Friday, July 30, 2010
Saturday, July 24, 2010
Ergo the system is destined for collapse for the Fed will have to print money to keep the checks coming by 2042 and by some estimates as shown in the graph above even less.
Working hard for a company is not the norm any more. I worked for 20 years for my first company then 3.5 years before the next on closed and 3.5 before the next one drove all the good people out. I was saving all this time and as a result I am not and will never be homeless. I have no mortgage, no car payment and no installment debt as all. I pay off my credit card in full every month.
Well the problem is they didn’t learn about money. They didn’t know where it came from or who controlled it. To them investing was leaving it all up to the company pension manager (if they were lucky enough to have one) or dumping money in a mutual funds in a 401k plan that they did not understand. So as everyone was tapping their home equity as if an ATM machine was attached to their home they never imagined the frightful reality that would soon hit them like a 2x4 to the head.
Soon they found that they had lost nearly half of their 401k money, the company they worked for was sold and gutted and the pensions they so took for granted were reduced or paid out in a lump sum. Then the IRS would take its 40% for early withdrawal and all of a sudden the "Golden Years" were not as attainable.
The whole mess went worldwide so Americans weren’t the only sheep that were sheered.
Now let’s get to investing. I started investing in precious metals in 2008 and have since done well. I cut my teeth on investing at the wrong time January 2009. I was gun-shy from the early losses as I really didn’t understand how to invest. I wasted hundreds in brokerage fees getting in and out of positions based on emotion. Then when the market changed direction in March, I got it all back. I bought a variety of companies, but I was focused on the mining industry. I learned how to do rudimentary charting and mostly did quick trades taking profits.
What have I learned from all this? That the markets are fickle and many manipulations go on behind the scenes and this I cannot control. When you decide to invest have a plan. One to get in and one to get out. Patience is a virtue, but don’t marry your investment. Keep an eye on the tape and get when the getting is good. Don’t worry about the high frequency traders with their fancy algorithms that make up most of the market. You don’t even come on their radar. They are looking to take down millions and are mostly competing against each other.
Don’t worry about the government officials as they are bought and paid for. The President is nothing more than a figurehead and has very little real power. He is kept in a cocoon and fed numbers that I am sure he does not understand any more than the previous one did. So I am not angry at the politicians. I just don’t see them as the real threat.
The real power is the To Big To Fail Banks. JP Morgan is at the top of the food chain. There are no sovereign countries, there are just peoples who are indebted to the banking cartels.
Saturday, July 17, 2010
Thursday, July 15, 2010
Sunday, July 11, 2010
Thursday, July 8, 2010
Railroad Traffic: "Carloads in June 2010 were up 15.8% from June 2009 but down 11.8% from June 2008. Weekly average of 278,312 was down from last month (288,419) and from April (294,758)" This is not the direction they want this to be going. I include this because it's a non-government statistic (and thus more reliable) and is a pretty good indicator of how the real economy is doing. The weekly average was at about 325,000 in Sept 2008 and 343,000 in July 2006, but up from a Lehman-era low in May 2009 of 248,000.
Credit Markets: "The latest consumer credit number continues the decline we have seen in recent months, plunging from $2424.4 billion in April to $2415.3 billion in May, a $9.1 billion decline, or 4.5% annualized, on consensus of $2.3 billion. Yet the biggest stunner was the April revision which was whacked from +$1 billion to a revised -$14.9 billion! In other words, there has been a $24 billion decline in consumer credit in the past two months. The biggest hit was, as usual, experienced by revolving credit accounts, which fell by a 10.5 annualized rate to $830.8 billion" http://www.zerohedge.com/article/consumer-credit-plunges-may-april-revised-much-lower-government-only-marginal-lender-two-mon Then we come to the M3 "money supply" numbers.. and here we must say that the Gov't stopped printing these numbers a few years ago, but several sites use the same forumlas to keep up the numbers. The Gov't publishes what's known as the M2 money supply numbers, which tell a completely different story. The M3 numbers are showing deflation, which is to say a slow but sure decline in the money supply: "On 7/2 money supply was $13.353 tillion. On 6/25 money supply was $13.546 trillion. On 6/18 money supply was $13.660 trillion" While these are not drastic falls in money supply, it's quite obviously going in the wrong direction: http://nowandfutures.com/key_stats.html The M2 numbers are as follows: "May: $8.580 trillion. April: $8.498 trillion. March: $8.526 trillion. Feb: $8.550 trillion" June's numbers have yet to come out, but overall the M2 numbers have been around $8.4 and $8.6 trillion pretty consistently since May 2009: http://www.federalreserve.gov/releases/h6/current/
Retail Sales: "The US Census Bureau today announced advanced estimates of US food and retail sales for May were $362.5 billion, down 1.2% from the previous month, but 6.9% higher than May of 2009" Again going in the wrong direction. June's numbers will come out in a few days. Remember that retail sales represent about 2/3rds of the US economy, and so this is a vital statistic. Next time I do this monthly report I'll wait until this number comes out because of it's importance. http://www.census.gov/retail/marts/www/marts_current.pdf
Overall: We're doing better than in early 2009 on nearly all counts, but not nearly as well as 2008. These last reports seem to indicate that deflation is gaining momentum and the economic recovery has stalled. June's retail report will be of vital importance; my guess is that it will be down from May's numbers.
Update 8am: Putting in an order to "sell" one Euro at $1.2650. It seems that the rally has stalled, and I'm still of the belief that parity with the USD is only a matter of time.
Update 6pm: "Sold" one Euro at $1.2650. This is added to the two copper positions I maintain.. "short" one contract from $3.07 and "short" one more from $3.02.
Monday, July 5, 2010
Sunday, July 4, 2010
On to today's subject.. the catastrophic state of European banks. Throughout most of the 20th Century, US banks were leveraged at 10-1 (that is, ten dollars in loans for every dollar in the vault). Therefore, if one tenth of the bank's loans went belly up, the bank is toast. In the 1980s, with the benign neglect of Alan Greedspan, banks leveraged themselves ever upward.. resulting in a leverage ratio at some big banks at 25-1.. and this ratio did not include the credit default swaps they had written. This led to mortgages and credit cards being handed out to anyone with a pulse.. with predictiable results. Sept 2008 nearly crashed the US banking system, thanks to this wreckless lending.
The European banks, not to be outdone by their Yankee cousins across the pond, leveraged themselves up even further.. in some cases sixty and seventy to one, nevermind credit default swaps. Worse, much of these loans ($1.7 trillion) were to Eastern European countries, who's political and economic stability were shaky. Worst of all, were also given to loaning huge sums of money to other EU banks, thus ensuring that should one go down, it would very likely take down others with them because of these loans as well as CDS's. For example, America's largest bank, Citibank, has roughly $2.2 trillion in assets. Britain, one sixth the size of the US, has three banks larger than this; France has two.
As the EU countries slowly begin to implode.. Greece is but the first of many.. the security of the banking system comes increasingly into question. Perhipery nations, to whom EU banks have loaned hundreds of billions, are also very shaky.. Rumania and Hungary in the last few weeks look pretty grim. Today, Ambrose's article is about Spain and their $1.1 trillion of external debt and how they are likely to need the EU/IMF bailout by summer's end. Already EU banks have essentially stopped loaning to each other, a sign of fear.. and rightly so. Only the ECB loans to EU banks.. this is a very bad sign.
Over a long enough period of time, this ends in one of two ways.. both of which lead to grinding Depressions on the Olde Continent. The first is hyperinflation in order to save the banks. The second is complete and utter collapse of the financial system and repudiation of debt. Anybody buying the official line "the economy continues to recover" are utter fools. This is coming.. my guess is that they'll hold it together this year, but 2011 is my guess for the financial apocalypse.
Here's an excellent graph on this: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/World%27s%20top%2050%20banks.jpg