Musing #1334, January 18, 2010
“Know thyself.” —Socrates
“Only the shallow know themselves.” —Oscar Wilde
“Hope and fear are both phantoms that arise from thinking of the self. When we don’t see the self as self, what do we have to fear?” —Lao-Tzu
“God has no religion.” —Mahatma Gandhi
“With God dead, there remains only history and power.” —Albert Camus
“Those who know don’t talk. Those who talk don’t know.” —Lao-Tzu
It’s obvious that Lao-Tzu and I are similar. We both talk, so therefore you can deduce that we both don’t know!
A Tour is Not a Vacation is Not a Trip
Last week Dena and I went to dinner with three other couples. The conversation turned to travel. Dena is planning a trip next October with her sister and other friends to tour parts of Italy. Someone asked me if I was going. I responded that they could not pay me enough to go on that tour. When asked why I felt that way, I responded there are two reasons. First of all, I hate tours. If I were to go somewhere I would want to rent an apartment and stay there long enough to really get to know the people and the culture. Second, I have no interest whatsoever in Western Europe. While the first comment met with a certain level of acceptance, the second comment created a minor furor. In short, everyone thought I was a “jerk”. I won’t argue with that description, certainly it might be accurate. (By the way tours are fine for other people. Many fine people I know really enjoy touring and seeing sites and museums and learning many interesting facts. It is not something I enjoy. We all have different tastes, likes and dislikes, that is what makes life so interesting.)
I have been to Western Europe but have no desire to return. I am not interested in the museums and/or cathedrals, etc. I am not a “foodie”. I prefer ethnic and peasant foods to haute cuisine. I would enjoy seeing the well-dressed handsome men and beautiful women (not necessarily in that order) in some of the cities but I can do that in the US in LA and NYC.
Of the places to which I have traveled so far, those to which I would like to return are Greece, Istanbul, Thailand, Bali, India, and perhaps Morocco.
I love the warmth and friendliness of the Greeks and have enjoyed stays on many of the Islands. I feel Greece is like a second home to me. I spent about six months cumulatively in Greece in the early 70’s during a three year span. I found it equally seductive when I returned in 1994 with Dena and our sons.
Istanbul is fascinating, being the cross-roads of the East and West, and Topaki is one of my four favorite museums on the planet. (The other three are the Rock and Roll Hall of Fame, The Prado, and the Aircraft museum in Tucson.) I regret not having gotten out of Bangkok and think I would like to get to know the real Thailand. Bali’s natural beauty is only exceeded by the inner beauty of its native population. I think I could spend months in Ubud. I also loved the food there! India is so special because of its spirituality and its vastness. India is, everyday an adventure that can blow one’s mind and expand one’s horizons. I have very fond memories of my brief stay in Tangiers and a trip to wonderful local fair that I attended with a Moroccan man and his French girlfriend. Going to the fair was like a trip back to Biblical times. I loved the people and the culture. I would definitely like to see more of Morocco.
Western Europe has no appeal to me because if or when I invest the time and effort to go somewhere I want it to be a “trip”. A trip is an adventure that expands the mind and exposes body and soul to new experiences ordinarily unavailable in one’s native habitat. In fact, if I really wanted to enjoy the best Italian food I might just spend a few days in Manhattan dining at “Eataly” which is a great experience in and of itself. (You can Google “Eataly” to find out what I am talking about.)
I am not sure why I wrote the above, but it was on my mind and what I enjoy writing is about things that are on my mind. For me, who loves being home, I only want to travel if it is a vacation, which means going to a beach with perhaps access to golf, or an adventure, which means being exposed to very difficult cultures and ways of life that might possibly change the way I think and/or perceive certain things. I have no interest in being a “tourist”.
A vacation is very different from a trip. A vacation is a week or two getaway to a beach, resort, mountain for skiing, etc. Vacations re-charge your batteries so you can go back to the grind of daily life. A trip must be at least a month and preferably longer. It must take you to a culture very different from your own so that you can question your existing values and norms. It should stretch your mind and enable you to return as a slightly modified being.
*******************************************************
As an observer from the middle end, I can agree with both Socrates and Oscar Wilde concerning the “self”. Furthermore there is room for the perspective from Lao-Tzu.
If one could truly know oneself, as per the advice of Socrates, he or she would be happy and fulfilled. However, it seems to me the issue is too complex to be totally understood, so Wilde’s sarcastic witticism is quite valid. If we can somehow transcend our individuality, as per the insights of Lao-Tzu, then we can stand above the fray of life and enjoy the complexity, beauty, and mystery of our planet and of our existence and approach fulfillment.
********************************************
Martin Luther King was a giant, a hero. Americans of all races and creeds are indebted to him for his contributions. I am pleased that we honor him with a national holiday. Jesse Jackson and Al Sharpton are not in his league or even his universe. I find them to be selfish and self-centered and basically manipulators who use public opinion and forums for their own self-aggrandizement. Jackson and Sharpton are complaining that Southern schools should not hold classes on Monday to make up a snow day. I think this is totally petty on their part. If Jackson, Sharpton, and even Obama were truly concerned about the betterment of the Black youth of America and their future what they would really do is focus on reforming our criminal laws and the decriminalization of drugs. Gangs, gang wars, addiction and a lifetime in jail are all by-products of the illegal drug trade. Society cannot afford to foot the bill any more. And the harm falls very disproportionately on the Black and other minority youths. Not a single one of these “activists” will take the unpopular yet ultimately moral position. Cowards are they all, in my opinion!
**********************************************
Astrology is in the news. Western Astrology is based on the Sun –also known as the “Tropical Zodiac”, while Indian Astrology (Jyotish) uses the stars–the system is “sidereal”. Because of the precession of the equinoxes using the Western astrological system there is a variance from what it was when these systems were established. I noticed an article about this in today’s Arizona Republic. Below are a couple of relevant paragraphs from David Hawthorne, an excellent practitioner of Jyotish, and golf buddy from Fairfield:
The Sidereal or Eastern system of astrology is based on the position of the belt of fixed stars and constellations in the heavens, whereas the Tropical zodiac or the Western astrological system is based upon the position of the Sun in relation to the Earth. The first degree of the Sidereal zodiac is measured from a point 180 degrees opposite the star Spica, whereas the first degree of the Western zodiac occurs when the Sun reaches the position above the equator known as the vernal equinox, on or about the 22nd of March each year.
Originally, the first degree of the zodiac was common to both systems. Due to the peculiarities in the Earth’s orbit, however, the belt of stars and constellations shift in relation to the Tropical zodiac. As a result, the two zodiacs are drifting apart. This is called the “precession of the equinoxes,” and today the difference between the two systems is calculated at about 23 degrees. Thus, if a person is born on January 1, he will have the Sun in Capricorn according to the Western system, but according to the Sidereal system the Sun will be at approximately 16 degrees Sagittarius.
In other words, if you subtract 23 degrees from the position of the planets and your rising sign in your Western astrology chart, you will arrive at your Vedic astrology chart.
By practical experience, and in light of the advice of the great sages of India, the use of the Sidereal method is preferable. It is mathematically correct, and it also penetrates into the subtle elements of nature, such as mind, intellect, and spirit to present a more complete picture of our soul’s sojourn in the realm of time and space.
Astrology has played an important role in my life. When or if I finish my autobiography and send it out I will explain how a chance reading of an article on astrology changed the way I viewed reality and consequently resulted in a huge modification of my focus and behavior in life.
At this point many of you must be saying to yourself, why am I reading this babble? Here is a guy who dismisses Western Europe and believes in astrology. He must be off his rocker!
********************************************************
I got some questions about how to hedge one’s holdings of physical gold and silver. Hedging requires both capital and some degree of market sophistication. The purest hedge is to use futures contracts. If one owns 100 ounces of gold one can short 1 futures contract and be fully hedged. I will be looking to do this, probably using far out in time contracts so I do not have to “roll” them. I would possibly start with the April 2012 contract if I choose this method. Another hedge would be to short the GLD. GLD is an ETF which represents 1/10 of one ounce of gold. So if you owned 10 ounces you would short 100 shares. One could hedge by buying puts on GLD but that is complicated by “time decay” and would not be my recommended choice. SLV is the ETF for silver and one share represents one ounce, so the math is simple.
I am hoping for one more rally from gold and silver in the next week or two so that I can implement this strategy at better prices. On the other hand, reading some of the comments by very astute analysts in this week’s Barron’s Roundtable, I do have some reservations about my own intermediate term bearishness.
Although gold has rallied a long way in the last 10 years it still has a long way to go. Furthermore, as noted in Barron’s, it remains underowned and skeptics abound.
**************************************************
I highly recommend that everyone purchase this week’s copy of Barron’s magazine. I think the roundtable discussion, an annual feature, is a must read! For the most part these participants are very savvy and have genuine insights into the stock market, economy, etc. Like all of us they each have their own perspective and prejudices. I think the explanations and secularly cautious comments by Marc Faber, (see pages 30,31,32) are especially important. Further insights along these lines provided by Fred Hickey, Felix Zulauf, and Bill Gross are also especially relevant. Needless to say I come down on the side of those who are critical of the Fed and its actions.
I just read the following comments from a technical analyst (McHugh) which I think echoes my analysis of what Bernanke has been doing:
J.P. Morgan Chase announced its earnings popped 47 percent during the fourth quarter, and rose 46 percent year over year. Their earnings better pop up, as most of the $600 billion QE2 printed money from the Fed is flowing through the large Wall Street banks. Glad the Fed has done such a nice job helping the Wall Street folks get theirs. Nothing of course for households. This Central Planner group has taken the approach that Wall Street is the economy, that what is good for Wall Street is good for everyone else. The approach is top down. Get Fed printed money into the hands of the big boys and let the households beg for crumbs. Let the households borrow it through credit cards. Who cares about the little guy. This is one of the largest concerted frauds on America ever. This strategy will not improve employment, will not improve the economy, will not provide a long lasting rising stock market cycle.
As he notes, “this is one of the largest concerted frauds on American ever.” The Fed’s policies are aimed at saving the banks and screwing the savers. It is an abomination!!!
************************************************
Back in the dark ages when IBM was a mainframe company and it had close to total domination in the space, one of the strategies it employed was FUD–Fear Uncertainty and Doubt. Before IBM was going to release new technologies, either hardware of software they would create all sorts of rumors, often conflicting so that potential customers and/or competitors would be confused about how to move forward or be prepared. This enabled IBM to continue its virtual monopoly in the mainframe computing arena.
FUD describes my current outlook for all the markets and for our economy. It seems obvious to me and most objective observers that the underlying foundation which would structure future growth and prosperity here in the US is seriously flawed.
The secular issues involve too much debt, structural unemployment, and government obligations which can never be met with “honest money” over the long term.
As a result, I would say there are three points of view prevailing among thoughtful and objective observers.
First, there are the deflationists (think of Gary Shilling for openers). The deflationists see excess capacity, too much debt, structural unemployment etc. leading to years of poor economic growth, high unemployment, and lower prices. They favor investing in bonds for both the income stream and the potential capital gains. Many “uber-bears” are deflationists and they see the stock market much lower in the coming years, taking out the bear market lows seen in late 2008 and early 2009.
Second there are the hyper-inflationists. They see the dollar undergoing a terminal erosion process. They conclude that the Fed is printing unlimited supplies of money, and the government will avoid ultimately defaulting on its sovereign debt by allowing terminal inflation. Inflationists believe that hard assets, commodities, agricultural land and owning productive assets (stocks in certain companies) are the way to structure one’s portfolio.
The third category is the “muddle-through” crowd. The analogy du jour for them is that we can continue to grow and possibly even thrive for the foreseeable future by continuing to “kick the can down the road”. They like equities and see the bull market continuing for the next couple of years. For most of these people the key will be stock picking and perhaps sector rotation.
Personally, I am in the FUD group, a fourth category. I can see the potential for all three of the above groups to be correct, but not at the same time. For the last year or so I have been leaning towards a deflationary point of view followed by a inflationary blow-off. Now I find the waters to be much more muddy!
My secular view (3 to 5 or 10 years) remains very strong that the minimum price target for gold is $3000 to $3600 and $10,000 is not out of the question. I am also have a firm conviction that the interest rate on the 30 year US Treasury bond will go to double digits. How we get from here to there is the difficult question.
If I had strong confidence is how the markets will play out this year I would be happy to let you know and to make some strong plays myself. Right now my single most highly confident call for 2011 is a dollar that strongly appreciates against most other major currencies, which include the Euro, Yen, Canadian Dollar, and Australian Dollar. I might possibly add the British Pound to the mix.
As I mentioned in my last missive this coming week is stock option expiration week. Many significant turns, highs or lows, have occurred around stock option expirations. Since we are at a high, logic would dictate the turn would be down. Assuming the stock market does turn down, it will remain to be seen whether it is a just a pause followed by higher highs later on in the year, or it turns into something more significant.
The major fly in the ointment for the bears is that the Lowry’s data, which is been very reliable for 78 years, is exceptionally bullish for the intermediate term. Lowry’s measures supply and demand. It is impossible to argue against the concept that the bottom line for price in any market, goods, or service is the underlying dynamics of supply and demand. Lowry’s has a proprietary and seemingly objective system for measuring and quantifying underlying supply and demand. Their data as of the close on Friday was the most bullish it has been since the market bottomed roughly two years ago. I would note, that what I consider to be other extremely reliable indictors have meant nothing in the last few months. It is possible that excessive volume in a few stocks like BAC and C along with the proliferation of ETF’s may render all historically useful forms of technical analysis invalid and that truly, now, “this time is different”.
That is what makes the markets such fascinating animals. The future is always a mystery!
*************************************************
I caught some flack for my comments about Obama and ObamCare in my last missive. All I can say, is get a copy of Griftopia and read the chapter for yourself. Taibbi, obviously a Democrat, says that Obama sold America down the river. He lays out in considerable detail what Obama did and who he bought off. Taibbi’s conclusion is that Obama really cared only about getting something done in order to help his popularity and he was perfectly willing to sell out to the insurance companies and anyone else in order to get his name on a piece of legislation. As one of the members of the Roundtable in Barron’s noted, for Obama, getting re-elected is Job No. 1.
My opinion of Obama remains that he is proving to be the worst president in history. He will lift that distinction from his predecessor, “W”, who was the worst president ever until this administration. (For those who are new to these musings, I am an equal opportunity critic. In my opinion the only thing worse than a Republican is a Democrat, and the only thing worse than a Democrat is a Republican. Furthermore, early on I supported Obama because I thought he was a man of integrity and even if I disagreed with his policies I would be proud of him. I have discovered that I was an idiot. Obama has no integrity. He is just a pretty face with oratory talent to fool the masses and me.)
Obama has proved to be another hypocritical elitist masquerading as the savior of the poor and middle classes.
***********************************************
Monday January 17, 2010
We now know who is the most important person on the planet. Obviously it is Steve Jobs. He announced this morning that he is taking a medical leave of absence. NASDAQ futures are trading down about 30 points, approximately 1.4%. (S&P futures are down only about 0.35% more in line with other world stock markets.) If you assume, as would seem to be clearly the case, that the difference is attributed to the announcement by Jobs, his value to the American net worth must be 10’s of billions of dollars. I don’t know what the total market capitalization of the NASDAQ 100 is, but it must be very large, and 1% is a very big number.
“Know Thyself” Socrates
“Only the Shallow Know themselves.” Oscar Wilde
“Hope and fear are both phantoms
that arise from thinking of the self.
When we don’t see the self as self,
what do we have to fear?” Lao-Tzu
“God has no religion.” Mahatma Gandhi
“With God dead, there remains only history and power.”
Albert Camus
“Those who know don’t talk.
Those who talk don’t know.” Lao-Tzu
**********************************************
It’s obvious that Lao-Tzu and I are similar. We both talk, so therefore you can deduce that we both don’t know!
Last week Dena and I went to dinner with three other couples. The conversation turned to travel. Dena is planning a trip next October with her sister and other friends to tour parts of Italy. Someone asked me if I was going. I responded that they could not pay me enough to go on that tour. When asked why I felt that way, I responded there are two reasons. First of all, I hate tours. If I were to go somewhere I would want to rent an apartment and stay there long enough to really get to know the people and the culture. Second, I have no interest whatsoever in Western Europe. While the first comment met with a certain level of acceptance, the second comment created a minor furor. In short, everyone thought I was a “jerk”. I won’t argue with that description, certainly it might be accurate. (By the way tours are fine for other people. Many fine people I know really enjoy touring and seeing sites and museums and learning many interesting facts. It is not something I enjoy. We all have different tastes, likes and dislikes, that is what makes life so interesting.)
I have been to Western Europe but have no desire to return. I am not interested in the museums and/or cathedrals etc. I am not a “foodie”. I prefer ethnic and peasant foods to haute cuisine. I would enjoy seeing the well-dressed handsome men and beautiful women (not necessarily in that order) in some of the cities but I can do that in the US in LA and NYC.
Of the places to which I have traveled so far, those to which I would like to return are Greece, Istanbul, Thailand, Bali, India, and perhaps Morocco.
I love the warmth and friendliness of the Greeks and have enjoyed stays on many of the Islands. I feel Greece is like a second home to me. I spent about six months cumulatively in Greece in the early 70’s during a three year span. I found it equally seductive when I returned in 1994 with Dena and our sons.
Istanbul is fascinating, being the cross-roads of the East and West, and Topaki is one of my four favorite museums on the planet. (The other three are the Rock and Roll Hall of Fame, The Prado, and the Aircraft museum in Tucson.) I regret not having gotten out of Bangkok and think I would like to get to know the real Thailand. Bali’s natural beauty is only exceeded by the inner beauty of its native population. I think I could spend months in Ubud. I also loved the food there! India is so special because of its spirituality and its vastness. India is, everyday an adventure that can blow one’s mind and expand one’s horizons. I have very fond memories of my brief stay in Tangiers and a trip to wonderful local fair that I attended with a Moroccan man and his French girlfriend. Going to the fair was like a trip back to Biblical times. I loved the people and the culture. I would definitely like to see more of Morocco.
Western Europe has no appeal to me because if or when I invest the time and effort to go somewhere I want it to be a “trip”. A trip is an adventure that expands the mind and exposes body and soul to new experiences ordinarily unavailable in one’s native habitat. In fact, if I really wanted to enjoy the best Italian food I might just spend a few days in Manhattan dining at “Eataly” which is a great experience in and of itself. (You can Google “Eataly” to find out what I am talking about.)
I am not sure why I wrote the above, but it was on my mind and what I enjoy writing is about things that are on my mind. For me, who loves being home, I only want to travel if it is a vacation, which means going to a beach with perhaps access to golf, or an adventure, which means being exposed to very difficult cultures and ways of life that might possibly change the way I think and/or perceive certain things. I have no interest in being a “tourist”.
A vacation is very different from a trip. A vacation is a week or two getaway to a beach, resort, mountain for skiing, etc. Vacations re-charge your batteries so you can go back to the grind of daily life. A trip must be at least a month and preferably longer. It must take you to a culture very different from your own so that you can question your existing values and norms. It should stretch your mind and enable you to return as a slightly modified being.
*******************************************************
As an observer from the middle end, I can agree with both Socrates and Oscar Wilde concerning the “self”. Furthermore there is room for the perspective from Lao-Tzu.
If one could truly know oneself, as per the advice of Socrates, he or she would be happy and fulfilled. However, it seems to me the issue is too complex to be totally understood, so Wilde’s sarcastic witticism is quite valid. If we can somehow transcend our individuality, as per the insights of Lao-Tzu, then we can stand above the fray of life and enjoy the complexity, beauty, and mystery of our planet and of our existence and approach fulfillment.
********************************************
Martin Luther King was a giant, a hero. Americans of all races and creeds are indebted to him for his contributions. I am pleased that we honor him with a national holiday. Jesse Jackson and Al Sharpton are not in his league or even his universe. I find them to be selfish and self-centered and basically manipulators who use public opinion and forums for their own self-aggrandizement. Jackson and Sharpton are complaining that Southern schools should not hold classes on Monday to make up a snow day. I think this is totally petty on their part. If Jackson, Sharpton, and even Obama were truly concerned about the betterment of the Black youth of America and their future what they would really do is focus on reforming our criminal laws and the decriminalization of drugs. Gangs, gang wars, addiction and a lifetime in jail are all by-products of the illegal drug trade. Society cannot afford to foot the bill any more. And the harm falls very disproportionately on the Black and other minority youths. Not a single one of these “activists” will take the unpopular yet ultimately moral position. Cowards are they all, in my opinion!
**********************************************
Astrology is in the news. Western Astrology is based on the Sun –also known as the “Tropical Zodiac”, while Indian Astrology (Jyotish) uses the stars–the system is “sidereal”. Because of the precession of the equinoxes using the Western astrological system there is a variance from what it was when these systems were established. I noticed an article about this in today’s Arizona Republic. Below are a couple of relevant paragraphs from David Hawthorne, an excellent practitioner of Jyotish, and golf buddy from Fairfield:
The Sidereal or Eastern system of astrology is based on the position of the belt of fixed stars and constellations in the heavens, whereas the Tropical zodiac or the Western astrological system is based upon the position of the Sun in relation to the Earth. The first degree of the Sidereal zodiac is measured from a point 180 degrees opposite the star Spica, whereas the first degree of the Western zodiac occurs when the Sun reaches the position above the equator known as the vernal equinox, on or about the 22nd of March each year.
Originally, the first degree of the zodiac was common to both systems. Due to the peculiarities in the Earth’s orbit, however, the belt of stars and constellations shift in relation to the Tropical zodiac. As a result, the two zodiacs are drifting apart. This is called the “precession of the equinoxes,” and today the difference between the two systems is calculated at about 23 degrees. Thus, if a person is born on January 1, he will have the Sun in Capricorn according to the Western system, but according to the Sidereal system the Sun will be at approximately 16 degrees Sagittarius.
In other words, if you subtract 23 degrees from the position of the planets and your rising sign in your Western astrology chart, you will arrive at your Vedic astrology chart.
By practical experience, and in light of the advice of the great sages of India, the use of the Sidereal method is preferable. It is mathematically correct, and it also penetrates into the subtle elements of nature, such as mind, intellect, and spirit to present a more complete picture of our soul’s sojourn in the realm of time and space.
Astrology has played an important role in my life. When or if I finish my autobiography and send it out I will explain how a chance reading of an article on astrology changed the way I viewed reality and consequently resulted in a huge modification of my focus and behavior in life.
At this point many of you must be saying to yourself, why am I reading this babble? Here is a guy who dismisses Western Europe and believes in astrology. He must be off his rocker!
********************************************************
I got some questions about how to hedge one’s holdings of physical gold and silver. Hedging requires both capital and some degree of market sophistication. The purest hedge is to use futures contracts. If one owns 100 ounces of gold one can short 1 futures contract and be fully hedged. I will be looking to do this, probably using far out in time contracts so I do not have to “roll” them. I would possibly start with the April 2012 contract if I choose this method. Another hedge would be to short the GLD. GLD is an ETF which represents 1/10 of one ounce of gold. So if you owned 10 ounces you would short 100 shares. One could hedge by buying puts on GLD but that is complicated by “time decay” and would not be my recommended choice. SLV is the ETF for silver and one share represents one ounce, so the math is simple.
I am hoping for one more rally from gold and silver in the next week or two so that I can implement this strategy at better prices. On the other hand, reading some of the comments by very astute analysts in this week’s Barron’s Roundtable, I do have some reservations about my own intermediate term bearishness.
Although gold has rallied a long way in the last 10 years it still has a long way to go. Furthermore, as noted in Barron’s, it remains underowned and skeptics abound.
**************************************************
I highly recommend that everyone purchase this week’s copy of Barron’s magazine. I think the roundtable discussion, an annual feature, is a must read! For the most part these participants are very savvy and have genuine insights into the stock market, economy, etc. Like all of us they each have their own perspective and prejudices. I think the explanations and secularly cautious comments by Marc Faber, (see pages 30,31,32) are especially important. Further insights along these lines provided by Fred Hickey, Felix Zulauf, and Bill Gross are also especially relevant. Needless to say I come down on the side of those who are critical of the Fed and its actions.
I just read the following comments from a technical analyst (McHugh) which I think echoes my analysis of what Bernanke has been doing:
J.P. Morgan Chase announced its earnings popped 47 percent during the fourth quarter, and rose 46 percent year over year. Their earnings better pop up, as most of the $600 billion QE2 printed money from the Fed is flowing through the large Wall Street banks. Glad the Fed has done such a nice job helping the Wall Street folks get theirs. Nothing of course for households. This Central Planner group has taken the approach that Wall Street is the economy, that what is good for Wall Street is good for everyone else. The approach is top down. Get Fed printed money into the hands of the big boys and let the households beg for crumbs. Let the households borrow it through credit cards. Who cares about the little guy. This is one of the largest concerted frauds on America ever. This strategy will not improve employment, will not improve the economy, will not provide a long lasting rising stock market cycle.
As he notes, “this is one of the largest concerted frauds on American ever.” The Fed’s policies are aimed at saving the banks and screwing the savers. It is an abomination!!!
************************************************
Back in the dark ages when IBM was a mainframe company and it had close to total domination in the space, one of the strategies it employed was FUD–Fear Uncertainty and Doubt. Before IBM was going to release new technologies, either hardware of software they would create all sorts of rumors, often conflicting so that potential customers and/or competitors would be confused about how to move forward or be prepared. This enabled IBM to continue its virtual monopoly in the mainframe computing arena.
FUD describes my current outlook for all the markets and for our economy. It seems obvious to me and most objective observers that the underlying foundation which would structure future growth and prosperity here in the US is seriously flawed.
The secular issues involve too much debt, structural unemployment, and government obligations which can never be met with “honest money” over the long term.
As a result, I would say there are three points of view prevailing among thoughtful and objective observers.
First, there are the deflationists (think of Gary Shilling for openers). The deflationists see excess capacity, too much debt, structural unemployment etc. leading to years of poor economic growth, high unemployment, and lower prices. They favor investing in bonds for both the income stream and the potential capital gains. Many “uber-bears” are deflationists and they see the stock market much lower in the coming years, taking out the bear market lows seen in late 2008 and early 2009.
Second there are the hyper-inflationists. They see the dollar undergoing a terminal erosion process. They conclude that the Fed is printing unlimited supplies of money, and the government will avoid ultimately defaulting on its sovereign debt by allowing terminal inflation. Inflationists believe that hard assets, commodities, agricultural land and owning productive assets (stocks in certain companies) are the way to structure one’s portfolio.
The third category is the “muddle-through” crowd. The analogy du jour for them is that we can continue to grow and possibly even thrive for the foreseeable future by continuing to “kick the can down the road”. They like equities and see the bull market continuing for the next couple of years. For most of these people the key will be stock picking and perhaps sector rotation.
Personally, I am in the FUD group, a fourth category. I can see the potential for all three of the above groups to be correct, but not at the same time. For the last year or so I have been leaning towards a deflationary point of view followed by a inflationary blow-off. Now I find the waters to be much more muddy!
My secular view (3 to 5 or 10 years) remains very strong that the minimum price target for gold is $3000 to $3600 and $10,000 is not out of the question. I am also have a firm conviction that the interest rate on the 30 year US Treasury bond will go to double digits. How we get from here to there is the difficult question.
If I had strong confidence is how the markets will play out this year I would be happy to let you know and to make some strong plays myself. Right now my single most highly confident call for 2011 is a dollar that strongly appreciates against most other major currencies, which include the Euro, Yen, Canadian Dollar, and Australian Dollar. I might possibly add the British Pound to the mix.
As I mentioned in my last missive this coming week is stock option expiration week. Many significant turns, highs or lows, have occurred around stock option expirations. Since we are at a high, logic would dictate the turn would be down. Assuming the stock market does turn down, it will remain to be seen whether it is a just a pause followed by higher highs later on in the year, or it turns into something more significant.
The major fly in the ointment for the bears is that the Lowry’s data, which is been very reliable for 78 years, is exceptionally bullish for the intermediate term. Lowry’s measures supply and demand. It is impossible to argue against the concept that the bottom line for price in any market, goods, or service is the underlying dynamics of supply and demand. Lowry’s has a proprietary and seemingly objective system for measuring and quantifying underlying supply and demand. Their data as of the close on Friday was the most bullish it has been since the market bottomed roughly two years ago. I would note, that what I consider to be other extremely reliable indictors have meant nothing in the last few months. It is possible that excessive volume in a few stocks like BAC and C along with the proliferation of ETF’s may render all historically useful forms of technical analysis invalid and that truly, now, “this time is different”.
That is what makes the markets such fascinating animals. The future is always a mystery!
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I caught some flack for my comments about Obama and ObamCare in my last missive. All I can say, is get a copy of Griftopia and read the chapter for yourself. Taibbi, obviously a Democrat, says that Obama sold America down the river. He lays out in considerable detail what Obama did and who he bought off. Taibbi’s conclusion is that Obama really cared only about getting something done in order to help his popularity and he was perfectly willing to sell out to the insurance companies and anyone else in order to get his name on a piece of legislation. As one of the members of the Roundtable in Barron’s noted, for Obama, getting re-elected is Job No. 1.
My opinion of Obama remains that he is proving to be the worst president in history. He will lift that distinction from his predecessor, “W”, who was the worst president ever until this administration. (For those who are new to these musings, I am an equal opportunity critic. In my opinion the only thing worse than a Republican is a Democrat, and the only thing worse than a Democrat is a Republican. Furthermore, early on I supported Obama because I thought he was a man of integrity and even if I disagreed with his policies I would be proud of him. I have discovered that I was an idiot. Obama has no integrity. He is just a pretty face with oratory talent to fool the masses and me.)
Obama has proved to be another hypocritical elitist masquerading as the savior of the poor and middle classes.
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Monday January 17, 2010
We now know who is the most important person on the planet. Obviously it is Steve Jobs. He announced this morning that he is taking a medical leave of absence. NASDAQ futures are trading down about 30 points, approximately 1.4%. (S&P futures are down only about 0.35% more in line with other world stock markets.) If you assume, as would seem to be clearly the case, that the difference is attributed to the announcement by Jobs, his value to the American net worth must be 10’s of billions of dollars. I don’t know what the total market capitalization of the NASDAQ 100 is, but it must be very large, and 1% is a very big number.