
everyone’s mind, of course, is whether this source of
strength in the economy could reverse course and become
instead a source of weakness. Put more bluntly: Is there a
housing “bubble” that might collapse, and if so, what would
that mean for the economy? To begin to answer this question,
we need to know what we mean by the term “bubble.” A bubble
does not just mean that prices are rising rapidly—it’s more
complicated than that. Instead, a bubble means that the
price of an asset—in this case, housing—is significantly
higher than its fundamental value.
One common way of thinking about housing’s fundamental
value is to consider the ratio of housing prices to rents.
The price-to-rent ratio is equivalent to the
price-to-dividend ratio for stocks. In the case of housing,
rents reflect the flow of benefits obtained from housing
assets—either the monetary return from rental property, or
the value of living in owner-occupied housing. Historically,
the ratio for the nation as a whole has had many ups and
downs, but over time it has tended to return to its long-run
average. Thus, when the price-to-rent ratio is high, housing
prices tend to grow more slowly or fall for a time, and when
the ratio is low, prices tend to rise more rapidly. I want
to emphasize, though, that this is a loose relationship that
can be counted on only for rough guidance rather than a
precise reading.
Currently, the ratio for the country is higher than at
any time since data became available in 1970—about 25
percent above its long-run average. Of course, the results
vary widely from place to place. For Los Angeles and San
Francisco, the price-to-rent ratio is about 40 percent
higher than the normal level, while for Cleveland the ratio
is very near its historical average.
Closer to home, the figure for Seattle is just over 35.
For Portland, it turns out that the price-to-rent ratio is a
bit anomalous. Unlike the ratio for the nation and many of
the cities I’ve mentioned, Portland’s ratio has been
trending up, and this pattern has been going on since the
late 1980s. This means that there’s not a stable long-run
average ratio to use as a comparison for today’s ratio, so
the analysis we did for the other cities wouldn’t be that
meaningful for Portland. What we do know is that the pace of
home price appreciation in Portland has been close to the
national pace over the past few years, lagging behind
somewhat in 2003 as the state struggled to recover from the
2001 recession, but mostly catching up in 2004 and early
2005 as economic growth picked up noticeably in the state.
As of early this year, home prices in the Portland area were
up 12 percent over a year earlier, only a bit below the
national pace of 12½ percent. More recently, I’ve heard
reports that upscale homes in the Portland area are
increasingly being sold at above-asking price—a phenomenon
we’re all too familiar with in the Bay Area! So it’s clear
that Portland’s housing market has been hot, but I’m sure
that’s no surprise to you.
In any event, as I said before, the fact that the ratios
for the nation and many areas of the country are higher than
normal doesn’t necessarily prove that there’s a bubble.
House prices could be high for some good reasons that affect
their fundamental value. The most obvious reason is the low
level of mortgage rates. This stems both from very
stimulative monetary policy and from the conundrum I
discussed earlier. Conventional mortgage rates have dropped
from around 6 percent in early 2004 to around 5 percent
recently.
Other factors could also be raising housing’s fundamental
value. For example, recent changes in tax laws may be having
an effect. In 1998, tax rates on capital gains were lowered
and the exemption from capital gains taxation for housing
was raised to $500,000. Both of these changes would reduce
the potential tax bite from selling one home and buying
another. Another development, which may be making housing
more like an investment vehicle, is that it’s now easier and
cheaper to get at the equity—either through refinancing,
which has become a less costly process, or through an equity
line of credit. Both of these innovations in mortgage
markets make the funds invested in houses more liquid.
So there are good reasons to think that fundamental
factors have played a role in the unusually high
price-to-rent ratio. But the bottom line here is fuzzy. It’s
very hard to say how big a role these factors have played,
so we don’t know how much remains unexplained. Frankly, even
the best available estimates are imprecise, and they don’t
definitively answer the question: Is there a bubble, and if
there is, how large is it?
Given this uncertainty, my focus as a monetary
policymaker is on trying to understand what kind of risks a
drop in house prices would pose for the economy. One of the
classic ways to do this is to ask “What if…?”—in other
words, to pose a purely hypothetical question. In this case,
the “what if” question might be, “What’s the likely effect
if national house prices did fall by 25 percent, enough to
bring the price-to-rent ratio back to its historical
average?” Before going any further, I want to emphasize that
I’m not making any predictions about house price movements,
but instead, simply discussing how a prudent monetary
policymaker could assess the risk.
First, there would be an effect on consumers’ wealth.
With housing wealth nearing $18 trillion today, such a drop
in house prices would extinguish about $4½ trillion of
household wealth—equal to about 38 percent of GDP. Standard
estimates suggest that for each dollar of wealth lost,
households tend to cut back on spending by around 3½ cents.
This amounts to a decrease in consumer spending of about 1¼
percent of GDP. To get some perspective on how big the
effect would be, it’s worth comparing it with the stock
market decline that began in early 2000. In that episode,
the extinction of wealth was much greater—stock market
wealth fell by $8½ trillion from March 2000 to the end of
2002. This suggests that if house prices were to drop by 25
percent, the impact on the economy might be about half what
it was when the stock market turned down a few years ago.
Moreover, the spending pullback wouldn’t happen all of
a sudden. Wealth effects—positive or negative—tend to affect
spending with fairly long lags. So, a drop in house prices
probably would lead to a gradual cutback in spending, giving
the Fed time to respond by lowering short-term interest
rates and keeping the economy steady.
Now let’s complicate things. Suppose house prices
started falling because bond and mortgage interest rates
started rising as the conundrum was resolved, say, because
the risk premium in bonds rose due to concerns about federal
budget deficits or other factors. Then we’d have the cutback
in spending because of the wealth effect, plus there’d
likely be further spending cutbacks, as borrowing costs for
households rose. Furthermore, a rise in long-term rates
would have effects beyond just households—it also would
dampen business investment in capital goods through a higher
cost of capital.
How manageable would this scenario be? Like the wealth
effect, these added interest-rate effects operate with a
lag, so, again, there probably would be time for monetary
policy to respond by lowering short-term interest rates.
This obviously would not be a “slam dunk,” but in many
circumstances it would seem manageable.
A matter of more concern is whether this scenario
would lead to financial disruptions that could cause
spending to slow sharply and quickly. One issue that
receives a lot of attention is the increasing use of
potentially riskier types of loans, like variable rate and
interest-only loans that may make borrowers and lenders
vulnerable to a fall in house prices or increase in interest
rates. I believe that the odds of widespread financial
disruption on this count are fairly slim, although, clearly,
some borrowers are vulnerable. First, the shift to these new
instruments appears relatively modest overall. Second, the
equity cushions available to both borrowers and lenders
still seem, on average, to be pretty substantial. This is
evident in looking at loan-to-value ratios, which have
fallen, on average, as home valuations have risen faster
than mortgage debt. In addition, most financial institutions
enjoy comfortable capital positions, so they’re better able
to weather any problems with their mortgage portfolios.
Finally, some of the risk associated with mortgages has been
transferred from banks to investors, as banks have sold off
securitized bundles of mortgage debt. These investors may be
in a better position to handle the associated risk. So,
while there undoubtedly would be some fallout from a
substantial drop in house prices, the financial system and
consumers appear to be in reasonably good shape to handle
the situation.
If you are using our "Search Engine
Oracle" technique, you might realize that there are now 405,000
references to the phrase "housing bubble" showing in Google.
About the Sun
You may recall that sometime this
summer, we are supposed to get three major "sun events"
according to the web bot runs. A little more recently, if
you can remember back to yesterday, we
reminded you to keep an eye on
www.spaceweather.com
because there was a threatening group of sun spots about to
crawl over the eastern limb (the sun's horizon to us, if you
will) and that posed a threat of an X-class flare (or several)
that could cause problems in space and disrupt communications.
Well, lookie here, right on schedule a smallish X-class flare:
"NOAA AR 0792,
Catania sunspot group 9, has produced an X1.3 flare peaking
at 06:35 UT this morning. The flare was accompanied by a
coronal dimming and an EIT wave observed by SOHO/EIT,
indicating the occurrence of a CME. At the moment there is
no SOHO/LASCO data available to estimate the angular extent
and the speed of this CME."
Web Bot Heads
Up on the Sun
We have seen repeated
references in the web bot runs from
www.halfpasthuman.com
to increasing activity on the sun and related impacts on earth.
The way the entities seem to be linked, as a casual reader, is
that we can expect a sort of "all at once" sequence of events
that will involve three bursts of energy from the sun,
abandonment of a space flight due to solar radiation concerns,
and this should all somehow tie in with earthquakes and a loss
of confidence in the housing market. It's a big concept to
wrap your head around, but consider the references in ALTA 905_4
which was published on June 11, 2005:
"Also common to
both Populace entities are many references to the same
descriptor set for 'energetic sun' or perhaps best taken as
'solar energy pours down to earth'. This theme has been
reported in previous ALTA reports around the concept of an
'energetic sun' which will 'send down storms 3/three times,
one day'. This reiteration of the same set of data, now
augmented, demonstrates the emotive potential is still
active, and the indications are that this occurrence will
happen later in July, perhaps in early August. {our timing
is usually off a few weeks at best}."
The fact that the web bots seem to
have scored another hit this week with
the flooding in the "five rivers" region of India increases
our confidence that we'll not only see the "shots from the sun"
somewhat coincident with the peak in the housing market, but we
can expect 5-quakes in a day for California and perhaps three
"great quakes" (over 8.0) in rapid succession between now and
the end of September.
Note: References to the web bot
project are exclusively by permission and reposting is not
permitted with out links to this site and
www.halfpasthuman.com
which is the original source.
Well, that'll certainly give you
some things to think about, but over the next week or two, if we
saw a sequence of events like "NASA considered bringing shuttle
back early because of solar radiation concerns" followed by a
series of earthquakes, and then a big drop in housing prices
this fall, we'd have to sit back and quietly says "told
you so..."
Regardless of the predictive nature
of our approach, we should see in the coming week just how
strong the linkage is between sunspots and investor behavior,
which is already operating in a highly pressurized head
space.
Good Judges!
Contrary to what detractors and the
group-think sheeple might claim, UrbanSurvival is not about
bad news. In fact, we are pleased as hell to present
the good news stories when they show up. For
example, here are two judges in the news that are keeping
fascism at bay and defending our beloved Constitution:
TIPTYPE: Government - Did Something Right! T1:
http://www.guardian.co.uk/uslatest/story/0,1282,-5177205,00.html
S1: Federal Judge Says Patriot Act Too Vague
"LOS ANGELES (AP) - A federal judge has ruled that some
provisions of the U.S. Patriot Act dealing with foreign
terrorist organizations remain too vague to be understood by
a person of average intelligence and are therefore
unconstitutional."
And...in
Seattle this week, as a would-be bomber was sentenced to
22-years, we note that District Judge John Coughenour got it
exactly right when he said:
"We did not need to use a secret military tribunal,
detain the defendant indefinitely as an enemy combatant or
deny the defendant the right to counsel," U.S. District
Judge John Coughenour said. "The message to the world
from today's sentencing is that our courts have not
abandoned our commitment to the ideals that set our nation
apart."
Amen! Why Coughenour is not a Supreme Court pick is
beyond us, because we expect he would have landed on the
rational (non-corporatist) side of eminent domain, too...
Hell on the
Mexico Border
We have to pass along this gem, as
we have already briefed you up on the problems of Neuvo Laredo,
a small drug and human running outpost on the Mexico border.
The BBC (not mainstream media in the US) is reporting that
America's border consulate there is being closed because of
escalating violence. The
Minutemen were right and the Bush administration is dead
wrong on border security, in our view.
We note that the "Conservative Voice" shares this view.
Reader Notes
This one is interesting:
George,
1. If you have
some time this weekend, you might visit
www.rense.com and check
out the lead stories on "Bin Laden/NASA" and "Guns of
October". Either one of these being true is too terrible to
contemplate.
2. Are you
familiar with FTA (Free To Air) satellite reception?
Basically, it is monitoring "free" satellite signals in the
C and Ku bands. This includes backhaul news and sports
feeds, syndicated programming, and news/entertainment
programming from around the world. Check out
www.lyngsat.com
for a list of satellites.
3. On the subject
of FTA, the satellite for Telesur is located at 40 degrees
West, below my horizon. The satellite carrying Cubavision
International from Havana is located at 58 degrees West and
although low in the sky, comes in well here in Illinois.
Keep up the good work and thanks for all your efforts.
Yeah, Elaine and I
have been thinking about this for the ranch - direct satellite
cards for PC's are down in the $100 range - see the KWorld
Computer Company web site at
http://www.kworldcomputer.com/product/DVBS-FTA/DVBS-FTA.html
We have more research to do, but it sure looks
interesting...don't know about the dish and if there is an LNA
requirement, how to deal with polarization issues, but we are
starting to research it.
Tell a Friend!
Please tell a friend:
We always appreciate referrals, so if you know of someone who
might enjoy this site,
please send them an email by clicking here. We are presently
serving up more than 100,000 pages views a week (!) - all of
which is made possible by the subscribers to our
www.peoplenomics.com
site. Don't forget to visit
www.independencejournal.com too, because we periodically add
lifestyle material there.
Visit the Bookstore, too. We have a number of books on
economic related issues such as the "For Sale by owner Coach"
which will give you a lot useful ideas should you decide to sell
property by yourself. Another popular title is "How to
Live on $10,000 a year or less..."
If you
haven't been to the bookstore, click here to visit.
Browsing bookstores is a fine pastime.
Green Zone
Insight
From our
correspondent, the Wandering Texan:
George:
Greetings from the Green Zone. As I am sure you know the
DC Big Dogs blew into Baghdad unannounced a couple days
back. I don't know what spin you are hearing as to the
reason for the visit but it may lead to what turns out to be
nothing more than a glorified BUG OUT. Truth is this place
is just a hair away from a full scale civil war, with us in
the middle. Every one here knows if this place craters, we
cant handle it. We are constantly packed and ready for the
hundred mile per hour run to the airport. Most others have
done the same. Each day the insurgents grow stronger, wiser,
and more aggressive. Now they kill everyone they can get
their hands on. The locals that join the police or the
defense forces just need the money, and don't have the heart
to fight. When the bad guys march in, either the US will
fight them or no one will fight them. When we pull out they
will take over. Damned if you do, damned if you don't. I
know it's hard to see over the walls of the Beltway, but you
guys in DC really need to look around. Two Thousand of the
sheep have already paid.
Wandering Texan- Baghdad
26 dead in a suicide attack there this morning.
Whine Merchant
My son,
who I mentioned earlier this week was trying to unload a $1,400
bottle of wine has run head-on into economic reality - no bids.
I told him to lower the price to $500 which he has.
If
you're looking for a $500 bottle of wine, click here. I
explained that the concept of drinking is to get into altered
mental space. As we point out in our ebook "How to live on
$10,000 a year or less" there is a whole science to getting the
maximum buzz for minimum bucks. Undaunted, my son whines
that people will still buy quality. I argue that if they
did, we'd all buy a Land Cruiser once in our life and that would
end annual car sales. He says styles constantly change.
My retort is that they only do so because advertising changes
the definitions of style in order to pull future demand into the
present - and that's why athletes are hired to hype $200
sneakers that have a $4 bill of materials cost and are made by
50¢ an hour labor outside the US
under the Big Lie of "free trade." He says I'm
unreasonable. If you agree with him, buy the $500 bottle
of wine. Otherwise, a shot of vodka on the rocks after
work today will be fine....People I know who can afford
$500 bottles of wine are paying higher fuel bills on their jets
and don't drink hardly at all. This economy is a sobering place,
after all.
Some Call it
"Growth"
The
Bureau of Economic Analysis this morning has released its latest
set of figures claiming that economic growth in the second
quarter of this year was bumping along at the 3.4% rate. This is
down a bit from the more robust 3.8% rate which was claimed in
the first quarter.
Consumer spending,
exports, and business investment contributed to the 3.4-percent
second-quarter increase.
-
Consumer spending
on goods and services increased 3.3 percent.
-
Exports, mainly
of goods, increased 12.6 percent.
-
Business fixed
investment increased 9.0 percent. The slightly slower GDP
growth rate in the second quarter resulted primarily from a
downturn in business inventory investment that was partly
offset by an increase in net exports.
Exports include
things like war materials, by the by. And yes, $300
billion of the GDP is war production - so consider that in your
thinking, too.
If you want something
to really bite your nails about, look at the claimed increase in
exports, which you know ought to have shown up in the balance of
trade deficit as an offset - and you get the idea that one of
the two numbers is not adding up to a healthy picture. But
wait!
Now the big news -and
it was sort of buried in the report. Remember my point
about historical revisionism which has become vogue in economic
reports? Well, we find in this morning's report this
little admission: "BEA today released revised GDP estimates for
the first quarter of 2002 through the first quarter of 2005.
This annual revision had little effect on year-to-year growth
rates. For 2001-2004, real GDP is now estimated to have grown at
an average annual rate of 2.8 percent, 0.3 percentage point less
than previously estimated."
Now crank this into
your thinking:
M-1
as reported by the Federal (which it isn't) Reserve stood at
1,365.1 billion in June. A year ago in June it was
1,336.8. That's a growth of 2.11%. Economics 101
says if the GDP is growing faster than the money supply, then
you have fewer dollars chasing more goods and services, which
means DEFLATION. On the other hand, if we look at the M-3
measure, a much broader view that includes refinancing of homes,
we see the rate of increase in the effective money supply is
9,279.4 billion a year ago, versus 9724.9 in June. That's
a 4.8% increase in effective money supply which is INFLATIONARY.
Want to understand
Fed policy as well as any of the talking heads? One word:
tightrope. If M-1 collapses we have a deflationary
depression. If M-3 goes skywards we have hyperinflationary
depression. Pick your poison. Remember, could
be only about 4-5 months of Greenspan left.
Mass Layoffs
I almost
forgot to mention that despite all the headlines about
additional mass layoffs, they are not yet showing up in
government figures, released this week and covering through
June. We will have to wait for almost the first of
September for our next glimpse of things, but for now,
here's
how the mass layoff picture looks:
Talking Head
Disease
We loved listening to the newscasts
on the Cyclops last night - the big hype was that the NASDAQ and
the S&P were at "four year highs"! What a wonderful set up
for the cold water thrown in by our fractal analyst G. Lammert:
"George, July 28, 2005, while not a key reversal
day, represented the second exhaustion gap day to new
multiyear highs for the behemoth Wilshire 5000 without
retracement of its now preceding two gaps. On 11 July 2005
the Wilshire (TMWX), on a minutely basis, gapped, skidding
and skipping upward, during the range from 12110-12140 to a
multiyear high. This gap has not been retraced during the
last 13 subsequent trading days. The 28 July gap occurring
near the 12405 level to yet another multi yearly high did so
with further growth ascension and without retracement.
Technically the equities are displaying classical peaking
characteristics.
It is quite remarkable that a summation index as huge as
the Wilshire can have ascending exhaustion gaps - a one
percent valuation growth represents a 150 billion dollar
rise in valuation in this approximately 15 trillion dollar
equity basket. Offset by the poor performances of large
companies such as Delta who yesterday were reportedly
worried about bankruptcy- a common problem for American
companies dependent on the non-federally assisted and,
otherwise stated, private selling of American made products
or services- it is unrealistic to expect the great Wilshire
to blow off in grand exponential fashion. Small trading gaps
for the Wilshire to higher new multiyear highs, will have to
do.
On the other hand, rotational money suddenly invested
into individual media- focused 'hot stocks' can well show
the classic blow off pattern. A look at DCX Chrysler's
yesterday performance is instructive in the technical
anatomy of a blow-off: its fractal growth pattern on July
28, 2005 was ... 12/30/24 of 24. Just as 7/7 was a transient
one day aberration of the underlying growth pattern for both
US and European equities, so will Chrysler's terminal one or
two day Supernovae performance at the conclusion of its
third fractal growth pattern find the retrenching
gravitational field of the consumer- saturation,
forward-consumption black hole that lies immediately beneath
its transient elevation.
This morning's early trading in Europe (July 29, 2005)
shows valuation exhaustion gaps to new 4 year highs for all
three of the major indices, the FTSE, the DAX, and the CAC.
Watch for the possibility of a key reversal day for those
indices.
Beware the coming deluge. Gary Lammert
http://www.economicfractalist.com/ "
Industrial
Strength Mess
Big chemical fire in the north Fort
Worth (Texas) area yesterday - visible for miles. No sign
of terrorism, just an
industrial accident by the sound of reports. More
suspicious:
Two oil
refinery fires.
Waiting for
the Sun
The web bots have been mentioning
three large shots from the sun at some point between now and mid
fall. And a reader who has been watching for these events
sends this "heads up."
"Just thought to remind you of something else about the
web bot predictions for this time of year. The problems with
the sun. The chances of experiencing Class X solar flares
has increased to 10%. CME's appear to be swinging this way
now.
http://www.spaceweather.com/"
From Our News
Tip Line
Try these on for
size:
T1:
http://www.rense.com/general67/deadp2.htm
S1: Hi George,
I told myself I was going to lay off emailing you all
these possibly useless tips but I couldn't pass this up
after the the timing of todays movie blurb and Cliffs
interview. The other night when Cliff described the Blind
woman and the dread, I was thinking at that time, he was
talking about the Southwest (AZ, NM area), not the Southeast
as described. Well, your update just hit me that I was
thinking the wrong side of the country! Get this, yesterday
I was site skimming (as I do most days for somehow hours on
end) and saw the following on Rense.com about a Dead pool of
the next event location. I went to Centcom.mil site and was
not able find any mention of this drill so I don’t know
anymore than what you read here. Without confirmation, I
cannot give it much validity but, with that disclaimer in
mind, it is worthy of consumption.. Just thought it was a
interesting co-incidence.
"Danny, "a former anti-terror marine," wrote: "My brother
in law is in the US Army, and was supposed to come home in
August and his leave got canceled. I did some checking
around, and it seems like a ton of leave got canceled in
August for the Army and USMC. Centcom's website tells of a
scary drill coming in August. They are running a drill of a
10 kiloton nuclear bomb, being smuggled into Charleston SC.
Now while they run drills like this a lot, they always do it
at Quantico....and BTW, August 6 and 9 are the anniversaries
of Hiroshima and Nagasaki." Rense comtinues: "A number of
readers noticed the upcoming Charleston "exercise." Wonder
if FEMA will be there? As I wrote in the first column, "If I
lived in any of the target zones above, I would keep my eyes
wide open to suspicious people wearing official disguises
(uniforms), flashing badges, prohibiting entry, working at
odd hours performing perplexing tasks. Watch them!"
T1:
http://www.atimes.com/atimes/Middle_East/GG29Ak02.html
S1: Succession struggle coming in Saudi Arabia? Death of
king near?
T1:
http://news.bbc.co.uk/1/hi/world/south_asia/4726645.stm
S1: floods cause
threats of epidemics in India and 'Tsunami rumour'- web bot
hit 3? (Yeah, see story from yesterday below - GU)
T1:
http://news.bbc.co.uk/1/hi/world/south_asia/3530038.stm
S1: floods cause
tunnel collapse at another hydro-electric dam in India - web
bot hit 2?
T1:
http://news.bbc.co.uk/1/hi/world/south_asia/4629869.stm
S1: floods cause
hydro-electric plant to shut in India - web bot hit 1?
(Actually no. The web bot hit on China's power
problems has been right on, but it was China, not India,
sorry.)
T1:
http://urbansurvival.com/week.htm
S1: About your
article: "We received an interesting memo allegedly from the
Environmental Protection Agency to its Federal Employees
this morning which reads in part: "TO: All EPA
Employees...."
Did you see that
the "danger pay" is only a 25% increase for working in Iraq?
All totaled you get 50%, but wow... is someone's life worth
30-40K? I'm not willing to risk mine for that measly $$$!
T1:
http://www.mirror.co.uk/news/tm_objectid=15793347%26method=full%26siteid=94762%26headline=blown%2daway%2d%2dbirmingham%2dtornado%2d-name_page.html
S1: rare tornado
hits Birmingham, UK, not Alabama! (Of course - the
Gulf Stream is shutting down - like we told you - expect the
unexpected in European weather - and it may get much
worse... - GU)
Weekend Movie
Tip
Yeah, I know you have a ton of
things to take care of over the weekend, but a reader sends
along this enticing blurb that's almost too good to pass up:
"Do you remember this movie?"
http://en.wikipedia.org/wiki/Special_Bulletin
Story of the
Week - Podcast
As an experiment today, I have done
a first "podcast" - a 2 minute 46 second .MP3 which deals with
our story of the week. There are two ways you can deal
with this. One is to simply
click here to
point at the file, in which case your browser should load
it and play after buffering it if you have RealPlayer or Windows
Media Player installed. Alternatively, you could
right click on
this link and use your browser's "save target as" option to
save it onto your desktop, or somewhere else where you won't
lose it, for later listening.
I will apologize up front for the
audio quality - it's a lot rougher sounding than I wanted,
because while the onboard software does a fine job of audio
processing (compressing and equalization to be specific), the
basic input is nothing more than a dime-store headset that I use
for internet telephony. Back at the ranch I've got a
near-studio sounding setup which includes an Alesis console, the
ability to do telephone interviews, not to mention a $200
condenser mic which sounds great. But this is a road
effort, so until (or unless) we get back to the ranch, what you
hear now is what it will sound like for the occasional podcast -
which might be something like our "story of the week" idea.
Click here to send along your comments.
Peoplenomics
So here I was, laying in bed
wondering how long before the 6-minutes of microwaving a huge
pot of coffee would take (oddly, it took 6-minutes like every
day) and I was hit with the topic for peoplenomics this weekend.
I call it "The Mistletoe Problem" - and it's about the behavior
of competing systems within fixed resource environments.
It might actual end up as a chapter in a book one day because at
the very core of our economic future is this ugly problem of how
capitalism (which may be thought of as a high growth rate
bacteria in an agar dish) behaves when the whole dish is
populated, or when it runs in to another high growth rate
bacteria competing for the same resource. Should be
interesting reading - and it's typical of the longer form
articles that I post every week over at
www.peoplenomics.com
Subscriptions are only $30 a year,, so if you're looking for
more brain food than headline news services,
click here
for details.
Thursday
Web Bots Hit
Again?
We have been watching the
developing tragedy in India's financial center, Mumbai with
considerable concern, not only for the loss of life, but for the
apparent fulfillment of another one of those stories which has
been tracked this spring and summer by the web bot project.
The June 16, 2005 ALTA 905_1 run
makes specific reference to huge and damaging rainfall;
"The
sense that appears out of the various layers of attribute
sets would seem to support the earlier ALTA reports
about the 'oceans of water' to be carried north in the
atmosphere. In this case, our values have a higher level of
immediacy and a slightly better level of detail, if we
assume the detail interpretation is not misleading. Please
note that we had 'electric water' = storm for the tsunami,
when the same data set clearly had 'force driven
water/wave'. So our interpretation can easily be wide the
mark, however the current data set has nearly 200 thousand
references and so presentation of any amount would be
meaningless. In this case though, our details suggest that
shortly after the 'thunder shock' that 'ripples the wind',
we will get the 'rain storm' that was seen in earlier
reports. In this case, we are now getting indications that
the rains will begin in the mountains, and will scour the
hills clean on their way down. Then as the winds shift,
again bear in mind that this image is replete with 'reversal
of movement', the rains begin to move over the plains,
and the 'five river valleys' until they, the rivers, over
flow in to one mass watery blockage which will induce the
'restricted movement' seen in earlier reports."
So where
are the "five rivers" if Mumbai's disastrous flooding it a hit?
Here's a site that describes five rivers near Mumbai this way:
"Mahableshwar
is one of the most popular hill-stations around Mumbai.
Situated at an altitude of 1372 metres, it is the ideal
vacation spot for a relaxed (and maybe an extended) weekend.
The hill-station has an interesting connection with history,
the Pratapgad Fort - where Shivaji used his "tiger claw" on
Afzal Khan - being 24 kms away. The development of
Mahableshwar as a hill-station began since the days of the
British. The place is the origin of the five rivers -
Krishna, Koyna, Venna, Savitri, and Gayatri, and derives its
name from the Mahableshwar Temple. "
What's
next? We are continuously thinking in background about the
imagery of a blind and crippled woman who directs a male who is
described by her "dread companion." Could the blind
crippled woman be an archetypical representation of "Justice"?
Could the 'dread companion" be something akin to an "enforcer?"
We had
in ALTA 605 a vision of this "dread companion" in the London
financial district about a month ahead of the 7/7/ bombings.
Now, we see the 'dread companion' coming up as imagery
associated with the "southeast" of presumably the US.
Therefore, we will be paying special attention to the Southeast
U.S. and especially terrorism training exercises which might
coincide with the next real attack.
CAFTA: The
Midnight Squeaker
We can only sadly report, "We told
you so." The so-called Central America Free Trade
Agreement, which sounds pretty innocuous on the surface, but
isn't beneath, was passed by CONgress last night. The
bare facts from Business Week's report sound pretty safe,
Fox coverage, at least in part
pictured this as a battle over sugar interests, which it may
have been, but only in part. Elsewhere, we read about
White House lobbying to obtain the two vote margin.
The real story, as we have been
pointing out is not about sugar, or free trade for that matter.
This is about corporate imperialism and the battle for consumer
markets at its worst. We have to agreed with Congressman
Ron Paul's assessment that:
"The House of Representatives is scheduled to vote (and
now approved - GU) on the Central American Free Trade
Agreement in the next two weeks, and one little-known
provision of the agreement desperately needs to be exposed
to public view. CAFTA, like the World Trade Organization,
may serve as a forum for restricting or even banning dietary
supplements in the U.S.
The Codex Alimentarius Commission, organized by the
United Nations in the 1960s, is charged with “harmonizing”
food and supplement rules between all nations of the world.
Under Codex rules, even basic vitamins and minerals require
a doctor’s prescription. The European Union already has
adopted Codex-type regulations, regulations that will be in
effect across Europe later this year. This raises concerns
that the Europeans will challenge our relatively open market
for health supplements in a WTO forum. This is hardly
far-fetched, as Congress already has cravenly changed our
tax laws to comply with a WTO order.
Like WTO, CAFTA increases the possibility that Codex
regulations will be imposed on the American public. Section
6 of CAFTA discusses Codex as a regulatory standard for
nations that join the agreement. If CAFTA has nothing to
do with dietary supplements, as CAFTA supporters claim, why
in the world does it specifically mention Codex?
Unquestionably there has been a slow but sustained effort
to regulate dietary supplements on an international level.
WTO and CAFTA are part of this effort. Passage of CAFTA does
not mean your supplements will be outlawed immediately, but
it will mean that another international trade body will have
a say over whether American supplement regulations meet
international standards. And make no mistake about it, those
international standards are moving steadily toward the Codex
regime and its draconian restrictions on health freedom. So
the question is this: Does CAFTA, with its link to Codex,
make it more likely or less likely that someday you will
need a doctor’s prescription to buy even simple supplements
like Vitamin C? The answer is clear. CAFTA means less
freedom for you, and more control for bureaucrats who do not
answer to American voters.
Pharmaceutical companies have spent billions of dollars
trying to get Washington to regulate your dietary
supplements like European governments do. So far, that
effort has failed in America, in part because of a 1994 law
called the Dietary Supplement Health and Education Act. Big
Pharma and the medical establishment hate this Act, because
it allows consumers some measure of freedom to buy the
supplements they want. Americans like this freedom,
however-- especially the health conscious Baby Boomers.
This is why the drug companies support WTO and CAFTA.
They see international trade agreements as a way to do an
end run around American law and restrict supplements through
international regulations. "
We will find out later today as the smoke clears how much
damage the pharmaceutical vote buyers got away with. But
in our view, CAFTA would never have passed without the "drug
money" backers pushing their agenda with the jobjackers.
As one reader notes:
"CAFTA is the end. If anyone ever doubted the utter
corruption of those who would be our servants, the passage
of CAFTA reveals the putrefaction of our administration, and
those it has bribed, to every American who knows the
Constitution. Unfortunately, we're outnumbered by some truly
ignorant sources of lanolin."
While
the usual suspects in mainstream media cover the superficial,
the facts are that corporate interests, led by the
pharmaceutical industry and the low wages lobby bought another stack of favors from the
CONgressmen who are looking out for their campaign war chests
rather than the interests of the six or eight working families
left in America. Are you registered to vote next time and will you
remember this?
N Korea's Big Poker
Game
As we continue
watching the world's longest running Texas Hold 'em game, we see
the US and North Korea have split on the issue of
denuclearization. This is the equivalent of a new round of
cards being dealt this week,
the US and other's in the talks "passing" and now North Korea is
upping the bid to the other parties. I wonder if the
World Poker Tour could do a special on "Poker Applications in
Foreign Relations"? Bet me it wouldn't be a ratings
grabber. I'm all in.
There Goes Customer
Service
With 439 people dead
in the flooding which came to Mumbai (India) this week,
we have to wonder what impact there will be on hold times and
customer service levels among all those US companies that
rushed to replace their American employees with dime-an-hour
wage slaves in India.
37 inches of rain in a day may have an impact on hold time,
we figure.
Terror War Speed Bumps
If you speak any of
the languages which might be used by terrorists, you might want
to dust off a resume and send it to the FBI muy pronto. That's
because a report in the
Boston Globe says the agency is falling behind in translating
tapes from suspected terrorists.
We received an
interesting memo allegedly from the Environmental Protection
Agency to its Federal Employees this morning which reads in
part:
"TO: All
EPA Employees
The United States is currently supporting the Iraqi people as they
build new essential services, their economy, and other government and
political institutions. The President has called upon all Federal
departments and agencies to support the rebuilding of Iraq through
details of Federal employees to the Department of State's Iraq
Reconstruction Management Office (IRMO).
These details offer concentrated career developmental experiences for
employees, especially in the areas of communications, consensus
building, and the governance processes. Federal employees detailed to
IRMO will have a unique opportunity to serve our country and make a
lasting contribution to world peace.
A list of knowledge and skills currently needed for these assignments
and information about the application process can be found at:
http://careers.state.gov/opportunities/iraq/index.html
. If you are
interested in one of these detail opportunities, speak with your
supervisor and contact your local Human Resources Office.
The Environmental Protection Agency supports the President's request
for detailees and looks forward to doing our part to help in the
reconstruction of Iraq."
OK, so now in
addition to the military spending, we're "detailing" federal
employees to this?
San Diego's
Mess
If you haven't been
following it, the city of San Diego has been having more than
its share of woes with the city budget verging on bankruptcy,
reducing city services as a result, and voters who are dazed and
confused at the huge number of people who want to be mayor.
As result, it looks like there will be
11-names to choose from when the November 8th election gets here.
personally, we like surf shop owner Donna Frye, although
not because of her politics, but because surfers we've known
tend to be fairly mellow, right thinking people.
Panamera?
What the hell is a "Panamera,"
you ask?
That'd be the new four-door Porsche that is on the drawing
boards. The Porsche team is planning to spend a
billion dollars (EU-bux, which would make it closer to $1.2
billion in US paper FeRN equivalents) building this four-door
screamer. As with all Porsche products, it should be a hoot to
drive. But what kind of mileage is the design team
targeting? After weaning myself off my 911, *(the 944 was part
of my treatment program) I've remain resolute in not spending a
significant fraction of my net worth of cars. But that
doesn't mean I don't see the beauties of the beasts. A triple
black Panamera sounds like fun...
Hey! Speaking
of oil companies, we noticed the headline that Shell
makes a profit of over a million dollars an hour.
Think it has anything to do with low fleet economy levels?
Same thing at Exxon.
Reviews of Web
Bot Cliff
I mentioned that
Cliff of web bot fame was going to be on Alex Merklinger's
Mysteries of the Mind last night. I think the reviews from
readers of the technology say it all:
Just wanted to thank you for letting us in on Cliff's
radio interview last night. He was fascinating to listen to
- his predictions for the remainder of the year were a bit
unsettling, if not downright eerie! Especially the image of
the blind/maimed woman and dreadlock dude duo. Gives me
added credence for the food storage, precious metals and
camping gear I have acquired over the past few years.
Then, to wake up this morning to find out the House
passed CAFTA?!?!? Did they have a secret meeting at
midnight? I wasn't expecting that for another week anyways.
NASA has its own problems to deal with as well. If I were
the astronauts I would be more than a bit concerned about
how I was going to get home safely.
On to a new day here in the southeast - with dreadlock
dude in our shadows....
---
Thank you for the reminder about Cliff being on "Mysteries Of The Mind".
Wow! What a program! You may want to remind your audience
that the program is archived and it is well worth hearing a
second time.
Please keep us posted, as much as you can, as we approach
the dates that Cliff mentioned.
---
I just finished listening to Cliff on Mysteries of the
Mind. He gave me so much to think about that I probably
won't sleep tonight. Thanks for introducing me to someone
who thinks on a level that I can only admire!
---
Thank you for the heads up on Cliff's appearance with
Alex Merklinger.
Cliff did a pretty 'special' job tonight. It's going to take
me several days just to consider the implications of what
the Bots are turning up i.e., that human beings
subconsciously know what lies ahead for them.
This thought will take some getting used to.
And then there are the matters of August 12th and December
3rd. We live in interesting times!
Thank you again, and if you are talking with Cliff thank him
for me - I view his discussion tonight to have been a very
important one for me.
---
If you want to poke around
www.mysteriesofthemind.com in a few days, you might be able
to find the achieved copy of the interview. Yup, well
worth listening to if you want to know how Nutjobs 1 through 3
think and what drives our news focus.
Praise for Cuba
Apparently, my
daughter Denise & I have a bit of an ideological difference, not
unexpected when there's a 30-year age difference between people.
She makes the point that despite my criticism of Cuba's
lifestyle, and Castro's shortcomings in some
areas,
the country does pretty well in healthcare. Point
taken.
But an even more
interesting notion is raised by a reader who suggests that Cuba
might already be the kind of country the rest of the world will
be in the near future as oil runs down and oil prices go through
the roof. He references a 2004 article at
http://www.communitysolution.org/pdfs/NS2.pdf and says read
it and think about it. Again, point taken.
Peoplenomics
We are extremely
pleased with this week's report over at
www.peoplenomics.com -
our subscription service which you can dig into for a modest $30
per year. Our topic this week is how to play a last minute
blow off rally, which is certainly a possibility yet this year.
What is
"Peoplenomics?" It's a whole different way of looking at
economic events through humanistic eyes. Economics, you
see is all about one thing: Money. The problem, in
case you haven't noticed, is that the pursuit of money has
collided with the limited resources of all types on this
somewhat frail planet. Why are wars being fought on behalf
of corporate interests? That's economics.
Peoplenomics, on the other hand is about the thoughtful weighing
of the economic realities of the day with the
humanist/humanitarian survival of planet issues.
Over time, we're
developing an economic model which can accompany both prosperity
and humanity - an area of endeavor which unfortunately, we see
little effort toward accomplishing. Which is why we have the
government we do, why corporate interests rule CONgress, and why
later this week, it's almost a dead-to-nuts sure bet that the
job stealing Central America Free Trade Agreement will be
passed, complete with a rider that will steal your rights to
sound natural food supplements.
The right way to picture the world, we think, is to view
conflicts as showdowns between corporanomics (corporate
directed politics and economics) versus Peoplenomics, the
long term economic interests of humans.
Podcast
Question:
I'd like to poll you,
if I might, on whether you'd have any interest in a five-times
weekly Podcast? The service would be at a small premium
and only for subscribers to our
www.peoplenomics.com
site. The charge would be an additional $30 per year.
The format .MP3 and it would be available each day 30-minutes
before the market open. Specials would be provided when a major
market moving event occurs, such as Fed rate changes and so
forth.
This would be the
same report - about 90 seconds in length - as we will likely
begin promoting for radio station use late this fall. I'm
pondering whether to take a bombastic/sarcastic approach to the
reports, or a more laid-back mellow "raised eyebrow" approach.
Is a 90-second piece too short? What would be the right
length?
Wednesday
Bots On Radio!
Alex
Merklinger's Mysteries of the Mind on the internet radio tonight
at 6:30 PM Pacific Time. Cliff, the crusty curmudgeon
behind the web bot project has agreed not only to an interview,
but he will discuss some of the meta-data that I've had access
to that (in part) drives the kind of news items we cover here.
Specifically, since about 1999, there has been an over-arching
concept of "cohesion" in world affairs - we saw it in 'holding
Iraq together", the "cohesion" within the EU and so forth.
Tonight, Cliff will get into the latest shift, which begins
August 12th, which is where at the meta level "militancy" and
casting off central authority comes to the fore. So mark
it down:
www.mysteriesofthemind.com at 6:30 Pacific tonight. High
bandwidth recommended.
Showdown on
CAFTA
We have
railed repeated against CAFTA ever since before NAFTA was passed
because common sense says it's bad legislation.. Say what you
will about Ross Perot, his prediction that the "Big sucking
sound you hear after NAFTA" would be American jobs leaving the
country. He was precisely right. Any any of the hundreds
of thousands of people who have lost their middle class jobs to
third world and they'll tell you Perot was right. Not that
what the people want really matters - this is about
money. Corporate money, and gobs of it.
In the next day or two, this jobjacking masterpiece CAFTA will
come up for a vote in the House but we are afraid that it
will be passed because of all the corporate grease involved.
In case you have been asleep, CAFTA would do two very bad
things: First, it would export more American jobs to
Central America, promoting corporate interests who want to pay
workers less but doing so under the dishonest guise of "free
trade". The second thing it would do is restrict our
access to high potency vitamins because of the New World Order's
pharmaceutical industry backed codex rider that's included.
Is it worth a phone call or email to your CONgressperson?
***Bottom Line*** Corporate interests will get CAFTA if they
spent enough.
Greenhouse
Denial
Reuters
is reporting this morning that "The
world's top polluter, the United States, is set to unveil a pack
to combat global warming by developing energy technology
aimed at cutting greenhouse gas emissions..." We
would love to see meaningful action by the US on
Kyoto, but this smacks of a Rove-like well orchestrated plan to
hype the "hydrogen economy" and pass out tax dollars to
administration pals in the energy patch while failing to meet
world citizenship standards. Of course, our view is really
pointless because as we all know from watching the weather this
year, and reports of ocean currents shutting down, that we're
probably past the point where politicized half-measures would
work anyway. But, it's good theatre for the masses. Circuses and
cakes. And speaking of circuses...
***Bottom Line*** This is a classic "bait and switch."
Energy
Legislation
The new
Energy Bill is being hashed out in conference, and we will
repeat some of the apparent lessons to keep things simple:
-
MTBE
lawsuits will be allowed. Read: Lawyer groups have
more horsepower than small chemical manufacturers.
-
The
call for the US to cut 1-million barrels a day in oil
consumption by 2015 was stricken. Read: oil companies
have more grease money than conservation groups.
-
The
bill gives $14.5 billion in tax breaks to the industry
leaving CONgress trying to come up with $3-billion in new
revenue to offset the costs. Which means you and I
will pay more, while industry will reap the breaks and
there's no performance measurement system in it that we've
been able to find.
Predictably, the Oil Patch Republicans will call this "Darned
good" legislation while less oil endowed politicos say it
showers favor on energy companies. Not that it matters - as
CONgress is elected by big money campaign contributions, not
real policy beliefs that the Framers of our beloved Constitution
had in mind. Fortunately,
there is still a "Take back America" movement out there beyond
the political parties. We especially like the idea of
an accountable CONgress.
Notice that Nova Scotia natural gas may have peaked, if you're
still in denial about this Peak Oil issue?
***Bottom Line*** Thems that have, gets.
Secrets on Tax
Returns
We are concerned that the Bush administration won't release the
full tax return of their Supreme Court nominee.
***Bottom Line*** What are they hiding? Honest men don't
fear disclosure, do they?
Four Busted in
Bombings
British
police have arrested a total of four people, not in connection
with the July 7th bombings, but
in
connection with the subsequent series of bombs that failed to
explode. The issue, of course, is what will happen when the
evidence in the case is presented - will these really be the
culprits?
***Bottom Line*** Wait for the trials.
NYSE Merge
Death Threat
Well,
lookie here: as the battle to block the proposed merger of
the
NYSE and Archipelago has heated up, we notice the FBI is
investigating a death threat made against one of the merger
opponents. When you read the death threat, reported in the
story, it paints a picture of a very sick exchange member.
***Bottom Line*** Voice print analysis is the odds on bet to
find the perp.
Top Near -
Fractals
Our
resident fractalist, G. Lammert figures that the market on a
fractal basis, may be within a few trading hours of putting in
its high:
"George, with daily fractal analysis and reanalysis of
asset valuation curves and the quantum discrete units that
make up the minutely, hourly, daily, and weekly dynamic
money-debt-asset mechanistic macroeconomic system, an
obvious fractal pattern, so readily apparent in retrospect,
often comes into view of the myopic fractalist.
At major lower order valuations, top quantum units in
individual equities and commodities, many times complete
classical inverse growth fractals. The time units of the
inverse top fractals can be in minutes, hours, or days and
usually are in a quantum sequence of either x/2.5x/2x or
x/2.5x/x,1.5x,1.6x,2.5x, the former being much more
prevalent.
Identified for the Wilshire 5000 and better seen in the
NASDAQ is such a classical x/2.5x/2x inverse top fractal
with weekly units starting in January 2004.
The weekly fractal sequence has a base of 15 weeks and
will be completed this week.
First top weekly fractal: 18 January 2004 - 25 April 2004
15 weeks (X)
Second weekly fractal: 25 April 04 - 1 January 05 37
weeks (2.5X) (Note that a weekly decay valuation asymptote
occurred on the 15th week on 1 August 04 of this 37 week
second fractal).
Third (final) weekly fractal: 1 January 05 - 27 July 05
30 weeks (2X) (Note that again a weekly decay valuation
asymptote occurred on the 15th week on 1 April 05 of this
potential 30 week classical third and final fractal).
This long term classical inverse top growth pattern may
elegantly be yet another fractal confirmation of the
Wilshire March 2000's final secondary top - ideally near or
exactly on 28 July 2005 completing a final 12/30/24:
x/2.5x/2x daily fractal growth pattern." Gary Lammert
http://www.economicfractalist.com/
***Bottom Line*** When George feels a break out to the
upside, it's over for sure.
US Withdrawal
this Winter?
There's
a report that the Prime Minster of Iraq believes that
a lot of US forces can be removed from Iraq as early as this
winter or next spring. But there are conditions tied
to it, namely that the insurgency quiets down, something that we
don't see as likely. Wouldn't it be nice though?
***Bottom Line*** Believe it when you see troops coming home.
Cheney's
Nuke Plan
We are reading reports with alarm today that Dick Cheney has a
task force which has planned a
nuclear attack on Iran in the event of another 9/11 type attack
on the US - regardless of whether Iran is involved directly.
***Bottom Line*** Look for more demonizing of Iran to pimp the
plan for Oil War 3
Texas Hold 'Em
We
mentioned earlier this week that the nuclear talks with North
Korea are looking like a long-running Texas Hold 'Em poker game
- which we thought would go on almost endlessly until one of the
players either goes "all in" (which would start a shooting war)
or until someone "calls" the North.
As
we were afraid, we see today that NK is once again making
demands on the US and there's no sign of a check or call
yet. So, what's the river card in this mess?
South Korea is making new proposals, but again, it's like a
small raise in poker terms.
Also on
the nuclear front, the
outgoing president of Iran says that country will not agree to
refraining from uranium enrichment. While this increases the
risk of a Western attack on Iran's nuclear facilities, the other
side of it is that Iran has no doubt seen how a little bit of
uranium can be used to great advantage by good poker-playing
countries like North Korea.
***Bottom Line*** He who has the nukes calls the tune.
Cuba
Celebrating Failure
We
noticed a report from the Voice of America about how
Cuba was celebrating the 52'nd anniversary of the start of
Castro's revolucion in Cuba. How do we put this
nicely? Cuba's government has failed to elevate the
quality of life of the Island's fine hard working people, proved
Marx was a crack baby, and failed to develop and economic model
that was anything other than a corporatism knock-off run by a
committee of bureaucrats. Hardly the kind of thing to
celebrate, don't you think?
***Bottom Line*** Castro is still in denial about his
revolution.
Occupying
Russia's Ex
There's a report in the Chicago
Tribune today
alleging that the US has "outflanked" the Russians and their
buddies again, the Chinese on the question of the US presence in
Kyrgyzstan, where the Pentagon wants access to bases in
order to launch operations against Iraq and Afghanistan, and
whoever else eventually. While this sounds like wonderful news,
to those in favor of the Oil Wars, we're not so sure that the
Chicago Trib story has it right
after we read a bit in the Russian press about how the US troop
levels in Kyrgyzstan will be gradually reduced.
***Bottom Line*** Strategic battle
for Russia's Southern Tier continues.
My Son, the
Wine Merchant
It is always nice when a father and a son have similar tastes -
and in the case of my son, I'm pleased to report that he really
likes good wine. On the other hand, I'm also pleased that
he understands economics and is selling off his prized $1,400
bottle of wine.
The interesting question to me is whether he'll get even his
asking $700 opening price. I like wine and everything,
too. But
Cribari
Vino Bianco is $10 for a four liter jug and served well
chilled, it's more in line with our economic self image.
If you have thoughts
on whether this would be a worthwhile venture,
please click here to pass them along.
Tuesday
More on Asia's
Web Troubles
We have been scratching our heads
wondering what is going on with the Asia internet problems which
showed up this morning. A check with an IT whiz brings
this:
Hey George,
It's 11:05 am your time, and the Internet in Asia and
elsewhere is still throwing a conniption fit.
Based on the stats at this moment, there's 100% packet
loss in the following locales:
Several U.S. locales, probably attributable to
maintenance downtime, but given the 24 hour stats, I can't
see a machine being down so long.
Frankfurt, Germany, ditto.
Timis, Romania, ditto.
Brisbane Australia, not sure if this is downtime or not.
Asia (as internettrafficreport.com classifies) has a real
problem though.
Bangalore, India Jawa Timur, Indonesia Haifa and Tel
Aviv, Israel Japan Samoa Taiwan
All are experiencing unusual problems which appear to
have started at 16:45 yesterday and continue into today. The
index has fluctuated between 25 and 28% for the last several
hours. Yet, a search of the news sites indicates not a
titter about it. I am clueless.
I guess we can always blame the North Koreans. They
probably don't like the way the talks are going.
I'll play around with a graphical trace router or 2 to
see whether these are just isolated incidents, or wholesale.
More later.
We'll be waiting...
Web Problems
in Asia
We noticed with concern this
morning that web traffic in Asia was suffering a more than 50%
loss of packet traffic, and several countries (including
curiously Israel) were showing a complete loss of the internet
according to
www.internettrafficreport.com
You can visit
http://www.internettrafficreport.com/asia.htm to check on
the status of Asia, which we expect will improve through the
day, and the rest of the Internet Traffic Report web site does
an excellent job of tracking net performance overall.
Our specific concern here is
obvious: Millions of traders (and perhaps you) in the US
and elsewhere have come to depend on the 'net as a means to
execute financial transactions. If the 'net were ever to
fail on a widespread basis, under the burden of excessive
traffic (perhaps from fast market conditions), or under a direct
terrorist attack on key routers, the effects could be
devastating. We simply point to this morning's conditions
as something to crank in to your calculations if you really
believe that you would be smart enough to "bail out" of an
inflated market "at the top." A few dedicated hackers, and
there are no markets. Reality check?
And what's with Israel showing 100%
packet loss? Is there something larger about the
not-too-secret war for control of the NWO than meets the eye? Is
this a kind of secret message from one faction of the war for
the world to another faction?
British Terror
Writing
Are we the only one's who find
British writing a bit confusing on the hunt for the "terrorists"
which the government says are behind the 7/7 bombings?
We read that a "dragnet widens" on the one hand yet within a
sentence or two "police have narrowed their search."
Widening? Narrowing?
Reports around the web continue to
allege that the actual explosions on the trains blew up
through the floors which means explosives which were placed
under not aboard trains in back packs. The definitive
report remains to be written, but we have lots of hard questions
about whether this "event" was real or staged. The victims
are dead, sure enough, but the false flag allegations continue
to swirl through the infosphere.
More interesting is this story about Tony Blair's agents
allegedly trying to bomb subways in Chicago!
The paragraph that demands further consideration alleges
this:
"Bush & Blair
obviously are trying to cause a Terrorist attack in America
to derail the Federal Grand Jury Investigations of their
roles of the Plame leaks which is violations of National
Security Laws and their War Crimes against Sovereign Nation
Iraq with intentional falsified reports. Their further
Treason Attacks on America involve Rouge CIA, DIA, British
MI-6, Russian and Mossad agents who were also involved in
the 9-11-2001 World Trade Center Attack and Pentagon
attacks. "
The fallout from the
London explosions continues ringing around the world.
The Pakistanis are saying that their countrymen had northing to
do with it, although how they can make such an assertion
given the number of Pakistanis in the world is not clear to us.
Manufacturers
Resource War, Redux
In the larger context
of what we have see the Manufacturers Resource Wars played out
with by proxies militant Islamists versus freedom loving
capitalists who are willing to bomb any country back to the
stone age if they disagree with our oil-driven agenda. In
the land of new pipelines, for example, we see
that another 40 Taliban have reportedly killed in Afghanistan.
At the heart of the
proxy war is the Iraq conflict and on that front, the German
magazine Der Spiegel, says
things are quickly descending into civil war.
Last, but certainly
not least on our "hit parade" of corporate resource war linked
escapades, we see the Italians are out with
another batch of warrants for US CIA operatives who were
involved in a cloak and dagger operation that went sour - and
public. This brings the number of operatives involved to 19
if the LA Times count is right...
We continue to view
it all with a sense of detachment - at least as detached as we
can get at $2.75 a galloon for gas here in L.A.
Summer Shakes
What's this?
A 5.6 earthquake overnight in Montana? From a
shaken reader:
"Looks like the
summer shakes are continuing, we had a 5.6 magnitude quake
here in western Montana at about 1009 pm mountain time
tonight. This one was shallow, about 3.5 miles deep and
centered about 23 miles NNW of Dillon Montana, curiously
near the Yellowstone area as the crow flies. Keep up the
good work my friend, I love your site. I read your free
daily update religiously and trust me we couldn't agree more
about what's coming both financially and to society as a
whole. Keep yer powder dry and your car ready to travel.
Remember, fish, hunt, and garden. "
Thanks! Note that we're not
too worried yet, although it seems like the web bot predictions
about 3- great quakes (meaning bigger than 8.0 on the Richter
scale) between now and the Fall Equinox, seems less and less
far-fetched.
Super Weeds
So you think that genetically
modified food will save the world from starvation? Well,
think again. A report out of England says that when GM
crops are introduced into the environment, a strange thing
happens: Plants that compete for resources and grow easily
(we call 'em "weeds") suddenly
become uppity and react by becoming extremely aggressive.
Call them super weeds.
Power Jitters
Not only is California on the verge
of having power problems as we get into late summer, but up
around the Great Lakes,
power plant operators are worried by a combination of high
temperatures and restrictions on how much heat can be released
into the environment from their various cooling towers and
ponds.
Tokyo Weather
Bring the
old bumbershoot if you are planning a trip to Japan over the
next day or two:
Tropical Storm Banyan should be showing up so flood warnings are
out.
NK Talks
Although there is the expected
hyperbole surrounding the
resumption of talks between North Korea and five interested
parties, such as the US, we don't expect any quick
breakthroughs on this front.
North Korea has been slowly playing
a fine hand of Texas Hold 'Em" and the pot keeps going up in
value. We don't expect any real showing of hands until
someone says "Call!" and it's way too early for that.
Oil War TV
I don't know if you have the
satellite capability to pick it up, but there's a new television
news operation starting up in the Caribbean which looks like
it will take a pro Venezuelan president Chavez line - part of an
effort in the region to counteract US efforts to unseat Chavez
because he is trying to put taxes on exported oil so that his
country is not completely pillaged economically to keep our
SUV's on the road. Why the very nerve of these folks!
Monday
Anthrax in the
Dakotas
While most of the world is looking
at Bird Flu as a major health threat, we are watching reports
out of North Dakota that animal anthrax is increasing and
disease containment controls are being put in place.
Low risk to humans say authorities, but still anthrax is a worry
to add to your ruminations. Couple this with drought and
heat wave warnings for places like Chicago and don't ask me
about food price predictions for late this year...make your own
stab at it.
But is is showing up in South Dakota as well.
We are also tracing reports out of
China that a mystery illness has killed 17 farmers.
There are related reports that the military has been brought in
to contain the farm populations in place in order to prevent the
spread of whatever it is --- with bird flu or something
like it - -suspected.
Then there are the areas of
Siberia where the Russian media report bird flu is showing up.
Labor Self
Destructing
One of the long awaited
consequences we been looking for, as the country heads into its
"stealth depression" (at least here in the opening hours) is the
implosion of the labor movement. We see direct evidence of
this today as the
Teamsters and Service Employees are leaving the AFL-CIO
after failing to 'reinvent' that group from the inside out. What
has happened here is worth watching because Labor failed to save
jobs when they had a chance (pre NAFTA) and with dissent in the
ranks, Labor's ability to oppose further job theft, to places
like India and China, and with this week's CAFTA vote, Central
America as well.
More on point, Labor has failed to
expose the "Big Lie" of "free trade" for what it really is -
which has 2% to do with free trade and 98% with encouraging
corporations play labor rate differentials in order to
fatten their "profits" while failing to realize that in doing
so, they have rotted the core of American enterprise and thrown
away any pretense of moral leadership by the U.S. Money first,
people last. Forget self sufficiency and economy of scale - this
is the world of big box stores and slave labor camps in the
third world. But, mind you it's a profitable
concept before the system implodes.
If this sounds like a sensitive
topic to me, you'd damn right. It's why we use the term
peoplenomics rather than economics when discussing
our viewpoint. Peoplenomics is about human-oriented
mechanisms of trade, exchange, and stored value. Gold and
purchasing power parity, to name two core concepts.
Economics is about collecting paper and damn the social
consequences.
Summer Shakes
Returning
Not that we can do much about it,
but the quake series that
www.halfpasthuman.com labeled as the "summer shakes" are
back with us as a
7.0 hit the Nicobar Islands on Sunday. The Saturday
quake off the
coast of Honshu. Japan was notable not because of its 6.1
magnitude, but because it was deep - 45+ miles down. Nicaragua
had a 164
km deep shaker on Saturday while one at 203 km deep hit
Afghanistan. Just try to ignore that 4.2 in the Channels
Islands off L.A. this morning...hopefully it is not a precursor.
3.6 in the Fresno area overnight, too. Oh goody!
Tony's Police
State
As we were afraid might be the
case, police in London have now confessed that the man shot dead
last Friday on the grounds he was a "terror suspect" turns out
to not have been a terrorist at all. T&his is turn has
convinced one reader to observe that Britain is now a police
state in everything but name:
Here is the situation: -
http://news.bbc.co.uk/1/hi/uk_politics/4071968.stm
You can be shot in the street as a terrorist if you "look
suspicious".-
http://news.bbc.co.uk/1/hi/uk/4712061.stm
We have more surveillance cameras per head of population
than any other country -
http://news.bbc.co.uk/1/hi/uk/4710239.stm
You can have your passport taken off you and put under
house arrest if they "suspect" you of being a football
hooligan -
http://news.bbc.co.uk/1/hi/england/leicestershire/3801317.stm
You can be arrested and held without legal representation
for at least 7 days -
http://www.yourrights.org.uk/faqs/terrorism/arrest-under-the-terrorism-laws.shtml
You cannot even watch TV without obtaining a license
You can be arrested as a terrorist for speaking, if you
have deemed to have said something that promotes terrorism
You can have your face plastered all over the media as a
suspected terrorist and your life destroyed, even if you are
innocent -
http://news.bbc.co.uk/1/hi/uk/4688501.stm
You can be stopped in your car for random breath testing
House arrest without trial -
http://news.bbc.co.uk/1/hi/uk_politics/4303427.stm
If you have a screwdriver in your pocket, you can be
arrested on the street for "going equiped" to do burglary -
http://www.yourrights.org.uk/your-rights/chapters/the-rights-of-suspects/stop-and-search/index.shtml
For this the average person pays 60% of their wages in
various taxes
Your emails can be read without court order. Your phone
calls can be listened to without court orde r Your mail can
be intercepted, opened and examined without court order
The secret services are a law unto themselves, they do
what they like, as was evident in Northern Ireland. If you
look at Northern Ireland, you will see the model of what
they want the UK to become. Road blocks, check points and
troops on the streets. I think in five years we may even see
internment of "undesirables". Like in the US, there are
several concentration style camps mothballed just waiting
for their new guests. There's one a few miles from me in the
county of Lincolnshire.
George Orwell couldn't have put it better -
http://news.bbc.co.uk/1/hi/uk/3388797.stm
Well done Mr. Blair, keep up the good work.
Obviously I'm not going to put my name to this one, as it
is likely that GCHQ will flag this email."
Vladimir Putin figured that the
British have only themselves to blame for creating the
conditions that led to the recent bombings.
Meanwhile, we find ourselves in a deep Constitutional funk
over terrorism: We appreciate the need to contain the growing
terrorist movement, but at the same time we're also mindful that
British tyranny is what we cast off 229 years ago and today's
trends look suspiciously more totalitarian every day.
The British results of the 7/7 bombings has been lackluster
at best - and it's proof that having video surveillance photos
has not resulted in captures. Nevertheless, in the
"permanent war for permanent peace" USA, the
supporters of additional video surveillance systems are out
promoting sales - as though the London bombings are a ready-made
sales brochure for such encroachments into our rights to
privacy.
If we had a robust political party in opposition, we'd be
less afraid, but the Rove Republicans have used old National
Socialist "Big Lies" at every step of the way to further their
agendas, including the trumped up "reasons" for the Iraq War.
While Hillary Clinton and Howard Dean complain, we wonder why
NYC police and firemen are still under gag orders not to talk
about explosions they heard and how it is that
WTC-7 was demolished. While
we're at it, how many people have forgotten that at
least 4 of the alleged hijackers had surfaced and tried to
clear their names?
Although the "reality" of 9/11 as a cause for the Iraq War
has been effectively sold to the American public, the Bush
administration continues to grow more concerned about the
grand jury which is investigating the Valerie Plame case.
"What's being covered up in the Plame-Rove case seems to revolve
around the Bush administration's orchestrated, and perhaps
illegal, propaganda campaign to justify its invasion of Iraq.
Valerie Plame and her husband, former Ambassador Joseph
Wilson—who wrote the op-ed in the New York Times that got this
whole thing going—are just the tips of very large icebergs, and
one of those icebergs has a name: the White House Iraq Group
(WHIG)..."
It's clear from these kinds of reports that the Plame case
has the potential to get down to some of the high jinx that led
to America invading Iraq, a plan which has gone terribly wrong
as the
oil stubbornly refuses to flow freely.
America herself is in a dangerously unbalanced state: the
Democratic party is in ruins, and the Republicans are the ruling
corporatist-owned party. We see clear evidence of this as
Republicans advance the job-wrecking Central America Free Trade
Agreement, which is as much about sending the few remaining
American manufacturing jobs to places like Costa Rica, as
it is a smokescreen for multi-national pharmaceutical companies
to steal our rights to non-prescription vitamin and mineral
supplements. We find it masterful
deceit to package health, farming, and job theft into a
single piece of legislation now pending this week in the House.
A more honest approach by CONgress would be to advance a
"daylight democracy" concept single-purpose legislation. The
present "tack a rider on it" approach to lawmaking invites the
kind of corporate abuses that take the short term view of
profits over the long-term goals of a functional democratic
republic.
All this drones on while the Mexico border leaks like a sieve
and the average family is reduced to wage serfdom conditions
that would make the industrial age British factory owner proud
of our 12-hour plus
days. But if you don't like it, just refinance your house and
buy a new car. Conspicuous consumption, prescription only
medications, and your papers always at the ready are sure ways
to prove you are an American. That's the New
Paradigm,
Longshoremen
Know
I used to spend a bit
of time covering the waterfront as a news reporter - and I have
to say I enjoyed the candor of folks like Harry Bridges back in
the "old days." I'm reminded by a reader today that
despite the "figures" and "reports" from government, a word or
two from a hard working longshoreman of stevedore can tell you
much about where things are headed - and they'll do so in a
common sense way:
"Just a note to update you on my conversation with a
longshoreman from the Port of Seattle last night.
The ratio of full (30%) vs empty (70%) cargo ships
leaving the US has stayed the same. We are still buying more
than selling (except for scrap and food).
What is more important is that beginning in June this
year, when the cargo trade usually starts to significantly
increase at a seasonal level, trade is slowing. This year,
cargo ships are not coming into the port as they did in past
years and the work load has been down for those on the
docks.
The longshoreman said they are the first to know of a up
or down turn in business and with the down turn of imports,
a slow down turn in the economy could happen in 6 months or
less. If you remember, last year the ships were coming in so
fast that a waiting line occurred at all the west coast
ports. That line is not happening this year."
MTBE Suits
While the gasoline
additive MTBE has been alleged to reduce pollution, there are
plenty of reports that this killer toxin is showing up in
groundwater around the US in dangerous levels. Now, it looks
like
CONgress will not include a provision in the pending energy bill
which would shield gasoline and MTBE makers from lawsuits.
While we would like to think that this is sound thinking by
CONgress for a change, it's more likely that lawyer lobbies who
want to sue have more money doled out than the companies are
willing to spend for bulletproofing legislation. I hate to be so
cynical on Monday, but it's in my nature, I guess.
Peoplenomics
This week, our
subscription service,
www.peoplenomics.com takes a look at the risks and rewards a
playing a blow off top. With the caveat that whenever I
get bullish, a market peak is likely at hand, the case is made
that some indices are already showing upside breakout potential.
Subscription
information here. We see a trend is revisions to traditional
economic indicators...
While we caution
subscribers about the upside potential, there are plenty of
reasons why our resident fractal whiz is keeping a conservative
posture:
"George, the
world macroeconomy finds itself in a situation in which
there is no (good) way out. A terminal and final perfect
fractal sequence has a high probability of occurrence this
trading week confined within the limits of a 22/54/54
maximum weekly growth fractal sequence. Many of the world's
equity indices' fractal patterns are following the identical
or very slightly different variations of the Wilshire 5000.
They are synchronized for a final lower order daily fractal
top on or near Thursday 28 July 2005 to complete a final
x/2.5x/2x daily fractal growth sequence. This daily sequence
is contained within the potential terminal 103 daily growth
fractal sequence of the last 50 week fractal sequence
beginning in August 2004. The ideal final daily growth
fractal pattern of 12/30/24 would represent the third and
terminal portion of a 51- 52/129-130/ x to 2x or 64 final
day sequence.
Watch for a key reversal exhaustion gap day which is
anticipated within the next ten trading days, ideally
occurring on July 28 2005. In an ideal fractal sequence the
Wilshire 5000, representing over 95 percent of US collective
equity worth, should gap to a new multiyear high ending on
the low of the day but above the exhaustion gap. If it gaps
but does not end on or near the low of the day, further
lateral movement up to a maximum of x/2.5x/2.5x or
12/30-31/30-1 days is possible.
Since August 2004 which the began third and final weekly
growth fractal the Wilshire and the major European indices
are all following similar daily terminal growth patterns.
The first two daily growth fractal sequences followed a
51-52/129-130 day (x /2.5x) pattern with a very
characteristic nonlinear trading gap drop near the end of
the second fractal. Since the finish of their second
fractals, the indices have begun their third and final
fractal sequence with nearly identical 12/30-31/19-21 of an
ideal 24 day pattern.
The German DAX like the the US real estate indices
typified by IYR and the US housing construction industries
by $HGX Is showing classical blow-off characteristics. For
those doubting the validity of fractal analysis, a look at
$HGX is very instructive. The daily fractal count of $HGX, a
leading index in the US housing bubble economy, is exactly
12/30/20 of a probable 24 days. This fractal evolution is
most elegant in its classical illustration of a perfect
x/2.5x/2x growth fractal evolution.
Importantly for timing purposes the Chinese stock market
is following a 7/17/10 of 14 day growth pattern that places
a perfect fractal apogee contemporarily with the US and
European indices on potentially the 28th of July 2005. Two
very different numerical x/2.5x/2x patterns arriving at the
same apogee suggest strong confirmation of a major global
market peak.
The dollar index is following a growth pattern of
28-29/66 or 67 of 70-71. Remembering that the end of second
growth fractals are herald by nonlinear decay, expect a gap
to the low side in the next 3-4 trading days to a range of
86.25 or lower for the dollar index. The Swiss Franc has an
identical inverted growth of decay pattern with an
anticipated reciprocal rise in 3-4 trading days. Gold will
follow the the Swiss Franc's rise.
The business news media will likely highlight and
interpret the coming dollar index fall over the next few
days as an 'obvious' sign of favorable Yuan currency
readjustment. The natural occurring and expected fractal
fall in the US dollar index will be interpreted as a healthy
indicator for improvement in future US exports - exports
something other than empty trans-pacific metal containers
and circa 'US civil war' greenbacks - to be sold in the
Chinese economy. Extrapolating beyond the data, commentators
will remark that this may be the turning point of the US
current account deficit. The high probability fractal sudden
(and final) rise of Chinese, US, and European equities over
the next 4-10 days will be misinterpreted as the
international markets' response to the revalued Chinese
Yuan, which at present has been lowered only a miniscule
percentage.
In reality there is no way out of the economic
difficulties the US and the leading economic countries find
themselves in. Once America gave up its protectionism for
American manufacturing jobs by the embracement of NAFTA, the
horse was out of the barn, running further and faster away
each day, never to return. Foreign factories have been
built, many times with the aid of American corporations
seeking higher profits from the low cost labor and absence
of ubiquitous lawyers and liability laws; foreign companies
have undergone organizational and export savvy maturation
and sophistication, and processes for automatic and
efficient foreign governmental exchange of domestic currency
for export gained dollars has likewise matured. Exchanged
dollars have only one or two market places available for
foreign government investment. Foreign government owned
dollars are invested in either the US federal debt markets
or in the oil and raw material commodity markets to secure
both present and future purchases. These limited investment
areas and the absence of significant wage related add on
cost to finished foreign products have provided an extended
illusion that all was well with the global economy which had
a 'glut of savings'.
Economic realists recognize that this unbalanced
arrangement can not last. America can not in perpetuity
borrow and consume. Items produced by American labor with
the added cost of transport and the American tort system can
not compete with the low cost of Chinese domestically
produced items. Reevaluation of the Yuan will eventually
lead to inflationary prices of Chinese products sold in
American markets putting more pressure on the cash strapped
debt ridden saving-less American consumer. Congressmen and
Senators threatening import tariffs to protect American
manufacturers do not have a grasp of the dilemma at hand for
the US economy and the debt ridden wage earner. 15 years ago
before NAFTA, tariffs would have protected American
manufacturing jobs and domestic commerce. Much more US
federal debt would have been owned by Americans. Because of
the smaller profit margins and less money supporting the
debt market, interest rates would have been higher, keeping
housing valuations more in line with traditional or slightly
higher than average long term interest rates and ongoing
wages. The debt-interest rate-wage-asset overvaluation
dynamics would have not been nearly so seriously askew. At
this point in history with interest rates 'artificially'
kept down by the great economic aberration that
characterizes the Chinese-US temporary symbiosis, rapid
transitional shifts that are characterized by the nonlinear
collapses of second growth fractals become relevant.
Macroeconomic imbalances have always been and will be
self correcting. The various and integrative total of asset
valuation curves tell the composite macroeconomic story each
day and each week. Asset valuations grow and decay, evolving
by discrete fractal units that represent an instantaneous
integration of the underlying money supply as applied to all
available assets. Today's stressed macroeconomic dynamics of
countervailing forces have been brewing and beginning to
swirl like a tropical storm near the beginnings of hurricane
alley. The inevitable inflationary pressures of the
revaluation of the Yuan and/or the possibility of import
tariffs are being produced by the irritation and angst of
massive and ongoing continued loss of American manufacturing
jobs. The huge and escalating current account deficits that
are required to grow and to support ever growing US debt and
to maintain low long term interest rates will be diminished
by the inflationary pressure of a valuating Yuan, import
tariffs and dollar diversification into other currencies.
The Chinese have recently discovered that having US
dollars does not necessarily assure purchasing power and
acquisition of US assets and oil companies even at a premium
over other bids. They now understand the utility of currency
diversification. Global imbalances will self correct and
self correct in an optimal fractal manner. There is no
(good) way out. Gary Lammert
http://www.economicfractalist.com/ "
Jain On
Housing Bubble
Our friend Jas Jain
is worried as the dickens about the potential of the housing
market to trip over itself any old day now. If you're thinking
about one last refi of your house, you might want to consider
this:
"I sent out the
graph in Fig. 1 below to a private list with simple
wordings: Draw your own conclusions.
From few
responses I got, it seems that some people do need to be
pointed out what might be obvious to many. I have updated
the graphs as of the latest S&P 500 index value as well as
the S&P’s estimated reported earnings at the end of 2005Q2
of $62.00 per share, in current dollars, for the past 12
months. Let me make three quick observations about Fig. 1:
1. Earnings are highly cyclical.
2. When earnings are far above the trend-line, it has
been a good time to sell the market; conversely, when
earnings are far below the trend-line, it has been a good
time to buy the market.
3. It is not just the P/E that is important for
valuation, but where we are in the earnings advance-decline
cycle.
Trying to time these things precisely is like trying to
be too cute. I personally think that it is a fool’s game and
I refuse to play it. Those who enjoy the game, be my guests.
When I first published Fig. 2, a certified Scam Lover
said, “Nice chart, but flawed logic.”
OK, let us look at the logic. The idea of smoothing
earnings for a period such as 10 years has been around for a
long time. Fig. 1 is the best argument for the use of
10-year, or similar, average. Also, because periods of high
inflation, or deflation, would distort the value of the
dollar earnings, using inflation-adjusted, or real dollars,
has been used widely. The latest to popularize this
methodology in determining stock market valuation were
Professors Campbell and Shiller in early 1990s. They
presented their work to the top honchos at the Fed and they
accepted it is a valid methodology for comparing valuations
over time. BTW, it was this presentation that led to
Greenspan’s “irrational exuberance” comment in Dec 1996. Do
you know what happened in December of 1996? The P/E in
December of 1996, using Campbell-Shiller method, was only
exceeded during Q2-Q3 of 1929! The current P/E is just a tad
below what it was in December of 1996. Yes, any logic that
comes to a conclusion that one dislikes is flawed logic by
definition.
An old friend said today, responding to my general
negativity about the US E-Con, that the stock market P/E is
not out of line. Which line are you talking about, old
friend? The Red line in Fig. 2 is the current P/E line.
Before the bubble of late 1990s this line was only crossed
once, for eight months, in 1929! If we use dividends, then
the current line was never crossed until July of 1997.
Conclusion: The US stock market, with S&P 500 as the
proxy, was never more over-valued than today except for
period since the bubble of 1990s and a brief period in 1929.
Yes, only a hope that we are in a New Era makes people think
that the stock market is not over-valued. Some even claim
that it is 20-30% under-valued!
I have provided a historical perspective in pictures and
you can make up your own mind." email:
jas_jain@hotmail.com
As I said before,
while Lammert and Jain are giving excellent reasons for caution,
the Russell 3000 looks like it could be starting a major up move
which could drag the Dow off to new highs. As usual, we
will let the market decide the outcome while we sit on the
sidelines and watch our physical assets and lack of debt pay
effective dividends.
Saturday
Not for the
Weak of Heart
This weekend, we explore the
possibility that the market could be setting up for a blow off
peak to new all time highs next spring. However, playing
this potential blow off could be like catching falling
knives. We explore the two competing theories at
www.peoplenomics.com
and look at implications for real estate and other investments.
Subscription
information by clicking here. This weekend's report
looks at the range of "best case" and "worst case" scenarios and
offers some insights into how to play it.
Plenty Hot
We notice that a
bunch of cities, such as
Las Vegas, are tying all-time heat records this week, while
at the same time, weather behavior around the world is
bothersome.
Even olives for that Martini could be impacted by some of
the weather in Europe. More important to American
consumers is what the present heat wave and
evolving drought will do to food production - something
which is starting to percolate up out of the farm belt.
Our colleagues over
at www.halfpasthuman.com,
where the web bot project lives, issued a warning more than a
month ago that the heat would be incredible this summer - just
as it's turning out to be. From the June 16 (ALTA905-1
Report):
"Our indications
are for a different sort of weather pattern to emerge
globally over the course of this summer and fall. We note
that the data indicates at the macro level that the 'usual'
movement of weather over North America is seen as 'reversing
direction of movement' or 'change of moment direction'. The
previous 'successful movement' is now seen as being
'blocked' by 'columns' which in turn are seen as supporting
a 'roof' of heat. Note that it would be also possible to
interpret this last as a 'roof' *over* 'heat'. In either
case, the 'columns' are seen as 'resting solid upon the
plains/planes/flat areas' such that a 'fence of poles' is
created which 'prevents/blocks movement'. The data suggests
that this 'fence' will act as a 'mountain' upon 'the spine'
of another 'mountain' such that 'no movement passes' and
'clouds/thunder build'. While the timeline of the progressed
model indicates that this 'fence of columns' forms in June,
or perhaps early July, there are also lunar associations
such as 'last quarter phase' and 'light leaves the face' {of
the moon}"
They're very modest
with the "I told you so's" but we lack their restraint. The
current data run is the 1105 series and you can get
subscription information here. Whether you see any
changes in the weather where you are located doesn't matter a
whit to us. We simply read the daily records being set -
day after day - and notice that a
sixth named tropical storm (Franklin) is now meandering about
the Atlantic and conclude rather confidently that things are
not the same as they used to be.
Add to the potential
climate nightmare the
idea that the Gulf Stream is shutting down because of climate
change, and a few snips from the data reads about the
Humboldt current and you have the potential for catastrophic
climate collapse. Food doesn't grow once earth
temperatures get past 122 degrees or so.
We continue to be
amazed that the Bush administration has kept its collective head
in the sand over air quality and other drivers of change, a
malaise shared by many in CONgress who keep their hands out
to special interests while the disaster buildings.
To say it again, we
don't care whether you believe in climate change. The odds
are pretty good that we will enter into a period of more extreme
oscillations - both cold and heat. But the reality of
climate change is that when people start to go hungry from it,
economic reactions will be severe and perhaps permanent.
You can't eat Federal Reserve (debt) notes.
Yuan More
Thing
Yes, there are tons
of emails coming in about the revaluation this week of the
Chinese Yuan. Here's a typical one:
hi George You may want to read this (contrarian, possibly
similar to your) view about the Chinese revaluing their
currency. I know you probably get LOTS of emails a day, but
this link's worth reading
http://www.forbes.com/newsletter/2005/07/22/china-yuan-revaluation-housing-cz_jr_0722soapbox_inl.html
News from
Elliott Wave International
On to Our Charts!
Write when you get
rich,
George Ure, The People's Economist
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Saturday, July 30 2005 08:00 AM PDT 
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