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

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

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

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:

1. Needs to float $13B to $15B in debt to stay afloat,
2. The interest rate they are offering is not attractive to investors,
3. The return they would have to offer to generate interested buyers they cannot afford,
4. They need the money,
5. They want to offer the lower interest rate and have the US Government guarantee the bonds in case they default,
6. Such US guarantees are the burden of the US Tax Payers in the event of default,
7. California says they won't default because they are going to tax their citiziens to pay for the bonds,
8. 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,
9. 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

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:

1. Bilderberg Group
2. Trilateral Commission
3. Council On Foreign Relations

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:

1. Halted the spread of Russian catalyzed Communism,
2. Prevented thermonuclear war,
3. 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%

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

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

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

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.

US Taxpayers to bailout European Union

"Among European banks, SocGen was the biggest recipient at $11.9 billion, Deutsche got $11.8 billion and Barclays was paid $8.5 billion."

AIG massive payments to banks stoke bailout rage
REUTERS — 2:03 PM ET 03/16/09 By John O'Callaghan and Lilla Zuill



Translation: US Taxpayers just pushed $30B more into AIG to prop it up and AIG sent all of it to Europe. If that wasn't bad enough, US politicians and the US news media are focusing on the $165million in bonuses paid to AIG employees to distract the US Taxpayer from what is really going on.



"The call for "realistic" expectations is in stark contrast to the hopes of a "new global deal" at the G20 summit espoused by Gordon Brown, the Prime Minister, who will host the meeting on 2 April in London...Doubts surfaced over the likelihood of agreement after France and Germany spoke out against the co-ordinated fiscal stimulus that Mr Brown and the US President see as vital."

Darling plays down hope of G20 plan to save world economy
Published Date: 14 March 2009 By Gerri Peev



Translation: As long as the US government is willing to pull the train; the EU is willing to ride. And why not? Why should the EU risk inflation and currency devaluation when the US is so willing to print money and take on debt.

Beware the SECOND DERIVATIVE

When x and y are real variables, the derivative of f at x is the slope of the tangent line to the graph of f' at x. Because the source and target....yada, yada, yada....I got a D in calculus but A's in economics, finance, and psychology.

Which qualifies me to advise you to "Beware the purveyors of the second derivative". These are the people who tell you that they are seeing positive indicators in the economy. What are the measuring? They are measuring the change in the change.

And, you should know that even when the change in the change is positive, it can still be negative.

Class, Dismissed!

Why You Can't Make Money In the US Stock Market

Not Legal

If the caption of the photographer is correct, then in the United States this is illegal. If they are Police SWAT (Special Weapons and Tactics) or the National Guard then it is OK. However, calling out the National Guard for a minor domestic disturbance is at least troubling.



U.S. Army soldiers patrol the streets of Samson, Ala., after a man killed 11 people, including his mother, in a shooting rampage before turning the gun on himself on Tuesday afternoon. Photograph by: Mark Wallheiser, Reuters

http://www.vancouversun.com/news/dead+Alabama+shooting+spree+Police/1375074/story.html

Where is the AIG bailout money going?

I get this question alot and the answer is simple:

(1) AIG is an insurance company.
(2) Of the many things they insure, financial instruments is one of them.
(3) Banks hold financial instruments (like CDOs) and they want to protect their investment a little by buying insurance from AIG which basically means that the Banks will get their money if the CDOs default because AIG has insured them.
(4) The CDOs default.
(5) AIG needs to pay the banks the insurance.
(6) Lot's of defaults occur and AIG runs out of money.
(7) So.... the USG gives/lends AIG money (billions) but it only passes through AIG to the banks in the form of insurance payouts. It is just another way of channeling money to banks.

Once all the insurance policies are paid off there will be no need for AIG to exist as an insurer of financial instruments. AIG will be allowed to declare bankruptcy which means the USG won't get paid back all the billions they (you) lent them.

The Trashing of Mark-to-Market Accounting

OK. I am going to try to make this easy for those not of the "Green EyeShade" persuasion.

The drum beat on the news is that we must suspend the Mark-to-Market rule! MTM is killing our financial institutions! And so on....

What is MTM? Mark-to-market, or fair value, accounting rules require financial companies to value assets based on what they could fetch in a current market transaction. Seems reasonable? Let's see how Mark-to-Market concepts work in the real world....

Our World - Two ordinary people: Let's assume you want to sell me your car. We could look up the market value of this car in a number of sources and that becomes the basis for our negotiation. And maybe I agree to pay a little more or a little less than the appraised value but if it is an honest transaction where no one is hiding anything, generally the deal is made at or near the market value.

The financial world: Banks have all these bad loans on their books. And nobody wants them. What do you think these loans are worth? A lot less than what the banks lent for sure. But the banks say, "if I have to show these loans on my books based on what I could sell them for, then I will be insolvent!" Too many liabilities and too few assets. I am too big to fail!!!!! And if I fail, you are going to be very, very unhappy. In fact, until you take these bad loans off my books or give me some way to say they are worth more than they are, I am not going to lend any money.

And so my dear readers, the drum beat begins. Everyone will start talking about how Mark-to-Market is killing our economy, destroying lives and ruining our society. Anyone who opposes repealing this rule will be swept aside or personally attacked.

But here is the best part.... only financial institutions will be exempt from Mark-to-Market rules. They will get to decide what their assets are worth not the market.

The rest of us, well, we are at the mercy of "bend over" Bernanke and the Central Banks of so many of your countries. Your house, your car, your investments, your business will be worth what the market says it is worth.

Mark my words.... you are marked to the market.....

Great Video on Understanding the Credit Crisis

Jonathan Jarvis did some great work on this video... very educational and easy to understand.


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Coming To A City Near You

Economic conditions are stirring social unrest around the world. Pictures were published between December 2008 and February 2009.

UNITED KINGDOM

RUSSIA

FRANCE

ICELAND

PS: Did you know the Iceland Krona has completely collapsed (see above).

LATVIA

GERMANY

GREECE

CHINA

KOREA

Listen for the Lie

A really smart person reminded me the other day to "Listen for the Lie". He explained that the "the lie" is really the intentional ommission of an important fact or something that really can't be said openly.

Sensing that I understood his point but really didn't take him seriously or at least appear thoughtful about his profound impartation, he asked me, "What is the largest greenhouse gas on earth"? I quickly replied "CO2". To which he said, "Do some research, find the lie".

So I did and quite easily at both the US Government Environmental Information Site, EPA websites and FEDSTATS, you can see that the largest and most dangerous greenhouse gas from a global warming perspective is water vapor. However, since water vapor is not man made the graphs conveniently leave this data out of their analysis.

You can see that if you eliminate Water Vapor from the chart on the left, the CO2 column will become absolutely huge. That is why everyone is so careful to say "MAN MADE GLOBAL WARMING" so you can eliminate any discussion of water vapor.



Here are two quotes from the EPA Study entitled: "GREENHOUSE GASES AND GLOBAL WARMING POTENTIAL VALUES"

Greenhouse Gases
Although the Earth’s atmosphere consists mainly of oxygen and nitrogen, neither plays a significant role in enhancing the greenhouse effect because both are essentially transparent to terrestrial radiation. The greenhouse effect is primarily a function of the concentration of water vapor, carbon dioxide, and other trace gases in the atmosphere that absorb the terrestrial radiation leaving the surface of the Earth.

Water Vapor (H2O)
Overall, the most abundant and dominant greenhouse gas in the atmosphere is water vapor. Water vapor is neither long-lived nor well mixed in the atmosphere. In addition, atmospheric water can exist in several physical states including gaseous, liquid, and solid. Human activities are not believed to directly affect the average global concentration of water vapor.



Kind of interesting, isn't it?

Mad Money

As of today, I don't own any gold. My sell point was $950/oz and I cashed out with an 18% gain since early December. The IMF will begin dumping gold on the market to prop up the large number of countries that are approaching insolvency, this will be a time to consider buying back in.

So what next? I still like metals but this time it is copper, zinc and aluminum. The fiscal stimulus implemented by China in the fall of 2008 was 15% of their annual GDP and it was focused on real stimulus. In addition, their unelected government officials, are using their oversurplus of US dollars to extend social benefits to their population to keep the people happy and them in power. This is leading to less contingency saving by the population and thus spuring local consumption. They don't need nor can they wait for the US consumer to recover.

Kind of ironic that China is using its currency surplus from the trade imbalance with the US to pay for universal healthcare for Chinese citizens. Universal healthcare in the US will be paid for by printing more US dollars which will eventually result in currency devaluation.

Now if you think this all makes sense, then I suggest you do some research on the following:

DBB for basic metals
UDN to short the US dollar
and any reputable ETF that is a proxy for the Chinese economy.

I want my share(s)

My tax dollars recapitalized the banks and I want my shares now. The bailout mechanism created preferred shares (as opposed to common shares) and I would like my shares delivered to my brokerage account, now. BTW- If you don't pay taxes, you don't get any shares.

Government "leaders" say the US tax payer will make money on the bailout. Great! How? When do I get my check? I should be getting an apportioned share of the dividends payable on my preferred shares.

Some Simple Math

My dear Hi Q readers, thank god you and I and perhaps more importantly our leaders in Washington have full understanding of CDOs, CDSs, TALFs, TARPs, etc. With all the discussion of a "bad bank", you can feel comforted that they understand the difference between Real Assets (managed under RTC) vesus derivatives. Here's some data.

There's Some Chance...

I lost a friend and I can't tell you his name or show you his picture. His final instructions were very clear: "that there should be no announcement or publicity of my passing".

He was WWII veteran of the US Navy; a Coxswain on a destroyer. He defended the fleets that laid down bombardments on South Pacific islands before my own father, a US Marine, stormed those beaches. There’s some chance that I am here today, because he was there then.

In high school, I remember him as a staunch supporter of women in sports. He was a booster long before Title IX legislation- long before it was “fashionable”. Now I have two daughters who play sports and there's some chance that the work he did then is benefitting them now.

He was active in Church and not just his church. If a church was open and filled with people, he was there adding his voice in song and praise. He prayed at weddings and funerals for people he knew and even those he didn’t. There’s some chance that the religious anchors my own children hold dear are due to his example.

He was a teacher whose classroom was the world. He learned from life’s experiences and passed those learnings on in clever, subtle ways. Seldom did you know you were being taught. And there's some chance, that the number of people he educated can never be known because they themselves learned without knowing.

Consenting to give his daughter’s hand in marriage, he became my second father. I pray that there's some chance his daughter sees in me what she saw in him.

What in the world is going on in New Hampshire?

HCR 6 2009: http://www.gencourt.state.nh.us/legislation/2009/HCR0006.html [Full Text]

"That any Act by the Congress of the United States, Executive Order of the President of the United States of America or Judicial Order by the Judicatories of the United States of America which assumes a power not delegated to the government of United States of America by the Constitution for the United States of America and which serves to diminish the liberty of the any of the several States or their citizens shall constitute a nullification of the Constitution for the United States of America by the government of the United States of America. Acts which would cause such a nullification include, but are not limited to..."

------------------------------------

On a separate note, California (the 8th largest economy in the world) has their credit rating downgraded to A-/Stable. Get your checkbook ready because we cannot let a State in Union go bankrupt. No state in the union has ever filed for bankruptcy.

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Obama-Limbaugh-TEDBITS Stimulus Plan

After Obama launched Limbaugh into legitimacy by mentioning him, by name, in a high level white house meeting, Limbaugh challenged back with the following Obama-Limbaugh stimulus proposal as published in the WSJ: http://online.wsj.com/article/SB123318906638926749.html

To wit, Limbaugh writes, "Fifty-three percent of American voters voted for Barack Obama; 46% voted for John McCain, and 1% voted for wackos. Give that 1% to President Obama. Let's say the vote was 54% to 46%. As a way to bring the country together and at the same time determine the most effective way to deal with recessions, under the Obama-Limbaugh Stimulus Plan of 2009: 54% of the $900 billion -- $486 billion -- will be spent on infrastructure and pork as defined by Mr. Obama and the Democrats; 46% -- $414 billion -- will be directed toward tax cuts, as determined by me."

I like this bi-partisan idea but would like to add my own twist to Limbaugh's $414B. Rather than tax cuts, I suggest we issue US Citizens prepaid debit cards in the amount of $1,600 each. That is $414B/the number of US Citizens 18 and older less administrative expenses. These prepaid debit cards would expire in 24 months of issue and can be used at any establishment capable of handling major credit/debit cards. Default PIN number would be the last four digits of your social security number.

Now my dear readers.... that is stimulus! Four times bigger than the Bush stimulus checks of 2008 AND they can't be saved and must be spent!


Important Information On Your 401K

I couldn't resist....

http://www.chrismartenson.com/blog/government-offers-buy-impaired-401k-assets/12386

I Am Somewhere Between Morocco and Botswana

Well, I tallied up the 2008 TEDBITS portfolio performance and I am down 14.6% for the year. When stacked up against the performance of various stock markets around the world, it appears that I find myself somewhere in Africa.

Click on picture to enlarge---->

It didn't happen 30 years ago, so why now?

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Clip Courtesy of HULU.COM

Original Air Date: May 11, 1978
"The Sighting"
Season 4; Episode 22

Network / Studio- Sony

Title- Barney Miller

Description- Situation comedy about a New York City's precinct captain and his multi-ethnic band of officers. The series won several Emmy Awards including Outstanding Comedy Series.