Tuesday 31 May 2011

No, really, don't play soldiers, kids.


It seems this title from last Thursday was a touch premature.
Less than a week later comes the news that school kids are being disciplined for forming the shape of a gun with their fingers.
We used to do that sometimes, but cap-guns that made a loud bang without actually shooting anything were easy to get. Who remembers those rifles with a cork in the end attached with string? You'd bung in the cork and crank it up, pull the trigger and the cork made a 'pop' when it came out. better than cap-guns, which went through rolls of caps at a pocket-money-depleting rate. I had a double-barrelled cork-popper in the style of a shotgun. Not one person was even slightly disturbed by this.
Now there are machine-guns that fire foam darts. If a child took one of those to school they'd probably be crucified at the school gates as a warning to the others.
Fortunately the parents deem this as going to far (about bloody time too) but I don't expect the school to back down. Many teachers have reached the point where they know less than the children they are teaching, and the head teachers and governors take pains to get rid of any teacher who atually knows anything. They can't have intelligent teachers in their schools because as bosses, they have to be the most intelligent ones around. Therefore they only want staff who come somewhere below sea-squirts on the IQ scale.
It's not the teachers at fault. It's those who control who gets to be on the staff and who gets to stay. As always, the Righteous remain behind the scenes and let their frontline staff take all the blame.
The school has a different tale to tell:
'The issue here was about hand gestures being made in the shape of a gun towards members of staff which is understandably unacceptable, particularly in the classroom.'
If you had tried that on any of the teachers when I was at school, they would have responded with a blast of withering sarcasm that would have made you look a total prat in front of the rest of the class. You wouldn't have done it again.
So is that what the parents were told?
'We were told to reprimand our son for this and to tell him he cannot play "guns" anymore.
'The teacher said the boys should be reprimanded for threatening behaviour which would not be tolerated at the school.'
It appears not. Once more the Righteous try to squirm out of their actions and are caught out. I cannot imagine any teacher feeling threatened by a child pointing at them but then, teachers used to be able and willing to do something about it.
To be honest, I am surprised at the parents' reaction. Oh, don't get me wrong, it's a refreshing change from the usual hand-wringers who believe that a child pointing fingers is a sign of a future serial killer. I am surprised that didn't happen this time. Perhaps, at last, the camel's load is approaching that final straw? It's a very, very big load now.
Nuneaton MP Marcus Jones branded the ruling 'political correctness gone mad'.
That old chestnut. When will these people realise that political correctness has not 'gone mad'? It's doing exactly what it was designed to do.
It was mad from the start.


Our Three Immediate Recommendations for Safety and Profit


Martin D. Weiss, Ph.D.

Never before have I seen so many threats to your safety and wealth converging in one time and place — a continuing deterioration in bank safety … a renewed decline in the housing market … a new series of sovereign debt breakdowns in Europe … and worst of all, the growing likelihood of a similar crisis striking Washington.

Today, I’m working from home, commemorating Memorial Day and focusing on giving you simple, practical solutions to avoid these unprecedented dangers:

Danger #1. Bank failures.

Washington politicians and Wall Street fatcats have sworn on a stack of bibles that “the banking crisis is over.”

But their words don’t match their own numbers.

Last week, for example, the FDIC announced that nearly 12 percent of the nation’s banks were at risk of failing, the highest level in 18 years.

That’s a total of 888 banks they recognize could be dangerous to your financial health.

They won’t name endangered banks. It’s one of the closest held secrets of our era.

But we do! We give you an instant Weiss rating on your bank, S&L, or credit union. We let you know when it’s been downgraded or upgraded. And we do this all as a free service for loyal readers like you.

My recommendation: If you haven’t done so already, use this free service — so you can make the safest, most prudent and most informed choices possible. Here’s how …

  1. Go to www.weisswatchdog.com
  2. Sign in or sign up. (No cost to our readers.)
  3. In the upper right hand corner of the screen, click on banks and thrifts (S&Ls). Or, if you prefer, choose credit unions.
  4. Then, also in the upper right hand corner, type in the name of the institution and click “search.”
  5. You should see our Weiss rating, ranging from the top rating of A+ to the lowest rating E-.
    • If it’s B+ or better, it’s a recommended company, and we feel your savings are safe. (Not counting the threat of inflation, of course.)
    • If it’s a D+ or lower, we consider it weak and NOT recommended.

      Problem: On our list of institutions rated D+ or lower, we now have 2,706 banks and 2,582 credit unions. That’s more than one out of every three in the entire nation! So chances are pretty high yours is among them!

  6. No matter what, be sure to add it to your personal Watchlist. That way, as soon as the rating changes, something that happens quite frequently, we will send you an immediate alert via email. Again, no charge.

Danger #2. Dark economic storm clouds.

Another set of numbers that belie Washington’s words of assurance are the latest stats pouring out on the economy:

Home prices are falling again. Foreclosed homes are being dumped on the market at the fastest clip ever. And anyone still counting on another new round of bailouts from Congress must be living on another planet.

Especially vulnerable investments: Shares in banks, mortgage lenders, construction companies, real estate firms and REITs.


My recommendation: Reduce your exposure and start by selling your most vulnerable positions.

How do you know which ones?

While you’re at www.weisswatchdog.com, you can also look up the rating on each and every one of your stocks.

If it’s a D+ or lower, we consider it among the most vulnerable. And no matter what, add it to your watchlist so we can alert you to any changes.

Danger #3. The next big debt crisis.

If you thought the debt crisis of 2008-2009 was a harrowing experience, wait till you see what’s coming next.

Remember: That last debt crisis impacted strictly corporations in the private sector of the economy. This one is hitting sovereign governments, including our own!

Also never forget this: The last crisis was cut short by massive government bailouts. But there’s no one rich enough to bail out the United States of America!

In fact, the way things are shaping up now, it may even be tough for Europe to bail out Spain and Italy, which are far bigger than the countries bailed out so far — Greece, Ireland and Portugal.

My recommendation: You can either sulk into a corner and hide, or you can come out fighting with exchange-traded funds (ETFs) that are specifically created to profit from this kind of a crisis.

For example, in the last round of this crisis, an ETF that surges when real estate stocks plunge grew 166% in value. With that ETF, $10,000 invested near the beginning of the bust grew to $26,600 near the end of the bust.

Dramatic Gains in Select ETFs

Another good example: When Fed Chairman Ben Bernanke started printing money like crazy to rescue the economy, he helped drive up precious metals and key commodities. Result:

An ETF tied to oil jumped 90%.

Our favorite ETF that invests in gold bullion, jumped 121%.

An ETF linked to gasoline surged 200% — a triple.

The ETF we like best that invests in gold mining shares gained 250% … the one that buys silver mining shares surged 305% … and an ETF that leverages silver bullion skyrocketed 700%.

Even assuming you missed that 700% opportunity and bought only our favorite gold mining ETF, you could have seen $10,000 grow into $35,000.

All of this is, of course, past history. But as Mike Larson tells it, it was just a dress rehearsal for the bigger debt crisis — and larger profit potential — coming next.

Stand by and check your inbox. You should be getting his updates as part of your regular membership.

Good luck and God bless!



When Faith In U.S. Dollars And U.S. Debt Is Dead The Game Is Over – And That Day Is Closer Than You May Think


A day is coming when the rest of the world will decide that it no longer has faith in U.S. dollars or in U.S. debt. When that day arrives, the game will be over. Traditionally, two of the biggest things that the U.S. economy has had going for it were the U.S. dollar and U.S. Treasuries. The U.S. dollar has been the default reserve currency of the world for decades. All over the globe it was seen as a strong, stable currency that was desirable for international trade. U.S. government debt has long been considered the "safest debt" in the entire world. Whenever there was a major crisis, investors would flock to U.S. Treasuries because they were considered a rock. Sadly, all of this is now changing. Today the rest of the world is losing faith in the U.S. financial system. In fact, even the United Nations is now warning of the collapse of the dollar. But if the U.S. dollar and U.S. Treasuries collapse, that will be an absolute nightmare for the U.S. economy. If the rest of the world does not want our dollars someday, then what are we going to give them in exchange for all of the oil and all of the cheap imported goods they send us? If the rest of the world does not want our debt someday, then how in the world are we going to be able to continue to consume far, far more wealth than we produce?

The rest of the world is watching the U.S. government run up record-setting budget deficits and they are watching the Federal Reserve print money like there is no tomorrow and they realize that the U.S. financial system is slowly imploding.

As mentioned above, now even the United Nations is warning that the U.S. dollar could collapse. The following is a brief excerpt from a recent news report put out by Reuters....

The United Nations warned on Wednesday of a possible crisis of confidence in, and even a “collapse” of, the U.S. dollar if its value against other currencies continued to decline.

In a mid-year review of the world economy, the UN economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.

But it is not just the United Nations that is concerned about the U.S. dollar.

On April 18th, Standard & Poor’s altered its outlook on U.S. government debt from "stable" to "negative" and warned that the U.S. could soon lose its prized AAA rating.

At one time, it would have been unthinkable for Standard & Poor's to do such a thing.

But today it is amazing that it has taken them so long to make such a move. U.S. government finances are falling apart.

When the credit rating of U.S. government debt starts declining, interest rates will go up. Just ask the government of Greece how painful that can be. Today, Greece is paying over 16 percent on 10 year bonds.

The following is what John Williams of Shadow Government Statistics recently had to say about why Standard & Poor's issued such a warning about U.S. government debt....

S&P is noting the U.S. government's long-range fiscal problems. Generally, you'll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That's 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S. was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.

Look, the rest of the world is not stupid. They know that the U.S. government is hurtling towards financial disaster. The appetite among foreigners for U.S. government debt is decreasing rapidly.

In fact, according to Zero Hedge, foreigners are dumping U.S. debt at a very rapid pace right now.

In addition, the cost to insure U.S. debt has risen sharply in recent days.

Right now, the Federal Reserve has been buying up most new U.S. government debt with dollars that it has created out of thin air. This is a giant Ponzi scheme, and it is a major contributing factor to the decline of faith in the U.S. dollar.

The dollar has fallen by 17 percent compared to other major national currencies since 2009. What makes that fact even sadder is that all major currencies have been rapidly losing value compared to hard assets over that time period. The dollar is just sliding faster than almost all of the other global currencies that are constantly losing value as well.

Anyone with half a brain could have seen that this would be the end result of reckless government borrowing, but unfortunately our politicians have been ignoring this problem for decades.

Now a day or reckoning is fast approaching and it is going to be very painful.

The U.S. government has piled up the biggest mountain of debt in the history of the world. Just consider a few shocking facts about this unprecedented debt....

*If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.

*The U.S. government borrows about 168 million dollars every single hour.

*If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

*It is now being projected that by the year 2021, interest payments on the national debt will amount to $1.1 trillion dollars a year.

In a previous article on The American Dream, I detailed some more absolutely horrifying statistics about U.S. government debt....

#1 If you divide the national debt up equally among all U.S. households, each one owes a staggering $125,475.18.

#2 The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law two years ago.

#3 During Barack Obama's first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

#4 In the new budget that the Obama administration has proposed, the U.S. government would spend 3.7 trillion dollars in 2012 and by 2021 the U.S. government would be spending a whopping 5.6 trillion dollars per year.

#5 The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.

#6 The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.

#7 The U.S. national debt is currently rising by well over 4 billion dollars every single day.

#8 The U.S. government is borrowing over 2 million more dollars every single minute.

#9 The U.S. national debt is over 14 times larger than it was just 30 years ago.

#10 Unfunded liabilities for entitlement programs such as Social Security and Medicare are estimated to be well over $100 trillion, and nobody in the U.S. government seems to have any idea how we are actually even going to come close to meeting all of those obligations.

#11 If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now. But this year alone the U.S. government is going to go about 1.6 trillion dollars more into debt.

#12 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

So have our politicians learned anything from the mistakes of the past?


The U.S. government continues to spend money on some of the most ridiculous things imaginable. For example, the Department of Health and Human Services has just announced a brand new $500 million program that will, among other things, seek to solve the problem of 5-year-old children that "can't sit still" in a kindergarten classroom.

Isn't it good to see the government investing our hard-earned tax dollars so wisely?

Of course if our kids weren't being constantly fed foods packed with sugar, high fructose corn syrup and aspartame we wouldn't have to spend 500 million dollars to deal with this problem.

When it comes to government waste, nobody seems to do it any better than the U.S. government.

Our politicians continue to assume that the rest of the world will always want our dollars and our debt, but that is simply not the case.

Over the past couple of years, global leader after global leader has publicly talked about the need for a new world reserve currency.

In fact, globalist institutions such as the IMF and the World Bank have been very busy discussing what the world is going to use as a global reserve currency after the death of the dollar.

The rest of the world is not sitting around waiting to see if the U.S. financial system is going to recover. They are already making plans for the demise of the dollar. They are increasingly using other currencies to trade with. They are becoming more hesitant to buy more of our debt. They are realizing that the days of U.S. dominance are coming to an end.

So what is that going to mean for us?

It is going to be a complete and total disaster.

Right now, we live far, far beyond our means. We borrow gigantic piles of money to make up the difference between what we produce and what we consume. We are absolutely dependent on the fact that the rest of the world will take our dollars in exchange for the things that we need.

The current situation is not sustainable.

It will come to an end.

When it does, our standard of living is going to feel like it has changed overnight.


Panic Capital Flight in Greece, Depositors Yank 1.5 Billion Euros in 2 Days;EU Wants Severe Bail-Out Conditions Including International Tax Collection


Courtesy of Google translate please consider They lifted 1.5 billion Thursday and Friday from banks

Only a few steps separating from Friday to yesterday's mass panic! From early morning to counter the banks there is serious pressure for withdrawals of deposits, especially small amounts. The pressure on banks began last Wednesday, culminating in yesterday's day.
It is significant that Thursday and Friday, banking sources estimate that rose around 1.5 billion euros in total! According to the same month in May estimated the outflow estimated at least 4 billion from 2 billion in April.
The majority of depositors rushed to withdraw for pensioners and small savers and amounts ranging from 2-3000 lifted until 10 -15 000 euros. Motivation in most cases it was the fear that led the country into bankruptcy, deposits frozen even temporarily left without cash, or even lose their savings.
Politicians do not seem to fully understand the risks posed by a widespread panic, not only for the stability of the banking system but for the economy and the country.
EU Requests Severe Bail-Out Conditions Including International Tax Collection
The Financial Times reports Greece set for severe bail-out conditions
European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens.
People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures.
Officials warned, however, that almost every element of the new package faced significant opposition from at least one of the governments and institutions involved in the current negotiations and a deal could still unravel.
In the latest setback, the Greek government failed on Friday to win cross-party agreement on the new austerity measures, which European Union lenders have insisted is a prerequisite to another bail-out.
Officials think Greece will be unable to return to the financial markets to raise money on its own in March – as originally planned in the current €110bn package – meaning that the IMF is now forbidden from distributing any additional cash. Without the IMF funds, eurozone governments would either be forced to fill the gap or Athens could default.
30,000 Protest in Greece

Courtesy of Google Translate More than 30,000 Greeks in Athens take center inspired by the protests of Spain

Some 30,000 people, police said, more as protesters have gone to the streets Sunday in Athens to protest the Greek political class. The demonstration has been called through social networks, as well as in Spain, and the participants cited the movement as a reference 15M.
"We've had enough. The politicians are laughing at us. If things continue like this, our future will be very hard," said one of demonstrators gathered outside the headquarters of the Greek Parliament in Syntagma Square, while his teammates chanted "Thieves, thieves!".
This is the fifth day of protests in Syntagma Square and this time they have been joined by a Spanish group who wanted to express solidarity with the merger.
"People were outraged, but needed motivation to express themselves. The Spanish have given us that motivation," said Argyrou Iphigenia, an insurance agent, told Reuters. "We're not asleep. We are awake. The IMF must go. There are solutions without them," he argued.
Is it any wonder people are yanking money out of Greek banks? How long before a bank freeze?
Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.


Crop Circle in Russia astonishes locals and public


More info and images at Kosmopoisk-Ivanovo blog
Near the village of Znamensky in the fields there were circles of unknown origin Dozens of townspeople came to see this spectacle .
They came up with very different assumptions: from the invasion of alien civilizations to someone playing jokes. It is expected that this will be dismantled by experts ufologists. They are soon to come to the scene. 24.05.2011 (18:26)







May 26, 2011

Holy Mary, Mother of God, received at the foot of the CROSS, "The Mission" the most precious ever!
The Divine Sacred Heart of Jesus Himself says "All children" born of "Mature Fruit" stil hanging in the Tree of Life, which is Jesus Christ, the Priest par Excellence, become "The Living Church."
By the GIFT from the CROSS, Holy Mary Mother of God made Man became "The Mother of the Church" which is carried in Her most pure Womb:
"All the Seed of the Holy Living Church," who are ...

All Christians in the world!

MARY, "is theTerror of demons and becomes the Target of Satan" who by "Her Identity" received "Her Divine SON" and "Her Spouse who Is the Holy Spirit", will be persecuted. She and the Seed She carries in Her, that Satan wants to devour ... (Christians)
Apocalypse 12 (4-5) Woman, the Child and the Dragon.
The Dragon stood before the woman about to give birth, to devour Her Child, when it was born.
She gave birth to a SON, a male child who was to rule all nations with an iron Sceptor. And Her child was caught up to God and His Throne.

"It is Jesus risen in Ascension to his God and Father"
The Woman (Mary) fled to the desert (Protected by GOD) to be nourished for 1260 days (With Her Children Christians, protected and nurtured by the Church).
Apo. 12 - (14) Then the two wings of a great eagle were given to the Woman to fly into the wilderness to Her place where She is nourished for a time, times and half a time (in Daniel 7-25, the 3 years are explained)
While Mary and Her Children of the Church are sheltered, what is said in Daniel 7-25 comes to pass.
In this Kingdom (against GOD), the Enemy shall speak words against the Most High. He shall oppress "The Saints of the Most High," thinking to change times and the Law and the Saints will be given into his hand until a time and times and half a time (1260 days or 3 ½ years).
These Saints are those of the Old Testament who have not yet recognized Jesus Christ and who will be confronted by the enemy, while the Christians in the Church will be sheltered with Mary, Mother of the Church!

Our Holy Church as "OUR LADY OF FATIMA"
Pray for the Whole World with Jesus and Mary.
(more messages at The Future Life of God With Men)


Europe at the Abyss; US Housing in the Abyss; Who is to Blame?


Robert Samuelson on Real Clear Politics says Europe at the Abyss

It has come to this. A year after rescuing Greece from default, Europe is staring into the abyss. The bailout has proved insufficient. Greece needs more money, and it can't borrow from private markets where it faces interest rates as high as 25 percent. There is no easy escape.
What's called a "debt crisis" is increasingly a political and social crisis. Already, unemployment is 14.1 percent in Greece, 14.7 percent in Ireland, 11.1 percent in Portugal and 20.7 percent in Spain.
Some causes of Europe's plight are well-known: the harsh recession following the 2008-2009 financial crisis; aging populations coupled with costly welfare states. But there's also another less recognized culprit: the euro, the single currency now used by 17 countries.
Launched in 1999, it aimed to foster economic and political unity. For a while, it seemed to succeed. In the euro's first decade, jobs in countries using the common currency increased by 16 million.
It was a mirage. For starters, the euro fostered a credit bubble that led to booms in housing, borrowing and consumer spending. But one policy didn't fit all: Interest rates suited to Germany and France were too low for "periphery" countries (Greece, Ireland, Portugal and Spain).
Money poured into the periphery countries. There was a huge compression of interest rates. In 1997, rates on 10-year Greek government bonds averaged 9.8 percent compared to 5.7 percent for similar German bonds. By 2003, Greek bonds fetched 4.3 percent, just above the 4.1 percent of German bonds.
"The markets failed. All this would not have occurred if banks in Germany and France had not lent so much," says economist Desmond Lachman of the American Enterprise Institute. "It was like the U.S. housing market." Both American and European banks went overboard in relaxing credit standards.
"Markets Failed" Says Desmond Lachman
Few economic statement make my hair stand straight up more than that bit of complete nonsense from Lachman. The markets did not fail. Bureaucrats who dreamed up the Euro failed.
Those bureaucrats devised a currency union with nothing more than suggestions on fiscal controls. Making matters far worse, countries in the Euro-Zone have widely differing political philosophies and policies.
That currency union was not brought about by the market. The free market would never have done such a silly thing.
Every major currency union in history without a political and fiscal union has failed. There is a nice Table of Monetary Unions on the site Euro Know that shows just that.
Bureaucrats, not the free market new better. Bureaucrats, not the free market failed.
Not Different This Time
Potential problem were recognized well in advance by many. In February 1995 The Independent wrote a misguided editorial Why we say Yes to a single currency.
The rationale of The Independent was "It's different this time".
The economic arguments that, on balance, Britain will be better off inside the currency union than outside are persuasive. The discipline of a permanently fixed exchange rate would significantly reduce the risk of a return to high inflation and create greater certainty for companies and investors. There would also be lower transaction costs. There is no doubt that a successful single currency would strengthen Europe's position on the global economic stage.
The opponents of the single currency do not agree. They argue that the experience of the ERM and events since Black Wednesday show that to be locked into a single currency is damaging. Exchange rates, they point out, can act as important "shock absorbers" in times of unexpected crisis. These are powerful arguments. They are most powerful when applied to some EU members - notably Spain, Portugal and Greece - whose less developed economies would make the exigencies of a single currency regime punishing, unpopular and potentially disastrous.
But this is not the condition of Britain today. In 1992 the needs of the British economy were at odds with the priorities of the Bundesbank. They were trying to control inflation, we needed to get out of recession. By contrast, in 1999 six or seven countries will find themselves at the same stage in the cycle, with very similar economic priorities. So things are likely to be different.
Points of Failure Predicted In Advance
Things were not different were they?
Ironically, in that 1995 article, The Independent pointed out the exact points of failure: Spain, Portugal and Greece.
Tony Dolphin, Chief Economist of AMP Asset Management, wrote a response to that article less than a week later. Please consider, European monetary union: the benefits, the problems and the traveller's tale
The potential benefits of European monetary union are questionable, the potential costs could be very serious. A successful monetary union requires that the economies joining it are broadly the same, especially in regard to their response to external and internal inflation shocks. This is not the case in Europe. Take two examples: oil and housing.
The effect of a sustained, steep rise in the oil price will be very different in Germany, which is highly dependent on imported oil and gas; in France, where nuclear power is used to generate a high proportion of energy needs; and in the UK, where the North Sea sector of the economy would actually benefit. Imagine trying to set an appropriate, anti-inflationary interest rate policy for a monetary union including these three economies should the oil price double.
The housing sectors of European economies also differ, with the UK's high level of home ownership financed by variable rate mortgages not being found elsewhere. This makes the UK housing market more sensitive to interest rate changes than is the case on the Continent. It is easy to envisage a situation where the interest rate policy of a European monetary union was entirely inappropriate for the housing sector of the UK economy. And, since their home is most families' main asset, this would have negative repercussions for consumer spending and the overall growth of the economy.
These and other structural differences between European economies will not disappear over the next four years, nor at any time in the foreseeable future. Until they do, the economic argument against European monetary union is powerful, and far more clear cut than the political arguments for or against.
Yours faithfully,
Tony Dolphin
Chief Economist
AMP Asset Management
Failure of the "One Size Fits Germany Policy"
I have no idea what Tony Dolphin is doing today but put him in the class of those who can say "I told you so." Here is the key paragraph:
"It is easy to envisage a situation where the interest rate policy of a European monetary union was entirely inappropriate for the housing sector of the UK economy."
The UK did not adopt the Euro but Spain did. Interest rates in Germany were not appropriate for Spain. The result was a Spanish housing bubble of epic proportion that has now collapsed.
One interest rate policy simply does not work. For further discussion, please see ECB's "One Size Fits Germany" Policy; Rate Hikes to Stress PIIGS
Compounding Spain's misery, Trichet has embarked on a rate-hiking campaign at the worst possible time, with Spanish unemployment in excess of 20%, and youth unemployment near 40%.
Housing Market Nonsense
Note that Lachman also blames US banks for the housing bubble.
"It was like the U.S. housing market." Both American and European banks went overboard in relaxing credit standards.
That too is nonsense in that it does not place the blame where it belongs, on the Fed. The Fed held interest rates too low, too long. Money was too loose, banks lent.
Blaming banks for lending when real interest rates are hugely negative is tantamount to placing a bottle of vodka in front of an alcoholic, telling the alcoholic it is the best vodka in the whole world, then blaming the alcoholic for what happens next.
Not only did the Fed hold interest rates too low, too long, the Greenspan Fed endorsed derivatives, subprime loans, and adjustable rate mortgages. Meanwhile Bush was praising the "Ownership Society" and Barney Frank was in the back pocket of Fannie Mae and Freddie Mac.
Ben Bernanke was totally clueless, in complete denial about the bubble, going so far as to say home prices were "based on fundamentals".
None what has transpired has had remotely anything to do with the failure of the free markets. We have a failure of regulation, not a failure to regulate. Lachman, like Bernanke, really needs to get a clue.
You cannot fix a problem until you understand what the problem is. Unfortunately, politicians and economists in both the US and Europe are still in denial. Statements by those blaming markets instead of politicians and the Fed, do not help.
Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.


Scientists Create Ethanol From Hydrogen They Created From Ethanol


Join the forum discussion on this post

Alas, today I had intended to put up my book review of Amanda Little’s book Power Trip, but I left the book on my desk in the office and I need to review some notes first. So that should be posted for my Thursday column. If you haven’t noticed, I have fallen into a pattern of putting up a new column each Monday and Thursday. Because there is always a lot going on in energy, I generally have three or four decent choices for these new columns.

This week, I was sent a guest column on nuclear power called Fukushima a stake through nuclear industry’s heart. I had initially decided to run it, but had a change of heart. The reasons are that I think the tone of the essay invites hostile responses. It is also extremely anti-nuclear, and I don’t want this blog to become known as an anti-nuclear blog. To be honest, I have had many of the same thoughts as the author since Fukushima — that is to say that I think this is going to be a devastating blow for the nuclear industry — but I still want this blog to be a place that we can debate the issue free of hostility and hyperbole. So, I decided that a link to the essay would suffice.

Then there are always short stories that are perfect for our Energy Ticker, but which might be a stretch as the basis for a column. So I decided to pluck some of the more interesting stories of the past few days and write some commentary on those. The themes I will cover below are Solazyme’s IPO, booming E85 sales, a story that predicts $5 gasoline for this summer, and a new breakthrough in the generation of hydrogen from ethanol that stuck me as humorous.

Thoughts on Solazyme

Solazyme Surges in Debut on Bio-Fuels Bet

Solazyme Inc., the developer of oil products from genetically modified algae, jumped 15 percent in its first day of trading on increasing demand for renewable sources of fuel and specialty chemicals.

The company rose $2.71 to $20.17 in Nasdaq Stock Market trading, after being priced late last night at $18. South San Francisco, California-based Solazyme sold 10.975 million shares, raising $197.6 million, according to a regulatory filing.

The demand validates the technology used to convert organic material into biofuels and specialty chemicals, said Pavel Molchanov, an analyst for Raymond James & Associates Inc.

“The science in their process works,” Molchanov said today in a telephone interview.

I would disagree with Mr. Molchanov that the demand validates the technology. We have seen plenty of demand that was based more on hope and hype for any number of technologies, and we have seen many companies rise to extremely high valuations, only to come plummeting back to earth. However, I do agree with his last statement. The science works. One thing that distinguishes Solazyme from many other companies in this sector is they have produced significant quantities of renewable hydrocarbons — reportedly 100,000 gallons in 2010.

I have written about Solazyme here a number of times, going back over two years. At the Pacific Rim Summit in Honolulu in 2009, I sat down for a visit with Solazyme’s President and CTO Harrison Dillon and got to ask him a number of questions about Solazyme. Over time I have developed a favorable view of their approach; it makes sense on many levels and avoids many of the challenges of conventional algal fuel production attempts.

Critics will respond that their fermentation approach is sugar-based, and sugar requires land and therefore also sets up competition with food. My response to that is that sugarcane offers many income opportunities to farmers in developing countries, and as is the case with ethanol production one doesn’t have to necessarily use the refined sugar. When I visited an ethanol plant in India in 2008, they extracted and produced sugar for sale, and then used the leftover molasses as the feedstock for the ethanol plant.

I believe this is the sort of model for future biofuel production. It is an income source for farmers, and can produce food and fuel without heavy reliance on fossil fuel inputs. I have long been on record in support of the sugarcane ethanol model, primarily because it isn’t heavily reliant on fossil fuels. I think Solazyme’s model could work in exactly the same way (except hydrocarbons are easier to separate from water than is ethanol). The biggest questions will be whether they can get the production costs of the fuel down, as well as whether there are limits to the scalabilty of the process. On the costs, their recent movement into other consumer products will help spread out the capital and operating costs so that they aren’t borne solely by the fuel.

There are reports that Solazyme can now produce fuel for $3.44 a gallon. I remain skeptical on that front, and have yet to see that number in context. I wouldn’t be surprised to learn that this is a projection for their oil, which still must be refined into fuel. However, if they can produce fuel at that price eventually — and they have good IP protection around their process — the company could be grossly undervalued at present.

E85 Sales on the Rise

E85 sales increase 27% as gas prices rise in quarter

As the price of gasoline climbed by 90 cents per gallon during the first quarter, sales of cheaper E85 ethanol blend rose by 27 percent during the same period over the fourth quarter of 2010, the Iowa Renewable Fuels Association said.

According to the Iowa Department of Revenue, sales of E85 by Iowa retailers reached 2,645,038 gallons during the first three months of this year. Compared with the first quarter of 2010, E85 sales were up 64 percent in 2011.

In addition to Solazyme’s approach, I believe E85 in the Midwest can provide a sustainable model for future biofuel production. On the other hand, E85 that is exported far from the source of production? Not so much, for reasons I detailed in E85 Case Study: Iowa.

Per the story above, E85 sales reached 2.645 million gallons in the first quarter. On an annualized basis, that would amount to 10.6 million gallons. However, Iowa uses 1.6 billion gallons of gasoline annually — 150 times the level of their E85 consumption. Thus, my contention is that there is an enormous potential market in the Midwest that has barely been tapped. So instead of trying to spend billions on a pipeline to move that ethanol out of the region, it would be a far more sensible energy policy to promote E85 demand in the Midwest. It would be far easier and less expensive to build out E85 infrastructure in the Midwest than to attempt to make the entire country compatible with E15 or E20.

Let’s first conquer the Midwest, then we can worry about exporting ethanol out of the area.

$5 Gas This Summer?

Comin’ this summer… $5 gas

Goldman Sachs’ crystal ball is proclaiming that oil will soon soar to $135 a barrel, and likely have service stations jacking up fuel prices to $5 a gallon in New York just like the summer of 2008 that preceded the recession.

Indeed, analysts say Goldman and the other oil trading giant that also has the might to move prices, JPMorgan Chase, have already placed their energy bets for the summer. JPMorgan predicts oil hitting $130 a barrel in the coming weeks.

On this, I disagree. You can mark me down as one who does not believe fuel prices — except in perhaps isolated incidents — will hit $5 this summer. I was asked about this on a radio station just over a month ago; whether I thought the claims of $5 to $6 gasoline this summer had any chance of materializing. That week (April 26th), West Texas Intermediate traded at $113 a barrel. I responded to the question that I thought oil at that price and under current market conditions was in a speculative bubble, and I expected oil and gasoline prices to correct down before summer. In fact, $113 turned out to be the most recent peak for WTI, which has since corrected back down to under $100 a barrel.

However, there are lots of things that could change that equation in a hurry. A hurricane in the Gulf of Mexico or additional instability in the Middle East could easily run oil prices up to $130 a barrel. However, I don’t believe under the current market fundamentals that is likely to happen this summer. It will happen, just not yet. I think this is the nature of the oil markets in these times of tight supply and demand. Oil races ahead of itself, driven in part by speculation. Then a correction comes, and oil is driven down (sometimes quickly again, with the help of speculators). Important to note that when oil hit $147 a barrel in the summer of 2008, Goldman Sachs’ crystal ball said we were headed to $200 a barrel. I said at that time that oil had gotten ahead of itself. By years’s end it had plummeted into the $30’s.

Hydrogen from Ethanol

Scientists Generates Hydrogen as an Energy Source from Ethanol and Sunlight

The amount of hydrogen and energy generated depends on the amount of catalyst used and the area exposed to solar radiation. Researchers have generated up to 5 litres of hydrogen per kilogram of catalyst in one minute. If 9 kg of catalyst were put in an ethanol tank and exposed to sunlight and the hydrogen generated were used to power a fuel cell, 3 kW of electricity would be obtained, an amount similar to that which is used in a home.

I had a chuckle when a reader recently sent me this story. Scientists have taken ethanol and used it to produce hydrogen. That’s academically interesting, but by no means the first time it was been done. The reason the story made me chuckle is that the way most ethanol is produced today relies heavily on natural gas. Most hydrogen in the world today is produced via natural gas through a hydrogen reforming process. So instead of natural gas to hydrogen, this breakthrough would be natural gas to ethanol to hydrogen. That led me to jokingly respond “What’s next? Scientists Create Ethanol From Hydrogen They Created From Ethanol?” Someone is probably working on the grant proposal right now…


How Governments Distort the Value of Money With or Without a Gold Standard


Speculation is not the same as gambling. As our good friend Doug Casey, a perennial favorite at the Agora Financial Investment Symposium, likes to say, speculation is the act (some might say “art”) of “capitalizing on politically caused distortions in the marketplace.”

Consider, for example, the recent housing bubble…and its subsequent bust. We touched on this in Wednesday’s issue, “Debunking the Myth of a Free Market Run Wild“.

Superficially, the mortgage meltdown looked like, and was so labeled, a “crisis of confidence,” leading to a convenient excuse for greater intervention by the Feds. Of course, and as usual, the exact opposite was true: the bubble was in fact a crisis of overconfidence, nurtured by the very same pinheads who pumped, via the Federal Reserve, more credit into the system during the 1990s and early ’00s than the free market would ever have reasonably tolerated.

As far as the perpetrators of the whole mess were concerned, the state-sponsored manipulation of the mortgage market, “worked”…which is to say, home prices went up…and up and up and up. But that was only half of the equation. The other half – the down and down and down part – is at present working its way through the bowels of the market. At last count, home prices – already 33% off their peak – were falling at a rate of about 1% per month. Ouch!

Needless to say, such a grotesque distortion had both its winners and losers. The winners, for their part, were to be found closely huddled around the DC-to-Wall Street profit pipeline, suckling on bailout funds and pulling ripcords on their golden parachutes. Losers, meanwhile, tended to resemble ordinary folks who were left to foot the bill, ordinary folks without the means to employ the gun-for-hire that is the state along with its various and multitudinous law “makers” and inner-beltway lobbyists.

Similar market distortions – from the tech bust in 2000-01 all the way back to Tulipmania during the Dutch Golden Age of the early 1600s – all find their origin in monetary meddling of one form or another. The asset class affected may vary, in other words, but the culprit – namely, governments who manipulate the money supply – is always the same.

The biggest distortion of the modern era, therefore, is not flower bulbs or dot-coms or even housing prices. These are effects, not causes. There is a much greater distortion underway, one that underlies all of these booms and busts, peaks and troughs. It’s the distortion of the value of money itself.

Explain Morris and Linda Tannehill in their book, The Market for Liberty:

Governments commonly sap the strength of their currencies by engaging in inflationary practices. (They do this because inflation is a sort of sneaky tax which allows the government to spend more money than it takes in, by putting extra currency into the economy, thus stealing a little of the real or supposed value of every unit of currency already there.) As tax burdens become more oppressive, few governments can resist the temptation to circumvent citizen protest by resorting to inflation. They then protect their shaky currencies from devaluation, as long as possible, by international agreements which fix the relative value of currencies and obligate nations to come to each other’s aid in financial crises. In a sense, the main protection which an inflated currency has is the fact that all the other major currencies of the world are inflated, too.

The history of centrally controlled monies is a history of theft, inflation and, eventually and invariably, defaults. From coin clippings during the Roman Empire through to debasement of German marks under the Weimar Republic…to hyperinflationary corruption of, in no particular order, Hungarian pengős…Zimbabwean dollars…Greek drachmai…Brazilian cruzeiros…Polish zlotych…Chinese yuan…Nicaraguan córdobas…US continentals…Peruvian soles…Angolan kwanzas…Russian rubles…Argentine pesos…

…and the list goes on (and on…and on…).

And it’s happening today, sometimes covertly, other times right out in the open. Belarus, for example, this week devalued its ruble by 36%…overnight!

For some, the solution lies in returning to a “gold standard,” to be maintained and safeguarded under the vigilant eye of the benevolent, “night watchmen” state. Fringy politicians and newsletter writers often advocate some form of metal-backed currency, whereby the state would be able to mint coins and print notes only so far as it had gold and/or silver in reserve to “back it up.”

This line of thinking seems, to us at least, to miss the point entirely. Have governments not gone out of their way to demonstrate their utter incapability of keeping a promise? The United States HAD a gold standard…more than once. (It also had a constitution. Remember that?) And what good did it do? Nixon may have severed the last thread of the dollar/gold peg back in 1971, but he was certainly not the first to devalue the greenback against the Midas metal. Remember, before FDR confiscated all the gold in the land back in 1933, an ounce of gold was only “worth” $20. (More correctly, a dollar was worth 1/20th an ounce of gold.) Then, in one fell swoop, the original New Dealer “revalued” the metal to $35 an ounce, thereby devaluing the dollar to 1/35th an ounce of gold. Some “standard.”

Men and women, kings and tyrants, prime ministers and presidents, both black and white and from the east and the west, have made a career out of cheating the citizens they affect to serve out of the value of their currency. Why give them another chance?

No. The solution is not vesting more trust in the state and the do-good meddlers who infest it. The solution is not tying them to a gold standard (again) only to watch them wriggle out from under it (again). The counterfeiters-in-chief of the world’s central banks have done enough already to prove they can’t be trusted, with or without a gold standard.

The solution, rather, is competing, free market currencies operating outside the reach of the easily, demonstrably corruptible influence of those in positions of power who would seek, as they always and forever do, to devalue it for their own ends.

Mired, as we are, in the archaic realms of state-backed currency monopolies, it is sometimes hard for us to imagine just what a truly free market currency might look like. Would it be backed by gold? Silver? Both? Or would the market, driven by the competitive need to provide a safer, more reliable store of value, create an alternative, superior guarantee of trust?

Advocates of a small but fast-growing digital currency network called bitcoin think they’ve found the answer (or, at the very least, an answer). If it is successful, claim its adherents, this totally-decentralized, peer-to-peer (P2P) currency could supplant the world’s central bank-issued fiat money, potentially providing savvy speculators with an opportunity to cash in on the greatest politically motivated market distortion of our time. But even if this particular currency does not fulfill the hopes and aspirations of its enthusiasts and participants, it has at the very least shown that the free market is ready for the challenge.

Joel Bowman
for The Daily Reckoning

How Governments Distort the Value of Money With or Without a Gold Standard originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.


Easy Way Out


Amid rising costs, increasing competition, and Wall Street's myopic focus on short-term profitability, many firms are fine-tuning business models. But instead of figuring out ways of giving more for less, a growing number of them are taking the easy way out. A key component of today's remarkably short-sighted "'value' proposition": deceiving and cheating customers. Here are four articles that highlight the "strategies" corporate America is increasingly relying on:

1. Lower quality

"Shopping 'Til the Quality Drops" (CNBC)

Lauren Parra prefers to spend more money buying quality items that will last more than two or three seasons.

These days it's getting harder and harder.

"I have noticed a shift in the quality of items. For instance, I noticed that Loft and Gap items look/feel like they'll fall apart—clothes aren't soft anymore," said Parra.

Parra, who likes to shop at Ann Taylor, Urban Outfitters and Rue La La, is not imagining anything.

Quality at many retailers seems to be hanging on by a thread.

According to Global Hunter Securities Macro and Consumer Strategist Richard Hastings, retailers have been collaborating with their production contractors for about two years. They are trying to push back on the total volume, cost and weight of every unit.

"Along the way, the consumer barely noticed. By now, everybody knows something is wrong," said Hastings. "If we had to put a number on it, it's probably a 7.5% decline in total quality and durability of products compared to a bigger increase in the cost of production per unit made outside of the U.S."

2. Deceptive packaging

"Inflation Diet: Same Price, Less Product" (MarketWatch)

Commentary: For cash-strapped consumers, it’s ‘caveat emptor’ on aisle 3

Economists are worried not only about inflation, but also deflation, and now it appears U.S. consumers need to worry too.

While prices for many goods are rising, in cases where prices are steady, the packaging frequently is smaller. It’s an unmistakable trend for grocery shoppers these days: every other package seemingly has a “great new look” for the “same great price.”

The problem is that the new look is a few ounces smaller than the old packaging. Or there has been some other creative way to have shoppers pay the same money as always without recognizing that they are bringing less home.

Barring a change in the way packaging is regulated, consumers need to change habits — or at least be more attentive — in order to make their dollars go farther and minimize the effects of this cost-inflation/product-deflation cycle.
Pinching inches

It’s been particularly noticeable to me of late because my family recently switched from our preferred grocery store to a nearby competitor. With the change, we noticed that it felt like our dollars were buying less and less.

Retail prices in the two stores are roughly the same, but we were buying less. For instance, a “half-gallon” container of orange juice from Tropicana is actually 59 ounces; a roll of toilet paper is shorter, the “new-look” salad dressing is four ounces smaller, and so on.

3. Unavoidable surcharges

"Airline Fees: The $500 Surprise" (CNNMoney)

Thinking of spending a weekend in Paris this spring? Think again.

The cost of travel to Europe has increased exponentially, mostly due to surcharges and fees which can add $500 or more to the price of round-trip airfare.

With the price of oil surging, travelers to Paris and other European cities will pay an extra $420 as a fuel surcharge, according to BestFares.com. Taxes and other fees can add another $100 or more.

For domestic travel, the cost of fuel is often lumped in to the base ticket price, although fuel surcharges are occasionally added on as well. Still, they are much higher on international travel partly because of the long haul.

4. Excessive and unwarranted fees

"Big Banks Hit Customers with Higher Fees, and More of Them" (USA Today)

The nation's biggest banks are increasing many of their fees, adding new ones, eliminating debit card rewards programs and making it harder for customers to avoid paying monthly charges for checking accounts.

At Chase Bank, fees have increased for overdraft transfers, outgoing wire transfers and stopped payments. New customers that sign up for a basic checking account face a $12 monthly charge, up from $6.

Experts warn consumers to expect more of these and other moves by large banks to boost revenue. "Services that used to be free will not be free," said Greg McBride, senior financial analyst at Bankrate.com, a financial information publisher. "There is very definitely a pocketbook impact on consumers."

Banks say they don't want to raise fees but they are losing revenue from new regulations."You are going to see a lot of creativity and innovation to recoup revenue losses," said Carol Kaplan, an American Bankers Association spokeswoman.


30 Actual News Headlines From 2011 That Are Almost Too Bizarre To Believe


Our world has become a really, really bizarre place. The pace of change has become so rapid that nobody can really keep up with all of the important things that are happening right now. Today, more events of significance will happen in a single week than used to happen in an entire month. If we were able to go to sleep right now and wake up in exactly 10 years, we would awaken to a world that would be virtually unrecognizable to us. To get an idea of just how fast the world is changing, just check out this short YouTube video. Keep in mind that neither YouTube or Facebook even existed 10 years ago. Prior to the 20th century, our forefathers could pretty much count on the fact that the world that their children would live in would be pretty much the same world that they lived in. Today, we can't even really know what next year is going to look like. We live during an unprecedented time in human history. Global events are building toward a crescendo. The pace of life just seems to get faster and faster and faster. I don't know about you, but for me days just seem to fly by. It is inconceivable that anyone could be "bored" in this day and age. If it was always your desire to live during a time in which you can "make history", then you certainly got your wish.

The news headlines that you are about to read are all real. Some of them are funny, some of them are shocking and all of them are bizarre.

You might find yourself laughing or smiling at many of these headlines, and there is nothing wrong with that. But there is also a very serious message here.

The world that we once knew is gone.

A new world is emerging.

Sadly, the new world that is arising might not look anything like what many of us were hoping for.

The following are 30 actual news headlines from 2011 that are almost too bizarre to believe....

#1 "The mouse that tweets like a bird: Japanese scientists create genetically-modified animal"

#2 "Liquid Medicine: Controversial Call To Add Lithium To Drinking Water For Mental Health"

#3 "Investigators: Polk deputy tied naked children to desk, beat them with paddle"

#4 "Vatican crackdown at Rome's Playboy Mansion-style monastery"

#5 "Woman Allegedly Kills Cat For Lady Gaga Concert Outfit"

#6 "Sesame Street's pinko puppets brainwash our kids"

#7 "Congressman Warns: Those Who Can, Should Move Their Families Out of the City"

#8 "Russian sect believes Putin reincarnation of St. Paul"

#9 "Chinese prisoners forced to slay dragons, mine gold in online games"

#10 "Duncan, South Carolina Police Ticket Parents for Cheering During High School Graduation"

#11 "Lawsuit Filed Against Texas School District to Stop Prayer During Graduation"

#12 "Judge orders use of Islamic law in Tampa lawsuit over mosque leadership"

#13 "This is a city built for a million people - but no one lives here: The Mongolian metropolis thrust into the 21st Century in a storm of steel and concrete"

#14 "Feds Issue Threat: No Fly Zone for Texas?"

#15 "Wear a headscarf or we will kill you: How the 'London Taliban' is threatening women and trying to ban gays in bid to impose sharia law"

#16 "Bush daughter Barbara supports gay marriage"

#17 "Shocker! On his own, judge demands homeschool student IDs"

#18 "Computer errors allow violent California prisoners to be released unsupervised"

#19 "U.S. meat and poultry widely contaminated with bacteria including superbugs"

#20 "Saudi men launch Facebook campaign to whip women who dare to drive"

#21 "Atheist Ads: You Can Live Moral, Meaningful Lives without God"

#22 "Europe to spend £225million on army of 1,000 spin doctors to promote EU"

#23 "$500 Million Obama Administration Program Will Help Kids 'Sit Still' in Kindergarten"

#24 "EL MONSTRUO 2011: The Mexican Drug Cartel's Purpose-Built Tank"

#25 "Girls hit puberty earlier than ever, and doctors aren't sure why"

#26 "Artificial Wombs Will Spawn New Freedoms"

#27 "Twin Girls Born In Single Body with Two Heads In China"

#28 "Giant Wolf Epidemic: Huge Packs Of Giant Canadian Gray Wolves Are Terrifying Idaho Residents"

#29 "Cows make 'human' milk"

#30 "32 Signs That The Entire World Is Being Transformed Into A Futuristic Big Brother Prison Grid"


The "Real" Mega-Bears


May 28, 2011 weekend update

Click to View It's time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

This chart is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. More...






Monday 30 May 2011

Stock Market and Economic Forecast for June 2011


Technical analyst Anthony Jasansky's stock market and economic forecast for June 2011.Just as the Federal Reserve is winding down its $600-billion QE2 monetary stimulus program, the latest releases of U.S. financial data increasingly point to another slowdown in the American and global economies.

Being a technically focused analyst, I generally don’t mull over the numerous fundamental data considered to be leading or lagging indicators for the economy too much. Instead, I prefer to look for guidance to the yield chart of 10-Year U.S. Treasuries.

The global capitalization of the bond market is massively larger than the global capitalization of stocks. The trend and shift in bond yields are a reflection of the assessment of the economic outlook by seasoned professional managers handling trillions of dollars’ worth of debt securities. The bond market is a leading indicator on changes in the economy.

A quick background: the yield of 10-year Treasuries peaked out at 5.3% in mid-June 2007. The stock market subsequently topped out in October 2007 and the recession officially started in December 2007. The yield on the 10-year Treasuries eventually bottomed out around two percent in December 2008, again months before the stock market hit its lows in March of 2009.

Over the subsequent two-and-a-half years, the rebound in bond yields has been as tentative as the economic recovery, all in spite of the Fed’s unprecedented money printing labeled as “quantitative easing” (QE).

Though the stock market has extended its advance well into 2011, the yield of 10-year Treasuries, currently at 3.07%, is well below its post-recessionary high of 4.01% of April 2010. It is quite likely that the intermediate slide of the past three months will take the yield below three percent. I expect that the stock market will eventually head in the same downward direction.

The prospect of a slowdown in the economy has already cooled down the commodity markets, with the CRB Composite losing as much 10% in the last four weeks. That caused the commodity-price-sensitive Toronto and Sydney stock markets to give up as much as eight percent of their April 2011 highs, compared to the four-percent setback in the S&P 500 during the same period.

However, the charts of the major U.S. stock markets since March 2011 have formed what is known in technical analysis as a rectangular formation. Until the price of stocks breaks out decisively from the rectangle, the odds of predicting the direction of a breakout and the subsequent trend are very low. However, according to technical guidelines developed by Robert D. Edwards and John Magee, rectangles are more often consolidations rather than reversal patterns.

Bottom line: stock prices are consolidating and are more likely to advance than decline at this point in the technical picture.


Guest Post: Bankrupt Nations Try To Stop The Future From Happening, Fail


From Simon Black of Sovereign Man

Bankrupt Nations Try To Stop The Future From Happening, Fail

Debt is slavery… or at least indentured servitude of the worst kind. That looming mortgage, the high interest credit card debt, the short-term car loan– these are the forces that keep people from breaking free and taking action.

Ironically, debt begets more debt. According to FinAid, the average US student loan debt for a four-year private university graduate is nearly $36,000, and $24,000 for public. Throw in that first car loan and maybe a mortgage, and suddenly you’re staring at hundreds of thousands of dollars in demoralizing claims on your future income.

At this point, most people figure… ‘hey, I’m already in debt up to my nose, might as well get in up to my eyeballs and buy a new plasma screen on credit.’

Debt is an enormous psychological burden that influences life’s major decisions. It’s why so many people stay committed to jobs that are unfulfilling in cities they detest under conditions they find disheartening. Nobody wants to rock the boat too much… take too many risks and you could lose your job, and hence the ability to make those monthly payments.

This familiar story has been playing out across the developed world for years. This is not an ill, however, that exclusively affects individuals and families. Even at the macro level, debt has the power to subjugate entire nations to the whims of their creditors.

Enter the IMF.

In July 1944, world leaders gathered in Bretton Woods, New Hampshire to be dictated terms of the new global financial system. The US dollar was set as the global reserve currency, and the International Monetary Fund was established to shower the world’s nations with the dollars they needed to participate in this system.

Like most governmental and non-governmental organizations, however, the IMF eventually took on a life of its own.

(The CIA is a perfect example of this; formally established in 1947, the CIA was charged with… wait for it… being the ‘central’ agency to coordinate US intelligence. It grew quickly into its own beast, culminating in the creation of the post-9/11 National Intelligence Directorate. It’s job? You guessed it: being the ‘central’ agency to coordinate US intelligence.)

Over the years, the IMF became the roving economic police force of the ruling class, coercing developing nations to take enormous loan packages they had no hope of paying off.

As a result, the local IMF (or World Bank) representative in developing countries became extremely powerful figures. Leaders in poor countries were so terrified of loan default, the IMF was able to shape policy and allocate national resources as the west saw fit.

Clearly the tables have turned.

By 2011, the IMF’s biggest customers have become ‘developed’ (i.e. contracting) countries like Greece which are relying more and more on the generosity of China. Now with the IMF’s former chief locked up in disgrace for the foreseeable future, the race is on to see who will replace him.

The new order of things is very clear. The western hierarchy of the past is insolvent, and its capital has migrated south and east. Western leaders refuse to acknowledge this reality and are clinging desperately to antiquated institutions like the IMF in order to retain control of a now defunct financial system.

Newsflash: the IMF is only relevant to western leaders who live in the past. French Finance Minister Christine Lagarde’s official bid to become the new IMF chief only shows how pathetic their intentions are. It’s like someone trying to take command of the Titanic as she’s headed toward the ocean floor.

China, the world’s second largest economy, is routinely relied upon to bail out the west… yet it has a paltry 3.65% of the IMF’s voting power. Europe, however, is arguably the most insolvent region on the planet, though it insists on remaining at the helm. Ultimately, the market doesn’t care and has been orienting itself towards the developed world for years.

Little by little we are seeing signs of a revolution in the financial system– grumblings from Zimbabwe about establishing an asset-backed currency, new exchange-traded gold contracts in Asia, more bank wiring routes that bypass New York City, and corporations in the developing world issuing debt on the international market in local currency with ease.

I’ve written extensively that China’s renminbi is being increasingly considered a reserve currency to compete with the dollar and euro. Other developing countries have already entered into swap agreements to accumulate renminbi reserves, and even western companies are issuing renminbi-denominated debt.

There are signs of more liberalized exchange controls all the time; it’s possible for individuals and corporations to hold savings in renminbi through a variety of ways… you can even walk into the New York City Bank of China branch and open an account.

The latest move is American Express’s new renminbi-denominated Travelers Cheques– a ‘cash equivalent’ issued by a non-Chinese financial institution. This is a major step, and its implications are far, fare more important than whichever white person is jonesing to head an irrelevant organization of the past.

Western leaders simply don’t want to accept their loss of primacy; they’ve become enslaved themselves, not only by the insurmountable sovereign debts they’ve accumulated, but by their stubborn refusal to acknowledge the simple reality of a new system they can’t stop and don’t control.


20 Questions Away From Your Survival Retreat


Guest Post: by ‘Be Informed’

I came up with a 20 question and 100 point quiz to those that are considering moving to a new place to help gauge whether the places someone is thinking about is best for them. While this is geared to the survivalist, it is also suitable to test an area and place being suited for the non-survivalist people and their family to relocate to. This also assumes that people and their family have enough money or have pooled money together with others to move and purchase property of some sort. See if it DOES all add up?

Ratings are from 0 to 5 and will be added together on all 20 questions to get a grand total to weigh in to.

For the following questions score the following; 0 for absolutely no, 1 for strong no, 2 for weak no, 3 for weak yes, 4 for strong yes, 5 for absolutely yes.

1. Is the climate you are considering moving to not too hot, not too cold, or is the weather okay enough for you and your family and not going to be a hardship on you and others with you? ________ out of 5 points.

Many people cannot physically take bad weather.

2. Are there good sources of reliable water? This can be from the municipal water sources to clean rivers and streams, ponds, springs, etc.
_________ out of 5 points.

Water is an absolute necessity to live, and if the power is gone and no water comes from the tap, you must have some source of water. Good quality water from city sources is another issue that has to be considered.

3. Is the new location, state or even foreign country, friendly or at least not hostile towards you? _________ out of 5 points.

This is extremely important to not go to somewhere that you are going to be hated. Even in your own country there are places that you just will not fit in because of beliefs, the way you look, whatever. There are places also that are very non-respective to the survivalist mentality, such as very harsh laws against owning guns or prohibiting ‘unsightly’ items to the community such as windmills that generator power.

4. Is there good access to wild food such as natural vegetables and plants, berries and fruit, hunting available? Are there good outdoor activities available most of the year? _________ out of 5 points.

It is always good to have a back-up food source you can get to in case there are no more deliveries to the supermarket and your food supply runs out. It is also nice to be able to keep yourself from indoor boredom by being able to get outside once in awhile.

5. Is the new location a place where you can remain employed or can you be self employed, or do you have enough money to get by for at least 1 year, preferably 2 or more years until either something happens or you can find something to bring money in? ________ out of 5 points.

Having enough money to pay for survival until something happens is essential and should be considered greatly.

6. Is the new area safe or safer from where you are moving, from to natural hazards such as earthquakes, wildfires, tornadoes, hurricanes, even poisonous or dangerous animals? ________ out of 5 points.

Natural hazards are expensive to prepare for and to recover from, even families with small children have to think about the problem of wild animals that can do a lot of damage to small children, even in their own backyards.

7. Are you far enough away from danger spots; high priority military targets to enemy forces, terrorist hot spots, suspect nuclear power plants, toxic waste sites, etc. ________ out of 5 points.

This is not as crazy as it sounds, just look at the Fukushima situation and the possibility of war in the future as examples.

8. Is the new home private enough for you and your family. Are you going to be safe from eyes watching you? _______ out of 5 points.

If you are storing up food and water and other supplies, you do not want too many people knowing this. Besides this, who wants snooping neighbors?

9. Is the new home and property a place you can get out quickly from if you need to, This includes being able to resell the property as quickly as possible if you have to. ________ out of 5 points.

This is something you have to think about, getting out if you have to because you made the “wrong decision” about where to move to.

10. Is your place big enough for you to store food, water, and supplies, and is there enough comfortable room for those people living there not to feel all cramped in? ________ out of 5 points.

Small living for some is all right, but for most it is not fun to be bumping into each other and what you have in the house.

11. Is the new place energy friendly. Can you put up wind power, solar, or some mill type power system driven by water? Is there enough sun for solar, enough constant wind, etc. Also are the costs of regular power and energy you get from companies inexpensive enough? _______ out of 5 points.

A high gas and electric bill can really break the bank, and other sources of self generated power might not be possible in some places.

12. Are the property taxes, state income taxes, and general prices to live cheaper than from where you are moving from? ________ out of 5 points.

Money is an issue until it does not mean anything anymore and the cheaper you go the more of something else you can purchase.

13. Are you far enough from dense populated areas. It should be thought of as a minimum of 50 miles from highly populated areas as a guide to this.
________ out of 5 points.

People considering moving are usually trying to get away from all the problems of modern society, this is getting away from the congestion and highly populated places. Most of the worst problems are in big cities.

14. Are you and your family members psychologically up to the big move and changes to your life styles all of you have been accustomed to. Are you prepared to leave behind friends and family? ________ out of 5 points.

For many people that stay in very undesirable areas they just cannot leave what they are used to behind. This is something to think about, is your life going to be safer and better and “is it worth it”?

15. If nothing happens for a long time where you move to and things are not what you planned for, are you willing to stick it out and stay put for at least awhile? ________ out of 5 points.

Many people leave somewhere too soon because things are not what they expected. There are many survivalists that might come back after a couple of years to the big city because the SHTF has not occurred on their schedule. When you move somewhere it should be kind of a sure thing, otherwise reconsider where you are going. This can also be unprofitable if you sell out at the wrong time.

16. Are the inconveniences such as isolation, long drives to get to the market, interruptions of services such as electricity or communications, and other pains something that you can overcome? ________ out of 5 points.

People that move will often find many of the expected services that they become use to no longer as dependable.

17. Are you and others with you ready and can cope with cultural shock, the differences and transition to what is likely going to be different and perhaps difficult to adapt to? _______ out of 5 points.

This can be a lot more difficult to deal with than people think.

18. Do you and your family and even friends with you actually like and personally feel safer where you’re planning to go to? Call it intuition and insight? ________ out of 5 points.

When you feel good about where you are going it sure helps the move and the switch to a new life.

19. What is the cost of maintaining the property, the physical work involved, how time consuming. For much hard work and high cost put down 0 to for little work and minimal cost 5. Anything between high cost and much work and little cost and work use 1, 2, 3, or 4. _______ out of 5 points.

Someone can take a rundown shanty and turn it into something liveable, but it is going to cost in money and back breaking work. For some people this is something of a challenge and enjoyed, to most it is a major headache.

20. Lastly, is the growing season. For 89 days or less put down 0, for 90-119 days put down 1, for 120-180 days put down 2, for 181-240 days put down 3, for 241-300 days put down 4, and for 301 days or more put down 5.
_______ out of 5 points.

Growing your own food is essential for anyone planning to survive bad times and the longer you can grow food, the longer without frost, the more food you can grow and the more room and time for replanting crops you have that do not succeed at first. A Longer growing season also has to do with the weather, so that you and your family can spend more time outside.

Now add up all 20 of the questions and get a grand total. Now see where your plans to move, rate from the descriptions below.

90-100 points, this is the place for you, go for it.

80-89 points, this is a really good choice and probably you and your family will be able to overcome the minor problems with time.

70-79 points, this has more problems and there are probably a few better places to go, but this would still not be a bad choice.

60-69 points, this is getting into the category in which you should reconsider this choice unless other family members have their sights set on this place. Probably many other places are better rated for you than here.

50-59 points, honestly you can do better for yourself, keep plugging in other places to find somewhere better.

49 points or less, forget it, you and your family can most definitely do better.

This is a guide of course and you can add other important issues, but this should give you a pretty good non biased idea of where you are planning to go. Non biased because you do not know what the end score is going to be. When you are looking for a safe and or better place to live why not aim for the most ideal place you can find and can afford?

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