Saturday, February 26, 2011


The recent events in Wisconsin brought to mind the warnings of John Perkins in his recent book, "Hoodwinked". The second of his stories of a career as an "Economic Hitman" in the employ of Chas. Main. Mr. Perkins was employed  as an economist to steer third world countries along the path of "free market capitalism". A boon to the capitalists at the expense of much of the working poor of those countries.
Search Books for hoodwinked

Naomi Klein, in her book, "The Shock Doctrine" also details this process of bringing Milton Freidman's free market thinking to third world countries. She and Perkins warn of these policies coming "to a third world country near you".

It looks like we, the United States of America, are now the third world country.

I highly recommend both of these authors books for a big picture look at free market capitalism and fascism in the modern world.
Below are some clippings of news items regarding the recent events in Wisconsin. The recent events in Wisconsin are eerily similar to the corporate meddling in democratic affairs worldwide in recent decades.

Facts about union representation and living standards:

 "Similarly, studies show union successes enhance the lives of all workers in a state. In anti-union states, the average worker earns $5,333 less a year, the proportion of people without health insurance is 21 percent higher and the rate of workplace death is 51 percent higher. In addition, there's evidence that union workers improve quality. Currently, after receiving an education from union teachers, Wisconsin youngsters collectively score second highest in the nation on the ACT/SAT college admission tests. By contrast, the five states barring teacher unions rank at the bottom of the pack: South Carolina dead last at 50th; North Carolina, second last at 49th; Georgia third from last at 47th; Texas fourth from last at 47th, and Virginia ever so slightly better at 44th."

From a newspaper article on Gov. Walker:

Walker did unveil one initiative towards growing those 250,000 promised jobs: the reconstruction of the Zoo Interchange. He said the Department of Transportation has developed a plan that will start reconstruction of the roadway earlier than scheduled and cost $600 million less than originally projected."

 Gov. Walker will take federal aid however??
And then sell revenue raising state assets to private concerns? Like the Chicago parking meters?

"One part of the budget repair bill that's raising eyebrows is a section that relates to the sale of Wisconsin power plants. The small section allows for no bid contracts, and no approval from the Public Service Commission. The paragraph can be found on page 24 of the 144 budget repair bill.
Many believe this paragraph long provision is a nod to the Koch brothers who are in the energy business. Their political action committee was the third highest contributor to Walker's campaign for the Governor.
Koch companies issued a statement saying, "We have no interest in purchasing any of the state-owned power plant in Wisconsin, and any allegations to the contrary are completely false.""

And of course this is how these public minded politicians got elected:
Charles and David Koch are conservative titans of industry who have infamously used their vast wealth to undermine President Obama and fight legislation they detest, such as the cap-and-trade climate bill, the health care reform act, and the economic stimulus package. For years, the billionaires have made extensive political donations to Republican candidates across the country and have provided millions of dollars to astroturf right-wing organizations. Koch Industries' political action committee has doled out more than $2.6 million to candidates. And one prominent beneficiary of the Koch brothers' largess is Scott Walker.

Tuesday, February 22, 2011

Failed breakouts spell trouble for the broad market

A couple of updates on charts that I recently suggested may be good trading opportunities. Rio Tinto broke up and out of a base and now has turned back into the base. This would be time to sell Rio for a small loss. Same for TBT, the interest rate fund. Interest rates look set to dip in a flight to quality in US treasuries.(Quality??)
When break out trades start to fail it is one sign of a change in sentiment in the broader markets, especially if the fails are in a wide array of sectors. Here are the RIO and TBT charts updated.

Silver is up nicely though

More on the dollar decline

While looking at Bubblevision today (CNBC), a large full screen advertisement played across the screen. Despite the sensational name of the article/website I believe this is a must see for laypeople to learn what THE MAJOR RISK is to the U.S. economy today. This gentleman says what I have been saying for sometime....
See it here:

However, this Mr. Stansberry has a checkered past. I would be wary of buying any of what he is selling, but thought the tutorial on the U.S. dollar was spot on.

Sunday, February 20, 2011

energy decline equals economic decline

Some time ago a young relative who was an avid supporter of Ron Paul remarked to me that he "didn't like economics". My reply to him was the "economics is everything".
I do believe that all social change in complex society is a function of the economic currents changing.
People often do not recognize the larger forces that are causing the change, but they realize something is happening, or they just feel "things have to change".
The change that is happening in the world lately: Currency devaluations, resource inflation, food prices, interest rate manipulations, and riots.

Looked at from an energy perspective, the world money system has been functioning for over 100 years with the cheap oil input to economies. What we are seeing now is the result of energy that is getting relatively more expensive. A world predicated on limitless cheap energy expects continued "growth". This growth has been predicated on borrowing. Debt. Debt is what creates money/currency. Growth is what allows the creation of debt.  Oil is what has allowed that growth.
Most of the people in the world do not understand economics. They just want things to be better. Or in the case of the developed world, they just want things the way they used to be. But the decreased availability of cheap energy is changing the equation.
How does a world view that considers "growth" essential, change?

Economics is a social phenomena. Liberals, conservatives, bleeding hearts and gun nuts. Both sides are wrong in the sense that they are going to get deflation eventually. Neither side recognizes that fact. The "liberals" want to continue the debt creation and "growth" in the face of declining resources. The "conservatives" want to cut spending now, though I don't think they realize the political backlash that will come when the economy actually slows down.The conservative side says if we cut our debt, private enterprise will grow us out of our troubles. However, growth is, and has been the result of cheap oil energy.

We all may want growth, but the earth doesn't care what we want. What we have going on today in the world is a case of unrealistic expectations running smack up against physics. Oil is getting increasingly harder to find and is getting increasingly more expensive to get to market. Oil makes the modern economy function. Not money. Oil.
Poor people in the rest of the world just look on the internet and the television and want what we've got. To avoid continued unrest, either they must change their expectations, or the consuming western world must modify our expectations. It seems the moral thing to do would be for us to quit wasting and using oil for nonessential uses. And we WILL reduce our usage, one way or another. It would be nice if we could all wrap our minds around this problem, and work to solve it from a realistic perspective in an "adult" manner.

Saturday, February 19, 2011

How far and long for silver?

Silver broke out to new highs this last week on increasing volume as indicated on the SLV silver fund. The only time in history that silver the metal was priced higher was back in the '80's when the Hunt brothers schemed to corner the market. Silver seems to be powering higher on the weakness of the US dollar. How long will the US dollar continue to slide and what will stop the slide?
Look at this article from Bloomberg for some background.

And my favorite chart of the US dollar:
I think the US dollar will soon go into freefall. There is no support from a price perspective below the lows on this chart. When will this happen, I don't know. It may be starting to happen now. There is talk of the "insatiable" demand from India and China for precious metals. China has allowed the establishment of a saving mechanism in gold that allows people to buy gold on the installment plan. Both of these countries, and much of the emerging market world has a long tradition of viewing gold and silver as a savings vehicle.

The US persists in low interest rates and this country is widely viewed around the world as irresponsible. The US govt. debt continues to skyrocket. There was a time when people all around the world held US dollars as their savings because the US dollar was more stable than the currency of their own country. There are more US $100 bills outside of this country than inside this country. I believe that is changing. The perception of our currency losing value is now becoming widespread and there is no reason to hold savings in the US dollar anymore for everyday savings.
Therefore I do think that the Silver and gold  price will continue to go higher as the world increasingly trades in their dollars for precious metals. And it will most likely continue until the US govt. and the US Federal Reserve is FORCED to defend the currency of this country by raising interest rates. They don't show much of a bent toward that now.

And a few words on the stock markets. At some point these sentiments will start to be felt in stocks. At the present time stocks are going higher on the prospects of inflation in corporate earnings. But the stock indexes are forward looking, and as the US Dollar slides it will increasingly be apparent that we will have to raise interest rates in this country. Higher interest on all of the debt we have taken on has the potential to be catastrophic.

Friday, February 18, 2011

Fleeing US Dollars?

Are the precious metals markets going up so strongly because of the coming collapse in the US Dollar?
Maybe too strong of words. But maybe not.

Thursday, February 17, 2011

Iran, oil, gold, silver, the USD...

Sometimes as I sit and watch the markets, and filter them through the news that is flowing into my ears I get these suspicions that maybe there are things happening in the markets that the news providers don't know yet. Actually I know that this happens all the time in individual stories, and sometimes in the big macro stories.
So oil is trying to act strong today, gold is up again, silver is up strongly, the dollar is down, and the stock market continues up, but on very slim volume.
There is rioting all over the middle-east as the Egypt unrest spreads. The U.S. is being very circumspect, not wanting to get on the wrong side of history again.(A move I applaud.) And now there is news that Iran wants to send two warships through the Suez canal. Something that they haven't done in a long time, I understand. Why would they be doing this now. Is the timing deliberate. I think it probably is. I think Iran would love to provoke a confrontation with the U.S. and Israel that would turn all of the anger in the middle-east toward the U.S. and Israel. And if they started something, what could we do? Of course we would respond in force to any aggression toward Israel, but the world knows the state of our finances. Another war would be another additional deficit pressure. And I don't think we would find the world willing to finance another U.S. war. Usually the U.S. dollar gets strong during times of stress, but there will come the day when safe haven is otherwhere.
And where is OBL? Would he ally with the Iranians?
I just get the feeling that something is up.......I hope not.

Wednesday, February 16, 2011

Lazlo Birinyi's prediction for the S & P.

The question for viewers on CNBC this morning was, "Where do you stand on Lazlo Birinyi's call?". Mr. Birinyi, who was the head of equity research at the former Salomon Bros., has said that he thinks the S &P could reach 2800 by 2013. That would be about double of where it is now. Given that many of the "traders" have been warning of a market top lately due to the declining volume, and the general bullishness, (both being "contrarian" indicators) his forcast will tend to be regarded by the traders as another bearish contrarian indicator.
I think the stock market appreciation can be thought of as inflation. As the dollar gets weaker, the stock market goes higher. The same as the precious metals and oil and commodities in general.
A look at the USDollar, as tracked by the UUP fund shows the large possibility of a break of long term support. A 20% down move over two years would certainly not be unusual. If you look at the same chart, you see the US Dollar has lost about 20% over the last two years and the S&P has doubled. I don't see why the S&P couldn't double again if the dollar goes down. It would have to be an orderly selloff in the dollar. A panicky move would probably not be good for stocks. Kind of like boiling a frog. Gotta do it slow, or the little sucker wants to jump out of the kettle!

I wouldn't use this to be blindly optimistic. Nothing in the markets is a sure thing, and nothing travels in a straight line. Risk control is always tops in my trading and investing strategy.


Monday, February 14, 2011

EMS bought privately

In addition to the reasons stated in this article regarding public health insurance making it more profitable for this company, I wonder how their private ambulance and fire services will do with the increased local and state budget woes. Will cities and counties contract for more private ambulance and fire coverage?? And let their highly paid and pensioned public employees go?

This from Bloomberg:
Clayton, Dubilier & Rice CEO Donald Gogel
Clayton, Dubilier & Rice Chief Executive Officer Donald Gogel. Photographer: Andrew Harrer/Bloomberg
Emergency Medical Services Corp. shares fell the most in almost two years after the company agreed to be bought by private-equity firm Clayton, Dubilier & Rice LLC for $64 a share, less than some investors expected.
EMS shares declined $7.74, or 11 percent, to $62.92 at 4:12 p.m. in New York Stock Exchange composite trading, for the biggest drop since Feb. 27, 2009. Before today, the stock had risen 31 percent since Dec. 13, the day before the company said it was considering strategic alternatives.
“I had expected the range to be between $70 and $75,” said Jeff Hoernemann, an analyst with Feltl & Co. in Minneapolis, in an e-mail. “The final price is certainly a disappointment to some shareholders.”
Stockholders of EMS, the largest U.S. operator of ambulance services and provider of emergency-room doctors, will receive $64 a share in cash, the companies said in a statement today. That’s 9.4 percent below the closing price of $70.66 on Feb. 11 on the New York Stock Exchange, and 19 percent above the closing price Dec. 13, the day before the Greenwood Village, Colorado- based company said it was looking at strategic alternatives.
Recent acquisitions by EMS may have affected the price paid for each share in today’s deal, said Hoernemann. EMS announced purchases of Milford Anesthesia on Dec. 2; Doctor’s Ambulance Service on Dec. 6; Blythe Ambulance services on Jan. 5; and North Pinellas Anesthesia Associates and Northwood Anesthesia Associates, a company based in Tampa, Florida, on Jan. 11.

Value ‘Above $70’

“Most analysts and investors alike would agree that based on the pure operational potential of the company in 2011 you could easily value it above $70,” Dawn Brock, an analyst with Kaufman Bros. in New York, said yesterday in an e-mail.
Directors had pushed for higher bids from Clayton Dubilier and runner-up Bain Capital LLC. Goldman Sachs Group Inc. and Bank of America Corp. advised EMS. Barclays Capital, Deutsche Bank Securities Inc., Morgan Stanley & Co., RBC Capital Markets and UBS Investment Bank acted as financial advisers to Clayton Dubilier.
The deal’s $3.2 billion total includes net debt as well as transaction costs of about $300 million, EMS said in a statement today. The company had $934.3 million in liabilities as of Sept. 30, according to Bloomberg data.
Onex Corp., whose group had 31 percent interest in EMS, will sell their 13.7 million EMS shares for $878 million as part of the deal, the Toronto-based company said in a separate statement.
Thomas Franco, a spokesman for New York-based Clayton Dubilier, referred comment to EMS. EMS spokeswoman Deborah Hileman didn’t return calls requesting comment.

Health-Care Overhaul

The U.S. health-care overhaul passed last year, designed to give millions of uninsured Americans taxpayer-subsidized medical coverage, made EMS an attractive takeout target, Arthur Henderson, an analyst with Jefferies & Co. in Nashville, Tennessee, said yesterday in a telephone interview. The company’s ambulance and emergency staffing and management units may both profit from the expanded coverage, he said.
“There’s money to be made in making all of this more efficient and that would be appealing to any private equity buyer,” he said. “I expect to see a lot more consolidation in health services, nursing homes, and long-term care. The number of competitors is going to get smaller and the ones that survive are going to get bigger.”
Private-equity firms had announced 397 pending or completed acquisitions of U.S. health products and services companies in the past five years, with an average size of $449.4 million and a typical premium of 30 percent, according to data compiled by Bloomberg as of Feb. 10. The biggest was the 2006 leveraged buyout of hospital operator HCA Inc. for about $33 billion, led by firms including New York-based KKR & Co. and Bain, which is based in Boston.

Health Deals

Private-equity firms, which raised $50 billion to $80 billion for health industry deals from 2006 to 2010, “have very deep pockets right now and will be looking to do more deals in this space,” Brock said in a telephone interview yesterday.
“Unless you believe there will be a wholesale repeal of health reform, which I don’t think anybody does, there will be some scenario where there are more covered bodies and more paying customers than you have right now,” Brock said.
EMS’s ambulance unit had 2009 revenue of $1.34 billion and its emergency physician business reported 2009 sales of $1.23 billion. EMS may have generated 2010 revenue of $2.86 billion, according to the average estimate of 10 analysts surveyed by Bloomberg. The company today said it planned to file 2010 results later this month.

Sunday, February 13, 2011

Wednesday, February 9, 2011

Is Bernanke a leader?

Here is the text of an e-mail I sent to those Republican shills at CNBC:

What Bernanke is trying to do is to break the currency pegs that the mercantilists around the world have used to keep their products artificially low. We were snookered by these policies for many years. It kept inflation low and we kept interest rates low and we went deep into debt to buy their stuff. Now Bernanke is trying to reverse this trend. They, the Asians in particular, are at risk of inflation if they keep their currencies pegged to the USD as Bernank takes the Dollar down. We need to move jobs back to this country. The devaluation of the dollar will make wages in this country cheaper. The devaluation of the USD will also take away some of the profit margin for those that import. I think this is where all the Republican angst comes from. Their financial supporters don't like the prospect of this new business paradigm. "Hire workers here? We can't do that!".
Bernanke is a leader. It has been so long since we've seen a leader that we don't recognize it, and feel compelled to attack him.
The US is in deep trouble, and it has everything to do with our balance of payments deficit. Importing inflation is the way to reverse that.

Couple Bernanke's policys with the prospect of RELATIVELY cheap energy, and we could import a lot of inflation without a big probem for years. These shale plays in Canada, N. Dak, and NY could be a boon. And as foreign enonomies slow down to avoid overheating, they will use less energy....

Tuesday, February 8, 2011

deja vu all over again

Haven't we seen this rodeo before? One week our illustrious Federal Reserve Bank Chairman talks his talk and gets the inflationistas all worked up, and the next week one of his regional chiefs talks tough about inflation. This week it is the Dallas Fed chairman telling the world that he will vote against any further Quantitative Easing. The markets didn't even hesitate.

The news is uniformly bad about housing. But some of the housing stocks are in solid uptrends. Not all, but a couple anyway. The housing stocks telegraphed the slump in housing when they topped back in July of '05, at least two years before the housing market tanked. The bottom for Lennar was in Nov. '08. The stock has been forming a large "head and shoulders" bottom, the inverse of the topping pattern years earlier. If LEN trades above about 22 it may be a good long term hold. Here is the chart.

Monday, February 7, 2011

A big picture thought.

I believe that oil is the determining factor in modern economies. With that in mind, it seems to me that in a world economy that is competetive for limited oil resources, one countries slowdown is anothers potential gain. China has become one of the U.S.'s main competitors for oil. China is trying to engineer a slowdown. It is hard for any government to "slow" a market based economy, due to the "hot money" that tends to go where the action is. If the hot money flees china, will it come here?
Oil price makes or breaks regional economies. The OPEC price hikes of the 1970's broke the U.S. The S&L crisis was was one result.
The subsequent decline in oil price through the 80's resulted in the oil money dependent USSR going broke.
The high price of oil in the 2007 resulted in the latest round of financial retrenchment.
Almost all countries have been debasing their currencies for the last several years. So the "effective" price of oil may be reset to a higher point. U.S. banks are fully capitalized, waiting for a pickup in the economy to lend. An easing of oil cost, or even holding steady for awhile may be the fuel for the fire here.
Even with long term interest rates moving up we may see the money break loose.(Bond funds in particular are losing money. It has to go somewhere.)
Many warn of the unempoyment picture as being a warning. Employment is a lagging indicator. Companys will tend to wait for their inventories to get low before hiring. Particularly after recent dangers.
I think that the workers who have dropped off the rolls of those looking for work may be related to the early baby boomers deciding to retire early. Many of them had huge gains in their real-estate over the past 30 years and I believe there are large numbers that have taken the opportunity to book their gains over the past few years, move to the more depressed areas of the country, and live off their gains. Many of those that lost their jobs the last couple of years probably collected unemployment insurance, but as it expires they simply stop "looking for work". And many may be content to be "under employed" forever.
The stock market may be due for a pullback, but so far the "bottom pickers" have stepped in to push it higher. The "tell" in markets is how well they handle bad news. ie, how well they bounce back after a selloff.
And as far as the argument that the volume is declining as the markets rise being a sign of weakness, I would propose that as buyers with the intent to hold come into the market, the fact of that holding will reduce volume. Less turnover.....


Thursday, February 3, 2011

Long bond rates up, bonds down??

As soon as our esteemed Fed Chairman released his comments this morning the bond market sank, and gold and silver rallied. It is probable that bonds will continue to sink over the next few weeks. Here are charts of the Lehman 20 yr. Inverse bond fund. (TBT) A daily chart, and then a weekly chart to give some perspective.

A break above 40 on the weekly and there is no resistance to about 45.
(old support becomes resistance) Lets see how it turns out.
As the TLT chart shows, a drop from here and next probable support at the 85 area. Below 80 is uncharted waters. It was the attempt to drop below 80 that started this whole mess in 08. High oil meant weak bonds, meant popped housing bubble and popped banks....

Wednesday, February 2, 2011

Weak economies?

Here is another good looking chart. From a longer hold perspective. A breakout to new highs would be a buy.

RIO will be a buy at $74, with a risk to about $68. A weekly chart is promising. How does a company that holds up this well portend a weak economy? At least, it signals strong silver prices......

Tuesday, February 1, 2011

Dollar crisis coming soon?

The USD is taking a hard dive toward long term support.
I don't see any support below this level. Unless the Bernank changes course.