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Hostages: Not Traveler's Insurance The Middle East continues to percolate away this morning with stories this way and that over the capture of what has turned out to be 15 UK sailors who were doing vessel boardings in a hotly contested border area between Iraq and Iran. One school of thought is that it's a retaliation move for the American arrest of Iranians in Iran a while back. My theory had been that the captures were timed to coincide with the Iranian president's visit to the UN in New York - a sort of 'traveler's insurance' policy, if you will. But now, he's cancelled his planned visit, says the Iranian foreign ministry. Visit or not, the UN is likely to set about sanctions.
One of my friends asked the question yesterday "What if Ahmadinejad wanted to use his UN appearance to announced that Osama bin Laden is the 12th Imam, or was at least in Iran?" In the Arab world, bin Laden is already viewed as having "won the war against the West." The whereabouts of bin Laden continue to be a mystery, but as SecDef Gates has pointed out recently, there's no proof he's alive. But again, with the visit off, no 12th Imam announcement likely today.
As the clock ticks toward possible UN action today, we note that Sec. State Rice is off to the ME again to, as Palestinian media headline: "...change [the] Arab Peace Initiative to "take into account Israeli reservations" --- The House has approved a bill requiring the withdrawal of American forces from Iraq a year from this summer, but that's not going anywhere. The White House will see to that by holding paychecks for American soldier's families hostage.
Power Shopping We note the continuing emergence of Dubai as a Middle East financial center continues with more top-notch tenants being announced for what's to be the largest shopping mall in the Middle East.. Look out West Edmonton Mall, huh?
If you're looking to do a little shopping this weekend (if you haven't figured out that shopping is a disease) you might want to put South China Mall, and Jin Yuan in China on your list, along with Mall of Asia in the Philippines on your "must do" list. If you live in Edmonton, the Chinese malls are about twice the size...let's see my "shopping instructor" sisters try to power shop these in an afternoon, huh?
Meantime China is to become Venezuela's top oil customer, reports the AP. See how it all fits? Gotta get them shoppers to the malls, right?
NK's Money As North Korea is using its presence at regional nuclear talks as leverage, we read that there's now a "US Treasure official to help free up North Korea fund" stuck in Macao. Everything's about 'leverage' Elaine's fond of saying.
Neighborly Comments You'll see that South Africa is becoming more and more concerned with a meltdown of Zimbabwe where inflation as we've noted previous has been running 2,000% a year. I'd be worried if I lived next door, too.
Do As We Say, Not As We Do Department Egypt has a series of constitutional changes going to voters on Monday...and the US has been critical of the changes, reports the Washington Post. This is rich - and I can picture my pal the Mogambo Guru rolling over on the floor, doubled up in laughter with the absurdity of such US positions while here at home in the once Land of the Brave, Home of the Free, Posse Comitatus is toast and the way cleared under mislabeled "Patriot" acts (and a bunch of signing statements - a process not mentioned in the Constitution) to have martial law imposed here. Go figure.
Smell a Rat? Um...let's see: 95-brands of pet food have been recalled and linked to a rat poison that's hard to get and no one wants to say how it got there. No one is asking if it could have gotten into the human-bound foodchain. Wheat gluten from China suspect but where else might it have gone, we wonder? . Peoplenomics: The "Kenny Rogers School of Economics" There are times, having been a country-western radio station news director for years, that I find a C&W tune playing lazily in the back of my mind while trying to grapple with the world's current economic direction. Lately, that song has been Kenny Rogers' 1978 hit "The Gambler" In honor of the tune, I'm thinking the People's Economist ought to be talking with you about the "Kenny Rogers School of Economics" which could be founded on some really solid financial advice from The Gambler: ""You got to know when to hold 'em, know when to fold 'em. Know when to walk away, and know when to run." This week, a steely-eyed look at "When to run?" starting with a short interview I did this week with Robert Prechter of Elliott Wave International on the question of which way the world's economy will break next: inflation or deflation?
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Friday March 23, 2007 Flashpoint Watch A story out of the Middle East has grabbed our attention today - according to a report, an incident in a contested waterway that marks the Iran/Iraq border may be underway - and it may involve the seizing of up to seven US or British forces who were patrolling and boarding vessels in the area. Click here for latest updates. Will the Gulf of Tonkin [a staged incident] be repeated?
Naturally, we will be watching news reports throughout the day, but at least at the outset, the markets (oil and gold, too) don't seem to be getting too worked up over things - but details are sketchy and it's early in the game. ---
However, even if a deadline is passed on the Hill, it likely won't mean much - if anything - to the signing statement prone White House.
It has also fueled anti-war demonstration, including one outside the office of House Speaker - democorp - Nancy Pelosi. Four were arrested there. --- There are two other aspects of the escalation in tensions today that might make between about now and Monday a high probability time for a strike against Iran.
First, Iran has continued to push its oil customers to chance currency - and is seeking non-US Dollar payments. Some 60% of their crude is now paid for in something other than dollars.
The other point which is pretty much buried by the US Mainstream press (which we call corpmedia for obvious reasons) is that Iran's president Ahmadinejad is scheduled to address the US Security Council on Saturday and will be in New York tonight.
Although such things are "not done" in the world of politics, wouldn't it be an interesting show of power/disdain for "what's proper/what's done" if the US were to either attack Iran directly or via our proxy, while its president was here? Or, taking it a step further, putting him in some kind of "custody" until what may be waterway hostages in Iran (from today's incident) are released?
Such things are admittedly low probability - single digits if that - but no matter how you slice it, when dealing with a country that holds 11% of the world's oil reserves, while we're scrambling to hold onto one with 10% of reserves (Iraq) when we have about 2% of global reserve domestically is a "reason" at corporate/boardroom/CONgressional/powers-that-be levels to keep all options on the table.
If you think the little bump (at least so far) in mortgage foreclosures is painful, just remember: No oil means no global economy, it would likely mean gas rationing, a mandatory return to 55 MPH everywhere, and wildly soaring food prices.
On the other hand, those are probably coming anyway...
Soaring Food Prices Along about June of last year, one of our in depth reports for Peoplenomics.com subscribers advised that there is a long term issue coming with regard to protein prices. It all had to do with the end of oil (e.g. Peak Oil) and the relatively inefficiency of creating protein by raising cattle.
Today, we are seeing the leading edge of the change arriving with a report out from an environmental group Earth Policy Institute that says US grain use for ethanol is driving up world food prices.
There is also much comment on the net about how the world may be facing the highest grain prices in history, that grain consumption by distilleries is vastly understated, and we have that confirmed by a farmer/reader in Northeast Washington State who write us that:
Being a farmerly sort myself lately (we're planning to put in goats this year) I have to wonder about folks who would lock in prices three years out. I mean, it's a fine thing to do if the world flips over into runaway deflation - that'd make the risk takers a handsome profit. But, the other side of it is, as government prints up money to pay for social programs, and as money overseas floods homeward, there could be tremendous inflation ahead. So, if someone were to ask about locking in fat/high/astronomical prices today, I'd got about as far as the next crop and call it good there.
That would be in keeping with two tenets underlying the UrbanSurvival Philosophy: You can't make a dime if you're not in the game, and It's easier to print money than run a farm.
The Orchestrated Housing Disaster Chris Dodd of the Senate Banking Committee has gotten something right - which in itself is a rate enough feat in Washington. He says the Fed has created a "perfect storm" in the subprime lending market that could lead to 2.2 million Americans facing foreclosure.
And then, as things progressed, Countrywide reported that it could turn into the worst-ever year for subprime defaults. The happy walk was that 90 percent of their customers would not lose their homes to foreclosure, which doesn't do diddly for the 10% who lose the home and roof. And for what? Following the 'we've made homes affordable' from Alan Greenspan, price of bubblators when he was heading the economy toward the rocks with serial bubbles?
Now, if you think I'm being hard on Greenspan for his mortgage bubble 'pump & dump' -- where subprimes were encouraged to loan like crazy, then bundle up bad loans as collateralized mortgage obligations and dump them on the investment community -- then you certain don't want to read what my friend Jim Kunstler (author:" The Long Emergency") has to say about this financial deity. Kunstler's piece "Amazing Mental Rot" begins:
Then he gets harsh.
But it's not like the US was alone in blowing up the housing bubble. The Belfast Telegraph reports this week that former Bank of England governor Eddie George has spilt publicly what we've been pointing too all along:
Now, how and why do you suppose this all tied in neatly with knighthood for Sir Alan? Duh. --- The reason that Banksters (and Fraudsters, to borrow Jas Jain's term) can get away with high crimes is two-fold.
First, now that more than half the planet's resources have been spoken for/seized/consumed/polluted/and squandered, the only way to keep 7-billion people alive is with a financial bubble or a massive war. Otherwise, if goods were shared around reasonably, the power trippers (the 1% who control 90% of wealth in the world) would not be able to maintain their grip.
Secondly, the average American doesn't know/appreciate/study/understand the rapidity with money "evaporates" due to inflation. For the umpteenth time, I will tell you that using the Federal Reserve own calculator (link in the left menu somewhere), if you plug in 11,723 which was the Dow high in 2000, you'll find that recent mis-reported all time highs are a complete hoax perpetrated by corpmedia to keep you from figuring out that your life savings is being stolen. So sorry.
Pace Out of Pace? The Chinese are reporting that Joint Chiefs Chairman Peter Pace says "China poses no threat despite its enormous military capacity."
Hey! Aren't they starting to dump dollars? Still building intercontinental capable Long March rockets?
Maybe one reason for not seeing danger in China is we aren't able to do anything about it. Remember earlier this week? Headline: "Military not ready for other ways - Troops in US lack resources, government says..."
Selling Out America Worth a read: "The Coming North American Parliament" from Accuracy in Media.
You see, while we're all distracted with basketball playoffs in high def, and we're told we're winning in Iraq and just be patient, please, the corpgov types are busily setting about their agenda of merging Mexico, the USA, and Canada into one Euro-clone trading block. If that lowers the standard of living for folks like you and me? So sorry.
Reader Question From the emails:
In no particular order? Dehypnotize from mainstream media. Downsize voluntarily. Use your downsize as a tool to get out of debt. Pay your credit card off so you don't pay banks interest. Get 6-months to a year of money in the bank at a subsistence level - better: get it in gold. Banks can close. Move to a few acres if you can and put in a garden. Grow food. Have a well. You need to plan on being self-sufficient. Partner with neighbors. Demand Constitutional accountability. Vote against American family dynasties, such as the Kennedy/Bush/Clinton, etc. clans and the liberty-stealing plans (like the North American Union) fomented by their minions. Own a gun. Guns. A side arm, a long arm, a shot gun.) Have ammo. Take gun safety courses. Shoot regularly. Spend time with your kids. Get a ham radio license - no code required now - ditch the cell phone. Don't eat GM foods. Get/grow heritage seeds. Keep organic wherever possible. Cut out unnecessary monthly recurrent bills. Have one parent in the home when kids are of school age. Build a shop. Own a generator. Read books. Learn new skills constantly. Own your life.
You also, by the way, own your government. Not the other way around. Says as much in the Constitution. Read it. Again. Bill of Rights, too..
And get that all done by Monday, would you?
Thursday March 22, 2007 Beyond the Camp Fire Last night here at the ranch, as I was just finishing the evening branch water, I heard a coyote celebrating a kill - and he was unusually close to the house. "Did I forget to close the chicken coop?" I wondered. A quick blast from the million candlepower light in that direction and sure enough, I'd forgotten to. A few seconds later (lock, load, and jog), the chickens were sleepily eyeing me wondering "Who's the fat boy breathing hard sticking his head in our house? Oh, just him."
It was a fine reminder of how what we don't know - or don't understand consciously - can blow up in our minds to larger-than-life-size; something I caught going on in my own head last night as I was heading to the coop. "Aha!" Learning moment. Time to reread the Allegory of the Cave from Plato's The Republic". The archetypes may be small, even manageable when faced directly, but in the right setting, they may cast huge shadows which magnify their true size.
Chickens? Plato? Archetypes? What on earth does all this have to do with what is ostensibly a site that gives a current-day view of long wave economics playing out? Mindset and mood setting.
A number of people have written to me and asked what yesterday's huge run up in the stock market meant following the Fed decision on Wednesday to hold rates as they are.. I'd label this moment: "Fed in a Box". The Fed has been bouncing off the progressively narrower box canyon (to put it in old cowboy movie terms) getting deeper and deeper into the "no way out" place, but so far they have been lucky, having come across numerous "wide spots" where they've been able to light off a few bubbles along the way since the Russians started the energy end-game by bringing down their walls in 1989 and restructuring to fight the ultimate end game, which is the Manufacturer's Resource Wars - now playing in an Iraq/Afghanistan/Oilstan near you.
That said, the decision - more properly "non-decision" by the Fed reveals the difficulties of growth and inflation.
On the surface, yesterday's snap-back rally was hardly a surprise. What most people are not correlating is the connection between the sudden sinking of the dollar, which traded near its two-year low right after the Fed statement came out.
Let me try to explain why the market went up - instead of down - this way:
The Dow (and other indices) reflect a fundamental sea-state change in how market valuations take place. Buying an American stock (or index) is very like owning a rental house in an economy going through severe inflation.
If the house is valued at $100,000 dollars one day - and there's suddenly a doubling of money in circulation, the value of the house goes up. Might go up to $200,000 dollars, if the money dollars chasing it are just right.
Now put on your hat for a moment and pretend you're sitting in China. You notice that "Gee, there certainly are a lot of US Fed Reserve Notes being printing - looks like they may have to double." That means that if you hold a pile of US notes, their purchasing power could be halved and that would mean you ultimately were paid only half what you thought you may in trade with the USA.
What do you do? For starters, you stop accumulating US Dollars,. because they are not likely - short term - to go up in value. This is precisely what China has done.
While it's true that there may be a "liquidity crisis" in the real estate lending sector due to predatory subprime lending, it's also true that there are untold billions of dollars sitting in overseas accounts, which could come flying back to the USA when the whole world awakens and finds the dollar's purchasing power is falling apart such that it could take two of them to buy what one used to buy.
Our first major hint will come when or if we take out the two-year lows in the dollar. That's because investors in the US stock markets are almost exactly in the position of someone owning a rental house.
One of the theories of modern markets is that it is asymmetric market information that leads to crashes. I disagree. I think that market crashes can occur when you have a sudden "flip" of investor perceptions - and what we have going on at the moment is dangerously close to such a threshold.
I'm not the only one to see the potential for a crash -- Mike Whitney's Atlantic Free Press article this week "Velkomin to the United States of Foreclosure" certainly lays out the market crash potential nicely, as does the latest update advisory from the Half Past Human folks, who are processing odd "bulges" in their data.
What I'm really focused on at the moment is the "teeter-totter effect" as the market almost manically decides one day that "everything will be alright" because the consumer is well and inflation's afoot. When that happens we get snap rallies like yesterday's. Next day - or a week later, we get a Feb. 27th type rout.
When the market find the other view --"Holy smokes, there are no more investors/renters with cash so the value of the consumer is falling and these houses/indices are wildly overpriced!" -- then you get a tipping point - and maybe more like it to come.
In the short term, we can expect to see more of this choppiness until the truth of the matter becomes evident. We can only note that hyperinflations like the Weimar event are shorter lived than the deflationary events like the Great Depression.
Maybe we'll get lucky and just have hyperinflation. Oh yeah; if that happens, watch gold. Double the amount of money chasing goods and you will double the price of gold, too.
There's plenty of time to place your bets and the markets globally haven't figured out the next move overnight - things look to open flat today.
But also keep your eye on the headlines. Anything that pops up in a new release like this one "Sell Your Home Fast to Stop Home Foreclosures as Foreclosure Rates Continue to Rise in 2007" hint at a tapped out consumer - the investment world equivalent of "no one to rent to".
Curiously, we won't be able to lay the next Depression at the feet of "asymmetry of information." It will be more akin to even within highly interconnected markets, endogenous crashes happen when everyone runs to one side of the boat and a capsizing occurs. A sort of "lemming" effect although the idea of lemmings doing mass suicides was a contrived movie scene. Only humans could be so dumb as to do what lemmings were [falsely] accused off. But we'll hide our stupidity under layers of paper and bushel baskets of data.
The real disaster to come is already lurking in our own minds. If you doubt the "lemming effect" in humans, count tattoos and bling-bling. Unless, you're chicken, of course. --- A reader sends a link and some similar thoughts:
Repeat after me: Endogenous Shock.
Constitutional Crisis One of the things our time monk friends have been wondering about is the occurrence of a "constitutional crisis" in about this timeframe. Does the showdown between the White House and CONgress over subpoenas count?
NK Hikes So much for the latest North Korea nuke talks - my but they play us for time well, don't they?
Tamiflu Danger The Japanese apparently have found a link between Tamiflu and teen suicide.
Thumb Printing By Car Dealers? Interesting email:
Truckers Worried
Comms Check As we slide toward the end of March, I thought I would pass on a note or two about the importance of maintaining our mirror site. Click here to click to www.independencejournal.com - our hot back-up for UrbanSurvival's daily reports. Different server farms, different states/grids/providers. Bookmark it. If one site is ever down - the hot back-up should be working. Odds of both going down? Only in a world-ending situation, I think.
Wednesday March 21, 2007 The Fed, as we predicted did nothing on the interest rate front - which will be a bummer for China, which had been hoping for higher rates, and for ARM holders, who were hoping for lower. When in doubt, do nothing - and Wall Street oughta party like it's 1999...
The next move, I expect won't be so easy - as pressure on the dollar mounts, so too will pressure on the Fed.
Zero Clues Living life is sometimes like a good detective novel - and at times, I'm reminded of Bill Pullman's "Daryl Zero" character in "The Zero Effect" (1998) - the fictional master detective who gets to the heart of things through the precise application of logic. Except, of course, that the precise application of logic seems lately to have a hard time getting us anywhere.
Take for example the headlines about Karl Rove, et all, who will now appear on Capitol Hill, but will not be taking an oath. To our simply way of thinking, if we the taxpayers foot the bill for these guys, then we ought to be able to get the sworn truth, with lie punishable, or what's the point? Zero.
Meantime, we keep reading various versions of whether the Russians are really trying to bring the Iranians to heel over the nuclear power (and probably more) ambitions of Iran. The chances of understanding all the footwork (US, Israel, UN, Russia, IEAA, etc...)? Zero.
The headlines coming our of Zimbabwe indicate that there's been a huge increase in violence in the country - yet as we've mentioned many times: They don't have much oil, so the chances of the US getting massively involved there (unlike our oil-driven involvement in Iraq) is what? Zero. Which, by the way, leaves the chances of peace at zero, too.
Change The River Name? There's a report labeling the Danube as one of the 'Top 10- World Rivers in Danger' from human-caused impacts and climate change. So maybe we'll go from 'Blue Danube" to sometime more like "Brown Danube" or maybe even "Dry Danube." --- Some of the other freshwater eco-systems in trouble? "Five of the ten rivers listed in the report are in Asia: Yangtze, Mekong, Salween, Ganges and Indus. Europe's Danube, South Americas' La Plata, Africa's Nile-Lake Victoria and Australia's Murray-Darling also make the list." --- The Rio Grande/Bravo off to the west and north from El Paso here in the USA has also made the list. The Rio Grande, last time I stood on the bridge over the river/creek/damp mud between the US and Mexico was only a trickle - probably thanks to the nut orchards upstream - nevertheless the word "River" being applied to it most of the time makes how much sense? Zero.
Done Louisiana Governor Katheleen Blanco has decided not to run for re-election this year. Reviews of her performance in office are mixed to negative, slow to take off tolls during Katrina, and what have you. As NOLA continues to pull itself back from the slide into mud, Blanco's future seems very much in tune with the Mississippi. Muddy.
Selling Human-Caused Warming While we all can figure out that humans have not caused the melting of the polar ice caps on Mars, we notice that Al Gore is still telling pension managers to "Fight Global Warming." On the other side of it, the Bush administration has been meddling in what government-paid scientists have to say on the issue - which is curious. We have to wonder what they might say that would endanger the American lifestyle paradigm? The fact of meddling on both sides, and the recent British television documentary "The Great Global Warming Swindle" leave us curious is one reader email may be onto something when he suggests
So here's the interesting "ponder de jour".
Suppose for a moment that in about 1990, when the economy was going through a bit of a slow spot, or perhaps a few years later, that someone in government called together all the best brains of academia and addressed the group as follows:
A man stands up in the back of the room:
Another man stands up...
The conference droned on...and fortunately this is a completely fictional account. As far as I know, such a conference never took place. But, on the other hand, it would explain the deaths of microbiologists (80 dead since 2001, by one tally)
We look back in on this hypothetical conference one last time:
Whew! Sure glad this conference never took place. If it had, we'd see the chance of the Fed lowering rates at their session today is about what?
Zero.
Tuesday March 20, 2007 A "Good Thing" About Depressions I told Peoplenomics subscribers in last weekend's report, that in my view, the best single source of information I knew about to set a genuine "feel" about how an economic Depression develops, is in my view, Martin Armstrong's classic work. Our Canadian correspondent, Tim B discovered recently that despite Armstrong being in jail (under circumstances that make us again question the integrity of American jurisprudence) his classic analysis is still available. You can find the 500+ pages of precision economic scholarship by clicking here - note that you will have to "right click to save" the .PDF files, but you really must read the lead-in and history of the period to fully grasp what is means. Go to the right menu when you click here, and download all the chapters.
So what is the "good" thing about Depressions? Simply that knock-you-on-your-ass complete global wipe-outs don't happen frequently. It's a frustration among people who read this site and get a 'hair stands up on the back of my neck' feeling about contemporary events. As one reader expresses it:
One of the things that jumps out of a reread of the last major Depression is that we saw a collapse in certain prices as technology (the tractor/power farm machinery) displaced draft animals and food production went through the roof. That was followed by an exodus from rural areas and into the big cities where factories were going strong fueled by a new communications technology, 'radio'.
I'm expecting that something almost the opposite could occur now - a flight back to the semi-rural and rural areas that I call "ex-urban' as jobs in the cities collapse or are outsourced to other least-cost labor unit countries.
The outsourcing trend has allowed corporations to fatten up their bottom lines at the expense of America's production independence. But, the trend may be about to stabilize and even reverse. I'm starting to pick up notes here and there that India, as an example, is turning out to have a shallower talent pool than many realized. Not that outsourcing is over, of course: It is still preferred by banks and many human-to-human contact settings [e.g. customer service] because of the commonality of language. Also, interestingly, media is now outsourcing some of its non-core functions now. Not that your local DJ doing the morning show will be replaced by a foreigner, but the radio stations traffic department (they're the folks that schedule commercial, print logs and crank out billing to advertisers) is an example of a non-core function suitable for outsourcing. It all comes down to who can input the keystrokes for the least amount of money. That's something which hasn't escaped the notice of entrepreneurial types. --- The outsourcing of jobs to least-cost centers has been mirrored by some corporations figuring out that being headquartered outside the USA could be advantageous. You maybe don't watch such things as address changes, but one thing to be constantly aware of is when and why big companies, like S&P 100 member Tyco International, have chosen to take up off-shore Bermuda as their corporate 'country-of-residence'. Less tax bite, and they are not alone.
As a Associated Press story is headlined "Halliburton's Dubai move draw criticism in Congress, but industry experts say it makes sense." Well, maybe, maybe not.
I woke up in the middle of the night a few hours back wondering "How many corporations will eventually leave America?" "How much tax revenue will be lost by opportunistic corporations - it's what they do - move their tax base off-shore, trade as ADR's, and make money off the world's largest pool of high end consumers while stealing away jobs and dodging taxes?" "Worse, what happens if corporations run to the Middle East to sit on the fence just in case the global showdown with militant Islam goes quite badly for the West?"
This morning, my worst fears of amoral corporate behavior seem on the verge of coming true as I catch the Bloomberg piece titled "Carlyle Says Mideast to be 'Fourth Center' of Private Equity." --- While the odds of the US sliding into a Depression may seem remote, the outlook for America's economy has seldom been cloudier. I mean besides the dollar bumping back to the 0.75 Euro level in the past day and the snap-back rally in the markets yesterday, we have piles of conflicting opinion. A World Bank economist says the US will avoid recession but might have a 'slowdown' but a Merrill Lynch report hints the odds of the "R" word are growing. InvestmentNews.com seems to think think it may hinge on how the subprime plot works out - and not a bad operating theory to hold.
--- Even the arrival of a recession would not be a 'big deal' unless you're one of those who loses a job and everything you've worked for in life, or we get a drought/climate change and we tip over into a Depression. But, from this morning's vantage point, the "Powers That Be" seem firmly in control and ready with tomorrow's Fed decision to maintain the status quo a while longer.
While it's obvious that we need a "Corporate Fair Practices Act" to break up what one professor emeritus labels (correctly I'd say) the MIMC (Military-industrial-medical complex) grip on governance of humans, as long as there is a good supply of circuses and bread, high-def at that, and the boat is not rocked past the critical angle that assures capsizing, it will take an 'out-of-left-field' event to push us into the D word.
The problem is that left-field events sometimes have a long gestation period during which it's easy to think the danger has passed. We may already be slipping: into a Big D with continued outsourcing, jobs collapse, the subprime disaster, and dollar weakening toward what some expect will ultimately be deflationary collapse (which by the by would explain why corporations are eyeing offshore homes more often). The about the only 'good thing about Depressions' is one is not here -- yet. As my colleagues over at www.depression2.tv are so fond of saying: "the second great Depression will not be televised" - at least at a level where you'll feel it. You'll just wake up one morning in a third world country and you won't have gone anywhere from where you were yesterday.
Home Building Jitters Naturally, as the subprime disaster unfolds, we are paying closer attention to housing starts and builder sentiment. The National Association of Home Builders report was decidedly down yesterday. That prompted my friend Jas Jain to offer this:
Curiously, no one seems ready to take on two of the major underlying enablers of the current mess: the appraisers who would give any number for money, and the assessors who jack up assessed valuations at the drop of a hat because their office size and raises are dependent on screwing the public just a bit more.
Green Meme About a zillion people - no, make that two zillion - have sent me the sighting of a 'green comet.'
Siberian Mine Disaster The death toll is up to 106 in a Siberian coal mine disaster. In addition to the human tragedy of this, think of one other thing: Mine disasters might be an indication of crustal movement - lilke that rip in the Atlantic which folks have gone into denial about.
Russia's Key Role Something to watch closely in coming weeks will be Russia's key role in the Middle East. On the one hand, we see Russia is telling Iran "play nice" on enrichment or no nuclear fuel. But oh, lookie here, the Moscow Times reports that "Russia urges Iraq on equal oil access." Got the juxtaposition? --- Meantime, there's a report North Korea is refusing to take part in six-way talks. --- Now, picture Iran telling Russia "Buzz off - we'll buy what we need from Pyongyang.
Modern Mayans & IncansI don't know how it came up, but Elaine and I got to talking about Gary Jennings' book "Aztec" as we were discussing how blood sacrifices were done at the top of the majestic ruins at Machu Pichu in Peru's mountains, and the blood actually flowed down stairs in a trough to a group of initiates into their secret priesthood order who were in dark rooms below.
I reminded her that we humans haven't come very far since then, except that our ritual killings, such as the hanging of Saddam Hussein's vice president yesterday, show up in global media.
Human progress seems to be even slower than I'd ever imagined. But the secret power-holders are still doing just fine, just like they were at the bottom of the stairs under the observatory at Machu Pichu..
Monday March 19, 2007 Fed Week The US market futures are pointing toward a sharply higher open this morning - and a 50 point pop would come as no surprise to us. Besides the Federal Reserve meetings this week and the rate decision due out Wednesday afternoon, we notice that Australia's Prime Minister says he sees a glimmer of hope in Iraq - something which would be dandy, but we're hping back on any celebrating for now.. On the M&A front, Clayton Dubilier may spring $5.5 billion for Service Master. And, you can't ignore the fact of China lifting rates in a bid to curb their growth a bit - that would leave their production with a little more elbow room to export things to the world's biggest consumer/debtor society - the US.
What I think is going on under the surface is large companies are under continuing pressure to grow their bottom lines and share prices and lately, the easiest way to do that is either go out and snag an existing business to fold into your own mix, as exemplified by Google's acquisition of AdScape, or toss $8 billion into a stock buyback program, as HP is reportedly ready to do.
The problem for the economy that results is that while acquisitions and stock buybacks may be a good thing for investors, they don't really represent new employment. In fact, the opposite is usually true as "management savings" are often the pop accounting way of justifying high acquisition costs.. As you know, increases in efficiency and productivity to have human fallout.
The dream corporation has high revenues, low cost of goods sold, massive profits, and low capex requirements. Something like the...uh...subprime mortgage business. Land rush business for a while, but the headline lately, like "Subprime mortgage woes create a spillover effect" remind us all bubbles pop. The only question is who will get stuck holding the bags of collateralized mortgage obligations and collateralized debt obligations (CMO's and CDO's) and how much of that will be expensed to taxpayers, as was the S&L crisis of a few years back.
For now, hope springs eternal with headlines like "Job market survives subprime mess." But the workout will be a long one, and ask us around late summer about the jobs picture.
Elliott and the Zillion Dollar Inflation Question I written many times that while it’s true that the Dow is at new “numeric” highs this year, a quick application of the Minneapolis Fed’s inflation calculator shows that in order to have maintained its purchasing power compared with 2000’s all times high (ATH), the Dow would need to be somewhere in the area of 13,989, plus or minus a six-pack.
In other words – and as close to plain English as I can at this hour on a Monday – the Dow in purchasing power terms has only done something like an 88-90% retracement following the 2002/2003 low, and for the broader measures, like the Russell 3,000, which two weeks ago completed a perfect double top, but on a purchasing power basis really only finished an 85% retracement.
So the question I put to Robert Prechter, mastermind of Elliottwave.com last Friday was this: Has the “Big One” (Grand Super Cycle End of Life on Earth as we Know It) started – at least potentially so – if the Dow doesn’t quick-like-a-bunny hop over 14,000 – which would be an inflation-adjusted new high from 2000?
So my first question for Bob was “When we look at a long time market view – say over the 7-years since 2000 – and there has been a significant difference between the “purchasing power” performance of an index like the Dow and the apparent (non-inflation adjusted) view, which is the “right” way for a student of Elliott to read it?
Is the difference between the “purchasing power” Dow and the “apparent” Dow, one of those contradictions that gives rise to alternate counts? In other words, the decline from 2000 to 2002/3 might be viewed as a I down if purchasing power is considered, or it could be viewed as a “IV” if looked at from the “absolute” number perspective. Which is right?
The decline from 2000 is wave A in both nominal and real terms, but the wave labeling is diffuse in nominal terms because of the selectivity of wave B. In nominal terms, the Dow is tracing out an "expanded flat" correction, in which wave B goes to a new high; the Wilshire 5000 index is a regular flat, having matched the 2000 high; the S&P and NASDAQ indexes are all zigzags, in which B does not go to a new high. In inflation-adjusted terms, there is no new high in any of these indexes, and in gold terms, there has been no B-wave rally at all! Then there are the secondary indexes such as the Value Line Arithmetic index, which was so strong in wave B that we label it wave 5 of the old bull market, just as we do with the 1968 high in the Value Line Composite. Although these counts are diffuse, the message of all of them is the same: bear market ahead. In most indexes, it will be wave C, a resumption of the bear market that started in 2000.
Stepping back from the short term trading aspect, for a minute, one of the things my friends who work in the area of event-predictive linguistics come up with is an end – and I appreciate these sound really dramatic – an end or major decline of paper assets as a class of investment. It implies the return to higher valuation for owning the physical – gold, silver, farm land, and so forth. Bob, you’ve been looking at Elliott as it applies to the whole social spectrum, not just day-to-day markets, so let me ask: “Do you see “paper assets” as potentially entering a long-term decline like my friends suggest?
Interesting comments to be sure - and its appropriate to give you a reminder that until Thursday Elliott Wave International folks have one of their periodic 'free weeks - here's a link if you're interested:
I've found Elliott, along with Gann angles, and Bollinger Bands as wonderful technical trading and/or analytical tools.
Korea Progress There's an interesting item about Korea today - word that they will shut down their nuclear activities at Yongbyon if their funds frozen in a Macau bank are released.
Politicking Let me see: We've got democorps trying to get Karl Rove to testify in the US Attorneys firings. One online report says its readers think US Attorney General Alberto Gonzalez should go, but the White House will do what's in its best interests, so we'll wait and see how they play it. --- Former Veep Al Gore is due on the Hill to answer questions about global warming - which we're betting is more caused by off-planet influences than human-caused pollution. However, whatever the cause, we do note the Phoenix just set another "winter" record: 94 degrees. Plenty warm, alright. At the other extreme, cleanup from the weekend snowstorm continues in the Northeast. --- Nope, overall, just another week forming up in the District of Correctness.
Piles of Dough Pictures of that $206 million dollars in cash from a Mexican drug bust have been released. Mostly hundreds, we hear...
Fly Me to the Moon ...but don't let me breathe there: "Lunar dust may harm astronauts', says a BBC report.
A Curious Letter 99.99% of the email I get about this site is positive - folks seem to like our 'different-than-mainstream' view of things, and especially because we don't swallow everything that comes out as a press release hook, line, and sinker. Worst, we have the good sense to apply purchasing power parity to things like stock indices and such - and even look to event predictive technologies so we know where to be looking for big events next.
Once in a while though, I get a sharply critical note -
Oh boy, where to begin. Let's take it paragraph by paragraph, shall we? The pet food recall is a big story because if something can kill pets, it can kill humans. And it's a HUGE recall and if you're not worried about humans as a target or risk, you'd on the banks of what river?
Similarly, on the "green death", it's pretty clear that the "green death" at least at one level is the emergence of the bee colony collapse syndrome. The web bot project is about archetype-level linguistics, not hot wire service copy. Whether the bee mess is laid at the feet of genetically modified crops, or some newly emergent bee disease remains to be seen, but again, if you're not considering the food price and availability impacts of nature's pollinators, you're on the banks of what river?
Paragraph #3 seems just a rant.
Ditto paragraph #4 - more rant, but I'd offer that many of the people who are living on $10,000 a year or less are doing so because of actions of corporations - shifting jobs overseas to fatten the wallets of the boardroom big shots, "right-sizing' everyone but their own kind, and victimizing people through excessive credit card offers and targeting them with scandalous subprime crimes seems not to be in your realm.
Paragraph 5 (about quality of readers) I don't want to brag but I know of at least one billionaire reader who's a regular reader - don't attack the readers, please. They come with open minds and take what they will.
Para. 6: We do focus on solutions. "Buy American" for example. "Buy Local" as another. "Keep your money in your community." "Get out of debt." You seem to have missed those.
As for the bots,, we use them as a "direction finder" or "trend identifier". For things like "Shortage emerging/encounters with scarcity" which are long term/high impact events predicted, we started tracking daily the "shortage" meme a year ago last Friday. If you want something really discomforting, try this graph on for size:
Sorry to use science on you. Especially when the facts suggest a crisis ahead for the global corporations, soaring food prices, and oh yeah, deflation all at once.
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