Sikhote Alin Meterorite (Russia 1947)

I picked up a piece of meteorite, a specimen from the Sikhote Alin meteorite crash (Russia 1947), the other day. I bought it from this cool shop that sells cool things. The above picture isn't mine but looks similar. You think about different things when you hold a piece of meteorite, like where did come from? How old is it? Puts everything into perspective.

It represents how insignificant and significant we all are in the scheme of things.

The Keynesian zero bound rate and deficit effect - inflation overdrive

I am not an economist. Although I work in the finance/legal industry. Have been trading in the markets for quite some time.

Everything is a learning curve drawn from analysis, theory and action. You make a call by gathering as much information as you can. Listing to the streets, the fundamentals, reality. Look at the charts and then make your assessments.

It's disturbing how some economists particularly in the Keynesian camp (which is current monetary and fiscal policy) seem to completely play down inflation risks. They unfortunately do not want to accept that inflation and inflationary pressures have changed since the 1930's. It's not complex math to see that America's GDP has slumped yet we have higher fuel/amenities costs and a weakening US Dollar.

The US is zero bound with interest rates, yet if the Federal Reserve could, they would run under 0% right into negative territory and beyond. This as they believe would increase money flow, free up liquidity from lenders and reinvigorate economic activity. Of course this would pertain two problems 1. lenders would continue to horde dollars (a natural human reaction to survival when low to negligible value occurs) since money would have a negative return, also known in Keynesian speak as 'liquidity traps'. 2. inflation, which as some economist have said could hyper accelerate in the medium term. Hyperinflation could occur due to many different inflationary reasons, one of them being if taxes are to increase to offset huge government deficits, prices on everything could in increase rapidly. But as we have discussed oil inflation which is already here (note current oil price in weak economic conditions), could be pre-curser to inflation. As an inflated oil price effects everything, as oil is in 'everything'.

So with massive deficits occurring in the US, plus a 0% interest rate is a perfect combination to inflation and hyperinflation. Although the Keynesian theory is that running beneath 0% rates with fiscal deficits will allow demand and increase output thus holding off deflation. Again the fatal assumption is that inflation is close to 0% therefore government stimulus, money printing and generally throwing money at economies will work. It is a frighting disposition, when we know and I mean we as people, consumers, individuals and participants in our global economy that inflation has not abated and it certainly doesn't feel like inflation is sitting roughly at 0%. So the Federal Reserve and US government policy economists are living in 'la la land'.

But regardless the Fed will have to leave their interest rate at zero indefinitely, due to a conundrum in which they have purchased and are now holding huge quantities of goverment bonds (debt). The problem is trying to sell debt that the Fed holds back into the market at a good price. As we all know even if the US economy starts to recover and the Fed will be required to tighten liquidity (increase interest rates), they will still have to hold interest rates at very low rate. Otherwise when the Fed does try and sell it's 'bonds', they will take a hit and a big one as upward increases on interest rates effect bond holders, refer to graph:



So the Federal reserve that has been paranoid of deflation, could actually mark down it's own bond purchases at some point if they do indeed increase interest rates. But since the Fed has shown little respect to the US consumer. They may just sit on the zero bound and try and sell it's toxic junk (huge unrealized losses) that the Fed also holds. So the Federal Reserve could actually cause deflationary pressures as in runs into losses. It's main hope of course is government trying to rein in liquidity and narrow the deficit, as discussed this can only be done with increasing taxes. Either way, with growing government deficits and a zero interest policy and inflation lead from oil and food; a hyperinflation situation looks to be more of a certainly than a long term deflation period.

Oil on a 25mth cyclical bull run? Update 4 - oil sits in static range.

Risk aversion is subtly moving into global markets. This can be seen with the static gold and oil prices, even with stock market rallies both oil and gold have maintained within their trading ranges. As discussed in Gold price breakout on 'mini' crisis, gold could breakout into the higher ranges depending on an 'event'. In the meantime the erosion of US dollar purchasing power is underpinning commodities which of course are good hedge on inflation/or global recovery.

From the two commodities gold may hold it's ground better than the oil price. If we see US dollar strength on a short term while markets enter a correction phase, the commodity correction could also include the oil price - if China's economy falters in the near term. So at this point the interesting aspect on a looming market correction is the indication that it is starting in Asia, notably China and Japan (indexes).

So if a commodity and stock correction does hit oil there are two supports that should be noted: 65 and 58 (on a 42 month graph). Please refer to graph:



Of course depending on a possible inter-continental conflict other markets will correct with gold and oil moving further up - substantially. This should be factored in (war) when looking at possible market conditions into 2010.

Rodrigo Y Gabriela - Mettalica cover 'Orion'

Not a huge fan of Metallica, but just listening to that riffing via two Mexican acoustic guitarists...Fantástico!

Federal Reserve Chief gets reappointed

Ben Bernanke has been reappointed as head of the US Federal Reserve by the Barack Obama.

Who in his period of being Federal Reserve chief has:

• managing to destroy the core wealth of Americans, this is seen in the erosion of US dollar value.

• his direct intervention to inhabit general wealth and prosperity of Americas (holding cash) by having insanely low interest rates, which has lead to continued speculation as people try and find wealth elsewhere namely stocks.

• bailed out institutional speculators who should have crashed and burned but instead where given welfare via the American taxpayer. The Federal Reserve and Treasury bailout have again ensured that the speculators are now overly speculating again to return to profit, hence the stock market rallies.

• seems to take pleasure in believing that re-inflation of the American ecomomy is vital, despite inflation already occurring in many aspects of the US and global economy, ranging from food, fuel, insurance, council rates, housing/tax registration. With US dollar decaying, further inflation will ensure. Which should just about wipe out any wealth left of the American consumer.

• secretly via bail out money has not revealed how taxpayer money was used to prop up maintain and save bad businesses of Wall Street (although US courts have ordered the Federal Reserve to disclose it's 2 Trillion loan program and it's losses).

• His direct contribution to US Debt to GDP is a nightmare. For any economist, commentator, politician to say that the US debt is 'manageable' is insane. This kind of debt is unmanageable especially when debt is piled up on top of debt, refer at recent attempt at the ecomomy to de-leverage (can you say global recession?). All this means is that a huge wave of de-leveraging will take place as goverment debt becomes a massive bubble.

His behavior is tantamount to criminal behavior, which is his direct attempt at destroying the general wealth of the American population.

China down again baby...

*side note re Obama's administration economic policy:
Biggest economic Stimulus was China's. It's faultering. Good forward bet that the US will launch a second fiscal stimulus if China's flops and the US follows suit (1st stimulus is washed out). End year could reveal global recession redux.

Too much optimism in the markets, a pending China meltdown beginning.

What a divergence. US stocks up via 'optimism' and excess liquidity, Chinese stocks down on 'fear' and tightening liquidity.

Tale tell signs were there especially the Rio Tinto fiasco refer to China's beatdown of Australia - it's all about business and the aggression (polictical) towards Australia refer to China sticks to it's beatdown.... Also refer to New bubbles forming in all markets, Chinese commodity buying could have peaked. Watch global bond markets, may weaken on deficits and corp defaults

China is in trouble. A total export market collapse, over capacity and stimulus running and holding up a whole economy - which has caused an overly speculated stock market and property market. China corrected first (as far as a rebound in global stocks 2009) within their stock market which was shy of falling into a bear market, has now since rebounded back, I suspect was initiated by government officials paranoid of a total stock market meltdown. Despite a rebound the one year graph reveals the trend and it's going one way, which is down.



The US/European markets are reveling in far too much optimism, which is worry in it's self, with China potentially going into an economic meltdown. This may be that 'major' shock to the US/European markets.

Daredevil (Comic)

I remember 1986 I was 14 when I first picked up Daredevil, it was amidst Frank Miller's iconic (1983) run as writer for Daredevil. What an impression it left. He tore into the super hero concept of the flawed character (a blind superhero) like Daredevil, rewired with distress to reemerge the Daredevil character with new strengths. Miller's Daredevil had everything in it, drug taking, violence and a rawness that was never really topped. It was a class act.

In later years other writers came and went, some brought there own style and flare to the comic and passed on some great ideas to the Daredevil character.

Although I haven't been following the comic for years I did look at writers Brian Bendis and more recently Bru Brubaker runs, which I found weak, wimpy and depressing. The art static, boring and complacent.

All and all Bendis and Brubaker's Daredevil lacked any real lasting quality. Both their runs simply put were a depressed and crappy mess. Anyway Bendis is gone and Brubaker is finishing up (with issue #500). Let's hope they (Marvel) bring back some of the muscle, interest and dynamics that Miller set down 26 years ago.

Below is the new proposed art for the next run, new writer Andy Diggle

The Dow still showing downside pressure, but no substantial correction at this point.

We have stock markets that have bubbled in price (overbought) and now are stabilizing into trading ranges. I wouldn't consider the last few days the beginning of a substantial correction. As our current stock markets will only correct on something dire.

China peaking out in 2009 as the whole economy goes into a devaluation slump is a near term possibility. The recent correction in China stocks may be that precursor, which was shy of fallen into a bear market, has (somewhat) stabilized.

The global stimulus that has pulled a a slew of economies out of recession (populous won't feel much different as the private sector continues to shrink) should be completely washed out by end year. Watch for a 2nd wave of stimulus.

The Dow is still trading within ranges after bouncing off 9398 resistance

Recessionomics - update 4. Terminator and the lawyers

Recessionomics - update 4

The film Terminator Salvation was apparently one of biggest independent movies ever made. Not financed by the major studios but (long behold) financed by a hedge fund that helped the producers buy the rights for the Terminator franchise. All this in a recession hey?

So when money is tight the suing begins, in fact it already began in Terminator Salvation pre production as 'another' producer wanted his cut.

What does this mean for the producers and their company Halycon? Possible bankruptcy.

Whatever the outcome will be of this litigation entanglement, it all falls under the title Recessionomics.

“Terminator Salvation,” one of the most expensive independent film productions ever, on Monday became embroiled in a legal fight between two of the film’s producers and a hedge fund that had provided $30 million to purchase rights to the “Terminator” series.

Halcyon, a company owned by the “Terminator Salvation” producers Derek Anderson and Victor Kubiceck, filed suit in Los Angeles Superior Court accusing Kurt Benjamin — whom they said helped set up financing for the rights purchase while working at the Pacificor hedge fund — of fraudulent dealings that have pushed Halcyon to the brink of foreclosure on its loan."

New York Times Link

China's stock market correcting - August 2009

This could be the pending commodity correction beginning in the last quarters of 2009.
Factor in US dollar strength and market (stock) corrections. China could still beatdown on Australia, I wouldn't rule that out at all.

The West is falling into a 'planned ecomomy'

If you even get a chance, read a book by the modern day industrialist Ricardo Semler called the 7 Day Weekend. In which he refers to his philosophy and business model that is the company Semco. A great insight into anarcho capitalist leanings regarding worker and management input to maintain innovation, creativity and profits.

It is a comprehensive yet easy read detailing Semler's perspective on management, corporations and capitalism. One aspect that he points out that should be noted in the book is the term mercenaries in business, he refers to MBA guys (and girls) that work for investments banks. Not that loyal, yet hired to reign in as much money as possible; until one of them gets busted for insider trading and the whole thing goes south. Remember this book was written prior to the so called Great Financial Crisis, or global recession of 2008 - 2009. Although Semler does explain the ramifications of the 'dot com bubble' and the Brazilian financial crisis of late 1990's and it's effect on his company Semco at the time. It is a observation of arrogance and growth in business that naturally gets cut down in a business/economic cycle. So the mercenary aspect is the driven desire to make profits for an institution, usually for an investment bank. He describes that the mercenary idealism is purely opportunistic and self interested driven - to an extreme point. That a bank that hires full teams of mercenary type employees that end up being the backbone of the company, may at one point reap massive profits, but also may send the company bankrupt by extreme risk taking. As we recently saw with the investment banks of Wall Street (prior to the US government giving them welfare). His opinion is although the mercenary profit driven and 'loyal to none' aspect can work, albeit as a small aspect of a company, it should not be the driving motivation of a company direction. It will eventually sink the company.

I have known people who have worked for investment bank/s, their loyalty is not essentially to the bank but for higher ground and greener pastures. I am also aware of the external scrutiny when a bank starts to take bigger risks (usually in a profit bubble) - and it's eventual collapse or liquidation. It is in it's self a senseless environment to work in, yet investment banks are needed in the markets to arbitrate mergers and acquisitions and support initial public offerings on the stock market.

A strange thing has occurred in our society and economy, which ever way you want to look at it what has occurred is historic. A centralized global boom with all economies booming at the same time, huge amounts of leverage and excess thrown into the system. Low interest rates in most developed countries and housing/construction booms in literally every country on the earth. Then comes the bust, synchronized bust as we all know instigated by by the collapse of the US housing market. Mix in the so called solution, which was at the time and calculated fiscal and monetary policies by every government on the planet by throwing money into their economies. An economic and social experiment that has the historic hallmarks of a potential and major problem/s, namely inflation and growing government deficits; which also includes the danger of reinforcing credit bubbles within aspects of a now planned economy.

As the government of the world have fallen into a planning economy regime, they have also attached themselves very closely to central banks, as the two are now working in tandem in favour of government expansion policy. We have seen this with the US Federal Reserve under Ben Bernanke. With recent stock market rallies and a rebound of stimulus backed industries and Wall Street returning to profit. A clear distinction has taken place, with the US government become more of a economic planning based governing body it also has protected the top tier investment banks of Wall Street. Who, as Semler wrote in his book, have a mercenary mentality to profiteering. That all said in done in a free market economy, if a company chooses to become a mercenary driven business, then when it goes bust it goes bust. It doesn't get bailed out by governments nor does it receive funding to maintain business practices. Instead the US government has propped up and allowed Wall Street speculation again, whilst at the same time planning the US economy with stimulus packages.

Not only is the US falling into a planned economy but so is the rest of the West, it is a distortion of economic and business cycles and innovation. To drive, as the US policy machine is doing, more credit growth on top of huge debt to GDP is a pending nightmare. With the money speculators being fed liquidity by the central banks and their governments.

So not only is this a paradox, but a contradiction. That being a socialist leaning economic policy while at the same time supporting upper levels of the finance industry.

We are all now forced to rely a Goverment gamble on the 'planned economy' theory (as fas as sustaining an economic recovery). But the odds look pretty terrible, especially with credit/debt expansion continuing and the ever growing goverment deficits. Also don't forget planning based economic models are historically disastrous.

Whatever the case, if a downside occurs (and we are talking a 'major' downside as opposed to the one we just had) we all will be left picking up the pieces again thanks to goverment intervention.

Gold price breakout on a 'mini' crisis 2009

The current gold price is fairly static caught in a range between resistance of 965.30 and the 100 moving average at support of 927.55. The Commodity Channel index has dipped (refer to overlay). The Average True Range is pointing to flat volatility.

This could indicate a breakout pending the market being slightly nervous to a potential mini crisis ('mini' crisis in the sense it could escalate into a major credit crunch), which could be the commercial mortgage backed securities write downs and bank weakness into 2009. It is unlikely that the Federal Reserve will change it's dollar destroying polices and if a CMBS market starts to crumble, the Federal Reserve will pump more liquidity into the market so this will continue to support the gold price.

But a breakout potential is there, especially on the onset of a mini crisis brewing in the winds.

CCI = 20 days
ATR
(TR) H-L=7.92
(TR) H.C1=5.37
(TR) C1- L=2.55

MA 50 and 100


*morbius glass doesn't give investment advice, trade at your own risk

Investment update - August 2009

Any good trader knows that goverment stimulus policies have created bubbles in stock markets. Anticipated rallies could continue towards year end until a big sell hits markets. Until then the only long position that I hold in stocks is in pharmaceuticals that have performed very well on the back of depleted stockpiles of influenza drugs during the onset of the Southern Hemisphere flu season. So Governments will be buying up big to try and replenish low inventories of two of the major influenza drugs Tamiflu and Relenza. As the Northern Hemisphere prepares for winter, rallies in pharmaceutical stocks should continue. I would say that it would be sensible to close off positions on banks and consumer based stocks, apart from food and energy based stocks. Technology stocks are dead in the water. With the Asian export markets literally dead in the water, I suspect the only real price deflation will be on technology goods as inflation will start to take hold very quickly into the later months of 2009. Similarities are emerging to the 2008 inflation spike (March 2008) on food when Northern hemisphere crops reported low rain and drought conditions, we now have the beginnings of price inflation on food based commodities with sugar now at a 26 year high due to weak monsoon conditions occurring in the biggest sugar exporting country, which is India. India has now become a net importer of sugar (an attempt at price stabilization). So if the northern hemisphere goes into a bad drought throughout summer food stocks will spike again, with the current bellwether being high sugar prices.

So oil, food and pharmaceutical stocks, engineering/infrastructure stocks, gold stocks/warrants and physical gold. Potential sells on the Brazilian Real, Australia Dollar and Canadian dollar towards year end. No shorts yet on indices (who got short squeezed on the S&P 500 hey? After US Job data came out on the positive!)

SUGAR PRICE 07 Aug 2009
White
$/tonne up 537.20
07 Aug 2009
Raw
¢/lb up 20.81

*morbius glass doesn't give investment advice, trade at your own risk

S Magazine

S magazine is a high end nudie mag...wait that doesn't sound right, ok start again. S Magazine is a nice thick magazine that covers art, fashion and nude photograph. It is stylized sex as opposed to excessive saturation of sexuality in the media. So what you have here is runaway/ high end models posing in the nude projected by some of the best nude photography you'll see in a publication. It' slick and hard to buy. The way it should be. With my economic/social philosophy aside (excess restricts creativity and innovation) S Magazine fills that expectation if you are looking for something that is not your average 'sex' publication.

When a magazine is published twice a year (S Magazine) you know some thought and work has gone into the project.

Negative news slowly coming through, may unhinge the rally.

There is a correction feeling creeping through the markets, from bank write downs: Europe/UK to US unemployment figures out in a few days from now and US dollar concerns. All and all the rally is overbought (refer to major divergences against volume in the OBV and MFI) but trading within the ranges (Dow) refer below:

(For the markets to correct substantially, something major has to come through hard to say what that will be at this point.)

Clive Barker's art

If you followed my old blog you probably are aware I am fan of Clive Barker's art from OTIS: Ben BMaltz Gallery, 2008 above piece going for $8000.00USD

Below is *my framed poster from the Bess Cutter exhibition (*model on the left is sold separately)



Clive Barker website

Short sell the US dollar...look at it go!