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Duncan	02-Jan-07, 10:08 AM (GMT)
"trained"
At last, I've got a man in We've finally rumbled the fantasy of DIY: bathrooms need professionals, not deluded Linda Barkers Kathryn Hughes Tuesday January 2, 2007 The Guardian Thank heavens we don't have to pretend to be interested in DIY any more. Profits in the sector were down by £6m last year, as increasing numbers of people preferred to stay home rather than venture into Homebase or B&Q looking for showerheads, and Sunday mornings have resumed their usual sleepy rhythms. Even Carol Smillie, who used to preside over Changing Rooms, the programme credited with being both cause and symptom of the DIY boom, has put down the MDF and put on the sequins for Strictly Come Dancing. Instead we're now all crazy for DFY - Done For You. Apparently, getting a man in to paint your walls, fit a lavatory seat or even assemble your Ikea flatpack is now so popular that a host of sprucy handyman businesses have sprung up, promising to get someone competent with a screwdriver round within the hour. Instead of staring guiltily at coathooks that have been sulking in their box for three years, now all you have to do is hand over your credit-card details. The idea that untrained people could, by an act of desire, transform themselves into skilled tradesmen and women was always a delusion. You wouldn't pick up dentistry after seeing it on TV, yet millions of us believed that watching Linda Barker stencil a decorative border translated into being able to do it ourselves. This folly of imagining oneself to possess skills that one never trained for has now been bought home to me. I have three highly skilled and ferociously synchronised Russians pimping my bathroom. Yet only a couple of years ago I would probably have told you breezily that I was planning to accomplish the whole transformation myself in a single weekend with a couple of pots of Farrow & Ball. The fact that I never did, and so endured years with a bathroom so embarrassing I prayed visitors would never use it, shows how self-defeating the DIY fantasy always was. Instead of enjoying a nicely appointed present, I deferred constantly to an imaginary future in which I would one day suddenly feel the urge to get out the stepladder and start grouting. Ironically, what fuelled the DIY mass market was a fantasy of individuality. When Laurence Llewelyn-Bowen looped some red velvet around a curtain pole you felt you were being shown the work of an artist ... or at least a connoisseur. Yet a thousand semis would obediently sport the same oddly operatic curtains, cancelling at a stroke any suggestion of a unique vision. Charlie Dimmock, whose brief was to turn every Ground Force viewer into a landscape gardener, didn't even pretend that she'd bothered to take account of individual circumstances. Every plot of land, whether inner-city or rural, got a water feature, sparking a huge run on hosepiping and stone dolphins at garden centres. Perhaps another fantasy holding us back from employing professionals was a lingering worry that it smacked of servant-keeping. Employing a painter somehow suggested that you thought you were too grand to rag-roll your own wall. But the new breed of British handyman is likely to have been to university with your cousin, and to earn as much as you do. If from the new Europe, he will run his business with a professionalism that puts your accountant or osteopath to shame. Any suggestion that this is anything other than an economic transaction between social equals is clearly absurd, and self-defeating. Hang on to your social embarrassment if you will, but the price will be a domestic environment marred by half-finished stencils and wonky loo seats. · Kathryn Hughes is the author of The Short Life and Long Times of Mrs Beeton kathryn.hughes@btinternet.com
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Duncan	02-Jan-07, 12:10 PM (GMT)
1. "well....."
http://www.gold-eagle.com/editorials_05/burak010107.html \ \ \ http://www.gold-eagle.com/editorials_05/rosen010107.html \ \ \ DRIVING TOWARDS NATIONAL BANKRUPTCY by Dr. Chris Martenson The End of Money January 1, 2007 I have a question for you. Let’s say you’re driving down the road, at night, along a busy highway, 10 miles from the next exit, and the oil warning light suddenly blinks on. What do you do? Are you the sort that pulls over or keeps on driving? If you’re the sort that keeps on driving, upset mainly because you don’t have any black tape to put over that pesky red light, then you might as well stop reading right now because we’re about to pull over. First a set of definitions; when liabilities exceed assets by an amount that cannot be serviced by any conceivable future revenue stream, then one is said to be ‘insolvent’. When current cash flow cannot service current debt payments, then we say an entity is technically bankrupt. And finally, when a debt payment is missed, then a default has occurred, the entity is actually bankrupt and all sorts of legal machinery kicks into high gear. In my last article I wrote about the fact that United States budgetary and fiscal officials revealed to us that in order for the United States government books to net out to zero there would need to be $53 trillion in the bank, today, earning interest. Of course there isn’t any public money of that sort, or any sort, in the bank. SCREEEECH! <-- That’s the sound of this article pulling over to the side of the road Stop. Why is this not our #1 topic of debate in Washington DC? If we suspect that we are insolvent as the Comptroller and Treasury Secretary have indicated, then it’s questionable as to whether it does us any good to debate, say, the finer points of federal education reform or a new flag burning amendment. As noted above, insolvency precedes bankruptcy and bankrupt nations cannot afford to do anything so why talk about anything else? We have a bright red oil light lit up on our national dashboard yet the Democratic and Republican leadership continue to drive on bickering about who should have brought the black tape to put over the warning light. What would it mean if our nation went bankrupt? A good analogy would be New Orleans. The city is bankrupt; it’s a mess, and can only rebuild with federal (outside) assistance. New Orleans completely lacks the ability to rebuild on its own because it doesn’t have the funds and its economy is pretty much destroyed. But if the US goes bankrupt, who will help us rebuild? If the answer is ‘nobody’, then you might want to take a trip down to The Big Easy to see for yourself what this country is going to look like in a few years. The good news is that because the problem only grows more intractable with every passing day, our dithering politicians will have fewer options to chose from when the crisis hits thereby making their jobs that much easier. The bad news is that the more time we spend in denial, the less time remains for us to get busy and do something about it. There is even the danger that if we wait too long, we will face a potentially unfixable problem on the scale of what the Soviet Union experienced – catastrophic economic failure. During my time as a consultant, I had ample opportunity to witness a very clear phenomenon. If the person at the top of an organization was ethical, for the most part so were all the rungs and layers beneath them. Conversely, an unethical leader usually presided over an unethical organization. As a social animal, we tend to take our cues from above. Our federal government is now several decades into a reckless love affair with unrestrained profligacy. Because we’ve lacked any clear, moral leadership for so long, it is easy to find reflections of this behavior peering back from every corner of society. Consider the evidence: State pension shortfalls running towards a trillion dollars Municipal pension shortfalls in the hundreds of billions of dollars Corporate pension and healthcare deficits of one-and-a-half trillion dollars 401K savings of only $53k per 55 year old worker A national savings rate that has steadily eroded since the early 1990s falling from 10% to negative 1.5%, a condition last seen at the depths of the great depression in 1933 In summary, the list above indicates that at the federal, state, municipal, corporate, and personal levels nobody is saving for the future. I could probably tick off a few more but since I’m out of fingers on my non-typing hand let’s agree that pretty much covers it. We are not saving for our future, we are all in this together, but it will take leadership to get us out. It is imperative that we return to our heritage of saving and investing for the future. Somehow we’ve forgotten that a period of living beyond your means must always be balanced by an equal amount of living below your means. The belief that debts can be compounded forever is dangerously naive as it merely shuffles the bills off to the future as though they could be forever hidden by time. Leaving aside the obvious moral parallel between this behavior and the fable about The Ant and the Grasshopper, this insolvency issue, large though it appears, is merely a symptom; an effect rather than a cause. At the root of it all is our monetary system, which we need to understand before we can begin to posit solutions. Let me be clear – I think that while it was operating well, our monetary system was a great system, one that fostered incredible technological innovation and advances in standards of living. But every system has its pros and its cons and our monetary system has a doozy of a flaw. It is run by humans. Oh, wait, that’s a valid complaint but not the one I was looking for. Here it is: Our monetary system must continually expand, forever. Which means it has a math problem in the same way that a beached whale has a breathing problem. In each case we have a massive organism that was optimized for a very different set of conditions than those in which it currently finds itself. This will be the topic of our next article. In the meantime, be on the lookout for DC politicians seeking to buy black tape. All the best, Chris © 2007 Dr. Chris Martenson Editorial Archive CONTACT INFORMATION Dr. Chris Martenson The End of Money Bernardston, MA USA \ \ \ http://www.financialsense.com/fsu/editorials/kakani/2007/0101.html \ \ \ http://www.financialsense.com/editorials/hastings/2007/0101.html \ \ \ THAT'S A WRAP by Bill Bryan MarketPulses.com January 1, 2007 With the 2006 campaign now in the rearview as the New Year dawns before us and market participants gear-up for another action packed year ahead in the financial markets, we thought we’d take a step back and offer a quick review. US MARKETS After a couple of speed bumps in late spring and mid-summer, the major indices, DOW; COMP and S&P 500, caught a breeze at their backs. Fueled by lower commodity prices, particularly the pullback in crude oil from the $80 level, lower yields in 10-Year Treasuries, as well as further injections of liquidity, the markets rode off into the sunset producing double-digit returns, their best, at least in nominal terms, since 2003. However, while the US financial and mainstream media were toasting and boasting and Wall St. securing their $36 Billion in bonuses, it was foreign markets worldwide such as Asia and Latin America that were ripping the cover off of the ball, producing spectacular gains across the board. BONDS Much like the equities markets, 10-Year Treasuries also caught a breeze at their backs in July (coincidental?), whereby yields plunged from 5.3% to the December low at the 4.4% level. For the year, the note traded within a 100-point basis, where the yield curve remains in its inverted position (foreshadowing of recession ahead?). GOLD After reaching multi-year highs in May ($732), the “yellow metal” spent the remainder of the year digesting/consolidating the powerful thrust from the Fall of ’05, more than likely ending Phase I of the secular bull trend. Nevertheless, despite the “pause”, gold recorded another excellent year for investors, returning 23% (real money), while much of the “hot” money has been shaken-out of their positions. The secular bull trend remains in tact. And while the Fed and US Treasury continue their shameful and reckless debasing of the US currency (INFLATION), we’ve been more than happy in adding to our core positions, both physical and shares (Jr. Producers and Exploration) on pullbacks. SILVER Much like gold, after peaking in May, silver has found itself digesting/consolidating its impressive run into northern territory and perhaps signaling the end of Phase I of its secular bull trend. Nonetheless, it was another exceptional year for investors of the “silver bullet”, which produced a “whopping” 46% return. Again, while the “hot” money has been shaken from their positions, we continue to add on pullbacks in both bullion and shares (Jr. Producers and Exploration). On a further note, we’ve mentioned in past commentaries that the Gold/Silver ratio, which has been hovering in the 50 range, should contract to its historic norm somewhere in the vicinity of 20 in the years ahead. And IF such scenario unfolds, we expect that to occur at much, much, much higher levels. OIL West Texas Crude (WTIC) peaked in July just south of $80/bbl after a spectacular multi-year run from the $30 level in ’03. Such peak just so happens to coincide with the turn of both the US equities markets, 10-Year Treasury Note, the Fed’s “pause” in its monetary policy, heightened debate about “peak oil” and a couple of months after both Gold and Silver peaks ahead of the forthcoming November mid-term elections. Call us cynical, conspiracy theorists, or just outright “whacko’s” (not the first and surely won’t be the last time we’ve heard such) if you please. However dear readers, are you beginning to follow the pattern here? It’s all right in front of us. Could it be that upon announcing the new Treasury Secretary, Hank “Conflict of Interest” Paulson, that the former Chairman of Goldman Sachs acted in the manner of “Bruce Wayne” (aka Batman), and picked-up that fire engine red phone directing his former traders to cut its energy weighting from 7%+ down to 2% and change in the Goldman Sachs Commodity Index (GSCI) that triggered the slippery slope? While no one knows for sure, the events and timelines certainly suggest that something was most definitely amiss in “Denmark”. In any event, with geo-political events subsiding from a military perspective early in the year and now focused on potential “economic” warfare, oil finished the year flat-line for the most part, where the jury remains in deliberations on its future direction. FED/INFLATION The reason we titled this portion of the piece FED/INFLATION is, we believe that both are synonymous with each other. In fact, we’d go so far as to say that, “The Fed IS Inflation”. After seventeen (17) consecutive rate hikes beginning in June of ’04, the FOMC decided to “pause” in its rate hike campaign in ’06. While jawboning oil and precious metal prices lower, and understating both the PPI and CPI (we believe that inflation is running somewhere in the vicinity of 7-8% and perhaps higher), we must admit that “Big Ben & Co.” did a masterful job, as well as their global counterparts, whereby numerous Fed Heads scurried about the landscape proclaiming its intentions to fight and ward-off the Beast (Inflation). Yet credit creation continued/s to flow. Despite the baby rate hikes and the elimination of reporting M3, the broadest measure of money supply, it’s quite apparent that the world remains awash in liquidity, evidenced by the staggering rates of monetization ranging from single digits to the mid-teens, depending on which region of the world one chooses to extrapolate the data, which has produced wild speculation across all asset classes. While we can certainly single out the FRB and their machinations, this phenomenon has spread like a “brushfire” encompassing central banks throughout the globe. As a direct result, although the $USD has taken the brunt of such actions, global currencies find themselves in the debasement camp as well. And lest not forget, since the inception of the Federal Reserve in 1913, the purchasing power of the $USD has evaporated by roughly 97%. Thus, rendering its present .03cts value. Furthermore, throughout former Chairman Greenspan’s (The “Maestro”), who we ultimately believe will go down in the history books as the “Master of Disaster” eighteen (18) year tenor at the Fed, we’ve witnessed a 50% decline in the purchasing power of the $USD. And finally, during the past 4-6 years, the 2001 $USD now fetches you .70cts worth of today’s goods, a loss of 30% in just the past five (5) years alone. Astonishing and quite sad we may add. $USD Now that we’ve covered the Fed/US Treasury, it’s no surprise that the $USD is taking it on the chin. After bouncing from its late ’04 early ’05 lows at the 80 zone, the $USD once again finds itself flirting with potential disaster and in the process, potentially losing its status as the worlds reserve currency sometime in the future. Although US policy makers have reiterated their intent for a strong $USD policy, their actions or lack thereof, suggest otherwise. However, while Wall St. and a placated citizenry may not hear the alarm bells ringing, the rest of the world is taking notice and in such, several countries have recently openly discussed the possibilities of diversifying their reserves. In any event, the 80 level remains crucial support and we’ll have to see how it all plays out WHEN and IF such scenario occurs. Stay tuned. US/WORLDWIDE HOUSING We’re not going to spend much time on this issue as it’s quite apparent that the US housing market is experiencing difficulties to say the least. The air is whistling right beside our ears. Foreclosures across the nation are running at record levels, as the “Grande Daddy” bubble, $10 Trillion in US mortgage’s, finds itself on the down stroke. With $1 Trillion in ARM’s (Adjustable Rate Mortgage’s) about to reset in ’07, we can only surmise that the pain forthcoming will be enormous, although we’re sure that “Big Ben & Co.”, will certainly attempt to pull out all stops and usher the safety net beneath the fallen. With that said, it’s not just the US that finds itself in such a predicament. Recently we’ve read that former Fed Chairman Greenspan attributed the global housing bubble to the “fall of the Berlin Wall”. With that said, we’ll end it on that note, for we think that such statement speaks volumes. So, that’s a wrap for 2006. What will the financial markets do in ’07? Where will they go (higher/lower)? We don’t know and we’ll leave such questions for others to debate. Having said that, should the Fed and central banks worldwide continue with their current practices of excessive credit creation, the rising tide may float all boats and ducks. That is, unless of course, someone decides to pull the plug on the bath water, or we experience the unforeseen, unknown accident awaiting in the winds, such as a potential currency or derivatives debacle. In the meantime, we’ll enter the ’07 campaign much like we have these past three (3) years, with our core positions in Gold and Silver, both physical and shares, as well as high paying dividend oil/energy issues, which has served us quite well during the recent past, as well as a hoard of cash, where we’ll continue to rent (trade) selective issues that posses favorable technical risk/reward set-ups. Wishing all of you a Happy, Healthy and Prosperous New Year!! © 2007 William Bryan Editorial Archive CONTACT INFORMATION Bill Bryan MarketPulses.com Boston, MA USA \ \ \ THE ANNUAL BUCK HUNT The Future is in Futures by Pearce Financial, LLC January 1, 2007 Based on trading activity and reports, the following markets are setting up for potential trading opportunities. Special Report - The Annual Buck Hunt (US Dollar Index Trade) Everybody put on your camouflage trading jackets! The beginning of January is open season on the US dollar index and time for the annual buck hunt! This is one of our favorite trades of the year as it has become a tradition at Pearce Financial. In short, the "Buck Hunt" is a high-probability trade for a long term position in the US dollar. The parameters for the trade is set up in the first few trading days of January every year. The beginning of January is an important time frame for the US dollar. Most of the time, the high or low for the entire year is established in this time window. Perhaps it's due to the fact that large traders and hedge funds are returning to the markets to begin a new trading year. Maybe it's due to the Fed setting the tone for the year's US interest rate policy at the first FOMC meeting within the first few weeks of the new year. Anything could happen now: Maybe the greenback will decline in 2007 as the Fed's rate hike campaign is most likely behind us and Europe is still raising their rates...or maybe the greenback will rally on renewed confidence in the US due to the shift of power going to the Democrats. Perhaps the buck will soar as record highs in the stock market attract global investment capital and create a demand for US dollars...or will the US "twin deficits" command attention again and cause investors to flee US assets? Will the war in the Middle East finally come to a close or will it get even worse? Even if we had the answer to this question, how do we know what the effect will be on the US dollar? The fact of the matter is that nobody has a clue what the future will be. Therefore, the best that we can do is make projections based on probabilities. As technicians, we have an edge here. Our work is compiled by using data that is unbiased, historical fact. Here's our big observation: Over the last twenty-one years, the US dollar index has established a major high or low - quite often the high or low for the entire year! - during the first eight trading days of January. The numbers are astounding: During eleven of the last twenty-one years (52%), the high or low for the entire year was made within the first two trading days of January. During fourteen of the last twenty-one years (almost 67%), the high or low for the entire year was made within the first eight trading days of January. During fifteen of the last twenty-one years (71%), the high or low for the first half of the year was made within the first eight trading days of January. During seventeen of the last twenty-one years (81%), the high or low for the first quarter of the year was made within the first eight trading days of January. Odds like that are worth speculating on. According to "Random Walk" theory, this should not happen. If the markets are truly random, then the first two trading days out of roughly 250 trading days for the year has less than one-tenth of a percent chance of establishing the high or low for the year...yet it has been 52% for two decades! And the odds of the high or low for the first half of the trading year being established in the first eight trading days are roughly 8 out of 125 or just over six percent...yet it has been about 71% for twenty-one years. Fortunately for us technicians, facts always trump theories. Here's how we will use this data for the trading strategy: First, we will allow the buck to trade for the first eight trading days of January to establish a price range. Second, we will "bracket" the US dollar index by placing a buy stop above the highest high of the first eight trading days and a sell stop below the lowest low of the first eight trading days. When one of the stops is elected it will initiate the entry into the market. The other stop will then become the initial protective stop for the position. Third, once the trade has become favorable by at least 260 points, the protective stop is then moved to the original entry stop order price to reduce the risk down to just the commissions and potential price slippage. Traders with multiple contracts should liquidate half of the position at a 260 point profit as well. This locks in a net profit on the trade. Fourth, if we continue to ride this trade all year without getting stopped out, we will exit the position during the last trading week of the year to complete the trade. Then we will simply wait for the new trade parameters for the next year. Aggressive traders willing to trade on lower odds for bigger returns can also use the above parameters with one change: "Bracket" the US dollar index with a buy stop order and a sell stop order above the highest high and below the lowest low after just the first two trading days of January. That's all there is to it! Simple, but effective. As always, you should assess the risk on this trade and make sure it is compliant with your financial/emotional risk parameters before entering any trade. You may also want to consider using options in lieu of futures contracts on the US dollar index to further control your risk. Disclaimer: There is risk of loss in all commodity trading. The data contained are believed to be reliable, but have not been independently verified by Pearce Financial. Accordingly, such data cannot be guaranteed as to reliability, accuracy, or completeness, and as such are subject to change without notice. Pearce Financial will not be responsible for any indirect, compensatory, or consequential damages, including loss of profits which may result from reliance on this data. Pearce Financial and/or its Principals and employees may or may not follow strictly any or all of the trading recommendations contained herein. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. © 2007 Pearce Financial, LLC Archived Editorials CONTACT INFORMATION Pearce Financial, LLC (800) 800-1399 Email l Website Futures trading involves risk and is not necessarily appropriate for all investors. \ \ \
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Duncan	02-Jan-07, 06:42 PM (GMT)
2. "its a bit of a funny old time"
Information on deflation, including Japanese deflation since their stock market top in 1990: http://www.businessweek.com/magazine/content/02_11/b3774063.htm http://www.pbs.org/nbr/site/research/educators/060106_08b http://www.asiasource.org/news/at_mp_02.cfm?newsid=90624 http://www.rieti.go.jp/en/china/03030701.html http://www.mises.org/story/896 http://www.federalreserve.gov/pubs/ifdp/2002/729/default.htm http://www.federalreserve.gov/BoardDocs/speeches/2002/20021015/defaul t.htm http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/defaul t.htm http://www.kc.frb.org/publicat/sympos/1999/4q99bern.pdf \ \ \ Money men want to be monarchs of the glen By Auslan Cramb, Scottish Correspondent Last Updated: 12:01am GMT 02/01/2007 As the glossiest magazines have been busy pointing out of late, accessories come in many shapes and sizes. Christmas wish lists for the super rich may have included Rolex watches, Gucci bags and Cartier cufflinks. But the latest must-have accessory for slickers from the City is a little harder to wrap. John Dodd at Glenogil with sons Nicholas and Charlie The fund managers who earn bonuses larger than the salaries of most chief executives are queuing up to buy into that old Victorian status symbol, the Highland sporting estate. In the past year, record payments for financial workers in London have sparked a rural property boom north and south of the border, with almost half of all Highland estates sold in 2006 going to the men from the markets. Most are merchant bankers, hedge fund managers and investment specialists who are expected this month to share bonuses totalling £2 billion after a particularly good year. High-fliers could pocket up to £10 million on top of multi-million pound salaries, with at least 4,000 individuals getting a seven-figure sum. The demand for estates is now so high that potential buyers outnumber sellers by eight to one, and the estate agency Strutt & Parker has a waiting list of 71 potential lairds willing to part with a total of £286 million. Of the 12 estates sold by the company this year, half went to buyers involved in the financial markets who paid more than £10 million. Flichity estate near Inverness went for £2.5 million, while Culdaremore in Perthshire fetched £1.3 million. advertisement Andrew Rettie, of Strutt & Parker, said: "Fuelled by record bonus payments to investment bankers and other City personnel, the demand for estates in Scotland during 2006 has been the highest I have witnessed for a long time. "As we move into 2007, we have a large list of buyers and demand is going to remain extremely strong. "Not everyone working in the City wants to buy a Scottish estate, but if you are in your 50s and your children have left home and been educated, then you might want to indulge your passions. "And if it's game shooting or salmon fishing then what better place than Scotland?" The "City phase" is the latest trend in a property market that has had a succession of phases since Queen Victoria popularised Scotland as a sporting playground. In recent decades there have been Arab, Dutch, Danish and Hong Kong phases. Will White, a City PR adviser, said: "If you are a hedge fund manager, you can work from a castle in Scotland as well as from an office in central London. "The flights up to Aberdeen and Inverness on a Friday are just like getting on a plane to Barbados in terms of the staggering amount of wealth on board." John Dodd, 45, of Artemis Funds, still spends his working week in London, and has a home in Edinburgh, but four years ago he invested in his own slice of moor and mountain. A keen shot, he is also passionately interested in improving the grouse shooting and developing the forestry on his Glenogil estate in the Angus glens. The 19,000-acre property is the home in the country that he had always coveted. "When this estate came up for sale I thought it was a once-in-a-lifetime opportunity to be the caretaker of a very special bit of Scotland," he said. "I wouldn't say that sporting estates are a good financial investment. I would have been better keeping my money in the stock market, but it offers an escape and it is a wonderful place to bring up a family." Mr Dodd visits the estate every week with his wife and five children, who range in age from six months to 17. "I know many people who have bought estates, many who already own them and I know people who make money in the City and use it to buy farms or estates in Scotland and England. "I think for most people it is a lifestyle change and people want to do something with their money, and invest in an area and create jobs. The Victorian industrialists did it in their time." According to the Royal Institution of Chartered Surveyors, the demand from wealthy "lifestyle" buyers has driven up the price of farmland in Britain by nine per cent in the past year. In England, the most sought-after stately homes are classic Georgian or Queen Anne, and set in 20 to 100 acres. \ \ \ rfyl The 3rd year of an American president are most bullish for markets. Sorry, No bearish general market in the horizon for 2007 or 2008. Commodity markets still looks very bearish here. It means gold and silver market move down and gets little talked about. The US Dollar moves up and gets stronger as more foreign investors buy US Stocks. A pullout of Iraq is most likely this year or most likely early next year 2008. \ \ \ RUMBLINGS OF EURO DISCONTENT by Christopher Laird PrudentSquirrel.com January 2, 2007 I wanted to write a piece about the USD and its prospects in 07, something that is going to stay very much on the world’s financial radar. However, I have been following recent developments in the EU regarding discontent by France and Germany over the Euro. It seems that there are more than trivial Euro related disagreements surfacing between the EU nations, and the different economic situations they each have, some prospering – like Germany – and some suffering a great deal – France and others. The Euro has strengthened a great deal in the last year, and of course this causes some serious trade competitiveness issues. For example, Airbus is having lots of trouble competing in the airline industry because the strong Euro is making them cost ineffective. I don’t know if you have been following the recent airline sales, but Boeing is cleaning Airbus’ clock. The tension is becoming so great that there are: Reports of Germany and France readying stocks of native (non euro) currencies – in case of – what? Those reports alone made me take a big double take, thinking of what this can mean. French and other officials openly calling for the abandonment of the Euro in the sense of at least re attaining local central bank controls over interest rates. Presently, the ECB sets interest rates for the entire EU region. Believe it or not, there are actually Euro treaty contingencies to allow just that – retaking monetary policy control by nation. Of course, this would cause a lot of inter currency strife as nations compete with interest rate wars in the EU - supposedly having one common currency, but then having different interest rate agendas…basically such a retrograde move by the EU nations would cause a lot of turmoil, and possibly is not even manageable, but could possibly call into doubt the very viability of the Euro. Remember, the Euro is only about 6 years old, friends…. Which leads me once again to something I have said for some time, the Euro is only 6 years old, and the EU nations are buried in social programs so badly that I envision big Euro trouble. The Europeans are worse off than the US regarding out of control social programs that break their budgets every year, and eat away at any chance of them remaining economic exporters… something France is dealing with in a big way this year. Of course we keep hearing about the wonderful euro - and nations are all moving more foreign reserves into it… but… something is clearly not right with the Euro model. In fact, I have big doubts as to the future of the Euro, all financial Euro aggogery aside. I think gold bulls and people concerned about the USD would do well not to consider the Euro an automatic alternative….. Now, Germany has had a manufacturing resurgence, is exporting successfully to China. However, this does not necessarily bode well for the Euro. Why? Because other EU nations are definitely NOT benefiting from the constraints a strong Euro is putting on them, and are losing export and general economic market share. Germany’s success will do nothing but cause lots of grief between them and the other more troubled economies….Grief between a successful Germany, the biggest economy in the EU, and other seriously unhappy EU neighbors could spell doom for the common currency. For example, France had a 14 percent drop in car manufacturing activity in the year ended October. That is simply disastrous. Of course there are calls for a weaker Euro by France, and this is but one example, but a good one of the whole situation. Here is a good news clip about the situation: Euro Threatened with 2007 Meltdown, as French Economy Slumps Peter C. Glover | Bio | 01 Jan 2007 World Politics Watch Exclusive http://worldpoliticswatch.com/article.aspx?id=445 French Trade Minister Christine Lagarde has recently criticized the German-based European Central Bank (ECB), which, by raising interest rates six times in a year to 3.5 percent, has been instrumental in pushing up the value of the euro. During 2006, the euro rose 11 percent against the U.S. dollar and most Asian currencies, and a staggering 20 percent against the yen. Complaining about only selling one Airbus, and no satellites or ships at all, during the year, Lagarde pointedly told the ECB it needed to stop worrying about inflation and start "thinking about growth." French Premier Dominique de Villepin even called for limits on the power of the ECB, espousing the need to reassert national control over the economy. "We must clarify matters in exchange rate policy, which means taking back our sovereignty," he said. A clause in the EU's Maastricht Treaty (111-4) could allow them to do exactly that. The "get-out" clause allows EU states to set their own interest rates, effectively stripping the ECB of independent control… Which gets me to my point – I am getting a little concerned about all this ballyhoo about the Euro being the next great currency to ultimately replace the USD. I am concerned that gold bulls and other savings oriented people are being told pretty much a one sided story about the latest and greatest – Euro. The one side we all hear is how great the Euro is, but there are serious issues developing that could deal a death blow to that currency- leaving lots of savers with euros that could drop like a stone in value… all the while these savers thought they had moved into a safe haven. You know, the USD is toast at some point. However, whether the Euro is the natural alternative clearly remains to be seen. Not only that, but I envision a very severe global recession coming soon, (I’m not the only one, lots of very reputable economists and financial experts are also very concerned about a looming global recession) and that would just immeasurably increase the fracturing pressure on the Euro – not the other way around. In fact, even though the Euro is gaining lots of ground, if there is a big fracas in the EU over the Euro, and interest rates, I can easily see the Euro dropping like a stone, and losing all the credibility it gained in its short 6 year lifespan. Basically, the Euro has to prove itself for a good amount of time, and this has yet to finish (to say the least), and the EU nations are not exactly well known for getting along with one another economically. If a consensus were to develop that the future of the Euro is in doubt, the Euro will drop like a stone. The fact that there could be movement back to native currencies would be a death blow to the Euro, and I wouldn’t want lots of money in it. So, even though the USD is in very serious trouble going into 07, I would not necessarily jump with everything into the Euro! © 2007 Christopher Laird Editorial Archive The Prudent Squirrel newsletter is Chris Laird’s weekly macroeconomic gold newsletter. A month or so ago, I predicted the short term gold bear market is over based on the weak USD and the continuing concern in the Mid East. That has proven to be true – holding up gold in spite of weakness in the base metals…. Stop by and have a look. CONTACT INFORMATION Christopher Laird PrudentSquirrel.com Los Angeles, CA USA \ \ \ ric Are you on Crack? Gold will reach new highs this year, and the collapse of the Dollar will be all that anyone talks about. rfyl> wrote: > > > The 3rd year of an American president are most bullish for markets. > Sorry, No bearish general market in the horizon for 2007 or 2008. > > Commodity markets still looks very bearish here. It means gold and > silver market move down and gets little talked about. The US Dollar > moves up and gets stronger as more foreign investors buy US Stocks. > > A pullout of Iraq is most likely this year or most likely early next > year 2008. \ \ \ http://biz.yahoo.com/ap/070102/wall_street.html?.v=4 World Markets Rally; Wall Street Closed Tuesday January 2, 10:00 am ET Global Stock Markets Have Strong Start in 2007; Wall Street Closed to Observe Day of Mourning LONDON (AP) -- Stock markets around the world had a strong start for the new year, even as Wall Street remains on break until Wednesday. The major indexes in Europe posted gains. In Asia, stock markets in Hong Kong and Indonesia closed at record highs and stocks in Taiwan reached a six-year peak. U.S. markets are closed to observe a day of mourning for former President Gerald Ford. The four-day shutdown marks the longest stretch in which U.S. equities have not traded since the September 2001 terrorist attacks, when the market was shut for six days. Markets in several countries -- including Japan, Thailand, Malaysia, China, Singapore, New Zealand, Italy, and Switzerland -- also remain closed on Tuesday. \ \ \ rfyl That's your personal opinion! How often have you been right on Gold since the May 2006 top? Its best to do your analysis on your own not what other gold gurus are saying about gold that all hell will breaks loose. They have been more often wrong than ever being right even in the 1979/1980 rise in gold! ric wrote: > > Are you on Crack? Gold will reach new highs this year, and the > collapse of the Dollar will be all that anyone talks about. \ \ \
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Duncan	02-Jan-07, 07:19 PM (GMT)
3. "Deflation"
MARCH 18, 2002 INTERNATIONAL BUSINESS Japan's Deflation Disaster Plunging prices are clobbering the country's economy To see what havoc deflation is wreaking on Japan's economy, swing by a model-home complex in the upscale Tokyo suburb of Sakura Jyosui. There, big homebuilders such as Mitsui & Co. (MITSY ) and Misawa Homes Co. show off their latest homes, which boast elegant tatami rooms, wine cellars, and saunas. But there aren't many takers these days. This despite the fact that Misawa and rival homebuilder S x L Corp. last year triggered a price war that has crunched prices for a new home by as much as 28%. "Times are awful," says a Mitsui salesman. "And the competition is ferocious." Life is hell for such foot soldiers of the Japanese economy. Why splurge on a big-ticket purchase like a new home now, consumers figure, when it will likely cost less next year? And buyers aren't likely to change their tune any time soon. While some observers hope the early March jump in Japan's stock market signals a recovery that will put a floor under falling prices, such hopes are misplaced. That spike in the Nikkei could well prove temporary. Deflation, on the other hand, seems frighteningly permanent. All kinds of consumer and wholesale prices, from compact discs to three-piece suits, have been dropping for two years now--and show no sign of stopping. Nor should anyone have much confidence in Prime Minister Junichiro Koizumi's just-released anti-deflation package, which fails to address Japan's big problems, including extra capacity. Says Yuichi Ezawa, Japan representative and vice-chairman of UBS Group: "There is no easy escape from deflation." Indeed, it is deflation--and not the hoped-for shot in the arm from a rising stock market--that will have the biggest impact on Japan's economy this year. A number of structural factors are responsible for the continuing drop in prices. Frightened consumers don't want to buy, overbuilt industries are pricing their products to move, and cheap imports from China and the rest of Asia are flooding the markets. The result is that sectors such as food, clothing, consumer electronics, and housing are getting hammered. As corporate failures keep mounting--20,000 companies went under last year--consumers are wondering when they will get hit, too. Megumi Yamamoto, a young Tokyoite, loves the fact that she can now buy Sony CDs of Japanese artists for $3.75 less than last year. But, she adds, "I am very worried about my future." So are plenty of executives. Deflation has forced consumer-product companies to make wrenching shifts in planning and marketing, with mixed results. During the 1980s, when incomes were rising, pricing a product amounted to slapping a fat margin on top of the cost of production. Brand-loyal consumers, whose living standards were improving, went along for the ride. Today, retailers are fighting for a dwindling share of the household budget. "The profit margin is now what the consumers let you keep," quips Jerry Black, a managing director with Kurt Salmon Associates, a retail management consultant. Companies need to take a machete to distribution costs, shift production offshore, and get creative to pry yen from Japanese wallets. Sometimes this works. Frozen-food outfit Katokichi Co. can make its chicken skewers and octopus balls 15% cheaper in China, so it does. Since it started importing meat, fast-food king Yoshinoya D&C Co. has been able to cut prices by 30% and open new stores. It still expects to turn a $137 million profit this fiscal year. But not every industry can chop fixed costs so easily--especially in Japan, where costs are the highest anywhere. Consider distribution. Japanese trucking companies pay five times more in road levies than their counterparts in the U.S., while shipping costs are twice as high, largely because unions control the docks. Such high operating expenses are forcing the likes of Matsushita Electric Industrial Co. (MC ) and NEC Corp. (NIPNY ) to move more production to China and other low-cost centers. Consumers, meanwhile, can't afford to indulge in brand loyalty, which is hard to justify when so many cheaper products are available from abroad. "Nobody used to take South Korean electronics very seriously," notes Iain White, J. Walter Thompson (Japan) executive director for strategy. They sure do now. Deflation has also created, or at least popularized, entire product segments. Low-malt beers, or happoshu, which cost 40% less than regular brews, are hot in drinks. The $7,000 to $9,000 subcompact car is the fastest-growing product category for Toyota (TOY ), Nissan (NSANY ), and Honda (HMC ), while sales of family sedans are anemic. And no retail category is more emblematic of the shift in consumer psychology than the "100 yen" (75 cents) discount shops that are now all the rage. Some innovative banks are even designing loan products to take advantage of one of the stepchildren of deflation: ultralow interest rates. With mortgage rates around 3%, many homeowners are eager to pay their balance early before rates head north. In an effort to pick up new business, Shinsei Bank has introduced a mortgage scheme that allows consumers to pay off big chunks of their balance ahead of time without incurring penalties. "You're looking at a more effective way to finance your home," says K. Sajeeve Thomas, Shinsei's corporate executive officer and chief of staff. Some of these innovations are welcome, of course: Japanese consumers deserve a break. But at some point, deflation's destructive power could become too great for Japan to handle. Companies laboring under huge debts, for example, can't raise prices to service their loans. Maybe a lift in exports will help a few companies. But this year, most managers will remain as miserable as those house salesmen in Sakura Jyosui. By Brian Bremner in Tokyo \ \ \ Japanese Deflation Monday, January 09, 2006 The Japanese government announced in March that the Consumer Price Index fell 0.4 in 2000, after a 0.3% fall the previous year. That meets the international definition for deflation, which is two consecutive annual declines in prices. This is the first time in the post-war era that that has occurred in the world’s second largest economy. Experts blame a vicious circle of sluggish spending, falling prices and shrinking corporate profits. Taro Aso, State Minister for Economic and Fiscal Policy, said the condition was “mild”, but he warned that its psychological impact could grow. While insisting that the economy was still on a long-term course towards growth, his department blames external factors such as the economic slowdown in the United States and many Asian countries. Nevertheless, Haruhito Arai, a cabinet office economist, diagnosed the trend as “virulent" and noted that, internationally and historically, it is very rare for the Consumer Price Index to fall for two years in a row. According to Jonathan Watts of "The Guardian," no other developed economy is suffering from deflation, which was last seen on a global scale during the Great Depression of the 1930’s”. Experts also site domestic factors. They claim a combination of rising unemployment and renewed concerns about the banking sector is keeping consumers from spending. These concerns arise from the sharp decline of share prices on the Tokyo Stock Exchange since the start of the year. Many banks had counted on gains in their stock holdings to write off an estimated 30 trillion yen ($) in non-performing loans. Deflation in Japan can have devastating effects. It chips away at asset values, increases credit risks, pinches wages and salaries, and prevents the economy from generating any sustained growth after a decade of stagnation. According to the New York Times, stocks are trading at the same prices of 15 years ago, and land values in major cities, which back many of the loans made by Japanese banks, have fallen 65 percent from their peak in 1991. Excluding fresh foods, prices dropped 1.1 percent last year, the greatest decline since World War II. “A crisis of pernicious deflation, which could destroy people’s lives, is looming,” declared the Yomiuri Shimbun, the most conservative of Japan’s major daily newspapers, in a front page editorial. With growth slowing in the United States and elsewhere, many experts fear that another slump in Japan means problems for the rest of the world. Unfortunately, the news continues to worsen. Early in March, the government reported that machinery orders, an important indicator of investment, fell nearly 12 percent in January from the previous month. Additionally, Finance Minister Kiichi Niyazawa shocked Tokyo when he told Parliament that the government’s books were close to a “catastrophic situation.” An article from The New York Times offers a personal example to illustrate the results of deflation. “When Hitoshi Matsushita started pondering his impending retirement seven years ago, his first concern was putting a roof over his head. I was living in company housing,” he said, “I thought buying a place would be convenient for my future.” In 1994, prices for housing had already started to decline after Japan’s bubble economy had burst. The 76 million yen ($636,000) that Mr. Matsuchita paid for his apartment looked like a bargain. But real state prices have continued to fall, leaving the home now worth at most 40 million yen-and Mr. Matsuchita still owes the bank 30 million yen. “I can only work until I’m 70, and at that point, I guess my life will crash,” said Mr. Matsushita, who is now 66. “Right now, I’m desperate.”” Paradoxically, many still see deflation as a force for accelerating economic modernization. It is also regarded as a sign that Japan is finally opening its doors to international competition. Caffe latte sells at 320 yen compared with the kissaten, traditional Japanese coffee shops, which sell small size cups of coffee for more than twice that amount. There is also Uniqlo, perhaps the most popular store in Japan at the moment, which imports its apparel products from China. The Gap-like chain is putting enormous pressure on its Japanese competitors. Additionally, stable or even slightly declining prices can benefit older Japanese by preserving the value of their savings. Deposits held in postal savings accounts nominally earn 0.11 percent a year, but deflation has lifted the real return by almost 2 percentage points over two years. On the other side of the debate, many economists warn that Japan risks being sucked into a dangerous deflationary spiral that may only worsen as companies are forced to cut prices and wages repeatedly. “We have gone beyond the point where the deflation we are seeing can be attributed to globalization and greater competition,” said Takatoshi Ito, Deputy Vice Minister for International Affairs at the Ministry of Finance. “Deflation is now the mirror image of falling demand, and that’s not good deflation.” According to The New York Times, some economists argue that Japan needs more deflation as a form of shock therapy. Fewer debts, greater efficiency and a reallocation of labor, they say, is precisely the bitter medicine the economy must swallow. “If deflation continues, inevitably it will put further downward pressure on wages, and if wages are cut, then prices will have to fall too,” said Tadashi Nakamae, an outspoken economist. “I think Japan needs to accept that. Later, it will be offset by higher growth.” \ \ \ January 02, 2007 Market Outlook 2007 - Thoughts of a Professional Investor by Deric O. Cadora Many highly successful traders exercise their skills within a framework of fundamental analysis. Given that lesson, I like to take reflection time at the beginning of each year to establish macro themes around which I can trade. One year is a relatively short time with regard to macroeconomic themes. Scenarios typically develop over much longer periods, building as events unfold and psychology shifts. In addition, time unfolds within a trader's imagination at a much faster pace than in reality. In other words, one's fundamental analysis may be thorough and one's conclusions accurate, yet the scenarios envisioned may not come to fruition for quite a bit longer than anticipated. A trader must invoke patience and pay close attention to market signals, not only to trade at the right time but also to not trade at the wrong time. Most of the expectations outlined below have been discussed in daily posts to my market blog. Stocks Last year's prognostication began with the sentence, "My outlook for U.S. equities in 2006 is rather grim." Obviously, the impetuous rally of the latter half of the year proved the outlook wrong, though in mid-July it was looking mighty insightful. The reasons for my grim view, however, have not retracted, but rather grown stronger. Collective expectations for equity returns have become more ebullient. Bulls feel bulletproof after surviving the early summer tumble, and earnings expectations, especially in tech, continue to escalate despite incontrovertible proof that the demand side is weakening rapidly while inventories grow. I also cited the decay in the housing arena as a drag on the overall market and suggested that housing stocks and their suppliers, such as Building Materials Holding Corp., would have painful years. Housing shares did, indeed, tumble (BMHC fell 30% in 2006), though the effects of their decline have yet to be felt on a broader scale. That said, the rally from the July lows appears very much like a speculative blow-off phase for the greater cycle that began off the 2002-03 lows. I will not only reiterate, but amplify, my grim outlook for equities going forward. The U.S. economy is slipping into recession. In fact, if one uses more realistic figures for inflation than what the government publishes, we have already experienced recession in real terms. The effect of overzealous lending in the housing market is beginning to be felt in the sub-prime arena and will make a greater mark in 2007. More subtle indicators include the facts that Dow dog, GM, which lead the market higher by doubling off its early-year low, appears to have completed its counter-trend rally. Also, odd-lot short sales, a useful indicator of how unsophisticated investors are positioned, are at a 13-month low. Finally, Nasdaq indices have failed to better their November highs while the S&P 500 and Dow have set new highs. In recent years, weakness has tended to develop in the Nasdaq prior to broader market declines. Therefore, I anticipate that an inflection point could be imminent. The Dollar The dollar, by falling substantially, behaved as anticipated in 2006. As measured by the U.S. Dollar Index, the greenback lost about 8% of its purchasing power. So much for inflation running at only 3%! That the dollar lost ground despite the frenetic pace of U.S. bond and equity purchases by foreigners is a testament to its underlying weakness. Given that Chairman Bernanke halted rate hikes mid-year and will frantically cut them once the effects of the unwinding in housing becomes more ubiquitously recognized, the dollar is likely to continue its downward trend in 2007. I would not be surprised to see fresh all-time lows for our currency. Bonds Bond prices began 2006 in anticipated fashion... by falling sharply... then staged a surprise rally in the latter half of the year, much like equities. Also like equities, I believe this rally represents a blow-off phase and that a change in trend is impending. In fact, my outlook for bonds is identical to that of last year, so I will simply reiterate the view: "While many players believe an impending recession in the U.S. will drive yields lower, my opinion differs. I believe that a secular change has occurred regarding bonds and that they are entering a long-term bear market. We are now witnessing exactly the opposite scenario seen in the early 1980s when traders thought yields would stay high forever. What will drive bond prices downward, even in the face of recession? Simply the desire to exit dollar-based assets. Some sort of catalyst will be needed to instigate the first wave down for bonds, but once it starts, the selling will escalate from pressure by foreign central banks, or even large U.S. holders, as bonds are tossed like hotcakes." Precious Metals Precious metals performed fabulously in 2006. Gold's price increased 25% for the year, despite retreating sharply from a parabolic move that ended in spring. Many pundits assert that this parabolic move represented a bubble in gold's price and that its bull market is finished. I could not disagree more. First, the term "bubble" has been grossly over-used since the tech heyday. It seems any time an asset experiences a rapid price increase, people start shouting, "Bubble!" However, for price increases to truly be deemed a mania, the market must contain the necessary condition of broad-based participation, drawing in traders with little or no previous experience in the asset class who suddenly deem themselves experts. Tech in 2000 and housing in 2005 certainly qualify, but gold in 2006 does not. I do believe that precious metals will experience a mania phase, but that the event is years down the road with prices several times higher. As for the coming year, the road may be tricky. While one should expect precious metals to continue appreciating as the dollar slumps, there are headwinds. A recession could exert downward pressure on commodity prices. The damage should be mostly concentrated in industrial commodities, but there is a correlation between industrial and monetary commodities. Therefore, positive performance in gold and silver will ultimately depend heavily on weakness in the dollar. Perhaps traders with heavy PM exposure could hedge those positions with shorts in various industrial metals. Also, precious metals have experienced six straight years of price appreciation. Even the strongest of bull markets have down years, and I do not expect the current bull market in commodities to be an exception. Nevertheless, my outlook remains positive for precious metals in 2007. Energy Last year's prognostication for oil stated that the black stuff would not be a major winner for the year because the emergence of recession would mitigate demand. The view was spot-on. Oil closed the year barely $2 higher than where it began. During the first half of the year, however, oil surged more than 30%, largely due to speculation over the hurricane season. When it became apparent that no major hurricane would threaten the Gulf, the speculative premium unwound rapidly. Oil now sits at a critical crossroad. On one hand, its price is sitting just above the support of its bull market trend line. On the other, the rapid emergence of recessionary conditions should continue to mitigate industrial demand. A big battle is shaping up, and oil is likely to witness a sharp price adjustment in whichever direction it breaks. Therefore, the most prudent strategy for trading oil may be to construct option strangles going several months out. As was the case in 2006, geopolitical turmoil is a wildcard for oil. There is no doubt that tensions between Israel and Iran are intensifying and the odds of a strike on Persian soil are rising. A triple-digit price per barrel would almost surely result. The volatility spike I anticipated in 2006 did not occur. The VIX is trading at all-time lows, providing for very inexpensive options premiums, relatively speaking. Contrary to popular belief, this condition will not last. Risk cannot be under-priced indefinitely because an outlier event will eventually provide a catalyst for rapid change and risk adjustment. Whether or not such an event occurs in 2007 is unknowable, but given the extreme levels of risk absorption, caution is warranted. Wishing a healthy and prosperous New Year to all... Talk Back Deric O. Cadora www.theDOCument.com Deric O. Cadora is the editor of The DOCument, a daily newsletter offering stock market commentary, macro economic discussion, and technical trade signals. Deric is a professional investor and the proprietor of Atavia, Inc., a thriving web applications and web hosting company. His investment experience spans two decades, during which time he served as principal of a broker-dealer and developed proprietary statistical trading models. Copyright © 2005-2007 Deric O. Cadora \ \ \ http://www.safehaven.com/article-6626.htm \ \ \ http://bigpicture.typepad.com/comments/2007/01/construction_sp.html \ \ \ http://bigpicture.typepad.com/comments/2007/01/will_the_econom.html \ \ \
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Duncan	02-Jan-07, 08:40 PM (GMT)
4. "There’s only one reason why execs lay out hundreds of thousands of dollars on their own company: they know the stock’s about to take off."
A Vicious Circle By: The Mogambo Guru & The Daily Reckoning Crew -- Posted Tuesday, 2 January 2007 | Digg This Article Ouzilly, France Tuesday, January 02, 2007 --------------------- *** Ford was no dope - he pointed out that the United States was running out of two things necessary in an empire: money and energy... *** Our hair has deserted us...but our foolishness hangs around like a loyal sidekick... *** Last chance to get in on the Agora Financial Reserve...New Year's irresolutions and wishful thinking...and more! --- Advertisement --- Imagine Spending 22% of Your Yearly Salary on One Investment You’d have to be damn confident in that investment, right? And returns would have to be virtually assured, correct? One CEO just laid out 22% of his salary and his CFO followed suit, betting 31% of hers. $694,324 worth of insider buying can’t be wrong. There’s only one reason why execs lay out hundreds of thousands of dollars on their own company: they know the stock’s about to take off. Click here for more: http://www1.youreletters.com/t/467787/4459110/813026/278/ --------------------- "Wasn't he the one they used to say couldn't chew gum and walk at the same time?" asked a French friend. The markets were closed yesterday for New Year's Day. Today, many will be closed in honor of Gerald Ford, who is to be laid to rest after a state funeral. Gerald Ford seemed like a good egg, as presidents go. And yes, there were a lot of jokes about him. He stumbled coming down stairs occasionally. He had gone to Yale and had been a star football player, which led Richard Nixon to remark that he thought Ford must have played too often without his helmet on. But Ford was no dope. In his Inauguration in 1974 he said: "I must say to you that the state of the Union is not good: Millions of Americans are out of work. Recession and inflation are eroding the money of millions more. Prices are too high, and sales are too slow. This year's Federal deficit will be about $30 billion; next year's probably $45 billion. The national debt will rise to over $500 billion. Our plant capacity and productivity are not increasing fast enough. We depend on others for essential energy." You have to give the man credit. In this brief paragraph, he identified the two of the key things that would eventually undermine the empire. The early '70s were a critical turning point. Until then, the average man in America had made steady financial progress. The dollar had real value; foreign governments could trade their surplus dollars for gold. The U.S. government tended to balance its books. And until then, the nation could count on its own oil wells for the energy it needed. The two world wars of the 20th century were won largely because America had cheap, good oil...and the losers didn't. Germany had to bend its military strategy in Russia in order to try to secure the oil fields of the Ukraine. As a result, its drive to Moscow stalled. Japan's war effort was doomed too when the island nation ran out of oil. Its ships could offer no effective resistance to the U.S. fleet, because they had no fuel. It is of no concern to us whether our gasoline comes from Texas or from Venezuela. In our private lives, we are as happy to add to the profits of Gazprom as of Exxon. But if you want to play the role of a butt-kicking empire in the modern world, you need two things: money and energy. Ford noted that the United States was running out of both. President Ford sounded the alarm over a $30 billion budget deficit and a $500 billion national debt. The numbers sound almost quaint to us today...like a $15,000 mortgage or a wood stove. It reminds us of an earlier era...before there we ever heard of derivatives...before the financial operators took over Greenwich, CT...before the celebrities forgot to put on their underwear. Ah yes, dear reader, we are becoming sentimental. It happens this time of year...after the holidays. Yesterday, we sat in our office, alone...thinking about the years gone by...sniff, sniff... We remembered those days...yes, 30 years ago...when you could buy a gallon of gasoline for less than 50 cents and smoke a cigarette without risking a jail term. We remember, we bought an English sports car - an MGA - for only $200. And we sold a house for $23,000! Those were the days...when we were young and foolish. Now, alas, we are old and foolish. If only hair were as steadfast as foolishness! Through the years, our hair has deserted us...but our foolishness hangs around like a loyal sidekick. Meanwhile, circumstances change. In one era, we are young and restless. Thirty years later, we are careful and reflective. In one era, stocks are cheap and credit is dear. In another, even household pets can get mortgages...while stocks have never been more expensive. In one era, a nation is on top of the world...30 years later; it is slipping and sliding, desperate to hold onto its position. Of course, there were plenty of jackasses back in the '60s and '70s too. In '74, the United States was trying to figure out how to withdraw from another absurd military adventure - in Vietnam. The Vietnam War, like the war in Iraq, had proved good for military contractors and artificial limb makers, but bad for the nation. Scarcely a year after Gerald Ford moved into the White House, the last American troops were coming home. This report from the North Country Times: "His were the last American boots to leave the ground that day, the last pair of military feet to scramble aboard the last American helicopter out of Saigon on April 30, 1975. "And as the mechanical bird finally headed out of war-ravaged Vietnam, John Valdez looked down at the place he had just left, the U.S. embassy at Saigon. Some people were looting the building. Others just sat, talking. A few raised their heads to watch the American military fly away." Sic transit gloria belli. But for all the foolishness of the Vietnam War, the war in Iraq surpasses it in grand style. The Iraq War is far more expensive...it stirs up new enemies, rather than wrestling with old ones...and it comes at a time when the empire is no longer in control of its finances or its energy. The United States now imports vast quantities of oil...the revenues from which flow to enemies and potential enemies - Russia, Venezuela, or one of the Bedouin kingdoms. And it must also import the money to pay for the war! The cost is $8 billion per month. Let's see, that's $96 billion a year. Whoa...that's only a fraction of the $750 billion current account deficit. And it's only a fraction of the estimated 2007 federal deficit of $400 billion. In other words, the foreigners lend us money for the war - and a lot more! Man, oh man...we were so much better off when Gerald Ford was in the White House! Then, at least we could have a moronic war without having to beg the money for it from strangers. And you only have a few hours left! After midnight tonight, the doors of the Reserve will close - and won't open again until December...and by then, the price will have risen by $1,500! Only Hours Remain... http://www1.youreletters.com/t/467787/4459110/811120/404/ More news... -------------- Chris Mayer, reporting from Gaithersburg, Maryland: "The world's dollar-holders are in the process of revolting against the dollar's reserve currency status. So far this 'quiet revolution' has caused very little blood-letting...but things might get a little bloodier." For the rest of this story, see the latest issue of The Rude Awakening: New Year's Revolution http://www.agorafinancial.com/RudeAwakening/RAissues/2006/NovDec/RA122906.html -------------- And more thoughts... *** The family has dispersed. Maria went back to London for New Year's Eve. Jules went to Paris to spend the night with his friends. Sophia is teaching people how to ski in West Virginia. Our oldest son is in Florida, where he is preparing to move to Buenos Aires. That leaves only the two youngest boys with us. A family of four is perfectly normal...but we are used to much larger groups. And even our old friends from Paris - three of them - packed up and left yesterday. Yesterday, your author spent the day in his office...listening to Frank Sinatra and Dean Martin singing Christmas music...and growing nostalgic. The first of January must be the loneliest day of the year. Gone is the merriment of Christmas and New Year's Eve. What is left - at least out here in the French countryside - is a tranquility so intense it almost hard to breathe. At a certain age, a man sees more road behind him than in front of him. He wonders why he has taken the direction he took...and begins to see where it leads. What can he do differently? Is it too late to change course? What would be the point? He poses himself questions, but has no answers. He cannot go backward; he must advance. But towards what? He cannot tell. But he must move forward. The first of January will turn into the second before he knows it...then will come the rest of them...all the days and months and years, leading like highway signs to the end of the road. He must resolve to do something with them. He must make resolutions...so he can carry himself along. Otherwise, he will be carried along by time. Yes, the end may the same, but at least the journey will be more satisfying if his own two hands are on the steering wheel. At least, that is what he tells himself. And so he resolves... First, he will be kind and courteous to everyone regardless of race, religion, politics or family affiliation. Yes, it is that last category that is the tough one. It is easy to be gracious to the Maronite Christians and the Australian aborigines, but it is hard to be polite sometimes to the people you eat breakfast with. But this year, yes, he will do better. He will always be in a good mood, even when going through airport security lines or spending on the new kitchen. And if he isn't in a good mood, he will keep it to himself. Second, he will organize his financial affairs. He has been meaning to do this for years. But he has been so busy figuring out the world's financial system, he has had no time to tend to his own. But this year will be different. He will get a stiff drink and open up his own books. Then, he will put them in order...with a proper budget, a proper investment portfolio, accounts payable, accounts receivable, and accounts lost and found...even a Last Will & Testament! He will clean things up - selling off investments and properties that don't really contribute to his future well-being. And he will make a plan for his retirement financing! He doesn't want to think about any of it right now...but he promises himself he will get on it as soon as he has a spare minute. Third, he will finish that project he started last year. He can't quite remember what the project was or why he didn't do it in 2006, but he imagines that it is still waiting for him. Heck, 2007 will be soon enough. And then it will be finished. Fourth, he will always remember that he is as big a fool as anyone in public life. He will still laugh out loud at presidential addresses and stockbrokers' cold calls. But he will try to remember that politicians and Wall Street promoters are God's creatures too...and deserve the respect of all His works, even lamebrains and hedge fund managers. And yes, this will be the year that he tends to his health...with that program of diet and exercise that he meant to start five years ago. More exercise! This year he will take the time. No doubt about it. No backsliding. No excuses. He will make time available and he will do it. And won't he be proud of himself next year at this time - with a body that would make Schwarzenegger weep. Let's see, he has 24 hours in every day...364 days left in the year ahead. He has plenty of time. So, no more time to waste writing to Dear Readers...he has to get on the ball...get with it...get on the move... ...and let Dear Readers get on with their lives in 2007, too. --- Advertisement --- The Best Investment For 2007 - Wealth Insurance A New Year...a new slate...and new opportunities to profit - and protect your already existing assets. Join the most elite and intelligent investors in building a "wealth fortress" around your investments... http://www1.youreletters.com/t/467787/4459110/813027/1892/ --------------------- The Daily Reckoning PRESENTS: The U.S. economy is a myriad of contradictions and confusions - one, in particular, being that consumer spending is keeping the economy afloat. Hmm...the Mogambo can't help but wonder - where is the consumer getting the money to begin with? Read on... A VICIOUS CIRCLE by The Mogambo Guru The alarms started ringing the instant that the figures for Total Fed Credit hit the airwaves, and in that same instant I was scurrying like a frightened rat-in-a-trap. In my panic, I must have turned on one too many self-defense systems in the Mogambo Bunker Of Mortal Dread (MBOMD), and the newly installed Mogambo Intruder Pacification System (MIPS) did its job. And while the exact details of who shot the living hell out of who's stupid boat are still in contentious debate, I know exactly who threatened to (and I quote), "Come in there and kick some Nutcase Mogambo Butt (NMB)!", thus constituting a legal case of assault, albeit flimsy, of my own. In all the hubbub, I forgot about checking Total Fed Credit to see what set off the alarms in the first place, and also in that selfsame hubbub I forgot all about donning, as I usually do, an adult disposable diaper in case it is bad news, economically speaking. Well, Total Fed Credit was up $7.6 billion, foreign central banks stashed another $11.8 billion at the Fed, the Treasury printed up another $2.4 billion in actual cash, repo activity in the banks last Thursday alone was a staggering $32 billion, and the nation's current-account deficit went through the $880 billion per year mark. Gahhh! With big numbers like these impacting my fragile nervous system, the rest is history. I know, I know; I should feel sorry for the dumb, ignorant bastards who are doomed because their money is doomed because the Federal Reserve is creating so much money and so much credit that we are cruising to a huge inflationary bonfire and the destruction of the American economy, and they don't have any gold to protect themselves and blah blah blah. Then I remember that they are the same dolts who consistently elected and re-elected collectivist bozos to erect a suffocating, huge, expensive system of governments that not only looked the other way, but encouraged the Federal Reserve to create all that money because everyone wanted inflation in stocks, bonds, the size of government, and (later in the cycle) houses! There was just too much money to be made! And now we have price inflation in everything, painfully manifested in a dollar that is losing its buying power, just like the Austrian Business Cycle Theory so elegantly, and so confidently, predicts. After this short mental exercise, I naturally deduce "To hell with them AND their stupid boats! And the stupid trailer they had it on, too!" And it is not just us, either, as the stupid idea of constantly increasing government size, spending and number of people being given money is becoming apparent to the British, as the blaring headline of the Daily Express, "Highest Taxes In History", so dramatically attests. The article notes that things are getting much worse, as "When a crippling barrage of more than 100 stealth taxes is added, workers are paying almost half their earnings" in taxes. I will note, with an appropriate dose of Snarling Mogambo Outrage (SMO), that paying roughly 50% of income is exactly the proportion of income that Americans pay in total taxes, too, when you include income taxes, Social Security taxes, surtaxes, sales taxes, property taxes, excise taxes, government fees, etc. And why is all of this happening? Well, in a recent essay, Dr. Kurt Richebächer quotes Jean-Baptiste Say from his 1803 "A Treatise on Political Economy." "The encouragement of mere consumption is no benefit to commerce because the difficulty lies in supplying the means, not in stimulating the desire for consumption; and production alone furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption." Well, I got some bad news for Mr. Say, and it is a good thing that he is dead because he would probably croak from a brain explosion if he knew that not only do today's bad governments encourage consumption, but they are also actually the country's largest consumer! And, to compound their folly, they actually give out money to people so that they, too, can consume, or the government provides the services to be consumed, or (as in the case of health care) the government requires that people with insurance and/or wealth pay higher prices for healthcare to cover the bills of those who don't (or won't) pay. This is, for one thing, communism gone freaking insane. But Americans can handle some degree of insanity, just like my parents, who kept me shackled and locked in the basement all those years and referred to me as Mogambo, Spawn Of Satan (MSOS), but led otherwise perfectly normal lives. The bad part is 1) one day I am going to get big enough to bust out of this stinking basement to seek my unholy revenge, and 2) that all this money the governments are spending has to come either from taxes, or from borrowing. The economic ugliness of raising the money via raising taxes is obvious and legendary. But the problems of raising the money by borrowing are not so obvious, which is too bad, because they are worse, as it only postpones the repayment (either in higher taxes or higher inflation). And, even more egregiously, since there are no savings to be borrowed, all this money that the government needs to borrow and spend is created by the Federal Reserve, which increases the money supply, which causes prices to go even higher, which is what always causes the destruction of economies, and is behind the government's current need for more money! It's a vicious cycle! They say that consumer spending is what is keeping us afloat, which doesn't explain where the consumer got the money in the first place. In truth, government spending is now so huge that the money (earned or borrowed) came, originally, from the government deficit-spending the money that the Federal Reserve created just for the purpose, year after year, until the debt thus created now totals $8.6 trillion (roughly, a stack of $1,000 bills 540 miles high), which merely means that the government borrowed, and spent, and owes one enormously humongous load of money. The consumer merely ended up with it, just in time to be credited with keeping the economy afloat by spending it. To show you what I mean, the government budgeted $2.6 trillion, and they spent another $600 billion on top of that, to the tune of $3.2 trillion in cash outlays last year! The GDP of the United States is only $13 trillion, for crying out loud! And the actual, real-life deficit last fiscal year, as reported by the Treasury itself, was $4.6 trillion! 35% of GDP! In one year! Until next week, The Mogambo Guru for The Daily Reckoning *** Mogambo sez: If it ain't gold or silver, it ain't worth squat. And if you don't get gold and silver soon, you won't be worth squat, either, ditto soon. Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. If you're inclined to read more, you'll find the whole Mogambo here: Terror, Mixed With Laughter, Lying and Deceit http://dailyreckoning.com/Writers/Mogambo/DREssays/MG010207.html -- Posted Tuesday, 2 January 2007
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Duncan	03-Jan-07, 07:40 AM (GMT)
5. "market manipulation "
NYTimes: Central banks tiptoeing away from the dollar Submitted by cpowell on 04:24PM ET Tuesday, January 2, 2007. Section: Daily Dispatches By Jeremy W. Peters The New York Times Tuesday, January 2, 2006 http://www.nytimes.com/2007/01/02/business/02cnd-dollar.html Countries with large holdings of dollars in their foreign-exchange reserves are showing a new willingness to dump the dollar in favor of the rising euro. The latest to make a major move is the United Arab Emirates, which joined Russia, Switzerland, Venezuela, and others late last month when it shifted a chunk of its reserves into euros. There have also been ambiguous signals from China about a possible pullback from the dollar, and recent word from Iran, the world’s fourth largest oil producer, that it would prefer to be paid in euros rather than the usual dollars for its oil shipments. Still, currency experts say these moves are not likely to do any long-term damage to the dollar, for a number of reasons. First, the central banks that are adding other currencies to their reserves do not appear to be driven by a belief that the euro will eventually supplant the dollar as the world’s key currency. Rather, they are doing what investors typically do to minimize risk: diversifying their portfolios. Moreover, the amounts moved so far have been relatively small in a global market that trades trillions of dollars a day -- only about $2 billion in the case of the United Arab Emirates, for example. “There is some indication that central banks are moving to diversify reserves, but it’s at a very slow pace,� said David Powell, a currency analyst with IDEAglobal. “Is it the start of a massive shift out of the dollar? I would say no.� Moreover, experts say that the impact of such moves by central banks is generally fleeting at best. “Most people think it does not influence exchange rates for any long period of time,� said Edwin M. Truman, a senior fellow at the Petersen Institute for International Economics, who served for more than two decades as the director of international finance for the Federal Reserve. “It has some day-to-day effects but not any big effects.� News of the United Arab Emirates' decision contributed to the dollar’s fall against the euro, the British pound and the Japanese yen last week. For all of 2006, the euro appreciated more than 11 percent against the dollar and the British pound rose nearly 14 percent. But those trends seem to be driven by other forces, including varying prospects for growth around the world and changes in interest rates in the United States and elsewhere. One reason that dollars are not likely to start pouring rapidly out of central bank vaults is that foreign countries risk devaluing their dollar-denominated investments, at least for a while, if they dump the currency. Even a slight suggestion that a central bank is thinking about swapping dollars for euros can push the dollar down in the spot markets, and in turn hurt all foreign investors in American securities. China, which holds more Treasury securities than any other foreign nation except Japan, offers an example. In October, the most recent month for which figures are available from the Treasury Department, China held $345 billion in Treasury securities. That was up from $301 billion a year earlier. Its currency reserves total $1 trillion, about $700 billion of it in dollars, economists estimate. So in many ways, it is in China’s best interest not to let the dollar’s value slip. Heavy sales of the dollar could make it harder for the People’s Bank of China to manage its gradual appreciation of the yuan against the dollar. Anything more abrupt, Beijing fears, would make Chinese goods less competitive in the United States and pose problems domestically for some of its state banks, limiting their ability to borrow. Nonetheless, the rising euro is not something the United States or foreign investors can afford to ignore. “You have to start to thinking that the euro can be of some risk to the dollar,� said Shaun Osbourne, chief currency strategist at TD Securities in Toronto. “Over the course of the next 5 or 10 years, I don’t think there’s any danger that the dollar’s pre-eminence is threatened. But in the long run, there is certainly the risk that does happen.� One major issue driving investors away from the dollar is the possibility that interest rates in the United States and Europe may move farther apart next year. The financial markets are currently expecting at least one interest-rate cut by the Federal Reserve sometime next year. That contrasts with predictions of further interest-rate increases by the European Central Bank. Because returns typically rise with interest rates, the euro seems like a more attractive investment. “A lot of foreign investors think the Fed is going to cut rates in 2007, and that’s a rather dollar-bearish thing,� said Julia Coronado, senior economist with Barclay’s Capital. Some economists predict the dollar will fall even more in 2007. The euro finished 2006 at $1.31, and some forecasters expect it to climb near $1.40, a level it has never reached in its seven-year history. “We believe that the dollar’s decline versus the euro has further to run, with $1.38 a possible destination for the pair over the next six months,� said Tom Levinson, a foreign exchange strategist with ING Wholesale Banking in London. Even so, few economists think the dollar is headed for an inevitable demise. “The dollar is still the world’s No. 1 currency, and it’s going to stay that way,� said Nigel Gault, chief United States economist for Global Insight. “The euro is gradually going to become more important, but I don’t see it becoming more important than the dollar.� \ \ \ THE DEADLY ART OF STOCK MANIPULATION. In every profession, there are probably a dozen or two major rules. Knowing them cold is what separates the professional from the amateur. Not knowing them at all? Well, let's put it this way: How safe would you feel if you suddenly found yourself piloting (solo) a Boeing 747 as it were landing on an airstrip? Unless you are a professional pilot, you would probably be frightened out of your wits and would soil your underwear. Hold that thought as you read this essay because I will explain to you how market manipulation works. What the professionals and the securities regulators know and understand, which the rest of us do not, is this. "RULE NUMBER ONE: ALL SHARP PRICE MOVEMENTS -- WHETHER UP OR DOWN -- ARE THE RESULT OF ONE OR MORE (USUALLY A GROUP OF) PROFESSIONALS MANIPULATING THE SHARE PRICE." This should explain why a mining company finds something good and "nothing happens" or the stock goes down. At the same time, for NO apparent reason, a stock suddenly takes off for the sky! On little volume! Someone is manipulating that stock, often with an unfounded rumor. In order to make these market manipulations work, the professionals assume: (a) The Public is STUPID and (b) The Public will mainly buy at the HIGH and (c) The Public will sell at the LOW. Therefore, as long as the market manipulator can run crowd control, he can be successful. Let's face it: The reason you speculate in such markets is that you are greedy AND optimistic. You believe in a better tomorrow and NEED to make money quickly. It is this sentiment which is exploited by the market manipulator. He controls YOUR greed and fear about a particular stock. If he wants you to buy, the company's prospects look like the next Microsoft. If the manipulator wants you to desert the sinking ship, he suddenly becomes very guarded in his remarks about the company, isn't around to glowingly answer questions about the company and/or GETS issued very bad news about the company. Which brings us to the next important rule. "RULE NUMBER TWO: IF THE MARKET MANIPULATOR WANTS TO DISTRIBUTE (DUMP) HIS SHARES, HE WILL START A GOOD NEWS PROMOTIONAL CAMPAIGN." Ever wonder why a particular company is made to look like the greatest thing since sliced bread? That sentiment is manufactured. Newsletter writers are hired -- either secretly or not -- to cheerlead a stock. PR firms are hired and let loose upon an unsuspecting public. Contracts to appear on radio talk shows are signed and implemented. Stockbrokers get "cheap" stock to recommend the company to their "book" (that means YOU, the client in his book). An advertising campaign is rolled out (television ads, newspaper ads, card deck mailings). The company signs up to exhibit at "investment conferences" and "gold shows" (mainly so they can get a little "podium time" to hype you on their stock and tell you how "their company is really different" and "not a stock promotion.") Funny little "hype" messages are posted on Internet newsgroups by the same cast of usual suspects. The more, the merrier. And a little "juice" can go a long way toward running up the stock price. The HYPE is on. The more clever a stock promoter, the better his knowledge of the advertising business. Little gimmicks like "positioning" are used. Example: Make a completely unknown company look warm and fuzzy and appealing to you by comparing it to a recent success story, Diamond Fields or Bre-X Minerals. That is the POSITIONING gospel, authored by Ries and Trout (famous for "Avis: We Want To Be #1" and "We Try Harder" and other such slogans). These advertising/PR executives must have stumbled onto this formula after losing their shirts speculating in a few Canadian stock promotions! The only reason you have been invited to this seemingly incredible banquet is that YOU are the main course. After the market manipulator has suckered you into "his investment," exchanging HIS paper for YOUR cash, the walls begin to close in on you. Why is that? "RULE NUMBER THREE: AS SOON AS THE MARKET MANIPULATOR HAS COMPLETED HIS DISTRIBUTION (DUMPING) OF SHARES, HE WILL START A BAD NEWS OR NO NEWS CAMPAIGN." Your favorite home-run stock has just stalled or retreated a bit from its high. Suddenly, there is a news VACUUM. Either NO news or BAD rumors. I discovered this with quite a few stocks. I would get LOADS of information and "hot tips." All of a sudden, my pipeline was shut-off. Some companies would even issue a news release CONDEMNING me ("We don't need 'that kind of hype' referring to me!). Cute, huh? When the company wanted fantastic hype circulated hither and yon, there would be someone there to spoon-feed me. The second the distribution phase was DONE....ooops! Sorry, no more news. Or, "I'm sorry. He's not in the office." Or, "He won't be back until Monday." The really slick market manipulators would even seed the Internet news groups or other journalists to plant negative stories about that company. Or start a propaganda campaign of negative rumors on all available communication vehicles. Even hiring a "contrarian" or "special PR firm" to drive down the price. Even hiring someone to attack the guy who had earlier written glowingly about the company. (This is not a game for the faint-hearted!) You'll also see the stock drifting endlessly. You may even experience a helpless feeling, as if you were floating in outer space without a lifeline. That is exactly HOW the market manipulator wants you to feel. See Rule Number Five below. He may also be doing this to avoid the severe disappointment of a "dry hole" or a "failed deal." You'll hear that oft-cried refrain, "Oh well, that's the junior minerals exploration business... very risky!" Or the oft-quoted statistic, "Nine out of 10 businesses fail each year and this IS a Venture Capital Startup stock exchange." Don't think it wasn't contrived. If a geologist at a junior mining company wasn't optimistic and rosy in his promise of exploration success, he would be replaced by someone who was! Ditto for the high-tech deal, in a world awash with PhD's. So, how do you know when you are being taken? Look again at Rule #1. Inside that rule, a few other rules unfold which explain how a stock price is manipulated. "RULE NUMBER FOUR: ANY STOCK THAT TRADES HUGE VOLUME AT HIGHER PRICES SIGNALS THE DISTRIBUTION PHASE." When there was less volume, the price was lower. Professionals were accumulating. After the price runs, the volume increases. The professionals bought low and sold high. The amateurs bought high (and will soon enough sell low). In older books about market manipulation and stock promotion, which I've recently studied, the markup price referred to THREE times higher than the floor. The floor is the launchpad for the stock. For example, if one looks at the stock price and finds a steady flatline on the stock's chart of around 10 cents, then that range is the FLOOR. Basically, the markup phase can go as high as the market manipulator is capable of taking it. From my observations, a good markup should be able to run about five to ten times higher than the floor, with six to seven being common. The market manipulator will do everything in his power to keep you OUT OF THE STOCK until the share price has been marked up by at least two-three times, sometimes resorting to "shaking you out" until after he has accumulated enough shares. Once the markup has begun, the stock chart will show you one or more spikes in the volume -- all at much higher prices (marked up by the manipulator, of course). That is DISTRIBUTION and nothing else. Example: Look at Software Control Systems (Alberta:XVN), in which I purchased shares after it had been marked up five times. There were eight days of 500,000 (plus) shares trading hands, with one day of 750,000 shares trading hands. Market manipulator(s) dumping shares into the volume at higher prices. WHENEVER you see HUGE volume after the stock has risen on a 75 degree angle, the distribution phase has started and you are likely to be buying in - at or near the stock's peak price. Example: Look at Diamond Fields (TSEFR), which never increased at a 75 degree angle and did not have abnormal volume spikes, yet in less than two years ran from C$4 to C$160/share. Example: Look at Bre-X Minerals Alberta:BXM), which did not experience its first 75 degree angle, with huge volume until July 14th, 1995. The next two trading days, BXM went down and stayed around C$12/share for two weeks. The volume had been 60% higher nearly a month earlier, with only a slight price increase. Each high volume and spectacular increase in BXM's share price was met with a price retreat and leveling off. "Suddenly," BXM wasn't trading at C$2/share; it was at C$170/share.... up 8500% in less than a year! In both of the above cases, major Canadian newspapers ran extremely negative stories about both companies, at one time or another. In each instance, just before another share price run up, retail investors fled the stock! Just before both began yet another run up! Successful short-term speculators generally exit any stock run up when the volume soars; amateurs get greedy and buy at those points. "RULE NUMBER FIVE: THE MARKET MANIPULATOR WILL ALWAYS TRY TO GET YOU TO BUY AT THE HIGHEST, AND SELL AT THE LOWEST PRICE POSSIBLE." Just as the manipulator will use every available means to invite you to "the party," he will savagely and brutally drive you away from "his stock" when he has fleeced you. The first falsehood you assume is that the stock promoter WANTS you to make a bundle by investing in his company. So begins a string of lies that run for as long as your stomach can take it. You will get the first clue that "you have been had" when the stock stalls at the higher level. Somehow, it ran out of steam and you are not sure why. Well, it ran out of steam because the market manipulator stopped running it up. It's over inflated and he can't convince more people to buy. The volume dries up while the share price seems to stall. LOOK AT THE TRADING VOLUME, NOT THE SHARE PRICE! When earlier, there may have been 500,000 shares trading each day for eight out of 12 trading days (as in the case of Software Control Systems), now the volume has slipped to 100,000 shares (or so) daily. There are some buyers there, enough for the manipulator to continue dumping his paper, but only so long as he can enlist one or more individuals/services to bang his drum. He may continue feeding the promo guys a string of "promises" and "good news down the road." (Believe me, this HAS happened to me!) But, when the news finally arrives, the stock price goes THUD! This is entirely orchestrated. "RULE NUMBER SIX: IF THIS IS A REAL DEAL, THEN YOU ARE LIKELY TO BE THE LAST PERSON TO BE NOTIFIED OR WILL BE DRIVEN OUT AT THE LOWER PRICES." Like Jesse Livermore wrote, "If there's some easy money lying around, no one is going to force it into your pocket." The same concept can be more clearly understood by watching the tape. When a market manipulator wants you into his stock, you will hear LOUD noises of stock promotion and hype. If you are "in the loop," you will be bombarded from many directions. Similarly, if he wants you out of the stock, then there will be orchestrated rumors being circulated, rapid-fired at you again from many directions. Just as good news may come to you in waves, so will bad news. You will see evidence of a VERY sharp drop in the share price with HUGE volume. That is you and your buddies running for the exits. If the deal is really for real, the market manipulator wants to get ALL OF YOUR SHARES or as many as he can... and at the lowest price he can. Whereas before, he wanted you IN his market, so he could dump his shares to you at a higher price, NOW when he sees that this deal IS for real, he wants to pay as little as possible for those same shares... YOUR shares which he wants to you part with, as quickly as possible. The market manipulator will shake you out by DRIVING the price as low as he can. Just as in the "accumulation" stage, he wants to keep everything as quiet as possible so he can snap up as many of the shares for himself, he will NOW turn down, or even turn off, the volume so he can repeat the accumulation phase. In the mining business, there seems to always be another "area play" around the corner. Just as Voisey's Bay drifted into oblivion, during the fourth quarter of 1995 and early into 1996, the same Voisey Bay "wannabees" began striking deals in Indonesia. Some even used new corporate entities. Same crooks, different shingles. The accumulation phase was TOP SECRET. The noise level was deadingly silent. As soon as the insiders accumulated all their shares, they let YOU in on the secret. "RULE NUMBER SEVEN: CONVERSELY, YOU WILL OFTEN BE THE LAST TO KNOW WHEN THIS DEAL SHOWS SIGNS OF FAILURE." Twenty-twenty hindsight will often show you that there was a "little stumble" in the share price, just as the "assays were delayed" or the "deal didn't go through." Manipulators were peeling off their paper to START the downslide. And ACCELERATE it. The quick slide down makes it improbable for your getting out at more than what you originally paid for the stock... and gives you a better reason for holding onto it "a little longer" in case the price rebounds. Then, the drifting stage begins and fear takes over. And unless you have serves of steel and can afford to wait out the manipulator, you will more than likely end up selling out at a cheap price. For the insider, marketmaker or underwriter is obliged to buy back all of your paper in order to keep his company alive and maintain control of it. The less he has to pay for your paper, the lower his cost will be to commence his stock promotion again... at some future date. Even if his company has no prospects AT ALL, his "shell" of a company has some value (only in that others might want to use that structure so they can run their own stock promotion). So, the manipulator WILL buy back his paper. He just wants to make sure that he pays as little for those shares as possible. "RULE NUMBER EIGHT: THE MARKET MANIPULATOR WILL COMPEL YOU INTO THE STOCK SO THAT YOU DRIVE UP ITS PRICE SHARES." Placing a Market Order or Pre-Market Order is an amateur's mistake, typifying the US investor -- one who assumes that thinly traded issues are the same as blue chip stocks, to which they are accustomed. A market manipulator (traders included here) can jack up the share price during your market order and bring you back a confirmation at some preposterous level. The Market Manipulator will use the "tape" against you. He will keep buying up his own paper to keep you reaching for a higher price. He will get in line ahead of you to buy all the shares at the current price and force you to pay MORE for those shares. He will tease you and MAKE you reach for the higher price so you "won't miss out." Miss out on what? Getting your head chopped off, that's what! One can avoid market manipulation by not buying during the huge price spikes and abnormal trading volumes, also known as chasing the stock to a higher price. "RULE NUMBER NINE: THE MARKET MANIPULATOR IS WELL AWARE OF THE EMOTIONS YOU ARE EXPERIENCING DURING A RUN UP AND A COLLAPSE AND WILL PLAY YOUR EMOTIONS LIKE A PIANO." During the run up, you WILL have a rush of greed which compels you to run into the stock. During the collapse, you WILL have a fear that you will lose everything... so you will rush to exit. See how simple it is and how clear a bell it strikes? Don't think this formula isn't tattooed inside the mind of every manipulator. The market manipulator will play you on the way up and play you on the way down. If he does it very well, he will make it look like someone else's fault that you lost money! Promise to fill up your wallet? You'll rush into the stock. Scare you into losing every penny you have in that stock? You'll run away screaming with horror! And vow to NEVER, ever speculate in such stocks again. But many of you still do.... The manipulator even knows how to bring you back for yet another play. What actors! No wonder Vancouver is sometimes called "Hollywood North." "FINAL RULE: A NEW BATCH OF SUCKERS ARE BORN WITH EVERY NEW PLAY." The Financial Markets are a Cruel, Unkind and Dangerous Playing Field, one place where the newest amateurs are generally fleeced the most brutally.... usually by those who KNOW the above rules. Just as I have a duty to ensure that each of you understand how this game is played, YOU now have that same duty to guarantee that your fellow speculator understands these rules. Just as I would be a criminal for not making this data known to you, YOU would be just as criminal to keep it a secret. There will always be an unsuspecting, trusting fool whom the rabid dogs will tear to shreds, but it does NOT have to be this way. If every subscriber made this essay broadly known to his friends, acquaintances and family, and they passed it on to their friends, word of mouth could cause many of these market manipulators to pause. IF this effort were done strenuously by many, then perhaps the financial markets could weed out the crooked manipulators and the promoters could bring us more legitimate plays. The stock markets are a financing tool. The companies BORROW money from you, when you invest or speculate in their companies. They want their share price going higher so they can finance their deal with less dilution of their shares... if they are good guys. But, how would you feel about a friend or family member who kept borrowing money from you and never repaid it? That would be theft, plain and simple. So, a market manipulator is STEALING your money. \ \ \
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Duncan	03-Jan-07, 08:26 AM (GMT)
6. "we are all so different"
ric I am doing my own analysis. The US trade deficit continues to increase at an ever faster rate, and the current account deficit and budget deficit are a higher percentage of GDP than ever. If the dollar is in such good shape, why did they stop publishing M3 figures if not to hide what they're doing. TA charting of the Dollar projects a breakdown from current levels, which is not surprising considering the strength of the Euro and the desire of Central Banks to diversify out of the Dollar. Gold has based and will not go below $600 again, probably ever. There is resistance here at $640 and at $655. If it breaks out above $655 it will take off. Our overseas creditors are not as eager to finance our deficits as they were. The result will be a decline in the American standard of living. \ \ \ A European central bank is buying gold -- but who and how much? Submitted by cpowell on 09:04PM ET Tuesday, January 2, 2007. Section: Daily Dispatches Buying Bullion: Central Banks Seek Alternatives to the Dollar By Ambrose Evans-Pritchard The Telegraph, London Wednesday, January 3, 2007 http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/01/03/cngold... Gold punched ahead in new-year trading on dollar weakness and the revelation that a member of the European Central Bank system had begun buying bullion, the first such purchase in years. The ECB's family of 12 banks have been major sellers of gold since the euro launch in 1999, helping to drive prices down to a 20-year low at the start of the decade. Constant ECB sales have acted as a cap on rallies. Any indication that Europe's big guns are at last switching to the buy side -- even if tentatively -– could have a profound effect on investor psychology at a time when central banks worldwide want alternatives to dollar reserves. The ECB said one of its member banks bought gold in the week ending December 22, 2006, but did not identify the amount or country. The news helped lift gold $4.10 to over $640 an ounce. Euro-banks have bought gold before -– in July, for instance -– but past purchases involved coins bought from Greek citizens under a scheme run by the Greek national bank and did not signal any change in strategy. The latest purchase refers to bullion reserves, suggesting one of the euro-zone banks may have broken ranks, countering the pattern of sales by the Banque de France, and the Dutch, Spanish- and others. Analysts said the Bank of Italy was a possible candidate. Rome has not sold any gold so far, and stunned investors by switching 20 percent of its reserves into sterling in 2005, a move that reaped fat rewards as the pound surged to 14-year highs against the dollar. Under an international agreement, a group of 15 European banks are limited to sales of 500 tonnes a year. They fell far short of their quota last year for the first time. An ECB spokesman said member banks had bought gold "once or twice" since the euro launch in 1999, calling the latest purchase an end-of-year "technical" adjustment. Nikos Kavalis, an analyst at GFMS, said it was too early to tell if the purchase was significant. "We would be cautious about this. These banks have a duty to uphold monetary stability: they're not hedge funds," he said. \ \ \ Fighting over gold in the land of Dracula Submitted by cpowell on 08:53PM ET Tuesday, January 2, 2007. Section: Daily Dispatches By Craig S. Smith The New York Times Wednesday, January 3, 2006 http://www.nytimes.com/2007/01/03/business/worldbusiness/03gold.html ROSIA MONTANA, Romania -- Eugen David, a small-time farmer with a chipped tooth and muddy boots in this obscure wrinkle of Transylvania, is an unlikely man to attract the attention of movie stars and moguls. But he counts Vanessa Redgrave, George Soros, and Teddy Goldsmith among his backers in a land battle with a Canadian gold mining company. The company, Gabriel Resources, owns the rights to mine the hills here and wants Mr. David, 41, to leave his 50 acres of land so that the company can carve out what would be Europe's largest open-pit gold mine. Mr. David says he isn’t budging. "We don't want to move," he says, staring across at the brown-gray stain of Rosia Montana's defunct gold mine, which would be swallowed by Gabriel Resources' huge project. In the old days, a pipsqueak like Mr. David wouldn't stand a chance fighting powerful and sophisticated adversaries like Gabriel Resources and its minority partner, the Romanian government. But this is the Internet age, when local activists like Mr. David can tap into an increasingly well-oiled global network of non-governmental organizations for financial and political support on a long list of causes and emerge with almost as much clout as any corporation. Mr. David's stubbornness has struck a chord with the anti-globalization movement. Gabriel Resources' proposed open-pit, cyanide-leaching mining process has also drawn the ire of international environmentalists who are now trying to stop it. They just might win. Mining is one of the world's most unpopular pursuits these days, particularly the gigantic gouging that leaves the earth pocked with moonscape-like craters a mile or more wide. Gold mining is disdained even more because of the perceived frivolity of its end: to provide lucre for the rich, status for the everyman, and hidden stores of wealth for nations. But it also has a strong allure, particularly for resource-rich countries like Romania that are struggling to develop impoverished communities that need jobs. The $3.7 billion project would plow more than $2 billion into the Romanian economy and could earn Gabriel Resources and its shareholders profits of $1 billion or more. And the company involved here, a Toronto-based corporation with market capitalization of $1 billion, is run by savvy mining executives, many of them highly experienced from cutting their teeth building Barrick Gold Corp., the largest gold mining company in the world. The allure is perhaps stronger in Romania because the country was created, in a way, by gold mining. Early in the second century A.D., Emperor Trajan extended Roman territory to include what is now Transylvania, in the western half of Romania, to mine Europe's most important gold deposits. The mines helped finance the expansion of the empire to its peak. When the Romans abandoned the territory almost 200 years later, they left behind colonists who are the ancestors of Romanians today. When the Romans left, the mining did not stop. The eventual ruling dynasty, the Hapsburgs, and the Communists, who turned to open-pit mining, continued the process, though with dwindling efficiency. The mine was finally shut in early 2006. Gabriel Resources was born in the breakup of the state-owned economy after communism's collapse when Romanian businessmen with little mining experience and suspected ties to the former secret police won a vast concession to exploit mineral deposits. Mr. David and his neighbors realized six years ago that the company planned to expand the old mine and formed an association called Alburnus Maior -- Rosia Montana's Roman name -- to try to stop the project. They were engaged in an ineffective letter-writing campaign when the founders of Gabriel Resources moved the company's listing from Vancouver, British Columbia, to the more respectable Toronto Stock Exchange. Mr. David's opposition might have withered had it not been for an ill-advised plan to build a Dracula theme park near the picturesque Romanian town of Sighisoara, once home to Vlad Dracula, the notorious Romanian ruler and inspiration for "Dracula," the Bram Stoker novel. Prince Charles of Britain, fond of Romania's old Saxon villages, was outraged. So was Teddy Goldsmith, the aging anti-globalist environmentalist and scion of a wealthy business family. A Swiss-born environmental journalist named Stephanie Roth, who wrote for Mr. Goldsmith's magazine, The Ecologist, moved to Romania to help defeat the project. With such powerful forces aligned against it, the theme park for Sighisoara died. While in Romania, Ms. Roth heard about the Gabriel Resources' plan for Rosia Montana and went to meet Mr. David in April 2002. Within months, she had introduced him to some of the most powerful environmental organizations in the world. "When I came there was no computer, no Web site," Ms. Roth said. "I tried to empower the local organization." Ms. Roth started by helping Mr. David's group obtain a grant for a few hundred dollars from an American environmental organization, Global Greengrants Fund. They organized a public hearing in Rosia Montana that drew 40 non-governmental organizations with Romanian operations, including Greenpeace, and catapulted Mr. David's dispute onto the national stage. Then Ms. Roth took to the road. By the time Gabriel Resources' founders turned the company over to more professional management in 2005, the company had an international coalition of nongovernmental organizations arrayed against it. But the mining industry doesn't easily back down. Hoping to extract an estimated 300 tons of gold and 1,200 tons of silver from the mine, Gabriel Resources introduced a public relations campaign with Madison Avenue-style television commercials and community sponsorships to win over 960 Rosia Montana families that it needed to relocate. It cast itself as an economic savior. It even countered a critical documentary with its own film, "Mine Your Own Business." Some efforts backfired. Gabriel Resources helped sponsor the Transylvanian International Film Festival in nearby Cluj-Napoca. But when its organizers invited Ms. Redgrave to receive a lifetime achievement award, Ms. Roth quickly put the actress and Mr. David together. Ms. Redgrave's acceptance speech became a rallying cry against Gabriel Resources' project. The anti-Gabriel Resources' movement had its mascot and the European press began covering the story. Word of the movement had by then reached the Open Society Institute of George Soros, which has been working for years for more accountability from Romanian public officials. "When guys in SUVs with bags full of cash show up in a poor locality in Romania, they can really make the law there," said Radu Motoc, project director of the Open Society Foundation-Romania. Nearly all members of Rosia Montana's former and current council are either employed by Rosia Montana Gold, Gabriel's local subsidiary, or have family members who are, according to the foundation. The foundation, which has already given $35,000 to the cause, says it plans to spend as much as $240,000 next year fighting the project and helping Mr. David. Because of the polarizing debate surrounding open-pit gold mining, it is hard to find an unbiased commentator to assess the risks and benefits of Gabriel Resources' proposed mine. A major focus of contention is the use of large quantities of highly toxic cyanide to separate gold and silver from the ore. In 1999, Aurul, a joint venture of the Australian mining company, Esmeralda Exploration, and a Romanian national company, Remin, began a leaching operation to recover gold from old tailings in Baia Mare, or Great Mine, roughly 80 miles north of Rosia Montana. Like Gabriel Resources, the company promised a state-of-the-art, self-contained project that would not pose risks to the environment. But less than a year later, the dam holding back a lake of cyanide-laced water burst, sending 100,000 cubic meters of contaminated water downstream to the Danube, killing more than 1,200 tons of fish in Hungary. Gabriel Resources says it would build in safeguards that were missing at Baia Mare. It has promised to convert most of the cyanide into a nontoxic compound before discharging it into the mine's tailing pond. It also promises to clean up pollution left by past mining operations and spend $70 million to do as much as possible to repair the altered landscape after its project is done. "Arsenic, cadmium, nickel, lead," said Catalin Hosu, a public relations official for Gabriel Resources, ticking off just a few of the heavy metals that leach from ancient mines to give this valley its name; Rosia Montana means "red mountain." "We help the biodiversity; we help the environment," said Yani Roditis, Gabriel Resources' chief operating officer. That's difficult for many people here to believe. The new project will grind down several hills, leaving four deep pits in their place, and slowly fill an entire valley with wastewater and tailings that will take years to solidify. Robert E. Moran, a mining expert hired by the opposition to evaluate the impact of Gabriel Resources' plans, said that the mine, despite detoxification, would inevitably produce other toxic byproducts damaging to the environment, including heavy metals. The controversy, meanwhile, has splintered the town, its buildings divided between those with signs that read, "Property of Rosia Montana Gold Corp." and others that say, "This Property Is Not For Sale." "I was born here, so why should I leave?" said Gabriela Jorka, 38, who runs a small general store in Rosia Montana. "I'd rather kill myself." Eugen Bobar, 60, the school principal, says that the dispute is pitting parents against children, husbands against wives. But only about 40 percent of the families to be relocated remain, and Mr. Bobar predicts that most of them will leave. "Most of the people who talk about the environment are just making an excuse," Mr. Bobar said, sitting in the school's office late one night. "They will leave for a good price." Mr. David, however, insists there is a committed core of opponents who will not sell, whatever the offer. In that case, Gabriel Resources warns, it may ask the state to step in and move people out by force. But that could lead to years of legal wrangling. The company has told its shareholders that it expects to receive final approval for the project from the Romanian government this year and will start producing gold by mid-2009. Gabriel Resources, which is based in Toronto, is, meanwhile, trying to win over the remaining holdouts. It is sponsoring education for underprivileged children in Rosia Montana through a nongovernmental organization run by Leslie Hawke, the mother of the actor Ethan Hawke and a celebrity herself in Romania. She supports the project. "It's probably better that nothing happened, but the gold is there and if they don't do it, somebody else will," Ms. Hawke said. "And I'd rather that they do it than somebody else." \ \ \ http://www.pinr.com/ Although it is not clear which group was responsible for the Bangkok bombings -- with some analysts claiming that the military itself may have been behind the blasts in order to strengthen its mandate to rule or as a sign of a power struggle within the ranks -- the incidents will have the intended effect of increasing political and economic risk to Thailand. Outside of the four southern-most provinces, Thailand has not witnessed deadly political violence in over a decade. The December 31 attacks change that paradigm. For the short-term, the December 31 attacks will have a negative effect on tourism and political stability in Thailand. If the attacks prove to be a one-time event, however, and more attacks do not occur, visitors will resume their travels to the country and the tourism trade will be only marginally affected. Despite increasing economic risk, Thailand still remains one of Southeast Asia's most stable countries and a favorite destination for tourists. \ \ \ http://www.safehaven.com/article-6629.htm \ \ \ http://www.safehaven.com/article-6627.htm \ \ \ http://www.safehaven.com/article-6628.htm \ \ \ http://bigpicture.typepad.com/comments/2007/01/books_in_the_qu.html \ \ \ http://bigpicture.typepad.com/comments/2007/01/reminiscences_o.html \ \ \
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Duncan	03-Jan-07, 10:35 AM (GMT)
7. "prepare for the basic yes, no decisions"
Britain The Times January 03, 2007 'Everything went down to zero very fast. It was quite a shock' Helen Nugent As a City professional and the owner of an art gallery, David Stevenson hardly ever missed a credit card payment and always met his mortgage commitments. But failure to keep up with the rent on the gallery business, into which Mr Stevenson, 49, and his wife had invested their life savings, resulted in bankruptcy and the loss of the family home. “It was very difficult,” said Mr Stevenson, from Kent. “We suddenly found ourselves transformed from a position where I was working in the City with no personal cashflow issues to a situation where personal cashflow became a massive issue.” A decision to give a personal guarantee on the five-year lease on the gallery meant that Mr Stevenson’s landlord was able to employ a private detective to present the family with a statutory demand. At the time, the Stevensons had missed three months’ worth of payments. By the time they appeared in court, six months later, the sum due had risen to £25,000. The Stevensons, including their 12-year-old daughter, were instructed to leave their home and moved into temporary accommodation. Mr Stevenson said: “Everything went down to zero very, very fast. It came as quite a shock to the system. Bankruptcy is very hard. Although I have now been discharged, it does diminish your prospects of employment, particularly the ones I am familiar with.” Consumer groups report that increasing numbers of people are approaching them for help with debt difficulties. Sarah Miller, a spokeswoman for Citizens Advice, said: “We do see evidence of a Christmas debt hangover, and this month we expect to exceed the 140,000 debt problems that Citizens Advice bureaux dealt with in January 2006.” A report published by the charity last year revealed that its debt clients owed an average of £13,153, and that it would take them an average of 77 years to pay off what they owe at a rate they can afford. \ \ \ Reflections By: Theodore Butler -- Posted 2 January, 2007 | Digg This Article At this time of year, it is natural to analyze and review. In addition to normal year-end reflections, I find myself especially contemplative as I have just celebrated 30 years of marriage and will soon cross the milestone of having spent 60 years on this earth. Round numbers just seem to make you more reflective. I am most grateful for the gift of life and for sharing it with a woman of unique inner and outer beauty. But, of course, this essay is about silver. It’s gratifying that the price of silver rose 45% in the past year and has almost tripled over the past four or five years. I feel grateful to have been given the opportunity of being heard. The hundreds of thousands of words I wrote did not hurt anyone. In fact, those who bought silver have done very well. However, there is little benefit in focusing too much on the past. It serves no purpose to repeat how good a buy silver was at four dollars. Higher prices usually undermine the original reason to buy, especially a double or triple. Is this the case with silver? In order to determine if silver is still undervalued, it is important to try to understand why it has risen and what forces can continue to propel it from here. The main reason silver has doubled or tripled in price, is that it was way too cheap previously. There were remarkably few public analysts who correctly labeled silver as dirt cheap under $5. There were quite a few who predicted an avalanche of scrap selling at higher price levels. That selling has not occurred. Why does the biggest negative argument in silver always seem to be the amount of selling, scrap or investor holdings, that will surely occur at sharply higher prices, al a 1980? Bad things will happen to silver investors if the price goes higher. Huh? Why does this seem to be a bearish factor unique to silver? Why have I never heard a stock, or real estate, or bond, or even a gold analyst, proclaim that sharply higher prices in those things will bring a wave of selling? To a great extent, the rise in silver has been a stealth move. We’ve tripled, and it is a move almost unknown or unrecognized. Sure, those interested in silver have more than noticed the move, but there are not many of those in the investment world. Silver has not risen due to some great collective and emotional speculative movement by the masses, like we’ve seen in real estate. By every objective measurement, we are still far from bubble conditions in silver. The price rise to date appears to be a natural adjustment to prior super-depressed levels. When compared to the price rise in other metals, silver "had" to rise. As such, silver’s price rise is still relatively contained and off the radar screens of the world’s investors. More specifically, if I had to pick the one reason for silver’s price rise, certainly from the $7 level in June 2005 to the $15 level 9 months later, it would have to be the silver ETF (exchange traded fund). So convinced was I that the ETF would greatly impact the price, that I sincerely doubted it would be allowed to come to market. I am still surprised it was allowed to come to market. Any mechanism that involves the physical buying of any industrial commodity must impact the price of the commodity and alter supply and demand. Before the silver ETF was finally approved, I wrote that I doubted we would ever see other commodity ETFs, and I am not surprised that no other ETF involving the buying of physical commodities have come to market. I think silver was allowed to come because of its close association with gold, where there were already multiple ETFs in existence serving institutional buyers. While I would have thought the purchase of 121 million ounces, through year-end, by the ETF would have done more than double the price, I’m not complaining. In fact, I have come to appreciate just what a blessing this silver ETF has been to all silver investors. I remember writing how we all owe a debt of gratitude to Barclays for introducing this ETF, whether it eventually came to market or not. I never imagined how prophetic my words would be. If the 121 million ounces were not purchased by the ETF, that silver would still be "out there". The bulk of that silver would still have been available to industry insiders, including those who have manipulated the silver market for decades. Most assuredly, this quantity of physical silver within their reach would have enabled them to extend the silver manipulation for years longer. Since this silver is now in the ETF, the manipulators can’t use it to dole out when necessary to control the price. With regulatory approval in place to add close to 300 million ounces total in the ETF, the manipulators appear to be on borrowed time. The Short Concentration There is another big milestone that causes me to further reflect. I’ve just crossed the 20-year mark in my quest to root out the remaining principal force of the silver manipulation, the out-sized and uneconomic short position on the COMEX. (Leasing, the other force, appears to be dead.) Thanks to all who involved themselves in this year’s campaign to expose and force the regulators to confront the concentrated short position. It has now been more than two decades that no good answers have been provided for how such an obvious and documented concentrated short position could not be manipulative. This unusual concentrated short position is unique to silver. I understand that this is a difficult to grasp concept (as is short selling, in general). When I first started petitioning the CFTC and the COMEX, 20 years ago, about the short position in silver, it involved only the size of the total short position. Only in the past seven years did the additional issue of the excessive short position being super concentrated in the hands of just a few entities come into focus. This has clarified the issue immensely. Not only did (and does) silver have a manipulatively large short position on the COMEX, that short position, over time, is held in fewer and fewer hands. This is the very essence of any manipulation. There can be no other reasonable conclusion. Remarkably, the COMEX net short position of the four largest traders has grown noticeably more concentrated in the past few months. From this past June when I started petitioning the CFTC and COMEX, the concentrated net short position has grown by 25%, on average, or 50 million ounces, to an average of roughly 230 million ounces. In many measures, the concentrated silver short position is now greater than ever. Four or less traders net short more than two hundred million ounces of silver is manipulative, in and of itself. Not because short selling is evil, but because concentrated short selling to that extent must artificially influence price. The simple question is still – what would the price of silver be without this concentrated short position? I assure you it would be much higher. Recently, I wrote that I would be dead wrong if this concentrated short position could be liquidated without a giant impact on price. These big shorts are trapped. They can liquidate some portion of their short position on a price rig to the downside, engineering a tech fund sell-off, but not the bulk of their position. It is just too large and it is still the silver investors best friend. As it stands now, each dollar that silver rises amounts to a $230 million loss for the shorts. A $4.00 rise would be almost a billion dollar loss. That’s one reason I say the shorts are trapped. Objective analysis demands that one be alert to signs that a market has topped out, especially when prices have moved sharply higher. But price alone may not tell us all we need to know. Copper looked expensive at $1.50 (on the way to $4), oil looked high at $40 (on the way to $80), and zinc looked overpriced at $1.00 (on the way to $2). Therefore, all conditions must be analyzed to see if price reflects over or under valuation. The fundamentals could hardly be better – strong buying via the ETF and the Central Fund, coinage programs and industrial consumption, coupled with a fall-off in mine production in Mexico, Australia and the US. If it were not for the potential short-term negative of the concentrated short position, it’s hard to imagine what could hold or push silver lower. And maybe, just maybe, the short sellers will fail in rigging a further sell-off. You want to own as much physical silver as you can before that happens. Front Dating? As observers of the financial scene are aware, the current scandal de jour concerns the backdating of stock options to company insiders. This practice involves the granting of options at favorable exercise prices with the benefit of hindsight. It is inherently unfair and fraudulent and seems to have been taken seriously by companies and regulators alike, as well it should. The NYMEX went public seven weeks ago, in what has been touted as the most successful initial public offering (IPO) of the year. The IPO price was set at $59 a share and the first day’s trading saw a price range of $120 to $150. Interesting, the first day’s price highs have yet to be exceeded, indicating that open market purchases of NYMEX stock have not fared as well as purchases at the IPO offering price. . The strong price performance was hailed by most as a testimony to strong institutional investor demand, although some questioned whether the underwriters priced the issue too low, thereby depriving sellers of the offered shares (including the exchange itself) from receiving true full value. When questioned about the possibility that the shares were priced too low, NYMEX senior management publicly stated that the strong investor demand was not completely anticipated. Perhaps. A reading of SEC filings by the NYMEX suggests another possible reason for the shares being priced too low. It seems that the many millions of dollars’ worth of stock options granted to management (by management) shortly after the IPO, had exercise prices set at the IPO price of $59, and not an average of the first day’s free trading price. In simple terms, this gave NYMEX management a strong incentive to see the shares priced as low as possible, in conflict with the obvious fiduciary incentive of getting the highest price on the IPO. This also suggests another possible motive for the sudden departure of the former CFO, who forfeited many millions of dollars of potential profits from the granting of stock options with such a favorable exercise price. Perhaps he found this IPO pricing and the setting of the exercise price distasteful. My area of knowledge does not extend to what is the customary practice in pricing IPOs. But if this practice is customary, it doesn’t make it less perverted. If back-dating options is bad, surely front-dating, or artificially setting the exercise price at will and contrary to the best interests of the company, surely must be much worse. -- Posted 2 January, 2007 \ \ \ http://www.dailyspeculations.com/
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Duncan	03-Jan-07, 08:30 PM (GMT)
8. "now that; thats an engulging day wed, and big time; thats turned the market"
\ \ \ http://bigpicture.typepad.com/comments/2007/01/wage_surge.html \ \ \ Conclusion: The markets are historically bullish into the first couple of trading days of a new year. This is the period known as the Santa Claus rally. http://www.safehaven.com/article-6632.htm \ \ \ January 03, 2007 E-Economic Newsletter by The Mogambo Guru Provided as a courtesy of Agora Publishing and DailyReckoning.com -- Scholars and scientists have long debated if the famed Anger Of The Mogambo (AOTM) was so powerful that if my puny Earthling brain literally exploded from the outrage of this monstrous monetary insanity committed by the Federal Reserve, would my pounding, pounding heart make my headless body run around seeking some spooky, malevolent revenge? Now we know the answer: No. Apparently, tests indicate that I just act that way because I am so peculiar and hateful, and therefore, they all concluded, the use of the straightjacket was, indeed, indicated. And the reason that we know this fascinating fact is simple; last week my brain did not explode, although, in that same mind-blowing week (in a blatant burst of blasphemous, bloated banking excess), Total Fed Credit exploded by another $6.8 billion, another $8 billion of actual cash was released, the banks increased their books of Loans and Leases by $34 billion, foreign central banks plowed another $10 billion into their accounts at the Fed, and, to top it off, the Fed itself bought up $2 billion in government securities! Enough money was created to allow Total Commercial Paper to jump by $23.7 billion! All in one week! My God! This is insane! This is freaking insane! As you would expect, this all prompted another Mogambo Regrettable Incident (RMI) in response to such horrific monetary terrorism. My preliminary legal defense strategy is that my brain must have, you know, blanked out at the shock, as video surveillance tapes clearly show that although I cannot squirm or contort my body enough to escape the suffocating confines of a modern straightjacket, I can still kick, squirm, spit, scream, crap, pee, puke and swear so much (and so loud) about this suicidal monetary lunacy that, at the end there, I end up totally, totally exhausted and totally, totally disgusting. The reason for my outrage is, of course, the inflation in prices that must result from all this monetary inflation. It is now a fact, as George Ure at UrbanSurvival.com writes (citing NowandFutures.com and John Williams at ShadowStats.com), that inflation in M3 (the broadest definition of "money supply") is actually running at 11.5%! After that dreadful news sunk in, the rest of the day is a blank. But at just about the same time that the tranquilizer dart was wearing off and I awoke to find found myself alone, in a straightjacket, in a padded room, the mail arrived! Whee! In amongst the usual hate mail and "Last Notice!" letters from angry creditors threatening to sue me unless I pay back at least some of the money I owe them ("Hahaha! Fat chance, suckers!"), was my new 1040 tax booklet with the tax forms for filing my 2006 personal return. Forced to turn the pages with my nose and rudely (and crudely) getting gelatinous, gleaming snot all over everything (as a sort of a performance-art editorial comment), I am immediately wondering why this year's 1040 booklet has no helpful page of "What's New This Year." I soon surmise that it is because they don't want you to notice the rampaging communism that is eating the guts out of America, as administered by the Uniform Tax Code. For example, I am always astonished at the wealth of deductions available, and this year several new ones have appeared on the front of the 1040 tax form where you list deductions from gross income. "Archer MSA deduction" and "Jury duty pay you gave to your employer" are new deductions. Surprisingly, gone is the deduction for "Educator expenses", which I assume is because teachers were abusing the hell out of the deduction, which I further assume is because they have no shame anymore, as evidenced by their willingness to indoctrinate our children with socialist group-think and that whole "all you need is love and a government program dispensing money" idiocy. And what in the hell is a deduction called "Domestic production activities deduction", anyway? If I take my wife to an expensive-yet-charming hotel to get her pregnant, I can write it off as a tax deduction or something? Wow! Why haven't I heard of this before? And mind you, these are only the deductions! The really big, lucrative action is found in tax credits, which are the most luscious of the tax plums! A tax credit is an actual deduction from the taxes you pay, whereas a mere tax deduction is just a lousy deduction from income. To illustrate, a $1,000 tax deduction on an income of $5,000 is worth (at a tax rate of 35% on the remaining $4,000 taxable income) $350. You still have to pay the 35% tax on the remaining $4,000 of income. Total tax due: $1,400. Now, compare that to a big ol' tax credit of a $1,000, which is sooOOOoo much better! First, you figure your tax due (35% of $5,000), which comes to $1,750, which sounds bad. But wait! Now you deduct the $1,000 tax credit from that! Total tax due: only $750! No wonder tax credits are so freaking popular, eh? And tax credits are growing, as Congress has responded to the raging inflation that they allowed the Federal Reserve to cause, by trying to protect some groups of people from inflation's ravages (never you or me, I note sarcastically) by giving them money. Thus, we have things like a tax credit for having children under the "child and dependent care expenses" (Form 2441), a tax credit for being "elderly" or "disabled" (Schedule R), tax credits for going to school in "education credits" (Form 8863), yet another " Child Tax credit" (Form 8901), and "Retirement savings contributions credit" (Form 8880). This last piece of commie-trash tax legislation is that if you are low-income, and if you put some money into a retirement savings account, then the government will give you some, or most, or all, of the money back in the form of a tax credit! Hahaha! Literally giving people a free, pre-funded retirement account! Which is invested in stocks, which will, marginally, manipulate the stock market up! Hahaha! This is the deplorable, dimwitted depths to which the deplorable, dimwitted Congress has now plunged the United States. What seems to be new this year is a tax credit for (I assume) upgrading your home's energy efficiency with "Residential energy credits" (Form 5695). Surprisingly, the credit for "Adoption expenses" (Form 8839) is now gone. And if you want a real laugh, then do like I did, and turn to the Earned Income Credit (EIC) tax tables, where you can note with amusement that there are actually columns in the table showing the actual tax credit payable to taxpayers with NO children! Even though you are required to have a "qualifying child" to get EIC in the first place! Hahaha! But the absolute best is always Line 55, where you deduct from your tax bill mysterious "Other credits", for which you can subtract, I assume, big ol' chunks of money from your tax bill if you submit some mysterious Form 3800, Form 8801, or some other "fill-in-the-blank" Form number, for which no information is ever available in the booklet. I am not sure if this is really Kafka-esque, or just weird, but it makes me suspicious as hell. So, I can only wonder at the abysmal corruption that must also run rampant through the entire 3.5 zillion pages of the tax code, as this is just the obvious stuff that is right out there in the open, for crying out loud! But the point is that all that tax credit stuff is a pathetic Congressional attempt to try and alleviate the suffering caused by inflation, which is caused by them wanting to spend so much money that they allowed the Federal Reserve to create the money they needed, which is a really, really stupid and economically-suicidal idea, which was easily prevented by the Constitution requiring that money be silver and gold. And since inflation can only get worse if you keep making it worse, it gets worse. Ergo, more tax deductions, and more tax credits, for more people. And a few more for business reasons, too, to make the economy zoom a little! I feel compelled, because that is the nasty way I am, to add that this Constitutional requirement that money be only gold and silver was suddenly, out of nowhere, disallowed by a despicable Supreme Court, which allowed that arch-villain, FDR, a Democrat, to doom us all. And every Supreme Court since then has upheld every assault against this traitorous decision. In case you haven't guessed, I have never made it any secret that I despise the Supreme Court, in that they are the arrogant idiots that, to this day, persist in saying that the Constitution does not say that our money has to be silver and gold, as it clearly does, which we can prove because we know WHY such a requirement was put in there in the first place; to prevent the inflation that we now have, so that it wouldn't kill the economy and the country, which it now has: The economic movement you are seeing is only the death-throes of a cancerous, bloated, dysfunctional and idiotic economy. So, the Supreme Court killed America. It's as simple as that. Now, no less than John Roberts, the Chief Justice of the Supreme Court himself, is "issuing a report ", whining that prices have risen so much that the salaries of federal judges have fallen "further and further behind the cost of living", and that "The time is ripe for our nation's judges to receive a substantial salary increase"! What arrogance! What stupidity! He wants our taxes to go up to give these halfwit judges more money! Hahaha! Having grown tired of yelling out of the window "Screw 'em all" about the Supreme Court and the federal judges, and "Screw you, too!" in response to the neighbors who insist on ordering me to shut up, shut up, shut up, for God's sake shut the hell up, I now reveal the new plank in the Mogambo 2008 Presidential Campaign Platform (M2008PCP): Federal judges may never have their salaries or benefits increased, and thus they are sentenced to live with the results of their own execrable, staggering incompetence in disregarding the Constitutional requirement that money be only of silver and gold, and then allowing the excessive expansion of fiat money and insane degrees of fractional-reserve banking by ruling against the plaintiffs in lawsuits that have come before them! And now they want more money! Hahahaha! Like I said, "Screw 'em!" And ditto holding the salaries of Congresspersons forever constant, who would then be much, much, much more careful about what in the hell they are voting for, and spending, and what they allowed the Federal Reserve to do! Thus, the only way for them to achieve a higher standard of living for themselves, and all Americans, is to do their jobs right, and thus make the dollar stronger, thereby increasing the buying power of the dollar! This, then, is my brilliant, brilliant stroke of genius that I proudly call The Mogambo Stricture (TMS) that I hope will propel me to the fame and fortune that I neither deserve nor expect, but which I crave so desperately because I am weird that way, and maybe I can make a few bucks, too, because God knows I sure could use it. -- From Bloomberg.com we learn that Germans as a group are pretty snockered or stupid, as "Consumer confidence in Germany, Europe's largest economy, fell for a second month on concern increases in sales taxes and health-insurance costs will reduce household incomes." If you see any Germans, you have my permission to scream at them "Hell, yes, it will reduce your incomes, you stupid Aryan bastards! What in the hell is the matter with you?" Well, maybe I am just being testy with envy, as these Germans apparently get to sit around all day, eating huge, delicious sausages the size of your freaking arm, drinking delicious, high-octane beer by the liter, and who apparently don't have demon-from-hell wives screaming in their faces "You can't eat that, you pig!", and " You can't drink that, you moron!", and "Don't smoke that, you creep!", and "Stop abusing your expensive prescription medications, you stupid butthead!" and then they get to sit around in a dazed stupor, idly wondering about stupid things, like if paying higher taxes and costs will reduce their freaking incomes. Jeez! Gimme a break! -- For a Christmas present, my wife gave the 17th edition of Barlett's Familiar Quotations, and I was delighted to see that Ludwig von Mises, the "Father of Austrian Economics", was included, and further surprised to find out that his middle name was Edler, which seems strange to me, and like most people, I don't like strange things because they scare me. Well, in case you were wondering, there was nothing about how he got the middle name of Edler, but they do have four great quotes from him, including "Everybody thinks of economics whether he is aware of it or not. In joining a political party and in casting his ballot, the citizen implicitly takes a stand upon essential economic theories." From that, I am sure that Keynes would not be a Democrat, as he says that "Marxian Socialism must always remain a portent to the historians of opinion- how a doctrine so illogical and so dull can have exercized so powerful and enduring an influence over the minds of men, and, through them, the events of history" which, I note with ill-disguised Mogambo contempt, we are, again, having to re-live, in all its ugliness, because we are so laughably stupid as a nation that we cannot learn by merely listening to Mr. Mises, attend to the towering example of all of the world's economic history, or even heed our own Constitution as clearly written. But in talking about Keynes, as a happenstance, Philip S. sent an email titled "A Wise Insight" from President Gerald Ford, who said "A government big enough to give us everything we want is a government big enough to take from us everything we have." Keynes himself pointed out how they accomplish this in his "Essay in Persuasion" when he wrote "By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." Mr. Keynes did not explain what he means by "an important part", but I, in my Irrepressible Mogambo Arrogance (IMA), am happy to officially explain that the "important part" that they take from you is the buying-power of your wealth, and you are left with the "unimportant part", which is the paper it was printed on. And if you want to make a lead-pipe cinch bet, then bet that the government will take everything we have, as they must keep spending more and more, as once you start down that socialist/communist path, there is never a place to ever stop, or even slow down. And the way to do that is to buy gold and silver. But beyond these interesting tidbits, I am now denouncing the entire 17th edition of Bartlett's because they did not include Mr. Mises' most telling quote, which is how there is no way to prevent the eventual collapse of a sick, twisted and bizarre boom-time economy created with excessive creation of money and credit , and your only choice is to either have it implode either voluntarily (by immediately stopping that horrifying, insane crap right freaking now and voluntarily suffering the pain you deserve, you morons), or involuntarily (when the system collapses after trying to keep things going by creating hugely more excessive amounts of money and credit, making things hugely worse and worse, thus making the eventual pain so exponentially much worse, too). Interesting choice! But, to add to their infamy, Bartlett's did not have any quote by The Mogambo, including the most famous and true thing I ever said about economics, namely "We're freaking doomed!" All of which proves, as I have always alleged, they're all trying to keep the brave, noble Mogambo down. I mean, my name is not that long, and the quote is quite short, so how much room could it take in their stupid book? And they couldn't find room for me in 1,430 freaking pages? Give me break! But while they ignored me completely, I notice that they had plenty of room for quite a few quotes from John Maynard Keynes, and, as is usual with crackpots, he sounds so good (for the most part). And he perfectly describes the state of affairs in the USA back when he was writing, vis-à-vis politics and the economic havoc they cause. The quote is that ignorant politicians and hack economists are, for the most part, "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back." You can almost hear the contempt and sarcasm in his voice, echoing my own. Now, fast-forward to today. It is, unbelievably, even worse! Much worse! It is so bad (Audience shouts out "How bad, Mogambo?") that the chairman of the Federal Reserve himself IS a defunct academic scribbler! And the worst kind, too, as he was the head of the economics department of Princeton University, but nevertheless seems to have the insouciant opinion that the horrendous 18-year run of the disastrous, precedent-setting, unfettered monetary policies of the accursed Alan Greenspan is to be faulted only, I guess, in its restraint! Hahaha! Like I said (and if you are from Bartlett's, please pay particular attention here) "We're freaking doomed (WFD)!" -- The main reason why China does not really want a strong currency right now is analogous to the situation in Thailand, as MoneyMorning.com remarks "a strong currency carries its own problems - particularly when your economy still has a significant export sector." If you are an American, then you are understandably clueless as to what the phrase "significant export sector" means, since we don't export much of anything anymore except weapons, things that can carry weapons, things that design weapons, things that can make, or be made into, weapons, and some of the best frozen pizza on the planet. But MoneyMorning.com is apparently not interested in either blowing people to smithereens or tasty culinary delights (but what else is there?), but expertly continues to the point, which I had missed completely, which was that the importing nations (us Americans, for example) would experience higher and continually rising prices as the American dollar weakened against the foreign currency. They write "As Andrew Drummond says in The Times, 'successful exporting companies were already starting to lay off workers as prices exceeded what Western buyers were willing to pay. Even the country's rice market was in danger.'" -- Being the end of the calendar year, Bill M, who bills himself as The Mellowest Guy in Economics, says " I suggest you award first prize in the Moggie Competition (Mogambo Guru Great Idiocy in Economics) to the Bank of Japan for its outstanding effort in debasing not only the yen, but the fiat currencies of all countries with electronic means of communication with Tokyo." An excellent suggestion, Mr. Bill! My congratulations to the winners, and I proudly present it to them on behalf of all of us proletariat trash out here in the real world who will be ground up in the machinery of the government/central bank linkage, lubricating it with our blood, paying the agonizing inflationary price for such stupid monetary arrogance in order to pay for stupid collectivist extravagance! Of course, the government drinking our blood brings us naturally to gold, and David F. particularly liked the essay by Gene Arensberg at ResourceInvestor.com, as he thought that it summed it up the bullish case for gold particularly well. I agree. It reads "A secular bullish perfect storm trend for precious metals continues. Rapidly escalating global investor demand, easier participation by investors via ETFs, conversion of Middle East petroleum dollars to gold, rising new demand from Asia, possible central bank buying partially offsetting central bank selling, conversion from dollars to gold by large U.S. dollar denominated foreign exchange reserves, declining gold production, increased political and NGO interference to bring new sources on line, rapidly escalating costs to produce, delays and shortages of equipment and manpower, previous two-decade bear-market-induced shortage of intellectual capital for miners, safe-haven buying to hedge strong, reckless, competitive dilution of under-backed fiat paper currencies, probably continued de-hedging and continued troubling global political and religious tensions are just some of the factors contributing to the long-term bullish winds now blowing." He says this means that "In real terms, gold remains undervalued versus nearly all other commodities and strongly undervalued as measured by the world's fiat paper promises." In short, one more reason to buy gold. Now. Today. And, I hasten to add lest I be remiss, even more so for silver. -- If you want to see British banking desperation leading to sheer banking stupidity, then you need go no further than FT.com, where you learn "Abbey, the UK's second-largest home loans provider, has raised the standard amount it will lend homebuyers to five times either their single or joint salaries, eclipsing the traditional borrowing levels of around three and a half times salary. In some cases Abbey will now lend couples five times each of their salaries without requiring confirmation of earnings." Hahaha! Madness! The article goes on to say "Income multiples of four times or more are now becoming commonplace" and last week Bank of Ireland Mortgages and Bristol and West decided "to increase standard salary multiples from four to 4.5 times. Mortgage brokers say other lenders are set to follow suit for fear of being left behind." As absolutely stupefying as that is, it gets more bizarre when it goes on to say "in some exceptional cases", this "equates to income multiples of up to seven times salary multiples." Banks are loaning up to seven times income, so that people can buy a grossly-overvalued asset! Seven times! Insane! -- Paul Campos, writing at Rocky MountainNews.com, in an elegant essay, offers the dispiriting observation that "Of all the tragic aspects of this national disaster this is worst: The people who have been catastrophically wrong about everything are still in charge." He's right. One more reason why we're freaking doomed! -- If you need one more reason to buy silver now, and lots of it, on top of the dozens and dozens of other perfectly good reasons to buy silver now, Richard J. Greene, of Thunder Capital Management, writes "there have been more recent patents issued involving silver uses than all other metals combined." -- I seldom get the chance to report anecdotal news since I never get to meet other people, since nobody likes me or will even talk to me, except in grudging response to direct cross-examination by my lawyer, but I have been getting a lot more emails lately about how getting money out of the banks is getting to be a problem. For example, Roger S. Renken of the Northwest Territorial Mint writes of "An interesting new development. I have had 2 separate clients be limited in the amount of money they are allowed to wire transfer to $100k in one day." From other people I hear that the same problem is appearing for people wanting a lot less than $100,000, too! Naturally, people nervously seek me out, asking me what it all means, and of course I haven't the faintest idea because I am stupid, except that (like Dr. Egon Spengler explains in the movie "Ghost Busters" about what will happen if they turned off the electrical power to the containment device storing all those ghosts) I know, deadpan and looking right into your soul, "It would be bad." But nobody wants to see my exquisite Harold Ramis impersonation, which even I admit is pretty bad. And so in desperation, I turn to Mr. Renken with a pleading, "Save me!" look in my eyes, and, to my great relief, he at least has a clue what it might mean! "When I look at the derivative exposure of Chase," he says, "I sense an unsettling connection." He thinks it is all "scary." I think it is all "scary." We both think it is all "scary." Ugh. ****Mogambo sez: Since it is customary at the end of the calendar year to toot one's investing horn, The Mogambo Portfolio (TMP) is up there with big dogs, sporting a 24% gain, as being almost 100% in precious metals, precious metals mining stocks, precious metals-oriented mutual funds, precious metals ETFs, and a small percent in oil, paid off like freaking gangbusters again this year like it has for the last five years in a row. Trained professionals and ordinary people, who know me for the complete idiot that I am, obviously realize that I just got lucky again. But other people, who do not know of my pathetic intellectual incapacity, are sometimes fatally curious to hear a Little Mogambo Investment Tip (LMIT) after learning of such seemingly stellar returns. To those naïve, foolishly trusting people, The Mogambo smiles beatifically, and although the Mighty Mogambo Heart (MMH) is breaking at such pathetic financial desperation that you would feel a need to hear the stupid opinions of a certified bonehead like me, I say "I expect 2007 to show similarly hefty results, only more so." I pause for dramatic effect, and then add "Maybe a LOT more so! And wouldn't that be nice for the people smart enough to have bought gold and silver at these low levels?" They nod. I nod. They smile. I smile. They go home to buy gold and silver as a way of making a wise investment. I go to a cheap restaurant to buy a pizza as a way of having dinner while making a pig of myself. Thus, everyone's happy, and we all live happily-ever-after because we all got rich, rich, rich, and had a wonderful, wonderful, wonderful time from then on. Anyway, that's the way I got it figured, starting in 2007. Since you asked. Talk Back Richard Daughty, the angriest guy in economics The Mogambo Guru Copyright © 2005-2007 Richard Daughty \ \ \ Wednesday, January 03, 2007 Trading Resolutions: Part I "See, when you drive home today, you've got a big windshield on the front of your car. And you've got a little bitty rearview mirror. And the reason the windshield is so large and the rearview mirror is so small is because what's happened in your past is not near as important as what's in your future. Where you're going is much more important than where you've been." - Joel Olsteen I always have been a sucker for setting new year resolutions. After all, I'm very much a goal oriented person as I've explained in previous years. Beyond my trading and investing goals, I decided to take a different approach this year. In 2007, my resolution is simply "to do 5 things this year that I've never done and that I think I would really enjoy doing." While not commonly advocated, I've learned that among your own goals in both life and career, it is also important to set "fun" goals for yourself to make sure you don't forget the important things in life and to stay motivated. Too many times we set goals that only require sacrifice and hard-work, and while both of those things are required ingredients for success, living a successful life is not all work and no play. If success requires only that, then what's the point? As the saying goes, you'll never regret not having worked more on your death bed. As such, as I looked back over 2006 in the past couple of weeks, I became disappointed in myself that I didn't take advantage of some "fun" opportunities. So, my personal resolution is to make sure that doesn't happen in 2007. In setting your own goals this year, make sure to add some "fun" stuff in your life. Over the break, I did take time to review the answers I received as part of the 2007 membership survey. In that survey, I asked members to answer the following question: "If you had to make a New Year's resolution for yourself in trading or investing, what would it be?" Here are some of the trading resolutions I received: Trade less. Exercise more patience. Be patient, buy right and buy big. Be sure, be not afraid. Don't sell out on fear at the bottom of corrections. Only make pre-planned trades; do not chase the "stock of the day" Learn everything I can from others who know far more than me. Try to apply what I have learned in a more consistent way. With more discipline. Investigate before you invest. Don't fight the tape. I am paid to wait for the best opportunities. Work harder, trade less, research more, be patient. Keep your feet on the ground and expections reasonable. Sell when all the news too good and buy when all the news too bad. Stop listening to experts. The market will always be there and so will good opportunities. Plan the trade and stick to the trading plan. Keep educating yourself. It never stops. You do not have to be "in" the market all of the time. Do more homework. Create lists of stocks that will perform well when any type of news is released and constantly evaluate those lists. Devote more time. To learn more from those that succeed. Pick my trades more carefully. Don't let one or two day counter-trends influence decisions that were made with a medium term goal. Maintain focus and a positive mindset. Let my trades go at the end of the day and enjoy life to its fullest. Do not trade on emotion. Be willing to be in cash. Cut losses more quickly. Observe my thinking/mind during the trading day. Make a plan and follow the plan. Otherwise, do nothing. Stick with one approach. Trade more to my strengths. Remember "it's money and not my ego." Take small profits if nervous. Always have a pre-planned exit point on bad trades. Step back from the noise and spot the longer term trends. Those are some pretty good resolutions. I'll have more for you tomorrow and Friday. Posted by Kirk \ \ \ http://www.financialsense.com/fsu/editorials/rinehart/2007/0103.html \ \ \ A 2007 OUTLOOK: A YEAR OF INVESTING DANGEROUSLY by Paul Petillo Managing Editor, BlueCollarDollar.com January 3, 2007 I am fully aware that the calendar is only a benchmark of time, some way to delineate one event from another. That said, should 2007 really be much different than 2006? We were witness to a year of record setting gains on the Dow, an equity indicator that is at best a billboard of enthusiastic deception. Surely the only way someone might be negative towards such unbridled optimism would be the result of sitting on the sidelines as the index gained over 1500 points. The Dow Jones Industrial Average gained 16.3% for the year. This was an impressive feat. With 912 trading sessions without a 2% decline (read: without a healthy correction), even the most optimistic investors should be concerned. International stocks surged 23% while the S&P 500 racked up an impressive 14.5% gain for the year. Yet, the most telling sign was in the surge of value related stocks (18%) as compared to the gains posted by the growth sector (8.3%). Growth, the barometer of company strength and profits did not materialize for investors in 2006 and that particular sector seems poised to do much of the same this year. An underlying theme for much of the optimism over the past year was based on the perceived value of the stock. Stock buybacks reached record levels in 2006 topping $435 billion. (This number topped capital spending during the same period.) Inexpensively borrowed money used to purchase shares on the open market only served to increases the price side of the price to earnings ratio, the go-to piece of data used by the majority of investors. What worked on ’06 to generate investor interest might meet with increased skepticism and possibly even some profit taking in ’07. Risk in 2006 was not much of a consideration. That allowed herd mentality to rule the trading desks around the world. Companies posted another year of profits that were cloaked in tax breaks, merger and acquisition activity, and the calm demeanor of the Federal Reserve gave investors a false sense of hope. We believed and we pushed stock prices ever higher. Which would make optimism our first concern heading in the New Year. As students of the market already know, optimism is freedom from any anxiety related to risk. Turning away from a banner year in gains is no easy feat. Conflicting economic data throughout the year was easily reasoned away or revisited/revised/recalculated when the following month’s report was issued. There was no validity in short-term information yet investors read the tealeaves and kept pouring more money. That sort of ‘bottom-of-the-cup’ prognostication came in a year free of major weather complications, a predictable central bank whose concern over inflation masked a White House based agenda of a fully deregulated business environment and a weak dollar. Weather-free investing still allowed oil to reach beyond sixty dollars a barrel. By the fall, those high prices were a non-event. Prices that were passed through to other businesses and eventually consumers went up so gradually that even the inflation hawks missed it. (You can factor those oil prices into almost every corner of the economy. Hiding it takes skill. Take an ounce from a box of cereal and you still have a box of cereal with the same price point – and no inflation.) We can shrug our collective shoulders at the tension in the Middle East and downplay the risk of a nuclear Iran, further deterioration in Iraq, and the maniac in North Korea but they cannot be ignored in 2007. Oil shock could come as a result of any of these country’s ambitions and the world’s reaction. We can ignore the bond yields and the fact that hedge funds continue to push the envelope of what would be considered sound investing. Eventually, fear based investing will filter over to the equity investor. Only in the stock market, where fear seems to manifest itself as a missed opportunity, will buyers pay continually higher prices for the belief that they will be able to gain their fair share of the run-up. Optimists will be convinced that inflation will have no effect in 2007, businesses will find new ways to create profits, and the growing inequality of wages coupled rising insurance costs and falling residential equity will stay marginal. Investors in commodities should be wary of several global developments in the coming year. The resource grab will continue and as a result prices will go up predictably and down. Any number of reasons will come into play in the coming year demanding steely nerves but several stand out. Should commodities come under pressure from better environmental controls or as Niall Ferguson, history professor at Harvard University calls it, resource nationalism, should the US economy slow, should investment shift from stockpiling to investment growth in politically suspect parts of the world increase, should countries such as China create resource colonialism among third world suppliers, investors can count on another year of volatility. Yet Mr. Ferguson believes that history will eventually drive prices down shifting the power from the suppliers (and countries vying for alliances) to the end customers, a global economy in need of fair prices. It remains to be seen how investors react to closer scrutiny of the markets. The record-breaking run-up was not much to brag about when you begin to separate the winners from the losers. The DJIA rose to those new levels with less than eight members of the index actually ending the year with new highs. In 2007, you can expect the field to narrow further in the coming year. The economy will slow and the Fed will let rates drop. Enthusiasm will wane and a mild recession will take hold. There will be business-averse repercussions from the Democratic Congress that favor labor. Henry Paulson, Treasury Secretary will continue his quest to drop regulatory hurdles for foreign investment (a concession the House Finance Committee might find itself willing to grant) and Christopher Cox, chairman of the S.E.C. does his part by dismantling Sarbanes-Oxley. The consumer will struggle (more on that segment of the economy later) in 2007, a belated reaction to the events of the previous year. If you can honestly say to yourself that your portfolio out performed the S&P 500, something investors are not likely to be when called upon for frank self-examination, then you were very lucky indeed. If you can honestly say the same thing at the end of 2007, you will be doubly fortunate. © 2007 Paul Petillo Editorial Archive CONTACT INFORMATION Paul Petillo Blue Collar Dollar.com Portland, OR USA (501) 313-5252 \ \ \
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Duncan	03-Jan-07, 08:39 PM (GMT)
9. "this borders on lunacy"
Wednesday, January 03, 2007 A Bubble In Risk Bennet Sedacca, President of Atlantic Advisors LLC just sent out the following article that he graciously agreed to share. It was also posted earlier today on Minyanville. From Bennet: I just got a good chuckle reading a Bloomberg article. Here are a couple of excerpts. Ukraine's largest poultry farmer, Myronivsky Hliboproduct, sold bonds for the first time, spurred by investor demand for higher yields. The company...raised $250 million to expand into beef, goose liver...at 10.25%...Moody's rates the securities B2. European bearing Corp in Moscow sold $150 million of 9.75% notes, its first offering to international bondholders. Treofan Holdings GmbH, a Raunheim, Germany-based maker of wrapping for cigarette packs sold 170 million euros of 11% bonds...boosting its ratio to more than 7 times earnings. The company probably will spend more than it earns in 2007, S & P says. The bonds have Caa ratings from Moody's and CCC+ from S & P and are trading at 101.4 cents on the euro. Let me state here and now that this borders on lunacy, and along with the parabolic rise in emerging/developing markets, feels like too much money is chasing too few assets. After all, between M3 and foreign money, that’s $2 trillion a year in demand. Prudence is again being penalized. Oh by the way, according to Merrill Lynch, European junk bonds have narrowed by 14 HUNDRED BASIS POINTS to 2.35 above Treasuries. Pardon moi???? You want me to buy what? Is this a joke or something? It must be April’s Fools day… According to Bloomberg, “nowhere have yields fallen more than for securities with the lowest credit ratings”. Bonds ranked Caa by Moody's and CCC by S&P (the category above default), pay 4.6 percentage points more than government securities, DOWN FROM 42 PERCENTAGE POINTS 5 YEARS AGO, Merrill says.... On top of this, REIT's now trade 250 basis points below historical yields relative to 10 year Treasuries. The same goes for Utilities which are now yield an eye popping 3.2%, (please note sarcasm) and at 19 x earnings. So much liquidity is being created that we are seeing a bubble develop in risk generally. I guess I'll just have to miss this party. When it ends the hangover will be long.... Bennet Sedacca Thanks Bennet, and not a day goes by that I wonder when it will end. There are some signs that psychology is changing in many places (more on that later tonight) but it still has not hit either the junk bond market or the stock market .... yet. Pension plans in particular seem more than willing to assume any risk. Smack in the face Lennar Posting Quarterly Loss After Land Writedowns the California Public Employees' Retirement System ("CalPERS") picked up land that Lennar was dumping. Let's review what Lennar is saying: Jan. 2 (Bloomberg) -- Lennar Corp., the fourth-largest U.S. homebuilder, had its first quarterly loss in at least a decade after it wrote down property investments and relinquished part of its stake in a company that controls 15,000 acres in southern California. The loss in the fiscal fourth quarter was 88 cents to $1.28 a share after a pretax charge of as much as $500 million, Miami-based Lennar said today in a statement. Quarterly profit was $3.54 a share a year earlier. "Market conditions continued to weaken during the fourth quarter and we have not yet seen tangible evidence of a market recovery," Chief Executive Officer Stuart Miller said in the statement. Is land the deal of a lifetime now or was it the deal of a lifetime 10 years ago? Consider this press release issued by Lennar: Lennar and LNR Expand Their Strategic LandSource Partnership to Include MacFarlane Partners' Venture and CalPERS. MIAMI, Jan. 2 /PRNewswire-FirstCall/ -- Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest homebuilders, and LNR Property Corporation ("LNR"), one of the nation's leading real estate, finance, management and development companies, announced today that they have reached an agreement to admit a new partner into their existing strategic joint venture, LandSource Communities Development LLC ("LandSource"). The new partner is MW Housing Partners, which is co-managed by MacFarlane Partners and includes the California Public Employees' Retirement System ("CalPERS"). The agreement also provides for a new non-recourse debt facility. In exchange for a 62% interest in LandSource, the MW Housing venture will contribute cash and property with a combined value of approximately $900 million. The property, which is part of an existing land bank relationship between MW Housing Partners and Lennar, is being contributed based on today's fair market value. Lennar will continue to have options to purchase those homesites at the market price at the time of the exercise. "We are excited to be investing in such prime property in Los Angeles, a market that we have favored for its long-term growth prospects," said Victor B. MacFarlane, founder and managing principal of MacFarlane Partners. "This is a once-in-a-lifetime opportunity that few pension managers and investors have the resources and the capabilities to participate in thanks in large part to the flexibility and vision of our long time partner, CalPERS." Exactly what sense does it make for pension plans to be picking up land being dumped by homebuilders right as one of the biggest bubbles ever is popping? CalPERS must be thinking land prices only go up over the long haul. Someone must have forgotten to tell Japan that since Japanese land prices fell for 18 consecutive years. The hangover from this party will indeed be long. Mike Shedlock / Mish http://globaleconomicanalysis.blogspot.com/ \ \ \ m Made $440 minus $60 comis never started till 4pm The best time is 2 to 5 pm \ \ \
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Duncan	04-Jan-07, 07:59 AM (GMT)
10. "The belief that nothing can shatter US consumer spending habits will be the next bubble to burst. Given that consumer spending is 75% of the economy, a massive reversal in consumer and lending psychology spells trouble for the economy regardless of what the Fed does. That reversal is at hand."
m I am going to try and trade pure price action So I cant read anything relating to markets Will do this for a week and see how I get on So if you don’t get anything from me don’t worry Will tell you how I get on each night \ \ \ http://www.signalwatch.com/markets/markets-dow.asp Updated Wednesday, 1/3 for Thursday's market. Key DOW Levels for 1/4 UP Above 12,600 DN Below 12,400 Wild Day.. Dow opens 2007 in wild fashion, but manages a positive finish. From prior commentary, "...The Dow ended the day on a highly volatile note, as the index continues to be repelled by the key 12,500 level. Keep a close eye on 12,450, as this level could give us an early indication of key weakness Wednesday..." The Dow opened the session with a huge bounce off the 12,450 level and proceeded to rally to 12,580, gaining 130 points at one point early in the morning, but was not able to hold on the day's gains, as seen in the 15 and 60 Minute Charts. The index then dropped sharply from the day's highs to the tune of 175 points before closing the day with a 70 point rally - quite a day indeed. The Dow ended the day with a mild 11 point gain, but is clearly looking to move. The index continues to hold above the major lower trend line from the Daily Chart, but a break of this line in the 12,350 to 12,400 zone could spark the next big long term directional move. Watch 12,400 for early weakness tomorrow. Otherwise, we could see the index continue to build out between 12,350 and 12,600 before another big breakout move is seen. Short Term Dow The Dow closed the day beneath the key 12,500 fulcrum, which we will continue to watch for early directional movement. Medium Term Dow In the medium term, we entered the Dow Long today at 12,553, but stopped out at the entry due to the Breakeven Rule. We later entered Shorts at 12,425, but stopped out with a 20 point loss. We are out of the market and will watch 12,600 up, and 12,400 down; using 20 point stops. NASDAQ & S&P The NASDAQ and S&P each sold off heavily from the day's highs, but received nice bounces late in the day. Each index has really stepped it up in the volatility department, which could spark a big, trending move ahead. Summary The Dow closed the day with a sharp v-bottom reversal from the day's lows to end a highly volatile session with a mild-looking 11 point gain. The index continues to hold above major support, which lies in the 12,350 to 12,400 zone. Continue to watch this zone for big directional movement. Thanks for listening, and Good luck in your trading! Ed Downs \ \ \ boe You guys all do a fantastic job of due diligence. Far be it for me to belittle any of the work done here but perhaps you guys are missing the largest data point of them all. http://ori.msnbc.msn.com/id/16442877 Now I wouldn't advise shorting based on Pat Robertson's dilusions but if anyone knows how to short The 700 Club, I'm all ears \ \ \ America's Red Ink. December 24, 2006 by DAVID M. WALKER Comptroller General of the United States. http://tinyurl.com/yjqm7p The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity's total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years. If this announcement related to a private company, the news would have been on the front page of major newspapers. Unfortunately, such was not the case -- even though the entity is the U.S. government. To put the figures in perspective, $50 trillion is $440,000 per American household and is more than nine times as much as the median household income. The only way elected officials will be able to make the tough choices necessary to put our nation on a more prudent and sustainable long-term fiscal path is if opinion leaders state the facts and speak the truth to the American people. The Government Accountability Office is working with the Concord Coalition, the Brookings Institution, the Heritage Foundation and others to help educate the public about the facts in a professional, nonpartisan way. We hope the media and other opinion leaders do their part to save the future for our children and grandchildren. DAVID M. WALKER Comptroller General of the United States Government Accountability Office Washington U.S.A. \ \ \ http://globaleconomicanalysis.blogspot.com/2007/01/significant-shifts-in-psychology.html \ \ \
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