Saturday, 06 March 2010 00:00
Last Updated on Saturday, 06 March 2010 20:34
Financial Intelligence Report
Sunday March 7, 2010
A Stroll Down Bizarro Lane
Before we get immersed in this weeks chat about all things economic, I have a bit of a story to relate that very well could help a lot of you out. I had to leave our NJ home/office and travel to our FL home/office last week. Unfortunately this trip had to be via vehicle as we were swapping one of them, and hauling some things with the other. Although the drive is long, at least it was uneventful, as there was no bad weather, no accidents, construction delays, etc. So, I was pretty thankful for all that.
I got back Thursday night, and on Friday am when I turned on my computers and tried to settle in for a day of market madness, all of a sudden I got a pop up on my screen. It was pretty convincing actually. It said it was windows internet security and it had found an infection. Well, I've been playing with these silly computers for 15 years or more now and I didn't think this was legit. So, I closed the alert and sure enough ten seconds later another one pops up. Then another. The fact of the matter was, I was infected with the "internet Security 2010" virus. I had never heard of it before, and figured it would be a snap for my anti-malware program to kill it. Ha, fat chance. Malware-bytes anti malware didn't even see it. Nor did Trend micro, Panda, Adaware, and half a dozen other programs I threw at it.
This thing is fierce. It has a thinking brain. It learns how to evade you, disguise itself and block off programs that might try and kill it. It then shut off my email access to the net. Then my browser access. This was getting pretty serious, and one snippet I saw about the darned thing said "particularly disturbing, IS2010 virus has the ability to repair itself" Wow. I beat on this thing for hours on end, and each time it came out the winner. I was wondering if I was going to have to do a "wipe clean" and reformat my whole computer. Wow that is a job I hate with a passion, and really didn't want to have to deal with.
I found that if I did a "system restore" to an earlier time, it would take the virus about 12 minutes to "learn" what I'd done. In those minutes I had Internet access again. I downloaded Spyware Doctor which was recommended in PC magazine last year. Sure enough Spyware doctor found the little booger. But, by the time I ran the scan and went to purchase the full version, the virus had shut down my Internet access again. So, it was a game of cat and mouse, I'd restore the computer to an even earlier date, and try and squeeze the full version download in before the virus caught up with me.
Finally after several hours, I had killed the virus. Spyware Doctor had identified it, and killed it. Let me tell you folks, I've used a lot of anti spyware, from Adaware to norton, symantec, panda, enod, trend micro and many others, but spyware Doc was the ONLY thing that killed this bug. I would urge any of you who are targets (when you own a web site you're a target, as we get 2K spam emails a day) to buy the full version of Spyware Doctor and maybe just maybe you won't go through the nightmare I had Friday. When all was said and done, I did battle with that bug for over 8 hours. I never want to do it again.
Okay, so I'm back in the saddle Friday, my computers going nuts over that bug, we have the big old "jobs report" coming at us, and I'm really feeling pretty washed out after that 23 hour drive back north. Yet despite all that I did get to play in the market a little bit, and it ended up being a very nice day. Granted we should ask the question "should it have been" a nice day? Didn't another 36K people not have jobs? Actually the number is more, much much more, but that's how far Uncle Sam perverted the numbers this month. I am reminded of a small note that Trader Rob sent me while I was traveling north. While they were hoopin and hollerin about the 30K drop in continuous claims on Thursday mornings Initial jobless report, what they failed to mention was that enrollment in the "special emergency" programs that extend benefits rose by over 240,000. Where oh where are my rose colored glasses?
As you all know, there's a pretty huge disconnect between what Obama and Wall Street tell us is going on with our economy and what is really going on. For instance I got a kick out of this blurb that showed up on Yahoo news yesterday:
WASHINGTON - A new congressional report released Friday says the United States' long-term fiscal woes are even worse than predicted by President Barack Obama's grim budget submission last month. The nonpartisan Congressional Budget Office predicts that Obama's budget plans would generate deficits over the upcoming decade that would total $9.8 trillion. That's $1.2 trillion more than predicted by the administration.
And to what do they say is the reason for the discrepancy between the two? Just this:
The agency says its future-year predictions of tax revenues are more pessimistic than the administration's. That's because CBO projects slightly slower economic growth than the White House.
Ya think? Let me tell you something. By the time we're ten more years into all this, you can bet on that number being more closer to 16 trillion than 10. But hey, we don't want to let something as silly as another 10 trillion in debt that we can't possibly pay get in the way of good politician hype now can we? Nah.
All right, back to Friday. The jobs number came out "Better than expected" and that had all the hair brained genius's on CNBC telling us how robust this economy is. They were giddy with excitement, and sure enough we put in a very green day in market land, ending the session with the DOW up 122 points and crossing over the 10,500 line. It was an out and out orgy fest for stocks, and they all ran from manufacturing to computers, to energy to you name it. If you had just stepped off the intergalactic express train for the first visit to earth you'd have had to imagine that this economy is humming along on all 8 cylinders and possibly overheating. Yet once again we have this disturbing annoyance called reality that suggests something quite different. For instance, check this out:
CHARLOTTE, N.C. (AP) -- Regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession.
26 Banks closed since Jan 1? I thought the economy was "robust" to coin a CNBC phrase?? Do robust banks go under and have to be divvied up to other outfits? I didn't think so, but obviously I'm amiss here. It must be some form of fuzzy math. Nor does "robust" explain away what I saw on my trip to Florida and back this week.
For any of you who don't know, for us NJ people to get back to FL, we use I-95. It's the only true highway that runs the length of the Atlantic coast. As you can imagine it's a very busy road, with hundreds of thousands of people making the trip from the northeast and mid Atlantic states to the sunshine state and back again. Along the way however something sticks out at you like the proverbial sore thumb. Closed up and boarded up hotels. Gas stations, in various stages of decay. Hotels that are open, are so desperate for customers there's price wars at every exit. I was absolutely astounded that on Wed night I paid just 39.95 to stay in a hotel that I had paid 89.95 to stay in just 4 years ago.
As we were motoring up through Georgia, we had to stop and pick up some machinery in Woodbine. I chatted with the gent there, he owns a land survey company. He said it was awful grim in his county, no building, no construction and some 9000 lots that people had bought in the bubble times have been foreclosed on. He didn't remember the last time he had a call for a lot survey. Moving further up the road, we noticed empty warehouse after empty warehouse, all of them with "for sale" signs on them. Big beautiful buildings with expansive parking areas and trucking terminals, sitting empty, beginning to rot. At one stretch of the road, we saw two hotels that once upon a time could house maybe 250 rooms each, absolutely gutted and left for the graffiti artists. No windows, no beds, just destruction, and it really did remind me of looking at the burned out buildings in Berlin in WWII.
Then of course there's the headlines. You know the ones. Of course they aren't on your local nightly news, you have to actually go to a site that lays out the truth. Here's a few for you:
New Jersey Transit Plans 25% Fare Increase to Cope With Expanding Deficit
REID: GOOD NEWS, ONLY 36000 LOST THEIR JOBS TODAY.
Oil rises to near $81
Unemployment Rate Including Discouraged Workers Rose To 16.8%
WSJ -Employment of Adult Males at Record Low
This is CNBC's robust economy. Closed down hotels, price wars, boarded up gas stations, empty warehouses, 26 banks going belly up, another 10 trillion in debt, states in the unfortunate condition of insolvency. Shall I go on? Well, maybe for a minute. What about Greece and the PIIGs? I almost fell out of my chair Friday am, when another brain surgeon said that "hey, somebody's going to bail Greece out, it's no big deal". No big deal? A monetary union made up of different cultures, most of them broke and making believe they can just move forward like nothing's wrong?? Huh?
I know what I hear on TV and I know what I see with my own eyes. My eyes have a very good track record of not lying to me, but TV has a track record of doing nothing else but lying to me. I think I'll trust my own eyes. For instance, whilst in Florida I met a young man who was quite visibly excited about his new car. I have to admit it was a stunning example of the auto craft, and surely cost 50G's or more. There's certainly nothing out of the ordinary about a young man buying his dream car, that's for sure. What I did find "interesting" however was that he had no bashfulness about explaining how he's paying for it. He stopped paying his mortgage a year ago. In his own words "the house is worth half of what I paid. So, I told the bank you keep it. But, I'll stay here and maintain it for you until you kick me out. Well that was 14 months ago and I haven't heard a word. So, instead of paying 1500 a month on my house, I pay 700 a month for my car".
There ya go. Another example of bizarre economics. People have more spending money right now because they've stopped spending for their house. How many people are there pulling off this scam? I have no idea, but considering that foreclosures are in the hundreds of thousands, I'd bet the economy is getting quite a blast from tens of thousands who no longer pay a cent ( for now) for shelter. Amazing isn't it?
Look folks, it's my guess that we can muddle through for the next several months as they carpet bomb us with stimulus money, and new jobs spending bills, and cash for "anything" bills. But there is no question we are deep into a deleveraging situation, a credit crunch, an impending commercial RE crash, and a host of other nasties yet to come. Looking at global stock market patterns, and the debt to GDP ratio's in foreign lands, this isn't going to be a "US only" disaster. I tend to think we'll be living through a synchronized global melt down in the next 1 - 3 years time. China is still putting up Cities that house a million people, but no one lives there. Japan is in a funk. Europe is trying to get Germany to pay for everything and they aren't willing to. Sovereign debt is without a doubt the next international shoe to drop. No question in my mind.
This is why I still have faith in Gold, Silver and related "shares". Each new debt they issue, each dollar they monetize, each bail out they conjure up, lowers the value of the currency in place. Only Gold and silver have the ability to withstand such monetary disasters. Sure we play the stock market. Sure we like making "dollars". But I sleep pretty soundly knowing I have some gold and silver "just in case" I'm right about things going forward. I suggest you consider it yourself.
Now onto the market:
10,566. Not bad eh? No, not at all. So, what happens now? Do we go higher and if so, how much so? Do we trade sideways and chop again like we did for weeks? Could we roll over? Well, here's our take and it's going to be very very interesting to see if it works out for us. Back a month or two ago we suggested that the market would make a mad dash higher, but it would come up short of the recent highs. If you remember, the high was 10723. It was our guess we'd get to 10600 or "so" and then top out and roll over. Now we're only 50 points from 10.6, and it's very possible they do get us to the highs. But then what? Is it possible we just punch through and make all new highs here? Sure it's possible, this market is getting juiced by Uncle Sam on a daily basis. He's got deep pockets, unlimited pockets.
But we're going to remain stubborn and suggest that even if/when we hit the highs, we struggle there, and pull down. Even if we exceeded the high by a hundred points or so, I'd be hard pressed to think it could hold up there. We know employment is rotten, we know banks are insolvent, we know that without Uncle Sam and Benji splurging some 24 trillion dollars, we'd be mired in the grand depression right now. The illusion of recovery is just that, an illusion. The only question that ever remains is "how far can the criminals push us?" and that's yet to be determined.
If we do take out the highs and just roll on up to 11K, I won't be surprised. I will just have under estimated the amount of money they are willing to spend to make it happen. In other words, as the worlds investors continue to pull money OUT of the markets, and they are, "someone" is making up the difference. Well, we know that someone to be Uncle Sam. As Larry Levine said from the Chicago trading floor, "for 9 months all the market gains came in the overnight session". Consider that for a minute. You buy XYZ at 25.00 at noon. But by 4 pm it's at 24.60, so you sell it. The next day it opens at 25.75. There's the gain...in the after hours. And who's got the buckaroos to play that? Institutions, Benji and Uncle Sam. Do they have the will to continue pushing the market up? We'll certainly see. But until we are clearly over that high, I have to figure that we might be looking at a shorting opportunity soon.
In the mean time we've been long several positions and they've done very well for us. For instance we took FCX at 77.11 and Friday it ended just shy of 81.00. Hey, four bucks in a few days makes us happy campers. The SPY we bought at 109, is up to 114, that too makes for a smiling editor. Our others are up nicely as well. But as we get closer to those highs, we're probably going to "sell halfs" and lock in gains just in case this thing runs out of gas. In the mean time, "lean long, but keep your finger near the sell button" okay? That's my motto for now.
We'll See you all on Wednesday.
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Bob's not nuts!