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What Could Possibly Go Wrong Now?, Doug Wakefield, Aug 14, 2014

When you have the highest value in US publicly traded stock wealth (Wilshire 5,000)

attained on the same day the oldest fear indicator (VXO) hit its lowest fear/highest

complacency reading on record, every manager, trader, advisor, and investor, should be

EXPECTING change, instead of hoping for even more extreme behavior.

By the way, that date was July 3, 2014. 

Dow 17,000 is critical moving forward.

So as traders wait for guidance from the high speed computer games, pictures in "The

Gallery " continue to reveal that cheap credit and bureacratic planning has totally

disconnected financial markets from economic and business reality, thus producing

highly unsustainable conditions.

Amazon's Operating Profits and Net Income Have Declined for 5 Years

[Source -Zero Hedge,7/24]

Amazon Stock Moved up 285% between 2010 Low and 2014 High

[Source - BMI, 8/11]

Argentina Stock Market Goes Parbolic. Climbs 208% in Year Before Debt Default

[Source- BMI, 8/7]

Argentina Defaults on Its Debt...Again

[Source - Forbes, Aug 1]

Italy's GDP (Gross Domestic Product) Has Declined Steeply Since 2007

[Source - Zero Hedge, 8/7]

Dow Jones Italy Stock Index - 2 and 4 Year View, and 15 Year View

Italy to Include Cocaine And Prostitution Revenue In Its GDP

[Source - European CEO, 5/23/14]

High Yield Bond Funds Smashed With Record $7.1 Billion Outflows

[Source - Zero Hedge, 8/7]

High Yield Bond Issuance Hits Record in June, As Yields Reach New Lows,

[Source -Forbes, July 2]

S&P 500 Exchange Traded Fund Outflows Soar To Biggest Since 2008

[Source - Zero Hedge, 8/6]

Have you prepared your investment strategies for the next major shift? Bulls become

bears and bears become bulls. Click here to subscribe to The Investor’s Mind for the

next 6 months, where the study of computer & human herding is followed weekly

through the lens of world markets. Specific market commentary is provided as we

navigate the most intervened markets of our lives.

Hoping for no change in direction is not an option. What is artificially inflated, must

come down.

 

Even Central Bankers Are Now Warning Investors and Managers. Are We Listening?

July 14, 2014

The mesmerizing trance of Dow 17,000 holds millions in mental lockdown. Yet, even the

global and central banking community have started warning about excessive risk taking

in recent weeks.

Should one consider selling now, or continue placing faith in Draghi’s asset

backed  securities scheme scheduled to start in September?

 

BIS Chief Fears Fresh Lehman From Worldwide Debt Surge, UK Telegraph, July 13

"Credit spreads have fallen to wafer- thin levels. Companies are borrowing heavily to

buy back their own shares. The BIS said 40 % of syndicated loans are to sub-investment

grade borrowers, a higher ratio than in 2007, with fewer protection covenants for

creditors."

Yellen: Seeing Pockets of Increased Risk Taking, CNBC, July 2

Yellen: Fed Could Raise Rates to Pop Bubbles, USA Today, July 2

IMF Tells Britain to Act on Housing Bubble Risk, Reuters, June 6

World Bank Cuts Global Economic Forecast, The Guardian, June 20

I See Speculative Bubbles Like in 2007 [Interview with former BIS Chief Economist

William White], Finanz and Wirtschaft, April 11

BIS Slams “Market Euphoria” Finds “Puzzling Disconnect” Between Economy and Market,

Zero Hedge, June 29

“As history reminds us, there is little appetite for taking the long-term view. Few are ready

to curb financial booms that make everyone feel illusively richer.  Or to hold back on

quick fixes for output slowdowns, even if such measures threaten to add fuel to

unsustainable financial booms. Or to address balance sheet problems head-on during

a bust when seemingly easier policies are on offer. The temptation to go for shortcuts is

simply too strong, even if these shortcuts lead nowhere in the end.” [Bank of International

Settlements' 84th Annual Report, June 29, 2014]

 

And of course, there are a variety of dominoes teetering on the edge even now that just

may kick-start a change from the illusory “feeling richer” picture that has been

produced worldwide for over 5 years now.

Portugal Banking Crisis Sends Tremors Through Europe, UK Telegraph, July 10

As Deadline Looms, Argentina Moves Closer to Another Default, Reuters, June 30

Hottest Five Stock Markets in the World, From Argentina to Dubai, CNN Money, July 1

The Dubai Market Dropped 25 Percent. It’s Still Overvalued, Bloomberg Businessweek,

June 27

Behind the Leviation, Powerline, June 30

Chart of the Day: “Holy $340 Billion in Quarter-End Window Dressing, Batman”, Zero

Hedge, June 30

Chinese Bad Loans Rise Most Since 2005 as Economy Slows, Bloomberg, May 15

Let me encourage you to share this information with others, and invite you to subscribe to

The Investor's Mind as use lessons from history as we come through the rest of 2014.

 

The World of Financial Complacency, June 24, 2014

"Old" VIX Plunges To Record Low, Zero Hedge, June 24

Click here for another chart of the historic extremes in complacency, low VXO readings.

How much longer before extremely rare levels of complacency are broken? Would

it really be that much of a surprise to see rare levels of fear follow rare levels of

complacency? As so much media hype continues on the “Dow 17,000” drama

(rising to within 22 points of that level on Monday, June 23rd), should we not be focused

on historic financial shifts taking place under all of this complacency?

Bundesbank, PBOC in Pact to Turn Frankfurt into Renimbi Hub, Bloomberg 

Businessweek, March 28

Bank of England and People's Bank of China Agree on London Yuan Clearing Hub,

International Business Times, April 14

Is China's Housing Bubbble Beginning to Burst?, Bloomberg Businessweek, May 19

China and Russia Ink $400 billion Gas Deal, USA Today, May 21

IMF May Move to Beijing One Day, Says Lagarde, The Straits Time, June 8

The Bear's Lair: Systemic Risk Is Worse Now Than in 2008, Martin Hutchinson,

The Prudent Bear, June 16

The Generational Short Part 2: Who Will Boomers Sell Their Stock To?, Charles

Hugh Smith, Zero Hedge, June 23

The Junk Bomb Ticking Beneath the S&P 500, David Stockman, Contra Corner, June 24

 

Before complacency is shredded by reality, let me invite you to subscribe to The

Investor's Mind to review lessons from history, as we come through the rest of 2014.

 

Do You See Any Warnings That Millions of Investors are Still Ignoring? May 23, '14

Click the pictures in the gallery below and share with anyone who will listen.

Social Benefits As a Percentage of Real Disposable Income is the Highest on Record.

Rare Extremes in Complacency (low volatility) versus All Time High in S&P 500.

Consensus Forecast of GDP (Growth) Over the Last Two Quarters and Reality

Margin Debt 1990-2014 – Third Peak in Borrowing in 15 years. Highest on Record.

Four Major World Stock Indices – All Squeezed into the Same Corner As of May 2014

China’s Economy in Sharp Contraction, As Is Japan’s.

Coming Into May Retailers Were Buying US Equities As Institutions Continued Selling

When the S&P 500 Have Been This Short Before, Stocks Have Crashed.

If you have to read my latest two public articles, Two World’s Collide: Financial and

Political Manipulation Accepted (May 8), and Two World’s Collide, The Financial/Political

Elephant (May 19), I would strongly encourage taking the time to do so.

Manipulation is a limited game. To embrace it and bury our heads in the sand

becomes more dangerous with each passing week.

The Dow few investors ever see. Click here.

 

Economic Takeoff or Take Down: One is Wrong - May 5 '14

Fed to Keep Trimming Stimulus As Economy Shakes Off Stall, Bloomberg, April 30

Retail Store Closures In 2014: At Highest Pace Since Lehman, ZH, April 21

US Economy Grows Just 0.1% in Last Quarter, The Guardian, April 30

If It Wasn’t for Obamacare, Q1 GDP Would Be Negative, ZH, April 30

Flood of Students Demanding Loan Forgiveness Forces Administration Scramble,

ZH, April 22

The American Middle Class Is No Longer the World’s Richest, NYTimes, April 22

Existing Home Sales Fall To Lowest Rate Since July 2012, Fox Business, April 22

Overseas events that are NOT positive for the “recovery” Fed view

The Richest Man in Asia is Selling Everything in China, Sovereign Man, April 16

China's 'Property Bubble' Is Financial At A Bursting Point, Malaysia Chronicle, April 9

Abenomics Agony: Japanese Based Wages Tumble By Most In 2014 (22nd

Consecutive Monthly Drop), ZH, April 29

EU Commisioner Warns 'Any Sensible' Person Should Oppose Further Russia

Sanctions, May 2, 2014

IMF: Ukraine Crisis Could Slow Down Growth In Eastern Europe, Hispanic Business,

April 29

What will it take to change the religiously held view of "buy and never sell"?

The Great(est Fool) Rotation: Who's Buying, And Who's Selling?, ZH, May 1

If you know someone - manager, advisor, or investor - sitting on a large stock position,

you might encourage them to review this chart. Then encourage them to subscribe

to The Investor's Mind, the cost of which is less than 1 hour of college credit at

their nearest university. Six months from now, it may prove to be the best money they

ever spent.

 

"I pledge to artificially inflate stocks markets, until everyone believes the economy

is good...or I am forced to admit our policies of unlimited money failed as stocks

collapse under the weight of so much debt" - Central Bankers' Pledge - April 9 '14

Socialism and the State: A Good Long Term Investment Strategy?

What's next for the Fed? A hint comes (came 4/9) this week, CNBC, 4/6

“Because at the end of the day, the Fed is still in complete control of the S&P 500.”

CEO of a money management firm

I thought we needed free markets for capitalism to flourish? Who will take over,

when the Fed loses “complete control of the S&P 500”? This statement is nuts.

Cracks in the Fed Pledge & Europe Moves Toward Chinese Yuan

When Even Goldman Complains About HFT (High Frequency Trading), ZH, 3/21

Triple Whammy Shocker: Goldman Shutting Down Sigma X?, ZH, 4/8

This Time Better Be Different, ZH, 4/7

It’s Not Just the Stock Market That is Rigged: the Entire Status Quo is Rigged, of two

minds, 4/3

Russia’s Secret Weapon: Crashing US Economy by Collapsing Petrodollar,

Voice of Russia, 3/28

Bank of England Signs Yuan Clearing Agreement with China’s PBOC, Bloomberg, 3/31

Germany, China Say Renminbi Hub in Frankfurt will Boost Trade, Yahoo, 3/29

More pictures from "the gallery" revealing extremes as of April 9, 2014.

Tale of Two Dows, of two winds, 4/3/14

Comparing Stock on Credit at 1/00, 10/07, and 2/14, dshort.com, March 2014

 

Pressure Continues to Build on the "All Time High " Illusion - Mar 25 '14

 

United States -

Wealthy Chinese Home Buyers Boost Suburban LA Housing Markets, LA Times, Mar 24

Dot.Com 2.0 Visualized (or Peak Greater Fool), Zero Hedge, Mar 11

China -

What a Bank Run in China Looks Like: Hundreds Rush To Banks Following Solvency

Rumors, Zero Hedge, Mar 25

The Music Just Ended: “Wealthy” Chinese Are Liquidating Offshore Luxury Homes in

Scramble for Cash, Zero Hedge, Mar 19

Russia -

Ousted by G-8, Russia Determined to Prove It Can Thrive Without West, Washington

Post, Mar 25

World Leaders Gather for Hague Nuclear Summit, Washington Post, Mar 23

General Dempsey: US Ready for Military Response to Russia if Crimea Conflict

Escalates, KyivPost, Mar 12

Israel -

Israel Has Two Billion Pound Fund for Possible Attack on Iran, Jewish Chronicle, Mar 25

Israel Closes Embassy Around the World As Diplomats Strike, Reuters, Mar 23

United Kingdom -

IMF’s Property Tax Hike Proposal Comes True with UK Imposing ‘Mansion Tax’ As

Soon as This Year, Zero Hedge, Mar 22

With this many variables to juggle, is it really possible for a small group of central

banking bureaucrats to keep stock markets levitated as we go into Q2, 2014?

A few more thoughts outside the mainstream financial industry as we close out March.

The Incompetence of the Federal Reserve and Deep State is Unavoidable, Economist

Charles Hugh Smith, Mar 25

Fisher Outs Bubbles Ben: QE Was a Massive Intended Gift to the 1%, David Stockman's

(former White House OMB Director) Contra Corner, Mar 24 

FDIC Sues 16 Large Banks for Allegedly Rigging Global Interest Rate,

The Spokesman – Review, Mar 15

Jeremy Grantham: The Fed is killing the recovery, Fortune, Mar 24

 

How Much Longer Can US Markets Ignore the Global Economic/Political Picture?

- Mar 13 '14

 

Yen-Pinching Undercuts Japan's Push Against Years of Deflation, NYTimes, Mar 10 '14

Rickards:The China Bubble is Bursting, Darien Times, Feb 22 '14

Russia Warns Could 'Reduce to Zero' Economic Dependency on US, Yahoo, Mar 4 '14

US and China Stand In Agreement on Ukraine  - And That Is Very Bad News for The

United States, The Economic Collapse, March 3 '14

To Understand What's Really Happening in Ukraine, Follow the Gas Lines on This

Map, PolicyMic, Mar 10 '14

The U.S. Has Installed a Neo-Nazi Government in Ukraine, Michel Chossudovsky,

Global Research, Mar 2 '14

EU and US Poised to Implement Sanctions on Russia, Irish Times, Mar 12 '14

US, G-7 Allies Won't Recognize Crimea Election Results, The Hill, Mar 12 '14

G7 Not To Recognize (March 16) Crimea Referendum, Xinhua News, Mar 12' 14

Chairman of Joint Chiefs: US Ready for "Military Response" in Ukraine, Zero Hedge,

Mar 12 '14

Change Course in Crimea or Face Costs, West Warns Russia, CNN, Mar 13 '14

 

Why Is so much history being Ignored? Click here to see what we all lived through in

March 2000, and click here to compare a recent snapshot of the same US index in

March 2014.

Could speed of light computer trading have anything to do with this alternate reality?

The Holy Grail of Trading Has Been Found: HFT Firm Reveals 1 Losing Day in 1238

Days of Trading, Zero Hedge, March 10 '14

Do you have an exit plan for when this bubble blows?

 

Parabolic move: $1.3 trillion made in 13 trading days to new "all time high". Time to

take casino chips off the table? - February 25, 2014

Are things getting better, or worse? Pick your media source.

Home Prices in 2013 Notch Biggest Annual Gain Since 2005, WSJ, 2/25/14

Case Shiller Has Second Consecutive Decline, Warns of "Bleaker Picture for Housing",

Momentum Gone, Zero Hedge, 2/25/14

Budget Cuts to Slash US Army to Smallest Since WW II, Fox Business,2/25/14

$3,000 Hike Slated for Military Family Grocery Bills, CNN Money, 2/25/14

Europe Futures Slide with Metals as China's Yuan, Shares Plunge, SF Gate, 2/24/14

Russia Will Withhold Loans to Ukraine for the time being,LA Times,2/23/14

Is the 14 YEAR picture from widely used financial data warning us? You bet it is.

Stock Wealth vs US National Debt - 14 years

US Publcly Traded Stock Wealth (Wilshire 5,000) - 2000 to 2007 top

US Stock Wealth - 2000 top to 2009 bottom

US Stock Wealth - 2000 top to Feb 2014

US Stock Wealth - Last 3 months - $1.3 trillion in 13 trading days. 6 TIMES the monthly

average since March 6, 2009...

...and the tapering of QE (quick and easy) money has begun.

Fed Cuts Bond Buying to $75 (down $10) Billion, CBS Market Watch, Dec 18, '03

Federal Reserve Continues to Taper, Cuts Monthly Purchases to $65 Billion, US News

and World Report, Jan 29 '14

Yellen Sees Few Risks to Divert Fed From QE Tapering Strategy, Bloomberg, Feb 11 '14

 

No Taper; Oz Has Spoken. Leave Your Brain at Home - September 18, 2013

Today, The Federal "Oz" announced to the world, "We will not slow down fueling the

stock market Ponzi scheme. When it blows, it will blow, risk be damned".

Forget headlines like the ones below. Real world risk have no bearing...today.

             Jerusalem Post, Aug 29

              News, Sept 9

              Sept 15

              Daily, Sept 16

              to Raise Debt Limit, CBS News, Sept 17 ‘13

Fortunately, we know that our financial leaders, who failed to see the 2008 collapse, are

still at the helm and are our "heroes".

  • “There is bound to be volatility,” Paulson said in an interview with Tom Keene on Bloomberg Television today. “When you have a big, ugly, messy problem, there is never going to be a perfect, elegant solution.”… Paulson praised Bernanke for bringing the U.S.economy back to growth while reducing the level of household debt and stabilizing the financial system. “I believe that Ben Bernanke has been a hero,” Paulson said [Source, Paulson Says QE Exit Causes Volatility With Bernanke Hero, Bloomberg, Sept 12 ‘13]

Change is coming. I agree with Paulson; “There is bound to be volatility”. I don’t

agree that Bernanke or he are heroes. Click here to subscribe to The Investor’s Mind;

independent thinking, not propaganda.

Watching Debt Signals, Not Just Stock Prices: When Nirvana Breaks  - August 16 ‘13

On July 24, 2013, I released my latest public article, The Nirvana Trade. Today, the Dow

closed again right at its 100 day moving average. Will it go up next week? Will it go

down? Frankly, this is NOT the big question. The bigger questions are: Where are we

when right now, when looking back over the last 20 years in US stocks? Where are we

when looking at various risk indicators through the lens of newly created debt that has

been used as the fuel to foster the rally since early 2009? How will rising borrowing

costs, as reflecting in rising bond yields since early May impact the larger economy?

Once you move away from the daily game, a very different view from “this could go on

much longer” starts to set up. The older the rally; the weaker the rally.  In fact, the

monster rally since 2009 may be over, and history has already started the next major

destructive bear decline, whether we start next week with a US stock rally or not.

Deutsche Bank Hopes “Not All Margin Calls Come At Once In Case of a Sell Off”, ZH,

8/13/13

Stock Market Bubbles and Record Margin Debt: A (Repeating) History of Ignoring All

Warnings, ZH, 8/9/13

Mortgage Applications Fall by 4.7% (off May high by 53%), The Motley Fool, 8/14/13

Treasury Yields At Two-Year High; Stocks Head for Weekly Loss, Reuters, 8/16/13

If you are seeking insights on how to navigate the major bear market ahead,

click here to subscribe to The Investor’s Mind. A subscription takes you through a

six-month period, and conditions are ripe for some of the largest up and down moves

across global markets that we have seen yet.

US Stocks Markets Don't Like Fed Releases - July 31 '13

Maybe it is time for investors and advisors to start developing a plan of action AFTER

the omnipotent Fed can not levitate US stocks? Oh that's right, they can only make us

believe they are gods.

Review these pictures of the S&P 500 on May 22nd, June 19th, and July 31st. Then

take a look at the movements of the S&P 500 over the last 3 months. Does this

inspire confidence in the crew that brought you the "we can always print more debt "

scheme?

If you are preparing for a sea change in global financial markets, consider a

6 month subscription to The Investors Mind.

Always keep reading and thinking.

Economics Can Not Trump Mathematics, Zero Hedge, 7/27/13

Bankers Own The World (And Are Ulimately Destroying It), Chris Martenson, 7/24/13

The Astonishing Collapse of Work in America, American Enterprise Inst., 7/10/13

 

Up, and ...Away?, July 10 '13

Am I crazy, or does there seem to be a disconnect from the financial world, as seen

through the eyes of these investment pros, and those making financial decisions

outside of the U.S. stock markets?

Bernanke: Highly Accomodative Policy Needed for 'Foreseeable Future', July 10 '13

Up, Up, and Away for Stocks, Acampora, CNBC, July 9 '13

Equities To Move Higher, Despite Fed Taper Talk: Pros, June 20 '13

A Weak U.S. Economy Means Fewer Babies (At Least For Now), July 9, '13

Only 47% of Adults Have a Full time Job, July 5 '13

Student -Loan Default Rates Rise Above Graduation Rates, July 8 '13

The evidence continues to reveal that stock values, built on high levels of debt for

"investing" (more accurately, daily speculating) are the illusion, and these larger

trends OUTSIDE the U.S stock markets continue to tell the REAL financial story. 

Recommended Readings: Bull: A History of the Boom:1982-1999(2003), When

Genuis Failed: The Rise and Fall of Long Term Capital  Mngt (2000),or

Infectious Greed: How Deceit and Risk Corrupted the Financial Markets(2003).

Films: Inside Job,  & Wall Street: The Speed Traders.

If you desire to understand the changing financial world and markets, and you believe

as I do that being a true contrarian still has value, click here to subscribe to The

Investor's Mind. "All Time Highs" are the best time for thinking rather than

following the crowd.

 

Fed's Speak, US Stocks Drop, Week 25, June 19 '13

Since the spring of 2009, market participants have grown to believe that there is only

one factor one needs to know. If the almighty Federal Reserve announces they

are starting or continuing a "stimulus" program, then you can count on higher

stock prices, no matter what takes place in the real world.

Wednesday, May 22nd and Wednesday, June 19th, have placed a severe crack in this

thesis. Click below for daily charts of these two "Fed speak" days.

Chart of the Dow on May 22, 2013; Chart of the Dow on June 19, 2013.

When we place both of these days in context of a larger view of the Dow, one can see

that computer selling could change the mood of the markets very quickly at current levels.

It would also seem that central bankers are having problems discerning how to

discuss financial markets that differ wildly from their underlying economies.

IMF: World Markets Upbeat Compared to Slow Economy, Yahoo News, 6/4/13

World Bank Cuts Global Outlook as Europe Contracts, China Slows, Live Mint, 6/13/13

Fed Keeps $85 Billion Pace of Bond Buying, Sees Risks Waning, Bloomberg, 6/19/13

 

Breaking 15,000: Up Then Down, Week 23, June 5 '13

 

The mainstream financial media is always touting the next 1,000 mark in the Dow on

the upside, celebrating this arrival as though "this time it is different". However, with all

the excitement of "you have to get in now!", why is the commentary on the rapidly rising

RISKS much more sparse until we have experienced declining markets?

This chart of the Dow was released on my April 15, '13 post.

This chart of the Dow was developed for my post today, June 5 '13.

In order to keep from being completely blindsided in the weeks ahead, we must

remember that unlimited debt for more speculation is a limited game. We must also

remember what while high speed computers can give the impression that everything

has become more stable as US equity markets rose steadily, when markets rise and

decline rapidly, the probably of a panic is rising quickly too.

Financial Markets Are At Risk of a 'Big Data' Crash, Financial Times, May 20, '13

The following are books I have read recently. Never stop learning, and never trust

your thinking to the mainstream media.

Broken Markets: How High Frequency Traders and Predatory Practices on Wall Street

are Destroying Investor Confidence and Your Portfolio (2013) Sal Arnuk & Joe Saluzzi

Currency Wars: The Making of the Next Global Crisis (2011) James Rickards

Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock

Market (2012) Scott Patterson

Bailout: An Inside Account of How Washington Abandoned Main Street While

Rescuing Wall Street (2012) Neil Barofsky

To enjoy a wide range of opinions and sources as the easy options leave the

investment landscape, click here for a 6 month subscription to The Investor's Mind.

 

Waking From the "No Risk" Financial Market Illusion, Week 16, Apr 15 '13

As the Dow came within 113 points on Thursday, April 11'13 of its 15,000 level, and

the S&P 500 came within 3 points of 1600, both being "first time in history" events, did

you not get the feeling that US equiity markets had come to a place where they were

not going to decline again? Was today's (4/15/13) hard sell off across global stock

markets a warning short that the the tide was going out again, or one more pull

back?

Our EXPERIENCE for 18 months has been that US stocks don't sell off hard more than

a day or hours before a "rescue" starts taking us back higher. This would not be

possible without high speed trading platforms, controlling the direction of prices. While

this may sound like we have reached Nirvana, it has actually lulled the public into an

illusion that is extremely unhealthy regarding risk and reality.

Read my October 27, 2011 public article, Darwin's Deceptive and Dangerous

Devices, then view the video , Wall Street: The Speed Traders by 60 Minutes, released

on June 5 '11. Click this link to view a daily chart of the S&P 500, produced one day after

the S&P 500 reached 1597, its highest level on record. Notice how controlled the day

appears. Now click this link to view a daily chart of the S&P 500, produced two days after

the S&P 500 reached 1597. Was there a great deal of warning for investors?

I would also encourage you to read the article, To Fast to Fail:Is High-Speed Trading

the Next Wall Street Disaster. The chart and video alone make it clear that risk

is rising swiftly, as so much money has been pushed long and short to extremes

in the last three months across global markets.

Nothing tells the story of the full blown mania better than a chart of the Dow.

It really is amazing how quickly things can change.

 

Cyprus and the S&P 500, Week 12 '13

In the last week, we have watched two pieces of history. The S&P 500 came within 2

points of its October 9, '07 all time closing high of 1565, and 13 points of its all time

intraday high of 1576. In the Mediterranean, just south of Turkey, the nation of Cyprus,

one of the 17 members of the EU, makes the news as an EU bailout attempt tries

"taxation without representation" on ALL bank depositors.

After Cyprus Bank Bailout, Depositors Race to Withdraw Their Cash. Is the Rest

of Europe Next?, The Daily Beast, 3/17/13

Cyprus Races To Rework Savings Tax After Closing Banks Til Thursday, The Guardian,

3/18/13

Cyprus Lawmakers Reject Bank Tax Bill, CBS News, 3/19/13

Cyprus Seeks Russian Rescue, EU Threatens Cutoff, Reuters, 3/20/13

How much longer can the facade of "more debt and global banking schemes is leading

to recovery" hold? Are there any other signs that being PREPARED for change is

prudent, rather than waiting for a warning from your friendly central banker before taking

any action? [See Week 8 '13 before examining the list below.]

The U.S. Can't Afford a Chinese Economic Collapse, Reuters, 3/7/13

Bubble on the Margin, Zero Hedge, 3/1/13

European Banks Slide As Cyprus Levy May Threaten Ratings, Bloomberg, 3/18/13

Fed Injects Record $100 Billion Into Foreign Banks Operating In the US in Past Week,

Zero Hedge, 3/9/13

Click here for a chart of the S&P 500 over the last 25 years, the Japanese Nikkei over the

same period, and several major equity indices over the last 4 months.

Now is the time to start preparing for the "After the Top" markets. There is no doubt now

that the next six months should be extremely different from the last six. I can not think

of a time since starting The Investor's Mind (Jan '06), when thinking OUTSIDE the box has

had more critical. Click here to subscribe.

 

After 14,000, Where Next?, Week 8 '13

I have made it a point since the May 2012 top in the Dow, to slow down the pace of my

post to the Weekly page of the Best Minds Inc website. In a full blown mania, less seems

to be more. If you have yet to read my Jan 23, 2013 public article, When Everyone Sees,

I would strongly encourage you to do so before February options expire on Feb 15.

To remind each of us that markets DO top, and that looking for historic prices extremes -

a topic that IS NOT the focus of mainstream media outlets - is very important for the

millions of investors who are seeking to understand RISK and OPPORTUNITIES at these

major turning points.

Below, are three such turning points I have written about since opening Best Minds Inc

in 2005; releasing Riders on the Storm: Short Selling in Contrary Winds with the launch

of The Investor's Mind: Anticipating Trends Through the Lens of History in January 2006.

 

Now check out the following articles, and decide for yourself; isn't it about time to start

looking for opportunities where markets look too fearful or too greedy?

.

Clearly, the Dow, the most watched indicator in the world, that as of 2/19/13 has

only closed 12 days in its 117 year history above 14,000, should be of concern to all

investors and managers right now....especially with all the other balls that must be kept

elevated or suppressed in order to maintain the illusion of "recovery". I can not think of a

better time to start thinking rather than following the crowd! Click here to join the

readers of The Investor's Mind. As of today, 2/13/13, the trading report, included with a

six month subscription, has once again changed its name. The new name;"After 14".

When Markets Don't Rise From Negative Economic News, Week 48 '12

 

It's Official: Eurozone Enters Second Recession in Three Years, 11/15/12, Time

Japan Economy Enters Contraction, 11/11/12, Rocket News

Slowdown Set to Take Toll on US Earnings,10/7/12, Financial Times

Money- Maybe Too Much -Pours Into Junk Bonds, 11/30/12, Huff Post Business

Obama's 'Fiscal Cliff' Proposal: $1.6 Trillion in Tax Increases, 11/29/12, CNBC

We have been groomed since the October 2011 bottom in US equity markets to believe

that the "new normal" for financial markets is to rally on headlines like the ones above.

Declines are now slow, while rallies are fast. Does anyone remember August

2011, much less September and October of 2008?

The evidence is there for those knowing where to look, that capital markets

are very close to returning to the "old normal".

I would stongly encourage each of you to read Charles Hugh Smith's great article

An Iceberg Called Bernanke. If you have yet to see the documentary Inside Job,

I can not think of a better time to view this film.

If you are ready for the "old normal" bear market, then consider a subscription to

The Investor's Mind. 2013 starts in 1 month.

 

What if Markets Started Reflecting These High Risk Trends?, Week 43 '12,

43rd Month since March 2009 Bottom

Social Unrest

Thousands march in Paris against Austerity in Show of Support for

Beleaguered EU Partners, 9/30/12, Yahoo News

Riots in Spain - Sept 25 '12 Spanish Protest the Proposed European Austerity,

You Tube

Welcome to the World Revolution in the Global Age of Rage, 7/30/12,

Andrew Gavin Marshall

Wars

Growing Tensions Between China and Japan Fuel Concerns Over Potentional

War, 9/17/12, The Globe and Mail

Confrontation Between China and Japan: Naval Deployments in East China

Sea, 10/24/12, Global Research

Turkey Strikes Targets in Syria in Retaliation for Shelling Deaths, 10/3/12, CNN

Iran Pours More Troops into Syria, ready to Target Israel from Syria and

Lebanon, DEBKA, 9/20/12

Could the U.S. Face 'Cyber Pearl Harbor'? Protecting Banks from Hacker

Attacks, Speech by CIA Chief Leon Panetta, PBS NewsHour, 10/18/12

 

Look at the headlines above. Have any of these events had a powerfully negative

impact on our markets over the last few months? No. Why? Because we have

grown dependent on central bank interventions to stop the impact of these major

world events. Is it healthy for managers and investors to dismiss this level of

geopolitical risk, and place their trust in these "debt til we drop" schemes?

My last post was 13 weeks ago, the week the President of European Central Bank

stated, "whatever it takes" to save the euro. Six weeks ago, on Sept 13th, Bernanke

announced that he would print up more debt in order to purchase an additional

$45 billion per month in mortgage backed securities.Since Sept 14th,

have US equity markets shown than they "appreciated" this supposedly good news?

We are at a major crossroads in markets right now, and possibly, the lack of fear in

markets to respond to these major geopolitical risks?The chart behind

"major crossroads", was released yesterday to those subscribing to The Investor's Mind.

To break the addiction of trusting in central bankers, click here for a six month

subscription to The Investor's Mind. We all need ideas as we seek to navigate the

incoming storm, which most certainly will be worse than 2008.

 

The Tower of Basel: Will Lies Ever Hurt Me?  Week 30 ‘12

Why China is Likely to End in a Disorderly Economic Collapse, 4/6/12

China’s Economic Slowdown: Why Stimulus Is a Bad Idea, 7/26/12

Earnings Season Can’t Fix The Global Economy: Downside Risk Growing, 7/26/12

Libor Fraud May Be the Mother of All Bank Scandals, 7/23/12

The Sovereign Default Dominoes Are Falling in Europe, 7/24/12

 When global central bankers tell us, “the ECB will act”, while bankers in Europe are

finding it extremely challenging to raise capital, mortgage lending declines rapidly in the

UK, and the Federal Reserve raises capital requirements (by its nature a deflationary

action) for US banks, what continues to fuel the belief that US equity markets will not

decline again? Has the 13,000 level in the Dow become a hypnotic drug to remove us

from what  must certainly come? Are the talks of “we will act”, nothing more than a ruse

to continue kicking the can down the road as reality grows closer with each passing day?

Does anyone seriously expect a central banker to every tell you, “Hey, we fostered 2

credit bubbles that have burst in the last 20 years. Don’t you realize this one will pop

too?” Are we so gullible, with so many warnings signs, that we actually expect these

money “gods” to tell us when the bubble is about to pop?

On March 13th, the Dow closed above 13,000 for the first time since the crash of 2008.

After today’s rally (7/26/12), where the Dow soared 211 points, the Dow closed

at…..12,887.

If there is one thing that we don’t need, it is more debt. The US national debt stood at

15,524 billion on March 31st. Yesterday, July 25th, it stood at 15,874 billion. Even

better, does anyone remember that on May 2, 2011, the Dow hit its 2011 high of 12,876,

just 11 points lower than it did today almost 15 months later! In the meantime, the rocket

engines of the US burned through one trillion, five hundred and fifty four billion in

increased national debt alone. The simple fact is that our financial markets have

becoming nothing more than a crowd control mechanism, keeping us entertained and

ignorant of the growing risk to our very way of life. 

Truly, this will be one for the history books when manias are written about in future

generations.

 

American Equity Markets: Isolated from the World?, Week 21 '12

Chinese Entities World's Biggest Economic Spies: Pentagon, Reuters, 5/19

China Can Now Monetize US Debt Directly, Zero Hedge, 5/21

Fed Clears China's U.S. Bank Takeover, Bankkok Post, 5/10

Bank Loans to Rise as Debts Come Due, People's Daily, 4/23

Chanos: Beware of China's 'Epic' Property Bubble, CNNMoney, 5/2

Fear of Bank Runs Mount in Southern Europe, Spiegel, 5/18

Greeks Withdraw $894 Million in a Day: ...the Beginning of a Run on the

Banks?, MSNBC, 5/16

Fukushima Will Be Radiating Everyone for Centuries, 60 Minutes Australia, 8/23/11

Japan Left With One Nuclear Reactor After Shutdown, BBC News, 3/26

Fukushima's Estimated Radiation Leak Doubles Vs Government, Bloomberg, 5/24

 

I wonder how many of my fellow Americans have placed their faith in a global socialist

institution, the Federal Reserve, to "keep markets up into the elections". If your "news"

is only about the upcoming Presidential election in November, or American markets,

you are sorely in need of expanding your horizons to the world outside the U.S. of A.

America is not a island. We depend on the rest of the world for our own futures.

Questions we all should be asking right now:

1- As China slows from a historical debt and property bubble, and the Pentagon is

informing Americans that Chinese entities have become the world's biggest economic

spies, why has the Federal Reserve and the Treasury Department given the most

powerful communist nation in the world major inroads into the US financial system

this May?

2- Should investment advisors and money managers in the United States be discussing

the bank runs that are taking place across the pond in Europe? Has the slow decline

in U.S. equity markets in the last 2 month's given Americans the impression that

these issues are Europe's, and will not impact their own financial lives?

3- We have heard very little about the worst nuclear disaster in history at Fukushima 

since Japan's devastating Tsunami last March. Are we to believe that no news is good

news?

I can not think of a more critical time to be asking questions and watching world events.

 

Could History Repeat?: The Dow 13,000 Level, Week 19 '12

US 'Flash Crash' Measures Suffer Delay, Financial Times, 5/6

Hollande: My Election Is A Rejection of Austerity, Sky News,5/7

Greek Voters Punish Voters Over Austerity, France 24 , 5/7

Merkel Loses Power In State Election, The Local, 5/6

Spain Is Headed for a Major Economic Crash, Forbes, 4/11

Payroll Survey Signals U.S. Jobs Slowing As Orders Drop: Economy, 5/2

Equity Fund Redemption Are Largest In 17 Years, Bloomberg, 4/27

 

The Dow is arguably the most watched stock index in the world. It moved past 13,000

for the first time since March '09 bottom on Feb 21st. That day, it's intraday high was

13,005. Today, Monday, May 7th, the Dow closed at 13,008, closing out 11 weeks since

the Feb 21st ascent above 13,000.

As the EU continues to erode, with Spain moving BELOW its 2009 BOTTOM last week,

and retail investors continuing to pull tens of billions out of US stock funds, would it

come as a surprise if we were to see a May 2012 flash crash? Remember, history

reveals that 2 years ago, on May 6, 2010, the Dow lost more than 1,000 points during

its historic intraday swing.

 

Fragile World Markets: Trust, Hard to Find - Week 16 '12

CME To Confer with Angry Traders, Chicago Sun-Times, 4/12

Europe's Troubles Suggest Imminent Global Recession, 3/12

The Shocking Truth About Unemployment in America in One Chart, 4/10

Why I am Leaving Goldman Sach, by Greg Smith, NY Times, 3/14

MF's Corzine Ordered Funds Moved To JP Morgan, Bloomberg, 3/23

"The only way to build trust professionally and personally is by being trustworthy"

Gerard Arpey, CEO, American Airlines [The Speed of Trust: The One Thing that

Changes Everything (2006) Stephen M.R.Covey, pg 49]

The greatest negative force facing global investors is the breakdown of integrity

and trust at the highest levels in our financial markets. This is being reflected

in prices across world markets. Discussions of more short term debt schemes are

nothing more than fuel to foster distrust, as investors realize that adding trillions in debt

over the last 4 years has only made the long term economic picture even more unstable.

How much longer will the euro and US dollar dance sideways, postponing a major

correction?

It would appear from the recent Executive Order, March 16th, titled National

Defense Preparedness Order, that someone is thinking about the need for

even more government "in peactime and in times of national emergency." Do most

Americans think the President is consulting the National Economic Council when they

read the title to this executive order? They should.

Sea Change- Back to the Real World - Week 10 '12

George Osborne, UK Has Run Out of Money, 2/26/12

The Mainstream Media Still Doesn't Get the ECB Greek Debt Swap, 3/6/12

Greek Debt Is Best Offer, Venizelos Says, 3/5/12

Worst Day in Europe Since Rally Began, 3/6/12

European Banks Now Face Huge Margin Calls as ECB Collateral Crumbles, 3/6/12

Punk Economics 2, David Williams - good short film on Greece & Europe debt crisis

Eventually, reality sets in, and gravity takes told. If you have yet to read "Making Our

Lives Stable", released on 3/2/12, I would encourage you to do so.

 

Only Blue Skies and Stability? - Week 9 '12

The Dow has risen 42 straight days since the open of 2012 without one signal day

closing down more than 100 points. Are such calm waters a harbinger of a sharp decline

in March? Could any of these developments impact world equity markets?

Russian Elections: US and Europe Must Rethink 'Reset', 3/2/12

Iran Cuts Down to 6 Weeks Timeline for Weapons-Grade Uranium, 2/22/12

China Continues to Gleefully Hack U.S. as Govt Efforts Sunk by Partisanship

Eurozone Delays Athens Rescue Funds, 3/2/12

 

Just a Few World Events that Could Derail a Parabolic Tech Rally - Week 7 '12

 

Moody's Adjusts Ratings of 9 European Sovereigns to Capture Downside

Risks, 2/13

Obama Proposes $800 million in Aid for "Arab Spring", 2/13

10% of Trades on NYSE Involve a Signal Notorious Company, 2/14

Greek Economic Deterioration Accelerates as Q4 GDP Slides by 7%,

Unemployment over 20%, 2/14

Iran Presses Ahead with Dollar Attack, 2/12

Qatar Financing Wahhabi Islam in France, Italy, Ireland, and Spain, 2/9

Yep, nothing but blue skys here. Stocks have nothing to do with world events

anymore, right?

 

An Economy to Match the Market Mania - Weeky 5, 2012

Job Report Lifts Dow to Highest Mark Since '08, Fox News, Feb 3 '12

Trim Tabs Explains Why Today's "Very,Very Suspicious" NFP Number Is Really

Down 2.9 Million in Past 2 Months, Zero Hedge, Feb 3 '12

Euro Zone Unemployment Climbs To Highest Level Since 1998, MercoPress,1/31

Which of these headlines explains the "reason" that not only the US, but British and  

German stock markets exploded higher today? Does news even matter any more?

Do true numbers even matter?

Well, we are back at the May 2011 high.

In 31 days, the Dow climbed 1177 points into its all time high in 2007.

Today, Feb 3rd, the Dow has climbed 1134 days in 31 days. Is this important when

the state can manufacture news and rallies?

Riots in the Streets, Capitalism No Longer Fits, Markets Yawn - Weeky 4 of 2012

World Economic Forum Founder, Capitalists Have 'Sinned', Manufacturing, 1/24

George Soros Predicts Riots, Police State, and Class War for America, RT, 1/25

China to Aid Saudi Arabia in 'Peaceful' Nuclear Power Development, Minyanville

Israel to Give Obama 12 Hours Notice on Attacking Iran, Israel Nat'l News, 1/22

India to Pay Gold Intead of Dollars for Iranian Oil, Debka, 1/23

Greek Default is Simply a Given: S&P, CNN Money, 1/24

World headlines about world level meetings that could have dire consequences

on equity markets. Yet equity markets yawned. Why does this level of news no longer

seem to move markets?

If you have not read my Oct 27, '11 article, Darwin's Deceptive and Dangerous

Devices, I would encourage you to do so. Never has so much power been placed

in such few hands.

To keep from getting trapped when "the tide goes out", review the comments

of these 12 industry leaders, in Bloomberg's Jan 13th Slideshow: Apocalypse How?

Dire '12 Forecasts.

 

More Debt, Less Truth - Week 2 of 2012

The Never Ending MF Global Story: Regulators Block the Truth, Forbes, Jan 9 '12

The Dismal Economic Outlook for the New Year, Paul Craig Roberts, Personal

Liberty Digest, Jan 10 '12

Welcome to the Paranormal: Bill Gross Warns of Financial Market Implosion and

the End of Economic Life as We Know It, Business Insider, Jan 4 '12

When information is suppressed about a bankrupt primary dealer, a GAO

audit reveals that the Federal Reserve made $16.1 trillion in secret loans to banks

between Dec '07 and June '10, and the manager of the world's largest bond fund

states that there is too much paper and too little trust, then why are many investors,

advisors, and market pundits still optimistic about high prices for financial assets in '12?

Did we not learn from 2008 that credit bubbles from cheap debt bring crashes?

 

The Start of 2012 - How much longer can market prices evade real world events?

Economic

China Housing Bubble Deflating; More Declines Seen in '12, Forbes, 12/19/11

Banking Crisis Will Spark Deflationary Sprial, Big Government, 12/23/11

Geopolitical

US Sanctions on Iran's Central Bank. Tehran has called this an act of war,

                                                                                                       Debka, 1/1/12

Iran Test Fires Missiles in Strait of Hormuz Exercises, CNN, 1/2/12

Societal/Political

After Struggle on Detainees, Obama Signs Defense Bill, NY Times, 12/31/11

Guantanamo Forever?, NY Times, 12/12/11

 

Random or Planned: Christmas 2008, Doug Wakefield

From Time Immemorial: The Origins of the Arab-Jewish Conflict Over Palestine

(1984), Joan Peters

The Nativity Story, 2006

The Daniel Project, 2011

Jerusalem: City at the Crossroads of History, Oct 2009, Doug Wakefield

After 8 years of research, I believe the two biggest lies of the 20th century are that we

can move towards global financial stability by ever increasing amounts of debt controlled

by a few players at the global level, and that through historical revision and global

political meetings and treaties, we will find peace in Jerusalem.

Today, as millions around the world will celebrate Christmas in 2011, how many of

those same individuals are watching the focus of world leaders, Jews, and Arabs,

surrounding Jerusalem. What insights could anyone gain from examining the

ancient writings of the Jews and Arabs? What makes this city unique?

If we are ignorant of the world around us, and wish to stay isolated from world trends,

we can either wait for the day that our glass house is broken, or we can break it today,

in an attmept to find the truth. As Charles Hugh Smith so aptly stated in an article

this month, the truth hurts and heals.

 

"In the Absence of A Credible Plan We Will Have a Global Financial Meltdown

in Two to Three Weeks"- IMF Advisor, Zero Hedge, Oct 6 '11

G20 Tells Eurozone to Fix Debt Crisis, Reuters, Oct 15

S&P 500 Extends Best Month Since '74, Euro Rises, Oct 27

What just went down? Was there a real crisis, or was this just hype? Read on.

To understand how massive the world of trading and investing has changed in just

the last 5 years, you should watch this report released by 60 Minutes in June, Wall

Street: The Speed Traders. You may also wish to review the SEC/CFTC Report,

Findings Regarding the Market Events of May 6 '10 as well as this white paper by

Themis Trading, Toxic Equity Trading Order Flow on Wall Street (12/17/08).

My current public article, Darwin's Dangerous and Deceptive Devices, explains why

our financial markets continue to move further away from reality, and why stability is

gone.

Investors Lose A Trillion Dollars in One Day, CNN Money, August 8 '11

Fat tail events rarely happen, but when they do, they leave us speechless.

Geithner Warns of Catastrophic Consequences if Debt Limit is Not Raised, 5/15

Obama in Moves to Avert Economic "Armageddon", Vanguard, 7/6

President Obama signs debt-limit bill into law, The Washington Post, 8/2

 

....and yet just 3 days after the bill was finished and signed on August 2nd by the

President, the Almighty Dow swings down 700 points to Friday's low, and world

leaders are calling for emergency talks. Clearly, the markets of the world are revealing

that substantial losses in capital markets were NOT going to be stopped by the passage

of this one bill, nor should any sane individual expect another G7 "rescue" meeting to

provide a long term solution. Only when the "global debt kings" stop demanding that

everything must be sold to pay them, will the global economy find a true economic

bottom. More debt printed by central bankers will only bring more pain, and less long

term gain.

 

The Sharpest Rally Since 1644, of two minds.com, July 9

Ireland's Bonds Downgraded to Junk, WSJ, July 13

Europe Stocks Fall on Chinese Interest Rates, Portugal Downgrade, July 6

Moody's Warns of a Downgrade for US Debt, Business Insider, July 14

               

 

 

debt will rescue

 

Unreported Soros Event Aims to Remake Entire Global Economy, WSJ, Mar 29

 

Egypt Protests Enters Final Friday, RTT News, Feb 4 '11

Hosni Mubarack Resigns as President, Al-Jazeera, Feb 11 '11

International Monetary Fund Director Dominique Strauss- Kahn calls for

NewWorld Currency, UK Telegraph, Feb 10, '11

Libya:MuammarGaddafi fires on His Own People, UK Telegraph, Feb 21 '11

Tsunami Hits Japan, Kyoto News, Mar 11 '11

Explosion at Quake Damaged Fukushima Nuclear Power Plant in Japan, Mar 12

Saudi Tanks Roll in Bahrain Amid Unrest, India Today, Mar 15 '11

Supreme Court Lets Fed Bailout Records Release Stand, CNBC, Mar 21 '11

 

 

"Stocks Look Bullish Again"

European Ministers Consider Boosting {$1 trillion} Bailout Fund, Jan 14 '11

How and Housing Slump will Slow Jobs Train, Jan 12 '11

Banks Still Suffering , Jan 13 '11

 

 

December 21 '10 - A Time of Reflection

For some, this has been a very rewarding year. For others, this has been a time of

painful trials. But in a world, where so much emphasis is on ourselves, we fail to

recognize that each of us are part of a larger story known as history.

For this reason, I would like for each of us to consider three questions as we move into

2011. Each question is linked to videos and/or music I was sent and reviewed.

Is there a Divine authority above man, who rules above the political and financial elite,

and who holds each man accountable for the actions towards his fellowman?

Are the rights of our fellowman and the nation state of greater value than power and

celebrity status given by the global market state?

If history is of tremendous value, especially at critical turning points, would it not be of

value to understand the events surrounding the birth of the individual from which the

holiday Christmas, and our Gregorian dating system (calender), originated?

I hope you will encourage your family, friends, and colleagues to discuss this material.

While there are no cookie cutter answers, the problem of unsustainble debt as a

"solution" are evident to all. 2011 is setting up to bring about major changes to

our thinking, our lives, and our finances.

 

Bank of America is in Deep Trouble, AlterNet

Even the Affluent are Stretched, Reuters

Roubini Maps out Nightmare Scenario of Domino Debt Collapse in Europe CNBC

Municipal Bond Funds Have Biggest Withdrawal Since 1992, Yahoo

Read the headlines above. Now I ask you, when GM pulls off the biggest IPO ever on

November 18th, it this a sign of sanity or a market topping? Could this be yet

another warning shot for investors?

Biggest UK Defense Cuts Since Cold War, Financial Times

Hard-Pressed American States Face a Crushing Pension Bill, The Economist

Mortgage Investors Put Pressure on Bank of America, Reuters

When the Fed governors meet on November 2-3, and the G20 meets on Nov 11-12,

will they bring about solutions for the unsustainable debt burdens we continue to

watch unfold? Will we see a change in the world, or will current imbalances only

grow worse?

Maybe Ben Bernanke is right, when he recently quoted economist Herbert Stein,

"If something can not go on forever, it will stop."

If you are seeking to avoid "herd thinking", you may wish to consider a

subscription to The Investor's Mind.

The Dow Notches Its Best September in 71 Years, Daily Finance

IMF Warns of Danger of Currency Wars, The Syndey Morning Herald

US Household New Worth Drop, Reuters

Insider Selling May Threaten Rally, CTV News

Look at the headlines above. Read the articles. Then determine which one does not

belong with the rest. With the waves of destruction that have come from bubbles that

have collapsed due to unlimited amounts of cheap credit, are there really any fools who

believe NEXT TIME IT WILL BE DIFFERENT?

Depressing: Unemployment His 70 Percent in some areas of Greece, Frugal Cafe

Afghan Women Building Lives Among Rubble, The World

Pension Fraud by New Jersey Cited by S.E.C. , NY Times

Bank Profits: A Sign of Economic Sickness Not Health, Nake Capitalism

When human lives in Greece and Afghanistan live daily with 70 percent unemployment

while we learn of the the SEC's first ever filing against a state for its misuse of funds,

funds that were designated for many of its own citizens, then more profits for banking

giants is certainly a sign of moral decline, a trend that history continues to reveal warned

each of us prior to the 2008 global credit collapse.

Understanding money and finances for the period ahead will require milliongs to

rethink deeply held beliefs on investing and money, and yes, the value of human life.

China Said to Test Banks for 60% Home-Price Drop, Bloombergs, Aug 4

Housing Market a  "time bomb", says Investment Legend, The Australian

Global Housing Bubble....Which Countries Are the Bubbliest, Mish Shedlock

When the Bank of England announced this week that they were facing a "choppy

recovery", and with US unemployment rates [U6 that is] continuing to hang above 16%,

should the articles above give us comfort that the global economy is in "recovery"?

On a lighter note, just be glad you did not make the news this week for racking up a

world - record speeding fine.

Dow May Crash if 10,600 Not Breached, July 15 '10

Magazine Mania Monday: Run For Cover?, July 19 '10

Vacant Office Space Hits 17 year High, July 6 '10

Is TARP Hurting Small Banks?, July 14 '10

FDIC backing 8,000 Banks W/ $13 Trillion in Assets

with Negative Deposit Insurance Fund

As the fundamental view of the US economy continues to reveal the deflationary forces

impacting the private sector, the size of government spending and debt continues to

soar to ever larger and more unsustainble levels. In an environment like this, market

pablum which feeds our desire to "postpone tomorrow" is worst that worthless, it is

highly destructive in PREPARING for the future. If the Dow cuts through the 10,000 level

again in the near future, should we expect another quick rally, like those seen since

May? If not, how fast could financial wealth be destroyed? What will it take for the

public at large to wake up to the fact that we are not returning to yesterday?

The Investor's Mind: Whose Got the Power - July '06

The last 3 months have produced 1000 point swings, both up and down in the Dow.

The speed of swings this size in both directions makes this a unique period in market

history. It also makes it a period when investors and advisors are paralyzed about

the future. For this reason, I decided to pull this issue from the archives and offer it for

a free download. I believe it is more pertinent today than it was 4 years ago.

If you are interested in accessing all current reports and newsletters, as well as

our archives, click her to subscribe.

 

Dow Theorist Richard Russell: Sell Everything, You Won't Recognize America By

The End of the Year, May 18 '10

After the Flash Crash, the Crash Camp Takes Over, May 19 '10

Global Macro's Raoul Pal: Here's Why A Crash Is Coming in Two Days-To-Two

Weeks, May 18 '10

Big Bills Leaving the Senate, May 21 '10

With the Senate passage of the Dodd financial "reform" bill on Thursday, why are

these seasoned hedge fund mangers and market technicians so dire? Could it

have anything to do with real world data and events that alluded markets for 13 months?

If you don't have a great team of thinkers and traders around you, I would encourage

you to consider jumping in now to The Investor's Mind. The severity of the next major 

decline leaves no room for pride about "past performance" for any of us.

Goldman Sachs Has First Quarter with No Trading Losses, May 10th

Goldman's Perfect Quarter Indicates Game is Fixed, May 10th

Goldman Can Create Shorts Faster than Europe can Create Money, May 10th

When I read headlines like the ones above, and contrast them with a May 12th

article in TIME titled, Mutual Fund Investors Not Rattled by Selloff, I can only wonder

what level of pain the next downturn will have to inflict on retail and institutional

investors before they stop trusting that the casino owners like Goldman are really in

place to foster the "free markets". 

At an even deeper level, if you have never been able to ask some of the world's most

powerful political/financial leaders a question directly, you may wish to learn from

someone who has been doing that for 16 years. Check out Joan Veon's

May 7th article, What In the World Is Going On ?

Dow Plunges Most Since 1987 Before Paring Losses; Euro Tumbles, May 6 '10

Stocks' Skid Deepens, May 6 '10

Dow Down 3% After Deepest Intra-day Plunge, May 6 '10

Gloom Over Europe as Crisis Shadow Intensifies, May 6 '10

While I have written about the science of an unsustainable system, when you watch

a day like today, it still takes your breath away. Click the links below, for some lessons

I have given before, and two charts of today's historic market movements.

Chart of the Dow & Wilshire 5000. Section 4 of Riders on the Storm, Traits of the

Excellent Manager, addresses the lessons one could learn from the 1987 crash

(pgs 28-34). For a complete copy of Riders on the Storm [Jan '06], access to our

archives, and our latest research, click here to subscribe to The Investor's Mind.

Federal Reserve Gets Political, Sends Congress Veiled Message, April 6 '10

Advice to the Financial Crisis Inquiry Commission: How to Question Alan

Greenspan on April 7th, Frederick Sheehan's Blog, April 5 '10

Fed Empowerment Act, March 25 '10

While the media on the left and the right focuses everyone's attention on the

monumental health care bill, the public, by and large, continues to be completely

oblivious to the Federal Reserve's constant march toward MORE power. As you consider

the links above from our modern world, contrast them with these words written by

President Woodrow Wilson, in his 1913 work, The New Freedom.

"Since I entered politics, I have chiefly had men's views confided to me privately. Some

of the biggest men in the United States, in the field of commerce and manufacture, are

afraid of somebody, are afraid of something. They know that there is a power

somewhere so organized , so subtle, so watchful, so interlocked, so complete, so

pervasive, that they had better not speak above their breath when they speak in

condemnation of it." [pg 18]

Sadly, most Americans have no knowledge of America's monetary history, and don't

care to learn. That will change in the months ahead.

Bulls Take Markets On First Quarter Thrill Ride, LATimes, April 1 '10

FOX News Poll: 79 Percent Say U.S.Economy Could Face Collapse, Mar 23 '10

The current market mania is clearly one for the history books.

China in Midst of 'Greatest Bubble in History', Rickards says, Mar 17 '10

Lehman's collapse was all its own fault, Mar 17 '10

Time Crunch Dems Lunge for Saturday Finish Line Mar 17 '10

Budget Deficit in U.S. Widens to Record $221 billion, Mar 10 '10

When one reads the headlines above, and considers the enormous scope of

CFR member Dr. Niall Ferguson's recent article in the LA Times, America, The Fragile

Empire, how can anyone with an ounce of intellectual honesty say we are in "recovery"?

I know, the markets have spoken again today, and price tells all. Or does it?

Beijing Seen Vacant for 50% as Chanos Predicts Crash, Feb 12 '10

Foreign Demand for US Treasuries Falls by Record Amount, Feb 23 '10

BOE's [Bank of England] King: Economic Recovery Fragile, Feb 23 '10

Number of Banks in Danger of Failure Hist Highest Level since '93 , Feb 23 '10

We can either look at the headlines above and come to the conclusion that these

problems are "normal", and just part of the ups and downs of markets, or that we

are at a turning point in history. If one reads Charlie Munger's "Basically It's Over",

then you come to the conclusion that we are leaving a period of credit mania, which

has lasted for decades, and that the changes coming will alter our lives down to the

societal level.

Wall St. Helped Mask Debt Fueling Europe's Crisis, Feb 13 '10

Wall Street tactics similar to Enron and those that caused the subprime crisis are now

being used in Greece, Italy, the UK and (undoubtedly) the US. Dr. Richard Koo notes that

real estate bubbles are far more destructive than stock bubbles because they involve so

much more debt. We see 50 percent vacancies in Chinese office towers, U.S. Commercial

Mortgage delenquencies on the rise, and UK fears of the same, as a U.S. Congressional

Oversight Panel warns, "a significant wave of commercial mortgage defaults would

trigger economic damage that could touch the lives of nearly every American." But, the

almighty Dow cannot be bothered, as it is bolstered above 10,000.

AIG and NY Fed Under Fire for Hiding Bailout Facts, Jan 27 '10

Now I ask you, is it really all that difficult to see why consumers are very uncomfortable

with the state of the economy, when they continue to learn that highly unethical

conduct at financial institutions like AIG were not only allowed to continue, providing

better deals to their best banking clients after they were bailed out, but that the New York

Fed, the most powerful of the 12 branch banks that comprise the Federal Reserve,

actually instructed AIG "not to disclose more than a dozen controversial couterparty

transactions to the SEC"? Maybe revelations like these have something to do with the fact

that since the Jan 13th post below, equity markets on a global basis have fallen quickly,

and investors, seeking safety, are willing to purchase 4 week Treasury bills at zero

percent interest.

Investors Turn Bullish on Stocks from US to Japan, Bloomberg, Jan 13 '10

The Fed Finger: More Observations on the ESHO Incident, Jan 13 '10

When the crowd has seen a market that "can only go up", is it that hard to fathom that

eventually they would come to believe that "the worst is behind us", thus pushing the

S&P 500 to reach a bullish sentiment extreme of 54.7, "only the second time the reading

has exceeded 50"? Sadly few understand that big market players are "assisting" their

confidence by gaming the markets. At this stage in history, this is perfectly legal, but

the "integrity" of the system is being destroyed.

Eurozone faces 2010 debt crisis, AFP, Jan 3 '10

Cost of Insuring Icelandic Debt Rises, Reuters, Jan 6 '10

California Debt Default 'increasingly likely' LA Times Dec 16 '09

Global Bear Rally will Deflate as Japan leads world in sovereign debt crisis, Jan 4

PIMCO Executive: 80% Risk of UK Downgrade, Jan 5 '10

What is clear from headlines like these, is that the "debt will always produce stability" lie

continues to lengthen Pinocchio's nose. No matter how many times our illustrious

leaders say low interest rates don't cause bubbles, seeking to brainwash the public into

believing that more debt will lead to sustainable economic recoveries, the headlines from

around the world present reality for anyone willing to look past the current bubble.

Bernanke: Don't Tamper with the Fed, CNN Money, Nov 28 '09

Fed Rage Boils Over on Capital Hill, CNN Money, Nov 28 '09

Just days before his Decmeber 3rd confirmation hearing, Bernanke makes the following

statement in the first CNN article above:

"Now more than ever, America needs a strong, nonpolitical and independent central bank

with the tools to promote financial stability and to steer our economy to recovery without

inflation."

And, while a truly independent bank might exist somewhere, in her book, The Web of

Debt, attorney Ellen Brown, points out our Fed's obvious conflict of interest:

"The 'Federal' Reserve is actually an independent, privately owned, corporation. It

consists of twelve regional Federal Reserve banks owned by many commercial banks,

which hold Federal Reserve stock in an amount proportional to their size. The Federal

Reserve Bank of New York holds a majority of shares in the Federal Reserve System (53

percent). Its largest sharedholders are the largest commerical banks in the district of

New York." (Page 125)

As the Fed persists in its refusal to provide details on the hundreds of billions of bailout

money it has given to the banks that own it, fighting tooth and nail to avoid being

audited, how can we be expected to trust that it is acting for the average person's benefit?

Small Business Loans: $10 Billion Evaporate, CNN Money, Nov 17 '09

Interest on US Debt, CNN Money, Nov 19 '09

Should Treasury Secretary Be Fired?, LA Times, Nov 20 '09

Most individuals today can not understand why equity markets show no concern when

headlines like the ones above and the ones below continue to come out every week.

I encourage you to read the Forbes article, The New Masters of Wall Street to gain a

better understanding of the few who play at a totally different level than the vast majority

in our "public markets". Then remind yourself of Newton's 3rd Law of Motion, "For every

action there is an equal and opposite reaction."

U.S. Unemployment Rate Hits 10.2%, Highest in Ten Years, NYTimes, Nov 6 '09

Summers: US Economic Recovery on Track, Reuters, Oct 21 '09

The Dow has climbed 56% in 7 months, and the Dow Jones World Stock Index is up 74%

over the same time. And once again, one of our government officials assures us that,

thanks to the $787 billion stimulus package, the US economy is on the right track. At the

same time, the St. Louis Fed shows that commercial and industrial loans peaked when

the TARP stimulus was passed one year ago. While the media directs our attention to

the weekly swings in initial jobless claims, we ignore the bigger unemployment picture.

With a deficit three times the size of last year's record national deficit, the US government

must once again raise its national debt ceiling. With the non-partisan Center for

Responsible Lending calling for 8.1 million foreclosures over the next 4 years, are we

really expected to believe we are watching a sustainable economic recovery?

Briefing by Treasury Secretary Tim Geithner on G20 Summit, Sep 24 '09

While Geithner speaks of "optimism about prospects for global recovery" and "a

common, shared commitment" from "finance ministers and central bank governors from

around the world," Beijing sees it differently. Russia wants the yuan, ruble, and gold to be

components of the SDR, and they, with the world's largest oil producing and consuming

nations, are calling for the IMF's Special Drawing Right to replace the dollar as the global

reserve currency.

All this while the US unemployment rate hits a 26-year high and commodities rise 29

percent on increasing inventories. Is it any wonder that overriding one's emotions to

search for the next contrarian move, before it begins, is so difficult?

Dubai Real Estate Collapse, Socio-Economics History Blog, Jan 09

US Being Sucked into Civil War in Yemen, UK Telegraph, Sept 10 '09

US Consumer Credit in Record Plunge, AFP, Sept 09 '09

G20: Inflating The Global Economy to Prosperity, Seeking Alpha, Sept 11 '09

Does the story of Dubai support the repeated lesson from history that flooding easy

credit is not a long term sustainable strategy? If you are then flooding credit for a war in

Afghanistan, what could happen to expenses if the US became involved in a new war

in the Middle East? What if at the same time, the availability of credit continued to

collapse for the consumer? Would all of these support the G20's attempt to create

another bubble of "prosperity"? I know, "the worst is behind us".

Job Losses Moderate, but Unemployment Rate Hits 9.7%, WSJ, Sept 4 '09

Broader Unemployment Rate Hits 16.8% in August, WSJ, Sept 4 '09

Strapped Cities Lay Off Workers, Cancel Projects, CNN Money, Sept 1 '09

Now, let's see. Should the financial markets focus on the 9.7% or the 16.8%

unemployment rate? If 9 out of 10 cities are forced to cut spending, due to sales and

property tax declines, isn't that negative for equity markets? Regardless of which

unemployment rate we choose to acknowledge, aren't both higher than the worst case

unemployment rate, of 8.9%, the bank stress test assumed this past spring?

So, once again we see that the real economy has very little to do with the markets. Sadly,

most individuals still don't understand how the "financial casino" works these days, and

why risks levels are much higher now that we are in a "recovery." Feel free to visit the

Recent Updates section of our homepage to read our latest public article, Please Don't

Wake Me. To gain access to our most comprehensive research, click here to sign up for

a six month subscription to The Investor's Mind.

Number of Troubled Banks Rises to 416, August 27 '09

Federal Reserve Says Disclosing Loans Will Hurt Banks, August 27 '09

"In fact, so far the FDIC has covered all deposits, regardless of the amount, in

the large banks that have failed, such as The Republic Bank of Dallas, Chicago's

Continental Illinois Bank, and the Bank of New England. The reason is simple: the

government fears that if any depositors lose money in a large bank's failure there could

be a run on the deposits of other large banks that would spark a major bank collapse.

After all, any bank is only as safe as you or I think it is."

The Coming Economic Earthquake (1994), Larry Burkett, pg 134

Debt a threat to growth, IMF says, August 10, 2009

China's hidden debt problem, July 27, 2009

Spainish Unemployment Rate Rises to Decade-High 17.9 %, July 24, 2009

Dubai's Property Market Crumbles in Crisis, August 16, 2009

As we continue to hear chearleading governments around the globe, commending

themselves for enacting so much stimulus (creating more debt) so quickly to save the

economies and getting the global "green shoots" growing, some of the harsher

economic realities seem to be going unnoticed. Even in such difficult times, we can still

find relief in helping others, like those in Tiawan's mudslides and floods.

The Bank Killer, August 3, 2009

Fed Audit Will Show What They're Hiding, August 1, 2009, Ron Paul

Before we get fleeced for another round of bad bank bets, we should follow Ron Paul's

counsel and let "our" elected representatives know that the Fed is in dire need of an

audit. The fallacy of the necessity of the "official secret" for our benefit must give way to

verification of those who have proven untrustworthy. Indeed, the Fed has begun to require

stricter standards for banks who desire to lend to commercial borrowers, setting our

economy up for the latest in the Fed-engineered crises. So, where is all the bail-out

money going again?

Bernanke: The Economy Will Bounce Back Stronger, July 27 '09

US, China Pledge to Ensure that Recovery is "Secured", July 28 '09

Hidden From Sight, Debt Creeps Up on China, July 28 '09

Experts Float Debt Bubble Fears, July 22 '09

UK GDP Shrinkings More than Expected, July 24 '09

Strong statements continue to be made by political leaders regarding their confidence

that a massive increase in national debt levels will "secure" economic recovery. And

yet, we as individuals, across a wide range of cultures, have always been taught that

paying down debt and increasing savings were positive financial actions. Was Solomon

wrong when we wrote these words over 2900 years ago?

"The rich rules over the poor, and the borrower becomes the lenders slave."

Proverbs 22:7 [NASB]

Is Larry Summers Taking Kickbacks From the Banks He's Bailing Out, July 16 '09

SSA Bureaucrats have a Party...And Taxpayers pick up a $700,000 Tab, Jul 16

CIT Hires Bankruptcy Specialist As Bond Access Wanes, July 11 '09

Japan wholesale prices tumble, BOJ seen cautious, July 9 '09

While our government leaders line their pockets and throw parties - on the backs of

Americans - the troubles in the economy and market continue to mount. By the way,

which one of these articles supports the explosive rally we saw this week?

The SEC Needs Your Feedback, ZeroHedge, June27 '09

NYSE Halts Transparency, Feels Goldman Program Trading Disclosure is

Unnecessary, June30 '09

If you have any money in US equity markets, read the information Zero Hedge presents in

the links above. The NYSE released Information memorandum (09-31) on June 24 in

which they note the last day they will report daily program trading will be July 10th. Having

written about the negative impact a similar change, occurring in June 2006, would have

on assessing weekly NYSE program trading volume, I encourage each of you to contact

the SEC and the NYSE. Since information is power, withholding that to which we were

previously privy, is a divestiture thereof.

New Foundation, New Stability, White House Blog, June 17 '09

The following excerpt is from President Obama's June 17, 2009 speech:

"..it will require strong vibrant financial markets, operating under transparent, fairly-

administered rules of the road that protect American consumers and our economy from

the devastating breakdown we've witnessed in recent years."

Scripted speeches do not change the facts. When the current rally is over, those who've

invested based on how they feel, will regret their lack of skepticism.

More than 300 Banks on 'Watch Lists', May 27

GM Bankruptcy 'Inevitable' as Bondholders Spurn Offer, May 27

Treasurys Sink, 10 Yr Yield Hits Fresh High Amid Mtge Related Selling, May 27

Barack Obama, "We're Out of Money", May 24

Do the links in this area concur with the most optimistic readings in 8 months in the most

recent, May 27th, Consumer Confidence stats? Is the worst of the "recession" is behind

us, or is the optimism due to the recent bullish run in equity prices?

Moody's May Cut Rating on 34 Spanish Banks Amid Economic Slump, May 20

Japan Economy Shrinks at Record 15.2% Pace, May 20

US Housing Starts Drop on Apartments, Condominiums, May 20

Geithner's Gift to Wall Street, May 18

After reading these articles, would you want to buy the markets of Spain, Japan, or the US

housing sector? What if you learned that when the top 19 banks passed their stress test,

a few weeks ago, Wall Street had been given some help to encourage us to take risks?

If, after you review this information, you, like me, think the March bottom did not mark the

end of our markets' woes, I encourage you to consider joining the readers of our best

research, The Investor's Mind.

Regulators Said to Plan Stress- Test Disclosures May 7, May 1

Government Offers Details of Bank Stress Test, Feb 25

These two pieces are best understood in the context of the last few entries on this page,

and the Special Invpector General's April 21 2009 Report to Congress, on the Research

page. Is there a disconnect between the banking index over the last 2 months and the

importance of the stress test? Why are the results being delayed a few more days?

Commercial Real Estate Time Bomb Goes Off But No One Notices, Mish Shedlock

Let Insolvent Financial Firms Fail: Fed's Hoenig, April 21, 2009

In the first article above, you will notice that the stress test results are suppose to be

released on May 4 '09. And yet, even the Financial Times, like the article below, reveals

that this information has already found its way into the public domain. At the close

of business on Wednesday, April 22nd, the overall markets don't seem concerned.

Comptroller of the Currency,

Susan Boyle - Singer -Britain's Got Talent 2009

After watching the most rigged market rally in the banking sector history and joining my

fellow Americans in the Tea Party rallies on April 15, my wife shared this encouraging

video with me today.

London Summit, G20, Leaders' Statement, April 2, 2009  

FASB approves more mark-to-market flexibility, April 2, 2009

SEC to mull 4 short-selling rules, April 6, 2009

Gordon Brown, a "new world order emerging", April 2, 2009

The IMF's international currency, the Special Drawing Right (SDR), was expanded fivefold

to $250 billion. And while we hearing that bank leaders will be held to tougher standards,

FASB has relaxed the way Wall Street banks value their toxic assets. Those who decided

to short sell, to protect themselves from this ongoing parade of recklessness, now have

additional restrictions placed on them. Will these measures build trust? Though history

shows otherwise, we are being asked to believe that more government is the key to

"financial stability. The risk to investor only grows larger by the week.

G20 Financial Policy Makers Statement, March 14, 2009

Thousands Rally Downtown Against Government Spending, March 15, 2009

As Tea Party demonstrations expand around the US, global government leaders support

what appears to the greatest explosion of government spending, backed by ...you

guessed it....more debt, which of course, we are told, leads to "price stability." 

"Interest rates have been cut aggressively in most countries, and G20 central banks will

maintain expansionary policies as long as needed, using the full range of monetary policy

instruments, including unconventional policy instruments, consistent with price stability."

( Point #4 from G20 Statement)]

Soros Sees No Bottom for World Financial "Collapse", Feb21, 2009

CNBC Rick Santelli's Chicago Tea Party, Feb 19, 2009

The American Power Structure,Congressman Ron Paul, 1988

Whether we listen to one of the world's most famous hedge fund managers,a former Fed

Chairman, or the anger brewing on the floor of the Chicago markets, global investors

have been repeatedly forewarned of sharply lower market prices right in front of us. But,

this 1988 interview with Ron Paul shows that the problem has been building for a long,

long time. If we are to understand future trends and the viability of the proposed solutions,

we must take a critical look at the history of money.   

   

          U.S. Taxpayers Risk $9.7 Trillion on Bailout Programs, Feb9

          With All Due Respect Mr. President, That is Not True, Cato Institute, Feb9

        

         Clearly, we are watching the end of all sanity in our nations leaders. Thank

         goodness there are those like the Mises Institute and the CATO Institute, who

         understand that getting behind the largest expansion of the state in our

         history is horrible political and fiscal policy. If you are a corporate,

         political, academic, or religious leader in the US, I would encourage you to

         speak out against the continued destruction of our financial structure, and

         ultimately, our freedoms. 1835 US Debt - $33,733. Sept 2008 - $8.5 trillion.

         One of my subscribers sent me a link to a two minute video titled,

         "Are you going to finish strong?" Everyone that thinks the only answer for

         our lives today is a massive government built on trillions in monopoly money,

         needs to see this film. If you are becoming apathetic, watch this film.

          U.S. Stocks Rally on Speculation Jobs Data to Spur Stimulus, Feb6

          Job Loss: Worst in 34 Years, Feb6

          Officials Say Tentative Stimulus Deal Reached, Feb6

          CBO: Obama Stimulus Harmful Over Long Term, Feb6

          After watching one more rigged political rally today, in order to give investors the

          appearance that the continuation of massive socialization of the US is a good

          investment idea, I would strongly encourage you to read any of the material

          prepared by the Pete Peterson Foundation on our total debt. Where have we

          come, when our only solution is "You are driving too fast on this mountain

          highway. The only way to get down safer is to drive faster!"

          Brazil to Counter Meltdown with More State Aid, Jan12

          Wen Urges Steps to Reverse Slowdown Trend, Jan 20

          Swan Waiting on Data Before Deciding on Stimulus for Australia, Jan20

          S&P Downgrades Spain's Credit Rating, Jan20

          As we have watched the banking sector in the US decline sharply, once again,

          we all must remember, that this is a global condition. In order to understand

          this period in history, we must recognize that the expansion of the state's role

          in the US economy, is the same strategy being implemented around the world.

           US Banks Stay Mum on Bailouts, Dec 23

           Treasury Must Divulge Details on Bailout, Panel Says, Jan 9

           In the last few weeks, equity markets have been very complacent in the US, and

           have shrugged off almost every piece of painful economic reality thrown at them.

           Does this complacency bode well considering the lack of transparency coming

           from  the ground level of our financial system?

           In June 2006 issue of The Investor's Mind, we addressed why the great trust

           that has been given to the banking cartel known as the Federal Reserve, is a

           confidence few question during market booms. As we enter 2009, I have decided

           to release that issue for the general public. If you have an interest in our best

           research, and learning from a host of experts and charts, click here to subscribe.

           I have found that only by continuing my own learning as history changes the

           very world I live in, can I increase my odds in this highly deceptive time.

           Auto Bailout Collapses, Markets Down in Asia, Dec12  

           Auto Aid Plan revived as White House Mulls Loans, Dec12

           This morning, US history was made once again. The executive branch of the

           US government stepped in and overruled last night's US Senate's decision. At

           11:30 EST last night, the US futures market was down more than 4%. Yet, at

           today's open investors saw a quick recovery, finishing the day with a gain. ( Asia,

           Europe, US, Prices from www.cnnfn.com)

           So, how can the President overrule the Senate? By the powers created through

           the Executive Order, "National Security and Homeland Security Presidential

           Directive."  

           While, this halted the decline in US stocks that would have most likely ensued,

           should so much power reside in one branch of US government?

    

           While the Federal Reserve continues to refuse disclosure the contents of the $2

           trillion worth of garbage it has received as collateral from the financials and the

           bond markets reflect severe concern for short-term liquidity, what does this tell us  

          about the revered Efficient Markets Hypothesis's second assumption?

       

           "Information is readily available, and costless to obtain."

           Even more, with so much interference by so few in the government, how will our

           markets ever divest themselves of inefficient investments and companies?

           Wall Street In Late Day Rally, Dec5  

           As we finish Friday, Dec 5th, investors are greeted with a 259 point increase on the               Dow. This is even more rewarding for those investors who thought that Monday's

           680 point decline was triggered when a government agency stated that they finally

           knew we had been in a recession since December 2007. Thanks for the "quick"

           conclusions guys.

          Many mainstream market pundits are espousing, "just hold on", and that this is a

          "buying opportunity". Since Tuesday, learning that in the near future Americans

          may be hit with a Value Added Tax, already found in Europe, the hedge fund  

          industry is expected to have lost 45% of its assets between June08 and Nov08,

          and today, finding out that November job losses were the worse in 34 years, and US

          foreclosures were up 76% from a year ago, that group of individuals commonly

          referred to as "investors", actually pushed the Dow up again to close the week,

          just 2% lower than it opened Monday. Is this real or another bear trap? 

          If you believe that something very deceiving is unfolding, I would encourage

          you to join our group of subscribers. I have found they have a commonality.

          They are all highly skeptical and voracious readers. They understand that

          in this highly dangerous period, strategic thinking from a variety of minds is

          critical to keep your sanity and capital.

           Citigroup Gets U.S. Rescue From Losses, Cash Infusion, Nov 24

           As of today, November 26, investors in the US have seen a substantial rally off

           of the 6-year low last Friday, accompanied by massive bailouts: first, there was

           Citicorp, on Monday, and then consumer, student, small business, and mortgage

           loans on Tuesday.

           Since our leaders have gone mad, creating trillions of new debt, in their attempts

           to bring stability, let's consider how our founding fathers saw paper money. This

           film by Dr. Larry Parks should be taught at every college and presented by every

           major news station.

           Fed Defies Transparency Aim in Refusal to Disclose, Nov 10

           With the $2 Trillion the Fed has loaned to various financial institutions since

           September 14th, Bloomberg filed suit to force the Fed to disclose the recipients of

           the funds and the collateral it has accepted. Though the Fed and Treasury said

           they would divulge such information, its refusal to do so should come as no

           surprise:

           "The Federal Reserve System virtually controls the nation's monetary system, yet it

           is accountable to no one. It has no budget, it is subject to no audit, and no

           Congressional Committee knows of, or can truly supervise its operations."

           This statement comes from a short film produced by the Ludwig von Mises

           Institute in the 1990s. Begun in secrecy (18:12), the Fed has fought every call for

           its transparency (34:30). If you cannot watch the whole film, be sure to view the

           segments around the minute marks (noted in parentheses) above.

           9 Banks Including Citi, JP Morgan in Treasury Program, Oct 14

           Treasury: First Nine Banks to Get Funds This Week, Oct 27

           Dow Retakes 9000 in Furious Rally, Oct 28

          

           After a history making explosive rally, our emotions would want to see this

           as a very bullish sign for equity markets. But considering the fact that

           $250 billion dollars of new debt was created for the largest banks on Oct 14

           and Oct 27, are value investors leading these explosive one day rallies? Are

           these structural positives for the health of our financial markets?

          

           Click here and view charts on the Dow and a Banking Index over the last 3 weeks.

               

           Baltic Dry Index Drops Below 1,000 for the First Time in Six Years, Oct 28

           Dubai Property Market on Edge Amid Global Slowdown, Oct 28

           When one looks at global shipping, and the hot Dubai real estate market along

           side the performance of one of its major financial indices, you get a very different

           picture than "the worst is behind us." Sorry, but these don't seem like indicators

           one would find at a credit contraction bottom.  If you have lost a great deal of money

           over the last year, I strongly encourage you to consider reading, Traits of an

           Excellent Manager. This research,[ Section 4 of our historical research paper

           on short  selling, Riders on the Storm ( Jan06)], contains interviews with some of

           the most recognized short sellers in the world. It could never be more timely for

           investors, advisors,  and traders, around the globe. If you wish to see our ongoing

          comments regarding HOW to navigate this global storm, consider becoming a

           subscriber. Considering the size of losses I have heard from individuals

           contacting us in October, I believe you will find the cost extremely low.

           There will always be a bottom. The question I have been asking since 2004, is

           not WHEN will we be there, but how to avoid massive losses along the way as       

           our human tendency is to seek information we want to hear, versus arguments

           based on hard data that we need to see and hear.

 

            Alan Greenspan: I made a mistake, Oct 24 '08

            The "Maestro" states today that he made a mistake in how he perceived banks

            would protect their shareholders believing that it would have been in their interest

            to do so.  His mistake was that there was " a flaw in the model that I perceived

            is the critical functioning structure that defines how the world works."

            Can you imaging holding the what is arguably the highest financial position

            in the world and NOT understanding the relationship between fostering

            cheap credit through a fiat currency, with the results that your actions

            fostered the largest credit bubble in history? Can you imagine having this post

            and NOT studying the long string of credit bubbles as far as back as

            John Law's Mississippi Scheme in France during the 18th century?

            The following is a quote from Mr. Greenspan in Ayn Rand's Capitalism: The

            Unknown Ideal [1967]. This book states that  it is "a collection of essays on the

            moral aspects of capitalism:

           "The abandonment of the gold standard made it possible for the welfare statists

             to use the banking system as a means to an unlimited expansion of credit. They

             have created paper reserves in the form of government bonds which  -  through

             a complex series of steps - the banks accept in place of tangible assets and

             treat as if they were an actual deposit, i.e., as the equivalent of what was formerly

             a deposit of gold. The holder of a government bond or of a bank deposit created

             by paper reserves believes that he has a valid claim on a real asset. But the fact

             is that there are now more claims outstanding than real assets."

             (Alan Greenspan, Gold and Economic Freedom Essay, first published in

              the July '66 issue of The Objectivist.)

            "Government regulations do not eliminate potentially dishonest individuals, but

             merely make their activities harder to detect or easier to hush up. Furthermore,

             the possibility of individual dishonesty applies to government employees fully

             as much as any other group of men. There is nothing to guarantee the superior

             judgment, knowledge, and integrity of an inspector or bureaucrat - and the deadly

             consequences of entrusting hum with arbitrary power are obvious. Capitalism is

             based on self-interest and self -esteem; it holds integrity and trustworthiness

             as cardinal virtues and makes them pay off in the marketplace." (Alan Greenspan,

             The Assualt on Integrity, first published in the Aug '63 issue of The Objectivist)

             From my years in this business, and from reading Greenspan's comments

             for 2 decades, I can come to no other conclusion than the man is either

             delusional or a pathological liar.

             I would also encourage anyone seeking to understand Mr. Greenspan's true

             record, to read Dr. Larry Parks book, What Does Mr. Greenspan Really Think?,

             and Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve by

             William Fleckenstein.

             Dow Sees Biggest RunUp Ever, Oct13, 

             Bank Stocks Miss the Rally, Oct 13

             As central bankers around the world are ready to guarantee every deposit on

             the planet, and hundreds of billions in new paper money (debt) is coming

             from Europe to the US, why would the largest bank in the US, NOT join today's

              party? Why would the banking index LAG the rally?

              Germany Moves to Shore Up Confidence in Economy

              Financial Crisis: Asian Countries Join Global Push to Cut Interest Rates

              Financial Crisis: £500 Billion Bailout Helps Stabilise Banks

              Iceland Suspends Trading After Banking Seizures

              Putin May Boost Russia's Power as Iceland Seeks Loan

              Gordon Brown Seeks Legal Action Against Iceland

              U.S. May Take Ownership Interest in Banks

              Oct 5 - Oct9 '08

                            

              Over the last year, investors have been inundated with the term "credit crisis".

              Sadly, I am finding more and more investors who never understood that

              these were the signs of market declines to follow. The headlines above,

              reflect that credit and markets are also shifting international alliances.

               Blue-Chip Stocks Suffer Worst Single-Day Point Decline, Sept 29

               Feds Pump $630 Billion into [Global] System, Sept 30

               Dow Rebounds 485 points in Session, Sept 30

               No Bailout; House Blocks 700 Billion Deal, Sept 29

               Ray of Hope as US Shoots for Bailout II, Oct 1

               Now I ask you, is it really all that hard to see who is in control?

               Nouriel Roubini's: Paulson's Plan A Disgrace, Sept26, by Mish Shedlock

               An Action plan for Americans today and Sunday. Since we have been told

               Washington must ram this "rescue plan" through as soon as possible,

               then "We the people" should go into action. While I don't think this will stop

               the passage of what history will look back on as the worst piece of legislation

               forced on the public, we can at least tell our children and grandchildren we

               voiced our opposition to this increased concentration of powers, i.e. the new

               office of US Treasury Czar, and the next step toward the destruction of our

               capitalistic way of life. When Barclays in the UK can buy the North American

               operations of Lehman Brothers, the largest underwriter of municipal bonds

               before they filed bankruptcy, for $1.5 billion, and save 10,000 jobs, are we

               certain that the only way to halt the enormous demand for cash infusions by

               banks is to allow the US Treasury to raise the national debt almost

               a trillion dollar in one bill? Oh, and where is the clear explanation for why the

               hundreds of billions in bailouts over the last year have yet to regain "investor

               confidence"?

               Hedge Funds Wrestle with Short Sell Ban, Sept 25

               In their rush to act, paper the world in fiat, and declare market declines

               unlawful and immoral, by restricting those "evil short sellers," our illustrious

               leaders must have forgotten that market makers, attempting to offset their risk

               by maintaining a neutral stance, and hedge funds who run

               long-short strategies based on math models, comprise the majority of short

               selling volume. So if a politician or media pundit tells you that short selling must

               be banned, tell them you have a better idea, let's ban their ability to destroy

               our money. Oh, and did you know there was no ban placed on a CEO of these 

               same companies being able to dump their own stock during the temporary ban

               on those seeking to short their stock?

               The Unraveling of the Shadow Banking System moves to Hedge

               Funds, Dr. Nouriel Roubini, Sept 23

               Bernanke: Approve Bailout or Risk Recession, Sept 23

               Mad as Hell - Taxpayers Lash Out, Sept 21

               Letter From Edward Yingling, President and CEO of the American

               Bankers Association, to Fed Chairman Ben Bernanke, Sept 19

               Letter to Congress, Three Fatal Pitfalls, Signed by 66 Economics

               Professors, Sept 24

               "The origins of all quakes are essentially the same. The action always starts

               when the rocks along a tiny segment of a fault begin to slip. How big the quake

               turns out to be depends not on the triggering event, but on where it happens; on

               whether it trips only a short chain of slipping events in the rocks farther afield, or

               taps into one of the long 'fingers of instability' that runs a long way through the

               crust."

               SEC Halts Short Selling of Financial Stocks to Protect Investors and

               Markets, Sept 19

               Are we to believe that legal short sellers were the only downward influence on    

               stock prices? Or has anything happened in the last 12 months that would cause

               rational investors to want to sell their financial stocks? If prohibiting short selling

               is the way to stabilize financials, then why not do the same in tech, medical,

               housing, retail, etc? Or, maybe this is not about short selling. All we need to do

               is look at opening prices to see that it is NOT what is happening during regular

               trading hours that is causing these companies their greatest declines.

            

               UK Regulators Stops Short Selling of Bank Shares, Sept 18

               FSA statement on short positions in financial stocks, Sept 18

               With options expiring tomorrow, it looks as though something had to be done

               after the SEC's new "naked short selling" rules failed to initiate a strong rally,

               especially in financials, as can be seen in these charts: Dow, Brokerage Index,

               Banking Index. Or was just a random event on another ordinary day? 

               SEC Stiffens Short Selling Rules Amid Market Turmoil, Sept 17 '08

               SEC Issues New Rules to Protect Investors Against Naked Short

               Selling Abuses, Sept 17 '08

               In the heat of a market meltdown, we should stop and ask, "Are the markets

               dropping as the natural consequence of destroying the dollar for decades and

               the collapse of trillions in complex, opaque, illiquid debt instruments or because

               of the 'naked short sellers?'"

               In Riders on the Storm, our research paper on short selling, we addressed this

               very accusation, noting that when shorting rules were revised in 2006, the door

               was left open for those who short illegally. If today's action is an honest attempt

               to restore the integrity of our markets, we applaud the SEC's efforts. But, with

               this change, like the emergency order of July 15th, being initiated within days

               of options expiration, we cannot help but ask, "Why now?" It is far more likely that

               the markets' turmoil of the last 2 weeks is the result of long investors making

               sell decisions on real financial information.

                A Bailout for Lehman? Not Likely, Sept 12 '08

                Washington Mutual Shares Sink Below $2 on Capital Concerns, Sept 11

        

               After the largest bailout in history on Monday (Fannie and Freddie), institutional

               investors and fund managers holding financial stocks were met with the more

               bad news from a 158 year old investment house and the largest credit union in

               the country. And still the Dow closed the day less than 1.8% below its January

               2008 bottom of 11,634. What's wrong with this picture?

           

           

               SEC paves way for switch to international accounting system, Aug 28

               FDIC: 117 troubled banks, highest level since 2003, Aug 28 ‘08

               UK House prices face a plunge of 10.5%, Aug 29 ‘08

               Bank of China flees Fannie-Freddie, Aug 28 ‘08

 

               As we head into a relaxing Labor Day weekend, the SEC seeks to change from a

               national to an international accounting system, the FDIC notes the largest

               number of troubled US banks since 2003, the UK housing market is in its

               sharpest price decline in 18 years, and China’s fourth largest bank is selling

               $4.6 billion in Fannie and Freddie bonds. Is globalization progressing smoothly?

               Will nations share each others pains with the same fervor as they shared gains?

               I.O.U.S.A.: Live with Warren Buffet, Pete Peterson, and David Walker

              On Thursday, August 21st, this documentary will be shown in over 400 theatres

              around the US. If you're in a position of leadership or if your decisions have a

              financial impact on others, I encourage you listen to the perspectives from some

              of the highest levels of leadership in the US.

             

             Dow Gets 331-point Boost, August 5, 2008, CNN Money

             Sadly, many market pundits look for a story that fits the market's daily direction,

             since they have no time to do any research. The article must go to press almost

             instantly after the markets move. If the markets move up or down the next day,

             they look for a new story to explain that day's movements. This has created

             an environment where comments have no connection with a series of events or

             any longer term trends.

             If you look at the history of the NASDAQ, you will find that the most powerful up day

             in the history of the NASDAQ was not in 1998 or 1999, but almost 9 months into

            

          

             Paulson Sees Fannie, Freddie Share Purchase, 'Only If Necessary', July 15

             Paulson Seeks Authority to Shore Up Fannie, Freddie, Bloomberg,

             July 13, '08

             "Treasury Secretary Henry Paulson swung the weight of the Federal Government

             behind Fannie and Freddie.." Now with a weekend of intense talks about what

             needed to be done to stop the hemorrhaging at two Government Sponsored

             Entities, both stocks went from opening up 32 and 16 percent respectively, to

             closing by the end of the day down 5 and 8 percent. Yes folks, that was the stock

             fluctuation on two entities that hold or back 5 trillion in mortgages, about half the

             outstanding mortgage debt in the United States. Now contrast that number to the

             total outstanding public debt in the US. Finally contrast these numbers with the

             through the Lens of History.

         

             Goldman Sachs Does it Again, CNN Money, June 17, 2008

             According to this article, Goldman Sachs has the Midas touch. But, those

             concerned with future earnings may want to consider little details - like

            "leveraged loan issuance falling 74% in the first quarter while loans backing LBOs

            plunged 88 percent." Or, consider Doug Noland's June 13th Prudent Bear article,

            noting "Asset Backed Securities Issuance is running at 27% of its comparable

            level from 2007. Home Equity ABS Issuance is running at $303 million compared

            to 2007's $184 billion. Year-to-date CDO issuance of $13.8 billion compares to the

             year ago $208 billion."

           

            Citigroup leads drive to hurt Taxpayers, Bloomberg, May 9, 2008

            Banks Say Auction Rate Investors Can't Have Money, June 9, '08

            When city and states have to pay $5 to $10 million to Wall Street to get out of

            investments they were sold by Wall Street, while banks and brokers prohibit   

            individual investors from selling "safe-as-cash" investments the investors were

            sold by the same, should we be confident? What other questions are investors

            not asking because they are afraid to investigate?

 

              Crisis of Confidence Includes Consumers, March 17, 2008, Gallup

               When you read that one of the largest brokerage firms in the US experienced

               "an old fashioned 'run on the bank' ", and that the Fed is working to "stabilize" the

               situation by expanding the government's role as fast as the debt markets are

               losing money in the private sector, is there a reason to be quickly looking at other

               investment strategies besides buy and hold?

               If you have not changed from your basket of buy and hold investments, you may

               want to consider the following:

    1. Are you asking tough questions to your bank regarding the safety of you cash reserves? If not, why not start now?  
    2. If fashions change, tides come in and out, and weather changes, would it not be prudent to look for trends to come to an end?
    3. With almost every economists now espousing that we are either in or     going into a severe recession or even a depression, how long will it take you to gain back your investments in the months ahead should markets decline sharply as history teaches?
    4. If your advisor is not familiar with the tool known as short selling, then    just have them call Goldman Sachs after reading this article we posted   
    5. last fall. In fact, do some homework, and google "inverse or bear funds."
 

  As Bill Fleckstein stated recently in Gretchen Morgenson's column in the        NYTimes, "We are a Bailout Nation". I don't know about you, but that does

  not sound sustainable. To subscribe to a publication that has been

  asking questions since Janaury 2006, click here. Our content has moved

  to weekly from monthly as of March 1, 2008 due to the speed of

  government intervention, and the extreme loss of historical perspective.

                JPMorgan Scoops up troubled Bear, CNN Money, March 17, '08  

                Foreign Investors Veto Investors,International Herald, March 17, '08       

               According to the OCC, JP Morgan has the largest derivatives exposure of any US

                bank. When a company like this purchases Bear Stearns, one of the US's top

                five brokerage houses for $2 a share, when Bear traded at $170 a share in

                January of '07, should we be surprised if the Dow or the S&P 500 drops

                substantially in the next few weeks or months? Destroying the dollar looks to be

                running out of favor with the international community. Those that haven't started

                asking some very hard questions of their money managers may pay the ultimate

                financial costs.     

                     

               

                Syria Vows to Strike Back at Israel, February 15, 2008, DEBKAfile  

                On February 13, Mughniyeh, one of the most lethal terrorist of the last twenty

                years, was killed in a car bomb. In reaction, Lebanese, Iranian, and Syrian

                leaders call for a war on Israel. If the "humanitarian crisis" in Gaza looked like

                war preparations, Mughniyeh's death is the excuse to start it. The last three

                weeks contain many parallels to the weeks leading up to the Six-Day War in

                June 1967. As we seek to stay abreast of this developing crisis, I encourage

                you to compare your news sources with those of www.debka.com. As this

                situation heats up, those living in a democracy or republic should investigate

                Walid Phares latest book, The War of Ideas: Jihad against Democracy.

                Trading in CDOs slows to a trickle, February 11, 2008, Financial Times  

                "Just three CDOs worth a total of $1.3bn were sold last month - one in the US                         and two in Asia - compared with 37 deals worth $22 bn in January 2007,

                according to analysts at Morgan Stanley."

                In the June 2006 issue of The Investor's Mind we stated the following

                with a chart on the derivatives growth from the Office of the Comptroller

                of the Currency: " The credit derivatives market has grown at 75 percent per

                annum from $55 billion to $5,472 billion in little over eight years. The OCC's

                stated objective is, 'To ensure the safety and soundness of the national

                banking system.' The more we find out about the derivatives market, the more

                likely we are to question whether they're achieving their goal."

                If you are just now coming to grips with the foundational problems in our

                capital markets, and have never taken a hard look at the history of the financial

                world, let me strongly encourage you to take a crash course by reviewing our

                more than 2 dozen lessons written since Jan. 06. A current subscription,

                allows you access to the past 2 years of our research. Denial of our current

                juncture is only going to become more costly.

        

                          

                Societe Generale trader wanted to be a star, officials say,

                January 28, 2008, International Herald Tribune

                With the January 22nd and 23rd window of relief, pundits have tried to explain

                our previous steep sell off. Some suggest the $7 billion a trader at a French

                Bank lost, triggered the sell off, while others contend that it was the bailout of

                two of the largest bond insurers in the industry, who together insure more than

                $2.5 trillion in debt. Or maybe these are simply two more stories reflecting an

                ongoing credit contraction that is unresponsive to cheap credit. In fact, this

                Sacramento article shows that the more bureaucrats try to intervene by lowering

                rates, again, the more they compound the problem they helped to create.

              

                U.S. Stock Futures Point to Major Decline on Re-Open, January 21,   

                2008, CBS Marketwatch     

                As investors continue moving from greed and complacency to fear, only a few

                market commentators have discussed the possibility of accelerating declines.

                Similar to the logic-defying force of the crowd on the way up, are the downside

                adjustments that coincide with the crowd's realization that the force of nature

               has never been overcome by new financial schemes.

   

                The following quote, by Dr. Benoit Mandelbrot, discoverer of fractal geometry, 

                is found in our September 2006 newsletter, "Too Costly To Bear:"

                "The size of price changes clearly cluster together. Big changes often come

                together in rapid succession, like a fusillade of canon fire; then come in

                minor changes, like the pop of toy guns."

                If you are accepting anyone's opinion of what the market will do in the future

                without critically questioning that opinion (this includes us, too), you are setting

                yourself up for failure. 2008 is already proving how unforgiving markets can be.                

                UBS to launch global warming derivatives index, January 9, 2008,

                Financial Times               

                Those who think global warming is just a political discussion, fail to understand

                Wall Street's product manufacturing mentality. The more debt central bankers

                produce, the more new products roll off the shelves. We shouldn't be surprised

                by their lack of familiarity. Nor should we be surprised by the many investors who

                claim they never understood all the risks that came with the highly-rated and

                highly-leveraged credit instruments that have been unraveling since mid-2007.

               

                China Property Bond Risk Rises to Record, January 11,2008, Singapore  

                Property Press          

               

                With all the negative US real estate market headlines, it is easy to miss the fact

                that this great credit mania has dramatically impacted property values and risks

                from China to New Zealand to England to such off-the-beaten-path places as

                Kazakhstan.

               

                Fed to Lend $60 Billion to Ease Credit Crunch, January 4, 2008,

                CNNMoney.com

                With the markets rattled and fear rising, the Fed announces that they

                will increase more short term loans starting with the next auction on January

                14th. Investors should also note the much larger extension of short term

                loans announced today by the European Central Bank.

                RBI Permits Shortselling by Foreign Investors, January 1, 2008, Hindusta

                Times

                Much like the elimination of trading curbs and the short-sell, plus-tick rule in the

                second half of 2007, in the US, India is now allowing institutions to sell short on

                a limited basis. While the efforts of legal short sellers improve the quality of

                information on companies they investigate, our research, in "Riders on the

                Storm," considers the timing of these changes? Whether one employs short

                selling or not, knowing the history of short selling, during and after prior manias,

                will prove useful to us all.

              The Shadow Knows, Bill Gross, December 2007 Investment Outlook

                When Blackstone, one of the largest private equity dealers in the world, notes

                a "reluctance of big banks to lend," and the world's largest bond manager, Bill

                Gross, states that "Fed ease has lowered Treasury yields, but for the rest of the

                market — the segment that influences the bottom line of U.S. corporations,

                homeowners, and consumers — not much has changed," we can be sure that

                a crisis is upon us. When we consider the effect this is already having on state

                and municipal revenues, we begin to glimpse how widespread the impact from

                the credit mania turned bust will be.     our Fear & Perception article, suggests that China's trend is nearing its end.

                "These Are Not Normal Times," LA Times, December 20, 2007

                When Treasury Secretary Paulson uses the words "market failure" seven times,

                while President Bush urges Wall Street to come clean on the amounts of their

                mortgage related losses, while Wall Street's biggest banks decide they don't

                need the superfund that was necessary to maintaining liquidity only two months

                ago, we can all agree with Paulson's observation: "these are not normal times."

               

                Citi moves $49 billion onto balance sheet, December 13, 2007,

                CNN Money

                         

                China, Playing It Safe, December 11, 2007, RiskCenter

                Hog Wild for China, Fortune, December 24, 2007

                "In 2007, [China's] current account - a broad trade balance - will register a $400

                billion surplus, about 12 percent of gross domestic product. That's up from $21

                billion, or 1.7 percent of GDP, in 2000. As a share of GDP, China's surplus is

                'triple Japan's level in the 1980s when Japan-bashing was at its peak.'"

                Though I respect Jim Rogers' long-standing public criticism of the credit bubble,

                our research of global equity markets, manias and operational problems, see

           

                As they simultaneously try to address overvalued markets and contracting credit,

                central bankers’ have taken dramatic actions in the fall of 2007. In an attempt to

                maintain our current market and economic circumstances, the U.S. Federal

                Reserve has cut the Fed funds rate three times since September 17th, while, for

             

                 CDOh no!, November 8, 2007, The Economist

                In our September 2006 newsletter, we used sand pile studies to discuss the

                inter-dependence of individuals within the markets, noting that "the motion in

                one grain can induce motion in thousands of others." As default rates on

                subprimes continue to accelerate, banks, brokers and insurers are taking huge

                losses and bond issuance has fallen 65 percent from last year. When we are

                overwhelmed our natural tendency is to deny that our corner of the world will be

                impacted. We must not allow this tendency to go unchecked.

               

                 Subprime Panic Freezes $40 Billion of Canadian Commercial Paper,

                 September 25, 2007, Bloomberg

                 As we noted in our public article, "What Lies Beneath," defaulting mortgages

                 are causing the commercial paper market to seize. Many companies who lent

                 their money in the commercial paper market are not receiving their principal

                 back upon maturity. As potential lenders lend less or not at all, this will intensify

                 the liquidity crisis.

       

                 Goldman pulls off profit despite subprime woes, September 20, 2007,

                 MarketWatch

                 One thing most investors forget when talking about the short side of the

                 market is that your big brokerage houses use short hedging strategies as part

                 of their market operations. Evidently, some players know how to do this better

                 than others.

                 Paulson Sees No End To Credit Turmoil, September 11, 2007, Reuters

                 How can the US Treasury Secretary state, "This is far and away the strongest

                 global economy I've seen in my business lifetime," on July 11th, and then state

                 that he sees the current credit crisis impacting confidence longer than any

                 previous shock of the past two decades? Does this include the Long Term

                 Capital's 1998 implosion and the stock market meltdown from 2000-2002?    

               

                Panicked Customers Rush to Withdraw Savings from Northern Rock,

                Sept 14, 2007, International Herald Tribune depositers

                  

                A Liquidity Squeeze - Banker's Mistrust, August 16th, The Economist

                With the inability to distinguish good borrowers from bad ones, many banks

                have become unwilling to lend to each other. It's not just the risky hedgies they

                must worry about, but money market funds nowadays. As the Fed and central

                banks the world over, continue to inject liquidity and the Big 4 step to the Fed 

                window to take it, a panic rush to safety still ensues. Nouriel Roubini gives an

                excellent explanation as to why the uncertainty continues, with his last three

                paragraphs showing the extent of the leverage employed and how some money

                markets have assumed severe risks.

               

                "There seems to be a natural tendency in markets for past successes to lead

                to more-risk taking, more leverage, more funding, higher prices, more collateral

                and, in turn, more risk-taking."

                Is adding liquidity a short term band aid, or a long term solution? If you think

                this is just academic theory, I implore you to check out Riders on the Storm:

                Short Selling in Contrary Winds. Can you think of a more timely item to learn?

                With the intense emotional feelings that occur during large price swings, I would

                encourage you to download and read this piece by Dr. Janice Dorn, The Trading

                Doctor. Dr. Dorn was interviewed for the December 2006 issue of The Investor's

                Mind.

      

                Booming Equity Markets Attract More Money, August 9, 2007, China Daily

   

                Let's connect the dots from a real world perspective. Our human nature is

                to buy in AFTER the good numbers are posted, and the better the numbers, the

                fewer the questions. Let's look at one of the most explosive markets of the world

                in the last two years and see if we can see this pattern. The money supply,

                that is, the debt that can be created out of thin air by a central bank, has grown

                by 18.5% as of July 2007 on a year-over-year basis. This has forced consumers

                to use more of that freshly printed credit to purchase items, due the mystery of

                "inflation". But that's not all. Since investors have the innate ability to buy based

                on stories of PAST returns, what better story to sell that the Shanghai's rise

                over the last 2 years, a major beneficiary of the credit boom. At some point the

                reality to this scheme starts to sink home, that an explosion of credit has some

                very painful side effects when markets return to earth, and skeptical thinking

                becomes more vogue than the feeling from mania wins in the "casino".

           

                Subprime Loan Crisis May Impact Some Chinese Banks, August 8, 2007,

                China Daily

                BNP Paribas [a French bank] Suspends Funds Because of Subprime

                Problems, August 9, 2007, International Herald Tribune

                Credit Risk- The US Subprime Collapse Spreads Into Germany,

                August 9, 2007, Risk Center

                China Threatens "Nuclear Option" of Dollar Sales, August 8, 2007,      

                UK Telegraph

                                                     

               Young Going Crazy For Credit, July 19, 2007, China Daily

               "A survey conducted by Daily Business News showed that by the end of this year

               China will have 60 million credit cards, 80 percent issued after 2005." Note the

               connection between the growth of China's money supply over the last five years,

               as noted in the Asian Development Bank's Outlook 2007, the Shanghai Stock

               index's explosion since the summer of 2005,and the People's Bank of China's

               decision to raise rates for the third time this year.

        

               Bear Stearns Tells Investors No Value Left, July 18, 2006, Bloomberg

               Today, after the fifth largest brokerage firm in the country stated that $20 billion

               in 2 of their hedge funds, containing securitized subprime mortgages, collapsed

               such that one has no value and the other only 9 cents on a dollar, most investors

               and advisors are still unaware of the effect this will have on our markets.

               Iran Asks Japan to Pay Yen for Oil, July 13, 2007, Bloomberg

               For those who were familiar with the material contained in our March 2006

               issue: Oil and Water Do Not Mix, this event came as no suprise. However,

               the history of oil and money in Iran [Persia] has a long history prior to the

               development of the petrodollar in 1973. An overview of this history was

               presented in our January 2007 issue: Persia-Fuel for the Fire.

           The Greatest Economic Boom Ever, July 12, 2007, CNN Money

   

               "'This is far and away the strongest business economy that I have seen in my

               lifetime,' U.S. Treasury Secretary Hank Paulson declared on a recent visit to

               Fortune's office." Compare this statement to that made by former Bank of

               England Governor, Eddie George, as noted in the March Investor's Mind.

               "In the environment of global economic weakness at the beginning of this

               decade ...external demand was declining, and related to that, business

               investment was declining. We only had two alternative ways of sustaining

               demand and keeping the economy moving forward- one was public spending

               and the other consumption.

               We knew that we had to stimulate consumer spending. We knew we had

               pushed it up to levels which couldn't possibly be sustained into the medium

               and long term. But for the time being, if we had not done that, the UK

               economy would have gone into recession just as the US did."

                 

               Dow spikes 283 points, July 13, 2007, ContraCosta Times

               While various media pundits try to explain the reason for the Dow's recent

               explosive day and move towards 14,000, what should investors and advisors

               make of the fact that Standard & Poor's stated that it would lower the rating of

               612 bonds, and Moody's stated that it would downgrade 399 bonds, before the

              explosive day. The sad reality is that it was not a mystery.                

      

            Looking for Contagion in All the Wrong Places, July 2007, Bill Gross,

                PIMCO Investment Outlook

               Paulson: Housing 'at or near bottom', July 2, 2007, CNN Money

              

               BIS Warns of Great Depression from Credit Spree, June 25, 2007,

                UK Telegraph

               "Virtually nobody foresaw the Great Depression of the 1930s, or the crises

               which affected Japan and southeast Asia in the early and late 1990s. In fact,

               each downturn was preceded by a period of non-inflationary growth exuberant

               enough to lead many commentators to suggest that a 'new era' had arrived."

              

               For more details, see the Conclusion to Bank of International Settlement's 77th

               Annual Report on our Research page.

              

              

               SEC: 12 Debt Probes Underway, June 26, 2007, CNN Money

               "The Securities and Exchange Commission has opened 12 investigations

               into collateralized debt obligations (CDOs) linked to the sinking subprime

               mortgages." With the recent developments at Bear Sterns, is this a harbinger

               of higher markets? If we're in the early stages of investigating the CDO markets,

               the developments that led to the Sarbanes-Oxley Act could be instructive. Bear in

               mind, the month Sarbanes-Oxley was signed into law, was also the month that

               saw the largest stock fund redemptions in the 2000 to 2002 crash. But hey, why

               study history, right?

              

             

               Merrill Sells Assets Seized from Bear Sterns, June 21, 2007, CNN Money

  

                        

               Bear Stearns' Hunt for Big Cash, June 13, 2007, BusinessWeek

               In what looks like another crack in the sub-prime dam, Bear Stearns is

               attempting to sell $3.86 Billion worth of mortgage-backed bonds to raise the

               cash it needs to bail out its own High-Grade Structured Credit Strategies

               Enhanced Leverage Fund. In a case of he-said-she-said, after a questionable

               first quarter, this fund, with leverage of 3 to 1, is down 23 percent for the year and,

               with investors looking to withdraw half the fund's assets, suspended investor

               redemptions. For those who wonder how this mess will turn out, we need look

               no further than Kevin Duffy's most recent article.

               G8 Agrees to Reach Global Warming Agreement, June 10, 2007,

               Environmental Leader

               Though global warming gains more and more headlines, is this trend in the

               earth's temperature really that unusual? As big business and global government

               lead the charge to stop CO2 emissions before we "destroy" the world, no one

               seems to be asking whether this is the most pressing issue facing the U.S. and

               the globe. Yet, with all these [in]vested interests, I am sure that this issue is here

               to stay.

        

               Greenspan warns China stocks primed to fall, May 24, 2007, CNN Money

              "It is clearly unsustainable. There's going to be a dramatic contraction at some

              point." China's national stock exchange grew at an annualized pace of 70   

              percent, then contracted, then grew at an annualized pace of 291 percent, then

              contracted, and has most recently grown at a annualized pace of 526 percent. So,

              why should Greenspan's comments be considered anything out of the norm?

              Today, May 30th, 2007, the Shanghai Composite closed down 6.5 percent. A

              number of days ago, this same index suffered a one-day decline of 8.8 percent.

              Now I ask you, was this decline a result of my May 23rd, 2007article on parabolic

              rises, Greenspan's comment on March 24th, or, more likely, just one more grain

              of sand on a large, unstable sand pile built by mammoth amounts of credit?

                      

              Not the Markets of the 1990s, May 18, 2007, Doug Wakefield

              Dow Jones Islamic Global Indices , Chicago Climate Exchange,

              Weather Futures: Chicago Mercantile Exchange,

              NewsFutures Prediction Market, TradeSports Exchange

              

              These markets didn't even exist in the 1990s, yet we need to be aware of

              them. As the rampant expansion of credit fosters “financial innovation,” a whole

              new group of markets has come online with which no individual, institution,

              market maker, or government has any long-term experience. This flood of new

              financial alternatives certainly doesn't fit with the traditional buy and hold

              investment models.

   

              Disclaimer: Since I have no experience with any of these specialty markets, this

              is not intended as "investment" advice for these exchanges or their products, or

              their appropriateness as part of a "balanced" portfolio.

            

               Stock Buying Fever Grips China, May 10, 2006, China Daily

           

               Since the Dutch Tulip Mania of the 1630s, parabolic rises have always ended

               badly.

              Jeremy Grantham: All the World's a Bubble, April 27, 2007,TheStreet.com

                 

             

           The World Islands, Ten Real Estate

              New Jersey Diverts Billions of Dollars From Pension Fund, April 4, 2007,

              China View

                            

              The Richest City in the World, March 12, 2007, CNN Money

              A-Share Accounts Daily Opening at 90,000, January 26, 2007, China Daily

              The China Securities Depository and Clearing Corporation noted individuals are

              opening an average of 90,000 new accounts a day, compared to an average of

              2,708 new accounts per day in January 2006. The Shanghai Stock Exchange

              Composite Index rose from 998, on June 6, 2005, to 2993, on February 15, 2007.

              Does this have an effect on the number of new accounts?

              Merrill Lynch Sounds Alarm on Global Liquidity, February 6, 2007,

              Telegraph

              When I took my first course from the College of Financial Planning, in 1985, an

              illustration of economic cycles was part of our basic teaching on risk. Yet

              throughout the '90s and since 2000, I'd not seen an illustration on economic

              cycles. It was as though, in the forum of "conventional" finance, cyclicality had

              ceased to exist. Seeing the chart in this article took me back to 1985.

               World Economic Forum    

              Modern Marvels: Engineering Disasters - Teton Dam, History.com

              What could financial engineers learn from talking with civil engineers? Does

              nature have any lessons for market participants today?                  

                         

              New "Warehouse" for Derivatives, November 17, 2006,

Ellen Silverman, Risk Center

"It is the first time that a centralized 'warehouse' of this type has been

created in the 'over-the-counter' derivatives sector," which will make it

possible to "record, monitor, and help process trades in the credit

derivatives markets." With the new CDO's, in the article below, and a $26

trillion credit derivatives market, I am glad that someone has finally been

able to put together a 'centralized warehouse.' Better late than never. You

may also want to read the July issue of The Investor's Mind.

New CDO Uses Leverage to Counter Narrow Spreads

Inside Moody's: Structured Finance, Winter 2006

Just when you thought leverage couldn't expand any further, the boys in

product development roll out some new toys. Read this and the "Global

Derivatives Explosion" article under our Research tab, and then ask

yourself if this tool is suitable for any investor, sophisticated or otherwise.

 

Near a Housing Bottom? November 8, 2006, Paul Kasriel

David Lereah, Chief Economist for the National Association Realtors,

states that  the recent NAR survey results indicate a stabilizing market.

Lereah states, "the worst is behind us as far as a [real estate] market

correction." Riders on the Storm contains an August 2005 LA Times

Lereah quote, stating "If you paid your mortgage off, it means you

probably did not manage your funds efficiently over the years. It's as if you

had 500,000 dollar bills stuffed in your mattress - very unsophisticated."

     

GAO Chief Warns Economic Disaster Looms, October 28, 2006,

Matt Crenson

David Walker, Comptroller General of the United States and chief of the

Government Accountability Office (GAO), is touring the nation in a

Fiscal Wake-UpTour to try to draw attention to the unsustainability of our

nation's current fiscal policy.

"The ship of state is on a disastrous course, and will founder on the reefs

of economic disaster if nothing is done to correct it."

     

Market Risk - World Regulators Focus on Derivatives October 4,

2006, Ellen J. Silverman, RiskCenter

“Officials from Britain’s Financial Service Authority, the Federal Reserve

Bank of New York and SEC want to tighten up derivatives markets, where

explosive growth in recent times has fueled fears of potential financial

disaster.”

  

Raising the Volume: The Explosive Growth of Exchange-Listed

Options in the U.S. September/October 2006, Jim Binder

“After a year of no growth at all in 2002, year-over-year options volume

rose by 16% in 2003, 30% in 2004, and 27% in 2005. In contrast, the

combined stock trading volume of the New York Stock Exchange and

NASDAQ actually declined by 3% in 2003, then rose by just 6% in 2004,

and 4% in 2005. More recently, stock market trading accelerated in the

first half of this year, with volume up 16% over the same period last year.

That still falls far short of the growth rate in the options business, which

rose 45% in the first half of 2006.”

 

An Inflection Point in China's Banking Problem, June 6, 2006,

Dr. George Friedman, Stratfor

China's booming economy has lead many to overlook the "small"

problem of its non-performing bank loans. This changed in May, when

some highly visible organizations came out with reports revealing the size

and scope of bad loans in China's banks. Clearly, China's banking

industry has reached "an inflection point."

      

A 'Fiscal Hurricane' is on the Horizon, November 14, 2005, USA Today

Comptroller General of the United States, David Walker states, "we face a

demographic tsunami" that "will never recede." It seems gloom and doom

is no longer relegated to the lowly. Indeed, pessimism has reached a

lofty perch.

Federal Reserve Statistical Release, Discontinuance of M3,

November 11, 2005

Effective March 23, 2006 the Federal Reserve will stop reporting M3. Since

this measure of the money supply has expanded by $1.2 trillion in the last

24 months, and $430 billion in the last 5 months, it is not difficult to guess

why this has occurred. Never fear. We can still extrapolate the information

from the governments quarterly flow of funds report which contains 93

other reports.

The King of Real Estate's Cashing Out, October 25, 2005,

CNN Money

"Tom Barrack, arguably the world's greatest real estate investor, is

methodically selling off his U.S. real estate holdings as prices drive the

market to nosebleed levels." Just one more warning signal for those

caught by the mania. 

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