Deflation isn’t the only type of depression…get ready!
Posted by MC on Sep 29, 2009
As we know, we did in fact almost have a proper (and IMO much needed) bear deflation period. It was SOOOO close. But as the US goes…so does the entire world economy more less. If we have a full deflationary depression so will the other countries. If some manage to show strength their exports will be too expensive and they’ll end up battered eventually. This is the power the Bretton Woods brought to our table here in the US. With essentially everything “pegged” to our currency we have absolute power. A power we have abused horribly. Or should I say the rich bankers coerced us to abuse? We are merely puppets on a string.
In our recent recession the US wealth AND foreign wealth stepped in heavy. Compared to recent pricing (TA wise) we were at a bargain prices on many things. I must ask though, FA wise can you stand behind the US and it’s balance sheet? I’ve never done a real balance sheet and I’d be interested to see what some come up with since I have no formal training. Bottom line for me is this…buying because you HAVE to is far different that buying because you WANT to.
Setting TA and FA aside, here’s the reason IMO why foreigners are buying shit up here. In part like we said…everything is “pegged” to the US and they don’t wanna crash along with us. But also with the newly flooded money supply practically EVERYTHING (staple of life wise) will shoot up in value. We have far more dollars chasing the same goods. They don’t want to have USD on hand, they want to have goods that people will buy with the USD. If you save now you are a fool. USD will be losing ground in terms of spending power. INVESTING is far different than saving on something lame like a CD or bank instrument. I know this…but how many others do?
FAR MORE DOLLARS!!!
As an example of buying because you HAVE to…
I am out of the tech loop since I was let go last year. I didn’t know Intel built a US campus. I bet Intel bought here in the US for a few big reasons…and IMO quality of labor is NOT one. Appreciation of the property would be a major reason I would assume. Also, they have an interest or stake in the fire. WE are the people buying their computer chips and if we collapse so does their market. Again, it’s out of necessity not desire IMO.
Inflation can and will continue to create and transfer MASSIVE amounts of paper wealth. The concern I have is the wealth flows from those that do all the work (middle class) into the hands of those that do nothing (wealthy). And what the middle class will eventually be left with will be worthless paper assets (401k, mutual funds etc…) I understand the biz are the ones taking risk and they need to profit, but after taxes etc… we are slaves to the system. We as consumers are so debt strapped we NEED these jobs and we NEED the pay rates to continue rising just to cover interest and inflated costs of living. Everybody is strapped with leveraged liabilities in the US and our nest eggs are trapped in fictional paper assets…that is a concern of EPIC proportions to me.
Are service jobs really worth $30+ an hour? I guess technically we could be paid $1,000 an hour and something like a loaf of bread could be $100. If they can continue to raise wages in pace with inflation then the bubble could grow and grow and grow in theory. Sure is becoming a slippery slope if ya ask me.
Please watch this video
Posted by MC on Sep 21, 2009
http://www.chrismartenson.com/sites/all/themes/cm/cm-crashcourse.php?height=560&width=760
GI Joe said it best…knowing if half the battle.
This is a GREAT video series I highly urge you to watch.
Local Hometown Hero
Posted by MC on Sep 11, 2009
[youtube]UOLa8uwBRD4[/youtube]
A hometown hero here in Buffalo, NY. Older story but it’s hits close to home because I know him and his brothers personally. This is a true American hero, not Paris Hilton or the other idiots that are so closely followed and worshiped. Wanna mold yourself after a true hero, here’s your man. He didn’t do anything a normal citizen couldn’t have done…BUT HE WAS THE ONE THAT ACTED! Cars were driving by and would have let this guy die. It’s a VERY fine line between hero and hethan. We can ALL be heroes to many people on many different levels if we just do the right thing.
Way to go Jeremy! 
Has housing showed us it’s hand???
Posted by MC on Sep 3, 2009
Go there! USE IT!
What you can do is type in a city or for our purposes a state. Now look at the left column and compare the # of houses sold (believe it shows the last 6 months) to the # that are currently on the market. Most big markets through the plummet up till about a year ago were 1 sold for every 3-4 on the market. Things have handily reversed. So overall you now have about 4 houses sold for every 1 that is on the market currently. If ya ask me, that would likely signal the bottom in housing has been solidified.
Could all that be 1st time buyers using Obama’s gift money? IMO no way…4:1 can’t be all brand new homeowners. Some of the lift may be from that, but either way the point is housing is turning and churning again big time. Who cares about why, this is America and people asking the most questions and flinching the most tend to be late to the party or get left behind entirely. Define your data and go with the data, not what your feeling.
Some will say interest rates will go up and that’s bad. Interest rates rising should make people on the sidelines ACT! They have been stalking for better rates and procrastinating for quite some time. If the rates go up they are VERY likely to act and stop bargain hunting IMO.
Just another tool in the shed so to speak. GL
Can we have a “Cash 4 Clunkers” program for our economy…
Posted by MC on Aug 30, 2009
Can we have a “Cash 4 Clunkers” program for our economy…since they are trashing our future?? I mean clearly our economy is a clunker at this stage…fundamentally speaking. HRMMM.
“Cash 4 Clunkers” has done what the government intended it to do…stimulate and prop the markets/hurting industries/economy up. Especially the auto makers and lenders they now have ownership stakes in. Gotta love that they can overstep their bounds and pick who is “too big to fail”. So much for “free markets”. Long term is all this smart…not at all. As loans continue to be written, and for higher amounts, the bubblish need for higher wages grows. They are advancing the debt slavery exponentially. They are further removing peoples ability to save or think ahead. 
The more loans that are written, the more the money supply expands. The more the money supply expands the less our USD stretches. So yay for reduced spending power. A dollar is not a dollar, even though it looks the same in your wallet. Don’t believe me, think of just maybe 5 years ago. $1 would buy you 1 gallon of gas, where now you need 3-4 of those same bills to get the same 1 gallon. It’s just not a realistic or sustianable scenario! If you don’t let an economy (especially one with garbage fiat currency) both expand AND contract to the full extent you limit the lifespan of the currency. So they force things to expand and expand and expand, while only letting minor (in relation to expansion) contraction occur. Things were a lot more sustainable until 1995 and the tech bubble…see the below chart.
What ATR or Average True Range shows (more less) is the number of points traveled for the noted period. This is a yearly chart so every bar represents 1 year of price movement. So this shows through an equasion…basically every year the price flucuated xxx number of points. The calcs are not important, the important part is prior to 1995 things were crusing along at a pretty reasonable and non exponential rate. Then it got a wee bit insane [/sarcasm] and has never looked back.
Some may argue or debate about this not being a “log scale” chart. I say why when you’re trying to compare 1 point to 1 point or value to value why do you need to have exponential skewing??? Is a point not a point? Do we need to skew the picture to make things look less insane? Draw fibs on a non log, or look at ATR on a non log chart. They give the same numbers/readings whether log or arithmetic. Why? Because a point is a frickin point! Now I will say…for trendlines log scale is a must. But for vertical to vertical comparison log is not a valid view IMO.
Some interesting numbers are as follows…
Great Depression: High of 386 points before putting in a low of 40. YES…a loss of almost 90%!
2009 “recession/depression”: High of 14,198 points before putting in a current low of 6,470. A 54% loss. So we gave back a whopping 7,728 points and still had 46% left in the tank. If we gave back a matching 90% to that of the Great Depression we’d still have a DOW of about 1,420. Nearly 4x the peak of the Roaring 20’s. The irony is back then our country was a PRODUCING nation that saved. Now we are a CONSUMER nation with piss poor GDP and deep red negative debt to savings ratios. Giving 90% back would leave us with a bargain technically…fundamentally speaking. LOL
Compare the Y2K bear to the 2009 bear:
Y2k high of 11,750 and low of 7,198 (39% loss). This bear took nearly 3 years to bottom, and had several semi-controlled waves/corrections. Again, only a 39% loss though it must have been painful as it just ground lower, then bounced, then lower…seemingly forever.
Again this current bear we lost 54% assuming we have bottomed…in about 1.5 years! So substantially more loss in half the time. (Insert Tom Petty’s “Free Fallin” song here).
Just seems at some point…somethings gotta give on a bigger scale…no?
Buffett speaks on inflation concerns…
Posted by MC on Aug 23, 2009
Puerto Vallarta News NetworkEditorials | Opinions | August 2009
The Greenback Effect
Warren E. Buffett - New York Times
go to original
August 21, 2009
In nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.
The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy — greenback emissions.
To be sure, we’ve been doing this for a reason I resoundingly applaud. Last fall, our financial system stood on the brink of a collapse that threatened a depression. The crisis required our government to display wisdom, courage and decisiveness. Fortunately, the Federal Reserve and key economic officials in both the Bush and Obama administrations responded more than ably to the need.
They made mistakes, of course. How could it have been otherwise when supposedly indestructible pillars of our economic structure were tumbling all around them? A meltdown, though, was avoided, with a gusher of federal money playing an essential role in the rescue.
The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.
To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.
Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out.
An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let’s look at the prospects for each individually — and in combination.
The current account deficit — dollars that we force-feed to the rest of the world and that must then be invested — will be $400 billion or so this year. Assume, in a relatively benign scenario, that all of this is directed by the recipients — China leads the list — to purchases of United States debt. Never mind that this all-Treasuries allocation is no sure thing: some countries may decide that purchasing American stocks, real estate or entire companies makes more sense than soaking up dollar-denominated bonds. Rumblings to that effect have recently increased.
Then take the second element of the scenario — borrowing from our own citizens. Assume that Americans save $500 billion, far above what they’ve saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks).
Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington’s printing presses will need to work overtime.
Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.
Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
I want to emphasize that there is nothing evil or destructive in an increase in debt that is proportional to an increase in income or assets. As the resources of individuals, corporations and countries grow, each can handle more debt. The United States remains by far the most prosperous country on earth, and its debt-carrying capacity will grow in the future just as it has in the past.
But it was a wise man who said, “All I want to know is where I’m going to die so I’ll never go there.” We don’t want our country to evolve into the banana-republic economy described by Keynes.
Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.
Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.
Don’t forget…the blog is just the front page…we have a forum loaded with info!!!
Posted by MC on Aug 20, 2009
BTW…the prior tweet, blog or whatever you wanna call it is part of an ongoing discussion at the below link on the TradersBASE forum!
http://www.tradersbase.com/forum/market-index-chatterbox/371-index-chatter.html
See ya there
MC
The anatomy of a market bottom…
Posted by MC on Aug 20, 2009
I usually hate peoples “similarity” charts. “Look at what happened back then…it’s so similar to the cycle today.” “History repeats itself”…BLAH. I discount most those charts because they rely on wave counts, indicator levels etc… and not the absorption of the float by strong hands. Indicators don’t make a bear market turn bull…the majority of shares being in strong hands which limits supply does.
Here we can see how a bottom is created. ABSORPTION of the majority of the float. Shown quite well when the lows are tested or break and there are not very many shares being sold. Then when resistance becomes support without a big volume glitch it further solidifies that supply has been all but removed from the market. I’ve heard rambling about…”the markets rising on low volume and there is no demand.” I read this as no supply myself. I digress, I’m a contrarian and some have suggested I begin to wear a tin foil hat. Maybe I’ll fit one up should I be proven incorrect here. 
I must say this…this current bear market had an absolute fall out and didn’t oscillate or cycle real cleanly. Also there is some lingering resistance over the line I drew, albeit fairly weak in comparison to the chop I illustrated as resistance. Given the volume traits shown I must say I’m pretty comfortable with the bulls here. Remember, volume should be low here because supply was drastically reduced in the market and prices will auction higher as long as demand outweighs supply.
GL my fellow tin foilers! 
Is the average mean good enough for your retirement???
Posted by MC on Aug 16, 2009
We traders know that “oversold” or “overbought” are heavily used, often improperly. But there is clearly merit to these terms when looked at as a zone not an absolute level. This enables us to have a bias, without doing heavy prediction or flat gambling.
In long term investing your cost basis has a huge effect on your overall bottom line. If you buy low the odds of being able to sell higher go up drastically. So why would you put a flat % in every period, regardless of the condition of the market? Why would you buy the same amount high as you would low? YES, I understand the 401k marketing machine and how by putting in the same each time you are “cost averaging”. And you are averaging, but not as efficiently as you could be. Shouldn’t you strive to improve your cost basis and achieve better than just the average mean? This is your NEST EGG after all, something that will determine your quality life after you’re done serving your time. 
Is it possible that with minimal effort you can do better than the blind herd and gain more than just the average mean? I say YUP! There are many strategies that can be used. Brainstorming this AM brought me to the following as perhaps a better practice than mean based cost averaging…
Don’t add at all while the market is in the “overbought” zone. When in neutral deploy say 5%. Once it drops to the “oversold” zone and the indicator flattens or hooks up begin to put in 10%. This simple premise will keep you from paying high, put you in the market buying the mean/neutral and down times and have you doubling down after the market was just beat up. The key on the buy zone is let a hook form or a period of basing/flattening first. Don’t throw added good money in the turmoil…keep some powder dry. After all, you’re still buying 5% on the drop as it is. We only want to double down when the drop stalls.
The below chart shows the zones as they relate to the price you would have paid. This simple slow stochastic indicator is available on FREE sites. I personally use and think www.bigcharts.com is a great free tool you have at your disposal. You could glance at a monthly chart of the S&P500 (SPX) with that indicator and know if you’re getting a good value or not, instantly. I’m not suggesting daytrading or going insane trying to beat the mean. I’m suggesting that through proper timing you can easily beat the average mean quite handily.
A more advanced technique is to look for divergence as depicted on the below chart. That is…where stochastic (momentum) is fizzling out despite the price continuing on higher or vice versa in a downtrend. This never guarantees anything but it does serve as a major warning sign in general. How could price go up despite the fact momentum is going down? When the market diverges or acts different than other indications would suggest it’s time to take note, a correction is quite possible. When the news is heavily lopsided it’s often another warning sign…as hard as it is to go against the grain of society.
I’ll be building on this in the near future. I’m now in charge of my IRA and am getting into the long term mindset again. I love daytrading the YM and what not but long term is a HUGE part of a nest egg. If nothing beyond it acting as a tax shelter, it’s a piece of the puzzle that shouldn’t be overlooked.
I look forward to someone ripping on this, maybe we can then go back and forth to improve both of our theories. I’m sure there are tons of ways to go about this, I’m just throwing 1 concept out quickly.
I can hear bitching and groans already about things like…
“That’s too much to manage, You mean I have to change my % and do work?”
Yup, DO WORK!
“It’s so confusing, I don’t know what I’m doing!”
Then get your head out and do some research. LEARN. I mean…WTF…it’s only your ability to eat and survive after retirement were talkin about here. Legwork early on can set you up for an easier and more fruitful retirement.
“What if the market goes higher and higher, aren’t I missing out on buying? Can’t I buy high and sell higher instead of buying low and selling high?”
Depends on what you term “missing out”. There will always be corrections that give you a better buying opportunities. One twist I thought about was…put 1-2% in while “overbought”. That way you are buying high, but buying fewer overpriced shares. There are a million strategies you could build, I’m merely sharing one of my thoughts. The market moves in cycles/waves and it will NEVER go 100% one direction. It’s a 2 way auction, it’s not possible for everybody to always be bullish. Keep this in mind when euphoria creeps in your mind. “Be fearful when others are greedy and greedy when others are fearful”
“I have an advisor. He says NOW is the time to buy, and I’m already missing out”
Is he paid by gains or by transaction? If someone has something to gain off me, I take their info with a grain of salt. If they are paid when I transact their info is likely self promotional. If they ONLY gain when I do, then they have incentive to make you money. Still…it’s YOUR retirement being tampered with. Bottom line, don’t be complacent, do some of your own homework.
“Then I may not have the same paycheck amount from month to month. I like knowing what my check is going to be every time.”
WAHHHH! Seriously. If you sacrifice nothing you will in turn gain nothing. Again…it’s only your retirement years that we’re talking about here. I would think it’s worth adjusting your income a few % a few times a year to enable your nest egg to do more than just keep up with the mean average. But if you like being average and mediocre…by all means worry about the few bucks each paycheck. LOL
HRMMM. Coiling and lingering so nicely…for now.
Posted by MC on Aug 14, 2009
Ok. If this coil can’t break into the next channel zone above it look out below.
We have macd (trend) and a custom stoch (momentum) both showing divergence. When both are aligned the move tends to be powerful. We are also at a fib 121% extension which at minimum suggests a retracement ahead.
Place your bets if you’re aggressive, or let the breakdown begin if you’re a more cautious trader/investor. We could be looking at a 800-900ish point retracement based on the broken resistance that never tested as support.
GL and play smart. 
