AAPL looks like it is coming up against big resistance point

I generally don't post a lot concerning market timing but I do like to watch the herd movements through the eyes of the Elliott Wave principle.  Aligning charts with other trend changers like the coming collapse of the Eurozone can provide strong odds for gambling in the markets.  I've been watching Apple shares reach what looks like the 5th of a 5th wave here and I suspect a large pullback of at leat 100 points is coming very soon.  It could in fact be quite a bit larger of a pullback.  Right now, everyone thinks Apple is unbeatable but without the paranoia and drive and instinct of Steve Jobs at the helm I don't like Apple's chances of continuing this bull run in its stock.  I think sales could fall off quickly in the coming recession and then it would be left with a fairly high price to book of 4.69.  That is not cheap at all and the only way to continue receiving that premium is to show constant and significant growth.  All that has to happen for Apple shares to drop to 350 is for the growth to run out.



I doubt that AAPL will fall in a vacuum.  The Dow will probably have to fall as well.  I see that it is potentially set up for this with a slight declining double top.  A break through resistance in the red circle would reduce the odds of this TA model playing out but if that resistance level holds then we could see a very significant pull back from here.

The markets are not a good place for people who don't want to gamble right now.  A collapse back to the lows of 2009 or even further is far from impossible.

Mish: 10 Things to Expect in Europe.

Just a short post this time in which I wanted to point to Mish's 10 short term predictions for Europe.  You have to scroll all the way down to the bottom of the post to get to them.  They are not even the main topic of his post but I have reproduced them here:

Ten Things to Expect in Europe

1. More bickering
2. More strikes
3. More emergency meetings
4. More trade wars, especially between Spain and France
5. Tobin Tax will backfire in France
6. Missed budget estimates across the board
7. Missed growth estimates across the board
8. Deep and lengthy recession will affect entire global economy
9. Recession will include France and Germany contrary to popular belief
10. End of Sarkozy's political career

The one I want to call your attention to is highlighted in red.  The reason I think this is important is because it highlights something I have said for a long time which is that those pointing the economic finger are themselves little or no better off than those they would accuse, condemn and seek to vilify.  In fact, long before Mish wrote that, I wrote very clearly that France and Germany are no better off than the PIIGS.  That was in June of 2011, a time when everyone actually believed that Germany and France were actually in great shape if only the PIIGS would not be so reckless.  Unfortunately, that was and still is all just propaganda.  France and Germany remain in the same boat as those who they played their vendor finance export scam with (the PIIGS). 

In fact, once the shell game of who gets stuck with the losses on sovereign debt fully plays out I wonder greatly if France and Germany will be in even worse shape on some fronts because I know damned well that their big corporations borrowed money in order to ramp up production for the phantom customers like the PIIGS and anyone else who is running a trade deficit with them.  The scam is quite simple at the top level although the details get complex very quickly.  In short, industrialists wanted to make more profits but the citizens of their own countries did not want to consume more.  So they looked outside the country.  But exporting to these other countries seeking profit never went well in the past because the weaker countries would get in debt over their heads and have to inflate their way out of it.  This gave them low credit ratings that disallowed any intelligent bank from financing increased levels of consumption by them.

So the money-scammers got together and determined that if everyone was under the same currency then their "customers" couldn't inflate their way out of the debt.  In their minds, this made the customers more credit worthy.  Actually, they believed no such thing but it was great cover to get more loans to ramp up production for these new, better, more credit worthy customers.   And so for a period of time it appeared to work.  Germany would sell the PIIGS things they really didn't need (else they would have built the capacity to produce them internally).  PIIGS were just making promises to pay that they knew they would never keep.  And so it went on and on until the Keynesian Krisis was unavoidable.   And so now here we are, potentially on the brink of WW3 because of all the people who are about to be very badly affected by the economic whipsaw which is heading toward us.

These are the wages of Keynesian thinking.  These are the wages of fiat currency and fractional reserve banking.  In truth we should just all throw our hands up in the air and laugh at ourselves for our global stupidity and gullibility.  We should just declare a debt jubilee and start over, this time with an honest money supply.  Within just a few short years we would be on track as a civilization and better off than ever. 

But this is not going to happen because such a return to honesty would leave a lot of con men cut out of the new prosperity.  These greedy bastards would rather see the whole world go down in a fiery ball rather than just accept the fact that they never personally have done an honest day's work in their entire lives and that their only real skill is the art of the con.   For the sake of themselves they would sell the entire planet to the Devil, and happily so.  Strike that. "Would" is too generous; they ARE doing it.  These people are more dangerous than any commonly understood terrorist faction.  They are the bankers and the elite moneymen of the world.  They are the masters of the universe in their own minds.  They are the Greenspans and the Bernankes, and the Geithners and the CEOs and officers of Goldman Sachs and JP Morgan.  They are the corrupt politicians that support the banks and bail them out of all responsibility for the problems they caused.

Unfortunately, they are also we.  We let them get away with it even though they do it time and again.  We don't want to speak up, speak out or get involved.  We would rather have the luxury of letting other people consume their time, their lives and their energy fighting the evil.  We are too busy, too self important or simply too ignorant to see or care what's going on and where it will eventually take us.  ALL of us.  We the people of the world.

I have seen the real enemy and it is us.

George Soros: cowardly elitist running scared.

Deflation is starting to leave a mark on the global Military Industrial Complex (Eisenhower's buzz phrase for the unholy alliance between military, government, corporations and banks).  In a recent interview, Soros warned that the world was at risk of societal collapse and about the rise of evil.  For many, these will be seen as scary words since they are coming from a man who is so rich and powerful and connected.  The common logic is that men like this likely see and hear a heck of a lot more than the average guy on the street.

Unfortunately, Soros might end up being right about where we are headed.  In late November 2007 I finally figured out what was going on thanks to straight talk from people like Ron Paul, Mike Shedlock, Peter Schiff, Robert Prechter and a host of others who were in no way fooled by the babble coming from the con men running the show.  I began writing family first and then friends and then, starting a couple years ago, this blog.  It didn't take much research to figure out that civil unrest often results when the fraudulent scam of fiat currency and fractional reserve banking finally goes bust as it eventually always does.

But Soros, being an elitist moneyman and a card carrying co-conspirator of the con, wants to tell only half the story.  He basically says that if we don't "do something" to stop the collapse of the con that everyone will suffer the consequences.  He is basically telling us that his fraudulent con is too big to fail.  Unfortunately for him, it's waaaaaay too big and too corrupt to bail.  Soros and others like him are part of an organized global crime syndicate which use the fraudulent concepts of fiat currency and fractional reserve banking to steal from others the wealth produced by their hard work.  When the criminals overpower the victims and there is nobody left to fleece, how can the criminal organization remain intact?  Mathematically, it cannot.  This is why the scam is collapsing and for no other reason: all the patsies have been fleeced.  Easily fooled people are now getting very, very hard to come by.  You really can't con all of the people all of the time and at some point during the collapse of the scam, you can't con anyone.

In truth, people like Soros got us here in the first place.  They convinced the ignorant that true growth was possible using debt.  The fraudulent money supply was leveraged up by scum like him so that he could somehow amass wealth that was millions of times bigger than what the average working man could hope to achieve.  Thinking people have to ask themselves how this could possibly happen in a fair economy.  After all, under true capitalism, wealth is supposed to be derived from hard work and, even better, working hard at smart things.  But what has Soros done for society??  He sits in his big office and looks down on the rest of us as he wallows in piles of cash which he did not earn honestly.  Note that I am not accusing him of criminal behavior.  But it's easy to legally do dishonest things when the laws themselves have been bastardized from those set in place by the U.S. Constitution. 

Once gold and silver coins were displaced by paper money, it was a free-for-all for the likes of Soros.  They understood how to game the system.  They understood how to leverage up using massive credit.  The result was that they "earned" galactic-sized profits without doing nearly enough productive work to deserve them.  It is no different from a con man who works very, very  hard at ripping off his fellow man.  It is not fair to say that the con man doesn't work.  The con man is in fact very skilled after years of hard work perfecting his chosen trade.  But it is not productive work.  It is parasitic.  Everything that people like Soros has was taken from society via guile, sophistry, leverage and the art of the con.

People like Soros have gamed society and the economy.  They have stolen all the wealth out the back door and left instead a debt ridden house of cards from a moral and economic perspective.  All we have left is the appearance of normalcy and even that is beginning to collapse around the edges on the global stage.  Now the elitists are starting to figure out the real cost of their scam and they are beginning to fear for their own lives and for their ill-begotten gains.  They fear the revolt of the patsy.  They talk as if they are worried for us all but they are selfish a$$holes who were never concerned for anyone but themselves.  They grabbed money and power and control and now, at this late stage, they finally fear they have gone too far.

As the con crumbles, keep in mind that this is actually a return to honesty and truth.  The fact that it will be a painful transition does not change that fact.  Madoff victims could have deluded themselves about their wealth but it did not change the fact that their money was already gone.  They were patsies in the scam waiting (without knowing it) for the truth to be revealed.  The reveal could be delayed but not forever.  No scam ever lasted forever.  Soros is only warning us now because he wants to be thought of as a truth teller.  He hopes that this distraction will stop people from wanting to string him up in the streets.  Sorry George, the streets are waiting for you and for people like you.  The streets are patient.  The streets are not forgiving and they will not forget.  The hard street is not so easily distracted as you might have deluded yourself into believing.  If you are worried about your own evil history finally catching up with you then maybe it's time to find a spider hole someplace.  While you are at it, take your fellow con men like Greenspan and Bernanke with you in addition to present and past CEOs of Goldman Sachs.  You don't want to perish alone like Saddam and Ghadaffi, do you?

Here is the bottom line that everyone needs to figure out.  Debt based growth is a scam.  Government controlled economy is a scam because it is also debt based control.  There will always be evil men.  There will always be those who would rather work harder at screwing their fellow man than spending that same effort doing something productive and good.  As these people get ahead, they crowd out the honest players.  At some point, all that is left are the con men and scammers.  Everyone else has been pushed out or wiped out.  But you can't con a con and so their practice of making a living by scamming others must come to an end.  Fiat currency and fractional reserve banking are the stock in trade of the economic con man.  Without the ability to count on a dishonest money supply to be able to game, the scammers wither and die leaving the hard working and honest to again claim their rightful status in society.  Deflation is the collapse of the con.  Deflation is the revenge of the honest saver.  Deflation is good and is in fact the normal state of human economics.  Only the intervention of con men changes this, but they cannot fight nature forever.  There will always come a reversion to the mean.  We are on the brink of this right now.  Anyone who fears deflation and instead welcomes inflation is either a formal or unwitting agent of the con.

Misguided Mauldin: Staring Into The Abyss

As much as I like John Mauldin, he has consistently missed the boat with respect to the big picture.  Like most economists and analysts, he has his facts and figures down.  The only problem is that the high level analysis of these facts is wrong time and again.  I think this is because he, like most other analysts, sees things through Keynesian eyes even if they are not strictly Keynesians.  They, as a group, have not figured out that the whole global economy is nothing more than a corrupt debt Ponzi.  This is why Mauldin was talking about "Muddle Through" several years ago while I was sending him emails telling him how badly he was underestimating the damage that was coming.  I saw it coming (and still see a good deal more ahead) because I see things through the eyes of someone who has applied Prechter's "all one market" decline in addition to Prechter's view of mania theory.

With his most recent newsletter release, "Staring Into The Abyss", Mauldin has long abandoned any talk of "muddle through" but still he writes things that just completely miss the point.  He wrote the following commentary and I have added my responses in red:

Europe has three main problems.

1. A growing number of its countries are insolvent or close to it. It is increasingly likely that the only way forward is for defaults of some type, to lessen the burden of debt to a level where it can be dealt with and that will allow the countries the possibility of growth, which is the only real answer to the problems they face.

John, I hate to tell you,but all countries are actually insolvent.  Globally.  Even the ones who don't show a lot of debt on their books.  This is the natural consequence of a fraudulent global money supply consisting of fiat currency and credit (a proxy for fractional reserve banking).  What we are seeing is a rolling admission of insolvency.  Those who can cover up the fact are doing so.  Those who cannot are defaulting.  The more that default, the more will default.  The admitted losses have to be eaten by someone.  The big exporters claim to have lots of cash but it is all denominated in funny money.  As the currencies of the world serially default and people return to gold as the only real money that ever existed, how much wealth will really exist?  Is Germany rich because Greece, Spain, Portugal, etc. owe it money?  I think not!  Germany's prosperity is nothing more than a vendor finance scam whereby an exporter "sells" things to someone else not for money (gold) but for debt (fake money).  When the debt collapses, those who thought themselves rich will be as Madoff victims: rich on paper one day, paupers the next.  The whole world is infected with a fraudulent money supply and so the whole world will suffer the eventual collapse.

Furthermore, you suggest that defaults occur to lesson the level of debt with the goal of this being to allow more "growth".  What you really mean is growth through debt.  Forgive the debts in order to increase the credit worthiness of the debtor thus enabling him to borrow more again so that he can default on it again in the future.  A ridiculous number of people think this makes any sense at all and it's disconcerting to see someone as smart as you spewing this same gibberish.  If they can't afford to pay their debts they need to default and then not borrow again in the future.  Anything else is just supporting the boom-bust mentality that concentrates wealth from the workers into the hands of the moneymen while trampling on peoples freedoms and privacy (the latter being part and parcel of the police state needed to control the angry masses who got screwed by the boom-bust con).

2. Because of growing fears of multiple defaults (just Greece would be bad enough!) most of the banks in Europe are seen to be insolvent and in need of hundreds of billions of euros of new capital. The interbank market in Europe is in a shambles, and banks park their cash with the ECB, at a lower rate of return, as that is the only institution they trust. They clearly do not trust each other. As an aside, I heard from many sources while I was Hong Kong and Singapore, meeting with readers and friends, that European banks (especially French) are cutting back on their trade lending, which is making normal commerce more difficult. Didn't we just go through that in 2008?

Growing fears???   How about mathematical certainties!!!  None of the "fixes" suggested actually fix anything.  All they do is restructure the existing debt and extend it forever.  Nobody is going to accept that.   No new generation is going to buckle under and work their whole lives paying off the debts of the dying generation.  Because of the growing realization of these truths, there are no more good bets for lenders to make and so they are looking at how to reduce their loan portfolios.  The Keynesian bull$hit about using new debt to "outgrow" existing debt and debt interest payments is proving to be exactly what the Austrian school has always claimed it to be: a scam.  Anyone who believes that something for nothing is a real strategy should invest in perpetual motion technologies whereby you get something for nothing.  It's just not real anywhere outside of the Keynesian mind.

  

3. The real problem in Europe is the massive trade imbalances between the peripheral countries and the so-called core countries. Without the ability to adjust currencies, those trade imbalances will render any debt solution moot, as a country cannot balance its budget while it runs a trade deficit and its citizens and businesses also deleverage. I have written about this arithmetic problem on numerous occasions. There must be balance or there must be a mechanism to achieve balance.

John, the ability to adjust currencies was never anything more than a soft default mechanism.  Why can't you see that?  The Euro was driven by the big exporting nations (Germany and France) so that they could sell stuff to others which others could not afford and then NOT be subject to having those debts inflated away.  By Euro-denominating the debts, the big exporters chose hard default over soft default.

The real problem in all this is the fraudulent model of exports as a way of making a profit.  That is not the function of exports!!  Thus it cannot work.  Exports are just half of the trade.  You also have to take in imports that balance the equation.  If you export more than you import for very long then you will soon find that those receiving your exports rack up such a debt that they can never pay it. 

What cannot happen will not happen.  The only real, economically truthful use of trade is not to make a profit but rather to diversify consumption.  Period.  Anything else is an unsustainable scam.  It will appear to work for awhile but then it must at some point collapse.  And when exporters borrow money in order to build production capacity that can only be paid for by the consumers of that capacity using debt, it is a double scam.  It is a mathematically unsustainable get rich quick scheme by the elite.  They have access to unlimited credit which they use for expansion.  The production output of this expansion can never be consumed by the producer and so they export it and accept IOUs in exchange for their production.  If this is a matter of policy (as it certainly is globally) then the debt will never be repaid and at some point the whole scam will collapse.

You rarely see real logic from economists and analysts.  Some of the honest ones just don't get it but many others are scam artists who know that telling the full truth is not good for the scam.  Once people figure out the truth they will demand a return to honest money.  The scammers know this will eventually happen but any con man wants to extend the scam as long as possible.  By diving into a bunch of details it is easy to distract even the most intelligent members of the audience.  That is why these analysts love the details so much.  By focusing on details which are themselves built upon shaky ground the authors can arrive to whatever conclusion they want to.  Once they are misleading the herd like this, even smart people can be made to repeat things like "the gold standard is restrictive to growth" or "we can never return to a gold standard".   I plan to expose the basic ignorance of both of those statements in future posts.

SOPA and NDAA are two peas in the same unconstitutional pod.

Stop Online Piracy Act (SOPA) is nothing but another power grab by the combined forces of business and government.  It’s far from the worst offense that Obama has recently committed to the American people but since it affected people in the here and now, it got proper attention and analysis.  Gary North’s evaluation is spot on:

"Let us not be naive. SOPA/PIPA is a payback for to the entertainment industry's generous support of PACs and campaign donations. For a list of who got how much, click here: http://bit.ly/SOPAbucks."

--Gary North

I’ll go one step further.  Let us not be naïve about a lot of things including the recent loss of Posse Comitatus and Habeas Corpus.  None of these things are being done FOR you.  They are being done TO you. 

The SOPA/PIPA assault was like a hammer-smashed finger.  It produced a fierce but short lived backlash that everyone clearly felt and was aware of.  God forbid anyone mess with the Internet now that we have grown so dependent upon it.  But Obama’s signing of the so called Defense Authorization Bill was more like cancer.  Most people didn’t know that it happened and many that heard about it didn’t understand the threat it poses to our freedom and privacy. Cancer patients are screwed unless they have a good and honest doctor who can interpret the x-rays.  Freedom loving citizens are pretty well screwed because they are too ignorant or foolish to seek a doctor who will properly and truthfully interpret the cancer theat posed by government excesses and the concentration of power. 

Like cancer, the activities of Bush and Obama (and the con men posing as leaders before them) have eroded our rights to a degree never before seen since the founding of the United States.  The government now has the legal right to apprehend and indefinitely detain anyone who it claims is in any way associated with terrorism.  The definition is so broad as to exclude nobody.  You simply have to be considered belligerent (whatever that means) and you can be hauled off.  We also have kept our illegal torture center open (Guantanamo Bay) and government now claims the right to assassinate our enemies and even own citizens without trial or due process.  These unconstitutional and immoral activities are potentially far more damaging to our way of life than SOPA but since people can feel and react to a thumb smash they cry out.  I say, beware the cancer far more than the thumb smash.

But SOPA and the Defense Authorization Act and the Patriot Act do have one thing in common:  They are being done solely for the benefit of big industry and big government.  The needs and rights of individual citizens no longer matter.  It is the military industrial complex trying to save itself as their credit and debt induced prosperity begins to collapse. 

The entertainment industry thinks that, by bribing our government with PAC money to pass SOPA, everyone who was sharing music, etc. will come running to them with dollars in hand.  Of course, that is not going to happen.  Whoever is sharing instead of buying has already decided not to buy or that they cannot afford it.  Government edict will not force them to consume. Big industry is willing to piss away the freedom of the people regardless of how little real effect it will have on their bottom line.

All the loss of freedoms open the way toward eventual deployment of the military in our country as a police force in a police state.  The recipe is not complex and Ron Paul has warned us of it many times.  In order to need a bunch of new military policing, all you have to do is to interfere enough with people’s lives.  At some point, the most negatively affected of them will get mad and cause trouble.  Once that happens it becomes an excuse for the rise of the police state.

This is a predictable scam.  It has happened in so many countries around the world so many times throughout history that it cannot be ignored as a real if not longer term threat.  It is in fact the most significant threat facing us as a nation today.  It is a bigger threat than the economy or anything else because it threatens to change the very basis of the US as a nation founded upon freedom to one controlled by fear and fascism.  Make no mistake: cancer never stays hidden forever.  It will one day surface and we will all have to deal with it.  The longer you let a cancer grow, the worse it gets.  Ignorance is not bliss when it comes to this sort of thing.

While you are considering all this, keep in mind why it is actually happening and that is because your government is selling you down the river.  People like Bush and Obama say one thing and then do another.  They are lying agents of the con.  They do not respect the people but rather hold us in contempt.  We are a resource to manage and to harvest.  We are as livestock.  If you don't see this then it really is time to ask yourself why not:

• Perhaps you are just ignorant.  That's no crime but it's really a big shame.  If this describes you, is your ignorance due to lack of intelligence or something else?  You be the judge.
• Perhaps you are just gullible and a poor judge of character.  Again, not a crime but how many times does your gut instinct have to be proven wrong before you start listening to people who have not been wrong?
• Perhaps you are indifferent or jaded.  It's hard not to become like this but things will never change until you add your voice to the side of those trying to change things.  Freedom isn't free.  Copping out is weak and without merit.  If this is you, please consider a change in direction.
• Perhaps you are complicit.  If this describes you then you really do know what is going on but it's somehow working for you.  You might even be smart enough to know that it cannot last forever but you figure you will cross that bridge if you come to it within your lifetime.  You likely suspect and believe that the status quo will last at least until you pass away naturally.  You go along to get along.  You really don't care that your support of the scam is causing long term damage.  You are effectively a collaborator; a sell out; a traitor.  Unfortunately, a significant portion of our population falls into this catagory.  Thanks a bunch for helping to bring down the best country in the world.  Thanks for helping to unravel 200 years of American freedom and prosperity.  You go by many names: George Bush, Barrack Obama, Mitt Romney, Newt Gingrinch.

US-led economic sanctions against Iran are effectively an act of war.

Gata recently reported on the US-led sanctions being placed on Iran and what this activity is doing to its citizens.  A simple analysis of the situation reveals that we have effectively declared war on Iran and we are directly attacking the prosperity of its citizens.  How many new terrorists will this create as young people watch their parents ruined economically and their own futures flushed down the tubes?  When people have nothing left to lose they resort to desperate things.  Our leaders know this yet they persist even though our own intelligence sources say that Iran is not close to having a bomb.

Our military industrial complex is beginning to feel the effects of the credit collapse in a big way.  Defense contractors are downsizing and preparing for a long economic winter.  The warmongers want to start trouble in any way that they can so that they can dupe the American people into going into even more debt in order to finance unneeded wars.  If they have to create new enemies in order to get their way then so be it.  If we are not careful we could see Russia and China jump in to support Iran.  If that happens then it would be a boon to the warmongers who would see world war as an economic benefit to themselves.

This is a track I have predicted long ago was possible and in fact history shows it has happened many times before.  We need to be damned careful here.  Iran does not need to develop its own nuclear weapons if Russia and China form an alliance with it.  Instead of stopping Iran from getting access to nukes, this activity could have the unintended consequence (or perhaps fully foreseeable and intended consequence) of enabling immediate access to nukes for Iran. Such an alliance would allow Russia and China to let Iran deliver nuclear strikes to the US and claim they were not responsible.  Everyone hates us because we are pushy, arrogant bastards on the world stage, not because they envy our prosperity.  In fact, they are all major trading partners with us and any aggression toward us would cause them all great economic pain.  So if it happens it will not have been because they wanted to but because we the people failed to listen to the sage advice and counsel of the only non-war monger running for president in 2012 and that is Ron Paul.  Everyone else in the running thinks war is normal and natural.

There is a growing risk that things will come to a major head on the global stage as a result of the economic pressures associated with a credit bust of historic proportions.  If that happens and it results in WW3, it will affect every single person in the USA.  From where I sit, Ron Paul is the only president that other countries would even listen to.  He is the only one that has the wisdom to look at both sides of the coin.  Electing anyone other than Ron Paul in 2012 significantly increases the chance that we will eventually see WW3.  I'm not saying for sure (nobody can predict the future with certainty), just that the odds of WW3 will be greatly swayed by whoever becomes our next president.

GLD ETF continues to lose ground against real, physical metal

In this post from August 2011 I pointed out that the price of physical gold has been rising relative to the GLD ETF.  The recent chart shows this trend to be continuing.  I suspect that at some point the trend will accelerate probably at some point go exponential.  At the end of the day, if you own GLD or some other

paper promise representing physical metal then you will be defaulted upon in whole or in part.  In fact, the gold vs. GLD chart shows the default is already happening in slow motion.

If you own GLD shares you own nothing but paper promises.  The value of gold metal is that it is no kind of promise at all, it is money, paid in full.  There are no other claims possible on it which could cause it to default.  With physical gold, nobody can ever go bankrupt someplace else resulting in you losing all your savings, Madoff style.  The pace of the collapse of paper promises for gold is still quite slow but as global economies go bankrupt, those who have stored value will want to put it into something that can be trusted.  No global fiat currency can ever claim that now given the level of globalization that has occurred over the past few decades.

Keep an eye on the gold metal to GLD ETF ratio.  It is one of my major indicators as to the real health level of the global debt Ponzi.

Japan's cancerous debt is eating it alive.

Japanese debt is now approaching 230% of its falling GDP.  That's the death knell of the Japanese economy.  The eventual outcome will be more far reaching than many can imagine.  The suggested fix?  Double the national sales tax to 10% and target it eventually for 15%.  Japan has massive debt, rapidly aging demographics, nearly zero immigration and of course a nuclear catastrophe that will take decades to clean up.  Their debt was bad enough when the rest of the world was scrambling to consume their industrial production but with the global recession starting to look a lot like the early phases of a global depression, exports will not save them.

Worse still, doing what appears to be the right thing of increasing taxes to reduce deficit and debt will only make things worse in the near to medium term.  Chemotherapy should be applied to cancer patients before they enter the terminal phase of the disease.  Hitting an already massively weakened patient with poisons is only going to hasten the patient's demise.  National debt is economic cancer.  If Japan does raise taxes, its currency will become stronger.  This will put increased pricing pressure on its exports and decimate its workforce as other lower cost suppliers in Asia like Hyundai kick the likes of Toyota to the curb with all of its massive and unpayable debt.  In addition, the best and brightest Japanese youth will leave the country to find a place to live where they do not get taxed to death in order to pay for the sins of the last generation.

At the end of the day the current trend of deflation will play out and Japan will have no choice but to massively debase its currency.  The resulting inflation will cause the price of everything to skyrocket but salaries will languish.  The net effect will be just another tax.  Japan is Greece on a massive scale.  The effects of the great credit bust will be massive and lasting on Japanese society and perhaps even its culture over the long run.  The Japanese concepts of permanent employment and of trusting corporations and government will collapse.  There will be massive civil unrest.  They might even make big changes to their immigration policies and open their borders and their societies to immigrants (as long as they bring money and talent with them).

None of the coming problems for Japan will be completely localized.  As the likes of Toyota and other debt laden car manufacturers of Japan begin to roll over they will have no choice but to downsize and reduce production.  Toyota is another GM waiting to happen.  As a result, the US market will no longer be flooded with high quality, cheap cars that have been subsidized with massive foreign debt.  Their collapse will lead to higher prices and less U.S. availability of everything they manufacture.  They, in essence, have been selling stuff to us at loss leader prices for decades and making up for the difference by taking on debt.  Buying market share with debt helped them put GM out of business but now they will choke on that same debt.  As Toyota goes, so goes the Japanese economy and likely the Japanese government and perhaps even the current Japanese way of life.

RICO lawsuits are the nuclear option for financial scammers.

GATA reports that MF Global execs will be prosecuted under the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO is meant to bring down organizations, not individuals.  RICO gives prosecuters special powers of investigation and it makes penalties far worse and more far reaching than normal laws would allow.  When bankers see their goodfellows going to jail over RICO convictions they either hunker down and curtail investment activity or begin to look for tall buildings and bridges to jump off of for past violations. 

In short, RICO lawsuits are just the next step in the massive deflationary environment that is playing out.  RICO was never considered while the bubbles were being blown.  Why?  Because it would curtail “growth” (AKA debt based bubbles).  All of the people at the top knew what was what the whole time but they didn't complain as long as they were personally benefitting.  Fraudulent growth gets people elected in a society and economy which is infected with a fraudulent money supply.  Honesty is not respected in this environment and in fact causes those who are honest to be labeled as "cranks", "wacky" and the like.  The fact that the people are finally warming up to Ron Paul is proof positive that we are, slowly but steadily, returning toward a more honest money supply (less debt) and more traditional ideas of what constitutes a leader.

Bottom line: DEFLATION still rules the day.  Forget the happy talk you might hear, the global economy is still swirling the bowl.  France and other major Euro-economies were recently downgraded again by S+P.  The result?  Complaints that telling the truth is making the problems worse and promises that more austerity will be coming.  It wasn’t long ago that the Euroscammers were talking about making their own credit agencies up from thin air so that they could ignore S+P, Moody's and Fitch credit rating agencies.  All public mention of that has now evaporated and S+P is clearly calling the shots again.  Without cheap credit all governments will eventually collapse so they have to do anything they can to convince the credit rating agencies that they are behaving like adults.  Of course, the only real way to do that is to stop needing any credit!  So it’s all a big show, an ongoing con game. 

The global debt Ponzi has lost critical mass and is imploding into itself just as educated people of the Austrian School of economics said it would.  When, not if.  Think.  Suspend disbelief.  Act.

Jeff Berwick: Who really owns your stocks.

For years now I have warned that every paper asset is loaded with corruption, starting with paper money and spreading like cancer from there.  Paper promises are just too easy to game.  Mankind cannot help but do it.  It’s built into our collective DNA.  First the bad people do it.  The better, more principled ones hold back.  But the rapid gains from corruption soon crowd honest players out of the market and, seeing this, normally honest people decide to join the ranks of the corrupt instead of being wiped out.  As the old saying goes, don’t tempt an honest man.

Paper assets are difficult or impossible to monitor which makes the owners of them easy targets.  When you present yourself for such easy fleecing, you will be fleeced.  The housing market showed many instances of this.  It was the most marginal of the big 3 asset classes whose ordering is real estate, stocks and then bonds (both corporate and government).  We are still unwinding all of the corruption in the housing market – everything from liar’s loans and NINJA (No Income No Job or Assets) loans all the way to “robo signing”.  There are still many questions about who really owns what.  We are probably on the backside of that curve but I think it is likely that not all of the corruption has been exposed there yet.  The details will be battled in the courts for years to come.

Looking forward, I believe that the stock market is up on deck.  If the housing market was full of corruption, all markets are.  You rarely see corruption well contained in an economy or a society.  It is like cancer.  If you have a little there is a good chance that you have a lot if you only look for it.  As with cancer, you either go looking for the corruption and kill it off or you ignore it and it kills you off eventually.  Jim Sinclair has been warning about the eventual uncovering of massive fraud in the stock markets.  In his most recent post he cites an article from Jeff Berwick. Yes, they talk about gold stocks but the same is true of all stocks.  In short, he is warning that many more people will be Madoffed.  They have been told they own shares in an account but, via some form or mechanism, they will not have access to the shares when the $hit hits the fan.  I see several ways for this to happen:

• You have shares in an account but the controller of the account does not own the shares.  They have been selling them off quietly in order to avoid going bankrupt in the hopes that times will get better and their trading operations will make money again.  They hope to buy the shares back at that time and quietly put them back into your account with nobody being the wiser.  Either that or the controller never did own the shares and has just been running another version of the Madoff Ponzi. Either way, when people try to cash them out en masse they will not get their money back.
• You have shares in the account and the shares actually exist there but they have legal claims upon them which are senior to your ownership because of the scam of Street Registration.  For example, they have been loaned out to shorts who themselves go bankrupt and cannot return the shares or they have been pledged as collateral in some other trade or business dealing that went south and so “your” shares now belong to someone else.  This is clearly possible based on Jim Sinclair’s explanation of registration of ownership.  In this case, the account controller basically stole your shares right from the start and then gambled with them.  When the gambler finally loses too much it will go bankrupt and you will never get your shares.

All of these risks are piled on top of the normal risk associated with owning stocks.  Unfortunately, these risks are not factored into stock prices because very few know about them or consider them possible.  They believe that their investments are protected by government watchdogs, blah blah blah.  They have given over their responsibility of protecting themselves at all times to a paper tiger regulatory organization.  Very, very foolish.  As Berwick states, the collapse of MF Global is just the beginning.  They were the most marginal player.  They were the Greece of those markets.  The larger players will collapse as well just as France and even Germany are beginning to swirl the toilet bowl.

All of this is completely predictable and was absolutely predicted.  In order to make these predictions for yourself, all you have to do is suspend disbelief regarding the fact that the world economy is one massive debt Ponzi.  Once you recognize and internalize this fact you will see that nothing is impossible and in fact a dramatic collapse of some sort is guaranteed.  The only thing that nobody can predict is the timing.

You can sit and worry about these things all day long or you can do something about it.  If you are still trying to figure out what to do, the answer is to stop investing and to instead begin SAVING.  At the end of the day, gold will be the last man standing in terms of money.  Dollar cost averaging into gold will work as a strategy until there is global thermonuclear war.  I'm not saying that will happen, only that this is what it would take in order for people to stop valuing gold as a store of wealth. 

But isn't gold a risky "investment"?  No, it's not an investment at all.  It's money.  James Pierpont Morgan said "Gold is money and everything else is credit".  Oh sure, the dollar price of gold will show volatility but the value of gold really doesn't change over time.  It's the perceived value of the paper asset known as the dollar that actually changes.  Also, the recent pull back in gold was not unforeseeable.  In fact, I called it pretty exactly in this post.  But even believing that this pullback was going to occur to the degree that I would write publicly about it, I did not sell one oz of gold.  It was a buying opportunity, not a sell signal because I am not trying to day trade gold based on dollar fluctuations but rather to accumulate wealth through the age old process of saving a little bit on a regular basis over a long period of time.