A Government For The People By The People

The dollar says inflation is coming as its value diminishes with the passing months. US Treasuries say deflation is our main concern as they continue to garner historically low interest rates. How can these markets broadcast polar opposite views? It’s simple: The federal reserve currently controls both markets. The federal reserve, a private bank, which could be argued is actually a private banking cartel, is printing dollars by the hundreds of billions (over two trillion in the last 18 months last time I checked) to buy US Treasuries, support insolvent corporations, and prop up asset prices like stocks and bonds. Why? Because that is the only way for our government to support its current policies of runaway spending on stimulus, bailouts, the war on terror, and to pay the interest on its rising debt. It also serves to devalue the dollar while artificially keeping interest rates low.

Essentially, the US government is borrowing money from the federal reserve, who prints the money and charges interest, which the taxpayer will be held accountable for, and also receives interest from the government for buying the T-bills, which the U.S. taxpayer will be held accountable for. Everyone with me so far?

These are but a couple of examples of how current monetary policy serves to transfer wealth from the public to private interests. Yet, you may argue that the auctioning of Treasury Bills supports our government’s ability to provide infrastructure as a foundation for the economy to function. True, but due to the inability of our government to work within its means (our current budget deficit is well over one trillion dollars for the year...and under the Bush administration we increased our national debt by over six trillion dollars), it must borrow massive amounts of money in order to function. The problem is that there are not enough borrowers to feed our insatiable need to spend. So, instead of tightening the purse strings, and allowing interest rates to rise until borrowers would be willing to take on the risk of owning U.S. Treasuries which, by the way, would contract the economy; the federal reserve and US treasury work together (again the federal reserve is not a government entity, but a private bank!!) and come up with a plan. Let’s print the money we need to buy our own debt, and also funnel money into our banks who can then buy more treasuries, as well as the stocks and bonds of the banks, and retail, and real estate companies. This way, interest rates will stay low, and stocks will go up, and it will look like everything is getting better. Meanwhile, these same corporations we're supporting who own the media, can keep pumping the American public with the message that we are recovering and everything is going to be fine. We’ve Avoided a Disaster, Hurray!

WAKE UP AMERIKA!!!

The US Government is not a government by the people for the people. It is an entity that is controlled by and supporting the interests of private corporations. The US government is currently a government of the corporation for the corporation. And as such it is printing money, which we and our kids, and our grandkids and their grandkids will pay interest on. That is if the U.S. doesn’t go bankrupt first, in which case we will be sending our kids off to wars to fight for who gets a slice of the American pie. Personally, I’d rather not go there.

Well, what can we do about that?

As far as I can tell, our representatives are still elected officials who fear losing power by being voted out of office.

1: Make noise!! Barrage your representatives in the senate and congress with phone calls, emails and letters to AUDIT THE FED!!! See the column to the right for contact information and a form letter to send to your representatives. Do it now. Do it tomorrow. Do it the next day, and the next and so on and so on. Tell your friends and family. Tell them to tell their friends. Just ask yourself, Do I value freedom? Does my society feel free? Do I believe that our freedoms are slipping away? If so, lose the complacency, and take action.

2: Transfer your money from large financial center banks. Put your money in local credit unions. Pay off credit card balances in full each month or better yet use a debit card from your local credit union. This strips power from the large banks, and redistributes it to local entities.

3: Buy from small businesses. Stop feeding money to Wallmart, Target, Costco, Best Buy etc…. and support local businesses, farmers, and food coops. Use their accessibility to talk to the owners/managers about where the business does their banking, and encourage them to also support local businesses by depositing their money at credit unions/local banks. Get viral with this shit, or my belief is that our children will be inheriting a much different set of rules than those that we have been fortunate enough to take for granted.

Fubsy

Joe Mo Fo

I love this guy! He's awake.
Beware: An F-Bomb for every dollar in circulation.

Weekly Links

Again, some tasty tidbits to digest.

Dan D, The Fundamental View: Democrats Spring to Action
http://thefundamentalview.blogspot.com/2009/10/democrats-spring-to-action.html
A brief commentary on the impetus behind Obama’s announced move to put tighter regulations on Wall Street and banks. Oh well, it’s a step in the right direction, although I agree with Dan, the motives are painfully transparent, even if the government is not. Politics are an incredible study in human avarice, greed and deception, IMO.

Dan D, The Fundamental View: Barack Obama-Worst Poll Rating Drop in 50 Years
http://thefundamentalview.blogspot.com/2009/10/barack-obama-worst-poll-rating-drop-in.html
And this prior post providing one explanation of the moves that follow a drop in popularity. Change, my ass. This should have been well in the works. Agenda item #1. Instead, Obama waits until the public’s frustration with his administration’s support of Wall Street via Geithner, Sommers, and Bernanke shows up in the polls. Yuck.

Tyler Durden, Zero Hedge: AG Goes Postal on Caruso Cabrera
http://www.zerohedge.com/article/california-ag-goes-postal-caruso-cabrera
This Rocks!! CNBS is nothing but a wall street cheerleading squad, and here they get called out by AG Brown. I love it.

Barry Ritholtz, The Big Picture: Existing Home Sales Fall in September.
http://www.ritholtz.com/blog/2009/10/existing-home-sales-fall-in-september-09/
Well folks, more bogus data by the mainstream data sources, in this case the NAR who claimed that home sales were up 9.4% in September. How do these idiots get away with their spins? Easy, Americans are still lolled into complacency, or confused into paralysis.

The Naked Capitalist: How Well has the Federal Reserve Performed for America?
http://www.nakedcapitalism.com/2009/09/5324.html

Paul B Farrell, CBS Marketwatch: The Death of the Soul of Capitalism
http://www.marketwatch.com/story/americas-soul-is-lost-and-collapse-is-inevitable-2009-10-20?pagenumber=2
A scary and all too familiar tome on how America now finds itself past its prime, and on the downhill slope to the collapse of our capitalist society. It is hard to read this type of commentary, but I believe it is prudent to do so.

Seven Lies in Two Minutes

Why do I post this? Am I yearning for the days of the Bush administration? Hell no, but I am not illusioned about our current Presidential administration. Change is what America voted for. What we got is much of the same. Shallow promises, and a government working for the interests of big business.

New Baby Due New Years...Exciting!

Death of the Soul of Capitalism

Paul B Farrell, CBS Marketwatch: The Death of the Soul of Capitalism

Paul B Farrell writes a scary and increasingly familiar tome on how America now finds itself past its prime, and on the downhill slope to the collapse of our capitalist form of society. It is hard to read this type of commentary, but I believe it is prudent to do so.

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Jack Bogle published "The Battle for the Soul of Capitalism" four years ago. The battle's over. The sequel should be titled: "Capitalism Died a Lost Soul." Worse, we've lost "America's Soul." And, worldwide, the consequences will be catastrophic.

That's why a man like Hong Kong contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: "The future will be a total disaster, with a collapse of our capitalistic system as we know it today."

No, not just another meltdown, another bear-market recession like the one recently triggered by Wall Street's too-greedy-to-fail banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great "American Economic Empire" for 233 years will collapse, a total disaster, a destiny we created.

OK, deny it. But I'll bet you have a nagging feeling that maybe he's right, that the end may be near. I have for a long time: I wrote a column back in 1997: "Battling for the Soul of Wall Street." My interest in "The Soul" -- what Jung called the "collective unconscious" -- dates back to my Ph.D. dissertation, "Modern Man in Search of His Soul," a title borrowed from Jung's 1933 book, "Modern Man in Search of a Soul." This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.

Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav's "The Seat of the Soul," Thomas Moore's "Care of the Soul" and sacred texts.

But for Wall Street and American capitalism, use your gut. You know something's very wrong: A year ago, too-greedy-to-fail banks were insolvent, in a near-death experience. Now, magically, they're back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing federal debt are killing taxpayers.

Yes, Wall Street has lost its moral compass. It created the mess, but now, like vultures, Wall Streeters are capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.

Here are the Top 20 reasons American capitalism has lost its soul:

1. Collapse is now inevitable
Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global "wars, massive government-debt defaults, and the impoverishment of large segments of Western society." Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is "inevitable."

When? He hesitates: "But what I don't know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000." But the end is inevitable, a historical imperative.

2. Nobody's planning for a 'Black Swan'
While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think "Black Swan" and read evolutionary biologist Jared Diamond's "Collapse: How Societies Choose to Fail or Succeed."

A crisis hits. We act surprised. Shouldn't. But it's too late: "Civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power."

Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately "one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions."

Sound familiar? "This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians," thus setting up the "inevitable" collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.

3. Wall Street sacked Washington
Bogle warned of a growing three-part threat -- a "happy conspiracy" -- in "The Battle for the Soul of Capitalism:" "The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised."

But since his book, "Wall Street America" went over to the dark side, got mega-greedy and took control of "Washington America." Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.

Who's in power? Irrelevant. The "happy conspiracy" controls both parties, writes the laws to suit its needs, with absolute control of America's fiscal and monetary policies. Sorry Jack, but the "Battle for the Soul of Capitalism" really was lost.

4. When greed was legalized
Go see Michael Moore's documentary, "Capitalism: A Love Story." "Disaster Capitalism" author Naomi Klein recently interviewed Moore in The Nation magazine: "Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don't put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control."

Greed's OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: "Capitalism does the opposite of that. It not only doesn't really put any structure or restrictions on it. It encourages it, it rewards" greed, creating bigger, more frequent bubble/bust cycles.

It happens because capitalism is now in "the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets." Yes, greed was legalized in America, with Wall Street running Washington.

5. Triggering the end of our 'life cycle'
Like Diamond, Faber also sees the historical imperative: "Every successful society" grows "out of some kind of challenge." Today, the "life cycle" of capitalism is on the decline.

He asks himself: "How are you so sure about this final collapse?" The answer: "Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline." Success makes us our own worst enemy.

Quoting 18th century Scottish historian Alexander Fraser Tytler: "The average life span of the world's greatest civilizations has been 200 years" progressing from "bondage to spiritual faith ... to great courage ... to liberty ... to abundance ... to selfishness ... to complacency ... to apathy ... to dependence and ... back into bondage!"

Where is America in the cycle? "It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical 'society cycle.' ... The U.S. is somewhere between the phase where it moves 'from complacency to apathy' and 'from apathy to dependence.'"

In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.

15 more clues capitalism lost its soul ... is a disaster waiting to happen
Much more evidence litters the battlefield:

1.Wall Street wealth now calls the shots in Congress, the White House

2.America's top 1% own more than 90% of America's wealth

3.The average worker's income has declined in three decades while CEO compensation exploded over ten times

4.The Fed is now the 'fourth branch of government' operating autonomously, secretly printing money at will

5.Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits

6.Bill Gross warns of a "new normal" with slow growth, low earnings and stock prices

7.While the White House's chief economist retorts with hype of a recovery unimpeded by the "new normal"

8.Wall Street's high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee

9.401(k)s have lost 26.7% of their value in the past decade

10.Oil and energy costs will skyrocket

11.Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world's reserve currency

12.In two years federal debt exploded from $11.2 to $23.7 trillion

13.New financial reforms will do little to prevent the next meltdown

14.The "forever war" between Western and Islamic fundamentalists will widen

15.As will environmental threats and unfunded entitlements

"America Capitalism" is a "Lost Soul" ... we've lost our moral compass ... the coming collapse is the end of an "inevitable" historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.

Faber is uncertain about timing, we are not. There is a high probability of a crisis and collapse by 2012. The "Great Depression 2" is dead ahead. Unfortunately, there's absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative

Feel Good Post

Healthcare Reform: Why Now?

This from CommonDreams.org

A perspective on Healthcare Reform that begs consideration. Why now? I see the reform movement as a huge distraction from what America needs, which is to decrease spending and focus on cleaning out the hubris on Wall Street, which is continuing to run rampant (even pick up steam), while our democratic society is threatened on every front.

Yes, our healthcare system is a crock. So, is our government. Putting congress in charge of revamping healthcare now allows them to ignore or put aside the more pressing and revealing issues of how Wall Street gained control of US policy. Hint, look toward the Federal Reserve.

Please read.

http://www.commondreams.org/view/2009/10/14

Stock Market Fuel

Why is the Stock Market Rallying? This is an excellent explanation. Although a better title would have US stock markets disconnected from fundamentals. Reality is that the Fed is flooding the markets with cash. So of course, markets are rallying. They are being fed Fed fuel.

John Browne: US Stock Market Disconnected from Reality, 321Gold
http://www.321gold.com/editorials/browne/browne101509.html

Dollar Breaking Support?

It looks like the dollar is breaking down below its previous support level of 75.89. This breakdown indicates continued decreasing demand and increasing supply, and lower prices ahead. If this occurs, commodities prices will continue their upward trajectory. This would benefit gold, oil and agriculture. This sets up a relatively low risk trade. With the dollar closing below 75.89 (currently 75.82) I will buy UCD (Ultra commodity ETF) with a stop to trigger if the dollar reverses course and closes back above 76.00.

Monday Links

There is so much material out there on the state of the US economy that I can't wait until the weekend to post it. Absorb this.

Barry Ritholtz: Getting Better?
http://www.ritholtz.com/blog/2009/10/getting-better/
Three paragraphs regarding stats on private investment in business expansion, and business spending.

Hoisington Investment Management: Quarterly Review and Outlook Q3 2009. The Big Picture.
http://www.ritholtz.com/blog/2009/10/quarterly-review-and-outlook-q3-2009/
Excellent article on the Ponzi nature of the financial system. Touches on the effects of unprecedented levels of debt to GDP and the promise of solving a crisis of excess credit by incurring more debt.

Karl Deninger: Is the Dollar Doomed? The Market Ticker
http://market-ticker.org/archives/1507-Is-The-Dollar-Doomed.html
Karl offer some math that shows that the US debt has doubled appx every 8 years, meaning that every 8 years more debt has been taken on then during the entire history prior to that period. That is exponential growth…of debt! He proposes that it can’t go on forever.

The Fundamental View: State Revenue Shortfalls Should Underscore There is No Recovery.
http://thefundamentalview.blogspot.com/2009/10/state-revenue-shortfalls-should.html
Targets decrease in state revenues as sign that recovery is not based on economic growth.

The Fundamental View: A Touch of Reality from Art Cashin
http://thefundamentalview.blogspot.com/2009/10/touch-of-reality-again-from-art-cashin.html
Art offering his opinion on the continuing rise of asset prices as reflected in the US stock market.

What is a dollar?

Rather than save this for the weekly links, I thought I'd post it now since I see the issue of currency devaluation as a cornerstone of the continuing credit crisis in our country. Bill Fleckenstein has been a notorious bear for a decade, warning against the tech bubble, the real estate bubble, and the credit bubble. With articulate precision he was right in all three cases. Will he be right this time? I don't know, but my premises are echoed in his article (link below) about the dollar, and its lack of inherent value (actually, the only thing that gives the dollar value is the ability of the U.S Government to back it, and the of the citizenry that the US Government will continue to do so). I have posted several times regarding my concerns pertaining to the increasing debt load of our federal government, and the increasing pace at which the Federal Reserve is printing money. To summarize my understanding of the risk of the increasing and unprecedented national debt, there are only three possible outcomes to rid the nation of this debt burden:
1) An increase in national productivity that creates revenues (and thereby taxes) through demand for a suite of products.
2) Default.
3) Monetize the debt, or in other words print enough money to pay it off....at this point 12 trillion and growing, not including the need to fund social programs like social security, medicare, and possibly a new public healthcare system.

I don't know folks. It seems to be the nature of the U.S. citizenry to assume all will end well. It seems to be my nature to disagree. I really welcome comments on this one.

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/your-dollars-are-just-monopoly-money.aspx

Fubsy

Trading Ideas

This chart is a thing of beauty. A break out to new highs after 18 months of consolidation. Fortunately, as I turn on CNBS, and listen to the analysts marching on to the screen, I hear them mostly calling for Gold to be frothy, and due for a pullback. "I would buy, but only at lower levels" is a common mantra. Well, from what I see, gold has a ton of support beneath its current price, and fundamentally speaking, it looks like the Fed wants to print dollars until we are buried in them. Also, looking at gold's cyclical nature, it looks like we are just two weeks out of a weekly cycle low, and have approximately three months or more until gold is due to reach its half cycle high. So, my guess is that they may be waiting a while for those lower prices to occur. For me, the risk/reward ratio is favorable. The one caveat is if the dollar should turn around and sustain some strength. For my money, I don't expect that until we test the March 08 lows a good 5 percent down from here. By that time, gold will be much higher than it is today. I am holding my positions in GLD, GDX, and SLV.

GDX remains in an uptrend. One of the most difficult things to do as a trader is nothing. When a trend is clearly visible, that is the thing to do. Just sit still and take the ride. My only moves will be to continue to add to positions at swing reversals out of corrections.

The bonds are beginning to change their tune. Investors have been buying corporate bonds and US Treasuries consistently for six months. (In the case of Treasuries the investor has been the Federal Reserve who is running out of their self-alotted 1.2 trillion dollar booty. I suspect they will simply turn on the printing presses again if interest rates continue to rise without the support of the Fed's buying spree.) Lately, there has been increasing supply and decreasing demand. It looks like there is a decent amount of supply of LQD waiting to be sold at the 105 to 107 level. And TLT faded around 100. We are now seeing a pattern developing of lower highs and lower lows. Watching LQD and TLT, and will sell short with any strength that reverses below previous highs.

It is interesting that the highest risk bonds, Junk Bonds (JNK), and High Yield Bonds (HYG, not shown) have continued to show strong demand. In fact they are currently selling at levels not seen since the top of the market in late 2007. Apparently the appetite for risk is back. Could it be some of the 2.2 trillion dollars the Fed has printed over the past year and change has found its way to the banks? And that they are taking this money for which they are currently paying how much interest...Oh yeah, Zero! and rolling the dice with high yield intstruments like Junk Bonds? Go figure. The more things change, the more they stay the same. Another head scratcher. Sorry people, this really can't end well.

And here, finally we have the small cap index. A group of 2000 of the most risky, and also most promising companies in America. Notice how they have returned appx 85% since March. As I wrote last week, this index is enjoying a vertical rise, and is heading into massive overhead resistance. I will short this on a swing reversal with a stop above 65.00. I consider this to be a high risk trade as I'm basically betting against the power of the federal reserve to prop up asset prices. Why? Well, I know that one day commercial traders who are taking the long side of the market will eventually reverse course, go short, and trap unsuspecting retail investors who will remain long far after the top has passed. It is the game of greater fools. I suspect that the moment is coming some time between now and the New Year, and I'm willing to lose small amounts on a few poorly timed bets in order to catch the top when it finally comes so I can ride the downtrend for some meaningful gains.

Thanks for reading!

Fubsy

Swine Flu Vaccine

Some info on the swine flu vaccine from Meryl Nass, M.D. This was first found on Naomi Wolf's Facebook page.

http://anthraxvaccine.blogspot.com/2009/10/why-am-i-concerned-about-safety-of.html

Weekly Links

Some of the more interesting articles I have seen this week.

Barry Ritholtz, The Big Picture: QOTD “The Banks Run the Place”
http://www.ritholtz.com/blog/2009/10/qotd-the-banks-run-the-place/
A Couple Democratic congressmen telling it like it is.

Mish Shedlock, Global Economic Trend Analysis: Overly Optimistic Consensus Plays Greater Fools Game Again
http://globaleconomicanalysis.blogspot.com/2009/10/overly-optimistic-consensus-plays.html
Mish looking at analysis of the stock market suggesting that the S&P 500 is perhaps, overvalued. My only question is how long until stocks will be priced based on valuation rather than the amount of money made available to banks by the Fed??? A good read.

The NY Times: Shoppers Shifting Priorities, An Interactive Graphic
http://www.nytimes.com/interactive/2009/10/03/business/metrics-retail-sales.html
This was found at The Big Picture. It offers a quick visual representation of retail trends over the past six years. In other words, how are shoppers spending there money, or not.

Richard Russell, Dow Theory Letters: The Questions are Endless, 321Gold http://www.321gold.com/editorials/russell/russell100909.html
What happens when the fed prints an endless supply of dollars? This is one perspective.

Barry Ritholtz, The Big Picture: A composite chart combining 29 secular bear markets.
http://www.ritholtz.com/blog/wp-content/uploads/2009/08/secular-bear-markets.png

Wall Street Journal: Fed Frets About Commercial Real Estate
http://online.wsj.com/article/SB125487629495569591.html#articleTabs%3Darticle
Banks are not taking losses on commercial real estate loans. Is this a repeat of the debacle the housing crisis caused on financial institutions, or worse? How much will the Fed print to keep the banks solvent once these losses suck more liquidity from the system? Green shoots, my ass. The only green shoots are the two trillion green backs that have been printed in the last year.

ETF Corner: Hope Running Wild
http://www.etf-corner.com/markets/2009/10/spy-hope-running-wild-.html
Great chart and commentary on why the recent strength in U.S Stocks fits the profile of a bear market rally. There are many other reasons. The question in my mind is will the Fed be able to print enough dollars to continue to provide liquidity to fuel a rise in stocks, or will economic forces (a weary consumer, weak job market, decreasing lending by banks to consumers and small businesses, collapse in the value of banks commercial real estate portfolios, rise on commodity prices like oil etc…) begin to take over.

Cornell University Video Series: Advice for President Obama, An Economics Panel Discussion
http://www.cornell.edu/video/details.cfm?vidID=410&display=preferences

Audit the Federal Reserve

Hey folks!

This is a note I sent to the House Financial Services Committee in support of H.R. 1207, Ron Paul's proposed bill to audit the federal reserve. Below the note, please find the link to send your own electronic message.

Fubsy

Dear House Financial Services Committee,

I support H.R 1207. If the Federal Reserve has the right to print dollars that affect U.S. citizens in myriad ways, I believe that U.S citizens have the right to know where that money is spent. I am encouraging my friends, collegues, and relatives to vote against any representative in congress that votes against H.R 1207. Amazingly, I have not spoken to anyone who disagrees. My gauge of the sentiment of the public is that there is a growing feeling of distrust of government officials and the Federal Reserve. THerefore, my suggestion to you is that you represent the people, not the banks. It's your future, as well as ours. I for one, feel intensely energized by misrepresentation in congress.

Sincerely,

Mitch Block
School Psychologist
Eureka, CA

http://financialservices.house.gov/contact.html

Story of the Day...Gold Makes New Highs...or not?

Having accumulated positions in GLD, GDX, and SLV for the past few months, I'm pleased that gold broke out today to all time highs relative to the dollar.

The question on many people's minds now is, "What next"? My view is that there are enough skeptics of gold to keep it rising for some time to come. As I stated in Sunday's post, Trading Ideas For the Week http://wallstreetwatchdawg.blogspot.com/2009/10/trading-ideas-for-week.html, I believe that gold is in a secular bull market dating back to 2001, and that secular bulls end in one way, and one way only: With the public becoming irrationally exuberant about the possibilities of wealth generation through the asset in question. In other words, the common thought at the end of this gold bull will be that gold will never go down again. "This time is different" will be the theme of the day. Cab drivers will be buying and selling gold, as will soccer moms, school teachers, grocery clerks, doctors and lawyers. Unfortunately for them, it never is different, and the public's mass immigration into gold, and the popular delusions that accompany it, will be the sign that it is time to look for an exit. Until then I will grab the bull by the horns and ride, adding to positions on swing reverals upwards as gold bounces out of it's cyclical bottoms.

I added to positions today as Gold not only broke through long term resistance, but is also just one week removed from a weekly cycle low. Note that gold has had a consistent rhythm in its weekly cycle of appx 21 to 26 weeks between lows. Thus, I see plenty of support for a sustained move higher. My target for this leg of the advance, between now and next spring, is approximately 1340.

Here's the real chart of gold's current value in inflation adjusted terms.

http://www.ritholtz.com/blog/wp-content/uploads/2009/10/gold-REAL-dollars.gif

Looks bullish to me.

Fubsy

Treasury Department Endorses Lying to the Public

This was found at Zero Hedge from Daniel Hoffmann of Wall Street Cheat Sheet. A good read chronicling yet another example of how the US Government rationalizes half truths, manipulation, and out and out lying. It's funny. when I talk about this with friends I often get a response in the neighborhood of, "That's just the way our government works", or "the people don't want the truth". To which I say, I'm a person and I want the truth. Is it a culturally accepted fact of life that our government is feeding us lies, so they can run their agendas without interference from the public? Pardon my French, but FUCK THAT!! Here's the link.

http://www.zerohedge.com/article/guest-post-treasury-department-endorses-lying-public

Trading Ideas for the Week

Here are a few compelling charts.

This chart of investment grade bonds suggests a recent change in the supply/demand balance for corporate paper. The steady rise of LQD over the past six months reflected an increasing risk appetite by bond investors. There were virtually no meaningful ticks to the downside over this period. The last two days have seen accelerated selling with increased volume suggesting that large positions are being liquidated, and perhaps the appetite for risk is in the process of decreasing.

Although this may lead to a change in the intermediate, or even long-term trend, I am especially risk averse trying to time shifts in market direction, as it often takes many attempts before a true top (or bottom) materializes. So, I will risk less than 1/4% of my portfolio with this position.

I will short LQD on it's next rally with a swing day reversal with a stop 1% above the high of the move. The number of shares will be determined by the distance between the entry price and the stop price.
Maximum risk: 170.00.

I will add to the position with a series of lower highs and lower lows.

As is stated in the chart, the Russell 2000 has gained appx 85% since the March bottom. My guess is the easy money has been made on the long side. The risk is shifting to the bulls. Anyone holding a position from a transaction occurring between Jan 06 and October 08 represents an eager seller, creating resistance at current levels. I'm not taking a position until one of two things happen: 1) The market fins a bottom, reverses upward, makes a lower high and turns back down breaking through the recent low, which would create a low risk entry, or 2) it rises toward the 62.00 level at which point I will short with any swing day reversal (a close below the low price of day the that the market makes its high for this move) with a stop 1% above the high price of the move.

The utilities have been rebuffed at the 30.00 level repeatedly. This implies a pool of sellers at this level. I'm initiating a small short position (100 shares) with a stop at 30.10.

Maximum risk: 160.00

Again, when I play a trend reversal I always start small as the area of least resistance is in the direction of the current trend. On the other hand, if the trend reverses, the greatest gains occur from being in the move from the beginning. My belief is that a lot of risk has been taken out of the short trade from the move made since March. So, I'm using tactics to get into short postions, and will continue to do this with tight stops until the market turns. I also believe that when the trend shifts downward there will be opportunities to add to the positions while decreasing risk.

There is one asset class that remains in a secular bull market: Gold. Looking at the chart dating back to 2001 it is obvious that the primary trend for gold is up. Gold has been consolidating between 660 and 1000 over the past 18 months. It has traded above the 850 range for most of this consolidation period, which suggests continued buying interest, and not a reversal in it's trend.

850 was the high in 1980. Interestingly, many people believe that gold is expensive given that it's trading near its all time high around 1000 bucks. I disagree. When adjusted for inflation, the high in 1980 would have been closer to 2350. Keep in mind that in 1980 the average new car sold for appx 6000. We are currently at less than half that valuation. I think gold has a long way to go. I have been accumulating small poositions between 850 and 950. I'm also accumulating Silver (SLV) and Gold Miners (GDX).

If I'm correct, and gold is in a secular bull market, I only need to ask myself one question:

How do secular bull markets end? Looking at any previous secular bull dating to the beginning of markets: real estate, tech stocks, industrials, railroads, tulips etc...one will notice that the bull ends when the general public believes that this time is different, and the asset in question will never go down. So, I will be a buyer of precious metals and miners until the time comes that I over hear grocery clerks, cab drivers, and moms at the park talking about buying or better yet, beginning their new venture as gold dealers. My guess is that the weighting of gold in the average portfolio at that time will exceed 25% and many people will have portfolios made up exclusively of gold. That's when I will watch for signs of the uptrend breaking.

Fubsy

Weekly Links

Tyler Durden, The Fed Rightfully Believes that Protecting Goldman is “In the Interest of the US Economy and the US Public”, Zero Hedge
http://www.zerohedge.com/article/fed-rightfully-believes-protecting-goldman-interest-us-economy-and-interest-public
A caustic and brilliant comparison of the extraordinary promise of open/transparent government by Barack Obama, and Fed chief Ben Bernanke’s appeal of Bloomberg’s lawsuit directed at the Fed’s lack of disclosure related to the spending of taxpayer monies. Awesome!!

Mac Slaveo, Crash/Collapse Dead Ahead. SHTF.com
http://www.shtfplan.com/marc-faber/caution-crashcollapse-dead-ahead-say-faber-rogers-dent-and-celente_10022009
Chronicles commentary by Marc Faber, Jim Rodgers, Gerald Celente and Harry Dent on the coming collapse of stock prices.

Karl Deninger: Is It Time to Recognize Reality? The Market Ticker
http://market-ticker.org/archives/1473-Is-It-Time-To-Recognize-Reality.html
Commentary on a variety of current economic issues/beliefs. Worth a read

John Browne, A Somber G20, 321Gold
http://www.321gold.com/editorials/browne/browne100109.html
John Browne offers his perspective on the G20 summit based on direct observations. He is the senior market strategist for Euro Pacific Capitol, Peter Shiff’s money management firm. Is he biased? Of course. We all are. An interesting perspective, nonetheless.

Eric Sprott, David Franklin: Safe Haven no More, Sprott Asset Management
http://www.sprott.com/Docs/MarketsataGlance/09_09_MAAG.pdf
An article addressing US Debt and dollar devaluation.

Dylan Ratigan: Why Would We Let Them Rig the Game. Huffington Post
http://www.huffingtonpost.com/dylan-ratigan/why-would-we-let-them-rig_b_302480.html
Dylan’s view on the healthcare system and reform.

Unemployment Numbers: Worse than expected...Better than Reality?

Whenever government data comes out, there are numerous research institutions that pull the numbers apart and present data that is significantly different than the government reported, but the numbers suggested by the following three articles are so far askew from the government reported numbers, I can only scratch my head and wonder, what is real? I will do more investigation and share my findings over the next couple weeks.

From Jim Quinn at The Burning Platform: The Plan is Unraveling-Unemplyment Figures are a Fraud.
http://theburningplatform.com/groups/quinns-daily-dose-of-reality/discussions/the-plan-is-unraveling-unemployment-figures-are-a-fraud

From Mish Shedlock at Global Economic Trend Analysis: Huge Downward Jobs Revisions Coming.
http://globaleconomicanalysis.blogspot.com/2009/10/huge-downward-jobs-revisions-coming.html

From Barry Ritholtz at The Big picture: The More You Dig Into the Numbers, the Worse They Get.
http://www.ritholtz.com/blog/2009/10/the-more-you-dig-into-the-numbers-the-worse-they-get/

Punk BBQ

From 1982. My brother, cousin and a couple friends rocking out in multi-media way ahead of their time. Good times...Love it!!

Housing...Fair Value??

The following chart is one of the most compelling reflections of the credit bubble that I have seen. It was published by Robert Shiller, and shows the average home price adjusted for inflation from 1890 to the present. The chart shows that that although housing values have decreased by some 30% since 2006 they remain above the highest relative value of any period prior to 2002.

With all the emphasis that the government and federal reserve are putting into stabilizing home values, including purchasing 1.2 trillion dollars worth of risky mortgage backed securities (bundles of debt backed by mortgages as collateral), providing an $8,000 refund upon the purchase of a home, offering loan modifications to underwater home owners, providing FHA loans with 3% down, and remarkably, often for principal greater than the assessed value of the home being purchased, I have the following questions:

Is the housing market ready to be stabilized?

Wouldn't it make the most sense for the market to return to historic valuations?

What would a swing to historic valuation look like following the most massive bubble in housing, and arguably, credit over the past 110 years?

Doesn't it seem feasible that housing prices would not only return to mean valuations, but possibly even mirror the spike up with an exaggerated devaluation of home values as excess credit is purged from the system?

If home values do come back to Earth, what will all the incentives aimed at decreasing inventories, boosting consumer sentiment, and jump starting the credit markets really promote? To my thinking, just the opposite. People getting into these new mortgages may again find themselves under water. If they do, this will likely lead to another round of loan defaults, foreclosures, and the tightening of consumer and lender purse strings. Not to mention that in this scenario the stimulative efforts of our government pertaining to the housing sector will add to the weight of already unprecedented US debt relative to economic production.

A grim scenario, but based on the chart, and our as of yet unpurged credit markets, one with reasonable potential.

Fubsy