Tuesday, November 29, 2011

American Airlines quietly goes bankrupt.

The latest victim to succumb to the global debt Ponzi is AMR corporation which is the parent company of American Airlines.  AMR filed for bankruptcy today.  Of course it eventually had to; how could it not?  When its competitors are allowed to wipe away their debts in their own bankruptcies over the past few years and then continue flying, what chance does honesty have?  More to the point, what chance did AMR or any other airline have against competition which was taking on massive debt in the early days in order to grow quickly?  And so therein lies the scam of it all.
Damned if you do and damned if you don't.  Any airline that failed to take on massive debt would be hard pressed to survive back in the salad days of air transportation.  The best aircraft and the best pricing went to those who were considered the strongest customers.  And now, any airline with all that massive debt is destined to go bankrupt as deflation makes it impossible to turn a profit.  Airlines can't raise rates because people can't afford them.  People have come to think of the airlines as a form of public, government sponsored transportation.  Airlines must use the best equipment, maintain it perfectly and run with incredible efficiency day in and day out or people who are paying $200 to fly from LAX to MIA have a kinipshin and demand government "do something".  I wouldn't work in the airline industry on a bet.  It's just too government-infested.  Investors in these types of government backed ventures are eventually taken to the cleaners.

By the way, don't let the shape of that AMR chart escape your attention.  That is the face of an exponential collapse.  The company has actually been insolvent for a long time but the money men were able to hide the problems for much longer than many thought was possible.  I'm guessing that the US government had ongoing clandestine money injections going into AMR over the years and now that the government debt is under scrutiny those quiet injections had to stop lest they be discovered.  I have no proof of this but that is what I would do if I were the US government and I had free money at my disposal just for the effort of printing it from thin air.

Oh and before I close this post, let me take the opportunity to write once again that I think General Electric is a bloated, debt laden Ponzi Pig which will certainly default on its massive half trillion dollar debt.  I wonder how much GE was into AMR in the AMR BK?  GE is definitely in the vendor finance business.  It "sells" things to its customers and then finances the deals itself.  That is a total scam.  It books the profit as if the debt was paid and then carries the debt on its books pretty much forever.   GE currently trades at $14.70.  I predict that before this credit bust is over it will trade sub $3 and probably will have to file for bankruptcy.  Anyone who thinks GE is a safe long term investment for their retirement money has no clue what is going on.  Unfortunately, lots of pensions, retirement funds and insurance companies are heavily invested in GE so if you have one of these programs then you are likely invested in it by proxy.  Good luck with that.

Sunday, November 27, 2011

Eurozone winding down toward unavoidable collapse

GATA reported today on an article from The Telegraph and, while not unexpected, the news isn't good.  In short, the global debt Ponzi is collapsing with the weak links going first but eventually it will be understood that there are no strong links – just weak and weaker.  We the people of the world all bought into the scam of fiat currency and fractional reserve lending and nobody did enough to get honest truth tellers like Ron Paul elected and so now we have a problem that must play out no matter who gets elected in 2012.

Once the fuel source of the Ponzi runs out (i.e. new credit and debt), the debt Ponzi must collapse.  If the following sentence from the forwarded article is true, the fuel source seems to be running very low: “Asian central banks and sovereign wealth funds are spurning all EMU bonds because they have lost confidence in a monetary system with no lender of last resort, coherent form of government, or respect for the rule of law.”  Bottom line: the Eurozone is rolling over.  Confidence has been lost in the leadership. “Unless Germany agrees to the full mobilization of the European Central Bank very fast, the eurozone will spiral out of control. As The Economist put it, "The risk that the currency disintegrates within weeks is alarmingly high.". Yeah, well it is now understood by everyone who is thinking clearly that Germany cannot save the Eurozone even if it wanted to.  The best it can do is to stall the inevitable collapse.  Any new money thrown at the problem will be lost.  It is a black hole of debt.  The on balance sheet numbers are bad enough but (because corruption is so rampant) the overall off balance sheet debt is far larger.  It is leverage upon leverage which simply cannot be repaid.  This is true of Europe, Japan, China, Russia, the USA and everyone else who is infected by a fraudulent money supply consisting of fiat currency and fractional reserve lending.  In other words, everyone.

Because the US dollar is the de facto reserve currency of the world, the final backstop of the global debt Ponzi is Ben Bernanke and the US Federal Reserve Bank.  The fact that anyone is talking about using U.S. backed federal dollars to save Europe demonstrates that it is 10 minutes to for this con game.  The temptation will be to try to save the Ponzi from a deflationary collapse by printing more money.  So what if this is unconstitutional?  So what if it will not work anyway?  The con men don't care about any of that.   They don't care about moral hazard.  They don't care about the riots that will occur on Mainstreet if High Street in Euroland gets a bailout at US Taxpayer and US consumer expense.  And make no mistake: the US riots will come and they will make OWS look like a Sunday picnic.

Unfortunately the problem is even bigger than the Federal Reserve can handle.  Much bigger.  But that won’t stop people from believing in false hope, especially when they see it as being in their best interest to do so. Those who will be most tempted to do this will be those with the most to lose: Berkeley's Brad DeLong said it is time for Bernanke to act on this as the world lurches straight into 1931 and a Great Depression II. "The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash," he said.  In short, the US bankers already own a lot of Euro debt which will get hammered when the Euro crashes.  Their solution: Just have the Federal Reserve buy them out of their bad investments.  Again.  Yep.  The bankers are at it again.  They collected interest payments for years on that Euro debt but now that the debt is going bad, they don’t want to face the risks anymore.  They want Uncle Warbucks to make them whole.  They already privatized their gains and now they want to socialize their losses.  Again.  The only way to do that is to debase the dollar even more.  That means higher gas and food prices, higher taxes, higher everything.  This will result in reduced imports by the US because Americans will have less buying power.  Reduced imports by the US means less exports by others and thus less cash for Europeans and Chinese and Japanese to spend on paying off debt.  The markets will view this as increased risk and thus demand even higher interest rates for their sovereign debt.  At some point the debt will just get too expensive to roll over.  These are the mechanics of the debt spiral.

One thing people really need to wake up to at this point is that posturing is no longer going to help.  During the early days of the collapse, government used to tell us that if they walked around with a bazooka in their pocket that they would never have to use it.  The threat of government intervention, they said, would force the market to stay engaged.  They thought the market could be so easily manipulated.  Since then this theory has been debunked in actual practice several times.  Still, it didn't stop The Telegraph from repeating the fairy tale yet again: “The Fed could buy E2 trillion of EMU debt or more, intervening with crushing power. The credible threat of such action by the world's paramount monetary force might alone bring Italian and Spanish yields back down below 5 percent before one bent nickel is even spent.”. Based on what I have seen, any improvement in confidence would be short lived – on the order of 7 days or less – and then the panic would set in again.  If real stimulus didn’t reflate things permanently, the simple threat of further stimulus certainly will not.  The market is, in essence, more afraid of getting left holding an empty bag by the other players in the debt Ponzi than it is of the Federal Reserve or any other central monetary authority for that matter.  If Bernanke goes too far with his helicopter drops then pretty soon the US will be the one struggling with increasing interest rates.  Once the US can no longer afford to roll its debt over, I guarantee you that the whole corrupt system will collapse.  There is no more powerful monetary authority on the planet than the Fed and once confidence in it is lost, confidence will be lost in the global monetary system.

At the end of the day people have to understand that, due to the interconnectedness of the global economy, there is no fix that does not result in a major crash.  Every positive sounding false hope action will result in a negative reaction of unintended consequences.  That is not to say that we should not elect Ron Paul and drive honesty back into monetary policy; we must do this so that we don’t continue to have problems years into the future and long after we should have gotten past the upcoming series of defaults.  We need to learn from our mistakes and stop doing the same things over and over expecting different outcomes than before.

Saturday, November 26, 2011

Look for tops in Wall St darling stocks.

An article on Yahoo Finance news which cited the Wall Street Transcript suggests that we all go out and buy the big name Wall St. darlings which have not had any correction yet while things like the solar sector are selling below book.  IMO such blatantly bad advice and analysis is a sign that a top is near for these stocks.  Nothing else but shilling the bid could account for big print headlines suggesting that we all pile even further into an already overcrowded flight to safety trade when in fact no stocks are safe.  This is exactly the type of game I would play if I were in the business of herding sheeple around for my own profit.  And all of this soul-less pumping is happening even though Wall Street Transcript's Wiki says, "In publication for more than 37 years, The Wall Street Transcript does not endorse the views of those interviewed, nor does it make stock recommendations.".  I laugh at how they claim to be unbiased even though they are the ones who pick who gets interviewed. 

To me, this is a tip of the hand by those who make a living gaming the system.  This sort of signaling used to work when fools and patsies far outnumbered every other player in the investment world.  Back in those days you could get away with this type of thing and nobody would bat an eye.  But people have wised up over the past several years of first hand observation of just how corrupt the big money system is where banks and industry collude with military and government in order to fleece the people of the output of their daily labor.

Yeah, it's currently blasphemy to say that IBM or MCD or other darlings can crash.  Everyone thinks these companies are unstoppable.  But the truth of the matter is that credit deflation is the most powerful economic force on the planet and that the fortunes of all companies are controlled by it. Once credit deflation locks its teeth into the global economy, where is IBM going to get a government contract?  You think IBM's business in Spain and Italy and Portugal, etc. hasn't suffered?  If the people are being forced into austerity and it is resulting in riots then I cannot believe that big contracts are being awarded to multinationals.  If the crowds got wind of it then the very lives of the leaders could be threatened during times such as this.  People are pissed and they have no patience for explanations and excuses from politicians these days.

Oh, and when will MCD account for all of its real estate losses globally that must have occurred over the last 5 years?  All we hear about is their profit and their measly little 3% dividend but nobody wants to talk about the fact that it was all paid for with debt.  MCD debt has been steadily increasing and now it has $12.54bn in debt as opposed to only $2.4bn in cash.  That's better than 5:1 leverage.  Deflation is very hard on those who are mired in unpayable levels of debt.  MCD's stock price is dependent on its growth which is dependent on its store expansion which is dependent on its ability to take on new debt for store expansion.  In a credit crash new debt becomes more expensive or even impossible to take on because nobody has money to loan.  As we have seen with sovereign debt in the Eurozone, the interest rates can move very rapidly once people figure out that there is no escape for the entity in question.  MCD and many other corporations are completely dependent on the availability of cheap credit for their growth.

As the Eurozone crashes, global credit is contracting rapidly.  This cannot be good for the likes of MCD and so the shameless stock pumping machine is turned on in order to lure more suckers into the debt Ponzi.  This is required so that the con men can take that money and slip out the back door.  If the con men just sold now with no new stream of steady buyers, the stock price would plummet and people would get the sense that there is something fishy going on.

Time will tell but I sense that the con men know that the credit deflation in Euroland will be an unstoppable force which will not be beneficial for shares of even the best name companies out there and so they are looking to make a fast exit stage left.  Alternatively, these guys could all be on the up and up and I am the only person in the universe who thinks global markets could be ripe for a collapse.  Yeah, sure.  Anything I see they have known about long before.  These con men are some of the most clever and insightful people on the planet.  If only we had them working on cures for cancer instead of trying to find yet another way to screw their fellow man out of his hard earned money...  If we got rid of fiat currency and fractional reserve banking that is exactly what would happen.

Wednesday, November 23, 2011

German 10 Year Bond Auction "A Disaster"

Reuters reports today that a recent German bond auction would have failed had not the German central bank purchased 39% of the debt. 

""It is a complete and utter disaster," said Marc Ostwald, strategist at Monument Securities in London.  "This does not bode well, it is the worst of uncovered auctions that we've had this year and little wonder that the Bund sold off on the back of it.""

So what does all of this really mean?  Well, in layman's terms, despite the media portraying it as the strong economy of Europe, Germany is a debt laden piece of $hit just like all other global governments, including the USA.  They cannot live without debt.  Their bond auctions are failing (i.e. no bonafide buyers are stepping up) and so their central bank has to print up money from thin air in order to buy the debt.  They have no choice in this.  They either do this or let the debt Ponzi collapse and just admit what a bunch of scumbag con men they have been all along.

They (and the USA) strut around telling the smaller players to behave like adults, to implement austerity, blah blah blah but Germany and France are just as bankrupt as the rest of the PIIGS.  This is not to bash Euroland.  Japan is a silent crisis.  I cannot stress how badly I think Japan will turn out.  It is entering into the teeth of the perfect economic and demographic storm.  Japan is screwed.  China is going to have a massive real estate bust, far worse than what happened in the USA.  Civil unrest in China will be extreme IMO, and the USA is going to have a real debt crisis within a couple years if not far sooner.  The USA will see significant civil unrest that will make Occupy Wall Street protests and its clones pale in comparison.

This is not new knowledge for people who understand that the world is controlled by the fraudulent concepts of fiat currency and fractional reserve banking which have pushed us into a global debt Ponzi.  Lots of "experts" will claim they never saw the collapse of France and Germany coming.  They will concede that the PIIGS are weak but they always protrayed France and Germany as the unsinkable overlords of that region.  But during the height of German and French politicians looking down their noses at the PIIGS, I wrote that Germany and France are no better off than anyone else in the Eurozone and explained why that had to be the case.

In short, we're all PIIGS now.  The entire global banking system is bankrupt.  You know this is the case because people are now talking about "saving" the Eurozone via the use of gold to either pay for or to collateralize debt.  Yes, that's right GOLD.  The money of last resort when confidence has been lost in fraudulent fiat currency.  The only real money that ever existed in the world.  As Mr. J.P. Morgan said, "Gold is money and everything else is credit".  As recently as two years ago if you mentioned "gold" in polite conversation you were labeled an extremist or a survivalist or some other such intimidation wording commonly used by the ignorant masses against people who would tell them the truth.  But now, apparently, that foolishness has been dropped.  Desperation has led the very people who used to laugh at gold to suggest and to hope that gold will be the savior of the Euroscam. 

Well let me say for the record that anyone who pays their fiat currency debts using gold at only $1500/Troy oz. is a complete A$$!  I mean, world class fool.  Pay paper denominated debts with paper!  Let me also say for the record this: anyone who accepts gold as collateral for a loan without having physical possession of such gold is a FOOL.  Nixon's elimination of the dollar-gold convertibility in 1971 proved beyond a shadow of a doubt that sovereign promises to back debts with gold are lies.  If the US defaulted on its promise to pay paper debts using physical metal then who else is going to feel morally obligated to do so?  The US has already set the precedent here.  If someone follows the US example of defaulting on gold backed debt notes (for that is what dollars were pre-1971), including Eurobonds, then the US will not be able to wag its finger at the perpetrators of the default.  It will not be able to talk about lack of moral character because we already proved that we would gladly dispense with morals if we had to choose between them and gold.

Folks we are in the end game now.  The global debt Ponzi is collapsing because it has to collapse.  No Ponzi scheme ever ran forever and none can ever run forever because payouts to those who are exiting the system are only possible if more fools enter the system.  Right now, the world has grown incredibly short of fools who are willing to loan money to con men and liars.  Thus, the debt Ponzi must collapse. Failure to recognize this (and its obvious implications) can be one of the worst mistakes anyone can make in their whole lives.  The implications are far reaching and serious.  As I have told family and friends, the time to wake up is past.  It is now time to grow up and see things with adult eyes.  Childish ignorance about the state of the global debt Ponzi is not your friend at this point.  The impact of a failing debt market on all other markets, including the stock markets, cannot be overstated.  Debt is used to purchase everything.  When debt markets fail, prices on everything else will plummet due to credit deflation.

Sunday, November 20, 2011

Be sure to check out my new fixed post on Investing.

I've created a new fixed post on Investing.  Access it via the top level menu for the blog using the Insight drop down menu.  There you will see fixed posts on Money, Investing, etc.  The Investing post is brand new and it is required reading for anyone still trying to figure out what is really what in today's complex economy.

Hedge Fund manager Kyle Bass is interviewed by the BBC: France and Japan are on deck for collapse.

The BBC’s Hard Talk show recently interviewed Kyle Bass, Managing Partner of hedge fund Hayman Capital.  I think the 20 minute interview  (part 1 and part 2) is well worth your time.  Note that his interview ends 5 minutes into part 2 so you can stop watching there.  But if time is short for you then here’s my brief synopsis:
  • The interviewer tried to demonize him for betting against the markets and she tried to imply that he made tons of money on other people's suffering.  His response was that he needed insurance because he saw all the problems coming and he had a duty to his investors to not lose their money.  He also indicated that he made big percentage gains but on a very small amount of money invested against the markets.  His real goal was to insure his main holdings against catastrophic losses which he succeeded in doing with his hedging strategy.  My take: if you are in financial markets then you are effectively trying to screw the next guy out of his money.  That's basically what non-dividend investing is.  So if you lose then don't be a poor sport.  Don't get angry at the winner for being smarter than you.  Instead, use the feedback as a growth mechanism.
  • Greenspan blew up the housing bubble as an attempt to stop the dot com bust from playing out.  Then he walked away and handed the reins to Bernanke.  Bass saw this and made leveraged bets against the housing bubble.
  • Every time a big bank or company got into financial trouble, governments bailed them out.  Bass noted that governments were doing this and then looked at government debt and how much damage it would do to them to take on debt from banks and industry.  This is how he figured out where to place his hedges which resulted in profitable bets against Greek sovereign debt.
  • He talks about “asymmetry” quite a bit and so I want to decode that.  What he really means by that term is that a particular market is/was not realistically pricing in the economic truth of a situation.   For example, back in 2007 Greek debt was carrying similar interest rates to German debt as if they were both similarly credit worthy even when anyone who could do math could see that was ridiculous. Because of this ridiculous assignment of good credit ratings to low quality Greek debt, it was possible for Bass to buy derivatives that would pay off “asymmetrically”.  In other words, a small amount of money would be lost (think of it as an insurance premium) if the "insurance contract" never paid off, but a huge payoff relative to the insurance premium if the insurance had to pay up.  Needless to say, the insurance paid off for him.  Because it was highly asymetric, a very small premium was needed in order to produce a big return.
  • The easy money has already been made on the Greek crisis and so Bass is already looking to the next markets that he thinks will blow up and those would be French and Japanese sovereign debt.  These are still highly rated with low interest rates being demanded by creditors even though their economies are weak and debt load is already very high.  In the case of Japan, it’s going to be a wipe out.  I have written about these things in more detail here and here. 
  • When asked the specific question of whether Germany can bail out Europe, Bass was adamant: No Way.  Germany has not recapitalized its banks like the US and UK have.  While people currently consider them the economic powerhouses of Europe, both Germany and France will swirl the bowl with the rest of Euroland when the sovereign debts of the PIIGS begin to default to the degree that they eventually must.  Any bailouts that Germany provides from now on are just throwing good money after bad.  The PIIGS cannot have real austerity measures without riots and perhaps civil war.  Thus, each time they fail to implement austerity they will just ask for another bail out.  They will have no choice.
  • Global debt has gown from $80 trillion to $210 trillion in the past 9 years (12% annually).  During the same time, global GDP has only grown 4% annually.  Despite Keynesian promises that you can grow the economy sustain-ably using debt, debt is outpacing growth at an exponential pace.  Nobody can say when it will blow up, but you have to be sort of brain dead to believe that exponential aggregate debt growth can end up any way other than badly.
  • Bass compared the Japanese (and by extension the global) sovereign situation to Bernie Madoff’s Ponzi scheme.  It will collapse when there are more people exiting the debt market than entering it.  Japan currently spends 50% of tax income on debt service alone.  Half of that amount is spent on interest payments.  If Japan’s interest rates move up by a measly 2% then its debt service costs will exceed its tax revenue income.  Think they can just raise taxes to make up for shortfalls?  Think again.  This is at a time of population reduction due to their baby boomers dying off when there are not enough young people to replace them.  Japan will eventually default on its debt because math will not allow any other outcome.
  • Bass pointed out that Italy was thought to be doing great and then a 1% rise in interest rates sent the country into a financial crisis.  In other words, things appear to be OK until they suddenly collapse. 
    • I wrote about the exponential nature of these collapses here.  In short, the damage has been done slowly over a period of time but people only figure it out at the very end (as in the case of Madoff) and that’s when everyone runs for the exits in panic.  Anyone who doesn’t run away gets left holding an empty bag in a Ponzi scheme.  Very few people understand even today that fiat currency and fractional reserve banking have created a global debt Ponzi that must collapse at some point.  At some point everyone will understand and they will all try to get out of the markets at the same time.  Many will lose everything.  The eventual collapse of the debt Ponzi is mathematically guaranteed.  There is no saving it.  People who let other people hold their retirement funds will be the worst hit IMO.  Smart people will lay hands on their own money whatever it takes.  Any penalties paid today will seem cheap compared to the haircuts that are bound to happen later on.
  • Bass recommends that everyone invest in “guns and gold”.  He says that the US and Europe have created 6 trillion dollars out of thin air since the crisis began.  As a result he wonders why anyone would want to own paper currency.  As for guns, he suggests that people look back into history.  When people rack up this much debt and it results in default, it generally ruptures the social fabric and civil unrest is the likely result.
As an aside, Bass recently diversified his fund into nickels to the tune of $1,000,000.  I guess I was not far wrong when I seriously suggested that exact strategy back in March of this year for the same reasons he stated.

Thursday, November 17, 2011

It's the debt, stupid.

The Eurozone is toast.  It’s game over.   Despite all of the posturing and promises and threats, interest on Greek 1 year bonds is now well over 250%.  As in 10x the rate of an individual consumer credit card for someone with questionable credit.  Or to think of it in the simplest terms, invest $10,000 today and hold it 
 for 6.5 months and the Greek government promises to pay you $10,000 in interest AND still owe you your initial 10k.  In other words, loan sharking rates.  Or, more to the point, the type of interest rate that you would have to charge a deadbeat based on the very likely chance that he will default on the loan.  Greek debt is clearly a form of economic arsenic.  Touch it and you die.  Greece can’t afford to pay those rates.  It also cannot afford to pay off the principal.  It must roll over debt.  1 year bonds must be rolled over each year or the principal must be paid off (which there is no money to do).

Now, for preexisting debt, the rate has nothing to do with Greece.  What it really means is that the street value of the bonds that Greece already sold has tanked.  Greece got the cash and investors got screwed.  The initial interest rate that was offered by Greece was probably well under 10% for these and that never changes.  But if the lower street prices for the bonds means I can now buy (from existing bondholders/suckers) 10x the number of bonds than I used to be able to do for a given amount of money, it means that I will collect 10x the interest relative to my invested capital and so the interest rate to me is now 100%.  Or in the case of Greek bonds, 267%.  Where interest rates do matter to the Greeks is when it comes time to roll over that 1 year debt.  After having gotten burned there will no longer be any buyers at 10%.  They will all want the street interest rate of 250+ %.  Greece cannot even begin to offer bonds at that rate and so Greece is effectively locked out of the credit markets.  If the European Central Bank (ECB) wants to loan them money then fine, but the ECB is backpedaling on the whole “lender of last resort” mandate.  The only other recourse is some form of default and there really is no such thing as a little default.  If you are going to default, go big.  Throw in the kitchen sink.  Default on everything and start over.

Of course when Greece defaults then anyone it owed money to will be left holding an empty bag.  Those creditors who claimed to be rich because deadbeats owed them money will get Madoffed.  One day their account statements will show that they are rich.  The next day the account statements will simply stop coming forever.  What cannot be repaid will not be repaid.  Of course, if Greece gets away with stiffing its creditors, why shouldn’t Spain, Italy, Portugal, and a host of other debtor nations including eventually the USA.  As Mish points out, the interest rates on the other PIIGS are rising.  They have entered the debt interest rate spiral.  Interestingly, France’s name is in that list as well.  As I have written many times, France and Germany are no better off than the PIIGS.  The regional relative prosperity of France and Germany was driven by “selling” stuff on credit to people from other countries who could not afford to buy it.  Enabling that credit was the only purpose of the EU and the Euro.  When they get stiffed for the debt then they will be nearly as poor as anyone else and the EU will fall apart.

Meanwhile, Obama is blathering on about the Eurozone lacking the “political will” to fix the problems: "Until we put in place a concrete plan and structure that sends a clear signal to the markets that Europe is standing behind the euro and will do what it takes, we are going to continue to see the kinds of market turmoil we saw".  Earth to Obama: you can’t fix an insolvency problem by sheer force of will, whether political or otherwise.  Who do you think you are, the Green Lantern?  This is not a comic book where a guy in a green, dollar colored suit can change anything he wants to simply by force of will.  That is just rhetoric from the elite who sold us down the river in the great debt Ponzi a long time ago.  It falls into the same category as wishing upon a star and the American Dream.  Those of you who have done any study on the monetary elite will understand those references.  The rest of you won’t think much of it even though these things have been controlling our lives for decades.  But to the point, the old “bazooka” in the pocket threat is now the laughing stock.  The markets are no longer being herded around by the will of the elite.  The market has run out of suckers to fleece.

And so in light of this, the con men are coming clean as I predicted they would.  I wrote,” Unfortunately for the con men, organized crime rings are generally brought down from within, not from external forces.  The con men and criminals take to infighting about who owns the right to fleece the people.  The numbers of con men grow and grow until there is not enough fat on the sheeple to feed all the wolves and then the wolves start infighting.  Eventually some of them start telling on the other ones and the whole thing unravels.”

They aren’t beginning to admit the truth because they feel guilty but rather as a shield against blame that they know is coming when the whole debt Ponzi just collapses.  They want plausible deniability.  They want to identify with the victims and to have the victims thank them for their honesty.  Of course this is only happening after the damage is done.  When the con men were rolling in the easy debt based money there was no negative talk or truth telling.  It was strictly taboo and anyone like Ron Paul who had the guts to tell the truth was labeled whacky or odd.

In the most recent Con Man Confession, Bond King Bill Gross of PIMCO states that “we’ve discovered that debt driven growth is a flawed business model when financial markets no longer have an appetite for it”.  So, Bill, it was a good and true business model as long as there were suckers willing to lend but when all the suckers got fleeced and the lending dried up it suddenly because a bad “business model”?  No Bill, it was ALWAYS a bad business model.  In fact it was never any kind of “business model” at all.  It was a debt Ponzi from day frigging one.  You knew it.  You ALL knew it.  Greenspan, Bernanke, Paulson, Goldman Sachs, JP Morgan… ALL of “you”.  You knew how it must eventually end yet you sold us down the debt Ponzi river anyway in order to make a buck.  You and people like you have betrayed the United States.  You belong with Greenspan and Bernanke with the title of traitor.  You are all part of an elite organized crime syndicate which has taken over the world using your scam ridden money supply tricks which are all powered at their root by the fraudulent concepts of fiat currency and fractional (fictional) reserve banking.  You all deserve the punishment of traitors.  And of course you already know that which is why you are now trying to feign ignorance.

Sorry Bill, you can’t fool all the people all the time and sometimes you just can’t fool anyone.  Keep making up the fairy tale stories about how you are just figuring all of this out along with the rest of us.  Keep trying to convince everyone that you have just been a misguided old fool all this time while sitting on your Bond King throne.  That story is not going to fly at the end of the day.  You will be better off finding a non extradition country to go create a new “just in case it all unravels” residence in just like GW Bush did back in 2006.

Sunday, November 13, 2011

Open letter to the good people of Italy.

Dear Hard Working People of Italy,

It's time for your wake up call.  Getting rid of one puppet playboy con man "leader" and replacing him with an EU insider like Mario Monti is not going to solve anything.   Sure, Berlusconi was a long time public embarrassment.  He was sort of a cross between the USA's Clinton and Obama (be thankful there was no Bush component to him!).  Sure, it was frustrating as well as an assault on the intelligence of the average Italian citizen to know that he even got to power in the first place.  Who knows how this happens but it happens globally.  Only buffoons and scammers seem to get ahead in the world of politics (ever wonder why that is?  THINK!) so don't feel too badly about it.

But Berlusconi's exit and Monti's entrance is no cause for celebration.  You've simply replaced one type of political scumbag with another.  Monti is an EU company man.  He has been placed there to try to make sure you pay the debt that you have been foolish enough to take on.  Again, don't feel too badly about having been swindled into taking on big debt, the USA leads the way in the foolishness here.  Debt is the natural outcome of a fraudulent money supply made up of fiat currency and fractional reserve lending.  It allows you to consume today based on future earnings.  It makes you think you are getting something special.  But all you are getting is the shaft because when everyone has easy money to buy things it pushes the prices upward essentially devaluing your labor.  If find that you work harder but end up with less, that is the reason for it.

For anyone who thinks Monti is going to be able to  "Lead Italy Out of Debt Crisis", please tell me, how will he do this?  Italy is like any other country, it has more debt than it can ever pay back.  Again, this is not the fault of the last government but rather the natural outcome of a fraudulent money supply based on fiat currency and fractional reserve lending.  So how is Monti going to fix anything?  Does he have a trillion Euros in hiding that nobody knows about with which he can pay the debt?  Of course not.  He was not installed to do anything for you, the people.  He was installed by the bankers and for the sake of the bankers.  Don't forget that!  There is nothing he can do for you but there is a lot that he will do *to* you if you don't watch him very closely.  He will sell you down the river at any chance he gets.  That is his one and only job despite anything that he might say.

Here is the truth of the matter.  You have national debts that cannot be repaid.  It is a sham to believe that you can repay them but many parasites make good livings keeping that sham alive.  Eventually the debt will collapse and eventually the Eurozone will collapse because it was a scam from day 1.   The ONLY purpose of the EU was to enable the offering of credit to other nations so that the industrial producers of Europe (Germany and France) would have more customers to sell their production to.  Without the EU and the Euro and the lines of credit that it allowed German and French bankers to set up to people who obviously could not afford to buy their stuff otherwise, German and French growth would have been very limited.  But now that the con is falling apart, the Germans and the French no longer worry about growth, they worry about collecting payments on what they have already loaned.  And so they installed their man Monti to facilitate that. 

At this point it is clearly in Italy's best interest to just call the whole thing a scam, repudiate the debt and then return to your own national currency.  But instead of letting new con men like Monti set that up, return to the old ways, the gold ways.  Back the New Lira with gold.  Make the backing public.  Make the Italian gold publicly auditable and restrict the printing of paper money in accordance with some intelligent, predictable, auditable PUBLICLY UNDERSTOOD formula that ties it to the national gold reserves.  This will force Italians to live within their means and it will push honesty back into all aspects of your society.  I'm sure you know that many sellers on EBay will not even ship to Italy these days because the mail system is corrupt and many packages are "lost" along the way.  It is fiat currency and fractional reserve lending which promote this type of corruption because people know they are not getting what they worked for and so they seek other means to attain it.  

This debt crisis might seem to many as a catastrophe; a crisis.  I contend that it is actually a healing, a return to sanity and an opportunity to drive real, long term prosperity into your country.  Italy could transform itself into a world leader by embracing gold backed currency which is managed openly and honestly.  The banksters will not like this because it will mean they can no longer sneak outsized profits out the back door.  Politicians will not like it either because they are owned by the banksters.  You need to find your own local version of Ron Paul and elect him into the lead role and throw the EU-installed company shill out into the street.  Of course, none of this is specific to Italy.  It is as true for the USA as well.  But the world has to start somewhere.

In bocca al lupo, come a trovare la strada in avanti.

Wednesday, November 9, 2011

Conditions may be ripe for a global market collapse.

I will be the first to say that nobody can predict the future.  I also respect the fact that some people are pretty fair at predicting direction while others are pretty good at predicting the timing but pretty much nobody gets them both right at the same time.  But since that doesn't stop anyone else from flapping their virtual gums, why should I be held to a higher standard?

I like watching stock charts in the same way that a hunter watches herd movements.  It is not an absolute predictor of the next step but it can give a good idea.  Right now the charts are perfectly set up for a major 3rd wave Elliott style collapse.  I'm not saying that it must happen right here and right now but the odds do
favor a mass "run on the markets".  5 waves down finished the 1st wave of this sequence and we might just have finished the 2nd wave retracement.  The result is a very ominous declining double top.  A break out of the downward sloping olive line would make me reconsider but it seems to me that all the unkeepable promises in the world have only kept the Ponzi plate spinning.  No real progress has happened and in fact Bernanke has signaled that he is out of gas in his helicopter.  Besides, the fuel source for the debt Ponzi which was, of course, debt, is beginning to be seen as a bad thing by the American voter.  All of a sudden, deficits are beginning to matter again.  It means that buying our way out of this hole with more debt is going to be impossible.  People are tired of living in fear and they are starting (very early still, but starting nonetheless) to face the debt down.

Combine that with the fundamentals and you still can't guarantee anything, but your odds of being right go way, way up.  And so the fundamentals are that a corrupt money supply consisting of fiat currency (aka debt money) and fractional reserve banking (aka credit/debt) have created a global debt Ponzi which must either continue to grow or it will deflate rapidly.  The marginal places will get hit the first and the worst which is why the Eurozone looks more like a battle zone and everyone is preparing for a Greek exit from the common currency.  Of course, when they do that, their debt to others will collapse and never be paid back.  I don't mean part of it won't get paid back.  I mean that virtually none of it will be repaid.  At least not without war.

Picking up speed in a very Greek like direction now are Italy, Spain and Portugal.  When they roll over, and they will, then France and Germany will also roll over.  How rich are you really if your debt slave defaults?  How can you make payments on all those factories if those who you were "selling" the goods to flip you the bird and tell you to have a nice day.  And then there is China.  What a massive real estate bubble they have.  I predict that China will probably have the worst bout of civil unrest and violence of any affected country.  I expect it to get pretty bad in some places over there.  It's one thing to be lied to like we were in the states.  But in China they were darned near tied down and then lied to.  Even those who did not believe the lies could not escape the system.  Well, maybe a relative few at the top.  In the US people will get screwed as well but they will have only themselves to blame for going along with the scam.  In China it wasn't a matter of going along.  It was a matter of survival and it changed the way people treated each other.  This is why I suspect their anger will be far greater: they were forced to believe in the system.  When the system fails them as it must, there will be blood.  Unfortunately, the export-driven Chinese economy seems to be rolling over right now.

The normal mechanisms for trying to soften the crash are money printing, capital controls, price and wage freezes, etc.   All of these are likely to benefit gold holders.  Right now there is a global circular chain of currency debasement and collapse happening.  Look at Greece for example.  Anyone there who hasn't moved his entire savings into gold is a complete fool.  Greece is going to leave the Euro one way or another because it can't pay its Euro denominated debt.  When that happens its credit will go to $hit and its money will likely be devalued big time: 50-80% with a week or two of the Exit Event.  Same happened to Iceland when it defaulted.  Gold is the only safe haven for them.  There is virtually no other way it can turn out.  People of Greece, are you listening?  Get your a$$es down to the gold broker and buy metal!!  People will begin to learn this as the serial defaults continue not only to occur, but to get bigger with time.  People in the most marginal countries will come to undertand that you either get into gold or get wiped out.  The US will have its future shocks as well and they could be quite significant, but not as bad as the most marginal players in the world.

When IBM and McDonald's and Apple shares begin to tumble with big gaps downward then it is the sign that the big money is bailing on the market.  They are now canaries in a stock market collapse coal mine.  A rapid collapse could easily follow when these untouchable stocks begin to get sold off to pay the margin calls on the weaker stocks.  Each time a country defaults on it debt, gold should get a shot in the arm because if you can't trust sovereign debt then the only real haven left has to be gold.  Gold is old money.  How old? Nasa suggests that it is born in neutron stars. Whether or not that is true, we do know for sure that it is never as a result of government decree.  Gold was among the first things on record to be used as money.  It will likely be among the last things standing as money.

Monday, November 7, 2011

Swiss National (central) Bank proves (again) that there is no safe fiat currency

It's almost a waste of time to go into all of the daily news regarding Germany, France and the PIIGS.  It has devolved into one predictable can kicking action after the next.  The collapse is coming which will be followed by the public anger stage, the civil unrest stage, the "contagion" stage, the finger pointing stage, etc.  There is no way out.  Every "fix" is nothing more than an attempt to issue more credit to already insolvent countries.  What cannot be paid back will not be paid back and there is no such thing as a little default.  If you are going to default, go big.  Default everything.  Throw in the kitchen sink.  This is what is going to happen in Euroland and elsewhere.  As I have often written, no scam lasts forever and a debt Ponzi is absolutely a scam.  The marginal players will get whacked the first and the worst.  It will be one for the history books and I would not be surprised if it resulted in war at some point.

While I'm waiting for something that can truly be called a catalyst for that sequence to go to the next level, I do want to point out again that the Swiss Franc, supposedly a "good" fiat currency, is turning out to be no better than anything else.  The Swiss Central Bank is promising to debase it yet again should it remain too strong relative to other worthless fiat currencies in the world.  The message is clear: there is no such thing as beneficial diversification from one fiat currency into another; all of them are crap waiting to hit the fan.  The reason is simple: fiat currency and fractional reserve banking (which, if you haven't made the connection yet, is a placeholder for credit of all kinds) have led economies to rely on exports.  When the currency gets too strong, export revenues fall.  Simple as that.  When export revenues fall, GDP falls, taxation falls, jobs fall, infrastructure collapses, safety nets collapse and then people starve and riot.  That's the inescapable math of it.  Ergo, the global race to debase.  The US is doing it.  The Japanese are doing it.  Euroland is doing it and even the supposedly "it's different with us" Swiss are doing it.  They have no choice because they are all painted into the same corner. 

The only safe haven from all of this is gold and perhaps some silver.  Governments can (and do) manipulate these money metals over the short and medium term to try to make them appear as risky assets.  But look around you: central banks are buying gold and calling their gold home from foreign vaults.  Bailouts in the trillions?  No problem!  As long as they are all paid for with fake, debt based fiat currency!  But request that payment for bailouts be done with gold and central banks will show you the door as Germany recently did to the G20.   Only an idiot will spend his gold on anything as long as other people are spending worthless paper on those same things and getting away with it.

A lot of people that I talk to are still incredulous when I explain to them the basics of gold.  You can spot the folks who really haven't done much thinking on the subject because they will be the ones saying "you can't eat gold".  I guess they read this is the mind-washing financial "news" along with the one liner that a gold standard is a "barbarous relic" blah, blah, blah.  People need to slow down a bit and consider that you can't eat fiat currency either yet everyone has absolutely bet their entire future on it.  To someone like me, this is a very scary thought.  Trusting in fiat currency is tantamount to trusting in greasy politicians and central bankers whose only goal is to remain in power without doing an honest day's work.  I'm still searching for the words that will be effective in explaining this to those who are still in The Matrix but the bottom line is that anyone who trusts in paper money is trusting their retirement to con men and liars.

Let me remind people that money was invented in order to store one's excess labor in a form that will not rot, deteriorate or go out of style.  The goal of this was to be able to work hard today and be able to save for a time when you are too old to work.  If there was no money, people would be storing their long term wealth in stores of dry goods, clothing, equipment and the like.  But if you get flooded or get forced out of your house by conflicts, you can't take all of this with you and so you lose your wealth or you have to sell it for a fraction of its worth. 

We've been there in the past as a people.  It was clear that we needed some small, easily divisible, high value per weight and size commodity token that is universally recognized as having value and easily exchanged that could serve as a marker for stored wealth.  By design, this token should be something that cannot be eaten because doing so would rapidly change the supply of it and thus its value (according to the laws of supply and demand).  I hope this point is not lost on people who believe that the inability to eat gold should negatively affect its value.  Anything could work as money as long as it cannot be easily acquired without doing any work to get it (and it passes a whole litany of other tests) but over thousands of years the people of the world have always selected gold as the best, most trusted form of money.  As JP Morgan said, Gold is money and everything else is credit.

Sunday, October 30, 2011

EU Elite to the People: Anoint us as Financial Kings and Dictators or Perish

As the onion of debt has been getting unpeeled in Euroland, the measures to combat it have escalated.  The trend is clear: accounting rules have been discarded, private banks have been bailed out with public funds, sovereignty has been diminished and power has been concentrated into the hands of fewer people.  With all that has gone on so far, the problems have not gone away and in fact the flame is getting nearer to the boiling fat.  One wrong move and the whole EU could go up in a fire ball.

Instead of letting the debt Ponzi unravel with bad consequences when it was first discovered, the EU "leaders" (con men) have kicked the can down the road again and again thus ensuring that the eventual collapse will not be just bad, it will be a disaster.  The thought that one can fix a debt problem with more debt is ridiculous but that has been the "solution" over and over again.  The people have been putting up with this because at first they believed that government actually knew how to fix things.  But over time I think that has ceased to be the case.  Now the people are simply afraid to think about what the consequences will be and so they keep agreeing to more and more can-kicking.

But it's now getting to the point of absurdity that I think most people will realize that they are damned if they do and damned if they don't.  There is no longer any possibility of escape and in fact the potential for any kind of a landing other than a hard crash has been off the table for some time now.  But it can get worse.  It can always get worse.  Here is the face of worse: the ESM bailout treaty.  In short, the Euro-Elite are now suggesting that they either be made a new type of royalty by law or the whole debt Ponzi will collapse.  Royalty might be the wrong words.  This is more like a financial dictatorship.  The Euro Dictator will:
  • Have immediate and unlimited access to cash from all member nations upon demand.
  • Be able to sue anyone who doesn't comply.
  • Be completely above any scrutiny.
    • No audits.
    • No ability to seize papers normally afforded to governments trying to shut down organized crime.
  • Be completely above any form of prosecution
    • The implication is that this refers to prosecution regarding financial stuff but as soon as any Euro-Elite gets implicated in other crimes they will claim that they are immune from that prosecution as well because it is only being used as a way to circumvent their financial immunity.
This is so arrogant and brazen as to be something out of a fantasy book instead of being real life. What kind of people would agree to something like this?
  • Sleeping, unconcerned, unaware people.  This would have been my top choice a few years ago but I think it's less likely anymore.  That the video exists and decodes the legal jargon into such clear terms of financial dictatorship is proof that people are awake and looking at these things.
  • People who cling to the foolish hope that their elected leaders are honest and trustworthy and that they know what they are doing instead of the reality that they are in it to win it for themselves.  I think a lot of people are in this stage of denial.  Kubler-Ross 101.
  • Scared people who don't know what else to do.  Unfortunately, I think this is where a lot of people find themselves today.  Through their own ignorance about money, credit and history, they laughed at the likes of statesmen such as Ron Paul (or the Euro-versions of him), thought his ideas were "kooky" when in fact he was right about everything.  Their pride will not allow them to admit how stupid they have been in listening to dirt bag statists and moneymen.  Now they see no option but to ride the snake to wherever it takes them.
Anyone who agrees to this new scam is a complete a$$.
Anyone who sits by complacently and watches it become the law of Euroland will get the government they truly deserve.
Anyone who does not fight against it by all means will become a slave to the new financial dictatorship.

Euroland: don't be afraid of the collapse.  It will happen no matter what you do so embrace it and work through it with your family, friends and neighbors.  It will be over within a couple of years if you just take the bull by the horns.  Don't count on corrupt government and their cronies to save you because they cannot and will not do that.  They are only saving themselves and to do that they must dig a bigger hole for you and yours.  Don't embrace more scammery in a foolish attempt to escape punishment for the scammery you already let happen.  Take responsibility for your own personal past complacency which allowed it all to happen as if it didn't matter.  Rise up and put these moneymen and elitists down as you would a rabid dog.

Figuratively speaking of course.

Saturday, October 29, 2011

Deflation now but some day inflation. Big inflation.

We are still in the throes of deflation but deflation never lasts forever.  At some point the inflation will come.  It must come.  And when it does come, it will come big.  How big?  I think Addison Wiggins has done a good job of explaining the potential in his free online slide presentation which is presented in a narrated video style format.

Addison Wiggins is someone that I have read and listened to for years.  He "gets" most of the problems that the US and the world is facing today.  I have subscribed to his free email, "The Daily Reckoning", I have read his book, "Empire of Debt" and I went to the public showing of his moving "IOUSA".  He is an excellent resource and his information helps fill in many pieces of the big jigsaw of understanding.

Smart people will take advantage of the free history training provided by his recent video.  Yes, it's a bit long winded.  Yes, it's really a sales tool for things mentioned at the end of the video (paid subscriptions to his recurring publications).  He also provides "suggestions" as to particular financial services which can save you from bad times.  As smart and perhaps as well intentioned as he is, let's face it, he's gone to all this trouble in order to sell you something.  His ability to pay his mortgage, feed himself, etc. depends on selling you these things and so he must sell them.  One of the advantages of being an uncompensated blogger (see any ads on my blog??) is that I can say whatever I want to say whenever I want to.  Nobody owns my words but me and I lose nothing for telling the plain truth as I see it.

My advice is to invest the time (30-40 minutes) it takes to watch his video but to just cut it off when Addison begins to talk about how to protect yourself because all of his suggestions are really just the sales pitch.  Your goal is to learn something without swallowing the sales hook.  I'm not saying that his suggestions must turn out badly and in fact some of the basic advice makes sense.  For example his first suggestion is to "make sure you live and work in someplace safe".   Well, that's pretty basic advice.  Have you noticed that even State Farm Insurance Company is now telling you exactly that in their latest commercials? 

Addison does expand on this to explain what safety is; he suggests you avoid states that have made significant unkeepable promises.  If I had to summarize his position it would be that broken promises (especially those made by trusted government agencies) will be the fuel of civil disobedience.  I agree with this.  As part of his sales hook he will share his research of where to move to avoid some of this.  The only problem is that I wonder if there are such places.  Even states which are touted to be better off then others (i.e. Texas vs. California for example) may have hidden, off balance sheet problems which would only surface after things get bad elsewhere.  One look at Rick Perry's insincere, elitist, smiling face tells me that things are not as rosy in TX as they appear.  He's just another disingenuous stuffed shirt looking to cash in on the ignorance of the people.

Addison's next suggestion is to move your money out of harm's way.  Sounds great, huh? Addison suggests moving money into overseas asset storage or into "underground banking" suggesting that risk free investing is possible.  His testimonials focus on people touting their "investment" gains as if a bank is a way of investing as opposed to just being a way to store (save) what you earned. Since I'm not trying to sell you anything it's easy for me to say: all of these are red flags for me.  Where will your money be safer in a crisis: in your hands or in the hands of a stranger?  Ummm, I'll bet on myself, thank you.  I'm pretty sure I won't rip myself off when the $hit hits the fan and I'm also sure that if all the bad things happen that are pointed out in Addison's video that the US will not be the only place in major trouble.  The whole world will be in trouble and there will be no safe havens.  But hey, it's hard for Addison to make money selling floor safes, food vaults and submachine guns which are probably the best way to ride out a global financial meltdown.

I could go on but out of respect for Addison I will say, just ignore the 2nd half of the video and learn what you can from the first half.  As you consider his video, consider these things as well:
  • The US is at the top of the debt Ponzi.  Our position there will tumble for sure over time but we will be the last to get hit.  Europe will collapse, China (what a real estate bubble!) will collapse, Japan (debt:GDP 200+:1!) will collapse and South America will collapse before we do.  Why?  Because they have our debt notes and we have the physical goods that we traded for them.  That is not going to change any time soon.  Our government has already shown that when foreigners try to bring their dollar savings back into the states to buy assets like oil companies or sea ports, the US government steps in and blocks the sale in the name of national security.  We will only see more of this protectionism.
  • Any "profits" you make on any of his suggestions will be taken by the government in the form of taxes and inflation.  The best way to protect your stored labor (i.e. your savings) is to store it in universal money (gold and silver bullion coins) in your own secure, hidden facility.  It's just too easy to do this to consider other risk strategies that will all be monitored and probably criminalized by government as it fights to retain its current level of power and consumption by sucking the life out of the citizens (who it considers to be its property as a rancher would consider its livestock).  That's right, the government believes that it owns you and that you can be "monetized" in any way that it likes.  This is not so obvious perhaps right now but when the crap hits the fan the masses will finally figure it out.  While we were sleeping and allowing government to grow out of proportion, it stopped being useful flesh in the body and instead became an aggressive cancer which is now intertwined into everything such that it cannot be easily extricated without killing the patient.
  • The US military is ridiculously over funded.  Back in WW2, tiny little Germany in cahoots with tiny little Japan were considered a real threat for taking over the world.  When the American people begin to figure out that the America Dream was exactly that, a credit induced illusion, then the appetite for war as a mechanism for staying on top will likely increase.  While many in the world wallow around in knee deep mud in order to scrape a living from the Earth (and are grateful for it), Americans have been taught that our lives and labor are worth more than other people's.  It's a nice illusion if you are on the right side of it but when the illusion can no longer be perpetuated using fake money there is a better than even chance that it will be backed up by military force.  The option to "Go Roman" on the world has been left wide open as a means for retaining US global dominance.  The US military will one day be faced with two choices: either pay for your own existence somehow (i.e. conquest and plundering) or be downsized massively because Americans cannot afford to pay the cost of our own military.  I can't say which route will be taken.  Right now I see it as a coin toss in terms of odds.
  • No matter what you do, learn from history as it tends to repeat itself or at least to rhyme with the past.  People today are the same as people back in Roman times or at any other time in recorded history.  If the herd reacted a certain way before then the odds are high that similar stimulus will result in a similar reaction in the future.  Never forget that while the people of the world have already proven that we can produce enough goods in order to satisfy the living needs of everyone currently alive, they have only put in the effort to do so because they were promised things which they can mathematically never receive.  As long as money continues to be the motivation for production and as long as the money supply continues to be fraudulent we will always be at risk that the producers of the world will simply stop producing (something like a global strike if you will) and that the store shelves can become empty in a matter of 3-4 days.  This can happen.  It has happened.  It will likely happen again.  Make sure you have your own stock of canned and dry goods today while prices are cheap and people are not killing each other in order to get that last can of beans on the shelf.  You can put up with almost anything if you have food to eat and bullets to protect yourself from those who didn't have the brains or the sense to stock up like you did.
If all of the above just sounds too "gloomy" to be true then you are probably in denial as Addison's video (and many of my past writings) predicted would happen.  The Kubler-Ross grief cycle will not be denied.  It took me a couple of years to get though it to the point where I can see and think with clarity.  Most people will get a crash course in it over the coming years and it could occur much sooner.  Look at what is happening in the world:
  • Greek sovereign debt is now universally agreed to be worth only 50% of face value.  IMO that is still way too high.  It will lose 90% or more before the house of cards has finished collapsing.  Some financial authorities are trying to claim that the 50% default is not a default but the US credit ratings agencies which are trying to rebuild their massively ruined reputations are calling bull$hit on this obvious attempt to sweep default under the rug.
  • Spain, Portugal, Italy are now on deck and they will want their 50% off sale too.  This is 100% guaranteed because they cannot pay back 100% of the debt.  In fact they will not be able to pay back any of it.  High unemployment will guarantee inability to repay.  All of it will eventually default as the Eurozone effectively breaks up.
  • Chinese real estate bubble is rolling over with gusto.  Expect big civil unrest as a lot of not-so-humble Chinese suckers finally realize they have been played.
  • The middle east is in shambles with obvious chaos, riots, mass public murder by the authorities shooting into demonstrating crowds, despots being dragged into the streets and executed, you name it.  The aftermath of the serial takedowns of US-installed government puppets in the middle east is going to be a big deal and it will likely be more anti-US than ever before because it is clear that the US has been meddling in everyone's business over there for decades.  As Ron Paul likes to remind us, the accepted CIA term for what happens after the meddling eventually falls apart is known as "Blow Back".  Idiots who did not listen to Ron Paul will be feeling the effects of middle east blow back for decades to come.
  • The Canadian housing bubble is going to roll over big time and so will the Aussie housing bubble. 
These bubbles were driven by profits from exporting commodities to China which itself was building a huge housing bubble.  Canada and Australia will follow Bubble-China over the cliff.  The chart at left shows how big the Canadian housing bubble is in aggregate.  Clearly, averages can be misleading because it combines sky high property values in Toronto with lower prices in other areas but at the end of the day the only real thing to care about is that it was all funded by banks.  When the debt goes bad, and it will because it must, the Canadian (and Australian) banks will be saddled with tons of bad debt that they have already determined will be dumped onto the back of the government (i.e. the taxpayers).  The whole world is one big debt Ponzi.  There are no "safe" places.  There is only self-reliance and reliance on family and friends which is, after all, how it was always meant to be before government took over using the corrupt tools of fiat currency and fractional reserve lending.

Sunday, October 23, 2011

Why are photovoltaic solar companies experiencing a Greater Depression?

Despite the fact that it is only a small part of the future solution for global energy, I believe that the long term future for photovoltaic solar technology is bright.  It has several things going for it:
  • Peak oil is real although will take longer to be fully felt because the US has been sandbagging its reserves. 
  • Oil extraction keeps getting more expensive.  Solar energy keeps getting cheaper as panel efficiency continues to climb.
  • Solar PV energy can be captured onsite instead of having to rely on government and government backed energy companies to keep up on maintenance of central power generation and distribution at a time of falling revenues.  When the rolling blackouts become the norm, expect people to step up and pay up for local generation.
  • Installed PV solar farms need little maintenance, have no moving parts and they make no sound.  They can be put on the roofs of any structure whose primary purpose was to simply block the sun (carports, etc.)

So if all this is true, why have most solar plays crashed, many of them sitting at levels which are greater percentage losses from the top than the DJIA saw during the Great Depression?  I think there are several reasons for this:
  1. The price per watt for PV solar is still too high.  Oil prices have gone up in the past 10 years but the real cost of it has been masked by the use of debt to buy it.  At some point debt will no longer be accepted as a means of payment and then we will know what the true cost of oil is.
  2. Despite many people thinking that immediate inflation or hyperinflation is right around the corner, the unfolding collapse in credit is telling a different story.  The money supply is made up of the monetary base plus the outstanding credit (AKA debt) with credit being at least an order of magnitude larger component of the money supply than is the monetary base.  Thus, as credit evaporates from the economy, the overall money supply shrinks and that is deflationary. The Federal Reserve and all of the government have been combating deflation, not inflation.  Bernanke has been inflating the monetary base as much as he dare without setting off a panic but still wages and jobs are, in aggregate, flat or falling while an increasing number of cities are going bankrupt (see predictions from Meredith Whitney).  All you have to do is look at the plummeting price of copper to know that the inflationists are re-thinking their positions.  China has stockpiled commodities like there was no tomorrow and soon we will see the great Chinese real estate bubble collapse.  This will cause commodity prices to roll over big time.
  3. PV solars, being new, are the canaries in the deflation coal mine.  They are front runners.  They got hit first and they will bottom first. When the commodity crash has played out and the inflation finally does kick in (and it eventually will), the surviving (key word is surviving) PV solars will be among the greatest beneficiaries. 
  4. PV solars were artificially kicked into high gear by government.  Unfortunately, governments pay for things with debt.  As the debt game began to unravel globally, solars stopped getting subsidized.  Thus, their crash is worse than if government never got involved at all.  Government intervention made things great for gamblers and market timers but horrible for normal investors and the whole industry is now worse off than if government had just let the free markets run the show.  Government involvement distorts markets and crushes the free market feedback loop that is so necessary for stability.  Central planning is always and everywhere misguided and in many cases is nothing more than a scam.  Government scammers back industries with taxpayer money and loan guarantees and then invest in these things personally, generally through hedge funds which are told about the government backing in advance (AKA illegal insider trading).  With weight of government behind the investment, personal profits fly for the con men.  Of course, in times like we have right now, the investments can also blow up in the faces of the con men.
The coming deflation is likely going to be the story of the decade IMO.  Bernanke’s helicopter looks to be out of gas.  He now has to choose between letting the natural credit deflation play out or putting the Federal Reserve – which is a private bank contrary to what many believe – into real jeopardy.  He cannot have it both ways.  As Harry Dent said, the Fed is checkmated and it has to choose badness in one form or another (massive deflation and bankruptcy vs. massive inflation or even hyperinflation).  I believe that the fed will try to save itself by allowing deflation to occur.  It will likely get bad for people (unemployment, civil unrest, etc.) such that Congress finally shuts the Federal Reserve down (in some form or fashion to include the simple installation of puppets) and then goes on a money printing spree which eventually destroys the dollar.  We are talking years and years here not months and quarters.  This is, of course, assuming that nobody honest like Ron Paul wins the 2012 US Presidential election and that we are instead left to the devices of new con men like Romney, etc.

Given that I like Elliott Waves, I will call your attention to the fact that Elliott Wave International is having “free week” for people interested in commodities.  All you have to do is create a free account at elliottwave.com.  I want to call your attention to this chart from their Sept version of their Futures Junctures newsletter (normally a subscription resource but provided free to anyone during free week…). 
What’s interesting about this chart is that they are calling a top in the CCI (Continuous Commodities Index) based on the wave count (and other technical indicators).  They are doing this at a time when it’s becoming clear that China’s housing bust is likely getting very close.  Anyone who thought that China’s consumption would save the world is going to be very disappointed when they find out that China is nothing more than a debt Ponzi just like everyone else.  It could easily lead to a huge contraction in commodities, including silver and gold (I suggested that gold was due for a pullback in this post).  Perhaps the most important thing to look for should this predicted contraction occur would be if gold failed to contract with everything else (or contracted at a slower rate such that the ratio of gold to commodities was still climbing).  It would be good proof that the silent remonification of gold which I believe is happening is in fact happening.
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