Thursday, December 29, 2005


BDI index not confirming new high in Transports nor is Dow which still lingers below 2005 highs, let alone old 2000 highs. After SEPT peak, action here has been one of shrinking base, not expanding.

INverted yield curve being EXPLAINED away by media wise guys, giving it extra weight.

I will need surgery, I hope it can bring me back to way I was, doing what I can to maintain my site. Hope my loyal readers are hanging in there with me.

UARM flying, no shortage of new bagholders, 37 X book value LOL 70X FORWARD PE. amazing.

What is keeping GM afloat? I think in 2006 some kind of ICEBERG is going to be hit, and like Titanic....


Tuesday, December 20, 2005


Bush didn't even wait for this "rubber stamp" group!


2005 Nearing AN END

Short and sweet, I will be gone week of Dec 21-28th. WIsh all a super holiday and NY.

New lows were double new highs today, this market is sputtering coming into home stretch. Market has been weak last few JAnuary's.

Maybe, it is working OFF overbought condition, with little damage if so for another push PAST 11K, 50/50 chance IMHO.

Bond funds selling off hard that I monitor. OIL may have topped, gold now into hard correction, break of $490 will usher in lower prices, IMHO.

Housing inflation continues, pressure is on FED to keep raising rates, or dollar might fall into black hole.

Easy money been made.


Saturday, December 17, 2005


M3 added only $1.1 B last week.



Given P's bugs.....3 amigo blackout period coming! and I dont bite my nails!!

$1 TRillion to money supply, low rates, hedgies buying etf's, most m & a's since 2000, cash buyback's galore, record bullishness, exploding double digit Spx earnings growth...........

...........stock market that has little to show for it! JAN high of 10,940 still stands!@! Dow running into overhead descending trend line drawn from 2000 high

Leadership harder to find, breadth weakening, Dec rally front run.$compq,uu[w,a]wallyiay[pc200!c400!f][vc60][iut!Ub14!Lh14,3]&pref=G 2000 key area for Naz IMHO.$VIX,uu[w,a]wallyiay[pc52!c10!f][vc60][iut!Ub14!Lh14,3]&pref=G Who needs protection?$SPX:$VIX,uu[w,a]wallyiay[pc52!c10!f][vc60][iut!Ub14!Lh14,3]&pref=G Just observe today between 2000. Higher bullishness, lower prices!!

Good news discounted...........bad news will cause implosion, IMHO


Thursday, December 15, 2005



by Dr. Kurt Richebächer

Reading so many ecstatic laudations on Fed Chairman Alan Greenspan, "the
greatest of all central bankers," two other names and occurrences came to
mind. The one was John Law and his tremendous wealth creation through
rigorously inflating the share prices of the Mississippi Company. And the
other was former Fed chief Paul Volcker and his recent article in the
Washington Post titled "An Economy On Thin Ice," wherein he expressed his
desperation about the economic and financial development in the United
States. Though he never mentioned his successor's name, it was all about
him and his policies.

Just a few samples from Paul Volcker's assessment:

Under the placid surface, there are disturbing trends: huge imbalances,
disequilibria, risks - call them what you will. Altogether, the
circumstances seem to me as dangerous and intractable as any I can
remember, and I can remember quite a lot. What really concerns me is that
there seems to be so little willingness or capacity to do much about

I don't know whether change will come with a bang or a whimper, whether
sooner or later. But as things stand, it is more likely than not that it
will be financial crises rather than policy foresight that will force the

What, after all, are the great merits of Mr. Greenspan, according to the
conventional laudations? They are, actually, seen in two different fields:
first, in the striking successes of his actual policies; and second, in
notable contributions to both the theory and practice of monetary policy.

His policy successes seem, indeed, all too conspicuous: lower inflation
rates than expected despite strong GDP growth; high gains in job growth;
and low rates of unemployment. And yet only two mild recessions, of which
the second one, in 2001, was so mild that it disappears when quarterly
data are aggregated to a year.

His extraordinary successes are generally attributed to radically new
practices in monetary policy. The Financial Times ran a full-page article
under the big headline "Greenspan's Record: An Activist Unafraid to Depart
From the Rule."

To quote the paper presented by Alan S. Blinder and Ricardo Reis of
Princeton University at the Federal Reserve Bank of Kansas City symposium
on this point: "Federal Reserve policy under his chairmanship has been
characterized by the exercise of pure, period-by-period discretion, with
minimal strategic constraints of any kind, maximal tactical flexibility at
all times and not much in the way of explanations."

It is true Maestro Greenspan disregarded any established rules in central
banking. To escape the consequences of the equity bubble that he created
in the late 1990s, he generated a whole variety of new bubbles that
radically changed the U.S. economy's growth pattern. What he achieved was
the greatest inflation in asset prices in history, which became the
economy's new engine of growth. What about its inevitable aftermath?

If Alan Greenspan jettisoned all inherited rules, he nevertheless chose
one predominant rule, actually, his only rule: a strictly asymmetric
policy pattern. Every central bank has two policy levers at its disposal.
The big lever is changing bank reserves, the banking system's liquidity
base. The little lever consists in altering its short-term interest rate.

Whenever monetary easing appeared opportune, Mr. Greenspan has acted
rigorously with both levers. When it seemed to require some tightening, he
always acted hesitantly and only with his little interest lever. He has
never seriously tightened bank reserves. Though hard to believe, he has
actually been easing the Fed's reserve stance since last May.

This is most probably occurring because the continuous rampant credit
expansion is increasing the banking system's reserve requirements.
Nevertheless, to keep the federal funds rate at its targeted level of 4%,
the Fed has to provide the higher reserves.

What this means should be clear: The Fed is anxious to avoid any true
monetary tightening in the apparent hope that the "measured" rate hikes
will softly do the job over time, causing less pain. Most probably,
though, this implies more rate hikes and more pain - later.

It was, as a matter of fact, precisely the same kind of experience that
induced Volcker to abandon such strict funds rate targeting in October
1979 in favor of targeting bank reserves. It marked the fundamental divide
in U.S. monetary policy from prior persistent monetary looseness and a
strong inflation bias to genuine credit tightening, ushering in a secular
decline in the inflation rates.

The Greenspan Fed has returned to dubious interest targeting, while
explicitly restricting itself to "measured" - in other words, very slow -
rate hikes. The true monetary ease shows in the continuance of the
relentless credit deluge.

When Alan Greenspan took over as Fed chairman in 1987, outstanding U.S.
debts totaled $10.57 trillion. According to the latest available data,
they stand at $37.35 trillion. This is definitely Mr. Greenspan's most
conspicuous achievement.

To escape the aftermath of the equity bubble, the Fed created the housing
and bond bubbles in 2001 and the following years. It is time, we think, to
ponder the aftermath of these two asset and credit bubbles. The inverting
yield curve is primarily threatening the huge existing carry-trade bubble
in bonds. But the big housing bubble and the smaller car bubble too have
plainly peaked. Rising interest rates and poor income growth are
relentlessly taking their toll.

It should be immediately clear that the potential economic and financial
aftermath of a bust of these bubbles will be many times worse than the
potential aftermath of the earlier equity bubble. Spending and debt
excesses have multiplied over the past four to five years to an extent
that threatens the stability of the whole U.S. financial system.

Lately, Mr. Greenspan's public speeches have insinuated that the high
asset prices in the United States in recent years may, ironically, be due
to the extraordinary success of his policies, by leading investors to
demand lower risk premiums. Eventually, however, this reverses and asset
prices fall reflecting "the all-too-evident alternation and infectious
bouts of human euphoria and distress and the instability they engender."

Yet he emphasized that it is "simply not realistic" to expect the Fed to
identify and safely deflate asset bubbles. The right response in his view
is for all policymakers to keep markets as flexible and unregulated as
possible. Flexible markets, he said, helped absorb recent shocks, such as
stock-bubble collapse and the Sept. 11, 2001, terrorist attack.
We are not sure what shocked us more, this senseless, arrogant remark or
the complete silence on the part of American economists. Exuberance, just
by itself, is unable to inflate asset price levels. The indispensable
primary condition is always credit excess, and Mr. Greenspan delivered
that in unprecedented profligacy. By the nature of things, loose money and
credit excess lead, and exuberance follows.

America's reported economic recovery since 2001 has been its weakest by
far in the whole postwar period. For the working population, there never
was a recovery. They speak euphemistically of a shortfall of employment
and income growth. It is better described as a fiasco for both.

Two acute dangers presently lurk in the U.S. economy and its financial
system. One is the inverting yield curve threatening to pull the rug out
from under the huge carry-trade bubble in bonds, and thereby from under
the housing bubble. The other is the slump in consumer spending. Consumer
borrowing is slowing, while employment and labor income growth are
weakening again.

It seems that the carry-trade community is betting on prompt rate cuts by
the Fed if something goes wrong in the economy or the financial system. We
suspect that the Fed, grossly underestimating the enormous vulnerabilities
in both sectors, will stick to its rate hikes. The interest "conundrum" is
pretty much the only thing holding up this house of cards.

"Super-liquid markets" has become the common bullish catchphrase. It
should be realized, however, that the existing liquidity deluge in the
United States and some other countries has its sole source in the
monstrous asset bubbles providing the collateral for virtually limitless
borrowing. It needs a sharp distinction between earned liquidity from
saving and borrowed liquidity accrued from asset bubbles. The latter kind
of liquidity can vanish overnight.

The sharp surge in inflation rates is forcing the Fed to continual rate
hikes. Doing so, it takes enormous risks with the existing bubbles.
Bluntly put, it has lost control.


Dr. Kurt Richebächer
for The Daily Reckoning

Tuesday, December 13, 2005

QTWW sold at yesterdays close

CAT IN HAT QTWW TA by: duratek (45/M)
12/12/05 04:16 pmMsg: 20491 of 20582,uu[w,a]daclyiay[pd20,2!c50!f][vc60][iut!Lg!Um12]&pref=GAs you can observe, each time ROC did stock far my TA has been pretty good, now below 50 EMA 20 EMA near $2.85 next stop IMHO RSI turn down

**update stock opened weak now near $2.70 (profit near 25% on that trade)



The high, when registered in markets, will likely stand for many years.


Sunday, December 11, 2005

Gold Technicals

My post on RB

SteveZ Ghost of Xmas past?
Gone but not forgotten?
End of 2005 Tax break to repatriate foreign earnings at only 3% gave dollar support as foreign currencies had to be sold, soon to end.
Double US deficits not shrinking, near $1.2 trillion 2005.
Also March could be end to int rate hikes......also $$ supportive......but gold has risen even as $$ has!!
March ends reporting of M3. March begins Iran Euro Oil I wonder as Bernanke steps in with liquidity flair.......that's why I am thinking gold bull wants to shake off as many weak hands before WILD phase begins....good sign if it stays above $50.
We see now steveZ as we were the few that screamed of bear's arrival near 2000........we also should have been screaming about the gold bull's beginning.......lessons of past 5 years worth a lifetime.
Somtime down the road my maybe the Dow has one more gasp to above 11K before table is set yet once again.......few voices see trouble ahead as before....
Housing is INDEED slowing and over 800K jobs at risk.....been the backbone of economy.....not sure what could step in....lowering rates hat trick will have less of an effect and could do double damage to US dollar.....another positive for gold.....and not even a whisper for deflation.....

Thursday, December 08, 2005


My orig buy was $2.55. Stock closed at $3.23 today before earnings. UP on higher volume. Price following volume. A good sign. Near my orig target area, I will monitor reaction to earnings, if true there is HUGE 9M short position,what if they get pressure to cover?



Starting to add up IMHO, TOL warns and lowers 2006 guidance. MSFT in India to hire 3,000 workers and invest $1.5 B there, the SHIFT continues.
GM near the brink. Gold at $520. Housing declining could strip as many as 800,000 jobs. Interest rates near inversion.High energy leads to Recessions. BOJ signals END to zero rate policy sees inflation!!!!! NIKK falls 300 points at 93% bullish sentiment top is in there IMHO


Wednesday, December 07, 2005


This is what I was worried about, real potential for weak XMAS reatil. I don't know, but have we reached the point where not only rubber met the road,but horse won't drink?

FED has flooded crisis amounts of liquidity, debt at historic levels, plenty of reason for pause.

Article saying as many as 800K jobs might be lost if housing slowdown arrives.


Tuesday, December 06, 2005

ROACH looks to 2006

The annual year-end forecasting ritual has begun. For us, it is always sparked by the extension of our forecast horizon to another year -- in this case, our first official glimpse at 2007. We also take an in-depth look at our calls for the year nearly completed (2005) as well as for the 12 months lurking just ahead (2006). It is as close to soul searching as the heartless macro prognosticator ever gets.
Time and experience -- there is a difference -- has taught me not to take the point estimates of our global forecast-extension exercise too seriously. We do our best as a tightly knit group of seasoned forecasters to capture the rhythm of the global business cycle. We agonize over policy assumptions -- monetary and fiscal -- currencies, oil prices, inflation, yield curves, and, yes, even global imbalances as we put the pieces of the global macro outlook together. But in the end, the outcome of this exercise typically suffers from the classic drawbacks of groupthink. The offsetting inputs from our far-flung network of economists around the world often tend to produce a rather boring outcome -- something close to a trendline forecast for the world economy.
Our latest year-end global forecast exercise is no exception. Our first cut at 2007 calls for a 3.8% increase in world GDP growth -- down slightly from an upwardly revised 4.1% increase for 2006 (versus our previous estimate of 3.8%). On the surface, these are pretty impressive numbers for the world economy -- slightly above trend (an average of 3.7% world GDP growth since 1970) and well above the global recession threshold (2.5%). If this forecast comes to pass, it would mark five consecutive years of above-trend growth for the world economy -- the longest stretch of global vigor since the late 1980s. With global inflation expected to remain well contained over this time horizon -- we are forecasting industrial world CPI increases averaging just 2.0% over 2006-07 --- our global baseline is starting to take on the ever-seductive characteristics of Rosy Scenario, that voluptuous handmaiden of yesteryear.
In looking at the major regions of the world, our baseline forecast conveys the impression of “steady as she goes” through 2007. Within the developed world, a slowing in European growth is most pronounced (downshifting from 2.2% in 2006 to 1.8% in 2007), whereas we have penciled in more modest downshifts to trend-like outcomes in the US (from 3.8% in 2006 to 3.5% in 2007) and Japan (from 2.5% in 2006 to 2.3% in 2007). In the developing world, the biggest shift is an upgrade to our 2006 Chinese growth forecast from 6.7% to 7.8%; while this would still represent a significant downshift from average gains of 9.5% over the 2003-05 period, it is certainly not as draconian a slowdown as we had been expecting. Our first cut at 2007 calls for a further moderation in Chinese economic growth to 7.5%. We also look for growth in India to slow somewhat to an average of 6.6% over the 2006-07 interval -- impressive gains by most standards but down from the heady 7%-plus pace of 2003-04 and the 8% annualized increase just recorded in late 2005. Elsewhere in the developing world -- Asia, Latin America, and Emerging Europe -- we see growth in 2006-07 averaging close to the above-trend 2005 pace.
The pitfalls of groupthink have long taught me to focus on the risks to our baseline view of the world. That’s especially the case when we peer into our scratched and cracked crystal balls and stretch the forecast horizon out for another year. Baselines are an important aspect of any macro debate -- be it for an individual economy, a region, or the world as a whole. But, in my view, the baseline should only be viewed as a starting point. Over the course of any year, the unexpected always happens -- namely, oil shocks, natural disasters, wars, or financial market disturbances. Our baseline is the benchmark by which we then measure the impacts of these all-too-frequent “exogenous” disturbances. This is where the rubber meets the road for the macro analyst -- not in discerning the precision of a baseline but in trying to capture the risk factors that are most likely to jar economies off this trend-like path. In that spirit, I present the five risks that I believe will be especially critical in shaping the global macro climate in the year ahead:
Global rebalancing. You’re tired of hearing about this, and I’m equally tired of writing about it. But, in my view, this remains the key risk for a still unbalanced world -- an overarching framework that unifies many of the other risks enumerated below. It is an outgrowth of the excesses of the world’s two main growth engines -- the American consumer on the demand side and the Chinese producer on the supply side. It also reflects the persistence of subpar growth in the rest of the developed world and lack of autonomous support from internal demand in the export-led developing world. And it reflects the increasingly precarious asymmetrical distribution of the world’s external imbalances -- a record US current-account gap that accounts for 70% of the world’s total external deficits juxtaposed against a far more broadly diffused distribution of surpluses. Global imbalances have, of course, been building for years, and the longer they continue to fester without major financial market consequences, the greater the conviction this state of disequilibrium is sustainable. However, with America’s current account deficit likely to widen further over the next year while at the same time the three largest surpluses -- Japan, Germany, and China -- start to shrink, I believe the presumption of sustainability will be drawn into serious question in 2006.
Chinaslowdown. After years of skepticism, the world now treats China as a perma-growth story, capable of sustaining 9%-plus GDP growth in perpetuity. We were wrong on the China slowdown story in 2005 and, as noted above, have responded to this forecast error by raising our growth forecast for 2006. However, based on intelligence gathered during a recent trip to Beijing, I now believe that Chinese bank lending will slow sharply in 2006, as the transition from a policy-directed to a commercial banking system reins in the excesses of open-ended credit growth. Publicly-listed banks, along with those that are about to go public, are now focusing on profitability and shareholder value, unwilling to tolerate a new round of NPLs that a perpetuation of policy lending might otherwise imply. The result is likely to be a surprisingly sharp slowdown in bank-funded fixed asset investment -- a welcome development for an unbalanced Chinese economy that is in danger of letting its investment boom turn into a breeding ground for excess capacity and deflation (see my 2 December dispatch, “China Slowdown -- Early Not Wrong”). Given China’s outsize claim on global resource demand, such an investment slowdown could also lead to surprising drops in oil and other industrial commodity prices.
American consumer. The American consumer has been the mainstay of a decade of US-centric global growth. Like impressions of the all-powerful Chinese producer, most believe that US consumption is now impervious to external shocks. I think that perception will be challenged in 2006. Lacking in normal support from labor income generation, the saving-short, overly-indebted, asset-dependent American consumer could well be squeezed by the twin pressures of a post-bubble housing market and higher energy costs. Contrary to widespread perception, US consumers are now in the process of cutting back discretionary spending in response to the energy shock of 2005; growth in real consumption is tracking an anemic 1.5% pace in 4Q05, down from the nearly 4% trend of the past decade. Moreover, not only should the Fed tightening cycle take its toll on house price inflation -- the sustenance of the Asset Economy -- but it should spur an increase in debt service obligations based on the profusion of floating rate loans that were taken out at below-market “teaser rates” over the last several years. In my view, the days of open-ended US consumption are drawing to a close -- sooner rather than later.
The dollar. A year ago, the dollar bears were strutting. Now it’s the new-paradigm dollar bulls who are exuding confidence (see, for example, Alan Greenspan’s 2 December speech, “International Imbalances”). However, with the Federal Reserve signaling that the end of its tightening cycle is now open to debate, I expect the interest rate differential theme to fade in importance as a driver of currencies. Foreign exchange markets should shift their attention back to an old theme as well as to a new one -- the former being America’s record and still-widening current account deficit and the latter being Japan’s economic recovery. If the Japan story is for real -- and I suspect it is -- there are powerful fundamental reasons why the yen should begin to appreciate. With Japan having the world’s largest current account surplus, that possibility is even more likely. I also look for a rethinking of the “China factor” in currency markets. With the exception of the US dollar, the RMB has appreciated against most major currencies this year. Nor do I expect the Chinese to up the ante on the “symbiosis trade” by raising their overweight in dollar-denominated assets. For China, this is a recipe for excess liquidity creation (brought about by the partial sterilization of Treasury purchases), mounting bilateral trade tensions with the US, and a huge fiscal hit in the event of dollar depreciation. Finally, I am highly suspicious of the consensus view that the dollar will continue to be bailed out by petro-dollar recycling from the Middle East (see my 28 November dispatch, “The Case of the Missing Petro-Dollars”). While a surging dollar could well be supported by a powerful momentum trade for a while longer, my advice is to watch out for a reversal in early 2006.
Central bank credibility. Central banks turned out to be great inflation fighters. Their record is far more tainted in managing the approach toward the hallowed ground of price stability. The Bank of Japan lost the battle against deflation and could well have a surprisingly difficult time in extricating itself from the anti-deflationary policy stance that remains in effect today. The Federal Reserve narrowly escaped the deflationary aftershocks of one asset bubble, but will it be so lucky when the housing bubble pops? As the newest central banker in the world, Ben Bernanke will be lacking support from the confidence factor that Alan Greenspan has long enjoyed -- potentially a serious problem in a US current account adjustment. Transitions to new Fed chairmen have not gone well in the past (see my 7 October dispatch, “Transition Curse”). Is there a compelling reason to believe it will be different this time? And then there’s the case of the ECB -- beginning a process of policy normalization when the Euroland economy remains shaky, at best. I suspect central bank credibility will meet a stern test in 2006 -- typically a tough development for financial markets.
In the end, good macro is not about honing the precision of the baseline forecast. It is more about a risk assessment of unexpected developments on the tails of the probability distribution. As I look to 2006-07, I see the downside risks outweighing those on the upside by a factor of two to one. Specifically, I think there is a much greater chance that world GDP growth could slip back into the 2.5% to 3.0% danger zone rather than cruise at or above our nearly 4% projection. As 2005 draws to a close, ever frothy financial markets are in the process of discounting an increasingly sweet macro scenario that bears a striking resemblance to our baseline view of the world. If my risk assessment is correct, financial markets could be in for a rude awakening.

Roach on China

The die is now cast for a significant slowing of Chinese GDP growth in 2006. At work is likely to be a downturn in China’s all-powerful investment cycle
About six weeks ago, I threw in the towel on the ever-elusive China slowdown call (see my 21 October dispatch, “Wrong on the China Slowdown”). In doing so, however, I cautioned that we simply may have been too early in looking for a downshift in Chinese economic activity. Based on intelligence gathered during a recent visit to Beijing, I am increasingly convinced that is, indeed, the case. In my view, the die is now cast for a significant slowing of Chinese GDP growth in 2006. At work is likely to be a downturn in China’s all-powerful investment cycle, driven by an important and surprising contraction in bank lending.
China’s booming investment cycle is on an unsustainable path. For 2005, we estimate that fixed asset investment is likely to exceed 46% of Chinese GDP -- astonishing by historical standards for China or any other economy. Given China’s special investment needs as a large developing country -- namely, urbanization, industrialization, and infrastructure -- there is every reason to look for an investment-led growth dynamic. But the Chinese investment cycle has gone well beyond what those fundamentals might suggest. Even in the heydays of their own development booms, the investment shares of the Japanese and Korean economies never got much above the low-40% range. I very much agree with Andy Xie who recently argued that China is now at a point where its ever-rising investment share is a recipe for excess capacity and deflation (see Andy’s 22 November dispatch, “China: Toward a Deflationary Landing”).
The consensus view in the markets is that China will sustain its investment boom through the 2008 Beijing Olympics -- that it will simply not accept the potential embarrassment of a growth slowdown until after that momentous event is over. Old China hands also note that the Chinese economy never slows immediately after the unveiling of a new development plan. With the 11th five-year plan covering the 2006-10 interval, this historical tendency also suggests any slowdown could be deferred until after 2007. Consider the implications of that possibility: If China stays the course of its investment-led boom, then the fixed asset investment share of its GDP could well be in the 55-60% range by 2008 -- a recipe for a monstrous overhang of excess capacity. With Chinese inflation already quite low -- the CPI increased at only a 1.2% y-o-y rate in October 2005 -- China is not that far away from outright deflation. Should its capacity overhang continue to build through 2008, a deflationary endgame in China would be more likely than not, in my view.
Nor would this be a great thing for the global economy. Despite its relatively small share in the global economy -- only about 5% of world GDP (at market exchange rates) -- China now spends more on fixed investment than any country in the world. In dollar terms, China’s fixed asset investment was running at an annual rate of close to $1,100 billion in the first three quarters of 2005 (at market exchange rates) -- in excess of annualized 2005 investment totals in the US ($987 billion), Japan ($733 billion), and the Euro-zone ($651 billion). If China’s investment boom remains unchecked and its currency continues to appreciate, its dominance in shaping the global investment cycle will only grow. This underscores the distinct possibility of Chinese-led gluts in worldwide capacity -- not just a problem for China but increasingly a deflationary risk for the global economy. In short, China’s investment-led growth boom is now in the danger zone.
So what stops it? The simple answer is one word -- reforms. Up until now, China’s investment binge has been funded largely by its “policy banks” -- huge organizations that were originally integral parts of the country’s central planning apparatus. China would, in effect, gather a massive reservoir of national saving, and the policy banks would then distribute the proceeds to state-owned enterprises, which employed and paid workers. Bank lending in China has not been a market-based, risk-adjusted credit allocation process. It was, instead, the open-ended state-directed funding of a state-owned economy. Unfortunately, given the precarious conditions of a largely unprofitable state-owned enterprise sector, policy lending was also a recipe for a huge build-up of non-performing bank loans (NPLs). Chinese reforms are bringing this vicious circle to an end. It started with an especially aggressive push toward state-owned enterprise reforms in the early 1990s -- shuttering the worst of the lot and privatizing the survivors (actually “corporatizing” since the state still maintains partial ownership). And now the reform process is moving into the next stage -- changing the funding mechanism by converting policy banks into commercial banks.
This could well be the tipping point for China’s runaway investment boom. The public listing of China’s policy banks changes the very character of the nation’s financing architecture. Charged with delivering profitability and shareholder value, publicly listed banks are bringing the days of open-ended policy lending to a close in China. Credit allocation must now follow the best practices of international commercial lending standards. So far, only one of China’s major policy banks has floated its shares, but two others are expected to follow suit within the next year. Collectively, these three institutions account for about 40% of total bank lending in China. The implications are that policy lending must give way to commercially viable lending. To do otherwise is a recipe for open-ended NPL creation -- an outcome that would represent a major failure for Chinese banking reform.
In my conversations with Chinese banking officials and regulators two weeks ago in Beijing, I got the distinct impression that this change in credit culture is now being put in place. Given the legacy effects of a state-owned economy and state-directed policy lending, this is not something the Chinese come by naturally. But there are two key elements of Chinese banking reform that are facilitating this dramatic transformation -- the first being the establishment of strategic partnerships between China’s policy banks and international commercial banks. Secondly, Chinese banking reform also entails the centralization of huge networks of branch banks. Between them, the three policy banks still have over 46,000 branches offices throughout China. Historically, these branches have had great autonomy -- closely tied to local governments and their local employment imperatives. As publicly listed companies, however, branch autonomy is now giving way to an increasingly centralized system of tight internal controls -- necessary not only for consolidated banking system efficiency but also essential for the efficacy of Chinese monetary policy.
There are signs that this dramatic shift in the Chinese bank lending culture is already working. A turn in the bank lending cycle may now be at hand. After peaking out at close to 5.5 times nominal GDP in 2003, total bank lending in China has since declined to around 5 times nominal GDP in 2005. This compression still has a considerable distance to go on the downside; after all, this same ratio was 4.5 times Chinese GDP as recently as 2000. As newly listed Chinese banks, along with those that are about to become listed, move to put their lending practices on a commercially sound basis, I suspect that the days of open-ended Chinese bank lending will quickly draw to a close. At that point, the excesses of a bank-financed investment boom will then come under increasingly intense pressure. All this points to a prompt and significant deceleration of runaway Chinese investment growth. As a senior Chinese banker put it to me over lunch in Beijing a couple of weeks ago, “Policy lending is out. Profitability and shareholder value are in. As commercial banks, our lending must slow. A big investment slowdown is coming -- sooner rather than later. I worry about Chinese growth in 2006.”
The cynics dispute this claim, arguing that the State won’t allow it. But in the end, the State can’t have it both ways -- drawing on international capital willing to bet on banking reform and holding on to uneconomic, state-directed policy lending practices. China doesn’t need 9%-plus GDP growth to keep the magic alive -- 7-8% will do just fine. A more rational, market-based system of credit allocation could go a long way in restoring sanity to an overheated Chinese investment cycle. The sooner the better, in my view. The alternatives of excess capacity and deflation -- and the hard landing that would then occur -- are unacceptable to Chinese reformers. We were wrong on the China slowdown call in 2005, but my guess is we were only early. In light of what I just learned about the rapidly changing bank lending culture in China, I am quite comfortable with the out-of-consensus possibility that Chinese GDP growth is about to slow into the 7-8% range.

Monday, December 05, 2005


Oil Price To Stay High On Upside Risks Oxford Analytica, 12.05.05, 6:00 AM ET Oil prices have fallen from post-hurricane highs this year. If market oversupply materializes, they will continue to fall. However, risks on the upside are more likely to prevail in 2006. There are two ways the oil market may evolve in 2006: -- Weaker Market. In the aftermath of Hurricanes Katrina and Rita, oil prices fell by around $10 per barrel. Since the hurricanes, Organization for Economic Cooperation and Development (OECD) commercial stocks of crude and products are now at the higher end of the figure during the last five years. Combined with the threat of high oil prices on demand for oil, the market could move into an oversupply situation unless Organization for the Petroleum Exporting Countries (OPEC) takes action soon. -- Tighter Market. However, falling oil prices are a normal market reaction after hurricanes, as happened following Hurricane Ivan in 2004. The anticipation of hurricanes typically pushes prices above that justified by actual supply and demand balances. Market signals are pointing to tighter rather than weaker market conditions. On the demand side, there is so far little sign of any response to high prices, though the International Energy Agency (IEA) and others have been lowering their demand forecasts for both 2005 and 2006. Demand strength has been largely driven by economic growth--forecast at 3% for 2006--which shows few signs of slowing: -- OPEC. OPEC countries are showing exceptionally strong demand for oil, fueled by the sharp increase in oil revenue. -- China. In China, during the first half of the year, the government tried to ration demand. Initially, demand stagnated but, since September, it has picked up again and China may add 500,000 barrels per day (b/d) this year. -- United States. Earlier numbers suggesting lower demand in October appear to have been misleading; unsurprisingly since three-quarters of U.S. consumption consists of light products that are unresponsive to higher prices in the short term. Also, where dual firing capability exists, exceptionally high natural gas prices have helped boost oil demand. Oil demand is also affected by winter weather. If the current forecasts of an exceptionally cold winter in the Northern Hemisphere prove to be correct, this could significantly increase demand. On the supply side, both non-OPEC and OPEC may disappoint in terms of additions to capacity and supply: 1. Non-OPEC. Non-OPEC supply is being revised downward, as anticipated projects face increasing delays due to constrained capacity in the service industry and the aftermath of the hurricanes: OECD. Production is expected to decline by 850, 000 b/d in mature OECD economies this year. Russia. Russia is a cause for concern. Political uncertainty, inflation and rouble appreciation all increase costs and reduce profitability, inhibiting production growth and discouraging further investment. While there are signs of greater resources being invested in upstream activities and the service industry globally, the long lead time on projects means these will not bear fruit for a number of years. 2. OPEC. OPEC countries are currently producing around 30 million b/d, although the official quota is only 28 million b/d: Spare Capacity. The IEA estimates OPEC capacity of 32.1 million b/d at the end of 2005, while the U.S. Energy Information Administration puts the surplus in October at only 1 to 1.5 million b/d. Saudi Arabia has promised to meet shortfalls in crude supply, but refused to discount the price of its heavy sour crude, leading to few takers. It is unlikely that significant extra capacity will emerge outside of Saudi Arabia, though OPEC is expected to increase its natural gas liquids production by some 350, 000 b/d. 2006 Projections. Expectations of increased supply vary between 700,000 b/d and 1 million b/d by the end of 2006. This will largely consist of light sweet crude, which may alleviate some of the constraints facing refineries. Refining Shortage. A shortage of upgrading refinery capacity also remains a problem. This was aggravated by the hurricanes pushing up the price of light sweet crude. Unless gross domestic product growth collapses, the market looks as though it will remain tight throughout 2006. The market is still vulnerable to the threat of losing another major exporter through, for instance, another natural disaster. In such circumstances, a large price spike could be expected. If any market weakness does emerge, OPEC is likely to step in to protect the price. Even if the market weakens, OPEC is well placed to defend the price, while any potential shock to the market will lead to a price spike. Oil markets will probably remain tight during 2006 and prices are likely to continue around their current levels. Risks are on the upside rather than the downside. To read an extended version of this article log on to Oxford Analytica's Web site. Oxford Analytica is an independent strategic consulting firm drawing on a network of more than 1,000 scholar experts at Oxford and other leading universities and research institutions around the world. For more information please visit, and to find out how to subscribe to the firm's Daily Brief Service, click here.

Saturday, December 03, 2005

GREENSPAN going out in style

Broad money supply (M3) surged $42.7 billion (week of November 21) to a record $10.114 Trillion. Over the past 27 weeks, M3 has inflated $489 billion, or 9.8% annualized.

SOB!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! this phantom wealth printing press seems to NEVER STOP!!!!!!!!! in front of surging assets.......since 2000 top there has been and not even since FED began raising FED funds.....ANY real tightening or restraint.

The FEd has engineered the destruction of our economy and monetary value.


Friday, December 02, 2005


I posted I purchased at $2..55 (about 1-2 wks ago) it closed today at $2.76 whoopie! LOL

I am still hoping for a price above $3.00, fell action is contructive to this.My buddy Matt's doing great catching breakouts on BIDU and ECA.

FDG got away from us after posting $32 low now $40. Gold stocks looking for correction. very high bullish %

So for now I'll stick with it, again testing my TA "system" and I'll see how it goes.

Looking for other stocks, not getting too excited in this environment right now, feel correction OVERDUE IMHO


MUST READ and coming to an end

I am afflicted with elbow tendanitus, it is affecting my hands, so unfortunately I must LIMIT my postings, unlike before.

I will attempt to post once a week, either on FRI or SAT, take care One way affair, every correction is followed by more monetary expansion, there seems to be no end in sight. BDI refuses to confirm economic/market rally, this concerns me. You can see it correlated to rise from 2002, how it drooped into 2001.

I can ONLY conclude what we are seeing is a f'ing mirage, another Greenspan ASSET INFLATION.

Near $600 B has been pulled out of home equity to finance consumption.


Tuesday, November 29, 2005



Market comments

Dow Up, Nasdaq Down in Afternoon Trading (YHOO)
Tue 2:36PM ET - AP
Stocks were mostly higher Tuesday as Wall Street struggled to extend its recent advance despite a trio of upbeat reports on factory orders, housing demand and consumer confidence. A drop in the bond market, which fell on fears of higher interest rates, helped put a cap on stocks' advance.
· Consumer Confidence Numbers Soar in Nov. AP
· Oil Prices Down As Warm Weather Persists AP
· Federal Vioxx Trial Gets Started in Texas AP

CPN under a $1
TOL reversing RED

Bull markets SOAR on good news. 11K in sniffing distance.


Saturday, November 26, 2005

SPX/VIX RATIO$spx:$vix,uu[w,a]daclyiay[df][pc20!c5!f][vc60][iut!La12,26,9!Lh14,3]&pref=G

Nearing nether reaches here IMHO, imminent correction is at hand. NOT necessarily the end of current move.



It doesn't take a genius to see the relationship, now how with near $60 oil for better part of year does US GDP hold up? When EVERY time in the past gas soared to such levels a Recession followed? everytime.

Things are different now?

Yes, they are! Historic endebted consumer and zero to negative savings rate.Consumer spending is near 75% of our economy, how sad. If consumers keep up their track record and expand XMAS spending, is there little doubt where that money is going to come from?

ANALYSIS of secular bear and bull markets from 1900 *(live link)
"The big question is now are we in the beginning stages of a 4th Secular Bear Market which started in 2000. The average length of the previous 3 Secular Bear Markets was 18 years with a minimum of 16 years and a maximum of 21 years. Thus if you add 18 years to the year 2000 and take + or - 3 years on either side then the next Secular Bull Market may not begin until sometime in the 2015 to 2021"

CYCLICAL BULLS "also had four cyclical bull markets that ranged from 21 to 38 months in length and the Dow"

Current bull began OCT 2002, so it has run for about 37 months! MY FRIENDS is that long in the tooth or what?

Secular Bears tend to follow Secular Bulls, last bull was SECULAR, longest running in history, what should follow??? a 3 yr correction that only took stocks to trailing 30X SPX?? 2% Dividend yields? NO!! Bottoms are made with single digit SPX and 6% yields.

Trade, be happy, be aware what kind of market conditions you are in, IMHO



NOV 15TH Dr Richebacher

November 15, 2005

The narrow concept of inflation as a rise in consumer and producer prices made perfect sense until the late 1970s, as long as credit excesses used to go overwhelmingly into the purchases of goods and services. But ever since, it no longer makes sense, because credit excesses are dispersed over much wider areas, in particular asset markets and imports.
Judging simply by the atrocious credit and savings numbers, the U.S. economy has the most rampant credit inflation around the world. It shows lately in the huge trade deficit (lately at an annual rate close to $800 billion); it shows in grossly overvalued asset markets running into many trillions of dollars (mainly bonds, stocks and housing). But lately, it is also increasingly showing in the consumer and producer price indexes.
It is a regular comforting mantra in the Fed’s FOMC press releases that "Core inflation has been relatively low in recent months and longer-term inflation expectations remain well contained, but pressures on inflation have stayed elevated." Emphasis on "core" inflation serves to distract attention from the ugly realities in price inflation.
After all, U.S. inflation rates of consumer and producer prices are now at the top in the world, even despite the Fed’s gross understatement. As of September 2005, the PPI was up 6.7% year over year. A year earlier, in August 2004, the 12-month rise was 3.3%. As to the CPI, it showed a rise of 4.7% year over year in September, as against 2.5% a year earlier. Import prices are up 9.9%.
Annualizing the price increases over the last three months, the numbers become outright frightening. For the PPI, in September, it was 14.8%, for the CPI, 9.4% and for import prices, 20.5%.
Presenting these numbers, we have to repeat our familiar mantra that heavy hedonic pricing and quite a variety of other statistical ploys have substantially reduced the reported U.S. inflation rates. Conservative estimates put their downward effect on the consumer price index at 1–1.5 percentage points per year. Critical observers put them closer to 3 percentage points.
Yet even the officially reported, understated CPI rate of 4.7% has become uncomfortably high, considering that second-round effects of the surge in oil prices are possible, and even probable.
Until quite recently, the Fed prided itself on having learned from Japan’s experience that a bursting asset bubble should be treated with fast and massive monetary easing to moderate its aftermath. This assumes, first of all, that belated rate hikes are the main reason for the protracted dismal performance of Japan’s economy. It is hard to see how a mere delay in rate cuts can have such devastating long-term effects. In contrast, Japanese experts regard two quite different reasons as most important. They cite structural problems caused by the prior credit excesses and never-ending deflation of house prices.
Mr. Greenspan claims great success that with his policies he managed the U.S. economy’s mildest recession in the postwar period. Actually, he replaced the bursting equity bubble with a whole variety of other bubbles, of which the housing and the bond bubbles played the leading roles in fueling America’s greatest consumer borrowing-and-spending binge.
The trouble is that with these new bubbles, the U.S. economy and its financial system have accumulated ever-greater imbalances and excesses. And while the ensuing housing bubble saved the economy from deeper recession, it should be realized that a housing bubble is a far more dangerous specimen than an equity bubble. There can be no question that the economy today is in far worse shape today than in 2000–01.
It strikes us that the Fed’s increasingly hawkish talk lacks the slightest hawkish action. Rather, it keeps adding reserves to the banking system in order to prevent the federal funds rate from rising above the targeted 3.75%.
In other words, the Fed is accommodating increasing demand for reserves, due to continuous strong credit demand. In general, reserve policy outweighs interest rate policy in its effects on the economy and the markets. It explains why the credit rampage has so far not shown the slightest moderation. In terms of bank reserves, monetary accommodation remains in full force.
We keep wondering what the Fed has in mind with its new policy. First of all, let us make it clear that even a federal funds rate of 4.5% is anything but high compared with present inflation rates. But apparently, it is widely perceived as very high, possibly too high, and that tells us something about the U.S. economy’s truly perceived strength.

Friday, November 25, 2005

Dr Faber "Road To Ruin"

I expect Dow to better 11K, was suprised though a close over it was rebuffed, next level would be 11,301


Thursday, November 24, 2005


We are at the area AGAIN that had previously marked the mkt top, which is 30% ABOVE the 2000 relationship, then said bull mkt high from 20 yrs of rally.$SPX:$VIX,uu[w,a]wallyiay[pc20!c50!f][vc60][iut!Ub14!Ua12,26,9]&pref=G *NOTICE HOW macd IS WEAKER STILL*

I hold this relationship in HIGH REGARD. You can observe how the ratio CALLED the 2002 low, do you not? You could have bought wth both fists then could you not? the fact we STILL reside 30% above the 2000 high relationship is PROOF enough of the excessive ill placed bullishness seemingly ingrained, unending.

When Greenspan exits, so will the bull, you heard it here first. Enjoy the turkey, we must be sure we don't end up on the menu.....They say WAGE GROWTH will sustain spending???!!!! They say consumer in great shape, that debt is no problem, that no savings is a non issue. They say there is no need for M3 data.

There are SO MANY DIVERGING relationships as dynamic as the one above, none point to beginning of anything wonderful

Duratek (my elbow tendanitus is keeping this brief)

Tuesday, November 22, 2005


"It seems almost inconceivable that we won't see $500 very soon, but it may have just done a bit too much this week" said John Reade, precious metals analyst with UBS Investment Bank.
Reade has just revised up his one-month average price target for gold to $465 an ounce from $440 previously. He, along with several traders and other analysts, said sell orders were building at $495 to $500 an ounce.
They said if gold did not manage to punch through $500 today or Wednesday, it may attract selling if U.S.-based investors decide to take some profits ahead of a long holiday weekend.
We continue to find it difficult, if not impossible, to justify the strength of the gold price with respect to any underlying economic relationship," he said, referring to a strong dollar, weaker oil prices and a massive surplus in the gold market.
"Nevertheless, the strength of the recent price action over recent days has been very impressive and against this background further gains are likely."
Barclays Capital estimated flows of money into commodities by U.S. mutual funds had risen 7 percent to $4.9 billion so far in 2005.
Another new product started trade Tuesday, with the Dubai Gold and Commodities Exchange launching a gold futures contract.
LONDON (Reuters) - Gold moved closer to the fabled $500-an-ounce level not visited since 1987 on Tuesday as investors shunted more money into the metal, but profit-taking ahead of a long weekend in the United States could prove a drag.
LONDON (Reuters) - Oil rose a dollar Tuesday on expectations colder temperatures in the Northern Hemisphere will ignite heating fuel demand after weeks of unseasonably warm weather.
U.S. light crude for January delivery rose $1.01 to $58.71 in electronic trading. The contract rose 49 cents Monday, helping the market bounce back from Friday's five-month low

NEW YORK ( - Here's what consumers can look forward to when the midnight bell-ringing comes to a stop: sharply higher home heating bills, holiday credit card bills, rising interest rates -- and now what looks like a slowing real estate market.
Consumer spending could suffer in 2006Cooling real estate market could finally force consumers to pull back. The impact could be huge (NOT BULLISH FOR COMMODITIES IMHO)

Saturday, November 19, 2005

Company of Interest

I have been studying themarket for years, and developing a system whereby I can help myself determine good risk reward trading opportunities. The dry runs are over, you gotta pay to play.

The ONLY reason I am going to list my trades (buys and then sells when I do) are to have a RECORD of how well I do. I am going to try to find ONE good trade a week, I wont force anything.

As an investor you can be paralyzed by analysis and lack of confidence, and many times driven to inaction becuase there is no way to avoid risk even on the "sure thing", which none are.

My problem has been the HOME RUN syndrome, and because that usually takes more cash to play, I wouldn't. SO I passed up winning trade after winning trade, a few of course didnt pan out, but most did.

I feel it more effective to adapt a single rule, not shooting for the moon. It is not important I List how many shares, just what and what price. I am not asking nor suggesting anyone follow any of my stock buys.

The link shows my interest, it is also a company with near $90 M revenues (listed on YHOO) and selling less than 1 X sales and about 1.29 book value, and I found this attractive. They had a few government contracts, so there is some interest here.

Wacthing it fall recently, I know not why, I felt we might be near some king of selleres pause if nothing else. $2.55 is price paid Fri., follow for amusement only.

I hope to prove to myself I can trade successfully, sometimes using stop losses to avoid LARGE LOSSES.

I avoided the BEAR MKT for many reasons, but in any environment there are opportunities, ifone spends enough time investigating, watching listening, reading, researching, becoming familair with, then using TA to "try" and pinpoint best buying opp.

I'm not going to get too jiggy here, just play money, market getting to some extremes in bullishness and overbought.....a pause that MIGHT refresh could be coming next week.

Buying is easy my broker will say, "it is the selling" that is the hard part!

When some "oh no Duratek is bullish" dont confuse seeing the rally for what it is, and continuing to look for potential trades. It NEVER pays to be too bullish nor bearish.


Friday, November 18, 2005

This is counter intuitive to current market rally. It is following SAME pattern as 2004 nov/dec ONLY other time it made a lower low!!

I smell a rat trap in this rally, should/will go much higher perhaps, could fall just as sharply without notice.

A key important high is being put in. 3rd week in row this has fallen. End of yr bullishness hides economic concerns in 2006.

UARM should open with a blast this AM, upwards of $13.....GL and GT.

Turned back at the first FIB, same time Transports are making NEW HIGHS!!??? I cannot justify this.

Buying power surged Thursday, so I expect higher prices. 10,742 on Dow SHOULD be blown thru today OPEX never know.

BULLY time of year. Tech rallues even with weakness in the powerhouses INTC CSCO MSFT and DELL AMAT none say we are getting jiggy here, yet GOOG above $400

Back in 1999, the FINAL runup made no sense, there was great fear of "missing out", I am sensing that here right now. The difference? 8,000 HEDGE FUNDS controlling 50% of the action or near it, some owned by LARGE BROKERAGES HOUSES, yr end bonuses on the line and they are going to JAM the performance down the markets throat.

SO, if pattern of adj money base continues, its decent is not bullish for down the road, market peaked right at end of year, JAN was weak, long term cycles are pointing down, but there are so many different ones, each could exert pressure.

Japan is ROARING higher each night, lots of savings there, 50% above the lows Japan appears BACK, inlfows into US are strong, this we will watch.


Thursday, November 17, 2005


"Silver has broken out" hey what happened to EWT's $3 target??. If silver goes....dollar falls, rates SHOULD rise. (SIL and SSRI 2 silver stocks)

Only question...'WHY Are the metals breaking? damnit, this shouldn't be bullish for stocks!

Like 1999.....none of this is going to make any sense, I'm getting feeling entire market is going to go...BALLISTIC.

And it will be like 1999 again, a MOVE Like that might be needed to have an "everybodys in the pool", shorts capitulate, when that happens, noone left to halt or slow the slide.

World markets are rising, additional BUYING , the funds for this coming from somewhere, and after 2 years of consolidating, the move up could be very dramatic.

When the fall comes 2006, 2050 who will be an apocolypse. AS debt piles on itself to the moon, but with FED and Central BAnk liquidity everythings floating seems like everything, market is ovebrought, feels like not ready to to correct yet



August 12, 2004
Here comes the economic clincher. Total US credit market debt (government, corporate, and individual) is $37.1 TRILLION. Debt is over 300% of GDP and still growing. Total credit market debt had reached 260% of GDP in 1929 on the eve of the Great Depression. Today, US total credit market debt has doubled over the past five years. The US Treasury Department has reported that there are $44 TRILLION in unfunded liabilities in the "Entitlement Programs". That alone is more than the net worth in the country. Added up, funded and unfunded US liabilities come to $US 81.1 TRILLION. The US net international debt position to the rest of the world stood as of March 31 at $US 5.2 TRILLION. Clearly, the USA is tapped out. It is running on empty momentum…..

Consider the pace of Fed debt "monetisation", as published by Mr. Russ Winter and taken from figures on the Fed's website:
In the year (52 weeks) which ended on May 5, 2004, average weekly Fed "monetisation" (outright buying of Treasuries with newly-created Federal Reserve Notes - aka US Dollars) averaged $US 577 million per week. In the 12 weeks between May 12 and July 21, that average weekly figure jumped to $US 1,395 million, just under two and a half times the pre May 12 level.

Over the last eight weeks of that twelve week period, the average weekly figure grew further to $US 1,532 million. Here are the clear tracks of the Fed "compensating" for the drop off in Japanese Treasury purchases. Here also is the evidence of the US Central Bank having to directly inflate its own currency through outright "purchase" of US Treasury debt instead of standing benignly by while the Japanese (and Chinese) Central Bank does the purchasing by inflating their own currency, the Yen. This is pure, unadulterated, unvarnished INFLATION by the US Fed which cannot fail, in time, to hasten the erosion of the purchasing power of the US Dollar.

But the Fed doesn't stop simply at "monetising" Treasury debt. It also has a practice which it calls "Permanent Open Market Operations". These are very low interest rate loans which it makes to "selected" financial institutions, as and when it deems them required. They are "required" whenever the Treasury markets look a little shaky, and or when there is a potential for them to look a little shaky, like just before a big Treasury auction, especially the quarterly refunding auctions. These "permanent injections of new liquidity" have been averaging well over $US 1 Billion per week since early May.

The Fed speaks of its "mission" as being one of fostering "sustainable growth" and its core task as being one of preserving "price stability". In its actions, the Fed has been creating new "money" at a pace never before equalled over the past three months while watching "growth" ebb away again. It has also advanced a long way on the path towards destroying the credibility (let alone purchasing power) of the currency of the United States. Remember that the next time you hear a speech from Alan Greenspan.
Ó 2004 – The Privateer

Wednesday, November 16, 2005


New Hi's 44
New Lows 64

New Lo's 214
New Highs 95

Market also came up to its rising 2003 lows trendline which it broke under, spinning wheels here, or pause to rise?

GOLD SPURTED higher today NEM rose almost $3 !! OIl and GAs strong across the board.

Lots of data tomorrow, ignore CPI and PPI data as it is crap.



NOT going to happen overnight, higher rates a factor, 50% SPECULATORS buying into FLA condo units a STERN WARNING

As suggested why in the world would the FED discontinue M3 data?


Tuesday, November 15, 2005

FED rings inflation bells

Bernanke speaks


U.S. October Producer Prices Rise 0.7%; Core Prices Fall 0.3%
Nov. 15 (Bloomberg) -- U.S. producer prices rose last month as costs increased for natural gas and heating oil. Excluding energy and food, wholesale prices declined by the most in more than two years, reflecting cheaper cars and clothes.

Prices paid to factories, farmers and other producers rose 0.7 percent following a 1.9 percent increase that was the biggest in 15 years. Excluding energy and food, so-called prices dropped 0.3 percent after a 0.3 percent rise in September.

Companies have had limited success passing through higher costs for energy and other commodities in the last year. The decline in the core, partly a result of how the government values new model year automobiles, won't be enough to keep Federal Reserve policy makers from raising interest rates to ensure inflation doesn't accelerate, economists said.

**Keep the illusion going.......consumers tapped out will go deep for XMAS, companies NOT passing on higher costs? why arent profits falling?


Saturday, November 12, 2005

From DOUG NOLAND and my comments

The Treasury market was volatile but finished yesterday with a strong rally. For the week, two-year Treasury yields declined 4 basis points to 4.43%. Five-year government yields fell 7 basis points to 4.49%. Bellwether 10-year yields dropped 10 basis points for the week to 4.57%. Long-bond yields declined 8 basis points to 4.74%. The spread between 2 and 10-year government yields declined about 6 to 14bps.

Junk bond fund outflows rose slightly to $138 million (from AMG).

Japanese 10-year JGB yields declined 4 basis points this week to 1.565%.

Broad money supply (M3) dipped $1.4 billion (week of October 31) to $10.075 Trillion. Over the past 24 weeks, M3 has surged $450.1 billion, or 10.1% annualized.

AS you guys already know!! November 10 – Bloomberg (Vincent Del Giudice): “The Federal Reserve announced today it will discontinue reporting data on the broadest measure of the money supply, M3, effective March 23, 2006.”


Total Commercial Paper surged $19.3 billion last week to a record $1.661 Trillion. Total CP has expanded $247.5 billion y-t-d, a rate of 20.2% (up 21.4% over the past 52 weeks). Financial CP jumped $14.6 billion last week to $1.496 Trillion, with a y-t-d gain of $211.7 billion, or 19.0% annualized (up 21.3% from a year earlier). Non-financial CP increased $4.7 billion to $165.3 billion (up 31.9% ann. y-t-d and 22.5% over 52 wks). WOW!!!!!

Copper traded to another record high.

FRICKEN SAD!!!!! China Watch:

November 10 – Market News International: “China’s exports for October alone rose 9.7% year-on-year to $68.09 bln and imports were up 23.4% at $56.08 bln… Exports for the first 10 months of this year rose 31.1% to $614.49 bln and imports were up 16.7% at $534.12 bln for the 10-month period.”
November 7 – Bloomberg (Ben Sills and John Fraher): “European Central Bank council member Nicholas Garganas said money supply growth is a ‘serious risk’ to inflation and may tip the bank toward its first increase in interest rates in five years. ‘There is no question that the recent acceleration of M3 growth poses some serious risks to long-term inflation,’ said Garganas… Should the ECB see ‘any indication that the risks to inflation are likely to materialize, we will act.”’

**Broker Dealer stocks set NEW HIGHS!! November 9 – Bloomberg (Gregory Cresci): “After paying more than $12 billion in fines and settlements over four years, Wall Street firms including Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. are headed for their biggest profits since 2000.


November 8 – Bloomberg (John Dooley): “The growing use of credit derivatives by hedge funds is adding risks to global credit markets at a time when bankruptcies at companies such as Delphi Corp. have raised concerns about declines in credit quality, according to Fitch Ratings. ‘Hedge funds are punching above their weight,’ said Roger Merritt, senior credit officer at the ratings company… The use of leverage and active trading strategies has increased their ability to influence markets and may change the behavior of credit markets during the next downturn.’”

**And this “leverage” is what is being used to goose stock markets?

POOLE FOOL : Moreover, the U.S. case is unique in a number of respects. The central role of U.S. financial markets—and of the dollar—in the world economy suggests that capital account surpluses, and therefore current account deficits, are being driven primarily by foreign demand for U.S. assets rather than by any structural imbalance in the U.S. economy itself.”

"We can all benefit from our good fortune in having access to increasingly safe, liquid and transparent financial markets. The United States has created for itself a comparative advantage in capital markets, and we should not be surprised that investors all over the world come to buy the product.”

DOUG DOESN’T AGREE!!! It is my view that the U.S. Current Account Deficit is today the most problematic imbalance in a world of gross imbalances and that it is poised to be the most pressing and intractable economic issue over the coming months and years. It is also my view that Dr. Poole has surpassed even Professor Bernanke as the framer of the most specious and dangerous analysis to originate from our Federal Reserve System.


A lot of things are uncertain these days, but as long as the world accommodates $800 billion U.S. Current Account Deficits – and the Fed is more than ok with it - it’s a safe bet that there will be heightened global inflationary pressures, increasingly unwieldy financial flows, and only greater Monetary Disorder. And, I might add, the word “debtor” (nation) is not the least bit misleading.

Friday, November 11, 2005

Best Of Richebacher NOV

November 7, 2005
The U.S. economy’s mainstay of growth, consumer spending, is down sharply since June, to wit, well before the hurricanes hit. The U.S. asset and credit bubbles have gone to such exorbitant excess that an abrupt reversal appears possible, if not probable. The reality of the situation is that the U.S. economy and its financial system have become addicted to continuously greater credit excess. As we shall explain, there is far more economic and financial weakness in the economy than most people realize…..
U.S. economic growth depends precariously on the full-blown continuance of the housing and refinancing bubbles as the shortfall of consumer incomes continues unabated. In addition, accelerating inflation rates are taking their toll. Consensus economists remain steeped in denial.
For sustained economic growth, it is imperative that corporations take the baton from the struggling consumer with a strong pickup in fixed investment. There is no reasonable indication this will happen. Instead, they are pouring record amounts into stock buybacks, mergers and acquisitions.
The bulls will jump at the idea that new rate cuts by the Fed will quickly reverse the situation in the markets and the economy. But there is little room for new monetary and fiscal stimulus, while the economy is in far worse shape than in 2000. After all, the Fed is sure to "push on a string."
But do not think that bonds will be a safe haven under these circumstances. Being built completely on highly leveraged carry trade, they are extremely vulnerable to any kind of disturbance.

Tuesday, November 08, 2005


*(EWT call for Bond Rally might be accurate with 9% daily bull reading from MDH Advisors)

Toll Brothers Cuts 2006 Delivery View
Tue 9:37AM ET - AP
Toll Brothers Inc. reported Tuesday robust gains in its fiscal fourth-quarter home building revenue, backlog and contracts, but the luxury home builder also trimmed its home deliveries forecast for fiscal 2006, citing fewer than expected selling communities and weakened demand in several markets.

Monday, November 07, 2005


*(click to enlarge) A few notes

Credit Bubble: (Doug Noland)

Junk bond fund outflows increased to $132 million (from AMG). Issuers included Chukchansi Economic Development Authority $310 billion, Atlantic & Western $300 million, and Rural Cellular $175 million.

Broad money supply (M3) expanded $10.2 billion (week of October 24).

*(below from

And what is also crystal clear is that with the recent absolute price level correction in stocks, the relationship of the S&P relative to gold is breaking through the lower level of the 2003 to present trading channel to the downside. Technically, not much lies below this trading channel except the lows in this relationship that date back to the first quarter of 2003. Remembering that as the S&P has underperformed gold in the past, the absolute S&P itself has been declining, does this recent break of relationship trend to the downside between the S&P and gold foreshadow what may indeed be the resumption of the primary bear trend in equities?

Again, we’re not suggesting this to be ultra bearish, but rather we’re simply trying to listen to market history whisper in our collective ears. In our own little financial market playbook of life, we’d consider a break of the SPX and gold relationship ahead below the early 2003 low to be a very negative omen for the macro equity market. We'd consider it "game on" in terms of resumption of the macro bear. Will we get there? We'll see.

As you’ve noticed, we've shaded periods of the S&P underperforming gold in red in the chart below. Of course these also correspond to very weak, or flat at best, periods of absolute S&P price performance. But, in our minds, what is most important in the chart below are the very well defined long term upward trend lines. To be honest, these trend lines are virtually picture perfect in terms of having captured very important price bottoms over the last 15 years.

Sunday, November 06, 2005


Is the Consumer ready to join the "BIGGEST LOSER" show???

Brudda's, WOOOOOOFFFFF Colonial WMSburg.....lets just say I've seen it, dont need to go back, PLUS ONE HOUR JAM to go 2 miles...eighhhhhh.

SO I pull off, I GOTTA PEE!!!!!!!!! McDonald's......hungry,,,,,dinner? HAndicapped person behind counter...OK..UNTIL she came out and said "MAY I HELP YOUUUUUUUUUU??? AFTER SHE licked something off her arm!! LOL NO....THANK YOUUUUUUUUU!!!!

Market....i think she got a short term pulback comin', then 200-300 point spurt could take 2-3 weeks, maybe hold up into DEC not sure. Somewhere in here I intend to double up on RYNVNX, and go LONG BONDS.

During this period, the market has rallied, in the face of rising bond yields, falling VIX, but we wont see a new low in VIX. And I am not sure we see a new high in yields, but the market isant going to sell off IMHO if money isnt being diverted into bonds at 23% bullish opinion.

EWT thinks the current rise in rates ENDS with a SPIKE, that should bring bullishness down to near recent lows of 10% previous high in yields. That would certainly be SUPER sign to enter with reduced RISK.....could falling rates accompany a rally in stocks? I dont think so because up til now, the mkt is reflecting economic strength (3.8 GDP) not expected weakness....."LOOK how good we're doing even after all this other shit?!"

This FASCADE will be shattered by either WEAK CONSUMER SPENDING for XMAS, or some other event I cant know.

EVERY TIME GAS has reached current levels of price a RECESSION has FOLLOWED (thurs King), they are fricked LOADED TO THE GILLS with inventory for a big xmas......the have's are doing great, but the have nots run the economy.

Housing has topped. Dont know if consumer has cried uncle on credit yet.


We want to think the bear mkt is over, but when you look at historic charts we know this is just wishful thinking. TOTAL CREDIT MARKET DEBT carries itself each day to higher historic levels. GAs has fallen but reg is stil near $2.30 and most cars take Premium near $2.50, reg was near $1.69.

Trucking may be going crazy as all this XMAS crap is being shipped out of warehouses to stores. WHAT IF GRINCH SHOWS UP INSTEAD?

SO, maybe XMAS will be unexpected HIT? VOLUME in market argues for continuation of rally. Slowing here will be initial sign. Fall in retailer another one. Falling stocks accompanies by falling commodities oil etc another one still.

Recession dont occur with rising commodities, reduced demand causes them to fall. XLE< oil ,COPPER arguably may have topped. SO has the Cyclical BULL expansion.

Hasnt it been fueld by the housing bull? IS there another leg up there? JUST LIKE that consumers quickly lose interest in fuel efficient cars, as gas drops, only worry was of getting it? Shortages? (PER FRI USA TODAY)

4.6% 10 yr is NOT luring investors away from stocks? hmmmmmmmm. but it has sadly outperformed stocks in general.

Bond prices usually rally when economic data looks weak, when BEAR MKT roars again, what better place to reside then there?

CONSUMER is in worst shape then ever before, no savings, nothing to fall back on, loaded with houses cars and stuff, past Recession and Bear mkt was highlighted by expanded debt, not a righting of ship and getting "house" in order. There are a lot of first going on here.

Future have 3 more rate increases priced in, so unless we get HUGE spike in yields will be difficult to time an entry into bonds. IF for any reason yields approach 5%, it will be considered a done deal they wil keep rising and we will get our 10% or lower sentiment reading.

Then I would say who is left to sell? OUR FOREIGN FRIENDS? Like I said, we will probably be among those negative, buying right is never easy.

GOOG near $110 B mkt cap, what a love afair. What FEAR? is that not a poster child for buying to sell higher?

EVERY similar spike in energy costs has yielded a Recession, the one we are going through the worst of bunch, so far 70 degree NOV has made us forget winter energy prices. But Winter IS coming. And so is K-Winter, I am sorry to say, and you guys know this cycle is LONG LONG overdue.

The FED has made a mockery of FREE MARKET rules, HELL TO PAY>


Friday, November 04, 2005


Reason inflation isn’t more visable is 2 fold. A) Gov stats lie lie lie, please observe CPI charts and wages.

B) THE MORE companies get price pressure, the MOE they shift to Chinese production to control prices! PLUS passing along costs as CLOREX suggested they would be raising prices directly adding to core pressure even if they don't choose to show it.

This all taking us further down the road to purgatory and destruction of our economy, and further enslaving Chinese workers and Americans to debt.

OK so I did post one anyway, later. PLUS the AVIAN FLU scare is just that, slight of hand, diversion to REAL ISSUES.


Thursday, November 03, 2005

U.S. and the Global Economy

*(From NY FED horse mouth so to speak)

U.S. and the Global Economy
October 19, 2005
Printer version

Timothy F. Geithner, President and Chief Executive Officer
Remarks at the Asia Society’s CEO Forum in New York City
I want to focus my remarks today on the imbalances in the world economy and their implications for the United States and Asia. These imbalances, which are most visible in the U.S. current account deficit, present challenges—and risks—for the world economy. How we manage these challenges will have significant implications for our economic future and for the rest of the world.
The sources of these imbalances are varied and complex. They are the result of fundamental changes in the world economy, changes not anticipated and not fully understood. They involve economic forces across the global economy, some transitory and some probably more enduring. The imbalances took a long time to build up and they will probably take a long time to unwind.
The magnitude and persistence of these imbalances seems to be the result of the interaction of two forces. The first involves a decline in U.S. savings relative to domestic investment, matched by an increase in savings relative to investment in parts of the rest of the world, principally in emerging Asia and the major oil exporters.
In the United States, public savings and household savings fell, while investment spending stayed reasonably strong and housing investment very strong, even during the latest recession. In the economies that became large net savers, the pattern differed across countries. In some countries, including much of emerging Asia and Japan, savings has been flat or fallen somewhat, while investment has fallen by more. In China and in the major oil exporters, investment spending is rising, but not by as much as savings is increasing. Europe’s net external position has not changed much over this period, and is in rough external balance overall, with substantial differences across the member states.
The second feature of this dynamic has been an increase in the willingness of the rest of the world to invest its savings in the United States. In those parts of the world where savings are high, they have become more globally mobile. And a greater share of those savings found its way to the United States. This phenomenon is due in part to the perceived attractiveness of relative returns in the United States arising from the acceleration of productivity growth here, and in part due to the dynamics associated with exchange rate regimes linked in one way or another to the dollar.
Together these forces have produced larger imbalances—deficits here and surpluses abroad—that have been sustained longer and financed more easily than conventional wisdom would have thought possible a decade or even five years ago.
Why does this pattern of imbalances matter and why should it concern us?
It matters because of the size of the U.S. imbalance. Our current account deficit is now running at a rate of above 6 percent of GDP, a level without precedent for a major economy.
It matters because of the composition of the imbalance. Our trade deficit is now roughly the size of the current account deficit, and very large relative to our export base. And our net investment income balances are now likely to move into deficit.
It matters because of the trajectory of the U.S. imbalance. On reasonable assumptions about its likely near term path, this deficit will produce a very large net deterioration in our net external liabilities relative to national income, with progressively larger net transfers of income to the rest of the world.
This pattern should concern us because it is not simply the result of the savings and investment decisions of the private sector. The fact that we are using a substantial part of the savings we are borrowing from the rest of the world to finance an unsustainable level of public borrowing leaves us more vulnerable than if those savings were being used for productive private investment. Large structural fiscal deficits limit the size of the sustainable external imbalance for any country, even the United States, and they necessarily increase concern about the terms on which we are likely to finance the present imbalance.
It should concern us because of how the imbalance has been financed. A substantial portion of the capital inflows that finance our current account deficit has come from foreign central banks—which have been accumulating dollar reserves to preserve exchange rate arrangements that are unlikely to be sustainable and are already in the process of change. The impact of a reduction in the scale of official accumulation of dollar assets could be fully offset by increases in purchases by private investors. But even in the context of a continued high degree of confidence in the relative return on claims on the United States, it is hard to know with confidence how the preferences of private savers might respond to the process of gradual evolution in their nation’s exchange rate regimes now underway.
And most importantly, perhaps, these imbalances matter because at some point they will have to reverse. Market forces will at some point induce an adjustment. And that inevitable process of adjustment will bring with it the risk of large movements in relative prices, greater volatility in asset prices and slower growth in the United States and in the rest of the world.
The magnitude of this risk is difficult to measure with any confidence. Past episodes of external adjustment offer some reassurance, but the present circumstances seem sufficiently different from historical precedent that history may not be a particularly useful guide.
The size of the imbalances and the persistence of the forces supporting them probably mean that we will be living for a prolonged period of time with the tensions that could come with the need for adjustment.
The risks associated with this adjustment process may be magnified by changes in the household balance sheet in the United States. The average household in the United States today has a higher level of debt to income and is somewhat more exposed to interest rate risk than in the past. The sustained rise in housing prices and the scale of borrowing against housing assets raises the possibility that a rise in risk premia could have a greater impact on household spending than would have been true in the past.
The adjustment process is also complicated by the fact that the rest of the world does not appear likely, even over the medium term, to be in a position to provide a sufficiently strong offsetting source of demand growth to compensate for the necessary slowing in U.S. domestic demand. Policy actions to promote structural reform in the labor, product and financial markets could potentially change this, but the policy changes required are politically difficult, and their effects on net savings over time might be offset by demographic and other forces working the other direction.
A number of observers have suggested that we can live comfortably with these imbalances for a long time, with very little risk to the U.S. and world economy. The rise in the surplus savings of the rest of the world, the relative ease with which those savings now move across borders, and the increase in the relative attractiveness of claims on the United States together may suggest the world can sustain larger imbalances, more easily, for a longer period of time.
These factors, however, do not alter the fundamental judgment that our external position is unsustainable and the adjustment process ahead could materially affect future economic outcomes. The fact that these imbalances might be sustained for some time shouldn’t make us more confident that they will be. Even if we could be confident that the world would be comfortable financing the United States on these terms going forward, that would not make it prudent for the U.S. to continue borrowing on this scale.
Time doesn’t necessarily help. The longer these gaps continue to build, the greater the risks, and the more difficult their resolution.
What can we do to mitigate these risks?
For the United States, these challenges put a premium on putting in place a more credible fiscal policy framework, maintaining as strong and resilient a financial sector as possible, and preserving an open and flexible economy. These things are all important and desirable, but they are more important, and we can less afford to tolerate any erosion, than would be the case if we were closer to a sustainable external position.
Improving our fiscal position is the most effective means we have available to reduce our vulnerability during this prolonged period of adjustment. We need to produce a substantial reduction in our structural deficit over the medium term and begin to reduce the more dramatic longer term gap between our resources and commitments. And we need to restore a reasonable cushion in our structural budget balance to help us deal with future shocks.
If we are unable to begin to generate more confidence in the capacity of the U.S. political system to produce these improvements, we would face a greater risk of future increases in risk premia. And even though substantial fiscal consolidation would not by itself bring the external imbalance down to a more sustainable level, it would improve the prospect for a smoother adjustment to that outcome.
The general risk inherent in these imbalances—the risk of more adverse growth outcomes and asset price volatility—reinforces the importance of sustaining the strength and resilience of the U.S. financial system. Our financial system today is in substantially stronger shape than it was even in the recent past, and the major institutions now appear to be managed so that they are less vulnerable to the type and magnitude of shocks they’ve experienced in the past couple decades.
Our challenge, however, it to make sure they are as well positioned to deal with the full range of potential future risks. And this requires an investment in risk management and controls commensurate with the increasing complexity of these challenges, and it requires a cushion of capital and liquidity large enough to capture the potential risk of losses in a less favorable macroeconomic environment.
The increase in the flexibility and resilience of the U.S. economy over the past two decades has a lot to do with the increased openness of the U.S. economy. And sustaining this flexibility, which is so important to our capacity to adjust to shocks, requires that we continue to support the process of openness and economic integration. We jeopardize future income gains if we are unable to sustain support in the United States for what has been a relatively open trade policy. How effective we are in meeting this political challenge is likely to depend significantly on how effective we are in improving educational opportunity and achievement in this country, and perhaps also in improving the design of the temporary assistance we provide individuals who bear the brunt of the adjustment costs than come with greater global economic integration.
These policies by the United States would help improve the prospects of a more benign adjustment process. But they would not be sufficient to produce a more favorable adjustment path. A more favorable adjustment scenario would require a complex mix of policies and action in each of the major economic areas, sustained over a considerable period of time.
For global growth to be sustained at a reasonably strong pace during this period of adjustment, the desirable increase in U.S. savings and the necessary slowing in U.S. domestic demand growth relative to growth of U.S. output would have to be complemented by stronger domestic demand growth outside the United States, absorbing a larger share of national savings. Exchange rate regimes, where they are currently closely tied to the dollar, will have to become more flexible, allowing exchange rates to adjust in response to changing fundamentals.
The global nature of these requirements does not imply that the United States can put the principal burden for adjustment on others, or that we can expect the broader global adjustment imperative to easily alter the forces in countries outside the United States that have contributed to these imbalances. If we focus adequate political capital on the factors within our control, we will have more credibility internationally in encouraging policy changes outside the United States that might reduce our collective risks in the adjustment process ahead.
The increase in macroeconomic stability in the United States over the past two decades, or the reduction in the volatility of growth and inflation, has contributed to what seems to be a significant reduction in expected future volatility of asset prices. And the U.S. economy is in many ways in a relatively favorable position to manage through the risks in the adjustment process ahead. The apparent strength in U.S. productivity growth, our greater overall flexibility as an economy and the resilience of our financial system puts us in a stronger position to deal with the challenges in the transition ahead. But we face a number of difficult long-term challenges as a nation—in our fiscal position, in how well we equip our citizens to prosper in a more competitive world and in our ability to sustain political support for the policies, including our relatively open trade policy, that have been an important source of the improvement in U.S. prosperity. Our external imbalances make it more important that we invest in meeting those challenges.
Thank you.

Market Views Thursday

The bulls have the bears retreating, and we have begun the "good 6 months" historically of the market, so those in the know are and have ben getting long.

Volume on this move has been heavy, so it must be respected. Transports spike above 4,000 today a new all time high! This throws market oddly enough, OUT OF SYNCH. Under Dow Theory when the Dow and Trans dont move together, you must beware. That is not to say the Dow will not make a new 2005 high, bu it is a ways away. Utility index also is under its 2005 highs. NAZ is leading % wise, the high beta stocks, willingness to take on risk is returning as the VIX melts away. GOOG at $380 a sign of that, $105 B mkt cap.

STill not a single week of bearish plurality in over 155 weeks. Only 9 weeks since Bear Market began in 2000, sperated another 150 week string.

The setup, potential for a come back in consumer sentiment, who wants to be blue for Xmas, I personally knowmany hurting andworried about high winter heating bills and energy costs. There is good reason WMT plans heavy discounting for XMAS starting very soon. I suspect XMAS retail will be better than expected, people will be willing to pile on even more debt, they always do.

Oil is steady near $60, but could continue to fall, already gas prices have fallen substantially, could add to cheer.

Finally, the wild card is interest rates, rising near previous 4.6% high, I wonder if it can take it out, bullishness towards bonds has melted away, setting up contrarian move, it hasnt shown yet.

But what other than sentiment is catalyst to get jiggy with bonds? The stronger the economy is shown, the less likely a flight to quality will occur.

FED futures suggest 3 more rate increases.

Many still point to Katrina spending as impetus to stay bullish.

If 10 yr breaks out above 4.6% it could spike much higher before retracing, a move such as that would crush positive momentum, and being SO CLOSE to it as we speak, I find it rather odd, the market is shirking it off....because who can see the future?

I leave little hope for any meaningful change in tax code, who is going to touch sacred home interest write off?

ATM tax is coming to MILLIONS of middle class taxpayers, so something has to be done, some kind of trade-off. Have your hand on your wallet, under this adm, the wise guys always come out on top in Cronyville.

A FED that continues to liquify the cash market by operating its printing press around the clock, further exagerating the imbalances in our economy that already exists. We bounce back bewteen ASSET inflation from housing inflation.

Our GDP ismostly Gov and COnsumer spending, so we have a consumptive economy, we go deeper into the 3rd world hole. Because we cannot do any of this from savings, because we have none.

Foreignors now own near 50% of our debt, and they are buying us a piece at a time. WE can NEVER hope to pay back $7 trillion in debt, trade and deficits.

NOT a single spending bill has been veto's by BUSH a first! LOTS of it going to his Crony pals.

Housing has not crumbled and maybe it wont, but that is one EXIT that wont accomodate a hasty retreat.

Everything is not as it seems, and go ahead get seasonally bullish if you must, but equilibrium under our currents ystem of imbalances and historical distortions is going to be a hose of pain when it comes time to pay the piper.

D Am I the last bear standing? *(No posts FRI or this weekend)