Markets - Starting another big tipping point?

Gold: Breaking out?

Thursday: This morning, the price of gold (live chart above) was trading up more than $5 an ounce - and with word out about HealthSouth being under the SEC's eye, with the warning of EDS - it looks like the panic time in the market is just about here.  With the news out yesterday on the inflation front, it looks like the Fed will have little room to move - and that's given gold a good kick in the pants in the pre-open today.

On a different topic, the Wednesday action in the market dropped the Aggregate Index (charts below) down to a mere 6-points from a downside breakout.  If that happens, we can set our sights on a crash/ MCHVE event in the next week or two.  Although we have some money short (Puts - November QQQ 20's that we picked up in anticipation of the building stampede at $0.95) we're largely in cash.  In our personal accounts, we rolled out of some Sept 22 Q-puts early this week at a small loss to stake out the November position because the timing was too tight on the Septs.  It seems to me that there's a good chance that the market will see a late session revival today as the PPT can be expected to play if it looks really bad.  Last think the Bush administration needs is a Black Thursday Friday or Monday.

Meantime: When the event comes, we'll be putting in sell orders on the Nov 20 Q-puts at 4:80 or so for a nice 4 1/2X return for a one month trade. We'll let the downside momentum steer our thinking on closing these out.  Depends how manic the downside action becomes. The rest?  In gold in the bank's vault, gold stocks and cash in the trading accounts ready for some bottom fishing when we set the high volume on the lows. Of course, once we're past the normal upside bias of option expiration, things can really get up a head of steam on the downside in ensuing weeks.  Enjoy the ride and keep the seat belts tight.

Aggregate Index: 36 points from Disaster

Wednesday: This morning it looks like global markets may be about to synch up and begin what's called a Massively Correlated Hyper-volatility Event (MCHVE) over the coming weeks or month.  I've shifted out of September index puts into Novembers because the speed of decline is difficult to predict.  No, that's not a recommendation (read the disclaimer), I'm just telling you how we're playing it in our personal accounts. Check out the action in Europe this morning.  As of this writing, the FTSE-100 in the U.K. is down more than 2.5%, Germany's DAX is down better than 3% while France's CAC 40 is down about 2.4%.  (Click here for updated numbers) Europe is at five-year lows today.

Although the NASDAQ 100 futures look like they might fight the trend momentarily at today's open, word that OPEC ministers meeting in Japan will keep supplies tight, isn't helping matters.  Nor is the light volume that accompanied recent gains in the U.S. markets.

Meantime, the Treasury's Economic Stabilization Fund (ESF) that bankrolls Fed interventions in the equities markets (buying options in order to entice arb players) has a major dilemma:  They may be able to work their magic in the U.S. markets, but the whole global marketplace?  A tough one for even for Sir Printdacash, our recently knighted Fed Chairman.

We're now in a zone where a single major exogenous shock would set off a chain-reaction that could push the Dow under 6,000 within a matter of days.  Whether it's a terrorist attack or something else (like a endogenous derivatives explosion) matters little.  As I wrote in last evening's update:

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I don't often sound the alarm - and frankly, I've only been right about 1/3'rd of the time (that's the nice way of saying wrong 2/3rd's of the time) .  But tonight, our Aggregate Index, that damn index that keeps tracking 1929-1932, comprised of the equally weighted SPX, Dow and IXIC (Nasdaq 100) has fallen to 6061.61.  Now, that may not sound like a big deal, but if it breaks below this level, we will take out the September lows of 2001 from a composite view and if THAT happens, if I can quote my (late) pappy, "Good God Gerty, bar the door!".  Check it out:

You might remember that the Think Tank proposed that we might see the end of the Federal Reserve System by the end of this year - as one of their studies of what the developing entities might mean.  And, subscribers to our "Inside Report" might remember that we had an analysis a couple of weeks back titled "5,800 In Sight".  It was laughter and slander as the market appeared to get ready for a launch on the upside in the past week or two.

But now comes the harsh reality.  When a market declines on news of "peace" that means "war" is the preferred option and that is not the kind of environment to be committing cash to, in our reasoning.

Still, it ain't over till the fat lady sings, which will be at the end of the week when we hold above, or sink below, what is a HUGE barrier.

A break below and it ain't Memorex, baby.

It's more of the real deal we've been writing about for...oh...five years or so...

(Do I sound like Jesse Ventura, or the WWF announcer, or what?)

Monday:

Silver Swindle Update

Headed for Millions:  You might remember our September 5th update where we alerted you to the possibility of a silver swindle that might be about pop onto the consciousness of the mass media?  Well, we're very close to the tipping point on this with a very well researched article on www.miningweb.com this morning.  It says in part:

"The problem is massive and widespread, also affecting Wal-Mart which is one of the largest jewelry retailers by any measure, and the implications are sure to be devastating. Luxury chain Tiffany has so far come up clean. Given the evidence pouring in from around the country, this impacts tens of millions of ounces of silver. Duped customers are going to want their money back or the real thing. The stores, fearing litigation, will swiftly turn on their suppliers, who will turn on the manufacturers to get back the money or 925 silver. Either way, it looks very positive for silver producers and anyone else long silver because this is not a problem to be solved quietly. However, the danger is that a large chunk of people will be put off buying jeweler altogether since there is no way to be sure you're getting what is promised. Miningweb will be following up with the buying units of the various stores throughout this week.".

Ref URL: http://www.mips1.net/mggold.nsf/Current/4225685F0043D1B285256C370007B6BD?OpenDocument

No, it's not on the evening news yet, but given how the media plays a game of following a very few leaders, I think the story has about hit its tipping point and should appear on the news shortly, perhaps in a venue like CBS "60-Minutes".

Tipping points happen when less than 5% of people involved sudden "get it" - so as we approach the "tip" on this story, it will start to move more quickly.

Saddam Says...

...that he will let U.N. inspectors in, but the veracity of anything from this fellow should be questioned. More likely, as Brit Tony Blair has called Parliament back into session on the 24th, Iraq War II is now more likely to start on the 29th and possibly not until full moon in October.  Alternatively, the Bush administration may keep to its original plan because Saddam could have something ugly up his sleeve.

Like what?  Oh, like a coordinated biological attack on the West as outlined this morning (Tuesday) in the NY Post. 

"September 16, 2002 -- WASHINGTON - U.S. intelligence officials fear that Saddam Hussein has concocted a doomsday plan that would use al Qaeda to attack America with Iraqi-provided biological weapons, The Post has learned. "

As you rush off to read the rest of the story at http://nypost.com/news/worldnews/57127.htm here's a tiny snip from the September 8th edition of "Inside Report" that fits right in with the NY Post's line of inquiry:

What if Osama has been making sales call on sympathetic countries within the Wahhabi sphere of influence?  What if he, and his supporters, are trying to cobble up a new Wahhabi Empire?  More to the point, where would he be making sales calls today?

 

Osama's sales calls would not have to include Saudi Arabia, which as you will notice in reports, has not been supportive of another U.S. mission into Iraq.  Being a country literally founded by the Wahhabi's, they're already in Osama's camp.  Syria may also be be counted as a potential Wahhabi alliance member, if for no other reason that a mutual hatred of Israel, and the old saying "The enemy of my enemy, is my friend".

 

Suppose, for a moment, that Osama has been making sales calls on Iraq and their "president" Saddam Hussein.

I'm not going to say "Told you so!" because there's no hard evidence yet.  But the notion of Saddam linking up with al Qaeda and burying the his deep and traditional fear of fundamentalist Islam would certainly be in keeping with expediency ruling the day - which underlies most alliances in the troubled region.

Now back to this past weekend's report:

The New 30-Years War

I wrote an article for subscribers - that's now on the free side of this site - about the possibility that the 9/11 event was the opening skirmish of something I labeled Oil War Two.  The period from 1966 through 1975 I had called Oil War One - and it's the first of what will likely be many resource wars in the future as we run out of natural supplies of energy and food because we have too many people on the planet.  As to the implications of Oil War Two,  I wrote back then that although the Oil War may be real, it's a stealth war because most journalists don't look for causes of wars.  Instead, they look for 15 second sound bites that aren't controversial.

I have serious news for you: If Iraq didn't have oil, and potentially the means to defend them developing toward NBC (nuclear, biological, and chemical) we wouldn't be going there to fight.  From the earlier article:

What we know about Oil Wars is actually very little, except for these few data points:

• They are typically not single front wars.  In Oil War One, the front was world-wide, consisting of Vietnam, the Middle East, and the Russian buffer states with the West.
• The Russians were on the opposing side of Oil War One, and they are on our side this time around.
• Islamic nations controlled the resource in Oil War One and similarly, they control [more of] the resource in this one.
• Oil War One lasted about 9 years, from 1966 through 1975.  We might infer that this is how long the present Oil War will last.
• Oil War One was fought to essentially a stalemate.  The West got continued access to the oil it needs to survive, but the Arab Oil Cartel got higher prices, and as the case of Saddam Hussein shows, much of that money has been salted away and used for the purchase of arms for the next Oil War, including weapons of mass destruction.
• In Oil War One - and I expect this to be repeated in Oil War Two, the core issue was control of oil and Israel was the front line of Western interests in the Middle East and that plays the same today.

There was tremendous fall out from Oil War One.  Fleet fuel economy requirements, a national speed limit of 55, the fall of the Shah of Iran, our "healing" with Vietnam, the requirement that the North Slope Oil Pipeline be completed quickly. 

Sadly, areas where we could have made substantial progress, such as development of solar energy, electric cars, and utilization of our coal resources, have all pretty well languished because of cheap oil.

If I were looking out over the next year or three, what I see coming is the major economic impact of Oil War Two.  As that realization dawns over people, which it is almost sure to do when Israel and the Palestinians go to a much wider war later this month, a few people will say "Gee, I wonder what's going on with all this".

But of course, you'll have visited www.dieoff.org and you'll recall Jay Hanson's note from last week that the Hubbert Peak probably occurred in 2000 (the point after which oil output will steadily decline despite new methods of recovery) and it will all make sense.

Welcome to Oil War Two.

This weekend, both the think tank's bots and Canadian News Hound Tim B sent me copies of an interview published on Jeff Rense's site.  The discussion is about the Russian view that 9/11 triggered a spiraling downward of the Western economy, and that the pending invasion of Iraq is really about cheap oil. 

For over a year, various (perhaps led by Tatyana Koryagina's work)  Russians have been developing a view that there are two factions fighting to shape the future: One faction wants the U.S. to be the sole global super power, while the other wants the U.S. to be subservient to the interests of a global elite.  Unfortunately, there is no "right" or "wrong" side of the discussion.  The U.S. should remain a strong and independent country, but at the same time, global issues like running out of oil and food encroach on the borders of every country. Balance is not what the factions are about - they're about winning for a particular viewpoint and gathering the economic spoils that go with victory.

The key part of this weekend's report:

"Mikhael Khazin drew a direct connection between the war threat and the unprecedented "structural crisis of the U.S. economy", for which the Administration has no solution. The only scenario for staving off a catastrophic financial-economic collapse in the U.S., would be a drastic reduction in the domestic oil prices inside the U.S., perhaps together with a sharp increase of oil prices for other countries.

 

"America needs prices in the range of $12-13 per barrel... or even down to $7 per barrel. This is possible only under one condition: getting full control over the petroleum resources of Iraq and Saudi Arabia. Isn't that what we are seeing? .. For this there is a limit of 4-6 months. ... Certainly, there are the factions Ivashov mentioned, but without objective economic causes, no global events would occur. Now global economic causes have emerged again: The situation in the U.S. economy has become intolerable. It is obvious, that Sept. 11 was prepared by many forces. Sept 11 occurred at a moment, when their interests coincided...."

 

Khazin also said he thinks the option of use of tactical nuclear weapons is part of the U.S. war plan, and would have the purpose of terrifying the whole world, showing the U.S. would stop at nothing."
Source URL: http://www.rense.com/general29/ruse.htm

If there's ever been a war parallel to the present situation, it is the Thirty Years War. Go check out the web site http://www.pipeline.com/~cwa/TYWHome.htm and you'll see some AMAZING parallels.  I've taken the intro from this page and have added some comments about our present situation:

The Thirty Years War is one of the great conflicts of early modern European history.
Always ready to improve on history, the Resource War will likely be a Forty Years War.

The Thirty Years War consisted of a series of declared and undeclared wars which raged through the years 1618-1648 throughout central Europe.
The Forty years war will consist of a series of declared and undeclared wars which will rage from 1975 to 2010 pretty much throughout the world.

During the Thirty Years War the opponents were, on the one hand, the House of Austria: the Habsburg Holy Roman Emperors Ferdinand II and Ferdinand III together with his Spanish cousin Philip IV.
The Forty Years War opponents are on the one hand, the nationalists wishing to preserve the autonomy of their countries and the globalists who seek internationalism and the end of nation-states.

During the long course of the Thirty Years War the Habsburgs were opposed by various international opponents of House of Austria: the Danish, Dutch and, above all, France and Sweden.
During the Forty Years War, the globalists were opposed by various individual states, including the Balkans, many Islamic Oil States, the United States, and Great Britain.

In addition to its international dimensions the Thirty Years War was a German civil war. The principalities which made up Germany took up arms for or against the Habsburgs or, most commonly, both at different times during the war’s 30 years.
In the Forty Years War there has been a civil war of sort between communism and capitalism in Russia.  The captive states that constituted Russia before 1989 took up arms for or against Russia at various times.

The Thirty Years War was also, at least in part, a religious war among Catholics, Lutherans and Calvinists. Ferdinand II and, to a lesser degree, his primary ally Maximillian I represented the re-Catholicizing zeal of the Jesuit Counter-reformation, while Frederick V of the Palatinate represented the equally militant forces of Calvinism
The Forty Years war may also, at least in part, become a religious war between Christians and fundamentalist Islam.

So, conspiracy theories aside, I've come to the conclusion that the pending oil war is really about natural resources and it may last longer than the Thirty Years War.

Henceforth on this site, I'll try to use the more correct term, because Oil War doesn't fully describe what is evolving. What is evolving it a chaotic mess because even with all the media hype, this one doesn't boil down to a 30-second sound bite for a talking head.

If there's a small contribution I can make to ending this war sooner than later, it's perhaps to label the present situation what it really is.  It's "The Resource War"/"Forty Years War" with one small caveat:

If we last that long.

On to the charts!

Write when you get rich...

George Ure

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