The Great Economic Shift

Long time

2008-09-14T23:34:00.005-05:00

Hi friends.

I have been busy for the last few months with work and school. I am sure that it must be surprising to see how turbulent the market has been over the last few weeks. The market is at a significant turning point as I write this post. With the S&P futures falling 43 points and the dollar/yen falling to 105.65 -2.20 this marks severe market turbulence.

LEH has filed for bankrupty - http://www.cnbc.com/id/26708143

Bank of America has bought Merrill Lynch for over 2X what the company was worth - Merrill bought out for $44

and

AIG, a Dow 30 component says that it needs financing immediately or it will not survive - AIG in credit crunch

We have now reached a point where you need to make a decision. Will you keep believing what they say on CNBC and what the fed says about the economic state or will you start listening to the market now that it is at a roar?

If you want to get updates on the details I suggest reading Mish's blog:

http://globaleconomicanalysis.blogspot.com/

He has been right about this mess for a long time.

The bailout of Merrill Lynch MER by Bank of America (it was a bailout, that will become clear in the next few weeks) is another sign that the financial system was on the brink of collapse today. However, there are too many moving parts and not enough repairmen on hand to keep jumping in and fixing problems. At some point, the machine is going to stall and catch on fire. Just stand clear when that happens.

Retail Sales Fall -0.6%, And That Is The GOOD News

2008-03-13T08:18:00.003-05:00

Retail sales fell below the consensus range of 0.2% last month to -0.6%. This was no surprise to me as I continue to expect big box retailers to suffer as the USD continues to fall and consumers spend more of what used to be discretionary income on gasoline and food.

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In the overnight forex market, the yen hit 99.75 yen/1 USD. Some are predicting 95 yen/1 USD, I am not sure where the dollars decline will stop, especially with the fed continuing to inflate faster than a hot air balloon.

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GOLD HITS $999.4/oz and will hit 1100-1200 in the next few months. Gold is set to take on the psychological barrier of $1,000/oz in the next few days. Once it holds that level, it is once again off to the races on the back of the falling USD.

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Indeed, things look grim for the U.S. economy. In terms of the stock market. Things are about to get worse as the next wave of earnings will ALL surely be dissapointing, playing out perfectly, George Soros's theory of reflexivity .

Bull Markets in Gold, Oil, and the Grains are fueled by U.S. inflation.

2008-03-06T20:12:00.013-06:00

I started this blog unaware of how quick things could go from relatively ok to a torrent of financial distress. The YEN/USD currently stands at 102.820. 100 YEN/USD is now a certainty. Gold at $1,000/oz is now a certainty. The only questions I have now are where the U.S. stock market will bottom and how long, and also where the dollar will bottom and how long that will take. Today was a wreck in the stock market, but there are many very important underlying factors which are being overlooked, or all together ignored.

Factor #1 :

Sub prime bonds made it into the single digits today a 92% decline as homeowners continue to "walk away" from declining home values:

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Factor #2

The yield on the T-bill continues to plummet. This is putting severe stress on banks holding money in the overnight market. This also is a result of people looking for a safe place to put money in order to weather the current financial storm/tornado/Cat 5 hurricane.

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Factor #3: The US Dollar/Chinese Remnimbi peg is in jeopardy. As if the USD can handle any more blows. The current traders in the Chinese currency markets are saying that the Chinese need to get rid of the peg. The current peg is at 7.8 Chinese Yuan/ 1 USD, but it is currently trading at 7.78. In the grand scheme of things .02 is not very much, but the point that needs to be made here is that the Chinese can not keep it at 7.80. If it trades at 7.78, under significant stress, it could trade lower. Not to mention that the last time the peg moved, the traders had advanced notice. The ultimate effect is increased cost of Chinese goods on an all ready stressed U.S. consumer.

Factor 4: Where is gold going?

You'll have to read what Jim Rogers says to find out.

I will put it this way, only someone who understands bull markets the way Jim Rogers does can make that kind of prediction.

Coffee, Pancakes, and Banking Executives

2008-02-24T23:38:00.002-06:00

Early this morning 7:30 AM I went to a local pancake house here in the northern suburbs of Chicago called Walker Brothers. It is located right in the middle of an area where many major corporations are headquartered. Allstate, Baxter, Abbott, and Walgreens to name a few. The place was pretty empty early on a Saturday, but I happened to sit next to a banking executive (50-55 years old and one of the VP's in the company) he was having breakfast with a business contact/friend. The conversation went something like this:

Executive: I've been working for the last 4 months trying to close a several hundred million dollar loan.
Friend: Really?
Executive: Yes and the fed has lowered rates from 5.25% to 3%. The loan ended up closing at a higher interest rate than when we started the loan process, even with the fed lowering rates.
Friend: How did that happen?
Executive: Nothing the fed has done has helped.
Friend: Nothing?
Executive: Nothing they has done has helped, in fact, they have made things worse. Much worse.
Executive: They really screwed everything up. The markets are totally locked up. No one is funding anything except things with very specific goals like student loans. Everyone is scared that what they are going to buy is going to drop in value. This is a giant mess and it will not be solved easily. I do not even know what can be done to fix it right now. The fed funds rate has gone down, but now home lenders are adding on extra percentage points for what they called "risk premiums" . So the money is being lent at 5% plus another 2-3% or more for what is now called a 'risk premium'. This is being added on to anyone with a credit score of about 600 or lower. Over the last 2 years people were able to gain access to money who did not deserve to have loans that large. People also got very rich over making loans to those people and now everyone is paying the price.

I had to leave at that point, but it shows that the end of the story for housing and the economy is anything but nearing and end of this downtrend.

Here Comes The Shift!!!

2008-01-21T23:09:00.000-06:00

Hang on to your hats folks. If the fed does not intervene, the market is set to crash from the open. Dow futures are down over -500 points and S&P 500 futures are down over -64 points. Professional traders are in a full out panic. I am expecting a torrent of stop losses and sell orders to hit the open of the market if the fed does not cut a full point. Expect computer systems at the exchanges to choke on the volume and lock up. Think about how panicky you get when your home computer crashes. Now imagine the panic when the computers at the exchanges crash when the DJIA is down -500 points. This is ugly.

A Golden 2008

2008-01-03T12:46:00.000-06:00

I hope that all of you had a happy holiday and a great New Years. I have returned from a long vacation, and I couldn't be happier to see gold at all time highs with SPG and DDR still sinking.

Gold and gold stocks are on fire. As I stated in earlier posts, I expected gold to rally into the end of the year because of multiple factors. Steve also gave everyone a lesson in gold bubbles. The lesson to be learned is that gold is not anywhere near finished in this run. The metal based at the $800/oz level for almost a month and is now screaming higher.

$1,000/oz will occur within the next year. Expect it to make headlines in most newspapers and major news networks. How many average joes on the street know that gold is at record highs right now??? Just wait until the American public hop on the gold wagon. That will be the time to think about selling. The American public are just as good as everyone else at hopping on to bubbles as they burst. The Nasdaq and housing are good recent examples. I am expecting gold to be added to that list.

Gold stocks are just breaking their 52 week highs. Now is the time to add to positions in gold stocks. ABX, GG, and AEM are on fire.

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Yesterday as the market tanked -2% these stocks were ringing in the new year with 5-10% gains. I expect these stocks to have a great 2008. Yearly gains of 100% from these levels are not out of the question. Especially if gold breaks the $1000/oz mark.

A Lesson On Gold Bubbles From My Friend Steve

2007-11-26T21:09:00.000-06:00

I am sitting on my veranda in Dominca having just read Doug Noland's latest article concerning the late great Alan Greenspan and his gratuitously self serving remarks about the state of the US and world economies. My view of Dominca and the Caribbean is asstunningly beautiful as Noland's indictment of Greenspan's policies is stunningly accurate. See: "No Regrets ".

This letter, however, is not about Mr. Greenspan. It is about gold and whether or not gold is in a continuing bull market or if in fact it has reached the bubble stage . My friend Michael has been after me to write a letter for his new blog but I have been reluctant to do so for two reasons. First because when one reduces one thoughts to writing one is much more likely to believe and defend those written thoughts long after they have been proven worthless. Second because there are truly great minds such as Bob Hoye , Jim Sinclair , Doug Noland, Mike Shedlock , and Adam Hamilton who have been writing brilliant analysis for years. Anything I may have to say is most likely my reflection on some of the thoughts of these truly original thinkers. In any event I do not believe we are in a gold bubble for the reasons that follow.

There is a difference between a bull market and a bubble. Gold has been in a bull market since at least 2001. Volatility is increasing but is not near the extremes of late 1979 and 1980. In the mid 1970s my largest stock holding was Hecla Mining. I bought it at an average price of around $5 a share. It moved in a relatively small range until late 1979 when it started moving steadily up. I sold half at around $11 and shortly thereafter I sold the balance at around $19. My sales were in November and December of 1979. In early 1980 Hecla (HL) hit $55 a share.

Gold was bouncing around with moves of $50 and more in a day not uncommon. Gold peaked at a closing daily price of about $850. The actual inter day high in the nearby futures was, close to $887.50. Clearly the volatility in precious metals and their shares was much greater in late 1979 and early 1980 than it is now. I would label 1980 as a time of a precious metals bubble. The present volatility in precious metals, while increasing, does not qualify as bubble type volatility to me. I expect that when we get to a bubble phase in gold we will begin to see "Tech Wreck" style volatility in gold and gold shares with gold trading in daily swings of $100 and more.

The second primary reason I believe gold is not yet in a bubble phase is price. Gold hit $848 in the nearby futures contract recently which caused some talk about gold possibly topping out at its old closing high of $850. Clearly there is some technical resistance in this area. The present price of gold near $850, however, does not account for inflation. In inflation adjusted terms gold would need to be in the $2,000 per ounce range to match the 1980 price of of $850.

Not only is gold far from its all time high in real inflation adjusted terms, but the potential demand for gold worldwide is significantly greater than in the 1980s. The increase in the populations and relative wealth of the emerging economies of China and India alone are huge real sources of demand for gold that were not present in 1980. Sovereign wealth funds are another enormous source of buying power not only for precious metals but also for the mines that hold them.

Volatility and price are telling me that gold is in a continuing bull market and not yet in a bubble. It is my opinion that gold has a real potential to exceed its inflation adjusted peak of $2,000 per ounce in the next few years. Volatility will certainly increase with price, so at times the down moves will be as violent or even more violent than the up moves. We may certainly enter a bubble phase in gold within the next few years, the propensity of our economy to blow bubbles has been well documented over the last decade. If fear in world politics and world market sets in Gold is certainly a likely target for the next round of fear generated bubble blowing.

If you wish to keep track daily of what is happening in gold I highly recommend Jim Sinclair's website. I have followed his writings on gold since the mid 1970s and there is no one that I know of who has more experience and insight about the price of gold. Jim Sinclair has accurately called the present gold bull market from its beginning but his excellent advice extends far beyond the gold market.

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Thanks Steve

2007-11-26T20:58:00.000-06:00

I have been begging my friend Steve to write an article for my blog since I started it. I am extremely excited to be able to post his article on my blog. I first met Steve in late 2006, and he was bullish on gold to say the least. I owe more than 90% of my knowledge of trading and technical analysis to Steve, and I am extremely proud to call him a good friend.

Protect Your Capital

2007-11-22T21:59:00.000-06:00

Indicators, as noted by Ira Epstein are showing that there is a very strong chance of a sharp drop ahead in the Dow Jones Industrial Average and the Nasdaq. This man is rarely wrong when determining if stochastics are embedding. He called the oil rally, gold rally, and the falling dollar. Listen to the man on short term trading. I would also like to note the the dollar continues to fall sharply against the yen and euro.

Mozillo's Top Ten List

2007-11-21T15:53:00.000-06:00

Mozillo has some explaining to do. It looks like Schumer is on his case now with a list of questions. Pay particular attention to numbers 6, 7, and 8 as I expect those particular ones to bury him.

Sen. Schumer then asks Mozilo ten questions. Here they are (the last two appear to be based on actual comments the CEO made to the Senator:

1) What percentage of Countrywide's subprime mortgages came from independent mortgage brokers?

2) Does Countrywide pay independent mortgage brokers more for loans with prepayment penalties? Did it ever do so?

3) How many buybacks did Countrywide do in 2006? What was the value?

4) What percentage of Countrywide's subprime mortgages were refinancings vs. purchases in each year from 2000-06? Please include data from your retail branches as well as your independent mortgage brokers.

5) How much business in piggyback loans did Countrywide do in 2006?

6) "Inside the Countrywide Lending Spree," by Gretchen Morgenson, that appeared in the New York Times on August 26th, stated that a C-minus rated borrower with a 500 credit score could get a $500,000 mortgage from Countrywide. Does Countrywide provide, or has Countrywide ever provided, mortgages on terms similar to this report?

7) The same article stated that Countrywide would lend to borrowers who had been 90 days late on a current mortgage twice in the past 12 months. Does Countrywide lend, or has it ever lent, to such borrowers?

8) That same article also stated that Countrywide had profit margins as high as 15% on some subprime products. Does this article accurately report Countrywide margins for any existing or past products?

9) Please provide the documentation you discussed to support your claim that Countrywide makes the same amount of money on FHA loans as on other types of loans.

10) Please provide the documentation you discussed to support your claim that Countrywide had received accounting advice for not giving independent mortgage brokers 1099 forms.

Remember when he was on CNBC talking about CFC's long term value to shareholders??? If you don't remember , check out the video below. Here is a transcript of the interview on Aug 24th.

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Here is a link: to the CFC stock chart

What a bargain, thanks Angelo.

Sell The Rallies

2007-11-21T12:27:00.001-06:00

Sell The Rallies

The short rallies in the INDU and the SPX are still being sold at every resistance. The market is having serious issues retaking the 13,000 mark even with the dollar falling more and more every day. The last time we were under 13,000 it lasted 3 trading days. This is a bear market.

I would like the stock market to go up just as much as every body else, but this is the time to listen to the market and protect your capital. Get short, buy puts, buy gold, yen, and the euro. All of the currencies are overdue for a consolidation before another downside move, but I am now convinced that the dollar will fall to 100 yen in the next 6-12 months.

The dollar is now at a 2 year low against the Yen.

Wheat is up the limit today to 800 cents per bushel, and soybeans are down 2.5 cents at 1084.5 cents per bushel. These numbers are not deflationary, especially with gold staying near $800/0z.

I expect gold to rally into the end of the year on concerns about the dollar, a weakening U.S. economy, and the fact that many large purchasers of gold will be taking delivery of the physical gold. I expect this to cause short covering in gold going into the DEC contract expiration on December 27th.

Protect your capital!!!!

and

Have a Happy Thanksgiving

Embrace the Horror

2007-11-20T19:37:00.000-06:00

Shock youtube financial guru Jefferson Krull. Persistently tells his viewers to embrace the horror. It seemed to work pretty well for him in early 2000 when he purchased massive amounts of puts on high flying Nasdaq stocks and made millions of dollars.

Now is the time to embrace the horror of the coming real estate price collapse in the commercial property sector. It seems like the media is starting to catch on. A lead article today read:

"US commercial property sales down in October"

Here is a short excerpt:

U.S. office building sales fell 70 percent in October from a year earlier, yet another sign the credit crunch that began in the U.S. housing market has spread to the commercial real estate market, Real Capital Analytics said on Tuesday.

You can read the whole article here: Commercial Property Sales October

I am embracing the horror by purchasing long term puts in SPG, DDR, and LEN.

I really like the SPG puts because the stock still has huge potential for downside trading at close to $90/share.

It should also be noted that commercial real estate bond spreads are widening even further.

Here are charts of the worst rated bond BB and the highest rated AAA bond in order to show that the garbage has been spread across all ratings.

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These spreads are so huge that it begs the question:

How much are these things really worth???

The truth is that NOBODY KNOWS!

Jim Cramer pointed out one way that people can find out. You can watch the video here:

One Bank Has Got To Go

Pulte Home Put Buying Bonanza

2007-11-19T20:16:00.000-06:00

50,000 January PHM 30 Strike puts purchased

In a transaction worth $90 million dollars, 50,000 puts on PHM were purchased. I would say that the odds of PHM surviving are slim to none with this kind of options activity. Charts of the transaction and of PHM stock are posted below. Click on the charts for sharper images.

It's An Ugly Market Ahead

2007-11-19T19:43:00.000-06:00

The 300 point rally from last week is now completely erased as credit losses mount at Citigroup. Citigroup's total write off is now approaching $26 billion dollars. Or roughly half of the United States monthly trade deficit.

The real story today is about the homebuilders. The XHB has now broken through the most recent low. Expect to see some of the builders going out of business in the next 2-3 months. This time is different than last time housing was in a slowdown. Even if interest rates drop to 1% again, no one will be able to get access to easy money. The homebuilders are in a death spiral.

Many are in an every day struggle to stay alive.

Do not believe the talking heads on CNBC. This is not going to end for a few years. If you have an option account. I suggest long term puts on commercial real estate and the home builders listed in the above article. Otherwise, do not go bottom fishing in a market where the fish will bite back.

The Final Countdown

2007-11-18T20:26:00.000-06:00

On Friday, FedEx (FDX) came out and said:

"it cut its profit forecast for a second time because of rising fuel costs and weak freight demand. The shares fell the most in 16 months"

How important are shipping data? Very important especially with the shopping season coming up and retailers all ready gearing up. The time before thanksgiving is when the most merchandise is moved into stores for sale by the consumer. Less merchandise shipped means less merchandise will be purchased.

This means that the recession is here. Recession is not an evil word. They happen every seven years in the U.S. It just seems like everyone here has problems remembering what things were like 7 years ago. As I recall, the stock market crashed, the fed let the money spigot flow, and things got better. Wash, rinse, repeat as necessary.

Here are some charts:

The consumer discretionary chart is important because it lists the goods which people purchase with their disposable income. I think that it is a great measure of the health of the American consumer. After all, what else does America really do besides consume these days?

It should be noted that when Greenspan was fed chairman, he called the CEO's of the shipping companies such as FedEx and UPS twice per month in order to gauge economic activity. It's too bad that he forgot to turn off the spigot at the end of his tenure. I guess that people are forgetful in their old age.

The final countdown has now passed for the U.S. economy. It is ironic that the Euro is still soaring against the dollar and the band "Europe" wrote the song "The final countdown" over 20 years ago. At least for me, it now makes sense what they were counting down to.

Welcome back to relative P/E valuations.

2007-11-12T22:41:00.000-06:00

Something I regularly track are the P/E valuations on major indexes. They were doing just great until huge firms started missing numbers. Now they are extremely over inflated. The P/E in the DJIA more than doubled (from 18 to 46) as many companies lost tons (in the literal sense) of money this last quarter.

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The 30 components in the DJIA provide a sample for what might happen to the Nasdaq.

Slaughtered as the Nascrash and Efade Financial get marked to market.

2007-11-12T21:45:00.001-06:00

The high fliers of the Nasdaq got hit hard today. This was how one of my trading pages looked today.

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I named the above page "Short Candidates". The ironic part is that I gave it that name over 5 months ago. In the market, timing is everything.

For the Nasdaq it looks like the 200 DMA is going to come into play. There is no mercy in this market. I'll repeat that: THERE IS NO MERCY IN THIS MARKET.

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As for the DJIA, the early morning rally was faded into oblivion. We are now under 13,000 on the DJIA, a level I pointed out last Monday that we could get under in the near future. That was over 600 points ago. This is really scary stuff and smacks of a serious bear market. Stocks are being sold at resistance over and over again.

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I guess it becomes hard to trade and sustain current market levels when your broker is going bankrupt. The sad part is that Etrade had a solid business built on a great product and satisfied customers. Then they make very stupid decisions and imploded a wonderful business. All to make a couple percent above the prime lending rate by purchasing securities no one understood until it was too late.

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Gold was down huge today, I am going to stick my neck out and say that gold is just correcting and that it is in a bull market. I expect it to be higher than $850/oz by the end of January. I was purchasing a 1/3 position in long term gold producer calls today. Gold is back above 800 as I type.

Monday Monday Monday

2007-11-11T02:00:00.000-06:00

For investors, Monday is setting up to be one of the scariest days on record. The yen carry trade completely unwound on Friday and the market had a steep sell off before the close. Going from almost unchanged to down 1.7% on the DJIA and 1.4% on the SPY in less than half an hour. The big picture is that we are still 500 points above the august low of 12,500.

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The current recession we are in is starting to drag down tech. On fears that the consumer spending is all ready getting hit.

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Note that support at the 50 DMA failed very fast, I expect that the 200 DMA will be tested.

The numbers retailers showed on Friday confirmed that this is the case. Consumer spending has dropped. With chain same store sales coming in at 0%. When factoring in inflation, growth is now negative. One of my friends who works at a large retail chain confirmed that same store sales estimates were reduced by 50% this week.

Consumer sentiment came in at levels not seen since 2005 after Katrina hit. Coming in a full 2.6 points below the consensus range.

I think that it is now clear that the economy can not take the effects of a declining housing market and high oil prices at the same time. Many people are wondering what is going on with Ben Bernanke saying that:

"he expects a raft of economic troubles will cause business growth to slow and as a lackluster forecast from Cisco Systems Inc. made investors wary of technology stocks. The major indexes each lost more than 1 percent, with the tech-heavy Nasdaq giving up more than 3 percent"

Many people are wondering why Bernanke did not say this sooner. Did not he know what was really going on???? Of course he knew, but imagine the market reaction if he came out when the DJIA was at 14200, and said that recession potential is increasing or all ready here. He would have been blamed for the subsequent market fallout.

He obviously took notes from Greenspan, who never publicly said that anything was wrong with the market, but was not bashful to say so behind closed doors. The participants in these meetings never thought that the information would be made public, but the freedom of information act changed that. Minutes from past meetings were released and the public read what they were saying behind closed doors.

From the March 21, 2000 FOMC meeting minutes (the top of the tech bubble)

"The members noted that equity prices generally had posted further gains during the intermeeting period, but in their view the large increases of recent years were not likely to be repeated, and an absence of such gains would have a restraining effect on consumer expenditures over time."

Why did not Greenspan warn the public at the time? Because he would have been blamed for popping the dot com bubble. Just like Bernanke would be blamed now if he really said what is on his mind.

Your job is to focus on the longer term picture. Monday will just be another day in market lore when you look back on it. It has the potential to be horrendous, I think that there is still opportunity out there to switch into gold stocks, foreign stocks, and Japenese yen. It is not too late to jump off the current bubble while it is bursting.

Gold closes at record high, but lows are the story of the day

2007-11-07T15:56:00.000-06:00

There is something that is difficult for most people (including myself) to grasp. Especially with the market bleeding red . The difficult concept is that when something goes down in the market, something else goes up. The reason that the stock market was down so much today had very little to do with housing and with the investigation of Washington Mutual. That mess does not have the power to drop the U.S. stock market over 350 points in one session. The stock futures are still ticking lower as I type.

The reason that the stock market fell so much today was because of China. They hold 1.3 Trillion U.S. dollars and they announced publicly today for the first time that they will sell dollars in order to diversify assets.

When the announcement was made, the euro gained a penny on the dollar in less than 4 minutes. In the world of currency trading, that is a monster move. It continued to rise throughout the session and put in what I think is an intermediate top. This is what caused the market to fall today. The declining dollar. Here is the usd/euro chart:

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The Japanese yen also had a similar move, but it has a more important relationship to the action of the stock market. The yen now determines if the U.S. market is up or down. And the dollar continues to move lower against it as I write this. If you thought today was bad, tomorrow could be worse if the yen breaches the 111.5 level and stays down there for any considerable period of time (30 minutes or longer).

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I know how bearish this sounds, but when looking at the bigger picture. It becomes clear that the August lows will be tested, and that some of the larger banks are at risk of suffering serious financial hardships.

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You can still make money by putting your money in the right places. I know I sound like a broken record, but Jim Rogers has given investors many options to make money in this type of environment. The Japanese yen can be purchased through the FXY.

Now, take a deep breath, calm down, and watch the video

What the market knows.

2007-11-05T23:23:00.000-06:00

I have found that market participants close to wall street tend to receive market information which no one should even have access to. Case and point: Everyone knew that Chuck Prince was going to be fired on Sunday the 4th of November, three days prior to it occurring.

So when I see a company falling as fast as Ambec Financial (ABK). It makes me wonder what everyone knows that we do not, and what the CEO is not telling us. Especially after THIS
article.

Here is a video of Robert Genader (The Ambec CEO) defending Ambec while his company's stock and the general stock market were in free fall.

Chart of Ambec Financial (ABK)

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Markets and Balancing Rocks

2007-11-05T18:19:00.000-06:00

This is currently the US stock market

Today seemed like a very panicky day in the market, but it was not. The two charts below illustrate that the market tested support and resistance throughout the day.

1 Month S&P Emini Chart

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6 Month S&P Emini Chart

I have added support levels
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These charts are the 1 month, and 6 month S&P 500 December futures . Futures markets, are some of the most highly liquid markets in the world. What concerns me is that the market was quickly sold off at resistance, and it looks like it is now in balancing rock mode. If it gets just the right push, we could be going right back below 13,000 on the DJIA in short order. In my opinion there are a few safe places to put your money right now, and few of them involve the U.S. stock market.

I think that the number one single thing to buy for the long term is: The Jim Rogers Commodity Trakrs. This index was created by Jim Rogers. Jim Rogers stores a large chunk of his money in this index. He also holds various foreign currencies like the Chinese yuan, Japanese yen, and Swiss franc . I think that the best way to make money is to follow what a billionaire does. Unless they buy an airline, that is a sign that a billionaire will soon become a millionaire.

I will post later about how I plan to make money in the coming days/weeks/months. Three words: commercial real estate

Jim Rogers On Kudlow

2007-11-04T19:55:00.000-06:00

Jim Rogers talked about all of the most important issues affecting world economics and how to profit from it Friday on Kudlow. One word: Commodities.

How high does Jim Rogers think oil will go within 10 years? You'll have to watch and find out.

If you do not know who Jim Rogers is. He started a hedge fund with George Soros in the late 1960's. The goal of the fund was to make $500,000 each and retire after ten years. They ended up topping that goal by a few dollars and making $10 billion dollars.

Is The Chinese Renminbi (Yuan) /Dollar Peg In Jeopardy?

2007-11-03T22:55:00.000-05:00

Bloomberg is reporting that Hong Kong currency traders are betting that the Renminbi/dollar peg will be reevaluted.

Currency traders are betting in the forward exchange rate market that the Hong Kong Monetary Authority will abandon its currency's 24-year peg to the U.S. dollar as overseas investment floods into the city.

In the forward currency market, an investor can buy Hong Kong dollars now for delivery in 12 months at HK$7.7106 per U.S. dollar, above the HK$7.75 top of the Hong Kong Monetary Authority's permitted trading range. The authority sold HK$7.828 billion ($1 billion) to defend the currency yesterday, twice as much as two previous interventions since Oct. 23.

It has become costlier to place bets on the peg ending. Volatility implied by U.S. dollar-Hong Kong dollar options expiring in six months rose to a 10-month high of 1.25 percent, according to prices from Tullett Prebon Plc. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options.

``What the forward market is telling you is that the pressure is not going to go away anytime soon,'' said Russell Jones, global head of foreign exchange and fixed-income research at RBC Capital markets in London, who believes the link will remain. ``The monetary authority is going to have to keep intervening to maintain the peg.''

I view this as a clear warning sign that the dam has signs of bursting in this market. The recent financial turmoil here in the U.S. is starting to create a high level of distrust between investors and dollar denominated assets. Especially within the investment banking sector. People from other countries are starting to ask how they can own dollar denominated assets when the underlying asset is declining and the currency is declining.

The US Dollar index is the calculated using the exchange rate against 6 other major currencies:

Weighting of each currency in the index:

Chart of the US Dollar Index:

(Click for a sharper image)

I would not be surprised to see the Renminbi added to the list on the USD index in the coming years.

Down Goes Citi!!! Down Goes Citi!!!

When a stock like Citigroup declines 20% in a month, I think that it is a call for serious concern. It has now become obvious that they have been hiding their losses. Today they announced a $6-$10 billion dollar write off.

Citigroup faces a write-down in the range of $6 billion to $10 billion, mainly because of exposure to subprime mortgages and collateralized debt obligations, CNBC has learned.

The size of Citi's write-off is still being debated, though a source told CNBC that Citi's board is pressing company finance executives to clarify the issue. The firm's audit committee is also scheduled to meet Sunday, in advance of the emergency board meeting.

Chart of Citigroup:

(Click for larger image)

Citigroup currently has a market cap of $182.69 billion. If they write down $8 billion dollars of losses (middle range of $6-10 billion). On Monday, 4.2% of the company will vanish into thin air.

Looks like the juice has been made

2007-11-02T12:25:00.000-05:00

Banking shares never recovered on the last rally.

It looks like the brief squeeze was used to sell and to short at higher levels.

The dollar is falling almost .01 against the euro, and gold made another new high at 810.60. I expect gold to open higher next week and continue upward. I think that the fed will not step in again soon to help out the struggling banks. I am also expecting the market to rally on hopes that the fed will do something over the weekend. It seems like investors are deeply worried about banks like Citigroup and Merrill Lynch.

Rumors are flying that Citigroup may cut its dividend, or even worse that it is potentially insolvent. The company stopped all lending in California on October 31st.

There are claims that Merrill Lynch attempted to hide assets by selling them to hedge funds with an agreement to purchase them back at a later date for a set price. Not only is this unethical, but I am sure that the government will be looking into this. The pressure from the street to beat estimates is tremendous, but lying, cheating, and stealing to get there is much worse than just taking the loss. Now is a good time to remind you about how great of a place America is. Where else can someone tank the company stock, hide liabilities, make unethical decisions, get fired, and leave with $130 million dollars?

Yes, America is a great place.

Watch out for the Squeeze

2007-11-02T11:10:00.001-05:00

A lot of stocks look oversold to me at this point. I wouldn't be a buyer just yet, but I would cover my shorts if I was short.

Subprime Zombies

2007-11-01T12:11:00.000-05:00

Yesterday was Halloween, but the zombies are still out and about today in the market. Sub prime zombies feed on rate cuts. If they do not get at least 50 bps at a time the zombies come out and feast on companies like ABK, MTG, PMI, RDN, etc. It looks like they are done feasting for today, but I am sure that they will get hungry again in the next few days/weeks/months. Mortgage resets tend to add to their hunger as well.

How Long Is a Fed Light Year?

2007-10-31T22:35:00.000-05:00

A light year is the distance light travels in one year. Light moves so fast that we perceive its motion to be instantaneous. Light travels at 186,000 miles per second. It seems to many of us that we receive information at the speed of light, while the fed receives it at a snails pace. The fed statement today was merely a review of what everyone all ready knew. Housing is a problem and inflation is out of control.

Here are some excerpts from the statement:

"However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction."

"but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully."

The fed is going to solve this problem the only way it knows how. It is going to print money.

The Boardwalks and Park Places of the Market

You need to put your money into high growth stocks to beat inflation. Stocks like AAPL, GOOG, BIDU, ISRG, UA and FSLR are the place to be.

If you want a steady climber that will profit the most from this inflationary environment. Get into gold stocks. These stocks have the potential to double or triple over the next few years. Stocks like GG, NEM, GOLD, and AEM are the place to be (all of those stocks are all ready multi-billion dollar companies).

The pain is not over for stocks like PMI, MTG, ABK, RDN, TGIC, MER, CFC, KBH, LEN, and MBI.

I'm not arguing that these companies will all go bankrupt, I just do not see the point of risking so much for a relatively small return. I have found that sometimes, when you go bottom fishing the fish bites back.

Gold Briefly Crossed 800 (It will be up there to stay soon)

Oil is Currently Touching 96/Barrel ($100 Doesn't Look So Far Off Now)

Mainstream Media VS. Bloggers

2007-10-30T16:28:00.001-05:00

What do these two have in common??
(Hint, it's not the tan)

Angelo "Angie" Mozilo
(CEO Countrwide Financial)

Robert "The Grenader" Genader
(CEO Ambac Financial Group )

There are some bloggers out there who are good at blogging. Then there are others out there who are so amazing that they deserve their own TV channel. Michael "Mish" Shedlock is one of those bloggers who deserves his own cable TV channel, maybe even his own network. He broke a story today on insider selling at ABK (he was also early on the case of CFC). It always seems like Mish is first on the case.

Stories like these me scratch my head and wonder why places like the WSJ do not pick this stuff up. These are clearly violations of Sarbanes-Oxley insider trading laws. Those laws were put into place to avoid what happened at Enron. It seems like dozens of Enron's are popping up everywhere.

This blog author is credited with the addendum.

Link to article:

http://tinyurl.com/3ahzeb
Ambak Financial

A Spooky Halloween Video

2007-10-28T17:55:00.001-05:00

Gold is currently at $791.40/oz in evening trading. Things could get crazy if it crosses $800/oz in the overnight market. I am expecting gold to come into strong resistance at 800/oz. It could also encounter fresh short covering at that level as well. A rate cut of 25bp seems guaranteed at this point, and the futures markets have priced it in all ready. Oil is up $0.50/bbl to $92.34/bbl.

Here Are Some Things I Find Scary This Halloween

A Bank Without Checking Accounts For Customers

2007-10-28T16:44:00.000-05:00

On the Countrywide bank FAQ site. They say that they are no longer accepting new customers for checking accounts. That is pretty spooky, and just in time for halloween. However, during the conference call officers of the company said that loans were now being funded through the countrywide bank as the company no longer has access to outside sources of credit.

Does anybody still use savings accounts anymore? How do the countrywide executives expect people to hold money in a savings account where you earn 3% interest (if you are lucky), inflation is running at 2% (according to the fudged CPI data), and the dollar has fallen 10.4% against other major currencies this year. Dollars kept in savings accounts lost 9.4% of their value this year subtracting for interest.

CFC Faq Site

"Quality Rated Paper With A High Yield!!!"

2007-10-27T20:51:00.000-05:00

This is what currently qualifies as A rated paper:

Last Price (35.86)

If you do not know much about bonds. They always start out at 100. This bond has lost 65% of its value. The rating agencies should issue downgrades on these bonds soon, but they can only downgrade them to BBB- (one notch above junk status). That is because many large institutions are not allowed to hold bonds with ratings lower than a BBB-. If the rating was below a BBB- the institutions would be forced to sell all of their holdings of the bonds. That would cause further price declines and even more selling.

The question also has to be raised: Who has the capital to buy them from the large institutions???

Here is the worst preforming sub prime bond. The BBB- rated bond. You should keep a garbage can close by for puking into if you dare to click on the thumbnail for a larger image.

Last Price (18.57)

The Sultan Of Slime Is At It Again

2007-10-26T09:40:00.000-05:00

"Freak of Nature"
"Alien Predator in Subprime Slime"

Anyone who can sell 500 million in stock and have people believe that the company is ok must be a freak of nature. No one person is directly responsible for creating more personal tragedy in in the housing market debacle than the Freak of Nature pictured above. At the same time there is probably no one that profited more. (Sent in by reader Steve)

Just take a look at:
RDN
MTG
TGIC

You can thank Mozilo for the gap up in those stocks today. In three months you can also thank him for those companies filing for bankruptcy.

CFC Conference Call:

"Loans are now being funded through banking deposits because CFC can not obtain funding in the capital markets"

They are giving out loans from their bank assets and deposits. These funds are not unlimited and will eventually run into negative territory, when there is a run on their bank. I am sure that bank customers are happy that their money is being handed over to save home-owners who are close to bankruptcy. This is a recipe for disaster. I would take my money out of CFC as soon as I could if I banked there.

If You Had a Bad Trading Day

2007-10-26T01:00:00.000-05:00

Just take a look at the chart below and you will feel better. The company is WCG, and they had the pleasure of being raided by the FBI on Wednesday. The stock was subsequently halted and as you see below there was a small gap down at the open on Thursday.

"The nature of the investigation is unknown at this time. A release from the U.S. Department of Justice was generally vague. It said the ongoing investigation does not directly concern, nor should it have an impact on, the delivery of any health care service to any person."

My guess is that they were actively participating in Medicare fraud. I know someone who used to work for the office of the inspector general and he would tell me that it was rampant.

P.S. Take a look at the RSI reading (overbought/oversold indicator) it went from above 70 (overbought) to below 30 (oversold) in ONE day!

What Is In Store For Today?

2007-10-25T16:48:00.001-05:00

What will the master of disaster say?????

The price action in MTG, PMI, RDN, and TGIC will be totally based off of what CFC says today before the opening bell. It looks like they are all going to pop, and catch a lot of shorts off guard.

CFC was a loan originator for 2.5% of all mortgages.

If they offer any good news (they are masters at making up BS) expect these stocks to bounce. They are all oversold right now, and most will eventually go bankrupt. Almost nothing, except for New Century Financial (NEW) goes straight down to 0.

What they said:

Countrywide loses $1.2 Billion

"But the Calabasas, Calif.-based company said it will be profitable in the current quarter and in 2008, as it restructures its business to take advantage of the current market."

Honestly, I do not believe that they are going to just waltz right on through with only one quarter of loss. This is the biggest credit bubble in history, and I think that they are going to suffer along with everyone else. After all, most of the mortgage resets have not even hit yet.

Heisenberg and Einstein Take On Inflation

2007-10-25T00:08:00.000-05:00

Have you ever tried reading a newspaper when it is pressed up against the tip of your nose? It is pretty much impossible to do without straining your eyes. That is how I view inflation, it is constantly in front of our face, and it is also constantly in motion. Also, prices tend to move so slowly that it is difficult to even see that they are moving at all. Whoever thought that Einstein's theory of relativity could be useful to economics?

It is kind of like seeing an old friend that you have not seen for a few years. Sometimes they will look drastically different, maybe they gained weight, grew a beard, or even had plastic surgery.

Imagine if you were able to transport yourself back 8 years and come back today. Would you perceive prices differently as they are now? Lets find out

Cost of gasoline in 1999: 1.33 per gallon (12 month average sampled 4 times per month)

2007: 2.95 per gallon

That is a 121% increase in the cost of gasoline over an 8 year period

Well, lets be honest. We all know that crude oil prices have skyrocketed because of increasing demand. I'm sure that prices for other things have not gone up. After all, the fed keeps telling us that inflation is under control.

Product	1999 Price	Price Today	% Increase
Electricity per 500 KWH	45.375	61.457	35.44
White Bread	0.899	1.212	34.81
Eggs Grade A	0.92	1.825	98.36
Orange juice	1.822	2.59	42.15

It is comforting to know that according to the federal reserve, people do not need to eat or use energy. Don't you feel better now that you moved that newspaper away from your nose :) ?

Gushing Oil and A Golden Shakeout

2007-10-24T16:18:00.000-05:00

I do not like high oil prices any more than the next person, but pretending that everything is ok with the supply and demand of the commodity is just as good as sticking your head in the sand. If U.S. consumers really cared about the price of oil, more pressure would have been put on congress by the public, and congress would pressure the auto makers. The end result would be an American made hybrid vehicle. Pretty soon people will be wondering if taking that extra 30-60 mile trip is really worth it. Without the implication and utilization of fuel saving vehicles within the next 10 years, "going out for a drive" just for the fun of it might be a thing of the past. The car I took on a 1,200 mile trip was a hybrid vehicle. It got 50 miles per gallon, at an average highway speed of 80 MPH (no exaggeration). Why are people so against hybrid vehicles? Is there anything wrong with getting 50 miles to the gallon while going 80 MPH?

Today, oil gained $2.70/bbl and bounced off the $85 support level.

If you think that oil is not going to $100/bbl you are fooling yourself. The current fed policy is to lower interest rates during a commodity bubble. It is the wrong move in every respect. The fed should have held interest rates steady and let the housing and credit bubble work its way out of the system. Instead, they decide to support the housing bubble with cheap money while it is popping.

I fully expect consumers to start feeling that pain again at the pump. Right now the average gasoline price in the U.S. is $2.82. I expect the average price to increase along with the price of crude oil. The spot gasoline price has slowly been moving up and testing out new levels.

The gold market tried to shake out weak longs in the last couple days.

I suspect that $800/oz is closer than people think

I'm currently counting on another fed cut as the 10yr yield dropped to 4.33% today.

Thanks for reading, and best of luck trading this volatile market.

The Squeeze Is On

2007-10-24T14:13:00.001-05:00

Mortgage Insurer Blood Is Running In The Streets

2007-10-23T11:59:00.000-05:00

The last time I saw stocks trade like this. It was during the late summer stock market plunge, and it was lenders who eventually went out of business.

Here is a chart of NEW (Formerly New Century Financial) before it went bankrupt.

The similarities between the charts of NEW, MTG -2.13 (-10.23%), and PMI -1.84 (-9.07%) are uncanny. The question that many have is: Why are these companies suffering so much today?

MTG released earnings 5 days ago, and the stock can not seem to gain any ground.The pain in these lenders over the last few days is likely coming from the fact that all of the brokerages could not exit their positions at the same time. So they have been forced to bleed these stocks down. Also, the pain in recent days is likely coming from devaluation of the company bonds (speculation, but more than likely considering the recent deterioration of subprime bonds)

PMI has upcoming earnings on October 30th before the market open. Will the stock have plummeted enough by then to stave off anymore pain? That is anyones guess, but I wouldn't bet on it.

These charts are scary to say the least, but short squeezes are more likely than not at this point. Here is a recent example of one:

(Don't get caught off guard if the insurers squeeze like this)

I am not a "perma bear" on the market. I do think that China is on its way to taking America's lunch. I just do not see any point in trying to catch falling knives. Why would you when you could own solid companies like AAPL +11.12 (6.38%), GOOG +13.95 (2.14%), ISRG +12.94 (4.53%), BIDU +19.93 (6.30%), or AMZN +5.79 (6.34%)?

The oil price zombie.

2007-10-23T10:22:00.000-05:00

Many of those on CNBC and around the financial universe have been chanting, praying, and doing rain dances in hope that oil prices decline. I decided to consult the best possible source when it comes to oil prices. Why not go with the man batting 1,000 on converting supply and demand data into great trading information (in more categories than just oil). He was the man taking the other side of the Amaranth trades (now that is guts!). For many it seems that oil is a zombie that just keeps rising from the grave rather than a commodity in a prolonged uptrend. Oil is going to $100 just based on supply and demand. Adjusted for inflation oil should cost around $102.97 per barrel (Inflation Calculator)

The current support in oil is at 85. As this chart shows, there is support everywhere.

Maybe it is time to think about conservation of energy rather than driving H3's

Kudlow Gets His Wish

2007-10-22T10:04:00.000-05:00

The dollar is rallying huge against the euro.

I wonder how coincidental it is that Kudlow was begging the fed to do something on Friday. I guess that wishes can come true.

Who is to blame?

2007-10-21T22:02:00.000-05:00

Current World Market Activity

S&P 500 Futures 1493.75 12.00
Euro/USD 1.3150 .00210
Nikkei 225 16,277.10 537.27 (3.20%)

Asian Markets

This week is shaping up to be one of the most volatile weeks we have had all year. It has come to the point where the average investor is starting to wonder why they should believe the HB&B's (Humongous Banks and Brokers) anymore.

Fingers will start to be pointed and capitol hill is likely to start calling people to testify in the coming weeks and months. When Enron collapsed it was a few billion dollars ($70 billion at its peak). We are now talking about many orders of magnitude greater. Some estimate $300-$400 trillion dollars (with a T) of OTC derivatives outstanding. I know what you are thinking. Dollars are not worth much any more in the world market. Isn't that just a few hundred euros?

Nope, "that's roughly 8.5 times the world's gross domestic product" -Tim Colebatch

The same sleazy tricks are being played with balance sheets, but this time they are allowed to get away with it.

"So much for the worst of this crisis being over. Just a few weeks back, there was some optimism building in the marketplace that the end of this bumpy road was near. Those upbeat views now look like they were just wishful thinking.

Why else would a consortium of banks — including Citigroup, JPMorgan Chase and Bank of America — be uniting with a plan to keep the housing-related debt crisis from worsening. If they thought conditions in the credit market were about to improve, would they be gathering for this group hug?

The banks have proposed creating a fund that will buy around $100 billion (€70 billion) in debt from structured investment vehicles, or SIVs, in an attempt to break the logjam in the market for short-term debt instruments that hold mortgage-related assets."

Below is a short video of who is partially responsible for this mess

This market is in repricing mode and things are going to stay extremely volatile. Remember that the fed can intervene at any time with another surprise rate cut, and you should be prepared for that to happen. Protect your capital.

Quarterly Housing Data

2007-10-20T15:16:00.000-05:00

Everyone knows that this mess has stemmed from the current housing market bubble bursting. The data are showing that the housing price data are just starting to show signs of a top. A trend is usually defined as 3 data points. According to the quarterly housing data, we have 2 out of three points. I created a chart showing where the median housing prices are now, and where I think they will be in 2009. The chart forecasts a 16.6% decrease in the median price of a home. In dollar terms, that is a pretty big decline, but in real percentage terms, it is not that much. In parts of the country (California, Florida) where homes have went up 100%-300% in the last few years, a decline of 16.6% wont make much of a dent.

(Click For a Better Image)

My point is that housing prices still need to decline and that the mortgage crisis will only be exacerbated by this. Eventually, this is going to bleed over into consumer spending.

As a German economist once told me: "The rest of the world freaks out when American's stop spending"

What Is the Emergency Number To the Fed?

2007-10-20T15:10:00.000-05:00

On Friday, the market suffered terrible losses.

The question now is:

What is going to happen on Monday????

The market is going to open lower on Monday. How much lower is anyones guess. This current "dislocation" in the stock market is going to take a while to sort itself out. Expect trading to be choppy, rumors to be flying, and volatility to increase.

Expect these companies to go bankrupt in the next few weeks. The current pain in the market is coming from these companies.

MTG

TGIC

RDN

PMI

At some point in the coming couple of weeks, the fed is going to show up in a helicopter and start dropping money. The fed knows that if they do not start helping to restart the credit markets, the stock market will suffer further losses.

If you are short, you should be expecting the fed to intervene in the market at any time.

On Monday the 15th, the fed announced that is was creating an SIV fund. This fund would buy debt currently not on the balance sheets of the large banks. The whole point of the SIV fund is to make sure that the big banks like Citibank (C) do not go under.

The question I have is: How was Citibank allowed to pull an Enron and get away with it? Enron went under by shifting debt off balance sheet in SIV's. When that debt was called on, Enron could not afford to pay it. You may remember that the Enron execs brilliantly tied the debt to the price of the stock. Once the stock breached a certain level. It caused the company to implode.

If the fed does not do more, people will start asking why the fed did not do anything to step in. After all it was them who created this problem by keeping interest rates too low for too long.

Personally, I would like to see them do nothing and let the market work itself out. Isn't that the point of free markets? After all, the S&P 500 is still up on the year: SPX

All the data is showing that the current problem is too big for the fed to fix. They can only keep putting band aids on the severed limbs for so long. This whole thing is just a flesh wound.

Right?

Go Go Gadget Gold!!! Gold Hits 775.70!

2007-10-18T21:21:00.000-05:00

In afternoon electronic trading gold hit a new high of $775.70/oz. $800/oz is now just a stones throw away. I think that it will get there by next week. Now is not the time to get thrown off the gold train. The XAU index is just about to power to new highs.

The XAU is patiently waiting to fly to new highs.

Worse Ideas and Mortgages

2007-10-18T20:44:00.001-05:00

As most people all ready know, the majority of the adjustable rate mortgage (ARM) resets is going to hit in early 2008. It is likely that these resets will force all ready stretched homeowners into default.

In the late 1990's before CDO's were invented, a catastrophe like this could be avoided. This is because the loan originator and the borrower could renegotiate terms and find a payment plan that suited both of them. The borrower would keep their house and the lender wouldn't be stuck with a defunct mortgage.

With the advent of CDO's the borrower and the lender can not renegotiate. Even worse, some firm in Germany or France might own your mortgage. How could you renegotiate if you can not even speak the same language?

Most people do not understand that this is a bubble of the greatest proportions. During such famous bubbles as the "South Sea Bubble" and "Tulip Mania". All of these rich people used large portions of their money to speculate. During the current housing bubble the average person borrowed 8X-20X what they were worth and purchased a house. Some of these people (like most Americans) actually have a negative net worth because they are so shackled with debt. The housing monster has lost it's food source and it is now in collapse.

The newest victims are companies that most people did not even know existed. What did these companies do? They insured the toxic mortgages now being defaulted on. They are also starting to look a lot like the lenders did before they started going bankrupt. One of the best no brainer trades (besides being long gold) for the rest of the year is long term puts on these companies. If you can find shares to short, that is even better. Take a look at the charts. I don't see how these companies can survive.

Click on Image For Clearer Picture
(It's worth a look)

These charts are terrible. It wont be long until the bankruptcy rumors start swirling. These companies insured the mortgage originators during what will be one of the greatest financial busts in history.

Disclosure: I own puts on MTG and PMI . These are not to be viewed as trading recommendations. Trading in stock and options involves serious risk and should only be done by experienced traders.

The Subprime Mess, Is it over??

2007-10-14T18:01:00.000-05:00

It's Over!!! It's Not Over!!!

Listening to the CNBC on this issue will make your head spin. I personally do not think that it is over, but I do believe that it wont affect good quality stocks. If you are putting your money into lenders, banks and builders, you are asking for trouble. Housing inventories are still climbing and prices have not declined substantially yet. I check this site regularly to find out if everything is OK:

http://ml-implode.com/

5 lenders imploded just this past week. Looks like more pain is on the way. Will helicopter Ben cut rates again? That kind of speculation is a shot in the dark at this point. Do what I did at the last fed announcement. Wait until the news is in and trade on it after it is released. Gold went up huge along with the rest of the stock market, and the dollar sank. This all happened after the fed announcement. Let the other traders do the dirty work for you before the announcement.

Welcome

2007-10-14T17:22:00.000-05:00

Thanks for stopping by my blog. This is the first post, in what will be a series of daily postings on the economy and financial markets. The super brilliant people at the federal reserve continually say that inflation is not a problem. It is good to know that they do not have to eat or use energy. Whether it be in the form of crude oil (closed at a record 83.69/bbl) gasoline, heating oil, electricity, or natural gas.

Gold is now basing in the 740-750 range with short term support at 742.50 (where I would try to buy on a break). There is even better support at the 732 level. Don't listen to the people telling you that gold shouldn't be that high. It has been consolidating for over a year and creating an ascending pennant ( a strong chart pattern I follow). Gold is in an early breakout stage right now. Remember when AAPL just cracked 90-100 a share and people said that was too much? Well that is where I think gold is right now.

Listen to the market. The market is voting all the time with billions of dollars and it is saying that gold deserves to be at this level. This is an early trend, and it is solidly up for gold.

Thanks for reading,

Michael