Saturday, November 24, 2012

JC Penny update... 3rd wave in progress. [JCP]

In a very recent blog post, I wrote about the ugly looking chart of JC penny and the plight of retail stocks in general.  The below, left chart is from that post.  At the time the stock was $23.96 and I wrote,  

“…I believe this has to put the shares into a 3rdwave and it will be a 3rd of a C wave so it should have some bad downward gaps in it (AKA "cliff diving"). As a bellwether for retail I think the JCP chart is telling us here that Bernanke is about out of gas to stimulate without causing inflation (otherwise known as “sterilized” stimulus whereby the stimulus stays within the banks for the most part and thus does not make it into the economy where it can cause prices to go up).”. 

 That was on Oct 8th. Fast forward to today and we get the chart shown directly above. As you can see, the price has since plummeted to $17.29 which represents a loss of roughly 28% in roughly 35 trading days.  That’s big time 3rdwave type movement.  Worse yet, JCP is now sitting at decade long support which it has tested twice in the past and bounced up.  I don’t know by what miracle JCP could possibly avoid collapsing through that support line given the state of global affairs but the odds of holding that support line are perhaps 10% this time.  In other words, a solid 90% chance of big time splash through and collapse.  But this post is not just about JC Penny and it’s not even just about retail.  It’s about the coming massive loss of all confidence in ALL stocks. 

I predicted long ago that the marginal players would get hurt the first and the worst.  Well, the marginal players have gotten clobbered even though you can hardly tell at this point from the DJIA and S+P 500 averages.  That’s because to get on those prestigious lists you generally cannot be a marginal business.  Plus, once on those lists, the big money that holds retirement funds and pension funds like to buy the big indices as a basket.  That’s why they don’t collapse as easily.  But there is growing economic and chart evidence that they will indeed collapse and it is my assertion that the collapse of the marginal companies is predicting the coming collapse of the big names.  Each brand name that breaks down causes another loss in the confidence of the financial markets which, I hope you know by now, are largely Ponzi schemes which will certainly collapse at some point before all the boomers are able to withdraw as much as they put into them. 

Making predictions about the near term movement of the herd is never easy but I think the setup is pretty obvious.   Everyone is complacent and nobody thinks much bad can possibly happen.  Pride, as they say, goeth before a fall.  Watch the marginal players like JCP for continued signs of collapse and then keep an eye on Wall St darlings:

Wal-Mart (WMT)
McDonalds (MCD)
American Express (AXP)
Home Depot (HD)
Johnson and Johnson (JNJ)
United Health (UNH)

When these guys roll over (and some of their charts look very scary with double tops galore...), the whole corrupt shooting match will roll over.  You have to be really, really economically ignorant or really, really foolish to be ignoring all these warning signs.  The new breed of winners are those that will let this Ponzi crumble and then swoop in and pick up the good, dividend paying (or completely abandoned leaders of serious growth areas like solar) stocks for 5 or perhaps 10 cents on the dollar.  I feel very sorry for anyone who has not been able to cash out of their pension fund or out of their 401k.  Huge numbers of people will get creamed in the coming carnage.  It's going to be one for the record books.  It is literally a perfect storm:
  • Japan loaded with debt, no longer a net exporter.  OUCH!.  It's completely out of gas after 25 years of scraping by.  Bye bye Japan.
  • China is a huge real estate bubble AND it has a large portion of its wealth tied up in US government debt.  Can you say "suckers"?
  • Euroland is going to explode sky high.  The EU will certainly break up as Greece, Spain, Portugal spin out of control with France not behind and Germany (yes, Germany), not all that far behind France.
  • Russia is a corrupt scam.
  • The US is going to lose reserve currency status and then it will smell a lot like Russia.  The US is a corrupt scam as bad as any other but it has the smartest moneymen (con men) on the planet and the biggest military on the planet too.  So it will likely be the last to fall and fare better than most places.
When all this will happen, I cannot say except it has to occur before the boomers get paid.  So, within 5-7 years IMO and probably much sooner.

Good luck to us all.

Friday, November 23, 2012

The fractional reserve gold scam continues falling apart.

GATA continues to monitor the collapse of the great fractional reserve gold scam. You can read about the latest news here, but in short, Austria is now talking about repatriating its gold too.

There are a couple of important things to note here:
·         People still don’t realize it yet but they will someday soon: gold is money and everything else is not. Or more to the point, as quoted from Mr. J.P. Morgan himself, “gold is money and everything else is credit”.
·         The basis of fractionally reserving something is the offering of credit and the assumption of debt.  The entire economic world is a fractionally reserved leveraged mess. That includes the gold and silver markets. By this I mean to say that promises for gold and silver delivery have been extended to people based on them having paid some small up front “lay away” fee (also known as the premium on a futures contract). The quantity of metals promised for future delivery far exceeds the amount of physical metal on hand. In other words, there is an un-payable debt promised to gold futures contract holders, many of which are hedge funds and even retirement systems.  This is clearly a fractionally reserved system.
·         This fraudulent system can operate for long periods of time because most people do not collect their metal. They simply sell their contract to someone else. At the end of the day the contract often ends up being settled in dollars, not metal. It effectively becomes a mechanism for gambling on the price movement of metals.
o   Moneymen love this business because they get to collect premiums on something they never had. It is in effect a shadow fiat currency system. Again, they do not have the physical metal to back all the promises and they are simply hoping (or going by historical norms) that a certain % of the participants will not claim their gold. Thus, the contract can be settled eventually without anyone having seen the gold. If this is the case, the gold need not even exist for the fraudster to make money. It is a clear version of modern alchemy: The goal of getting something from nothing.
§  Eventually all these schemes collapse either because the patsies get fleeced and have no more to gamble or they get wise. Either way, the major sign of impending collapse is the withdrawal from the system of the reserve element. In this case, of the gold. London is the center of western gold trading. Thus, London has been the historical holder of the gold reserves.
§  But now everyone is asking for their gold back from London as well as from the USA. This means the leverage in the western gold trade is climbing rapidly each time someone repatriates their gold. Why? Because less reserves in the hands of the traders have not reduced the size of the trades! Western gold trading is acting like it still has the same amount of reserves as it did before the Saudis pulled their gold out and Venezuela repatriated its gold and Hong Kong began storing its own gold and China started hoarding gold.
·         The effect of all this fraudulent, fractionally reserved trading has effectively been the naked shorting of gold (and silver).  As people begin to lay physical claim to the assets, the shorts must cover.  It is no different than in the late 1960s when other countries began trading in their dollars for gold.  At some point the US did not have the gold to give under the contract and so it defaulted.  The price of gold skyrocketed as a result.  That was effectively a short squeeze and the makings of the next one are happening again right now.  At some point one of the patsies is going to ask for its gold back and it will be told that the gold does not exist.  The futures market for gold will collapse in a massive wave of naked short covering and the price of gold will spike up far beyond what it should really be as the global shorts get squeezed.  It’s coming folks, sure as the sunrise.  Maybe not this week or this year, but soon enough I reckon.

The key to understanding all of this is to realize that there is a good reason that other countries were and are storing their gold in the UK and the US.  It's not that Austria and Germany and others did not know how to build their own gold vaults.  There must have been some good reason to allow someone else to hold onto their gold.  That reason is so that the countries could earn income on their gold.  How was that income earned?  By depositing it in the metals markets in foreign countries and allowing them to loan the gold out for interest or to create derivatives and other leveraged paper scams on top of the gold.  In other words, they loaned it out for the express purpose of putting it into a fractionally reserved investment scam. 

Now they are starting to realize that there are too many promises made on too little gold and so they are demanding repatriation.  In other words, they are wising up to the fact that the fractionally reserved gold market scam is long in the tooth.  They are becoming more concerned with return of their capital then return on their capital.  As Buffett likes to say, when the tide goes out we will see who is skinny dipping.  Given the intelligence of Buffett I suspect this is simply a clever reference to naked shorting.  When the tide (the reserves of a fractionally reserved system) goes out (get repatriated) we will see who is skinny dipping (highly leveraged naked short).

Tuesday, November 20, 2012

Jail time for unlucky trader is a message to all leveraged gamblers

The unlucky sap who lost $2.3 billion for USB was just given 7 years for fraud:

Is he the first or the only one to “push the limits” or “bend the rules” in search of trading profits?  Of course not.  The business of high stakes gambling with other people’s money is very competitive – hyper competitive even.  No risk, no reward.  As the legitimate risk plays began to dry up, the only thing that was left was the borderline risks or the outright fraudulent risks.  Any time the system rewards someone to go down a particular path, people will be testing that path.   Sooner or later someone goes one step too far.

The threat of jail time is the biggest wet blanket possible for leveraged Wall Street gamblers and the risk for them going to jail has never been higher.  In the past, corporations would just send in an army of lawyers when they screwed up, absolve the individual of any criminal wrongdoing and take the hit at the corporate level in the form of a large fine without admitting any wrongdoing.  Those days are gone now because of the additional focus being put on The Street by Main Street and also because large players are themselves getting weaker every year.  The people are beginning to want blood in exchange for blood and so the era of "slap on the hand" enforcement are fading in the rear view.  Even the biggest and baddest players like Goldman are feeling the pinch in visible ways.  You  can see the fear in many places including Tim Geithner abandoning his post now that it is clear that the US will suffer its own form of economic collapse going forward.  Note that he tied this decision to Obama winning again and probably would have stayed on if Romney had won.  I can only take this to mean to me that he sees Obama’s increasing give-aways as a real threat to the country and he doesn’t want to be around when it’s time to account for the mess. 

Bottom line: leverage of all kinds is being removed from the system and that is highly deflationary for now.  Leveraged debt is what fed the Ponzi and the Ponzi cannot stay bouyed without it.  "Growth" is not going to be possible again until the Ponzi collapses because too much of the "growth" was simply growth of the credit portion of our money supply.  Obama is still throwing money and easy policy at the problem hoping to restart the “animal spirits” (AKA “greed”) of the people but the people and most of the corporations are in full retreat.  Deflation is still running the show and I think it will get a lot worse with higher unemployment, dismal corporate earnings, increasing bankruptcies at all levels and civil unrest being just a few of the results.  The great Debt Ponzi is beginning to unravel at an accelerated rate.

Saturday, November 17, 2012

The decrapification of a nation.

Starting back in 2008 I realized that the problems facing the world and the US were going to be of historically significant magnitude. I realized that the problems were not the result of 1 or 2 or 5 years of mismanagement of the nation but rather of many decades.  In fact, the problems actually began in 1913 with the creation of the Federal Reserve even though few people understand the full truth of this matter.  I wrote very clearly and many times to family and friends that the whole world was going to roll over and it would start with the marginal players in the Middle East and in Europe but that it would eventually reach our shores.  I wrote that at times like these one could not even discount deunification of the United States and I pointed out that the #2 power in the world had already similarly deunified in the early 1990s when the USSR fell apart and became Russia and a bunch of 'stahns.

All of this writing seemed like crazy talk to many people at the time even though all I was doing was applying the lessons of history to the present situation.  And while deunification is still no serious threat to the US, the people of this nation have never been more deeply divided.  Wives are running over husbands for not voting, people are committing suicide because Obama won and his policies are attacking their livelihood and people are submitting petitions and talking about state secession from the United States as I have never before seen.

What all of this tells me mainly is that the herd is nervous.  The problem with a nervous herd is that it begins to become unpredictable.  The herd stands there when it should be walking or running away from predators and it panics when it should be ignoring the loud noise from a car backfire.  Ask any cowboy what happens to people who fail to respect the nervousness of the herd.  Better still, go on YouTube and watch videos from an incredible number of people who are preparing for civil war.  Yes, right now it still sounds like crazy talk - the ramblings of wild eyed southern boys or warnings from combat veterans who have returned home and brought with them the only thing they were ever any good at: combat sense.  And in fact, the odds still favor a nonviolent outcome to all this economic unfairness.  But those odds are very unstable and even something seemingly small like a federal bail out of California or Illinois could whip the herd into a real frenzy.

Yet every day the government plods along doing the same ole, same ole.  They make more laws and rules every day which apply to everyone except themselves.  They are even beginning to use force of taxation and law to regulate whether or not we use tanning salons or buy large sugary soft drinks.  These things sound like they might be from The Onion; some parody of life.  But they are not a parody, they have become real life.  We are living in a surreal world, one that few could have imagined was possible only 10 years ago.

I see a lot of people planning their "bug out" even though I really don't think they have a clue.  Where, exactly do they think they will go?  Some other country?  Trust me, however bad it gets in the US it will be much worse in other places.  Running out of the US will be, for the most part, out of the frying pan and into the fire.  The solution is not to panic and run away.  The solution is to band together and to decrapify this nation.

As a career software engineer and computer expert I am often called upon by people when their computers don't run as quickly as they used to.  Many people in fact believe that their computers are actually "wearing out" and thus the slowness must mean it is time for a new PC.  Of course, the truth is that their computers simply need to be decrapified.  In the vast majority of cases, computers either work at full speed or they don't work at all.  They don't slowly get tired and in fact they don't ever get tired.  They simply break one day and you either replace the dead component (which brings the computer back up to the exact same performance it had when it was brand new) or you toss it in the trash and get a new one.  In other words, the painful slowdown that people experience has nothing to do with the system and everything to do with the way they have been using it.  Computers slow down when they are loaded down with crapware.

People just love to add more software to their systems without considering the fact that the computer only has so much processing power.  If you piss all that power away doing useless background tasks and adding bloatware then there will be little horsepower remaining for the things you really want to accomplish.  People need to stop and consider how their computer got like that.  It generally happens bit by bit (no pun intended).  Perhaps on one given day the owner installs some new software  that he wants.  In the process of clicking "I agree" to everything without reading anything, he also agrees to install the Ask Toolbar or the Bing or Google toolbars.  I've seen more than one computer infected with ALL of these bloatware add ons.  And "infected" is exactly the right word for them.  They are in your face all the time and they slow the heck out of your computer making you think you might have a virus.  So you then install McAfee and Norton and all other manner of cancerous crapware in order to try to speed the computer up from the previous crapware installation.  By the time the user is finished the computer runs dog slow and the whole thing is so complicated that they don't have any idea of what to do about it.  For $125 they could take it down to the local computer shop and have someone look at it but then they will have access to all the private data and they might not even fix the problem.

And so it is with our government.  It keeps offering new services and laws and rules and restrictions and protections.  We keep clicking "I agree" next to their names at the ballot box.  We keep voting for more regulations and more debt.  And of course we read nothing before clicking "agree".  We are now at the point where a very good system - capitalism - is completely bogged down with crapware like fiat currency and fractional reserve banking, endless debt, endless war, endless nanny state, endless bail outs of the rich and too big to jail, etc.  And as usual it is so complex that people are talking about throwing it all in the trash and starting from scratch instead of just decrapifying our system and restoring it to the high performance that it has always been capable of sans the wet blanket of too much government.  Let me tell you: building a new system from scratch is a big job.  You have to assemble all the components and then reinstall all of the software that you know you need and then migrate all of your data and you have to do all of this without falling into the same traps that made the original system unusable.  Worse yet, when you don't even know what was wrong with the original system, you don't have the insight to avoid it on the new one.

As I said, I am a software engineer and a computer expert.  If I sit down at your computer I can decrapify it in less than 1 hour as long as you are standing there with me telling me which programs you definitely want to keep and which ones you never use.  I know what should be running in the background and what is just bloatware.  I can easily double or even triple the performance of your bogged down system simply by removing crap from it and in fact there is not a single living member of my family who has not benefitted from my decrapification services on at least one occasion.  The US needs decrapification services whether the people understand it or not.  Unfortunately, the people do not know who the experts are even when they stare them in the face.  Ron Paul is clearly the leading authority on Nation Decrapification even if few people recognize that fact.  If you want to know what a real expert says we need to do to decrapify this country, please read the full transcript of Ron Paul's final address to congress which he recently gave.  Ron Paul is an American hero whether the herd knows it or not.

Monday, November 12, 2012

Three major signs of the times around the world

Mish recently made 3 posts which I think continue to support my long standing thesis that the entire world is caught up in a debt Ponzi that is fueled by fiat currency and fractional reserve banking.  The first one points out that Australia is already rolling over hard.  Their real estate market is tanking as it was an even bigger bubble relative to their GDP than the US real estate bubble was.  The Aussie real estate bubble took longer to peak that that of the US.  However, since the US is a bigger economic flywheel than Australia and since the US controls the global money supply, the Aussie collapse is likely to play out a lot quicker than the US collapse.  

The Aussie dollar is still relatively strong coming out the back end of the great China-driven commodity bubble that fueled their real estate bubble (strong commodity earnings gave people the ridiculous idea that the new revenue stream could never end and so they used it to justify buying houses far beyond what was reasonable relative to their incomes...).  The Aussie dollar is going to plummet both in terms of gold and in terms of the US dollar.  The US dollar is eventually toast as well but since its value is only measured relative to other fiat currencies, it will do relatively better until the end of the crisis (at which time all fiat currencies will probably not be worth much relative to commodities).  That could take many years to play out though, and I actually expect a commodity crash to occur first (over the next 2-3 years) as China begins to sell off some of its stockpiled commodities in order to offset its collapsing exports.

The second story comes to us from Japan where Mish points out with caution that Japan's Current Account turns negative for the first time in 30 years.  People would buy Japan's debt because they thought it was an exporting nation, by means of said exports, would generate enough extra cash to pay off its debt eventually.  I always knew this was bull pucky and wrote about it long ago in posts like this and this.  The second link of the prior sentence tells Japan's real problem: they are great manufacturers but their manufacturing capacity was borrowed, not earned.  They borrowed huge amounts of money in order to make more stuff than they themselves could consume. 

This tactic is just a small variation of the age old vendor finance scam in which a manufacturer can only "sell" its goods to its customers by carrying the debt required to buy them.  By doing this, the manufacturing elite get to book "profits" even though all they really did was give stuff away in exchange for debt that will never be repaid.  Everyone thinks Toyota Motors is a great company but I know that they built it all on debt as part of the great debt Ponzi and thus there is a 100% chance that they will eventually be nationalized by Japan (massive GM style bail out) or go BK.  I doubt Japan will allow it to go under because of all the jobs that will be lost which is why I think nationalization is what will occur.

The interesting part will happen when Japan itself can no longer get any loans because it is already badly underwater in sovereign debt.  None of this is going to end well, folks.  It can't because the math of the debt Ponzi will not allow it to end well.  Japan recently fell from #2 global economy to the #3 position when China moved into the #2 slot.  Now that Japan is no longer a net exporter, what possible story can there be to convince others to buy its debt?  There is none IMO.  Japan has ridiculous levels of debt and declining demographics.  That's like mixing drugs and alcohol from an economic standpoint.  In layman's terms, sayonara, Japan, at least economically.

Today's third evidentiary piece was a toss up between the coming economic demise of California and Spain declaring a 2-year moratorium on evictions.  I'll choose to pick on Spain this time simply because its fate is much more obvious today than California's coming collapse.  In case you have not been paying attention, Spain is in the midst of a severe depression.  It is, in fact, worse than the Great Depression for them right now.  Overall unemployment is > 25% and unemployment among Spanish youth is well over 50%.  Aditionally, Spain is having increasing trouble (and expense) trying to finance its deficit and its debt rollovers on maturing bonds.  Unfortunately, this is happening at a time when Spain hasn't even been kicked out of the EU yet even though that will certainly happen before the worst is over for them.  In other words, Spain ain't seen bad yet, but its coming. 

What drove Spain into this mess was largely a credit-induced real estate bubble of historic magnitude and by that I mean one for the record books.  So, with Spain teetering on the edge with its real estate crashing, the ridiculous bureaucrats put another stake in the heart of those trying to hang onto their rental properties by making it legal to stiff them on the monthly rent without any landlord recourse.  It now makes zero sense for anyone there to pay any rent.  Instead, they can either save money or buy other things in the economy.  How long will landlords be able to last if they are not receiving rent?  Heck, even those who own the properties outright are at risk of going under if they cannot pay the property taxes because nobody is paying rent.  Then the Spanish government will nationalize the failing banks and eventually inflate away all the debt but not until bankrupting even the most honest real estate entrepreneurs.  After much finger pointing and infighting and drama, some bank will end up with all the real estate when the economy is reset and the people who worked all those years to afford it up until now will get completely screwed.  What a scam.

Like I have written before, holding even income producing properties with positive cash flow through this crisis is not a sure bet. Realtors tell investors "well people have to live somewhere". But where these realtors and their cliches be if the US government plays a similar game here in the US as the Spanish government did with their eviction moratorium?  Where will these investors be when the government declares them to be "rich" and thus susceptible to some form of wealth taxation?  After all, isn't that what an eviction moratorium really is?  Isn't it a statement that poor people should get something for nothing and that "rich" people have the ability to pay (via the gift of free rent)? 

That's exactly what it is, folks.  It's government "spreading the money around". It's vote buying using the money of the productive class to buy the votes of the less capable (and thus less fortunate) section of the population.  In other words, is a freaking scam.  Let me tell you who will do best is all of this: those who own physical gold instead of investments.  Those who are saving money instead of trying to use their money to make money.  For these people are taking no risk of wealth redistribution like real estate holders are.  And nobody can know how much hidden wealth they have so no wealth tax can be assessed.  When the collapse is complete, these people will still have buying power and they will be buying good assets at ridiculously distressed prices because so few others will have any money to bid against them.

I've written many times that it will get so bad around the world that people will begin to believe they have nothing to lose.  It will cause them to do desperate things.  What drove this recent eviction moratorium in Spain was the suicide of someone who was about to get evicted.  I hate to say it but most people will probably start killing politicians and bankers instead of or at least before they kill themselves.  The elite have every right to be shared $hitless when the desperate people finally turn on those who caused this global collapse with all of their shameless money games.

Thursday, November 8, 2012

The phony valuation of a credit juiced market is about to become obvious

Just this past Wed at 8:30 am central time before the markets opened I posted another warning about the shape of the chart of the S+P 500. That same day the S+P went into a nose dive and there was follow through again today.  As a result of this chart action, the the ending diagonal pattern that I wrote about has received its first confirmation: break down below the lower support line of the diagonal.

The chart below/left is the multi-year chart of the S+P 500.  It shows a clear ending diagonal playing out complete with a throwover on the "E" wave and now a breakdown below the lower green support line.  The inset chart on the right is a zoom in of just the final bit of the larger chart.  It shows the throwover running above the green resistance line, and then forming what most traders probably was a flag formation indicating more fun to come.  But instead of breaking out and up, it suddenly broke down and caused non-confirmation of the flag.  That is a run signal to any trading computer and so the computers sold the markets off.

If my Elliott wave count model is correct, we are playing out the 3rd wave of this 1st small wave down.  In the right hand inset I drew on the chart to model one possible outcome that is fairly common to see in cases like this: the so called "goodbye kiss" scenario where after breaking down through support the chart will rally back up, back test the support-turned-resistance (STR) line from below and then head down to a lower low.  I'm not saying that will happen, just that it's common and so it would not surprise me.  If this were to play out, I suspect the 5th wave will bottom at 1350 and then get a rally back up to kiss the STR line at around 1400.

This is when it would get interesting.  With waves 1 and 2 formed we would be facing a massive breakdown 3rd wave.  The power of this wave could easily crash the S+P 500 back below 1300 and in fact if it were an extended 3rd it could do far worse.  We are likely to see quick downward moves in this scenario, what I would refer to as "cliff diving".  Or perhaps more to the point this time, "fiscal cliff diving".  If that happens then it would be a 100% confirmation of the ending diagonal breakdown and anyone still in stocks at that time should have their head examined.  Of course I think stocks have been a really bad bet for some time now.  Despite the rally in nominal terms they have been selling off for a long time in relationship to real money (gold bullion).  Bottom line: I think this is a remarkably scary time to be owning any type of paper asset.  The deflationary forces at work are far more powerful that most people even dream of.  The stock market is little more than a Ponzi scheme at this point.

Click on picture for high resolution view.

Wednesday, November 7, 2012

Another look at the S+P 500: great caution is advised.

In a recent post I suggested that the S+P 500 is looking ready to roll over.  I want to follow up on that post briefly again today.  In short, the S+P 500 chart is looking more and more like the expected massive Elliott "C" wave has played out as an ending diagonal and that the top is in.

I like this EW interpretation/modeling of the chart because:
  • It shows a clear A-B-C retracement (see chart markers labled in red) in line with Elliott wave guidelines.
  • The C wave was clearly the strongest wave, again in line with EW rules.  Note: measure this from red B to red C to really understand how strong the "C" wave was relative to the "A" wave (red A).
  • The ending diagonal is very well formed, textbook even, with a throwover on the 5th wave of the formation (designated blue "e" below).
  • The overall formation forms a massive double top, at least to date, which indicates that despite all of the new money printing Bernanke has done that markets have run out of animal spirits.  In other words, it appears right now that the smart money does not think Bernanke can pump the Ponzi any higher.
Again, if Bernanke could just convince his Wall St pals to pump the charts to a higher high than was seen in 2007 then he could make a lot of people (and trading computers) believe that there is more easy money to be won.  He is so close right now that failing to do it will indicate that he has completely run out of steam, ammo and influence.  I am 1,000% sure that before this crisis is done playing out that people will spit when they hear Bernanke's name.  He will become utterly reviled as the destroyer of fortunes if not as the destroyer of nations.  Yes, that's how bad the damage is that he has done even if few people have the eyes to perceive it at present.  1 week before Madoff was exposed nobody would have dared to call him a thief and a liar and a dirty con man but he was and is all of those things.  Bernanke is Madoff but turbo charged and running on pure nitrous oxide.  Now that his protector Obama is re-elected, Bernanke will be faced with very hard choices: stay the QE course and ruin the dollar (and the whole federal reserve system) or start letting the bankruptcies and job losses happen and eventually let the Ponzi cards fall as they should have been allowed to a long time ago.  I think he will choose the latter and that his goal will be to crash the airplane as softly as possible.  A soft landing is now impossible.  The measure of success at this point is how few people literally die in the crash.

Watch for a break down below the lower green support line, especially one that occurs on volume and "with gusto" (i.e. with gap downs, etc.).  That will be the likely signal that the herd is starting to panic out of these significantly overvalued markets.

Sunday, November 4, 2012

Canada and Australia are rolling over along with China

As expected, China is rolling over with Australia and now Canada close on its heels.   It's no secret to those who are paying attention and who know the real score.

In short, China created a global commodities boom which they used to build skyscrapers, shopping malls, and entire cities that none of its citizens could afford.  So now they are rotting where they stand.  The commodities exporters, which include Australia and Canada, got an economic boom because of China.  As a result their real estate prices went sky high, dwarfing the US property bubble relative to the size of their respective economies. 

Mish writes:

Economists never envision a meltdown. But a massive meltdown is coming anyway. I must admit the pool of greater fools in Vancouver and Toronto was far, far bigger than I thought possible, but at long last the pool seems to have dried up. A crash awaits.”
Anyone who thinks the economic problems are near an end is either ill-informed or dreaming.  IMO, Bernanke just kicked the can down the road for a few years.  He will run out of the ability to stimulate at some point.  The US will be unable to borrow more money cheaply at some point.  There are two ways this might happen:

1.       Americans rise up against it and attack anyone in office who tries to add to the debt.  I give this a 20% chance of happening.

2.       For every borrower there must be a lender who has excess cash to lend.  As the marginal economies collapse they will have less and less cash, goods, products and services for themselves, much less to lend to the US.  In other words, the patsies in the debt Ponzi simply get fleeced so badly that they have nothing left to lend.  This is where the 80% odds live IMO.

The end game starts when US interest rates can no longer be manipulated down by Bernanke.  When rates begin to go up it will mean that for whatever reason there are not enough lenders willing to buy US debt at ridiculously low rates of return.  The result is that interest rates will have to rise in order to entice the remaining lenders.  As the interest rates rise, the debt service will increase dramatically.  When that happens the US will have to take on more debt just to service the existing debt.  It’s called the debt spiral. 

A debt spiral in the global reserve fiat currency signals the end of US ownership of it.  Sometime in the future there will be a so called “currency event” for the US dollar.  What it really means is a sudden and massive devaluation in the buying power of the dollar.  It will take most people by surprise because collapsing Ponzi schemes always do.  People who thought themselves well off because they have a lot of money in a 401k account or pension will find out the hard way that they really have no savings at all.  The wealth they think they have is no different than the wealth that Madoff victims thought they had before his multibillion dollar Ponzi collapsed. 
It doesn't matter who the president is, who is in congress, etc.  The damage has already been done and now the outcome is certain although the time frame is far from certain:
  • Stock markets will crash and they will stay down for a long time.
  • The buying power of government controlled retirement accounts will either collapse or be confiscated.
  • Pensions will go bankrupt.
  • The banking system will suffer a major collapse.
  • Expensive infrastructure will be unmaintainable.
  • There will likely be significant suffering and perhaps even significant war.
These are the wages of being economically ignorant folks.  These are the rewards for ignoring sound council of the honest and fair and historically informed like Ron Paul.  When it happens, go find a mirror to see whose fault all of this really is: the foolish, arrogant people who wanted something for nothing at the expense of their neighbor.

Thursday, November 1, 2012

1971 redux is happening right now.

In the past few years there have been stories about countries repatriating their gold.  As if by some signal only heard by the money elite, the likes of Saudi Arabia, Venezuela and most recently Germany have been repatriating their gold.  Something is afoot here and it's happening right under the noses of the sleepy sheeple who simply do not have a clue about the implications of the collapsing global debt Ponzi.  If you want to take the red pill, read on.

It is a matter of recorded history that in the late 60s, the world began to suspect that the US did not have enough gold to back all the money it was printing in order for its citizens to live well AND have a couple major foreign wars of aggression AND play around with space exploration. So other countries began repatriating their gold which was on loan to the US.   At that time, the loans were tracked by markers called USD.   For each 35 USD ($35) held by the lender, the US government was supposed to have 1 oz pure gold in storage and ready to trade for the markers on demand. After it became clear that gold lenders had gotten wise to the fact that the US didn't really have the gold and that they were not going to stop in their requests for repatriation, Nixon simply stopped trading markers for metal. This was done on August 15, 1971.  It was better than saying "we don't have your gold".  It was also the largest economic default in the history of man to date.

The current ongoing repatriation activity is a 1971 redux; it's deja vu all over again.  Only a moron thinks it will be different this time.  Like before, idiots trusted corrupt US government to hold their gold.   And just like before, they took markers for it in the form of accounting slips.   The gold has been loaned out 20 ways from Sunday and there is no longer enough gold to return to all those with a rightful claim. The US is effectively running a fractional reserve Ponzi scheme on the world's gold. The purpose of this is to keep gold's dollar based valuation down because gold is the only thing on the planet that can believably call the US dollar a fraud.  I say again, the US has been "naked shorting" gold in a major way by lending it out to others.  Since the gold never actually moves from the US government vaults, all of this lending is done using paper or electronic markers for the gold.  This allows the government to lend out a lot more gold than it actually has on hand.  This is an old game which has been played many times through out history.  It is effectively a trust based Ponzi scheme.

All Ponzis eventually collapse when the suckers try to pull their holdings out en masse. Why do you think Germany is trying to pull their gold back home so carefully? Why only 50 tonnes per annum "for inspection"?  It's clearly being done so as to not spook the other suckers into pulling their gold out. Germany is trying to sneak out the back door of the Ponzi so that others will get stuck holding an empty bag.  If everyone tries to exit at once, the US government will simply make up some rule out of thin air stating that repatriation is not legal, etc. just like it did in 1971.  I can already hear them and I can already read the headlines that the government controlled media will spew:  "Any attempt to remove gold from the US is an act of economic terrorism and will dealt with harshly".

How do I know this?  Because it's what I would do if I were one of the corrupt con men running the show.  It's simply obvious if you really understand the scam that is being perpetrated by the corrupt system of fiat currency and fractional reserve lending.  As usual, in times of crisis possession is 9/10ths of the law.  The US has a strong military which it will use against anyone who tries to take their gold back by force.  It will either lead to WW3 or it will lead to some new kind of monetary system but either way gold is going to be a major part of the future because every sovereign nation obviously knows that gold is the only honest money on the planet.

At the end of the day, the US economic hegemony is no longer backed by faith and trust but by fear of the US military.  These things never last forever because they are dishonest.  Nuclear weapons are the great equalizer which is why the likes of Iran are so keen to develop them.  Ever notice how the US pretty much leaves N. Korea alone?  Gee, could it be out of respect for their nuclear capability?  At the end of the day, might still makes right on this misguided planet.
Twitter Delicious Facebook Digg Stumbleupon Favorites More