As of 12/20/2009, the CPI adjusted 2000 dollar is worth 77.94¢, and the CPI without lies adjusted dollar is worth 47.96¢. The world purchasing power value has dropped by 10-20% more (based on other measures of dollar value), for a drop of 55-65% (otherwise known as inflation) since 2000, and more since 2002 when the dollar value peaked.
Our comments & predictions...
... as things change and develop
Possible turning period, repeating...12/27/2009
We've isolated a likely turn date range of between 12/28 and about 1/17 per our cycles and other indicators, but aren't "religious" about it - we'll still not fight the markets or their displayed trends, especially since more than a few others are expecting a turn during this period.
Note also that FASB has apparently backed off again on tighter accounting standards in the mark-to-market areas - FASB 157. For those that may not know, the SEC is over FASB...
Update 12/29/2009 - Best guess, 2010 will be a year of unusual volatility and sharp, moves that will reverse rapidly as the dozens of extant major economic and political issues ebb and flow... and as real fundamentals return to more favor and attention... BWTFDIK.
Some bloggers and economists are currently trying to sell the mistaken "interesting view" of bank lending preceding deposits and reserves. The actual historical facts since 1950 show otherwise (click for chart).
Update 1/1/2010 - Most weekly charts have been updated. The Fed & Treasury published early. COT charts will be published on AMondasy, soon after the data relaease.
Holiday schedule, etc...12/19/2009
Most weekly chart updates will be delayed from their normal Friday afternoon time until Monday afternoon, due to the holidays and delayed reporting from the Fed, Treasury etc.
Repeating due its importance: NB: FASB is on the move with attempted changes back towards mark-to-market, after loosening up date coincident with the stock market bottom in March - fair warning...
Probable continuation of the dollar uptrend, and pressure on precious metals.
Update 12/20/2009 - 4:29 PM EST Over 70% chance per our work that there will be a large down day tomorrow, barring massive behind-the-scenes intervention..
Update 12/21/2009 - Crash alert still live, and combines well with our other work which points at a large turn between 12/28 and 1/16 or so.
Update 12/23/2009 - 8:11 AM PT, lightened up about 1/3 and took profits (pre 3 day weekend and holiday) on PM shorts and dollar longs.
Update 12/24/2009 - 5:45 AM PT exited half of the remaining PM shorts and dollar longs.
Happy Holidays to all!
As most know, the dollar index intermediate term down trend channel has been broken. We put on a tiny USDX long position late last week and will very likely be adding on any breaks.
Excerpted from Charles Kindleberger's book "The World in Depression":
Just as in May 1873 and July 1914, with tension growing among Germany, France, and Britain, the crack, when it came, appeared in Austria. In the early spring of 1931, a Dutch bank wrote a polite letter to the Creditanstalt in Vienna saying that it was obliged to raise the charge on its acceptance credits from 0.25 percent a month to 0.375 percent. It was a timorous letter, says Beyen, not a prescient one, and the bank was somewhat surprised when the Creditanstalt chose to pay off the loan rather than renew at the higher rate. Three months later the Creditanstalt could have used the money.
The Austrian economy had been in disarray since The Treaty of St. Germain of 1920. Its finances had required League of Nations loan assistance, which entailed international supervision between 1922 and 1926...Industrial capital was consumed in the postwar inflation, and financial capital in the unsuccessful bear speculation against the French franc in 1924 that produced failures of the Allgemeine Industriebank, the Austro-Polnische Bank, and the Austro-Orientbank, as well as the private Union Bank owned by one Bosel, with grave difficulties for Kolmar& Co., Kettner, and the Brothers Nowak. Maerz calls this episode "the opening shot of a series of bank failures culminating in the breakdown of the Creditanstalt seven years later...
In May 1931 losses were still at 140 million schillings, and capital at 125 million plus disclosed reserves of 40 million for a total of 165 million. Under Austrian law, if a bank lost half its capital it had to "turn in its balance sheet," or close down. In an effort to rescue the Creditanstalt, the government, the National Bank, and the House of Rothschild, the last with help of the Amsterdam branch, furnished 100 million, 30 million, and 22.5 million schillings, respectively. But the announcement of the support operation on May 11, 1931, started a run, partly foreign, partly Austrian...
By June 5 the credit [for the entire country] was exhausted and the Austrian National Bank requested another. Still under pressure, the bank raised its discount rate to 6 percent on June 8 and 7.5 percent on June 16. The new credit was arranged by the BIS, by June 14 this time, but subject to the condition that the Austrian government should obtain a two-to-three year loan abroad for 150 million schillings. At this point the French interposed the condition that the Austrian government should abandon the customs union with Germany. The Austrian government refused, and it fell...
Update 12/17/2009 - We did pick up some extra dollar longs on the bounce, but not as much as we'd like. The size of the move today is quite unexpected, and gives us pause.
We've isolated a likely turn date range of between 12/28 and about 1/17, but aren't "religious" about it - we'll still not fight the markets or their displayed trends.
Cotton has been on a tear for the last few weeks, coffee hit new highs but pulled back today, sugar and cocoa have hit new highs, cattle and hogs trying to break overhead resistance... all bear close watching, especially cotton.
NB: FASB is on the move with attempted changes back towards mark-to-market, after loosening up date coincident with the stock market bottom in March - fair warning...
Full site and chart updates are in place for the last two weeks. We offer our apologies for being unavoidably away from doing chart updates due to both personal and family issues. Hopefully we'll have more thoughts on the state and direction of the markets by Sunday evening.
Update 12/6/2009 - Our best guess, the slowup in money creation by the Fed and Treasury over the last few months have us even more bearish on almost everything (including precious metals) on the short term. Looking again and still for low risk shorting opportunities. Small long USD position taken.
Update 12/11/2009 - Obama's big sellout, another good one from Rolling Stone
Weekly updates will not be available until late Monday or Tuesday due to personal and family issues.
No change since last week...11/22/2009
A few new charts on gold & silver alternate rhyming scenarios on the '70s comparison page.
Update 11/23/2009 4:14 PM ET - Chances of a down day tomorrow over 2 in 3...
Update 11/24/2009 - We expect QEv2 (Quantitive Easing version 2, aka another "stimulus or bailout or rescue") to start in the 1st calendar quarter of 2010, probably in January or February.
Update 11/25/2009 - Global Warming With the Lid Off (Wall St. Journal)
A very good short essay on "Unconscious Conspiracies".
Judge Voids Mortgage Due to Bank’s “Bad Faith”
For our U.S. readers, may all your friends & family have a wonderful Thanksgiving Day. With all the dark stuff going on in the US and on Earth, there's still a very large amount of items for which to give thanks.
Still rocky & in roller coaster mode...11/15/2009
Still on the alert for stock market and other breakdowns, due to slowing change rates in large monetary aggregates etc. The dollar index is still the primary factor.
FASB Rule Will Force Banks to Move Assets Onto Books (from May 2009)
Update 11/17/2009 - Did The Markit Group, A Black-Box Company Partially Owned By Goldman Sachs and JP Morgan, Devastate Markets?, HT ZeroHedge
Update 11/19/2009 - $118 billion in Treasury Notes to sell next week.
Social Security now operating in an actual revenue shortfall
Ideal turn point Monday or Tuesday, another possible stock shorting opportunity. Large Treasury auctions next week - over $80 billion in bonds & notes, over $60 billion in bills...
Good and Evil, about trading morality & ethics
How To Cure Health Care by Milton Friedman
Goldman’s Global Oil Scam Passes the 50 Madoff Mark
Level, at best...11/1/2009
Major trend line breaks evident in all US stock indexes, from the Dow and S&P 500 & Nasdaq, to the Wilshore 5000. Our best guess is to batten down the hatches, via hedges or outright shorting with appropriate stops near the broken trend lines... while being aware of a probable developing right shoulder in a head & shoulders formation - and as usual, we're far from infallible.
Seven Trading Lessons from a Legend (Jesse Livermore)
Update 11/2/2009 - 6:11 AM PT, awaiting TA or other signals for short entry points. 10:52 AM PT, initial short filled. 1:12 PM PT, large down move possibility tomorrow is over 60% per our work...
Trend changes afoot?...10/25/2009
As we noted on 9/27, the Fed continues to slow up on POMO activities and have almost completed the $300 billion Treasury purchase program target. They're also around $900 billion into the $1.45 trillion MBS & Agency purchase program targets. US stocks are considerably over-valued with operating PE over 25 and reported earnings PE being well over 100 ( PE chart )... and the simple conclusion is that we've established a tiny S&P short position and are also looking for at least a technical bounce up in the dollar index.
Update 10/27/2009 - More confirmation of a possible top - Rally Getting Tired?
(12:44 PM PT) We'll probably take profits on 1/3 or 2/3 of our short positions today or early tomorrow, likely bounce ahead... and we'll wait for a short term trend line break for confirmation, or just let our stops take us out... and then re-establish the short position after the bounce.
Update 10/28/2009 12:41 PM PT - took profits on 1/2 our S&P short, stops in place for the rest... and awaiting an expected reaction for re-entry.
Update 10/29/2009 - 5:33 AM PT. GDP up significantly more than estimates, closed all but a tiny short position. 6:48 AM PT, closed the tiny short position, went long for the expected big ride up.
Note that, of the 3.5% GDP gain, 1.7% (or almost half) of it was due to the "Cash for Clunkers" program per raw BLS data.
Until the banks are restrained, and the financial system reformed, and balance restored to the economy, there will be no sustained recovery.
Update 10/30/2009 - 5:54 AM PT, exited S&P long position. Updated our forecast on the real estate page. Taking the day off.
Still too many cross currents for decent certainty, but our best guess is up stock markets early in the week changing to down as the week progresses.
Wall Street's Naked Swindle
Most money supply numbers down lately, Fed slowing up on POMO activities and general pumping, bonds up, gold & silver down. September 22nd was a turn date per some of our work, but we're hesitant to go short yet.
Update 9/28/2009 - ... and today's U.S. stock market behavior is showing quite well why we're not comfortable yet with a short position.
Update 9/30/2009 - a certain well known deflationist blogger is at it again about currency manipulation/control and is yet again displaying his ignorance of facts and history with the statement "Currency intervention ... cannot possibly work.". We remind him yet again of the evidence and facts about the Paris Accord and Louvre Agreement in the mid '80s, as well as all the unaddressed and embarassing facts in our article Dollar intervention details, dubious journalism from last August.
This coming week - stocks down, dollar up, metals down.
Update 9/18/2009 - probable chance of a short term bounce in the dollar index.
Update 9/22/2009 - short term bounce in the dollar index is done, resume inflation trades.
Precious metals move...9/13/2009
It's our belief that the current move in precious metals is directly related to the recent IMF injection of $263 billion of SDRs into the total world money supply. Our long term minimum gold target remains at $3200.
There are no overall changes in any of our long term views or expectations. Stagflation exists and is also dead ahead.
All the principal contributors of this site will be taking some much needed time off over the next 3-4 weeks and also dealing with various personal issues, so any emails answers etc. will likely be quite slow. We haven't had a substantial break in well over 4 years.
The charts will continue to be updated weekly, but it may be as late as Sunday instead of our normal Friday afternoon, and any daily updates will be erratic at best.
May all your trades and investments go at least twice as well as you hope while we're off.
Just say no to deflation...8/23/2009
One simple chart showing total money (M3 + credit + gov't debt, per the basic definition of money as a medium of exchange (credit cards or credit in general and gov't debt can actually buy things [duh])) since 1915 - the basic proof that real deflation like the Great Depression isn't even close.
Same chart, but since 2000
Say yes to stagflation with the volume way up, and a roller coaster economy. Initial gold target 1068-1087.
Update 8/24/2009 - Great interactive charts from the Fed showing credit conditions across the country (hat tip - ZH)
Options expiration week coming up, last week was a down week and the Shanghai SSEC index is already down over 12% from its recent peak. Other world indexes, including emerging markets, were also down.
Four different pictures of CPI, since 1982
Update 8/19/2009 - we're currently positioned for large increases in volatility, and systemic and/or currency shocks. That's also known as "batten down the hatches", storm ahead.
10 trading rules
Wild ride continues...8/9/2009
A mild turn signal next week, centering around the 18th. A much stronger one is due around September 14th. Note also that the Fed will be discontinuing the "QE" Treasury purchase program in September, and also that their balance sheet levels have been roughly stable for many months - likely awaiting the normal monetary lag effects to appear in the economy.
World stock market 2007 tops, in date order
10/09 - US, S&P 500 and DJIA
10/11 - Japan, Nikkei
10/11 - France, CAC
10/14 - Britain, FTSE
10/14 - Germany, DAX
10/16 - China, SSEC
10/29 - India, Bombay
10/31 - US, Nasdaq
10/31 - Brazil, Bovespa
10/31 - Australia, AORD
10/31 - Canada, TSX
11/07 - Commodities, CCI
World stock market 2008-2009 bottoms, in date order
10/27/2008 - India, Bombay
10/27/2008 - Brazil, Bovespa
10/28/2008 - China, SSEC
12/07/2008 - Commodities, CCI
03/07 - Canada, TSX
03/09 - US, S&P 500 and DJIA
03/09 - US, Nasdaq
03/09 - France, CAC
03/09 - Britain, FTSE
03/09 - Germany, DAX
03/09 - Australia, AORD
03/10 - Japan, Nikkei
Update 8/12/2009 - one possibly useful definition of a dark age is an age where most of the people in a culture or society have not only forgotten how to do many things, but have even forgotten that they could be done at all. (paraphrasing Jane Jacobs in her book "Dark Age Ahead")
Always a good rule, among many, to live by. The "currency event" and "sudden stop" risks continue to grow, and the current stock market moves reflect certain elements of a mania.
Sugar, among other commodities, continues a large move up.
Oldie but goodie, from the darker side: Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US
May be helpful: 25 rules of disinformation and to a lesser extent, The Eight Traits of the Disinformationalist.
Update 8/3/2009 -
The real story on the GDP revisions
Case Shiller housing index, 1925-1941
Case Shiller housing index, 1990-2000
Update 8/5/2009 - Our fear calm index trend line was broken recently
There's little question in our minds that we're back to inflation, and not only just due to our total US money supply, adjusted with a debt deflation proxy chart... which we continue to watch very closely for expected trend changes.
It's important to separate goods from asset inflation too, as Eric Janszen of iTulip has noted for years. Its also important to distinguish between types of assets, as our hard vs. paper or tangigible assets long term chart shows.
The "stability" and gyrations of history of the world's reserve currency:
The world's reserve currency, the British pound, from 1910-1940
The long term British pound, from 1900 to current day, yearly
The long term US dollar index, from 1900 to current day
NB: the "currency event" risk continues to grow...
New S&P 500 daily chart with volume on our daily page
Update 7/23/2009 - New set of tracking charts on the confidence page, an equalized combined index chart of the dollar, CRB/CCI, S&P 500 and 10 year Treasury
Reversal potential, still...7/19/2009
We're still alert to a stocks turn or reversal, up until the 22nd or 23rd, now that options expiration week is past. Possible bottoming formations in many agricultural commodities. Cotton, coffee, rice, sugar, cattle, etc. close to breaking out?
Answering the question of what is "quality" in the phrase "flight to quality" will greatly help to determine the wisest investments going forward... and the phrase "return to the basics" also applies.
Many updates and new charts on the 'world' page, including 'total world money supply, adjusted for debt deflation, etc.' and a unique world asset picture.
Complete short & long term data on unemployment and unemployment claims
If we had to guess, we'd guess the week ahead will be even to up on US stock markets. We'll try and follow the existing short term trend, as usual.
New long term chart of M3 + credit + gov't debt, with CPI & CPI without lies (based on the fine work of shadowstats.com)
Turn, turn, turn...7/5/2009
We're currently in a high risk period for significant turns by our reckoning, and it continues through about July 23rd.
Random thought: according to Aristotle one Greek city state had a fundamental law: anyone proposing revisions to the constitution did so with a noose around his neck. If his proposal lost he was instantly hanged. (from Jerry Pournelle )
A new conspiracy section has been added to our quotes page.
Many new charts added to the confidence & sentiment page
Update on the possible 1987 parallel
Updated world velocity chart
Martin Armstrong's latest, "The Counter Revolution of Iran", about 7MB, 23 page pdf Update 7/8/2009 - 11:49 AM PST, ECB sells substantial amount of paper gold
Update 7/10/2009 - an idle thought... is what's ahead an EC or electrocardiogram market and economy?
A full picture of US unemployment claims
The Great Depression tight parallels... busted6/28/2009
An update and additions to our article and comparison work regarding the Great Depression and now, including commentary on the recent work of Barry Eichengreen & Kevin O’Rourke.
"There can be no doubt that besides the regular types of the circulating medium, such as coin, notes and bank deposits, which are generally recognised to be money or currency, and the quantity of which is regulated by some central authority or can at least be imagined to be so regulated, there exist still other forms of media of exchange which occasionally or permanently do the service of money. Now while for certain practical purposes we are accustomed to distinguish these forms of media of exchange from money proper as being mere substitutes for money, it is clear that, other things equal, any increase or decrease of these money substitutes will have exactly the same effects as an increase or decrease of the quantity of money proper, and should therefore, for the purposes of theoretical analysis, be counted as money". (emphasis ours)
-- Friedrich Hayek, Prices and Production, 1935, p. 96
Update 7/2/2009 - Update on the possible 1987 parallel
Update 7/3/2009 - Note: almost all charts have been created normally this week, but some data (like M2 and monetary base) has been estimated based on last week's growth rate. Charts will be re-created again on Monday when actual data is released by the Fed, etc. COT charts are from last week and will be published on Monday after they're released by the CFTC (the data has not been estimated for this week).
Updated world velocity chart
The Great Depression parallels... busted6/21/2009
Although there are some things that are behaving similarly to the 1930s like the Dow and unemployment, there are *many* stats that aren't, especially the monetary and fiscal ones. See the new charts on our Great Depression page that show how different it is now.
Also see our new article: Great Depression parallels... busted, which includes the three new charts.
Some day the various markets like stocks or metals will break out of the short term whipsaw patterns and show the real trend, although as usual the first move will probably be the reverse of the eventual trend. Quad options expiration this week, plus a CPI expected to come in around +3.5% has us slighly biased to stocks being down and metals and ag commodities being up this week.
Update 6/15/2009 - We're looking at hedging some of our gold position, the trend has clearly changed ( Same chart, long term )
Update 6/17/2009 - CPI surprises us and comes in significantly lower than expected, but is still running at 3.2% annualized, with PPI at about 6% annualized over the last two months. Probable stock breakdown ahead, with our preferred window between 6/25 and 7/18.
Update 6/18/2009 - Zero credibility
Looking at a dollar long position, and less probable ag shorts. On a much more momentous note, we're also making plans to close most of our futures accounts and exit speculation of any kind.
Preferred measures of velocity , Same, but since 2000
Many updates to the U.S. vs. Weimar hyperinflation page
Update 6/8/2009 - New charts - TIC flows, major classes - 1978 to date
Update 6/9/2009 - Updates to the U.S. vs. Argentina hyperinflation page
Update 6/10/2009 - Additions and updates to our Weimar Germany hyperinflation period charts
The BLS birth/death model, chart & data since 2001
Relative gold vs. stocks performance during the Weimar hyperinflation
We're very close to seeing a crossover in the 50 day and 200 day moving averages in the dollar index - the next few weeks should resolve whether we bounce or not. We're still mildly short, and still long soybeans and other ag commodities. It'll be interesting to see what the probable upcoming IMF gold sale will do to the market...
U.S. Treasury Supplementary Financing Program (SFP) vs. central bank swap lines
Energy costs per millions BTUs, since 1976
Update 6/1/2009 - Green shoots... of inflation
The CRB commodity index and CPI correlation
(same chart, long term)
Update 6/2/2009 - The Carbon Trade and Enron: An Inconvenient Truth, a tour de force on "show me the money".
New charts of U.S. witholding tax receipts
Update 6/3/2009 - 9:12 AM PST, covered all but a small USDX short, exited 2/3 of ag longs and tightened stops on the rest.
Update 6/4/2009 - 8:05 AM PT, added back to USDX short and about 1/2 of ag longs.
Update 6/5/2009 - stopped out of dollar short and exited ag long positions added yesterday at a small loss.
Regarding unemployment and the 'surprise' smaller drop in payrolls, note that the BLS' birth/death model added over 220,000 phantom jobs. Without that adjustment, the 345k loss would have been 565kk. With tongue firmly in cheek, we suggest aborting/euthanizing the BLS birth/death model.
Bear markets & inflation...5/24/2009
Bear markets & inflation, three new charts showing various bear markets and their percentage drops, displayed as nominal, CPI adjusted and CPI without lies adjusted. One probably surprising fact - the loss in the Nasdaq since 2000 was almost identical to the maximum loss in the Dow during the Great Depression - after a full inflation correction is done. The new charts are based an extension of our combination bear market chart initially published in mid 2007 and our long term inflation page.
Probably another choppy week ahead, still bullish on most ag commodities. Watching for a dollar bounce, or lower probability follow through.
Update 5/27/2009 - New chart on the real estate page - House price to rent ratio, 1983 to current.
Another new chart on the CPI is a lie page - the Case Shiller home price index vs. the BLS Owners Equivalent Rent (OER).
Ups & downs...5/17/2009
The USDX pause was more short lived than expected, and the bounce back up is very near the down trend line. We expect the down trend to continue this week with an eventual short term target of 80. We expect Monday to be an up day for US stocks, and then the rest of the week to be level to slightly down mostly due at least 3 POMO scheduled auctions... and as always, won't fight it if our best guess is incorrect. Last week's CPI release showed food price increases, and we remain generally bullish on most ag commodities.
The definition of the CRB commodities index changed in 2005, and it's now much more heavily energy weighted. Any comparisons using the CRB index both before and after the July 2005 change are invalid. The CCI index maintains the old definition. CRB vs. CCI since the definition change in 2005
Martin Armstrong's latest, a large PDF of about 8MB and 31 pages long
"... ask not what your country can sacrifice for your politicians — ask what your politicians can sacrifice for your country."
Update 5/18/2009 - stopped out of long PM positions, added mildly to USDX short. No stock positions, small bean long.
Update 5/19/2009 - Good examples of the problems with using 'median' prices to judge housing or other markets
Update 5/20/2009 - Six more charts added to our new Confidence & sentiment page.
Update 5/21/2009 - 5:55 AM PT, took profits on 1/3 of our dollar short and tightened stops on the remainder. 10:09 AM PT, took profits on another 1/3 of the dollar short.
We're looking for a bounce and pause around 81.5-82 on the dollar index, and still believe US stock markets are overbought and over valued. Soybeans, corn, sugar and other ag commodities likely have further up moves ahead.
Interview with George Selgin about free banking, etc. - long but quite good. The first decent treatment of free banking which does not come from the Austrian school.
We've added new charts for COT gold and silver options on the COT page.
SPX 90 minute trend line
We're still looking at October 2009 or so as an 'official' end to the current recession, and also feel that the chances of a 'W' shaped recession like what happened in the early 1980s is an over 50% possibility. They key negative factor that will rule it out is a currency event.
At least two POMOs (Treasury purchases by the Fed) scheduled for this week, and four for next week. Since early March, about $70 billion of Treasuries have been monetized and the Fed's System Open Market Account balance has grown from $515 billion to just under $1 trillion at $979 billion.
"... ask not what your country can sacrifice for your politicians — ask what your politicians can sacrifice for your country."
Update 5/6/2009 - New page, chock full of charts - Confidence measures
Correlation between the Dow and various miners indexes since 2000:
Battle Royale and a zoo...4/26/2009
Quite a trading range run in the S&P around 850 ±25, so whichever way the breakout goes will likely be explosive. We favor the downside for fundamental reasons, but haven't entered a trade due to a wary feeling about behind the scenes influences. We expect an up week for silver and are looking for an entry point in the low 13s or high 12s, basis spot.
12:17 PM - silver hit our buy point, but is still trending down - no entry yet.
New page, chock full of charts - U.S. households, asset mix and positions
New chart - Senior Loan Officer Survey from the Fed
Howard Ruff interviews John Williams of shadowstats.com
Update 4/30/2009 - Cassandra
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)
Flawed Credit Ratings Reap Profits as Regulators Fail - excellent
Housing Activity Forecast
Simple summary, with which we agree - new home sales close to or at a bottom, existing home sales have a ways to go, prices are far from bottoming.
goldmansachs666, great blog Virtually any blog sued by GS deserves some support
Ten principles for a Black Swan-proof world
The Armstrong cycle is in its turn period. Our best guess is that its a dollar value related turn, but our confidence level is below our 70%+ action level.
Stopped out of all soybean longs.
Under the weather. Hope to post some views & opinions later in the week.
One 'new' chart - the fuller view of money supply with credit, debt and CPI w/o lies, since 1900.
Update 4/14/2009 - Martin Armstrong's latest, about 700k and 19 pages long
Nice moves in beans & corn and other ag commodities last week, likely to continue since they're still under the radar of most. We continue to be very leary of the US stock markets and the dollar and are, as usual, staying away from "front page markets". Extreme volatility continues to show in our long term financial crisis chart and large or highly leveraged trades are still anathema to us.
The Quiet Coup (The Atlantic)
Destroying Capital Formation (Martin Armstrong's latest - 3 MB pdf)
The Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank announce swap arrangements("... these arrangements would support operations by the Federal Reserve to provide liquidity in sterling in amounts of up to £30 billion, in euro in amounts of up to €80 billion, in yen in amounts of up to ¥10 trillion, and in Swiss francs in amounts of up to CHF 40 billion.")
Our translation - early warning for the dollar to drop below 80 again.
Update 4/7/2009 - Operation Twist from the '60s - the actual effects, and an actual paper with the facts about the Fed's Operation Twist.. The factual bottom line is that it worked as the chart shows, and as some spin-meisters and dubious journalists avoid.
It's not unlike the fondly held but virtually completely false belief that currency intervention does not work, as proven by historical facts such as the actual results of the Paris & Louvre Accord in the '80s, as well as many other documented and successful currency dintervention results before and since.
Financial warfare is also an idea with a history. During the 1956 Suez Canal crisis, for instance, President Dwight Eisenhower used market pressures to keep the UK and France from attacking Egypt. So he "ordered the Treasury Department to dump British Sterling on the international market. This depressed the value of the British pound, causing a shortage of reserves needed to pay for imports," write Yale management professor Paul Bracken. "The message quickly got through to London, which, along with Paris, soon pulled out of the Canal."
Since their respective bottoms in the last 6 months:
- The S&P 500 is up about 22%
- Oil is up about 48%
- Copper is up about 45%
- Gold is up about 36%
- Silver is up about 58%
- Platinum is up about 52%
- Corn is up about 30%
- Gasoline up about 44% (retail up about 20%)
- Cocoa is up about 32%
- Wheat, corn and soybeans are up 15-18%
- The CCI (the old CRB commodity index using pre 8/2006 energy weightings) is up about 14%, and the CRB is up about 8%.
Concentrated shorts proven to suppress gold and silver (Pirates of the COMEX)
POMO FAQ(hat tip JesseL)
Update 4/3/2009 - Total job losses since the low in October 2007: U3 (official rate) - 4.97 million, U6 - 9.72 million & our U7 reconstruction, 11.1 million. Unemployment rate definitions & charts
Data changes have caused us to add a close second to the expected end of the current official U.S. recession - February/March 2010. We still feel that October 2009 is the more likely period for the NBER to call an end to it... and also believe that the *real* recession (defined as avoiding the use of bogus government stats) will continue well into 2010 and probably beyond.
We expect next week to be a down market for most US stocks, but are not yet certain enough to go short.
Not buying in...3/15/2009
None of our major signals or work show that the stock market has put in the final bottom yet, and we remain on the side. A possible turn on the 18th or 19th is on our radar.
Update 3/17/2009 - The turn on the 19th could be pushed out to next week by options expiration.
Update 3/18/2009 - More Fed direct monetization, up to $300 billion: Statement Regarding Purchases of Treasury Securities
Update 3/20/2009 - InsiderScore.com buy/sell ratio (hat tip - Russ Winter)
Real estate update...3/8/2009
"The temporal ordering of the spending weakness is: residential investment, consumer durables, consumer nondurables and consumer services before the recession, and then, once the recession officially commences, business spending on the short-lived assets, equipment and software, and, last, business spending on the long-lived assets, offices and factories. The ordering in the recovery is exactly the same." From: Housing and the Business Cycle (pdf) Source: Calculated Risk
Simple summary - watch Residential Investment & PCE for recovery signs.
We're still of the belief that the general US real estate market will bottom in early 2010 (or early 2011 as a close 2nd), as we have believed since we first predicted and pointed out the factors in 2006, and then clarified in late 2008. See our real estate page for more details and other tools to help determine a bottom, as well as another view of the stages of "real estate cycle".
Lessons from Swedish bank resolution policy
Martin Armstrong's latest from 2/19/2009 1.5MB PDF, 19 pages
Steady, but tighter stops...2/22/2009
Still long silver, and looking for an opportunity to add back. We may short the S&P on any reaction, and are still looking for a sugar reaction but will likely short it due to a probably H&S forming.
Now that the "stimulus" plan has been passed and the 2009 portion size is known, the Fed is again expanding the size of their balance sheet. The implied message is that the Fed doesn't think there was enough "stimulus" in the plan.
Steady as she goes...2/15/2009
Still with silver positions, but got stopped out of the sugar & TNote positions. We'll likely get back in both on Tuesday, and will also add to silver positions again. Platinum continues to out perform gold.
Update 2/20/2009 - will be lightening up 30-60% on all longs, pre weekend (as of 9:30 AM PT, 20%)(total as of close, 50%).
We've had multiple queries about out the fall off in our Fed & Treasury total money chart. and it having peaked. Our take is simply that the Fed is allowing for the $350 billion TARP remainder, and the ~$800 billion stimulus package, to do some of the work to re-inflate.
Still with silver, sugar & TNote positions. Sugar has broken out of it channel. Silver is up about 45% since its bottom last year. All stops tightened to both protect profits and guard against an expected high volatility week ahead. We expect a down week in US stocks as the new administration's PWG/PPT begins to show its hand, both privately and publicly, but are on the side since we prefer the risk/reward picture elsewhere.
The dismal record of Investing via Media Market Timing over the decades.
Stock bear, bottoming in some commodities...2/1/2009
Dabbling here & there in corn, wheat, silver, platinum & sugar etc. on the long side and looking for an entry on shorting 30 year TNotes.
Update 2/3/2009 - backed off on dabbling with everything except silver, sugar & TNotes.
And the beat goes on...1/25/2009
Nice moves in both gold & silver last week, as well as in oil. We're still mulling over an end of the 'official' recession call for late this year, and watching the actual facts as they develop. USDX wise, we're also watching for a shorting opportunity and remain quite concerned in the area of "currency events".
Major reasons for gold price changes, in no particular order:
This is not intended as a complete list but at least provides a framework within which to judge price action.
- Limits in supply, "peak cheap gold"
- Changes in demand (investment, jewelry, manufacturing, central bank etc.)
- Inflation direction & speed of change
- Real interest rate direction
- Fear - social, political, "financial system"
- Changes in confidence of money or a given currency or the "financial system"
- Manipulation/control by central banks and others
- Technical analysis factors
Deflationists get the facts wrong about Japan
Update 1/27/2009 - we're now calling for the end of the 'official' recession in October/November 2009, while the 'real' recession (as measured via use of John Williams SGS CPI and his CPI corrections, etc.) will continue through at least August 2010. It's too soon for us to predict, but the possibility of another 'official' recession starting in mid/late 2010, ala the 19870-1982 period, is far from zero.
Inflationists vs. Deflationists: Economics as Bread and Circuses: another good one from Jesse.
Kinder, gentler week at beginning...1/18/2009
We're looking for an entry point after a reaction within the next 7-10+ days to buy gold & silver and perhaps platinum... as well as some agricultural commodities like corn or beans. M3 has bottomed, velocity continues to look like it's bottoming, the CCI appears to be basing and the ESF recently sold some gold.
We're also strongly entertaining thoughts of the official US recession ending in the August-December 2009 time frame (best guess October), and please do note our use of the word "official". Please see the bolded text on our recession prediction and recovery chart for part of our reasoning on calling the recession end late this year, and a big hat tip again to Paul Kasriel of Northern Trust. Also note that this does *not* preclude another official recession starting in 2010 or 2011.
Still mildly bearish on US stocks. On the side on everything, under the weather.
The factual story of deflation and Japan since 1990, and the same, but part 2
Deflation, debt, monetary base & lags since 1990 in Japan
We're long cattle and corn as per last week's note on decent reaction entry points, and holding gold & silver longs from earlier. The CCI's down trend line has been broken, same with both the CDNX and the BGMI (mining indexes).
We repeat this from last year: The risks involved in the "creeping corralito" in the US are substantial. If you're a US resident and do not have money in non US assets, it's our opinion that the risk is significant to "events" that may prevent reasonably unfettered access to your funds, or worse. The chances are not low for a "currency event" this year. Extra cash on hand is also not a bad idea.
Now a total of five comparison charts - Monetary & fiscal stat comparisons, 1929 and now, and the continuing picture of relative deflation: An exercise and theory showing deflation in 'total money supply'.
Update 1/5/2009 - stopped out of gold & silver positions overnight at an overall small profit. Tight stops on both corn & cattle and may be stopped out on the open.
Update 1/6/2009 - added back some gold & (mostly) silver longs, still holding corn & some cattle with tight stops, and also added a USDX short this morning. Looking at copper longs...
Update 1/7/2009 - stopped out of gold & silver positions overnight again at an overall profit. 8:39 AM CT - long copper, small position. Took profits on 1/3 of USDX shorts. Our US stocks bias has switched to bearish. Stopped out of cattle long and half of corn long, momentum weakening in corn.
Regarding global fiscal stimulus: "What we need is more than 1 percent, we certainly need at least 2 percent, and some of the heads of government were arguing even that we need more than 2 percent. But you know in the IMF we're very conservative so 2 percent seems to me the right target. What we're trying to organize is this coordinated action plan to have a boost in growth starting from a [global] fiscal stimulus of 2 percent [of world GDP]. Some measures have already been taken by some countries, and we are looking for a result of an increase in growth of also 2 percent." Source: IMF
Prior years blogs