TED BITS

A Bridge TOO Farage

2011-12-30T19:52:00.001-02:00

Today I would like to introduce you to Nigel Farage.

But first, my apologies to the 1977 film "A Bridge Too Far" which is an account of "This WWII film follows the perspectives of American, Polish and British soldiers attempting to capture key bridges behind German lines in a complicated parachute and armoured assault. "

Nigel, is truly a "thorn in the side" of un-elected EU Bureaucrats and to get to know him, please click on the following YOUTUBE links.

ENJOY!!!!
Nigel Farage.... "The Game is Up!"
Nigel Farage... "You weren't elected and those of you who were we elected in secret".
Nigel Farage... "Attacks the EU President and everyone else in the EU Politburo".

Five years ago, I was having dinner in Wuppertal Germany with my colleague Hans who educated me about EU politicians, their non-elected status, their attractive salaries and benefits, and their long tenures. I listened and learned but didn't understand the implications. With the monetary problems in the EU today, I now understand what he saw so many years ago.

Getting back to Nigel, I would like to tell you about another Nigel- colleague of Hans and myself. Apparently, these Nigel guys have no problems creating international incidents!

You see, Nigel and Hans teamed up against me and another American (who we will refer to as TopTiger11) for a golf match in Austria. Think of this as an amateur's version of the Ryder Cup.

Nigel, a lefty, had a very aggressive slice. In one tee shot, he sliced left, overshot a 20 meter high hedgerow to launch his golf ball into "field's unknown". Thinking that we would cross through the hedges to look for Nigel's ball, Hans suggested Nigel must hit another ball. Because, if we were to cross the hedgerow in search of Nigel's ball we would need passports. His towering slice of more that 300 meters (actually only 100 meters forwards and 200 meters sideways) had violated the airspace and sovereign soil of Hungary.

So such is the lot of the world's Nigel's. Always creating international incidents. but, always speaking openly about the world as it is. Even if the listeners cannot handle the truth!

Next post, we will move from "A Bridge Too Farage" to "The Great EUscape". Long live the Euro...

The Government is Taking Your Pension

2011-12-04T10:47:00.000-02:00

In March 2010, I wrote to you about how governments are taking people's hard earned pension plans. For most people, in most countries, you have some form of your pension privately (your own savings) and some form promised to you by your government.

This year politicians have raided the "government provided" pension plans of their people all around the world. Here are a few real examples:

Ireland announced last week that it would use the country’s €24bn National Pensions Reserve Fund “to support the exchequer’s funding programme”.
Telegraph writes: "Portugal has raided €5.6bn (£4.8bn) of pension fund assets in a controversial scramble to meet its deficit targets."
The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.

Next is your private pension plans and we already have examples:

Hungarian government to claw $15bn of private pension funds back to the state system.
Christina Kirchner, President of Argentina, in 2008 seized her citizens’ private pension funds.
The US government is drafting legislation for “Guaranteed Retirement Accounts” (GRAs) in which private company pensions and private accounts of citizens are absorbed into a government system whereby Washington then decides how much money you get back. This is justified on the basis that private pensions have been tax advantaged for years and therefore are already quasi-government property.

There is an old saying that goes, "rich or poor, king or pauper, if you can't defend what you have- you have nothing".

Or you can follow this link and watch a YOUTUBE from George Carlin [WARNING: as is typical in his shows, he uses a lot of very offensive language. But, if you can be mature enough to look beyond that- you just might learn something].

How Money Became Debt Became Money Again

2011-11-30T01:13:00.000-02:00

Where you shocked when you found out that the US Federal Reserve pumped $7.7Trillion in banks around the world in 2008 and 2009 to stop a complete financial meltdown? Did you know that if they didn't do that, I would not be posting this blog and you would not be reading it? Civilization as we know it would have ceased to exist by 2011.    2010 would have been martial law around the world and soon thereafter it is Mad Max and the Thunderdome Society.

So don't get so pissed if a few bankers made big bonuses from the Federal Reserve cash infusion. They saved your ass and your way of life.   You should be thanking them.

So if the Federal Reserve "printed" $7.7Trillion why don't we have hyperinflation? Because that amount of money was just enough to offset a massive deflationary spiral. A commodel Coriolis effect of epic proportions drawing the turd of modern society into the septic tank of oblivion.

Deflation? What Deflation?

The same deflation that is crushing Europe, the EU and the Euro right now. You see, a financial institution will show "cash and cash equivalents" on their balance sheet. Do you know what a cash equivalent is? Well, one type is sovereign debt. So Italy floats bonds and banks buy them and put them on their balance sheet.   If that bank owes money to some other bank, it can pay that bank with cash equivalents. Or in this example, settle the payment by transferring Italian government bonds from their institution to another. So-- Debt is Money.

These same institutions can utilize fractional reserve banking to multiply the leverage effect of these cash equivalents by creating loans using these government bonds as collateral. Thus creating more money out of debt. In fact, the more money a government borrows the more money a bank can create!

UNTIL...those government bonds lose their value. When interest rates on government debt rises (like 7% for Italy) then the bond's face value decreases and affects every other outstanding bond too. This means assets (these cash equivalents) on the balance sheets of banks lose their value - fast.   And that means the likelihood of bank default increases.

Now you know what is going on in Europe. A massive deflationary spiral is in progress.

Back to the US. It is not when a US bank owns any European Government debt that puts it at risk. IT IS IF YOUR US BANK IS OWED ANY MONEY AT ALL BY ANY EUROPEAN INSTITUTION- GOVERNMENT OR FINANCIAL. Because- the deflationary spiral has made them all insolvent.

Now really back to the US... US banks in 2007 had massive amounts of Mortgage Backed Securities on their balance sheets due to the "housing bubble". These MBS are "Cash Equivalents"! That means banks can use them as if they were cash and they can make loans against them. Guess what-- house prices collapsed, MBS rapidly lost their value and the US banking system became insolvent.

How bad was it? Well $7.7 Trillion to be exact. Ben Bernanke created that much money and pushed it to the banks.   And that is why the US banking system is solvent today.

And that is how money became debt became money again.

Notional Accounts - The Dirty Little Secret

2011-11-22T13:34:00.000-02:00

You look at your bank statement or your pension account or, if you are fortunate enough, your brokerage account. You see numbers. But is what you own really there?

Let's say your statement says you own 10 shares of Apple Computer. Do you? Or do you have an agreement with your broker that if you sell those 10 shares they will give you the market equivalent in cash?

You don't own anything. None of it is there. It doesn't exist. All you have is an agreement. Your money is gone. It was taken and, in turn, you were given a promise.

Promises are only worth the integrity of the person making the promise. If the promise is being made to you by a corporation, well, you get the idea.

Bernie Madoff took everyone's money. So did Jon Corzine of MF Global. So did everyone else in the who's who of finance. It is a dirty little secret that everyone is doing it and the public must never know. But it is bigger.

When banks put money on deposit with your country's central bank, it is a notional account. The Central Bank took the money from your bank and promises to return it. The same thing happens to you when you place the money on deposit with your bank.

The only problem is that this is a game of "musical chairs" and you are playing with a blindfold with your ankles tied together.

See Something; Say Something; Next Pay Something

2011-11-02T22:09:00.001-02:00

The next jobs program for your country is to starting paying citizens for reporting unpatriotic activity. It starts by determining if you can get citizens to share information with the government for free. If that doesn't work, start paying them for information and call it a "jobs program".

* * * * wait for the two links below to fully load -- it is worth it * * * *

Just like the old Communist days... time to "name names".

A Rumble In The Jungle -- Or Why Greece Should Delay

2011-11-02T13:30:00.000-02:00

Have you noticed that Inflation Protected securities (TIPS) have been on the rise all year? Always good to have a bit of this in your portfolio when Central Banks around the world are printing money. Here is two charts from today-- first is a TIPS ETF and the second is a TIPS Fund:

So while Central Banks print money and lower interest rates while governments understate Consumer Price and Producer Price Indices, it appears to me the self correcting marketplace is seeing something different.

This is not cost-push inflation but rather a systematic reduction in the value of all money caused by monetary policy.

The good news is that all money is debt. Therefore... if this reflects a devaluing of currency then that means our debt is reducing by the same rate. Therefore... Greece should not accept any austerity since their debt load is falling by the day. Click Here.

Free Household Goods From China

2011-10-24T22:48:00.009-02:00

Apologies to my non-US readers because this is only possible in the US. For US readers, this is a great example of how to capitalize on the good intentions but basic ignorance of the government.

The current US Government is "the gift that keeps on giving". I dread the fact that they may not get re-elected making it so much harder to make money. But for now, you need to take advantage of every opportunity presented.

To the less informed, President Barack Obama this week will announce a series of actions to help the economy that will not require congressional approval, including an initiative to make it easier for homeowners to refinance their mortgages, according to a White House official. Read it here.

Another profit windfall is now presented to you on a platter. This is a little bit complicated so I will over simplify:

Form a US Limited Liability Corporation (LLC) created for the purpose of owning, occupying and refurbishing real estate property.
Fund your new corporation with $100. (yes only $100).
For $100 you buy a HUD (Housing and Urban Development) sponsored home provided you agree to take over the existing mortgage.
Don't make any mortgage payments. The property was probably in default anyway and it will take 6 to 9 months before anyone contacts you about your late payments and tries to foreclose.
Under this government program, you immediately qualify for an FHA 203K loan that can be used for "repairs and renovations". You should be able to leverage up to $2,000 of loan for every $100 you place into the property.
So let's say for each property you do this at $1000 so you can borrow $20,000. And do this for 5 properties to borrow $100,000.
With that $100,000, purchase a truck to enable the repairs and refurbishing. Maybe buy some nice tools including that table saw you always wanted. An iPhone to keep in contact with people doing the refurbishing. Perhaps buy some major appliances for yourself and family. You get the idea....
Now don't be stupid. You need to also make an attempt to repair and refurbish the property you just bought under this government program. The problem is that you are not very good as a repair man and you are an even worse business man.
Your corporation is forced to declare bankruptcy. You default on the mortgage. You default on the loans. You keep the tools, truck and appliances because it is the US tax payer that is backstopping your loan because this was a government program to jump start the housing market.

WARNING: I have greatly over simplified this. Not all housing qualifies. Not every US state is participating. 203K loans do have some rules and regulations. BUT... the new rules go into effect in November and will be in place of 1 year. Techniques were used to bypass the US legislature so no laws were written-- this was via executive order.

What we do know is this:

The government has put out the "free money" sign.
Hordes of clever people will flood the government offices.
The overload will ensure government employees focus merely on getting the workload "off their desk" ensuring little if any review of the applications.
This is a US election cycle so government money will flow freely.
Certain groups are well organized to capitalize on this "window".

So you are probably asking, "where does China fit into all this?". Well, the US government is backstopping the purchases you made with the loan you never intended to repay. The US government is also borrowing $1 for every $2 it spend from the Chinese government and the US government doesn't plan to repay the Chinese either.

Perhaps you can see now how it is your patriotic duty to capitalize on this program.

We All Swim In The Same Pool...

2011-10-23T12:38:00.000-02:00

...gene pool, that is. We have so much in common that seeking common ground should be easy. Let me illustrate.

Occupy Wall Street is amassing substantial funds through donations. With that much money, do you know what you have to do? Easy... set up a bureaucracy and set up a bank... And guess what happens... even in the OWS movement there are now the haves and have-nots. Read it here.

The US criticizes nations that treat their people poorly (human rights) yet feels perectly comfortable using a drone to kill a US citizen that it doesn't like. The act is clearly illegal but apparently if you do it in another country and make the kill from long distance it is ok-- even if you take a few other people to their death at the same time (but they weren't US citizens, so it doesn't count as much).

Other countries criticize the US for allowing its monetary policies and regulated financial system to bring the financial world to the brink of disaster in 2008. The fact that the US government forced its banks to lend to people who could never pay back their loans is absolutely outrageous! Now we sit and wait as the EU will give (it is not a loan because they will never pay it back) Greece another $8B to pay next months bills.

Western countries (EU and US) delight in their participation in the removal of evil, murderous dictators in Middle Eastern and Northern Africa nations only to have those despots replaced by groups of murderous mobs.

China is criticized for manipulating its currency while at the same time the US Federal Reserve floods the world with trillions of newly printed dollars.

Todays financial markets are schizophrenic because of "all the uncertainty". This is absurb. The sequence of events for the future are obvious. Make you plans accordingly. The world is very predictable because we are all the same, behaving in the same way, thinking the same thoughts, and dreaming the same dreams.

Is Everything In Position?

2011-10-14T10:31:00.003-02:00

Needless to say, I was disturbed about the recent decision to "go public" about the Iranian Terror Plot.
I say this because I believe that these plots are going on all the time and are addressed without fanfare and in some cases appropriate secrecy. So why is it important now to put this in the news? Why go public about the incident?

Perhaps it is time for another war. NATO got its much needed practice in Libya (nothing beats war games like a real war). Isreal has moved its warships off the coast of Egypt (apparently the Muslim Brotherhood has significant Naval capacity). And now for the US Navy...

The most recently released public information about deployment is shown below:

Click to Enlarge

An amateur would assess the situation as follows:
(1) The two battle groups in western pacific have their home port in Japan. However it looks like they are out and about making sure China knows we are paying attention to what is going on.
(2) Three battle groups are poised off the coast of Iran for obvious reasons.
(3) The rest of the battle groups are defending the East and West coasts of US. The greatest risk to the US is for some Iranian frieghter to launch a missle with EMP payload thus driving the US back to the stone age.

If things get really bad, perhaps the US will suspend the 2012 elections due to the emergency and we won't have to be burdened by those ridiculous political TV commercials that interrupt our zeitgeist.

Owed to a Grecian Earn

2011-10-05T21:50:00.000-02:00

Apologies in advance to John Keats....

Interesting article from Der Spiegel. If your German is a little weak, let me summarize for you:

(1) Greek government warns EU that if they don't get their bailout money by mid-October they are going to default as a country.

(2) Jean-Claude Juncker, Prime Minister of Luxembourg and President of the EU Group, announced on Tuesday that the next installment of the bailout package wouldn't be paid before mid November.

(3) No problem, said Evangelos Venizelos, Finance Minister of Greece, and announced that his government had suddenly found €1.5 billion in a bank stabilization fund that was set up during the crisis of 2008. Enough to keep Greece liquid until mid November.

Theatre of the Absurd, wouldn't you agree?

News from Greece: The Check is in the Mail

2011-10-01T12:16:00.001-02:00

Greece can't implement new austerity tax plans because they ran out of ink to print the forms...
Click Here

Greece can't implement new austerity tax plans because tax collectors plan to go on strike due to additional work load and threats of lay offs...
Click Here

Greek Citizens block access to Finance Ministry not allowing European officials to examine "the financial books" of Greece to see if they are cheating on their promises...
Click Here

The last story is almost too much to believe. EU officials actually need to see hard copy documents? You mean Greece does all its accounting on paper and there are no faxes? You mean EU officials couldn't access the Greek Government Systems? They had to travel to Greece personally?

This must explain why there was no ink left to print new tax forms it all went to printing government records on paper.

That is the problem with the Euro... if Greece had their own currency they could use all their ink printing money instead of paper records and tax forms. Rather than borrowing money from the EU and IMF, they could just keep printing money and giving it to their people-- it's the American way.

Remember: Doomsayers free ride; all others provide data

2011-09-29T22:36:00.000-02:00

Remember: Anyone blogging, on the radio, or TV that is predicting disaster is allowed 100% of their air time to spew their gloom and doom. However, when ever someone predicts that things are better than they seem, all of their air time is consumed with demands for proof and endless debate by the host.

Short sellers are legally allowed to say anything they want about a company and it doesn't have to be true. CEO's are muted by laws that do not allow them to make forward looking statements.

People are more likely to believe that things are worse than they are.

But, eventually the shorts get squeezed because the global economic engine is alive and well. Our current problems are not economic. They are political and they are monetary. It is Politicians and Bankers who created the problems and because they control laws and money they can never be held to account for their impact on common people.

When the turnaround comes, and it will, the same politicians and bankers will be standing in line to accept the credit.

Since the creation of the markets, it has been a macro "bull run". The general trend has always been up.

The future is very bright but I have no data to defend my position. Even if I did, would you believe it?

Relocation Services

2011-09-25T10:53:00.002-02:00

Dear Readers:
I wrote this piece over two years ago but I was advised not post it because it would be too upsetting. But now since we are well past our Financial and Political instability problems around the world, I can post this and continue to fulfill the TEDBITS mission of insight and entertainment for the Hi-Q.
Sincerely,
Tedbits

There was a lot of unrest because of what was happening. Confidence was lost. The system was collapsing. Those with much to lose- lost a lot. Those with little- lost everything. The politicians couldn't find any new people to blame. The people ran out of patience.

It started in the cities. We watched it on the news. But eventually it spread.

The police, whose job it is “to protect and to serve”, could do neither. There was too many of us to protect against so many. Police officers also had their own families. No one blamed them. Many of them were lost at the hands of those with nothing to lose.

It had been so long since we worked together as a community that the task of coming together was overwhelming. We lost the ability to organize and effectively structure for the common good. There was no basis upon which to make decisions or agree on plans.

One day, the military arrived at the top of our street. A soldier knocked on our door, who looked exactly like the proud military hero of our dreams. He was young, strong and confident. He spoke well. We felt comforted.

He was unarmed and clearly no threat. Telling us that there was no possibility for the government to protect us in our homes, he handed us a brochure that gave us information about where we would be relocated and what we should bring. It even included luggage tags that we were to affix to travel luggage, one bag per person, to be left by our front door to be picked up later by the quartermaster corps.

The letter said that we were free to “stay in our homes” rather than participate in the relocation. It also warned that there was no guarantee that there would be a second chance as the situation was fluid with matters worsening by the hour.

Our decision had to be our own. All communications, phone-internet-cable, had been down for weeks. The electrical power was unreliable and had been totally out since this morning. We would listen to the radio in our car for news but didn't dare drive anywhere- it was getting too dangerous. We were on our own.

In 2 hours, buses would be available at the main intersection near our house. We had that amount of time to make our decision, pack, tag, leave our bags at the front door and get to the buses.

So we did, never to return. They lost our luggage. But we don’t need it anymore.

Hedging for the common man

2011-09-22T23:21:00.000-02:00

Last year at this time, I posted a well proven technique for making money from what is called the "carry trade". I showed you a method whereby you can do what the big banks do and returns are nearly 100% guaranteed. You can refresh you memory here.

That was Carry Trade for the Common Man and now it is time for Hedging for the Common Man...

Fanfare please...[click]

It is simple: When gas prices are rising buy XOM or DBO. When food prices are rising buy food companies that can pass on price increases to consumers. After a nice run up, cash out. Here is the math:
BASE PRICES + (PRICE INCREASE - YOUR TRADING PROFITS) >= ZERO you win.

I have decided to buy my first iMAC computer. With the recent two day collapse of the market, I was finally able to buy a few shares of Apple Computer at a reasonable price. Apple is an unstoppable stock right now relative to the total market, so when AAPL resumes its run, I will cash out and have myself a free computer.

This is why people who spend their life watching American Idol, the Kardshians, Glee, etc. are getting poorer. But they are happy in their ignorance so I am happy for them-- after all life is short so might as well turn on the TV.

Back in the Saddle

2011-09-19T01:09:00.001-02:00

Haven't posted since April but I have been really busy working on dual citizenship for my family and moving my soft assets into hard assets geographically removed from where I live today. I am sure you are doing the same thing so you know how time consuming this is.

Anyway, I decided to start posting again because everyone has been emailing with questions and discussion points and it is too hard to have a conversation over email. So, mostly I hear from US citizens who are deeply concerned about their personal situation as America continues to have debt, currency and related economic problems.

Here is why you should not worry:

(1) All fiat currencies return to their original value-- zero. So will the US dollar. The US has had several currency collapses in its short history. In fact the Federal Reserve Note (the dollar) is not even 100 years old yet. Currencies have collapsed around the world in many countries throughout time. My point is, currency collapse is manageable if it is carefully engineered. What you are really seeing is the careful, thoughtful management of a collapse. If it is handled correctly, the currency will be replaced with something else.

PROOF: The value of Iceland's currency in 2009 was zero. However, Icelander's continued to buy and sell to each other using Icelandic currency. Why? Because a Kroner was still worth a Kroner to Iceland... it is just that no other country wanted them.

(2) When the US dollar is worth zero we will still buy goods and services from each other in the US using dollars. But what if no one else in the world will accept dollars? We can't import anything because no one will accept our money!!! Really? Think about this...

(2A) If we can't import anything does that mean we can't export anything? If so, how will the world feed itself since one of the largest US exports is food. To a hungry world food is more important than money. So don't worry about the dollar because we export food.

(2B) If we can't import anything does that mean we can't buy the 20million barrels of oil we consume every day? We don't have to. The US is energy self sufficient and natural gas, coal and petroleum reserves within the continental US and Alaska will last 300 years. So don't worry about the dollar.

(2C) There is always pain in transition so yes, cities will burn, people will be killed, periods of martial law may be required and aspects of the US constitution will be suspended. These are all temporary. The US military will come home to patrol the streets, order will be restored and we will rebuild. The feeling of unity and togetherness normally experienced during a common disaster will fill our hearts and we will be Americans again.

(3) But what about the massive US debt burden? Who cares. We were never going to pay it off anyway. We took exports from other countries and gave them little green pieces of paper in return. You tell me who was smarter. And what can they do? Bomb us? I don't think so.

(4) When will all this happen? Most likely very far out into the future. Too many people in powerful positions (government and non-government) have a vested interest in the status quo. The currency crisis and, its impact on the economy and wealth, started more than 30 years ago. Our darkest hours were between 1978 and 1982 but no body knew it because of the lack of mass communication and poor education levels to understand the message and its implications.

SOME HISTORY: In the early 1980's, people vested in the status quo managed the collapse. US unemployment was higher then. US interest rates were horrible. And the public was faced everyday with the prospects of mutually assured destruction from the USSR. But somehow we survived and somehow, some of us, improved ourselves and our situation. US banks were overexposed to South American currency collapse and hyperinflation. We were so close to the edge of Armageddon. But we didn't know it, so it didn't bother us.

REALITY: Today we are more aware. 24 hour news coverage for what is less then 15 minutes of news. We are victims of "speculative factualization". So you worry more. You are also older and you feel more vulnerable.

BOTTOM LINE: But if you accept the above, the future is very bright. I am a buyer and if I am wrong what difference will it make? But if I am right....

"When there is blood in the streets be a buyer even if that blood is your own".... Rothschild circa 18th century.

"Gamblers understand what Winners don't know". Ann Wilson circa 1980's

TILT

2011-04-20T23:58:00.000-02:00

The data is in. 2010 Government payments to citizens in the form social security, medicare, medicaid, unemployment benefits and stimulus programs that paid money directly to citizens totaled $2.3 Trillion.

Tax receipts for 2010 totaled $2.2 Trillion.

That means all the rest of the money the US Government needed to spend to keep things operating and pay the interst on all the previous years of borrowing needed to be borrowed.

The US Government is effectively borrowing money to pay the interest on its debt.

The US Government is borrowing money just to operate.

Now for your investment question of the day... Should buy 1 ounce of silver or 1 share of JPMorgan? They both cost the same in US Dollars.

A weakening dollar (because the only one really lending to the US is the US Central Bank) is causing oil prices to creep up because oil is traded in US Dollars so it takes more dollars to buy a barrel of oil.

This pushes commodity prices up so those companies with pricing power to pass along increase costs (preferably before their cost actually go up) will do well until the double dip.

Some say the US is exporting inflation by devaluing the US Dollar causing food, fuel and essential needs to increase in price around the world. This is not true. Inflation is ocurring around the world because these countries peg their currency to the dollar. So, as the dollar goes, so does their currency. If they let their currency float they wouldn't have this problem. But they won't change because if their currency becomes stronger then their exports would slow double dipping their economics.

So we are in a deadly embrace. Snakes emeshed in each other's death grip.

This has happened many times before and eventually things right themselves. But in the mean time, the investments that worked for you 10 years ago probably won't work now nor in the next few years.

OK, Break's Over; Everyone Get Back To Work!

2011-04-05T09:13:00.000-02:00

With the recent news that the US Unemployment Rate dropped below 9% comes some collateral damage. The Employment Security Commission of the State of North Carolina (US) recently posted the following information telling its residents that the 99 weeks of unemployment benefits were no longer available to those still looking for jobs:

"Please be advised that due to the recent decline in the North Carolina Unemployment Rate, the state no longer meets the Federal and State requirements of the Extended Benefits Program. In accordance with Federal and State law, the Employment Security Commission cannot pay any Extended Benefit claims for weeks later than April 16, 2011. "

North Carolina, the home of NASCAR, Country and God, will take this all in stride. Pick themselves up and get jobs. I don't expect the same whimper of acceptance will occur when similar facts begin affecting the big cities. Stay tuned.

The interesting thing about playing golf is that sometimes you get paired up with someone you don't know. Last year, I played golf with a 99 weeker (a guy that was well on his way to collecting 2 years of unemployment checks from the government). He had no problem paying the $65 for the round of golf because his wife worked and her employer was providing all the medical benefits for both of them. It didn't seem to bother him that I was paying for his vacation through my tax dollars. I didn't make a big deal of it because I didn't want to be swinging 5 irons at each other on the back nine. After all-- this is a civilized country! However, I did remind him that if his wife worked at a job well enough to have generous benefits that he needed to get prepared to write a check to the Federal Government because unemployment is taxable income and his wife's job probably puts them in a tax paying bracket.

So as he and many Americans are now filling out their Federal Tax forms, I am smiling at the prospect of him having to pay taxes on his unemployment benefits because such payments do not have any Federal Tax withholding requirements. Therefore, he probably spent every dollar he got not realizing that some percentage of it was going to have to be returned to the Federal Government in the form of taxes.

Drawing a Green Line through Earth Hour

2011-03-27T14:24:00.004-02:00

How did you spend Earth Hour this year? If you missed it, I am not surprised since most of the planet did too.

Earth Hour is a great example of "a flurry of awareness building misconstrued as actual progress".

Normally I stick to finance and economics but today I am going to play the role of electrical engineer to educate you about the finance and economics of saving electricity.

First, if you want to save electricity to save household expenses then you should do it. However, don't think that your saving electricity is doing anything to save the planet.

Fact #1) When electricity is generated and not consumed it is lost. So when you turn out the light you are saving household expense but not saving electricity. It is important to speak correctly.

Fact #2) It is possible to store unconsumed electricity for short periods of time but in many cases the economics don't justify it. Generally speaking, energy storage is economical when the marginal cost of electricity varies more than the costs of storing and retrieving the energy plus the price of energy lost in the process. Also, electricity cannot be stored for long periods of time- there is gradual loss.

Fact #3) Fuel-based power plants (i.e. coal, oil, gas, nuclear) can be more efficiently and easily operated at constant production levels. So nobody is ratcheting down the generator when you turn off a light in your house. It doesn't make sense to do so.

So when, everyone turns off the electrical consumption in their house for Earth Hour, the power plants keep producing anyway. The electricity generated during Earth Hour is either lost or temporarily stored for some future peak demand point.

Well done, people of earth.

Now let's draw that green line right through earth hour once and for all.

Power plants operate at their particular "green line" because that is the most efficient use of their design in terms of fuel consumption and reliability considerations.

Consumption changes must be massive and over a prolonged period of time to make the investment economics attractive to change the green line.

One way to do this is to massively reduce the human population. And this is why the environmentalists draw their green line this way...

Four Phases of the News

2011-03-18T00:03:00.003-02:00

The consequence of 24 hour news requires that the audience carefully evaluate which "phase" of the news they are hearing. For your entertainment and information, I submit the following:

PHASE 1: FACT FREE (pervasive)
A journalist once told me, "I could do a lot of painstaking investigative research OR I could just report something someone tells me. My job pays the same either way!". Fact Free reporting looks like this: CNN is reporting that other news outlets are saying, "______". You fill in the blank. Fact free content is when the news is the news. The only fact here is that someone is saying something. Whether what they are saying is factual is not relevant.

PHASE 2: FACTUAL (rare)
This is when what is reported is a true fact- duly confirmed by independent, knowledgeable sources. This rare event is difficult to detect because usually the fact is embedded inside someone's opinion about what you should think about the fact. The fact is like the chewy chocolate surpise inside a Tootsie Pop- you have to do a lot of sucking and licking to get to the good part.

PHASE 3: FACTUAL SPECULATION (common)
This is when the time available for broadcast exceeds the time needed to report the facts. News networks know that they cannot continously repeat the same facts over and over while retaining an audience. So, they bring in "experts" who speculate on "what might happen next" given the facts at hand. They speculate on the facts and consequently their speculation become the news.

PHASE 4: SPECULATIVE FACTUALIZATION (undetectable)
You move to phase 4 when the speculation in phase 3 is repeated so many times that now it becomes accepted as fact even though it didn't actually happen. By this time, all reality is lost, no one can separate fact from fiction. Since no one can confirm a speculatized fact, the best a news agency can do is report on who is saying what. This returns us back to PHASE 1.

If you've ever heard a news anchor refer to the "News Cycle". This is what they really mean.

Libya Trivia

2011-02-25T19:12:00.003-02:00

After 42 years of ruling Libya, why is Moammar Gadhafi still only a Colonel? I think if he had gotten a promotion or two along the way things might be going better for everyone.

NATO is considering possible military intervention. The debate is the actual number of civilian deaths required to insight action on NATO's part. Apparently, until it gets to about 100,000, nobody is mobilizing anything. It is not clear who is doing the counting either.

According to reports, Libya's military is ruthlessly attacking its citizens. This apparently has not caused Libya to lose its seat on the UN's Council for Human Rights. Long live the UN.

Some Libya trivia from the 20th Century:

Gadhafi drew a line in the sand (actually it was a line in the water) claiming certain international waters as Libya's property. The US, whose job it is to draw lines, got upset and decided that no one else should be allowed to draw lines on the planet. This resulted in two Libyan fighter jets getting shot down by Iceman and Maverick when the Libyan pilots accidentally pointed their nose cones at the 2 US F-14 Tomcats.

The Colonel then drew a line in the sand (real sand this time) a little farther south but tricked the US by later launching six SA-5 missiles against the U.S. Sixth Fleet and missed (not a good idea).

Gadhafi, realizing he was in trouble, then moved his tent complex farther south and drew another "line in the sand". By this time, the US had enough of his line drawing and launched Operation El Dorado Canyon, involving Air Force F-111s from airbases in the United Kingdom. The refusal of the French government to grant authority for an American overflight of their country greatly complicated matters and necessitated the accidental bombing of the French embassy in Libya. Ooops, sorry.

At that point Colonel Gadhafi moved farther south and drew another line in the sand but by this time he was standing in the country of Chad.

No wonder he never got promoted.

Rocks and Hard Places

2011-02-19T09:57:00.001-02:00

"CAIRO, Feb 18 (Reuters) - Egypt has approved the passage of two Iranian navy ships through the Suez Canal, an army source said, a move that could annoy Israel, whose foreign minister has called Iran's actions a provocation. "Egypt has agreed to the passage of two Iranian ships through the Suez Canal," the army source told Reuters."

The Red Sea is pretty tight quarters and military officials of all countries are always concerned about unintended incidents with war ships in such close proximity.

A quick check of the US Carrier battle groups shows something interesting:

The USS Enterprise and USS Kearsarge are straddling the entrance and exits to the Red Sea. The USS Carl Vinson is parked directly off the beaches of Iran. Probably in plain site of any sun bathers. That's a lot of warships packed into a small area of the planet. Remember these ships never travel alone.

What is also curious is that on the east coast of the US we have the USS Bataan, USS Harry Truman and the USS GWH Bush. On the west coast of the US we have the USS Makin Island, USS John Stennis, and USS Ronald Regan. It's almost like a "picket line" has been formed on each coastline.

I wonder if the US is expecting visitors.

PS: For those of you worried about the above disclosures, don't be. This information is a matter of public record. Besides, it is never about where the ships are. It is always about what they are doing and where they are going.

Eqypt Data and EU Warnings

2011-02-08T10:18:00.002-02:00

HEY! I just got my first reader from Eqypt!!!!! Welcome.... In celebration I thought I would post something about Eqypt.

The incidents in Eqypt are indeed unfortunate. And setting aside all the political rhetoric going on about Mubarak the US et. al. Let's look at some data.

Protests in Egypt are being carried out by a very, very tiny percentage of the population.
Curiously, most signs being carried are written in English.
70% of Egyptians work for some level of the Egyptian Government.
The Egyptian Government just gave 70% of the population a 15% raise.
According to The US Government Foreign Aid Website the US Government has $1.2B in annual investment in Egypt meaning most Eqyptians work for the US Government apparently.
If an orderly transition in Eqyptian Government is not realized the most important employer of the Eqyptian people will be lost and rising food prices will be replaced by unemployment on a Biblical scale.
And, US aid will be halted or reduced thus lowering US Government deficit spending. After all it makes no sense to for the US government to borrow money from the Chinese only to then give it to Eqypt.

On the Finance & Economics side of things Eqypt is not that relevant and any swings in the market are either short lived or overplayed. Eqypt is no more important than other recent crises that all made headlines and then disappeared: Dubai, Greece, Ireland, Spain, ....

Back to politics: A warning for the EU: Keep an eye on the Balkans. The path is clear. First the overthrow of the Pakistani government. Then Eqypt. Then Jordan. And then it is on to the EU. Movements no longer require joining land masses, they jump from country to country by means of Twitter, Blogs, and an old style media that still believes, "If it bleeds; it leads" -- hence signs in English -- a more international language.

Back to Finance & Economics: When the US Federal Reserve floods the world with cheap dollars through Quantitative Easing it makes everything look expensive and devalues the currency. However, political unrest drives a "flight to safety" for investors which is still considered the US dollar and US Treasury Bonds. This increases the demand in the dollar making it stronger. You now know the Ben Bernanke equilibrium strategy... devalue the currency while stumulating demand for the currency.

Back to the Human tragedy: Everything said above gives a strong feeling that Eqypt and therefore the Eqyptian people are not important. Nothing could be further from the truth but the mechanics of finance and monetary policy surely send that message that, "While we agree human beings are important; we must also agree they are irrelevant". My hope is that the people of Eqypt could establish some form of government that allows for periodic orderly transitions of leadership to help keep moving the country forward for the benefit of the people the government is supposed to represent.

Forgive us our Debts... As we forgive those with Debts against us...

2011-01-29T12:14:00.001-02:00

Perhaps the most controversial position I have taken where backlash seems the strongest in both emails and in public discourse is The Great RE-Boot. Where I simply stated that, "...the FED will simply forgive the USG of its debt obligations...The US dollar will remain the world's reserve currency, US debt to GDP ratio takes a multiple order of magnitude leap to the positive and no body gets hurt."

Much has happened since my posting of October and I present to you additional data from the recent Federal Reserve release to further the conversation:

Click to Enlarge

As you can see, the Federal Reserve of the United States now owns over 1/3 of the total debt obligations of the United States of America. They have rapidly moved from #3 to #1 in the space of 3 short months!

The Argument:

The Federal Reserve creates US Dollars and gives them to the US Treasury to spend on the operations of the US Government.
The Federal Reserve accepts Treasury Bonds from the US Treasury.
The US Treasury is obligated to pay back the Federal Reserve the face value of the Treasury Bond plus interest. This is how Government Debt is created.
Now if you loaned me money and I never pay you pack you lost your hard earned dollars. However, if the US Government never pays back the Federal Reserve, the Fed loses nothing because they printed the dollars out of thin air.
When Federal Reserve forgives the US Treasury of its debt obligations there is an immediate and significant improvement in the US Debt to GDP ratio which strengthens the country financially.
And, more importantly, nothing bad happens to the US debt held by China, Japan, etc. because the US Government still will pay back the interest and principle on the bonds they hold. IN FACT... they are in a better position to do so.

It's a great plan, and they are going to do it. But not yet. So don't worry and don't bet against America.

Interested In Expert Networks?

2011-01-26T01:17:00.002-02:00

Are you getting information that is 3 to 4 months (maybe even a full year) in advance of the general public? Then you may be a member of a so-called “Expert Network”.

The Expert Network questionnaire (score 1 for yes, 0 for no):

Does your network host require that “you not email me from your place of employment?”
Does your network host say, “If you must email me from your place of employment you must use Secure Socket Layer encrypted browsing?”
Does your network host say that, “the same rules we apply to your employer also apply to your lawyer?”
Does your network host provide you with PGP keys that were generated by FIPS 140-1 compliant tokens?
Did you need a “Guide to Defeating Sovereign Censorware” to enable you to stream information beyond your country borders?
Do you need OTR messaging services?

SUBTOTAL: If you scored 4 or more, you are a member of an expert network.

IDIOT OFFSET: If your score is 4 or more, subtract 6 if you failed to capitalize financially on this information.

SCORING:

<0 see Punk
1 to 3 see Sweet Kid
4 or more see Veterano

Head Game / Head Fake / Dead Head

2011-01-05T01:43:00.000-02:00

I am asking you to be optimistic. These next 12 posts will be on optimism because I don't want you to miss the opportunities that lie in front of us no matter from what country you are reading this post.

Optimism yields creativity and innovation. A pessimist never invented anything because, from their point of view, "Why invest the effort; there is no future!"....

I've travelled to many countries and the one common factor about news reporting is "If it bleeds; it leads". That means, if the news is bad, people will pay attention to your report. Good news attracts less eyes.

That is why pessimists dominate the news. And, people are willing to accept whatever they say without proof. BUT.... put one optimist on the news and everyone is yelling, "Show me your data!". Pessimists don't require data- only opinion. Optimists must re-prove their position constantly and their data is always being challenged.

If you follow the markets, I am sure you have heard the following:

(1) The market is in a downward trend; don't invest now until we hit bottom. Better wait.

(2) The market is in an upward trend; if you didn't get in; wait until a pull back.

(3) We've just experienced a pull back but until we see strong signals to the contrary, we could see another leg down. Better to wait.

(4) The pullback was shortlived; those that waited missed the entry point.

I could go on. But you get the idea. So what are you waiting for? What is the piece of data you need to tell you everything is going to be "all right"? When you finally get that data will you feel you waited too long?
The panic of 2008 is over....
(1) Get in.
(2) Get smart.
(3) Be smart.
(4) Be Optimistic.
(5) Keep Truckin.

Happy New Year - 2011

2011-01-01T13:47:00.000-02:00

To the Western World and much of Asia Pacific (the double dippers who celebrate 2 new years), Happy New Year to you.

I've taken a few months off from Blogging and shortly I will be posting at least 12 new blog entries on finance and economics for the coming year and beyond. But for today, I would like to share with you how my "Main Squeeze" and I welcomed the dawn of the next decade.

Here is a view from our backyard spa where we frequently welcome the dawn of a new day, listening to the local wild life and hoping to catch a glimpse of the family of white tail deer that live in our neighborhood.

Sunrise January 1, 2011

The deer can be often seen down by the pond. It is still snow covered and frozen over from the holiday snow storm.

Waiting for the White Tail Deer

For those of you in the market for a free standing spa, here is the Master SPA LSX it has been a great investment. Out of courtesy to my readers, I have spared you the picture of me sitting in the spa!

Where TEDBITS composes.

I hope you did your own research and made some picks from my August 09 posting. Everything really worked out except for the idea on TIPS.

All the best to my readers for the coming decade!

The relationship between debt and slavery

2010-10-29T19:38:00.002-02:00

I have no affiliation direct or indirect with the organization that developed this piece of media. I don't know much about them so this not a promotion of their mission or objectives.

HOWEVER.... THEY HAVE MADE A VERY IMPACTFUL VIDEO.

If you country is in debt to another country... surely this must give you pause to think...

Intervention Lasted Two Years. The Unwind Begins Again.

2010-10-11T09:15:00.000-02:00

It has been two years to the date when I posted on Bank Holidays.

I would say all the intervention - TARP, TALF etc. bought us some time. But the drum beat is sounding again.

The foreclosure fraud matter is serious. It is going to reopen old wounds.

Some new abbreviations for you to learn: REMIC and MERS. Add them to your ever growing list such as MBS, CDO, CDS and REPO105. They will all be in the news again shortly.

The Great "Re Boot"

2010-10-08T11:21:00.000-02:00

I often get asked, "What do you think is going to happen financially and economically"? Followed by, "Should I be worried"? The short answer is no. And this post will tell you why.

First of all, remember that there are many, many powerful people around the world that are fully invested in "the status quo" of how things work. They will do anything and everything to maintain it. I am not talking about elected politicians because they are the pawns in this game. We are talking about the people who really really run things.

But what if the TSHTF? I can't speak for all countries but the plan for the United States is very clear albeit undocumented, unreported and unspoken. Dr Martenson (link to the right) often speaks of the 3 big "E"s... Economy, Energy and Environment. I will outline what I think the plan is covering these three sections.

ECONOMY: As of this writing, the US Federal Reserve is now the 3rd largest holder of US Government Debt behind China and Japan. By the end of this year it will be #2. And while it may not be possible for the FED to hold 100% of all USG debt, it will reach a tipping point. When that happens, the FED will simply forgive the USG of its debt obligations -- this is referred to as the "big reboot". If you don't understand how this can reasonably happen please watch these 2 videos. The US dollar will remain the world's reserve currency, US debt to GDP ratio takes a multiple order of magnitude leap to the positive and no body gets hurt.

ENERGY: It is documented that if China reaches its full potential, the natural resources required to accomplish this will basically require a second planet. For decades the US plan is to conserve its own resources and buy energy from other countries now. Sooner or later the extraction curves of natural resources will peak and the US will still have its own resources, on its own soil, to use (Coal, Oil, Natural Gas, Uranium, Precious Metals for electronics, etc.) while everyone else has depleted their reserves. These countries will wake up one day and say, "hey we are out of oil. We sold it to the Americans and all we got in return was little green pieces of paper!"

ENVIRONMENT: When these 2 things are enacted, their will be disruption in the interconnected network of world commerce. So country self sufficiency and self protection will be crucial. Still being the only superpower on the planet, our ability to protect our perimeter is obvious. Inside the US perimeter is the planet's largest reservoir of fresh water (the great lakes) and the mid-west is still the breadbasket of the world. And, while it may be difficult to get kiwi fruit in February, I think there will be plenty to eat and to drink for the 400 million or so Americans.

If it is hard for you to appreciate the plan shown above, it is perhaps you are too caught up in the zeitgeist of current day distractions. But a word of warning- There is always pain in transitions. And, you may need to be a little more independent of the world around you at we go through the worm hole.

Why Investors Are Leaving The US Stock Market

2010-09-28T08:49:00.001-02:00

Last May 2010 I wrote about the May 6th "flash crash" (here). My belief continues to be that, "This was a premeditated demonstration of power over the market that was so sophisticated that it was unforeseeable and perhaps inconceivable upon which case the only possible response is capitulation to the victor." The bullies were asked not to do this to the whole market all at once but to please just do it to "little pieces of it at time". You see we need the bullies because they are providing liquidity to an otherwise desert dry (volume wise) stock market so we must let them extract their pound of flesh from retail investors, insitutions and pension funds.

On September 27, 2010, the target was Progress Energy and everyone stood by and watched. No one will say anything. Here is the chart (in milliseconds) of what happened at 9:57 and 42 seconds AM.

Chart Courtesy of Tyler Durden

First: Please note the time stamp on the chart. All of this happened during a millisecond slice of the 42nd second of the 57th minute after 9am.

Second: Anyone with stop loss orders got taken to the cleaners. Their orders went to immediate execution.

Third: Someone was buying at $4/share (down from $44/share) and had orders sitting there waiting to be executed.

Fourth: In the blink of an eye, the price returned to the $44/share mark. Bagging a 1,000% gain.

This is the work of high frequency trading systems using quote stuffing techniques. It happens everyday to somebody's stock. And this is why nobody wants to play anymore.

Read and remember this: http://tedbits.blogspot.com/2009/07/united-states-district-court-southern.html

I think whatever this was, it slipped out into the hands of some very clever, now powerful people. I hope they are only in it for the money.

Carry Trade for the Common Man - Do Something Patriotic

2010-09-23T22:37:00.000-02:00

I discussed the mechanics of carry trade in this post earlier in 2010: http://tedbits.blogspot.com/2010/02/some-carry-on-while-others-get-carried.html

The stock markets of most countries are going idle and brokers need to stimulate trading so they can earn commissions. I heard a radio commercial today about borrowing on margin.

Let's say your broker will lend you 5X your collateral at 1%. This was the interest rate advertised on the radio commercial!
So suppose you have $200, this allows you to borrow $1,000 @ 1%.
Use that $1,000 to buy some form a relatively safe and stable stock that yields 5% dividends (there are literally dozens to choose from).
Assume further that in a year, the price of that stock is the same price at which you bought it (no loss no gain).
You would make $50 on your $1,000 and still have the original $1,000.
Sell the stock and pay back the broker $1,010 dollars (principle + interest) leaving $40 gain.
Set aside $20 of the $40 for taxes.
Keep $20 for yourself. ( I did some rounding here but you get the idea )

Sounds like a lot of work for $20. But what if you multiplied all these numbers by 1,000, now that gets interesting don't you think?

Plus you will have earned $20 per 1,000 for your politicians so that they can fund wars or give it to their friends. How patriotic of you.

Can't muster up the collateral? Get a bunch of friends to go in together. People do it all the time for lottery tickets. They only difference here is that your odds of winning are near 100%.

If you have a financial adviser and they have not suggested this to you, maybe you should print this out and discuss it with them.

Think if everyone in your country started doing this! Millions of people! The coffers of your governments would get filled with tax money and you would have money to spend on things to stimulate your economy and grow jobs.

US Gov Debt Rating Cut to AA by New Global Rating Agency

2010-09-03T10:47:00.000-02:00

In July, I wrote about For Whom Da-Gong Tolls. Basically this was a warning of the consequences if the dominance of US rating agencies were diminished. Well, it has only taken 2 months for the impact to be felt.

Here is the latest from Da-Gong Global Rating Agency:

AAA - Norway, Denmark, Luxembourg, Switzerland, Singapore, Australia and New Zealand.
AA+ - Canada, Netherlands, China and Germany
AA - United States, Saudi Arabia

US rating agencies insist that US government debt be rated AAA. Da-Gong disagrees, "Americans may not like to hear the truth, but there is no gainsaying the massive budget deficits, the mounting national debt, the current economic weakness, the expansion of entitlements and the coming wave of retiring baby boomers".

China has been tempering its purchases of US Government debt forcing the US Federal Reserve to buy the treasuries that China won't.

My prediction-- one of two things is going to happen:
(1) Interest rates on US debt will start increasing dramatically as treasury buyers want better insurance for the risk they are taking thus adding more burden to the US debt (this is a deadly embrace).
(2) The US will cause or allow something bad to happen in the world which forces everyone to the only place of safety they know-- The US dollar. Thus counteracting Da-Gong's downgrade of US debt.

My bet is on option #2 because it has already had a successful trial run--> The overblown implications of a default of Greek Sovereign debt caused a "flight to safety", people ran to US Treasuries and US interest rates fell.

What do you think?

US Postal Service Confirms Dollar To Be Replaced by New Global Currency

2010-08-31T23:06:00.000-02:00

Back in May of 2009, I mentioned that a new global currency was on its way.

Since that time, there has been rumblings by many governments to replace the US Federal Reserve Note ("the dollar") with some other form of global currency to establish a new monetary system for financial settlements.

My prediction remains that "the dollar" will be replaced by an IMF created fiat currency known as Special Drawing Rights or SDRs.

It may strike you as unusual that the United States Postal Service now accepts SDRs as legal tender for transactions. Click here.

This is significant since the last time the United States Postal Service confirmed the existence of something fictitious was in the movie "Miracle on 34th Street". Per Wikipedia: in the 1947 film Miracle on 34th Street, the identity of Kris Kringle (played by Edmund Gwenn) as the one and only "Santa Claus" was validated by a state court, based on the delivery of 21 bags of mail (famously carried into the courtroom) to the character in question. The contention was that it would have been illegal for the United States Post Office to deliver mail that was addressed to "Santa Claus" to the character "Kris Kringle" unless he was, in fact, the one and only Santa Claus. Judge Henry X. Harper (played by Gene Lockhart) ruled that since the US Government had demonstrated through the delivery of the bags of mail that Kris Kringle was Santa Claus, the State of New York did not have the authority to overrule that decision.

Thus the USPS proved the existence of Santa Claus. AND.... has now proved the existence of Special Drawing Rights as legal tender for US Postal transaction making it a valid, legal substitute for the US Dollar.

Getting It Down Pat

2010-08-25T22:48:00.000-02:00

The Social Security System of the United States is at an inflection point where money being paid out is starting to exceed money being paid in. SS is one of the harshest taxes in the US because it takes 6.2% of everyone’s paycheck and requires their employer to add an additional 6.2% matching contribution. If you earn low wages, 6% of a small number is significant and if you are an employer, that means your employees are 6% more expensive.

A Real Story: Pat, born in 1948, started working in 1970 earning $5,784 per year. A good median income at the time and, being rewarded with cost of living wage increases each year, Pat retired in 2009 with a final salary of $44,144 per year – still about median income. Pat paid $53,234 into Social Security and is entitled to government retirement benefits of $18,514/year. Accounting for Pat’s employer contributions which matched Pat’s SS Taxes, Pat will consume all $106,468 (her contribution + employer match) sometime during year 6 of retirement (age 71); after which Pat starts taking “other people’s” money.

NOTE: Data to support the above calculations can be found here: http://www.ssa.gov/OACT/ProgData/retirebenefit2.html

Here is what is going to happen:

Today- We know that politicians didn’t save Pat’s contributions but rather spent them replacing Pat’s government “nest egg” with an IOU. As more and more “Pat’s” from the baby boom generation retire, the government needs to borrow more money to pay the benefits. The current plan is for the US Federal Reserve to buy US Government debt to maintain the financial stability of the economic system. Read that again- The Fed is buying US Treasuries with money it prints so that the US Government can give Pat $18,514/year.

Long term- (1) Ration healthcare so Pat doesn’t live too long and (2) make all illegal immigrants citizens so we can apply the 6.2% tax to their meager wages.

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In a parallel universe: Using the same basic data, Pat’s SS Taxes and the matching employer contribution are placed in a government trust fund that earned 3% return on average. Pat now has $291,603 and, at the same withdrawal rate, this money would last almost 16 years until Pat was 81.

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If you like Pat's story don't forget to read about Elieen, Peg, Matt and Bob (click).

Red Money

2010-08-23T23:46:00.000-02:00

This is the stuff of conspiracy theorists but if you told me in 2008 that the US government was (a) going to take control of the auto industry, (b) financially wipe out all stockholders and bond holders of the then private US auto companies and then (c) give the remaining value to the labor unions-- I would have thought you were a conspiracy theorist because of the US Constitutional protections against "unreasonable search and seizure".

Now for more... One of the provisions of the new United States Healthcare laws is that starting January 1, 2012; all purchases of precious metal coins and bullion over $600 must be reported to the Internal Revenue Service. I am sure you can immediately see the direct relation of precious metals trading with a national healthcare program. This was buried in the 2,000 page plus piece of legislation that no one had the time to read before they voted it into law.

And more... In the financial regulation reform bill just passed, another law was added that allows certain bank holding companies to freeze the money market funds (nothing in; nothing out) if the banks believe that sudden, unexpected money flows put the institution at risk. Risk to be defined by the banks themselves or the newly created financial regulation czar. Click here to recall my musing about US Czars.

Finally... The last leg of this positioning move is still open for public comment. But basically the plan is to confiscate the $4T in privately held pensions, pool it, and pay back to all retirees (those with and those without pensions) a fair monthly pension based on what some politician thinks is fair.

This is all positioning for Red Money.

At some point in the future, US currency will be changed from green to red. You will have some period of time (say 3 months) to convert all your green currency to red currency. This has two purposes:

(1) An estimated 1/2 trillion green dollars are suspected of being trapped outside the US, held by criminal elements both in the US and abroad as well as by ordinary people just keeping cash "off the books". If you don't want to expose yourself by making a cash transaction greater than $7,500 in a bank and alert the Internal Revenue Service you are going to spend the money on something. This is automatic 500B of economic stimulation forcing the world to buy US based goods and services.

(2) When only red money is left, the US Government will devalue it by about 50% thus wiping out half of the country's debt with the stroke of a pen. In US history, devaluation has been done already at least 2 times on a very large scale, once in the 20th century alone by president F. D. Roosevelt.

Stealth Oil

2010-08-19T21:48:00.002-02:00

The old joke goes like this: The CEO of a defense contractor takes the US President to a military air base and says, "Mr. President, parked here on the tarmac is the new Stealth Bomber- price tag a mere $2B each". POTUS replies, "but sir, I don't see any airplane!". "Of course not, Mr. President that's because our stealth technology makes them very difficult to detect". The leader of the free world replies, "That's fantastic! I'll take 4 dozen."

2 WHOI scientists review recent US Gov't
grant to search for missing Gulf Of Mexico oil.

Fast forward to 2010, where the Associated Press reports that-- Major study charts long-lasting oil plume in Gulf.

Excepts and commentary (emphasis mine):

FOLKS THESE ARE QUOTES! YOU JUST CAN'T MAKE THIS STUFF UP!

"A 22-mile-long invisible mist of oil is meandering far below the surface of the Gulf of Mexico, where it will probably loiter for months or more, scientists reported Thursday in the first conclusive evidence of an underwater plume from the BP spill." "The most worrisome part is the slow pace at which the oil is breaking down in the cold, 40-degree water, making it a long-lasting but unseen threat to vulnerable marine life, experts said." "Earlier this month, top federal officials declared the oil in the spill was mostly "gone," and it is gone in the sense you can't see it. "
Comment: Sounds like the Stealth Bomber story to me.

"Monty Graham, a scientist at the Dauphin Island Sea Lab in Alabama who was not involved in the study, said: "We absolutely should be concerned that this material is drifting around for who knows how long. They say months in the (research) paper, but more likely we'll be able to track this stuff for years."
Comment: Poor Monty, he isn't shown in the above picture so didn't get in on the first government grant. However, if he can glum on to the fact this is a persistent problem maybe he can get in on round 2 of the money.

"The scientists used complex instruments...to detect the chemical signature of the oil that spewed from the BP well after it ruptured April 20. The equipment was carried into the deep by submersible devices." Comment: They used rare equipment that nobody can understand and conducted the experiments where no one could confirm they were doing anything.

* * * I THINK WE SHOULD GIVE THESE GUYS MORE MONEY * * *

Comment on this model portfolio

2010-08-09T22:01:00.003-02:00

First the necessary disclaimer: The following is provided for educational and entertainment purposes only. The information that follows is neither an offer nor a solicitation to buy or sell securities and/or investment vehicles of any kind. In all cases, individuals are encouraged to do their own research and seek investment and tax advice from qualified, certified professionals properly licensed in the country or locality in which they reside.

Assume equal amounts invested--

Group 1: Playing the yield game:

Pimco High Income Fund

Strategic Global Income Fund

iShares S&P U.S. Preferred Stock Index

MFS Special Value Trust

Group 2: Hedge with the general market:

Standard & Poor's Depositary Receipts

Group 3: Buy Cheap Protection Against Inflation:

Health Care REIT Inc.

Fidelity Inflation-Protected Bond (FINPX)

Fidelity Real Estate Income (FRIFX)

Fidelity Strategic Real Return (FSRRX)

Group 4: Insurance for when the SHTF:

SPDR Gold Shares (GLD)

What do you think?

Too Few Too Big To Fail

2010-08-07T09:41:00.002-02:00

In the United States, a bank failure is the closing of a bank by a federal or state banking regulatory agency. The Federal Deposit Insurance Corporation (FDIC) seizes a bank's assets when its capital levels are too low, or it cannot meet obligations the next day.

The global financial crisis circa 2008 has caused 176 banks to fail as of this writing.

And now more failures are to come-- due to the new US Financial Regulation legislation recently signed into law with its "Pravda-esque" promise of protecting consumers and regulating wall street.

Interesting point #1: Three large financial institutions- the Federal Reserve Bank (a private bank) and Freddie Mac and Fannie Mae (quasi-government institutions) are all exempted from the legislation.

Interesting point #2: The stated intent of the legislation was to end taxpayer bailouts of financial institutions deemed too large too fail (TBTF). When in fact, what it has done is relieve politicians the nasty task of openly debating the next bailout in front of the public by establishing a taxpayer funded trust fund to bailout TBTF institutions. Get it? They didn't eliminate the bailouts only the public process was eliminated; the bailouts continue in secret with a private slush fund.

Here is what to watch for in the news:

Sooner or later, the US FED and FANNIE and FREDDIE who all have been buying up collapsing mortgages and mortgage backed securities, will now start forcing the banks that originally cast these bad loans to start covering the losses (i.e. buying them back). When this starts here is what happens:

Banks begin consuming their "loan loss reserves" and become unprofitable and eventually insolvent. Thank god the FDIC has hired hundreds of new auditors to handle a new wave of bank closures.
Banks know this is coming which is why they aren't lending now. They will lend less when the full power of the US government is unleashed upon them.
The last banks standing are the TBTF banks operating with a tax payer funded safety net and everyone who wants money will have to go to them. Because they are now government backed they are quasi-government agencies.

This is how to nationalize the banking system of a country without having to be very public about what you are doing.

For Whom Da-Gong Tolls

2010-07-21T22:38:00.002-02:00

As is customary after my medical exam, my doctor and I chit chat about the world situation. He asked me, "Do you think we will go to war with China". I answered saying that conflict may already be underway but I doubted that we would ever engage in a "shooting war".

To which he asked, "You mean an economic war?". I said, "No, monetary".

So to my dear Doctor C and all my faithful readers, I submit the following excerpt from the Dow Jones News service reporting on an interview my the Financial Times:

"Guan Jianzhong, head of China's biggest credit rating agency, blames his Western counterparts for the global financial crisis and says China, as the world's leading creditor nation, should have a greater say in how sovereign debt is rated.

Rating agencies such as Moody's Investors Service, Standard & Poor's and Fitch "are politicized and highly ideological and they do not adhere to objective standards," Guan, who is chairman of Dagong Global Credit Rating, said in an interview."

So here we have the Dagong show. And why not, if you were the largest creditor in the world, would you leave the task of credit rating to anyone else? Or better yet, do your own credit rating and don't tell anyone else-- leave the current puppets in place and threaten them with their very existence if they reveal true credit ratings to the anyone else.

First Installment on $20B Shakedown

2010-07-20T23:00:00.002-02:00

So, on June 17, I let you folks know how the $20B shakedown of British Petroleum by the US Government was going to unfold. The first installment is for $7B and was announced today at the Apache Corporation website.

Go back and take a quick look at my June 17 posting: here.

Now, after checking out the Apache Corporation website link above notice 3 things:

The underwriters for this transaction are all US financial institutions that have been bailed out by the US Government because they are insolvent,
The lead is Goldman Sachs former employer of just about everybody who is anybody in the US Treasury or Federal Reserve,
Apache Coporation does not have $7B to execute the purchase for the assets they announced they are buying.

This is getting really easy to predict. I hope you are making money. If you are just reading my posts for your entertainment; I at least hope that you are amused.

Sell into the Summer Strength

2010-07-07T01:01:00.004-02:00

When you visit here please remember you are getting the news about a year before it happens.

Remember my treatise of April '09 on the coming double bottom? It was hard to see then with the stock market roaring back after its March '09 lows. Even harder to see when we were all getting real "giddy" in December of '09. But here is comes.

This past April, I encouraged everyone to keep an eye on their country's bank statement. After all, it is your money.

Well, based on the June 30th report from the US Treasury, it looks like we might just tip over the country's legal debt limit before the November 2010 elections. Its a close call.

Also, on July 1, 2010, the Congress of the US decided that they are not going to publish a budget for fiscal year 2011 which starts in September 2010. Never before -- since the creation of the Congressional budget process -- has the House failed to pass a budget, failed to propose a budget, then deemed the non-existent budget as passed as a means to avoid a direct, recorded vote on a budget, but still allow Congress to spend taxpayer money.

Should be an interesting 2nd half of 2010:

A new supreme court justice (life time appointment btw) that was never a judge,
A war that cannot be won (war on terror),
A problem that cannot be solved (climate change),
Growing disregard for the "rule of law" by the government,
Politicians who cannot lead without spending,
$955B in stimulus spending that didn't stimulate ($168=Bush;$787=Obama),
An ecological disaster (Gulf of Mexico oil spill) that will not be re mediated,
A central bank (the Federal Reserve) which has exhausted all its monetary "tools",
Banks that won't lend,
Consumers who won't spend unless the government subsidizes the purchase (home buyer rebates, cash for clunkers programs, etc.),
shall I go on?

How to establish a $20B victims fund for free

2010-06-17T07:56:00.003-02:00

The USG needs to look tough on BP. BP is a responsible company and would be happy to have its liabilities and obligations played out through the US Court System (ala Exxon Valdez). USG says, "payup". BP says "see you in court". Hence the need for a meeting.

Here is a win-win scenario:

BP hires Goldman Sachs (GS)
Goldman borrows $20B from the US Federal Reserve @ 0%
BP sets up a Special Purpose Entity (SPE) and transfers some of its US based real estate from BP US to the SPE
The SPE uses the real estate as collateral to borrow $20B from GS
The land doesn't have to be worth $20B because Goldman does not have to comply with "mark to market" accounting so you use "mark to model" accounting because there is the "potential" for mineral rights on this real estate.
$20B bond is floated.
But buying a BP bond may be bad PR so...
GS splits the bond issuance up and rolls it into CDOs (Collateralized Debt Obligations) to blur the source.
The CDOs are bought by already underwater public pension funds (government workers, teachers unions, etc.) and GS reaps the underwriting fees and commissions
AIG, a company controlled by the USG due to previous bailouts, is then directed to issue Credit Default Swaps as insurance against the CDOs in the event the BP SPE defaults. Goldman buys all the CDSs at a discount.
$20B in cash transfers from the BP SPE to the USG for the victims fund.
Later the BP SPE is determined to be under capitalized (ie. the land really isn't worth $20B) and the SPE defaults on the bond.
The pension funds that bought the CDOs get a financial haircut causing them to go more deeply underwater increasing the pressure for a USG bailout of public sector pension funds.
GS cashes in on the CDSs used as insurance so it has the $20B to return to the federal reserve.
AIG is receiving government bailout money (TARP) so it gets $20B from the USG to cover the loss on the CDSs that it had to make good on to Goldman Sachs.

Bottom line:

A $20B fund was set up with money printed out of thin air and put in control of the USG to be doled out to "deserving" victims of the oil spill.
GS is paid for handling the financial transaction with money they never had to put at risk in the first place plus they got some land.
Public Pension funds go deeper underwater setting up the "next crisis" that government must solve.
BP had to give up some land.
US Taxpayer bails out AIG for $20B effectively paying for the "victims fund".
USG looks like it "got tough" with BP

That's a lot of alphabet soup in this fictitious story. And that is why it will work. There is no way the media could ever explain to the "man on the street" how he ended up paying for BP victims fund because it is too complicated.

Neutering The World

2010-05-31T21:17:00.002-02:00

One of the techniques employed by the transnational groups against standing countries is the fostering of the notion of "measured response". This means that a country's military should not overwhelm its rival in any situation but rather only deploy enough resources to make the fight "fair".

I don't really care about your politics as it comes to Isreal or the US or the Middle East or Saudi Arabia or Taiwan or Tibet or anything else.

My point here is that governments that give in to media pressure or NGO pressure concerning "measured response" or "soft power" end up killing their own military personnel. And I think this is wrong.

In the words of TUCO from the classic movie "The Good, The Bad and the Ugly", I offer you this YOUTUBE link....

How The Mainland Europeans Got It Backwards

2010-05-22T09:34:00.002-02:00

Bottom Line: A single form of government must come before a single currency. To reverse this sequence is absurd. The British and Swiss knew this from the start.

Facts:
1776 13 colonies declare Independence from Great Britain.
1791 The US Constitution is ratified effectively creating the United States of America.
1913 Passage of the Federal Reserve Act creates the first unifying monetary system in the US.

The EURO was unnecessary:
The creation of the European Union is a good idea. The creation of single currency showed a lack of understanding between the relationship of monetary policy and government policy. When the two are left to go in different directions- default and currency collapse are simply a matter of time. Once citizens of a country learn that they can vote themselves government payments without regard to the source of those funds, they will continue to do so until no money is left.

The rise of Germany:
Germany is accepting obligations of financially weak Euro members and yet is not getting any tangible assets from the counter parties. The German people will not let this go on for much longer. I am not talking about war - after all why destroy Greece militarily? You own most of the darn thing already that would be like bombing your own home.

France- the role of first follower:
An essential ingredient to being a leader is that you have a follower. Due to mutual banking interests (Soc Gen and DB), France will support Germany. Being first follower often takes more courage than being the leader, so give France some credit when it occurs.

Lastly- Ignore the BS that is reported in the media since it is all prepared for "public consumption". France complains they are not being consulted- this gives their government cover. Germany complains about speculators but they know they need the liquidity that speculators provide. Blah, blah, blah....

2X2 Analysis of The Near Crash of May 6th 2010

2010-05-11T23:25:00.003-02:00

Five days after the near market crash of May 6th, we still don't have any answers or even plausible lies about what happened even though micro second trades are routinely logged and cleared AND ostensibly erroneous trades during that same time can somehow be miraculously reversed. Yet the data on root cause for an event that almost destroyed our economic system as we know it seems MIA.

Let's have some four quadrant fun.

X AXIS: The event of May 6th was either a coincidence (a confluence of loosely connected but interactive events) or a premeditated act (most likely a demonstration of power).

Y AXIS: The event was either preventable or unforeseeable.

QUADRANT A: If it was premeditated and preventable then we know who and what happened and we should have the facts by now. But we don't, so I don't think it is "A".

QUADRANT B: If it was coincidental and preventable, it must be that regulating agencies are so ignorant of how the markets work that they did nothing to protect the basis of our economic foundation.

QUADRANT C: If it was coincidental but unforeseeable, why didn't regulating agencies have the contingencies in place so that when the markets move beyond certain control limits (for whatever reason) the stop gap measures prevent a meltdown.

QUADRANT D: This was a premeditated demonstration of power over the market that was so sophisticated that it was unforeseeable and perhaps inconceivable upon which case the only possible response is capitulation to the victor.

What is your vote? A B C or D

Do you think a $1T EU Bailout over the weekend (bailout of banks not of countries and their people) was ransom paid?

Why the fascination with gold?

2010-05-05T21:56:00.003-02:00

I freely admitted that I trade precious metals derivatives: http://tedbits.blogspot.com/2010/04/from-btq-pdq.html

Now with full disclosure let me tell you that I am NOT a "gold bug" nor do I believe that a country's currency must be backed by gold.

There is a reason why everyone wants nukes and it is not about using them. It is about keeping them in inventory. Don't bet against the dollar because it has the basis of the full faith and credit of the US Government.

And the dollar has very good backing:
Source: The Center for Defense Information (CDI) a member of the World Security Institute. The World Security Institute (WSI) is a non-profit organization committed to independent research and journalism on global affairs.

Stop Insulting Pirates!

2010-04-26T18:54:00.003-02:00

I am not one for "political correctness" in speech but if I were a pirate, I would take offense at this report on The Borrowitz Report (note: I shortened it up a bit for posting)

NORFOLK, VIRGINIA (The Borowitz Report) - Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs ... The pirate ... elaborated on the nature of the Somalis' work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted." ... The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the more relaxed regulations governing bankers as opposed to pirates, "plus to get our share of the bailout money." In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law." There are lots of laws that could bring these guys down if they were, in fact, pirates," one government source said. "But if they're bankers, our hands are tied."

I wonder if Borowitz is his real name... "borrow wits"?

I might add that if the Pirates do take bailout money that they infact will become government controlled at which time they must be considered Privateers not pirates. My guess is that their salaries will be capped as well. I hope they know what they are getting into.

Goldman Sachs - Old News

2010-04-16T22:48:00.002-02:00

The recent actions against GS is about old news. The NYTIMES wrote about it last December:
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=3&pagewanted=1

This is really old new because by the time it gets through the editors of a major newspaper, especially one so linked to the US Government like the NYT, you know that the story has been verified multiple independent times and was probably several months old by the time they printed it.

"Keep moving folks, nothing to see here".

So why did it take so long for the SEC to charge Goldman Sachs? One of two reasons: (1) They are not as good as NYT and most of the blogosphere at getting the facts or (2) The government needs everyone distracted for awhile.

What Goldman Sachs did may have been immoral by someone's standards but it certainly wasn't illegal under US Law. The process of packaging Collateralized Debt Obligations and then laying off the risk with Credit Default Swaps is also very old news.

Listen for the lie.

Notice that the drumbeat in the press is about how many pension funds were hurt because they invested in GS debt based special purpose vehicles that were destined to collapse. Notice how many pensions, mostly government pensions, at all levels of government are underfunded. Notice that GS made a deal with the devil in utilizing taxpayer funds to prop up their profits. Notice that AIG (the provider of Credit Defaul Swaps)to GS was nationalized in a blatantly illegal transaction executed by the New York Federal Reserve (under Timmy G) who later had to become Treasury Secretary in order to keep to truth buried. Recognize that none of these transactions could be accomplished without detection by GS the company or because of near incestous relationships in the fraternity of Goldman Sachs employees who now either work in government, the media or run their own hedge funds.

So to keep the real bad stuff secret, Goldman will take the fall. Like GM shareholders, GS shareholders will get financially hurt. GS will pay the government large sums of money which the government will use to prop up failing pension funds. Since GS got tons of money either directly from the government programs, near 0% interest rate loans from the Fed AND AIG insurance payments that are all funded by the US taxpayer; we have another example of pending redistribution of wealth from the tax payer to just about everyone else aforementioned above.

"Keep moving folks, nothing to see here". "The show is over; move along now".

It’s A Show About Nothing – Tribute to Seinfeld

2010-04-14T00:05:00.004-02:00

There is no reason to worry if Greece defaults on its debt. Did you worry when Iceland and Zimbabwe were collapsing recently? Did you know that countries throughout history have defaulted on their debt and nothing bad happened? Did you know that even states of the USA have defaulted on their debt and nothing bad happened?

When General Motors corporation defaulted on its debt to its bond holders recently did anything bad happen? When Lehman Bros collapsed and its obligations defaulted, did anything bad happen?

If you want to know why, watch this Youtube clip from an episode of Seinfeld.

You see my dear readers we are engaged in a show about nothing. Banks around the world create money that they don’t have via fractional reserve banking. And where do they get the fractional amounts upon which to leverage? They get it from their Central Banks who create money out of thin air.

When you default on debt you cause money to disappear that was never there in the first place. It’s a show about nothing. For more proof, what this:

From BTQ PDQ

2010-04-12T23:08:00.003-02:00

For those that are acronym challenged, the title means from Billions to Trillions to Quadrillions Pretty Damn Quick.

I must admit that I am part of the problem. I am a derivatives trader. Rather than buy real gold like the guys on TV, I buy and sell GLD. GLD is an Exchange Traded Fund which is nothing more than a proxy for the price of gold slightly discounted for expenses. A derivative is anything that you can speculate on that is a "proxy" for the real thing.

The great thing about derivatives is that you can leverage them up 10X, 100X, 1000X if you wanted to. So I could sell 100X more GLD contracts than I have gold in my vault to cover the contracts. This is allowed because your derivative contract is a financial claim on the gold but it is not a physical claim. In the event everyone tries to lay claim all at once, I simply default. If everyone tries to sell their contracts all at once, the price goes to zero.

In the end, I still have your money and you got nothing.

I was deeply concerned about total, global derivative contracts about this time last year when I published this post. But things have gotten much better as total exposure has dropped from $1.4Quadrillion to just over $1.0Quadrillion.

Remember when a billion was a lot. Remember how easy it became to start saying a trillion?

Math note: A Quadrillion is 1,000 trillions.

Now I present you with a similar table that has been updated since my last post. Please keep in mind that 100% default on all derivatives is very unlikely. However, what if 10% went bad?

How Eileen Became Bob

2010-04-08T20:29:00.010-02:00

This is not a transgender discussion. Having said this, I most likely lost 50% of my audience already as they just clicked "next blog".

Recently I wrote that you and I can't make easy money in the market. The video is here.

We are all handicapped with one short leg. I am Eileen. We all are Eileen. None of us can stand straight. The individual investor is a "wobbly" lot.

Central banks of various countries, who can simply print money and either give it to banks or buy market futures, are impacting markets. This forces us to follow a "false herd", our short, twisted and withered leg was cut off. We transformed from Eileen to Peg.

This week I talked to a really smart man about investing. He was a professor, technician but mostly he was a Quant. He didn't like PEG and I asked him, Why? His equations dazzled me into the realization that-- the reason I get 2 stock picks wrong for every 3; is because I am lucky.

Based on the "corrected PEG", I should be 100% wrong all of the time! This, my dear readers, requires some analysis of the broader market because I cannot be that wrong, could I? Or that lucky?

Therefore, I further applied his modifed PEG to about 50 of the more popular stocks based on volume traded. And you know what? They all stink! And if this guy is right, we are going to lose more than a leg. We are going to lose both of our legs and both of our arms.

Do you know what you call the guy with no arms and no legs? His name is Matt. Matt lies at your doorstep. Matt is the guy that everyone steps on and cleans their shoes. Eileen became Peg and Peg became Matt.

But we are not done.

You see after all the money printing, it seems that we must take more money from the people and give it to the governments. But the governments are not keeping the money because they are obligated to the people who are printing the money. So the money is returning to the rightful owners-- the people that printed it in the first place. So the story goes that more taxes are needed. And not just for the rich, but for everyone. Here comes the national sales tax or a VAT.

So let's take Matt, the poor unfortunate door rug with no arms and no legs and toss him into the toilet. For you see, the guy with no arms and legs that is now floating in the water is not called Matt, he is now called Bob [Define Bob: a small float usually made of cork; attached to a fishing line].

So now that we are all bobbing, please.... no one flush!

Thomas Jefferson once said, "The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin [coin = gold in the early 19th century]. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."

Check your country's bank statement

2010-04-02T09:49:00.004-02:00

I live in the USA and always check my country's bank statement. You should check your country's bank statement too, to see how things are going. This is the US statement as of 31MAR2010.

https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=10033100.pdf

If you don't know what the line items mean, you should. After all, it is your money.

One particularly important segment is Table III - C Debt Subject to Limit. Think of it as the self-imposed credit line established by the government. Unlike you and me, when the government reaches its debt limit it simply votes to increase the limit. In the US, this was done on 12FEB2010.

The point -- On average, the USG borrows $152B every month, which means that in roughly 10 months it will once again be bumping up against the debt ceiling.

But then again, it is only debt if you plan to pay it back. Right?

Do you think the Citizens of the PIIGS are checking their country's bank statements?

The Three Little "F"s

2010-03-31T22:32:00.002-02:00

I was worried about the markets today. March 31, 2010 marks the end of the US Federal Reserve's buying of mortgage backed securities-- an effort to try to stabilize the US housing market, the banking industry and keep the economy from a double dip recession. Year-to-date, the US Fed has purchased nearly $1.5Trillion in troubled mortgage backed securities.

What happened?

Good ole Fannie Mae and Freddie Mac (Government Sponsored Entities) said they will take the Fed's place and purchase MBS to keep the $5Trillion MBS market stable.

Of course no one asked where Fannie and Freddie were going to get the money to do this. After all, the FED can just print the money it wants to spend. But Fannie and Freddie rely on the US government to use US taxpayer dollars to absorb the losses.

Now maybe you understand why the following news report about certain US Government actions taken on Christmas Eve 2009 occurred:

"On Christmas Eve, Treasury's said it would allow the cap on funding commitment under agreements with the two GSEs to "increase as necessary to accommodate any cumulative reduction in net worth over the next three years." This was announced although neither firm is near the original $200 billion per institution limit established under the agreements. Total funding provided under these agreements through the third quarter has been $51 billion to Freddie Mac and $60 billion to Fannie Mae. Treasury also made the requirements to reduce the GSEs portfolios more flexible.

Treasury said it was removing the caps to "leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."

Hmmmmm...

Pension Confiscation and Haiti

2010-03-10T21:43:00.009-02:00

"President Obama has announced that he will push forward with his healthcare plan. Commendably, the president has pledged to avoid adding to the deficit, promising that tax increases and spending cuts will cover the full cost of the overhaul. But one tax increase in the president’s plan spells trouble for the economy. For households with incomes above $200,000 ($250,000 for married couples), the 2.9 percent Medicare payroll tax on labor income would be extended to interest, dividends, capital gains, and profits from passive investments in partnerships and S corporations." (Associated Press 2010.03.09)

Now we could say, Good! Let's soak those rich bastards! But after the cheering and more importantly after it actually occurs, here is then what happens to the rest of us working stiffs.

(1) There is no way to safely get gains greater than 2.9% and still make a profits so conservative investing techniques slow down.

(2) Remember that the 2.9% medicare tax is in addition to any income tax applicable to the gain also, so the return needs to be well above 5% to make any money at all.

(3) To get the higher gains, the risk is too great.

(4) Investment stops by the top 1% of the country-- who do most of the investing anyway.

(5) Financial firms lay off people.

(6) Financial (brokerage) firms pay less taxes because their profits fall.

(7) Investment arms of banks close - more layoffs more decreased taxes.

(8) The value of securities fall overall because the market for securities has been destroyed.

(9) Pension plans that are holding securities find their asset balances falling below solvency levels established by the federal government.

(10) Failing pension plans are forced to turnover their assets to the US Government's Pension Benefit Guaranty Corporation resulting in benefit cuts to the affected people.

(11) The unaffected people with 401K savings find their nest eggs now having been decimated by the same events turn to the government which will require them to turn over to the government all of your savings in return for a government supplied annuity.

(12) Argentina Redux. "come to papa.".

I Feel Uncomfortable About This

2010-02-28T10:25:00.003-02:00

I've had the opportunity to travel to many different countries and see what they watch on television. Unfortunately, I only speak english so much is lost in transalation but "pictures do speak a thousand words".

Here is a news clip from IRINN [IRINN stands for Islamic Republic of Iran News Network and is a full news channel, part of Islamic Republic of Iran Broadcasting corporation, headquartered in the Jame Jam Park in Tehran, Iran. The main programs are political, but sports, science and medical news programs also exist. Its language is mainly in Persian but there are special programs in English and Arabic.]

The news feed is courtesy of RIANOVOSTI [A Russian News services that provides much of its content in english]. There is no speaking so you won't need translation.

Buying Greek CDS and Watch Citicorp

2010-02-23T23:36:00.003-02:00

Two things... really important... double check my data because I can't tell when I get a really independent, second opinion on the data or if I have a person that is simply repeating what I have already heard. Confirming sources is getting really, really difficult.

Legislation is pending in front of the US Congress allowing money market companies to delay withdrawal requests for up to 7 days after a customer request has been entered. In addition, Citibank sent notices to customers that they are not obligated to honor customer's withdrawal requests under certain circumstances. I have seen the legislation mentioned, but I am not a Citi customer so cannot substantiate the latter. However, I firmly believe that controls are being put in place so as not to expose the banking system to the "run of withdrawals" experienced shortly after the Lehman collapse. If you don't know what I am talking about, post a comment to this post and I will re-post the links.
If you are a bond fund holder in funds managed by companies similar to G.Sachs and Pimpco (these are only metaphors- since holdings change by the second) don't worry about any Greek Government Credit Default Swaps (CDS) held by similar institutions. The US Federal Reserve (central bank of the U.S.) has reasserted its authority to either buy Foreign Sovereign debt directly in order to provide stability to world financial markets or to buy CDS instruments from US holders. This, of course, is done at the US Taxpayer expense eventually.

So here's the tip to make money. You always need to be on both sides of any deal. For example, US Gasoline prices will be at $3.00+ within the next 6 months. If you want to hedge your increasing gasoline costs as a consumer, then you need to own some oil company investments. That way when prices do rise, and everyone is moaning, you can moan right along with them knowing all the time you are covered.

Same with Bond funds held by too big to fail financial institutions. You need to be in the game on both sides. If you are a US citizen then you are already a taxpayer and you will be bailing out everyone world wide. You must get in on the other side of this hedge. One way to do this (and I do not recommend this) is to buy foreign bond funds sponsored by too big to fail institutions knowing the Fed will bail you out at taxpayer expense when things go bad.

I know what you are thinking...this not a way to make money, this is a way to lose less than the next person. That is right. Capital preservation is about you and I meeting a hungry bear in the woods. I don't need to out run the bear. I only need to outrun you.

This means, if we are all heading towards zero, then my plan is to be the last man there. However, if we are all going higher, the I plan to be the first horse out of the gate.

Thanks to all my readers!

2010-02-20T09:42:00.003-02:00

Every year around my birthday, I reset the visitor counter on this site. I would like to take this time to thank my many readers around the world for their frequent visits, comments and emails (click to enlarge).Blogging is my therapy. I feel better after I post. Please know that have tried to make the material interesting, entertaining and intellectually challenging.

In 2010, you can count on Finance, Economics and Government Policy to continue to be the predominate topics. I will try to be as global as possible. Also, I have no interest in blogging about "politics" - there are enough people doing that.

In closing, here is the visitors by country/region sorted by most visits.

One again, thanks to everyone.

United States (US) Europe (EU) Canada (CA) Belgium (BE) Germany (DE) Spain (ES) United Kingdom (GB) Australia (AU) Switzerland (CH) France (FR) Malaysia (MY) Netherlands (NL) Singapore (SG) Hong Kong (HK) Hungary (HU) Sweden (SE) Korea, Republic of (KR) India (IN) New Zealand (NZ) South Africa (ZA) Croatia (HR) Brazil (BR) Romania (RO) Jamaica (JM) Mexico (MX) Japan (JP) Chile (CL) Iraq (IQ) Poland (PL) Russian Federation (RU) Iceland (IS) Costa Rica (CR) Norway (NO) Czech Republic (CZ) Italy (IT) Dominican Republic (DO) Asia/Pacific Region (AP) Thailand (TH) Greece (GR) El Salvador (SV) China (CN)

Some Carry on while others get Carried away

2010-02-18T02:59:00.001-02:00

There is a delicate line between "carry on" and "carrion".

The Carry Trade is when financial institutions borrow money from the FED at like .25% and then use that money (not to make loans) but rather buy something else that has a higher yield like US Treasury Bonds. It is a way to make tons of money without risk.

Now you probably think that only the big institutions can do that but you are wrong. The common person can too! But there is a lot more risk involved. In fact, what I am going to tell you I don't recommend. So take this as an exercise in mathmatics not an a discussion about investing.

So here goes and I will use round numbers for convenience.

There are 600 or so stocks traded on the New York Stock Exchange that have a dividend yield of 5% or greater.
If you can gather up enough resources to open a brokerage account with, let's say round numbers of $100,000; A brokerage will allow you to borrow up to $500,000 or more on margin @ 1.25%.
So let's say you buy $500,000 in stock and after a year you will have $25,000 in dividends @ 5%.
Now you have to pay the broker back interest, so you owe them $6,235 leaving you with $18,750 in profit pre tax.
Now current tax rate on dividends is 15% so you owe Obama $2,812.50 tax on your dividends. You do get a tax credit for your margin interest (assume 25% tax bracket) of roughly $703; so your net tax is $2,110.
Subtract the $2,110 from your $18,750 pre-tax profit (step 4) and you get a cool $16,640 in your pocket to spend.
Now the tricky part. The brokerage also wants their $500,000 back. If those stocks you bought with the original $500,000 tanked then you are in big financial trouble and this normally results in people jumping out of windows al a 1930.
And that is why you never want to do this.
Unless of course, you knew the government or the Federal Reserve were going to do their level best to ensure the stock market doesn't crash again.

The banks get away with this because they are not worried about the implications of step 7. The US government will use tax payer money to cover any losses in step 7 that they cannot absorb. That is why many free thinking people firmly believe that Washington is concerned about Wall Street and not Main Street.

This not a US phenomenom. This is being done by central banks all over the world.

Financial institutions all around the world have been taking advantage of the "carry trade" made possible by their country's central bank.

Which means they have all been buying assets to capitalize on the yield differential.

Which means all this buying has been inflating asset prices.

Which means someone at sometime will start selling.

Then they will all start selling.

What will you be doing?

What will your pension plan be doing?

China Currency Revaluation

2010-02-15T21:17:00.008-02:00

China may revalue its currency soon. The Yuan does not float like most currencies but is rather "pegged" by the government. A 5% increase vs. the dollar is speculated- this will weaken the dollar. This is at a time when a stronger dollar will be better for the next treasury auction now that the US Government (via the executive branch) just raised the debt ceiling so the US can borrow more money.

However, a 5% increase vs. the dollar, while weakening the USD does make US exports look more attractive. That is if we were actually exporting anything anyone wanted because not much is actually manufactured here anymore. Hence, the conundrum from the state of the union speech calling for doubling US exports in 5 years. I am sure what the president meant was that we would be at 2X the amount of actual exportable products in 5 years allowing for adjustments in things we don't export anymore. This is mathematics similar to jobs created vs. jobs saved. My point being that success is defined as exporting 2X the amount of things we would of have been exporting if no action was taken. Are you following this? Cause that was the easy part.

China pegs its currency to the dollar. Why? Because that enables China to enjoy the same biased currency hedge that the US enjoys with having the dollar act as the world's reserve currency without taking accountability for being the world's reserve currency. Very clever. So why increase your currency and make your own product 5% more expensive. Doesn't that mean people will buy less Chinese goods?

Maybe. Or, maybe it doesn't matter if you buy less Chinese goods. Think about that for a moment.

Or maybe the Chinese are pressuring the EU. With the PIGS in near default (Portugal, Italy, Greece, Spain) the narrowing of the gap between Euro and Dollar is closing. Could a Yuan revaluation put so much pressure on the EU that the USG needs to bail out the EU and with what? More US Debt that is, by the way, purchased by China?

Editor's note: Keep an eye on this point. There is a growing drum beat that the EU's problems stem from Wall Street therefore the US (and therefore the US Taxpayer) is accountable to fixing any monetary problems in Europe. This is the same thing that happened when billions of US Taxpayer money was channeled to AIG only to go to EU Central banks.

Given the notion that China can now purchase US Debt in Yuan rather then dollars, this enables them to purchase 5% more of America without actually putting up any additional costs. Are you getting this? 5% is just the shot over the bow. 10% will come very fast.

Or if this happens and the US needs to float more debt then is planned and doesn't want to sell it to China, maybe the Federal Reserve can increase its purchases of US debt to keep liquidity flowing.

But does that make any sense? I mean the USG authorized the Fed to create money. The money created is given to the banks, who in turn, buy US Government debt. That is puting money from the left pocket to the right pocket and calling it a loan.

I am getting nervous that the conspiracy theorist I talked to in July of 2009 was right-- we may be at war and the matter is not made public. It may be everybody against everybody. But that is what happened monetarily just before the great depression.

=====================================================

**FLASH**: Not to freak anybody out but here is the pop up that I got right after I pushed the "PUBLISH" button on this post. Big brother is out there... no doubt. After all, if it was this easy to send me a targeted advertisement, just guess how good more motivated surveillance is!
http://finance.uncommonwisdomdaily.com/roi/war-on-the-dollar.php?sc=G100&ec=A97650&ga_campaign=uw+content+-+bernanke/obama/rwr+(a97650)&ga_adgroup=dollar-+text&ga_keyword=content&gclid=CKO8wpfH9Z8CFdRM5Qodb2ecfg

Part 2: Pension Confiscation?

2010-02-01T20:25:00.004-02:00

The first post on January 8th, 2010 is here: http://tedbits.blogspot.com/2010/01/us-government-pension-confiscation.html

The matter is now officially public.

"The Department of Labor and the Department of the Treasury (the "Agencies") are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue. "

Sounds benign. There is almost $4Trillion in privately held funds either in personal IRAs, 401Ks or Employer Sponsored pension funds. There are people who want to take your money and replace it with a promise. How do you feel about that?

If you would like to comment on the government plan you can email your response to:

e-ORI@dol.gov. Include RIN 1210-AB33 in the subject line of the message

If you feel uncomfortable with voicing your opinion you should reflect on why.

You can read the whole US Government Document here: http://www.zerohedge.com/sites/default/files/2010-02028_PI.pdf

Just so you know... you can use holdings you have now to purchase an annuity to ensure an income stream. You don't need government regulation to allow you to do this nor should it require you to do this. Interesting, isn't it?

Imaginary Numbers

2010-01-18T00:22:00.003-02:00

In March of 2009, I warned of changes likely to occur in Mark to Market accounting. Well they did. The result? Bonuses at the big financial institutions skyrocketed.

Mark to Market was replaced by Mark to Model which means: build an interesting mathematical equation that calculates that your crappy toxic assets are worth more than the market value and put that concocted value on your books.

WARNING: Don't try this home. It is illegal (fraud) for anyone else to do this but a financial institution.

SECOND WARNING: I need to get a little technical for credibility...

In first quarter 2010, FASB FAS 166/167 regulations were suppose to take affect because there are more crappy, toxic assets out there owned by the banks but they are kept "off balance" sheet. Again, don't try this home.

Simply put, 166/167 says off balance sheet stuff needs to start being put "on balance sheet". No more hiding the junk. But wait! We really didn't fix the old toxic asset problem, we only changed the accounting to make it appear we are adequately capitalized! We can't take on more toxic assets into our balance sheet - DO YOU WANT ANOTHER LEHMAN WEEKEND?

Fortunately, the U S Government, took the following action in December, thus delaying any type of true up. http://www.fdic.gov/news/news/press/2009/pr09230.html

So let me make it "dirt simple":

If a bank is under-capitalized it must use its profits to re-capitalize the bank and secure its health. If it does not have to use its profits for re-capitalization, it gives them to the bankers in the form of bonuses.
Mark to Model accounting ensures that re-capitalization can be avoided thus leading to higher bonuses.
Delay of FASB FAS 166/167 ensures that re-capitalization can be avoided thus leading to higher bonuses.
The banks continue to borrow money from the Federal Reserve at 0% interest and invest the money in assets that yield greater than 0% thus ensuring risk less returns, higher profits, and higher bonuses.
The bankers then save these bonuses because when all of this unwinds (and it will) the US Government isn't taking any of the blame and the bankers may suddenly find themselves facing legal problems. At which time, the bonuses will signed over to the lawyers who will represent the bankers.

US Government Pension Confiscation

2010-01-08T15:21:00.003-02:00

The news almost slipped out today so let's see if this gets legs. If this is real, it must be done in 2010 before the November elections.

Because the US government is now insolvent --> +$70Trillion in debt and growing. Fewer want to lend it money.

The Federal Reserve was propping up the US debt auctions but its owners (remember the Federal Reserve is a privately owned institution) don't want to keep buying US debt either.

The only way to keep the game going (at least for a few more years) is for the government to confiscate every one's pension fund, 401K and IRA replacing it with a guaranteed annuity funded with (you guessed it) treasury bills.

This is probably unconstitutional due to the 4th Amendment's protection from unreasonable search and seizure. However, you will happily give all your savings to the government after they cause the next market crash. That is-- government debt will be the only thing that seems safe.

Of course it won't be because the US government has no intention of paying on this sovereign debt. Which is why no one, including the Fed, wants to buy the debt anymore.

Now, if you didn't save for your retirement or you have one of those government pensions that over promised and underfunded, don't worry. You will get to use the retirement funds of everyone else.

Chinese Buying Mattresses for US Dollars

2009-12-31T17:47:00.004-02:00

On 12/30/09 a curious thing happened-- US Treasury T-bills were auctioned at an interest rate payable of 0.0%. And if you don't find that odd, let me tell you that about $5Billion worth of these things were sold! Furthermore, this information was not considered newsworthy enough to be reported in the media.

Don't believe me? Click here: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20091230_1.pdf

Why would anyone give the US Government $5B so that they can get the same $5B back at maturity?
(1) US Citizens feeling patriotic and lending Uncle Sam some walking around scratch?
(2) Financial institutions being forced to buy T-Bills whether they want to or not?
(3) Things will be so bad in 2010 that just getting your money back will put you ahead of the game?

This is the equivalent of putting your money in a mattress.

In these times, perhaps it is best to turn to the largest single holder of US dollars and debt-- the Chinese government to see what they are doing.

Here is what I found in the WSJ (12/29/09):

"BY JAMES T. AREDDY
SHANGHAI—A group of financiers is trying to put a U.S. mattress maker now under bankruptcy-court protection into play by encouraging Chinese bidders to top an already arranged offer for Simmons Bedding Co., according to people involved in the effort."

Somehow I feel these two items are connected...

What befalls autumn bees

2009-12-29T14:23:00.003-02:00

In the Northeastern United States, bees get very impatient and aggressive in the autumn.

I thought they were angry for having been born just before winter -- with a very short life time left.

However, science tells us that the aggressiveness stems from a growing shortage of quality food with impending onset of cold weather. This personality change makes them more likely to sting and swarm if provoked in the smallest way.

Money is the food of governments. It is the “mother’s milk” of politics. Did you notice that governments are now acting like autumn bees? Everything is a crisis. No time to read the legislation—just pass it! The taking of money and demand for legislative financial favors is at its pinnacle. What can’t be taken from the people will be printed.

As the money supply increases, the quality (value) decreases. Like bees with no honey, governments see the end of money.

But unlike autumn bees, what will bee-fall our hive?

To learn more about bees: http://en.wikipedia.org/wiki/Bee

To lean more about governments: http://en.wikipedia.org/wiki/Atlas_shrugged

Where Have All The Pictures Gone?

2009-12-09T08:30:00.007-02:00

Remember my post of March 1, 2009 showing all the media coverage of economic based social unrest? http://tedbits.blogspot.com/2009/03/coming-to-city-near-you.html

Since then there has been nothing. What do you think? Did everyone suddenly get happy? Is there Censorship? Does the press not cover riots and protests anymore?

Something happened to the people of the world during March 2009...

It is not that there aren't things for people to be upset about, they are just not taking to the streets or, if they are, the pictures aren't getting out:

2009.12.06 Radio Liberty: "Workers at Russia's Molot arms plant haven't seen their salaries in nearly six months. Unable to meet payroll, management has resorted to passing out food parcels to its increasingly angry and desperate employees." "This is partially related to the devaluation of the ruble and the accompanying rise in inflation. The buying power of workers has fallen approximately 40 percent. We don't see this situation improving."

2009.12.09 AFP: "GENEVA (AFP) – Unemployment in Switzerland soared to a five-year high ..." "The Swiss government said last week that it would halve from next year its quotas of permits for workers from outside Europe in a bid to curb unemployment."

2009.12.07 Washington, D.C. - infoZine - "The global financial crisis is having a devastating impact on families in emerging Europe and Central Asia, with the risk of the region giving back a fifth of the poverty reduction gains of the past decade, according to a new World Bank report. By 2010, there could be over 10 million more poor people in the region, and close to an additional 25 million more who were almost middle class but now just above the poverty line with the potential of losing their homes, jobs, and basic services."

2009.12.07 New York Times - "BANGALORE, India — In the United States and Europe, people worry that their well-paying, high-skill jobs will be, in a word, “Bangalored” — shipped off to India."

2009.12.08 The Vancouver Sun - "Financial markets tumbled on Tuesday as credit rating agencies slashed Greece and Dubai government-related debt and contemplated the potential debt rating downgrades of the United States and U.K., as both countries struggle to deal with large fiscal imbalances and accumulated debt that have resulted from the global crisis. "Anybody who thinks we are through this credit collapse is delusional," said David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto. "It is ongoing."

2009.12.09 Bloomberg - "Greece’s socialist government, elected in October, plans to cut the budget deficit to 9.1 percent of GDP next year from 12.7 percent this year. In contrast, Ireland’s Finance Minister Brian Lenihan will announce plans today to cut spending by 6 percent in the face of the worst recession in Ireland’s modern history." “There’s certainly an element of panic and hysteria,” said Peter Dixon, an economist at Commerzbank AG in London. “The ECB will bend over backwards to ensure that one of the countries within its orbit doesn’t default."

2009.11.07 New York Daily News - "President Obama signed a $24 billion economic stimulus bill into law... The law provides another 14 weeks of benefits to all out-of-work people who have exhausted their benefits... in states where the jobless rate is 8.5% or more get an additional six weeks. The extra 20 weeks could push the maximum a person in a high unemployment state could receive to 99 weeks, the most in history."

HERE ARE SOME PICTURES FROM THE FEDERAL RESERVE DECEMBER 2009 MARKET REPORT (Click to enlarge):

No social unrest in the US because the government continues to subsidize unemployed workers. Now you can get benefits for almost a full two years. The unemployed are staying unemployed longer than any time in US history.

Of concern is the fact that even with continued extensions of unemployment benefits, continuing claims are dropping. Since total unemployment has not improved and continuing claims are falling, this can only mean people are falling through the US social safety net.

The Value of Lost Data

2009-12-08T22:11:00.004-02:00

As quoted from the UK London Times (November 29, 2009):

"SCIENTISTS at the University of East Anglia (UEA) have admitted throwing away much of the raw temperature data on which their predictions of global warming are based. It means that other academics are not able to check basic calculations said to show a long-term rise in temperature over the past 150 years. The UEA’s Climatic Research Unit (CRU) was forced to reveal the loss following requests for the data under Freedom of Information legislation."

Fortunately, we no longer need the data because everyone accepts that global warming is occuring but the technique here can now be used in Copenhagen.

The plan is for Developed countries to emit less greenhouse gases in the future while Developing countries will be allowed to emit more. The idea being that at some point in the future, all countries will have contributed the same amout of greenhouse gases into the environment and then we will have another meeting.

Since developed countries have contributed the most green house gases and therefore have all the historical data, they will be in charge of keeping score going forward.

If, in the event Developed countries don't like the score going forward, they will simply lose their data and calculate events as they see fit.

After all, it is one of the worlds most greatest diplomats that said, "those that vote decide nothing; those that count the votes decide everything".

Look it up....

How to Transfer Wealth

2009-12-02T13:03:00.003-02:00

I just picked a bank at random and retrieved these figures for 12/1/2009:

For savers: 12 month Certificate of Deposit: 1.25 % return
For borrowers: Credit Card Interest Charged: 19.99% ; 30 Year Home Mortgage: 4.875%
20 Year Home Equity Loan: 6.49%

So it would seem banks would be lending lots of money because the rate at which they pay versus the rate at which they charge is really big. They should be making tons of money!
But they are not lending because even though the spread is huge, there is a risk free way for them to make even more money.

STEP (1): The US Federal Reserve bank creates money out of thin air and makes it available to preferred banks at near 0% interest.

STEP (2): Preferred banks borrow money from the Fed at 0%.

STEP (3): The Preferred banks use this money to buy US Treasury certificates that yield more than 0%. Example: 10yr yield is greater than 4%.

STEP (4): US government pays the interest to the preferred banks using Taxpayer dollars.

WHY BANKS DON’T LEND:
So… if you were a bank, why would you ever lend any money to individuals when you can lend it to the US government who will in turn take money from its citizens to pay you back. All this accomplished by using money that doesn’t really exist which you borrowed at 0% interest.

WHY AN ASSET BUBBLE IS FORMING:
Shaving a couple of interest points from the US government can get boring after a while. So, why not take some of that money and start buying domestic and foreign stocks. After all, the money is free and you, plus other banks, will all start buying and pump up the stock market creating a “herd mentality”. Maybe even get your friends at the FED to buy index futures with additionally manufactured dollars to really accelerate the rise in the stock markets.

WHEN WILL FED INTEREST RATES RISE?:
Never. What has been created is a massive “carry trade” at an unprecedented scale that can never be unwound. Besides, in the old days the FED raised rates so banks, in turn, would raise rates to cool down the economy by making credit tighter. Credit is already tight at 0% so there is no need to raise rates because it would have no effect.

WON’T ALL THIS MONEY CREATION CAUSE INFLATION AND REQUIRE THE FED TO RAISE RATES?:

No. We are in a well hidden deflationary spiral. As more and more individuals have less and less money because it is being taken away from them or they are jobless, local prices will fall- eventually resulting in labor rate parity world wide.

When people can’t afford things the price naturally falls. This is why the US housing market is not done falling and won’t stop until median home prices begin to align with median incomes.

Imported goods will become more expensive and therefore appear inflated but that is just currency effect without change in real prices. However, imports will slow because no one can buy them- eventually resulting in global economies becoming regional. That is- local goods, produced locally and consumed locally.

And besides, the FED is not really creating money because the money is not being allowed to fully enter the economy. We are simply point shaving here and the preferred banks only have to pay back the principle (0% interest rate effect) or even if they default- who cares the money didn't really exist in the first place!

My Healthcare Solution For The U.S.

2009-11-24T11:28:00.000-02:00

I wrote this back in July and never posted it. Time to weigh in...

(A) There is nothing wrong with health care in the United States. The Healthcare debate is about money.

(B) Today in the U.S., whether you can pay for it or not, everyone gets some form of healthcare.

(C) With US population growth near zero, the healthcare costs of the U.S. will be basically flat plus inflation in the future.

(D) There are three "costs" that occur within the healthcare system that do not contribute to healing and prevention. (1) Fraud, (2) Poor Productivity, (3) Insurance Company Profits. All three of these must be eliminated which further ensures point (C) above will be true.

(E) Fraud and Poor Productivity can be eliminated through the use of Information Technology provided some effort is put into business process re-engineering.

(F) Insurance companies would be required to operate at zero profit plus investment recap for their health insurance units. They can also leverage their back office operations with their other "for profit" insurance units (auto, home, etc.) to gain some economic advantages.

(G) Since Federal and State governments of the U.S. already provide more than 50% of the health care insurance coverage already, a government provided insurance option can be provided for those not wishing to buy private insurance. Government insurance programs for the poor and aged would continue as they do today.

(H) Those who remain uninsured, consume healthcare services and then refuse to pay for those services will be pressed into community service at healthcare institutions until their debt is repaid.

(I) Businesses may provide insurance coverage for their employees and/or self-insure as a means of retaining talent.

(J) Second amendment rights will ensure the government won't ration health care because the American people won't stand for it. The politicians will lose their jobs or worse.

Today my parents are covered by US government provided medicare and they buy additional insurance ("medicare supplement") from a private insurer to cover things that Medicare does not provide. What is wrong with that for all US citizens?

You see, if the arguments could be reduced to the facts and points above, we could make progress. But there are groups at work who are positioning the legislation such that their real agenda can be carried out later. And it is these groups for which the common citizens are most afraid and why protests are mounting:

#1) The anti-population crowd that believes there are too many people already and that death should be hastened for the unproductive and reproduction should be curtailed. Their basis lies in the belief that the planet's biggest problem is people.

#2) The anti-capitalist crowd who believes that anything that provides equal opportunity without equal outcomes must be eliminated.

#3) The anti-freedom crowd who believe that they know what is best for people and plan to use the provision or denial of healthcare to control people.

#4) The usual suspects that create massive legislative works in order to enrich themselves, their friends, or people who helped them get elected in the last election.

Federal Reserve concerned about its own solvency

2009-11-07T06:07:00.002-02:00

Took a vacation from blogging for 2 months but the latest FOMC report from the Federal Reserve has gotten me back in action. Pretty short read. The whole text can be found here: http://federalreserve.gov/newsevents/press/monetary/20091104a.htm

Federal Reserve people are like scared ducks in a pond. They look calm on the surface but underneath the water they are paddling furiously. That's why you need to really look at what they are saying in these reports because it all sounds quite benign. It isn't.

"In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010."

Agency debt is one of the reasons the financial collapse started. Agency debt is created by surrogates of the US Government created by the US Government. The US Government has taken no action AT ALL conerning US Sponsored Agencies, their policies, practices nor the legislation that mandates their actions and behavior. Everything that has caused the intial problem has continued, unabated, and even somewhat augmented by stimulus activity.

The Federal Reserve bank is basically saying in their report, "We've been buying your crap to keep you afloat. While we were risking our own solvency, you did nothing. Starting 2Q10, you are on your own".

===> If you are in the US and most of your holdings/cash are US dollars, you probably need to find an entry point to buy more gold. The price of gold is not going up. The value of the dollar is going down which makes it look like gold is expensive. We are just getting started.

Connecting the Dots on Electricity

2009-09-12T10:46:00.006-02:00

As a blogger since 2004, this is going to be my most important post. The service I try to provide you, my readers, is taking a series of complex data points and embodying them in a story that makes you think. What I offer is simple: Entertainment and Insight.

Something big is about to happen with electricity and it is going to happen soon.

I have selected 3 videos about electricity from TED.COM. Watch them in sequence and tell me if you connect the dots the way I do.

VIDEO #1:
Concept: Shai Agassi wants to put you behind the wheel of an electric car -- but he doesn't want you to sacrifice convenience (or cash) to do it.
What To Watch For: This not about an "invention". This is about a fundamentally new business model for the consumer of automobiles, the auto industry itself and the companies that provide energy.
http://www.ted.com/talks/lang/eng/shai_agassi_on_electric_cars.html

VIDEO #2:
Concept: Eric Giler has a plan to beam electric power through the air to wirelessly power your laptop or recharge your car. You may never plug in again.
What To Watch For: The live demonstration on stage. It works.
http://www.ted.com/talks/eric_giler_demos_wireless_electricity.html

VIDEO #3:
Concept: John La Grou, a long-time electronics inventor, audio designer and entrepreneur, wants to save lives and energy with a new, smarter type of electrical outlet.
What To Watch For: This is the answer to how we can consume electricity for new things (like cars) without increasing our total consumption of electricity. It works.
http://www.ted.com/talks/lang/eng/john_la_grou_plugs_smart_power_outlets_1.html

THE FUTURE IS "BRIGHT":

The last 200 years of human development has been immeasureably accelerated due to cheap and plentiful sources of energy. Cheap compared to doing the work manually or with donkeys-> 1 Barrell of oil = 5.8 million BTUs = 23,200 hours of human labor (agricultural standard). Because energy is so cheap, we have been able to do almost everything with practically nothing. This transformed modern society.

The good news is that limitless, cheap electrical power will remain with us. According to Ray Kurzweil , "We also see an exponential progression in the use of solar energy," he said. "It is doubling now every two years. Doubling every two years means multiplying by 1,000 in 20 years. At that rate we'll meet 100 percent of our energy needs in 20 years. [with solar power]"

In summary:

The new business model for private transportation has been defined and some country somewhere will adopt it.
The ability to transmit electricity wirelessly has been proven, it will now be perfected.
The rate of progression of solar power is an exponential curve.
Legacy forms of energy production are requiring more and more energy to produce energy due to "high grading"
Smart outlets are a bridging technology providing safety and extraordinary savings.

My New Corvette

2009-09-11T08:50:00.005-02:00

Probably wouldn't spend the money to own a Corvette but you must admit it is a great looking sports car with a colorful history. Because I am a US Citizen and therefore part of owner of General Motors, I will be one of the first in line to take advantage of the latest offer of a free test drive

More details coming on September 14, but here is what we know now (from above hotlink):

Details of GM's new Satisfaction Guarantee:

· Offer covers 2009 and 2010 Model Year Chevys, Buicks, GMCs and Cadillacs (except medium duty trucks)

· Customers (one per household) can return their vehicle between 31 and 60 days with less than 4,000 miles

· Customers will be informed in writing before they buy the vehicle of the terms of the Satisfaction Guarantee

· Customers must take delivery by Nov. 30

· The Satisfaction Guarantee covers the vehicle purchase price and sales tax, but not other add-ons like accessories, negative equity on a trade-in or other fees; other restrictions apply

· Leased vehicles are not included

· More details are available beginning Monday, Sept. 14, online at [Chevy][Buick][Cadillac][GMC].com/guarantee

Simple Truths

2009-09-09T00:31:00.003-02:00

Too Big To Fail:
HISTORY: The US Government (USG) coined this phrase to apply to US based, multinational financial institutions whom upon failure, would trigger a systematic collapse of society as we know it. In addition, the USG was also sending a strong message to the rest of the world that America is "too big to fail".
IMPLICATIONS: The rest of the world will bail out the US since they cannot afford the alternative.

Convert Debt to Equity:
HISTORY: Rather than the USG "loan" money to "too big to fail" multinationals, it purchased equity (normally preferred shares) in target companies. When the auto companies went bankrupt, the USG wiped out the debt holders, drove the share price to zero, but converted the value of the company to "new equity shares" which it doled out to its political supporters.
IMPLICATIONS: Therefore "debts" whether they be financial or poltical are paid off in equity. China holds $2 Trillion in US treasuries and federal reserve notes. Since we cannot pay them off and will not risk a default, the USG will give Alaska to China.

Who Gets the "First Mover Advantage":
HISTORY: Demographics in developed countries show that there are more and more older citizens and less and less younger citizens as a percentage.
IMPLICATIONS: There will be less and less younger people wanting to buy my stocks, bonds, real estate and other things therefore my nest egg will shrink due to simple supply and demand. So older people (the majority) will vote in politicians who take from the young to give to the old.
IMPLICATIONS 2: In order for the young people to stop getting squeezed by older people there will be a systematic process by which older people are removed from existence and their assets transferred to those who weren't going to buy them in the first place. This process is referred to as "healthcare reform".

Maxine on Bailouts

2009-09-08T22:49:00.005-02:00

*** This post has been removed since the facts are in dispute ***

Thank you to my commentators who have sent disputed evidence. All comments have been removed as well.

Tedbits

Pledge Allegiance To Debt

2009-09-02T10:20:00.003-02:00

I pledge allegiance to America's debt, and to the Chinese government that lends us money. And to the interest, for which we pay, compoundable, with higher taxes and lower pay until the day we die.

This is worth a visit: http://defeatthedebt.com/

Watch the TV commerical:

Highlights from the 2009.Q2 FDIC Report

2009-08-31T22:46:00.006-02:00

The only thing better than reading reports from The Fed is the quarterly FDIC report:

http://www2.fdic.gov/qbp/2009jun/qbp.pdf

Here is the highlights with pithy comments by me (in red):

INSURED INSTITUTION PERFORMANCE
1) Higher Loss Provisions Lead to a $3.7 Billion Net Loss

"Are you low balling the provisions to remain solvent?"

2) More Than One in Four Institutions Are Unprofitable

"That's 2,048 banks! Yikes...25%"

3) Charge-Offs and Noncurrent Loans Continue to Rise

"Meaning... things are getting worse and you are low balling #1 above."
4) Net Interest Margins Show Modest Improvement

"Duh... You borrow at near 0% and lend at much higher rates"
5) Industry Assets Decline by $238 Billion

"People are taking their money out of the banks"

Now for some scary graphs.

The FDIC can only cover 60% of the failing loans. So they are hoping that 100% don't fail? Which means they are in no position to insure your bank deposits in total if there was a "run on the banks". That's a pretty good indication that the 8,195 insured financial institutions in the United States are approaching insolvency and their primary insurer, the FDIC, is technically bankrupt.

Problem institutions were increasing >20% per quarter for 2 years! If this continues, by 2010 more than half of all insured US financial institutions will be listed as "problem". If this isn't the tipping point for the whole US financial system then simply wait till 2011 when we reach 100% problem institutions.

US Children Fund GM-CHINA Deal

2009-08-31T09:36:00.003-02:00

"SHANGHAI (Reuters) - General Motors said on Sunday it has agreed to set up a light commercial vehicle production venture with major Chinese automaker FAW Group, with total investment of 2 billion yuan ($293 million)."

A bankrupt company taking money from the US government; money which the US government acquires by selling US debt to the Chinese whereby the future generations of the Americans are left to pay the interest.

Debt is future consumption pulled forward to the present. The result is less consumption in the future or default because--- nothing is growing faster than debt.

Chatter

2009-08-27T23:02:00.002-02:00

I may have been a year too soon but the chatter is building again. Beware. Prepare.
If this is wrong what is the worst that can happen? You squirrel away 3 months of living expenses in your floorboards that could have been in a financial investment earning 0.05%.

People don't prepare because they are afraid of looking foolish.

http://tedbits.blogspot.com/2008/10/bank-holidays.html

Greenback Emissions

2009-08-22T11:01:00.003-02:00

I heard someone say we are too worried about greenhouse emissions and better start worrying about greenback emissions! Jeez, I wish I could think of clever lines like this.

Anyway, his comment reminded me that I haven't written about something that I think is very important.

The Federal Reserve and the US Treasury have been placing well timed trades in the S&P Futures markets since early March. Some of this you can see on the balance sheet of the Fed. Some you can't because it is being held off-balance sheet.

Such futures action makes it look like the stock market is going to go up. This results is really smart people front running this trend and less smart people putting money in the market driven by herd mentality.

At some point this will stop. Further, at some point those positions may have to be unwound.

What do you think will happen then?

Now that you read this please remember that any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Sold Out

2009-08-18T00:58:00.002-02:00

Before you read on please remember that any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Since some of you may have been following along from the market report I gave on March 20 (http://tedbits.blogspot.com/2009/03/bulldog-returns.html), I wanted to let you know that as of today, I am completely sold out of the above holdings and related equities. Signals were clear as of the first week of August that the market was weakening and I systematically tightened up my "stops". Over the past few weeks I have been taking money off the table and as of today, I am completely out. It was a great run.

I still believe in the China Recovery/Commodity Strategy but will not buy back in until I see a good 10%-15% retrenchment from current levels. My short position on the US Dollar is now closed and I am neutral on the dollar at this point. I like gold at $880/oz.

Other things I am watching:

Blackstone (BX) after it goes ex-dividend. Would love to see this at $10/share and probably start nibbling at $12.

China Battery (CBAK) at about $2.50/share.

And of course GLD, UDN, DBB, DBC, DBO after proper retracement.

For a speculative trade consider Image Sensing Systems, inc. (ISNS). Be very careful though because this stock is thinly traded. I am hoping for some institutional investors to move in on this one and send it to the stratosphere. I continue to have a minor position in ISNS.

It is possible that we will form a double bottom (http://tedbits.blogspot.com/2009/04/decoupling-double-bottom.html) because uncertainty is reoccurring in the financial markets as commercial real estate loans are defaulting.

Lastly, I must say I am getting more and more confused about inflation vs. deflation. I really believe we are heading for inflation if you've followed previous posts. However, I have read some compelling cases for deflation from reputable sources. The most clever point I read was a prediction for inflation in necessities and deflation in discretionary purchases. Ever since I read this it convinced me that this is probably our future.

Oxygen

2009-08-15T23:02:00.002-02:00

If you are a regular vistor, I hope you noticed that often times you can read about something here in my blogs about 3 to 6 months before it becomes news. I am not a psychic. Trends and patterns are obvious and how this world works is quite predictable.

Here is the next topic to watch for: Oxygen

You see, global warming is getting old. And after 11 years of cooling temperatures the polls are showing "it isn't selling" anymore.

The same thing happended in the 1970's and 1980's when the big thing was the "next ice age" that was soon coming. During these decades temperatures were actually warming.

Whether warming or cooling, it seems we just can't get the world to buy into the catastrophe of dramatic climate change. We can't generate enough fear.

Now there is something brewing that will really scare people. The world is running out of oxygen. You haven't heard much about so far because we haven't figured out a way to blame human behavior. But as soon as we do, watch out.

If you are still part of the greenhouse gas crowd... remember most of the green house gases in the atmosphere are NOT man made. Here is a link to a prior posting

Merchants of Death

2009-08-03T22:05:00.003-02:00

Here is an interesting graph. Draw your own conclusions. Click to enlarge.

Inflation Unwind?

2009-07-31T09:06:00.005-02:00

Because I am short the US Dollar, I watch US Treasury auctions very carefully. They continue to be under subscribed requiring "Primary Dealers" to buy what is unsold. This is the downside of the normally positive edge you get for being crowned a Primary Dealer.

The problem I see is that the amounts being bought month after month by these primary dealers exceed the cash on hand in the balance sheets. This means that the transactions are being conducted off balance sheet and someone is giving them the money to do the purchase. There are only two entities large enough to fund such actions: (1) the Federal Reserve itself could print the money and give it to the PDs off-balance sheet or (2) The CBO China could do it (but I doubt it).

Action (1) above is essentially quantitative easing [printing money] but being performed in a way that is invisible. This is becoming too big to unwind with annual US debt approaching $2T/year. This means inflation.

While I strongly feel that Action (1) is happening, I was is a discussion group with a fairly intelligent Conspiracy Theorist who believes Action (2) is happening. His idea is that Countries conquering other countries through war is passe'. He believes the 21st Century conquering is done by one country simply purchasing another. It is bloodless, doesn't destroy valuable assets and allows the respective economies of both countries to stay intact. He laughs when I point out that I think the US should sell Alaska to China by saying that I am only partially right. He contends that the whole country is being sold for the purpose of creating a New World Order, elimination of the United Nations, a the formation of a "Mega Country" [China US merger] which will control the world.

When I hear stories like this it makes me think my assessment of the situation is very rational. I think off-balance sheet is happening in a very big way.

Keep an eye on UDN, it is a method for US Citizens to short the dollar.

Customer Relations

2009-07-28T22:49:00.003-02:00

This post is an addendum to:
http://tedbits.blogspot.com/2009/06/customer-segmentation-on-global-scale.html

And is based on a new article reported here: http://apnews.myway.com/article/20090728/D99NE5E00.html

Here is your bottom line:

"Obama dispatched his top economic officials - Treasury Secretary Timothy Geithner, National Economic Council Director Lawrence Summers, White House budget director Peter Orszag and Federal Reserve Chairman Ben Bernanke - to try to reassure China that the U.S. will not let deficits or inflation jeopardize the value of Chinese investments.
U.S. briefers said the president's team told the Chinese that the United States was committed to making sure the economic and monetary stimulus being used to fight the recession did not fuel inflation.

The Chinese, who have the largest foreign holdings of U.S. Treasury debt at $801.5 billion, have been expressing worries that soaring deficits could spark inflation or a sudden drop in the value of the dollar, thus jeopardizing their investments. Chinese officials said those concerns were raised during Monday's talks."

What do you think happened? Vote here with your reply:

(A) The Chinese accepted the words of the US government officials because they like fancy speeches and are enamored with clever Americans.
(b) The Chinese asked for and got financial concessions (like inflation protection) for their $800+B investment
(c) The US offered to sell Alaska (after all the US is not using it for anything) to the Chinese for all the US Dollars held by the Central Bank of China and the retirement of all US Debt held by the Chinese
(d) The US Government told China that they (China) were really screwed because we plan to crash the dollar and not pay on any of the debt. [Known as the Argentina Solution]

You can reply anonymously, so let's hear your vote.

Cowboy and Street Thug

2009-07-24T22:32:00.006-02:00

FINE PRINT: What follows is a work of fiction. Any references to persons, legal entities or governments (living or dead or undead) is purely coincidental. The following is for entertainment purposes only. Any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Back in March is posited the following: China and Commodities Will Recover First

It was harder to make money under the cowboy but the new guy is so predictable that this is like taking candy from a baby. No wonder Wall Street loves him and no wonder they supported his election.

The cowboy operated under UN Resolution 1441 and there was no doubt what the end game would be: If the United Nations was to have any credibility then American blood would have to be sacrificed. He wasn't a smooth talker but there was no doubt about his willingness to step into the street for a gun fight. UN Resolution 1441 authorized military action against IRAQ and he took it.

Today we have the new guy. And, we have IRAN. Everthing was fine with a the December 2009 deadline on nuclear ambitions but the new guy decided to publicly move the deadline up to September. There is no UN Resolution that IRAN comply with this on any date! We are mano y mano now baby!

What happens in September?

(a) Will IRAN suddenly capitulate to the United States?

(b) Will the US attack IRAN, without a UN Resolution allowing such, because they didn't meet the September deadline ?

(c) Will the US have its surrogate ISREAL attack IRAN so the US can save face?

(d) Will IRAN ignore the US demand thus allowing a smoother talker of nuance, to point out the differences between cultural calendars and timekeeping that were no doubt at the heart of a timing snafu?

Given that (a) isn't going to happen all the remaining options are financially destablizing with a commensurate "flight to safety" to follow. With US Treasuries increasingly doubtful as "safe" given US government insolvency, some money will go into commodities and China. The dollar will collapse either because the US cannot fund another war, properly pay its surrogates, and/or lose its standing as a world leader.

I continue to like DBA, DBB, DBC, DBO, FXI and GLD.

Computer Pgm To Manipulate Markets Stolen!

2009-07-09T17:05:00.003-02:00

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

PROCEEDINGS BEFORE MAGISTRATE JUDGE KEVIN N. FOX,
UNITED STATES DISTRICT COURT

What follows is an excerpt from page 8...lines 3 through 7...

3 activity. In addition, because of the way this software
4 interfaces with the various markets and exchanges, the bank
5 has raised a possibility that there is a danger that
6 somebody who knew how to use this program could use it to
7 manipulate markets in unfair ways.

I am not a lawyer but I play one in the blogosphere. So let me interpret this testimony and then ask some hypothetical questions (which have nothing to do with the case).

FACT: Plaintiff has stated, as a fact, that the program can be used to manipulate the market in unfair ways.

QUESTIONS:

How would you define manipulate?
Does Goldman Sachs' use of the program constitute manipulation?
Would not such manipulation affect the market both during and after the fact of the program's use in both direct and indirect ways?
How would you define fair?
Does Goldman Sachs' use the program to manipulate the markets unfairly? (this is like asking have you stopped beating your spouse)
Is there a qualified, independent body that examines Goldman's use of the program to ensure compliance and absence of malfeasance?

Full text of testimony is posted on SCRIBD here is a convenient link: http://zerohedge.blogspot.com/2009/07/aleynikov-transcript.html

California won't accept their own IOUs?

2009-07-03T16:10:00.002-02:00

The US state of California, formerly the 7th largest economy in the world began issuing IOU ("I Owe You") certificates to people and businesses that they couldn't pay because they didn't have enough money. The IOU's are technically registered warrants meaning that they are convertible to legal tender.

Here's the irony: Let's say you were a contractor and did some construction work on state owned building. The state government will give you a registered warrant (IOU) that means they will pay you at a later date. However, if you hold CA Registered Warrants and want to use them pay any bill you owe to the state like taxes, licenses or workers compensation insurance, California will not accept their own warrants in return.

Don't believe me? search their own site: http://www.ca.gov/

How to make money on cap and trade

2009-06-25T22:49:00.008-02:00

Cap and trade (of anything) is the next financial bubble. One thing is true about all bubbles (ask the Dutch about tulips) and that is: "the first in, win" and the last out get screwed.

Cap and trade sets of up a market for trading greenhouse gas "allowances". This means that there will be a market for futures and futures markets will also provide the opportunity for index type investments. Those investing in all these vehicles will seek to hedge their upside and/or downside risk providing for the creation of collateralized obligations and offsetting credit default swaps.

Sound familiar? This is Financial institution's dream come true- a gift from the US Gov.

My point is... get in now... establish your position...and don't be greedy. When wall street and the USGov team up, you've got to be "in the game".

If you make a ton of money you won't care that your electric bill grew by 50%, US manufacturing completely shut down, and gasoline is $8.00 a gallon. In fact, you will facilitate the whole process by being one of those individual investors that is helping provide liquidity to those efforts to remake America.

The informed will make money, the poor will get tax credit offsets and those in the middle and those frozen in the headlights will foot the bill.

------------- I hate long posts but if you want to know how this all going to work:

I read the legislation, so let me bottom line it for:

Each year the USGov decides how much "man made" greenhouse gases can be introduced into the atmosphere by citizens and companys for which the USGov has jurisdiction (call this "the allowance").
Some of "the allowance" is allocated to citizens and companys. They will not get enough of "the allowance" to actually operate in a given year.
The rest of "the allowance" is given to Agencies of the USGOV or Non-Governmental Organizations who do not actually emit greenhouse gases but can "sell" their portion of "the allowance" to those that have been "underallocated". They will no doubt sell 100% of their "allowance" because they don't need an allowance to begin with. Get it?
The combination of 1, 2 and 3 above are a simple formula for taxing everyone in line #2.
These taxes are then either (1) passed on to the consumer or (2) avoided by curtailing production in the US [loss of jobs].
While reduction in greenhouse gas emissions can be measured, the affect on global warming cannot since there are too many other variables at play. Hence, the success at raising taxes is a certainty; the reduction in global warming is not.
Only Western Europe and the US are pursuing these policies. China and India are not since they have several billion people to keep happy.

We need a failure Czar

2009-06-11T16:50:00.002-02:00

The US government has 15 "Czars" in the executive branch ("Car Czar", "Compensation Czar", etc.). I would much prefer "Car Pope" or "Compensation Pope" so we could presume some degree of infallibility when they speak Ex Cathedra.

Speaking of infallibility. If "we learn from our mistakes", don't you think that failure is too important to leave to chance?

If I am "too big to fail"; does that mean I am "too big to learn"?

And speaking of education, wasn't it Benjamin Franklin, that great British separatist who noted, "The only thing more expensive than education, is ignorance"!

But I disagree. Ignorance is the domain of the innocent (ex: little children). We are really talking about stupidity and stupidity comes with experience.

This is why "History Repeats Itself" or better-- People repeat history.

So now I offer you some history about what happens when there are too many Czars with too much power, who answer to no one:

In January 1905, an incident known as "Bloody Sunday" occurred when Father Gapon led an enormous crowd to the Winter Palace in Saint Petersburg to present a petition to the tsar. When the procession reached the palace, the national police force opened fire on the crowd, killing hundreds. The people were so aroused over the massacre that a general strike was declared demanding a change in government. This marked the beginning of the revolution and the country was paralyzed and politicians grew desperate to keep their positions of power.
Rumors where then circulated that food and fuel would soon be in short supply and inflation was mounting. Strikes increased among formerly self-sufficient citizens who were forced to take low-paid, government jobs mostly in the military. The media, typically friendly to the government, feared for their existence and spread public distrust of the regime so that they would be seen on the side of the people who, by now, had organized themselves into well-armed regional militias.

It didn't go well for the Tsar; so what can we learn from his mistakes:

Don't allow the people to arm themselves,
Maintain control of the media,
Get the bankers on your side by giving them lots of money,
Don't leave community organizing to chance, fully fund it so you can control it,
Make sure the people are less afraid of you and more afraid of something else (like pensions, flu, healthcare) -- maintain "rock star" status if you can (see point 2 for help),
Find your semi literate, mystic Grigory Rasputin equivalent before it is too late.

Customer Segmentation on a Global Scale

2009-06-09T21:36:00.003-02:00

If you are an important customer, you expect special treatment. And you should get it. It is good for you as the buyer and it is good for the seller.

Most "good" customers are those that drive volume purchases. The seller usually offers a discount to the buyer and, in turn, the buyer buys large volumes. Both buyer and seller win.

Sometimes the key customer doesn't get a discount but rather some other consideration. Perhaps a rebate to be delivered at a later time. Perhaps preferential treatment that is hard to value but valuable none-the-less because it is not available to "lesser" customers.

China is the United States' most important customer when it comes to buying US government debt.

Why did Pelosi go to China? Why did Geithner go to China? Who will be next to pay a "sales call" to this most revered customer of US Debt.

Have you or your broker or your pension or your 401K bought any treasury bills lately. Do you think they (you) are getting the same deal as China? Are we all paying the same price? Are we all getting the same advertised, published return on investment?

What am I thinking here? I am quite sure we are all paying the same price and we are all getting the same benefits regardless of who is big and who is small. I mean after all, isn't it really all about fairness and a "level playing field"?

When is the next auction, I heard they are serving General Tso's Chicken....

BTW you've got to watch this if you like General Tso' Chicken...
http://www.ted.com/talks/jennifer_8_lee_looks_for_general_tso.html

Should I buy GM?

2009-06-02T14:22:00.003-02:00

FINE PRINT: What follows is a work of fiction. Any references to persons, legal entities or governments (living or dead or undead) is purely coincidental. The following is for entertainment purposes only. Any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Buying the stock:

(1) All the people who are going to own the stock after bankruptcy intend to sell it for cash. The government says it want's out. The Labor Union intends to sell the stock to pay for medical benefits. When there are more sellers than buyers a stock goes down.

(2) I heard Bob Luntz (Former Chairman of GM) on TV (2009.06.02) and he said GM will do well because the US dollar is weakening and this makes GM more competitive. When a Chairman is counting on currency for success you know this is a problem.

(3) He further indicated that the new breakeven point for GM is 10Million cars per year. Since "we" haven't been making any cars with "our" plants idled and "we" are cutting "our" product line in half and "we" are dramatically shrinking "our" dealer network; I couldn't exactly figure out how this is going to happen. He further implied that with 2million new drivers on the US roads each year; achieving breakeven was within reach. What do you think of a former Chairman focusing on breakeven rather than profitability? Emphasis mine: If you are a US taxpayer then you own GM; if you are not a US citizen but your country buys US Treasuries you are an effective owner of GM too!

(4) GM is now a referendum on Obama. Therefore this must be successful. Same with Chrysler. But not the same with Ford who didn't need mother's milk. If Ford is successful and GM is not... well, you get the picture.

(5) The Chinese are buying Hummer. Perhaps the recent visit by our Treasury secretary sealed the deal. I am sure they paid as much for Hummer as Fiat is paying for Chrysler. But I seriously doubt you will be able to find ANY reliable information on the terms of the sale or related recourse liabilities assumed by the US government (er... I mean GM corporation).

So my final anaysis is 3 sell signals; 1 buy signal; 1 neutral.

In any case, there are so many better places to put your money, why buy a car company? Did you throw money at the airlines when they were/are going bankrupt?

Should you buy a GM Car?

Yes... but only if it is a Saturn. ;-)

Californious est omnis divisa in partes tres

2009-05-22T19:03:00.004-02:00

How is your Latin? Similar words were uttered by Caesar when speaking of the soon to be conquered area known as Gaul (France/Belgium/Some Switzerland).

Similiarly we await our modern day Caesar to proclaim the future of the vanquished, bankrupt piece of geography known as California. The 8th largest economy of the world is insolvent and they are too big to fail.

If we accept that patterns of the past will guide our future then permit me to run a scenario. Chrysler was too big to fail and the recovery plan in place for this major car company may be just the answer to the California problem. Let's get started:

The current plan is that 55% of Chrysler goes to its labor unions. 35% goes to the Fiat car company- an Italian company. Neither of these groups actually owns any significant portion of Chrysler today so they are getting 90% of the company at no cost. The remaining 10% goes to the original owners of Chrysler who, by the way, used to own 100% of the company [but not anymore].

Now for the entertainment portion of this posting:

THE CHRYSLER FORMULA FOR CALIFORNIA

(1) Let's give 55% of all assets in California to the state labors unions.

(2) For the 35% piece, we need to find a non-US constituent that willing to accept 35% of the assets (at no cost to themselves). I suggest Mexico. California used to belong to Mexico and it seems only proper to return at least a portion back to Mexico at this time. Fairness at work, don't you think? Plus I would suggest that the US Government also issue an apology too, just for good measure.

(3) The remaining 10% would remain with the citizens of California. Which means each home owner would own only 10% of their house. Same with their car, their 401K, their bank account, their motoways, their stadiums, etc. etc. etc. If you own a business in California, you would now only own 10% of it.

Oh, by the way, if you own any California issued bonds, they are worthless. Yes, I know that US law requires secured bond holders to be paid first, but that law was overridden, without recourse, by the US Government. No legislative oversight. No judicial review.

If it will work for Chrysler it will work for California.

A new one-world currency - Final Chapter

2009-05-19T19:35:00.000-02:00

This will be last in a series of three posts on why a one-world currency will emerge to replace the US Dollar. My first two posts are here:

(1) http://tedbits.blogspot.com/2009/04/secret-societies-are-your-friend.html
(2) http://tedbits.blogspot.com/2009/04/worlds-8th-largest-economy-seeks-us.html

This final segment sums it all up. This is happening so fast that I began to get concerned that this treatise would be historical rather than predictive. Example: China allows the Yuan to be an international trade settlement currency-- that happened much faster than I thought it would.

PART III--- We are all going to be poorer together....

The concept of the EURO has its positives and negatives. And, as long as every sovereign nation sharing the currency is not failing "too much", it all works out. However, get a few "weak sisters" in the family and sooner or later the other brothers and sisters tire of carrying them. Keep an eye on Greece, Italy and Spain.

The UK didn't play the EURO game but that didn't make them immune. Their recent government bond auctions were under subscribed. That means no one wants your "IOUs" at the interest rate you offer or maybe at all. This is now happening in the US as the Treasury Auction has been under subscribed. No worries mate, the Federal Reserve (which is not part of the US Government but rather a private bank that the US government entrusted with the power to create money out of "thin air") will buy the bonds so the US government saves face.

Poor Iceland. Nobody wants their currency which means they can't buy anything. No one will loan them money because they don't have any money that is worth anything to payback the loan.

Actually, there are a lot of countries that are bankrupt-- some are doing desperate things. Zimbabwe is probably the worst. But, Argentina confiscated every one's pension savings. Venezuela is selling their soul to China. And, I could go on...

The risk of sudden military action is great. China has bought everything from mineral rights to political control in many countries. They are using US dollars to do it. What they can't buy they are now prepared to take as their military build up is approaching unprecedented proportions.

Don't think China will do it? You try dealing with several billion unhappy people all at once. Do I need to tell you what happens? You see, no other country faces the challenges that China does. No other country, nor its citizens, truly understands China's dilemma. And because we don't understand, we are in denial about what may happen.

But what about the US? Yes, quite a few "bad actors" has ruined the show for everyone else. The country entrusted to be the steward of the world's only "reserve currency". The country that is the world's policeman, who only asked one thing of every other country which was: "May we have a place to bury our dead soldiers who defended you?". That country created too many financial instruments that created too much dollars out of nothing. And when everything started to crash, continued to print more money to solve the problem.

“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”
Albert Einstein

But "printing money" in this sense does not really happen. It is more about moving numbers across a computer screen. Want to add more US Dollars to the world? Simply type in the desired amount into the Federal Reserve's computerized balance sheet. The rest is automatic. Quantitative easing, printing money, increasing the asset number on your balance sheet by typing it in... they all mean the same thing.

And every government is doing it. Why? Because it is easy and does not require any sacrifice from the people in that country. It keeps the current politicians in power.

But won't this burden future generations with debt, you might ask? No. Debt is only real if you plan to pay it off. Let me say that again. The only people concerned about debt are those that feel an obligation to pay the debt off.

Hence the emergence of Special Depository Receipts (SDR), the new world currency. It will not replace your country's currency but it will stand between your currency and the exchange rate of every other country's currency.

This means that there will no longer be a USD to EURO exchange rate. All currencies will be expressed in terms of SDRs.

So here is the sequence:

(1) All governments "print money" to deal with the economic collapse.
(2) Printing money results in inflation.
(3) Inflation hurts the people.
(4) All nations devalue their currency against the SDR
(5) The national debt of each country is reduced by the devaluation.
(6) Inflation is curtailed.
(7) Everyone is poorer because everyone's currency is worth less.

Now you understand why so much money is being printed and an unprecedented money grab is now underway. When everyone's currency is devalued, we are devalued together. But if I have been able to "front run" this devaluation and collect more pieces of paper now, I will be relatively better off than you when devaluation occurs. I got richer while everyone (including me) got poorer simultaneously.

The math is simple.

Epilogue: I know this is difficult to understand because it is hard to describe:
http://tedbits.blogspot.com/2008/12/gravity-and-inflation-point-of-view.html

But history tells us that the youthful America destroyed the Pound Sterling (a former global reserve currency). Also, the US Government confiscated gold from its citizens paying $28/ounce and then, when the deed was done, fixing the price of gold at $35/ounce basically devaluing everything by 25%.

It happened. It happens.

And now that you know what is going to happen, rest easy because there is nothing you can do about it.

With no compelling vision; Let's try some more fear

2009-04-29T21:25:00.006-02:00

I am not a doctor nor am I an economist. However, in the blogosphere, I play both. However, God gifted me with the uncanny ability to synthesize and conclude ["Connecting the Dots"].

Also, for full disclosure, I took steps to prepare my family for the FLU outbreak 2 weeks ago, well before it was fashionable. I am ready, are you?

Now, let me tell you why I wasted my money and what this has to do with a "one global currency". You see, for currency collapse/replacement to occur, you must have rampant protectionism between countries to magnify the monetary problem. Nothing like a pandemic to enable countries to "close their borders".

World governments trying to solve a debt induced economic crisis with more debt and more printing money are coming to the harsh reality that this is probably not going to correct the problem within the next year or so, if at all. Iceland is bankrupt. More that 15 countries are now considered or labelled "near insolvent" including the UK, Greece, Spain, Ukraine, and some other smaller countries." China is swapping out of US dollars for natural resources. And the US Federal Reserve bank is forced to buy US Treasuries because their isn't enough buyers of US Debt.

The new problem is-- governments began to leak information that things were starting to look better. Their comments were based on second derivative thinking. And sadly, once you tell citizens that things are improving, you really own the problem if things get worse. Not good for continued employment as a politician.

But what if we could blame the next leg downward on a pandemic? No one could blame our governments if we suffer further economic contraction or at least failed recovery because of an "act of god".

Here are some facts which suggest the public may be being played for a fool again to ensure that if economic woes continue or worsen we won't blame the government.

(1) Actual SWINE FLU deaths in Mexico according to WHO is only 7.

(2) US government launches a media blitz to concern and scare its citizens (I've spared you a link to the inane comments of the US Vice Presidet).

(3) Average annual deaths in the US related to FLU: 36,000 per year

(4) Last FLU epidemic in the US? February/March 2008

(5) Percent specimens resistant to targeted H1N1 antiviral? 0.4%

Don't believe me? Go to the Centers for Disease Control.

Interesting isn't it? What do you think?

A Decoupling Double Bottom

2009-04-25T23:20:00.007-02:00

So I countinue to stand behind my China recovery strategy and suggest you watch FXI, DBB, and UDN. Part of this outlook includes the devaluation of the US Dollar and its subsequent replacement as the global reserve currency. Think of this post as part 3 of the emergence of a new global currency- the previous two posts are:

(1) http://tedbits.blogspot.com/2009/04/secret-societies-are-your-friend.html

(2) http://tedbits.blogspot.com/2009/04/worlds-8th-largest-economy-seeks-us.html

Perhaps you are familiar with a chart pattern called a double bottom. It looks like this and is quite common.

Well, we are setting up for another major double bottom as was seen in the US during the late 1920's and early 1930's.

As we are right at where the red line is pointing. The next leg down is all set up because the fundamentals that caused the downturn have not been remediated. [click on chart to enlarge]

The first leg down which occured during late 2007 and followed through until today, was the typical pattern where the US "gets a cold" and everyone else "gets the flu". However, now that the top of the "W" has formed the next leg down will show a decoupling between the US and China. The US will go down due to fiscal and monetary policy while China will minimally softland and recover (ie: No "W" formation).

Why will decoupling occur? (1) because China is creating its own "consumer class" to be less dependent upon the US consumer and (2) China is trading its US "paper" for raw materials from Russia, Africa and Latin America-- better to own hard assets at the time of currency collapse.

World's 8th Largest Economy Seeks US Government Help

2009-04-16T22:25:00.002-02:00

So far taxpayers in the United States have channeled trillions of dollars into failing institutions such as General Motors, Chrysler, Freddie Mac, Fannie Mae, Deutsche Bank, Société Générale, Barclays, AIG, Citigroup, Goldman Sachs, the International Monetary Fund, etc. etc. etc.

Now the 8th largest economy in the world is asking the US Government to underwrite its debt which means they are asking the US Taxpayer to insure their debt.

News reports indicate that the People's Republic of California:

Needs to float $13B to $15B in debt to stay afloat,
The interest rate they are offering is not attractive to investors,
The return they would have to offer to generate interested buyers they cannot afford,
They need the money,
They want to offer the lower interest rate and have the US Government guarantee the bonds in case they default,
Such US guarantees are the burden of the US Tax Payers in the event of default,
California says they won't default because they are going to tax their citiziens to pay for the bonds,
Californians love to pay taxes and will not take any action (like leave the state) so with this in mind plus US taxpayer guarantees, investors (like insolvent Citigroup) will buy the bonds,
And, just like Freddie, Fannie, GM, AIG, and so on, if this works out they will be back next quarter for more money because nothing is going to change in the short term to fix their underlying problems....

Your humble oracle blogger predicted this would happen back on October 26th, 2008.

What does all of this have to do with my long awaited treatise on why we will have a global currency to replace the US dollar? Here is a clue: It is not considered debt if you never plan to pay it back.

Secret Societies Are Your Friend

2009-04-11T09:55:00.006-02:00

Blogs must be crisp and my posting on a global currency to displace the US Dollar is turning into a novel. Below is prelude to the full story. And, if it isn't true, it should be.

The following groups are working tirelessly on behalf of Europeans, Japanese, and those living in the Americas:

Conspiracy theorists call these groups "secret societies" and assign to them all manner of frightening objectives including, but not limited to, enslaving the world. In fact, these groups are made up of the elite of the elite and the common person shouldn't flatter themselves to think this "Overclass" is the least bit interested in controlling the masses. They already have all the power and money. Their mission? - To Look Forward, Taking Action to Protect Our Way of Life.

By the middle of the 20th century, it became abundantly clear to small group of intelligent, experienced, rich and powerful people, that the elected, self-interested, self-absorbed leaders of the "free world" each seeking to advance themselves and act in their own country's self-interest would be incapable of maintaining our way of life. An Overclass that could effectively scenario plan the future and guide free world leaders without the appearance of "control" was needed. An thus, these 3 groups, many of which share members emerged.

With access to information, the power to control economic outcomes, broad minded independence coupled with uncanny abilities in scenario planning and "game theory", these groups effectively:

Halted the spread of Russian catalyzed Communism,
Prevented thermonuclear war,
Ensured ample supplies of money and cheap energy to generally advance society.

Point 3 is very important. Energy is nearly free-- even at $150 a barrel for oil! Could you image how much the last 60 years would have cost us if were to make all these technological and economic strides still using horses, oxen and steam power? Could you imagine how constrained our economies would be if we still based our currencies on some selected precious metal rather than using a debt based system that allowed for sustained, expansive growth?

No one country, no one person could have accomplished point 3. It required the Overclass, with a patient yet comprehensive blueprint, to guide the cacophony of nation states to get us where we are today.

As I said, if this story isn't true, it should be.

US Unemployment Reaches 16%

2009-04-06T19:30:00.000-02:00

This statistic is largely under-reported but easily found at the US Bureau of Labor Statistics. Go here and access U6 to see the data. The point being, that the rise of the US Consumer requires confidence. And if you are marginally attached, discouraged, or under-employed you are less like to take consumer risk. Unless of course, you are borrowing just to survive. Then consumer risk becomes credit risk.

Chart was originally posted here. Click on graph to enlarge.

Easy Go; Easy Come

2009-04-04T14:13:00.003-02:00

If you are an investor, how long before 2008 did it take for your investment holdings to double? It is something important to know because if you have lost 50% of your net portfolio in the last 12 to 15 months, you will need a 100% gain (or doubling) just to get back to where you were before this all began. Did it take 5 years to gain 100%? Eight? Ten? Twelve? Never?

Will you ever be as wealthy again as you were at the begining of 2008?

Here's some hope.

There are about 250 trading days in the New York stock market each year. International markets vary but they are all around 250 or so. If your current holdings simply increase 3/10 of 1 Percent (0.30%) every day for a year, you will double you money.

You're back baby!!!!

Does this give you hope? If so, then you need to read This posting from 2005.

A New Casualty From The AIG Scandal

2009-03-29T12:33:00.003-02:00

On March 18th, I posted where the AIG money was really going and why the US government wanted everyone to focus on a few million in bonuses on NOT where the $30B in bailout money went:

Apparently, our "free press" was told not to report on where the money was really going because of fears of backlash by the American people. It is more important for the American people to mad at people on wall street and NOT be angry with their government.

Now it appears that a CNBC Host, Dylan Rattigan, broke ranks and started talking about the real AIG scandal. You can watch the events unfold here as he starts talking about the issue surprising the three guests who were there to talk about the DOW. Notice also that after a little discomfort, they admit that it is the "REAL UNTOLD STORY" and then you see them actually wanting to talk about the issue. Video is here:

http://economicedge.blogspot.com/2009/03/this-is-way-america-really-works.html

It seems the executive management of CNBC were outraged and forced the show to cut away to announce what is laughable "breaking news" that GOOGLE is going to layoff 200 people. It was reported that, during the cut away, Dylan Rattigan was fired and did not appear on the show he hosts in the evening called "Fast Money".

And as usual, news of his termination is now being "spun" so that everyone thinks that there are contract issues with Dylan and also sending out stories to discredit him as a professional and a human being.

So let me summarize:
(1) The AIG scandal concerning sending US taxpayer dollars to bailout EU banks was already public information, easy to locate and I was able to publish the details more than a week ago on this blog.

(2) There is nothing wrong with AIG sending money to the EU banks because after all it was a contractual obligation-- no laws broken as far as I can tell.

(3) But it looks bad. And that makes the US Government look bad. At a time when they want to look good. I feel sorry for them because all they have is their image. Because they have no business skills, they are ill-equiped to deal with the problem. Because they have no leadership abilities, they can't allow what must (and eventually will occur) which is a lot of pain for the American people [Deflation, Inflation, Currency Devaluation, Income Confiscation through higer taxes]. So they are taking advice from the very people who caused the problem in the first place.
(4) The "free press" is no longer free. They are being told what can and cannot be reported. And, if you do try to do some investigative reporting and don't clear it with your network executive, you will get fired. And your famiy won't eat. And as soon as we get government run healthcare in place, we will take away your healthcare if you don't do as we say.

I liked Dylan, I hope he goes to Bloomberg or Fox Businesses. I have been drifting from CNBC viewership for some time now... Now I won't watch them at all.

The Bulldog Returns

2009-03-20T21:10:00.003-02:00

I've been blogging since 2004. The large gaps in my archive are due to the fact that I needed to take down much of the investment advice I was posting under the so called "Bulldog Report". So, breaking with tradition, I am going to post some stock picks. Before you read on please remember that any information that follows is neither a solicitation to buy or sell securities. The writer of this article may or may not own such securities at the time you are reading this article. And, don't be a complete idiot-- do your own research before you buy financial instruments of any kind.

Whew.... now with out of the way. I am working on 2 strategies both based on China. The reason these strategies exist is posted here.

STRATEGY 1: CHINA RECOVERY

DBB: ETF for aluminum, zinc and copper
FXI: ETF for top 25 Chinese companies
UDN: ETF for shorting the US Dollar.

STRATEGY 2: COMMODITY RECOVERY

USL: ETF for United States 12 month oil
DIG: ETF PROSHares ultra leveraged long term energy
ENY: ETF for Canadian Energy (stay away from US companies unless ultra leveraged)
GLD: ETF for Gold
EGO: Canadian Gold Mining Stock (probably best financial fundamentals of gold miners)
UND: ETF for shorting the US Dollar

Of the two, I like Strategy #2 the best, since OIL crossed its 50DMA this week. OIL should move to $60-65US by end of 2009 because China has locked up reserves in Russia and Venezuela using excess US dollars in the Central Bank of China (afterall they can't keep buying US treasuries with those dollars earned from imbalance of payments). This move, along with the fact that Mexico will be a net importer of oil in 2010, will move all other buyers to the spot market. Also, remember that China has been providing engineering and financial aid to Iran and Iraq as well as selected countries in Africa for mineral rights.

The only downside I see here could come from a decision by the US government to sell Alaska to the Chinese to pay down the US debt or provide temporary jobs to displaced US workers. Other than that, I think this is pretty sound.