Black Monday 2? Finance Guys...Help me out here.

Discussion in 'Financial Cents' started by Blackjack, Sep 15, 2008.

  1. Blackjack

    Blackjack Monkey+++

    So I've been listening to all the uproar about the stock market, Merril Lynch, Lehman, etc. and some people are calling today Black Monday.

    I don't follow, nor do I fully understand the financial side, so I can just look to the experts we've got on here.

    No need to fully explain what all is going on, just a brief "load up the extra magazines" or "ignore it" or whatever I need to do. My mother has some money in an IRA, does she need to get it out?

    I remember last year, you guys saying that this was coming in '08. Can't remember exactly who... (Quigley? Bear?) Oh well, looks like y'all called it pretty well.
  2. ghrit

    ghrit Bad company Administrator Founding Member

    I'll take a first shallow cut at this. IRAs are generally managed funds that either directly or indirectly hold stocks as at least part of the assets being managed. Those stocks are safe, they cannot be lost to the IRA owner. However, the stock alone is guaranteed, the value is not. If the manager bought the stocks at (say) 100 frns, and the value is now (say) 10 frns, the stock is now worth 1/10th of what is was on purchase, and the IRA cash value is reduced by that much. Now the bad news: There is no simple answer to your question, most especially without knowing the manager's position and thinking, and without knowing what stocks are held. If the manager saw it coming, your Mum could be in very good shape because he ditched the risky stock holdings. Somehow, I doubt that, but it is worth checking. There are (or should be) monthly or quarterly statements that you can check for trends, including buy/sell activities that will point out what the thinking is and was. One thing to make sure of is that the funds are well diversified.

    If you yank the assets out (converting to cash) funds out, be aware of the tax penalties. Make sure you have a way of protecting the money from further drops, whether you buy stocks (self managing the assets) or put it in the bank and be willing to absorb further devaluation. As far as I know, you cannot take part cash and part as stocks, it's an all or none deal.

    Others here are mavens on precious metals as a hedge against inflation. PMs are and behave exactly like any other commodity, and knowing the market intimately is the only safe way to operate in commodities. It is a very specialized business, whether pork bellies, soy beans or metals.

    Not very comforting, is it? Worse, the pros know it too, and they fell on their faces. They did not do their homework while fishing off shore from their big boats.

  3. Tango3

    Tango3 Aimless wanderer

    perhaps this guy can help:

    Daily Update

    Here you will find my daily comments about market conditions and events to watch for. But you’ll also find knowledge you can use, in an easy to understand style. Ever wonder what CPI is and how it affects you and your family or retirement? What about Sub-Prime, or CDO’s or Liquidity? These are all topics I delve into from time to time to help you understand the market and the economics of this world. Older Posts can be accessed through the achieve link located on the main page

    Thank you for Reading.

    Monday September 15th 2008
    First off I’m really sorry for not posting sooner. The biggest freaking day in financial history and I can’t get online. I am in Chicago this week in training and it took me till about 10:30PM to get here from Toledo. SIX HOURS to get here, when it usually takes about 3 1/2 to 4 hours. Chicago had some of the worst flooding in years Sunday night and I was caught in the middle of it.
    When I finally got to my hotel the internet was all screwed up so I was reduced to CNBC and CNN for my coverage. I watched in abstract awe as the market ducked and weaved all day long. I was in class so I could only periodically check in on the markets. One hour it was only down 187 then down 300 then back and then forward. Finally we ended up over 500 points down on the DOW and more importantly (something I don’t talk about much), the S & P FINALLY closed below the magical 1200 mark. All I could think about was getting online and seeing what people here were saying. So I get back to the hotel only to find I can’t get online again. I was on hold with some Indian guy working on my problem. Surprisingly he got it to work for me, SO here I am finally. Late to the party as usual
    So I will ask the question that is on everyone’s lips. IS THIS IT? And I would offer this answer… A qualified NO… I wrote in my last big update that I was expecting the F and F bailout to buy the markets some level of stability that would last about 6 weeks, BUT it would fail and that the next round would be even bigger and knock even more off the top.
    I was right about the result and HORRIBLY wrong on the timing. The save didn’t even last 1 full week before the cracks showed up again. With the failure of Lehman’s and the buyout of Merrill over the weekend and the resultant bloodbath on the markets, I would dare say that we are now WELL past the fall out from F and F and we will now see fallout not PERCENTAGES worse than last week but factors worse. Just like I said, we flew past the low point of 11200 and went RIGHT to 10800(looking at futures and we are already testing that number). If this market doesn’t stick it tomorrow and keep us above the 10700/10800 mark, the next resistance point would be well into the 9000’s (probably 9800).
    This brings me back to the S & P close. As I stated above, I don’t generally comment about that market, because for so long it has played inside a very safe range. The 52 week trend line for the S & P has been broken and that number WAS 1200. The close today was about 1% below that number and I would say that is a CONFIRMING move. It wasn’t just a little below, it was convincingly below. This sets in motion all kinds of scary things as there are programs out there that watch key points in the markets and 1200 on the S & P is a BIG ONE. This will trigger sell programs to kick in and this could spiral out of control. So why am I saying that this is NOT it? Because we still have a long way for this to play out, though the timing is accelerating as we move through this. From 2000 and the end of the bust, it took us over 2 to 3 years to bottom at about 7400 in 2002/2003. From the top of the most recent market to where we are now, it took about 12 months and to whatever bottom awaits us; it will more than likely be less than another 6 months. So from top to bottom this market collapse will take us 12 to 18 months, whereas the previous one took 24 to 36 months to complete.
    I will take this time to do my duties and give you a quick update on the markets. The blood is already flowing on the other side of the world and I’m sure somewhere in a room in Washington or New York, there are men feverishly working to come up with some way to stop the next domino and it is a doosy. AIG is the next domino to fall and if they are dragged out into the street and shot, it will be a shot that is heard around the world and back again. So here is the market update.
    DOW obviously was down over 500 points and the S & P’s were fell below 1200 for the first time in ages. The DOW broke below the 11200 mark and it is not stopping. DOW futures are pointing at last look to a 122 point loss which will put us just above the 10800 mark. S & P is pointing to a 20 point loss. Japan and Asia are open and they are down on average over 5% and Europe closed with losses in the 3 to 5% range on average. The US Markets have about 9 hours to figure out something for the AIG situation or this starts all over again tomorrow.
    GOLD is surprisingly stable. It is at multi month lows obviously but it had almost no reaction to the roller coaster today. This in and of itself is telling of something.. What that is I don’t really know yet. But there is no possible way that Gold doesn’t SKYROCKET on news like we had today. One possible answer is that there are opposing forces at work today. You have people SELLING gold like mad to get liquidity to weather the coming shit storm(think funds), and on the other side you have those that guessed right and are sitting on a lot of liquidity already looking for something to chase, so they BUY gold/silver, the net result is a push??? I don’t know really. But it just doesn’t sound right to me.
    OIL is collapsing. This is in the face of Ike’s aftermath and Nigerian militants once again shutting in Nigerian oil, and more noise from Venezuela about cutting oil exports. There are several reasons this could be happening. One is the obvious, Demand is down BIG TIME and there is now a glut of unrefined oil in the system. Couple this with over 30% of US refineries off line right now and not taking in crude oil. RESULT: soaring gasoline prices and collapsing oil prices. I can only imagine how the futures traders are reacting to this little outcome. Seriously they have to be about 2 minutes away from hanging themselves. They bet on Ike tearing up the Gulf and oil skyrocketing. What happens, oil platforms get off pretty easy and you end up with a glut of oil and prices plummet another 5 bucks in one day. UNREAL.
    DOLLAR is stable surprisingly. The yen spread widened again and should be watched VERY closely. As has been stated numerous times by me and others, If the Yen carry trade is forced to unwind, it will cause a ripple affect that will make the current problems look like child’s play. There are literally TRILLIONS of Yen denominated bets out there that if the Yen/USD spread gets to wide, it will cause those bets to have to be covered. Result will be even more cash calls across the board.
    So what does it look like tomorrow? I have no idea. If the consortium of banks can get their collective shit together and backstop AIG, then tomorrow might actually see a hold or maybe even a nice little pop. If they fail to act and AIG is brought to its knees by the short sellers and their creditors demanding payment, they will file for bankruptcy sometime before the market open and then we’ll see if we can test the market stop mechanisms built into the system after the 1987 crash and only tested once after 9/11.
    So the REALLY big question I’m sure that’s on everyone’s mind is, WHERE DOES THIS END? And how will I know we are getting towards the end of all of this. The answer unfortunately takes a lot of courage to see and accept and is the whole point of this website. I will personally call a bottom to the current crisis when I see several of the following things and in no particular order. They are based on several assumptions. The first assumption is that we have indeed peaked or have very nearly peaked (close enough as a .01 increase in worldwide supply is technically MORE than .00 or -0.01, but it won’t make a difference) and the second assumption for me is that for the most part THE CENTER HOLDS. That last part is critical at this juncture.
    As you all know I am a big adherent to the true free market system. What we have seen over the past 50 to 70 years is a market that has slowly drifted from a mostly free market with very little governmental interventions, to a most controlled economy that has some free elements left in it. So keep that in mind as I say the following . And please spare me the lectures I know will be forth coming about how governmental interventions got us to where we are now… TRUST ME, I know…
    The center holding at this point is crucial to this not turning into a mad max scenario, where food starts disappearing from shelves and gasoline stations sit empty for weeks on end. The time for a hands off approach and to let the fire burn and hopefully leave the fertile remains upon which the economy could once again thrive HAS PAST and is long gone. Much like the fierce and destructive fires in the Western US we let WAY to much old wood and junk and brush build up. Because of our constant and unwise choices to put out every single minor fire, we have all but guaranteed a massive fire sometime in the future.
    Well the future is here and the fire is NOT going to be the beneficial kind. It is going to scorch the earth so that nothing will be able to grow in it for a long time to come. We can still avoid that outcome and it is going to take this country down a path that is dark and dangerous, but we have no choices at this point.
    I keep harping on the infrastructure of this country. This is the backbone of our existence and if allowed to degrade any further, we will have our choices stripped from us and the worst case scenario will happen. I don’t know how the specifics of what I am proposing would be realized, but the whole system needs to be stopped and we need to take a 1 week timeout and figure out how we re-focus our money system to work for us, instead of against us. This will take all the banks of the world working in unison to somehow decouple the money from the speculative to the REAL. And to use the REAL assets that still exist on this planet to work towards real answers. There is still years and years of oil left in the ground, and NG and coal and whatever else. But so long as the money system is arranged to use that energy as fast as humanly possible, because the very nature of our monetary systems FORCES that to be the reality, nothing will change.
    So back to my original question; what will it take to push things to that point? I would look for oil to crash to the 50 or 60’s COUPLED with no corresponding economic uptick. This would signal to me that people have finally worn out. That even with oil and gasoline being nearly given away, people just won’t use it. This would be also accompanied by unemployment in the teens or even 20’s and the overnight lending rates lowered to nearly ZERO. This is what BOTTOM looks like. It happens when the consumer finally STOPS CONSUMING and even with all kinds of Carrots and Brownies and IPODS and Stimulus Checks and Free money, they still will not consume.
    And guess what, we are no where near that point in time yet. This is the end of round one people and this fight is scheduled for 10 rounds. This has a long way to go…
    Thursday September 11th 2008​
    Well we are 4 days removed from the F and F nationalization. I said two days ago that I would give it 6 weeks or maybe longer before things started to unravel again, as this move was destined to fail and fail fast. I had no idea that this saving move would give us about ONE DAY of stability. We had a nice 300 point pop in the markets right on queue and then the day after that we have a 280 point swing to the negative and then yesterday we had a small down(edit UP) day. The close yesterday was just over 11200 and with the futures pointing already to a 120 point drop at the open, we will be solidly in the DANGER ZONE again. This market is hell bent on breaking below 11200 and the Fed and the Treasury Department are running out of ammo to stop it. In all actuality they are out of options at this point to stop this next plunge.​
    We can pray that it holds at 10700 as this is the next logical fire break point, if we plunge right past that, then it’s 9800 or so as the next fire break. I don’t know what they can do to hold this at the 10700 level, hopefully there will be “bargain hunters” that will flood into the market as it plunges below the 10999 mark.
    I am convinced that deflation is no longer “hinting” around the edges of this economy anymore, we are now starting to see SOLID evidence that a deflationary spiral has taken hold of this economy and I feel that we are less than 3 months away from NOT BEING ABLE TO STOP IT… I have written over and over and over again about how destructive a deflationary spiral can be and only slightly less destructive than a hyper-inflationary bubble. We as a country did not go through massive hyper-inflation, to be honest we only had Moderate to High Inflation over the last 10 years and only in the last 24 months have we seen a really strong dose of inflation. I feel this was accomplished by using our reserve currency status and we’ve been able to offshore our inflation (along with a lot of good jobs) to other countries, who have taken the brunt of our excessive ways.
    After reading a lot of people WAY smarter than I, I have come to agree with some of them that explain the current strengthening of the dollar and the weakening of commodities this way. The US friendly OPEC nations have been re-circulating their US Dollar reserves in an attempt to break the commodities bull and to put a floor under the US Dollar. I think this has to tie back to the meeting in Saudi Arabia some months ago that we commented upon ad-naseum. There must have been some sort of agreement struck that convinced the US friendly OPEC nations to work in unison to prop up our currency. Saudi Arabia, UAE, Dubai and several others, account for nearly 601 Billion dollars in US dollar reserves as of June 2008. As shown here.
    United Kingdom 2/ 280.4 Bln
    Oil Exporters 3/ 170.4 Bln
    Brazil 151.6

    The tin foil goes as thus; these countries and possibly others are working in unison with our central bank and Treasury Department to get these stagnant reserves back into the market even if it’s at a loss, just to keep the demand for dollars growing. This is causing people who were shorting the US Dollar(speculators, possibly from countries hostile to the US and our allies) to have to short cover and this has resulted in the stunning reversal of the US Dollar. This has had the affect of causing all dollar denominated commodities (like oil, gold, silver, copper, etc) to plunge in price as well as they have to cover those LONG positions.
    This cannot continue and if it is even remotely true, it will have a very ugly ending. Once these manipulations wear off, there will be an even stronger and more violent reversal back to the norm, which is a plunging US dollar, and surging commodities prices. How long this manipulation can continue is anyone’s guess, but this manipulation is coming with a VERY heavy price for the average person.
    Sure we are enjoying 3.59 gasoline again, and there is a whiff of prices coming down in the things we really need, like food, energy. But the other side of the coin is getting very scary. The markets responded to all this by starting to plunge and we approached some very important inflection points. We struck below 11200 late last week and the response was the nationalization of Freddie and Fannie. This I think was supposed to shore up the markets for awhile to mask what was going on elsewhere. If the response of the worldwide markets over the past 3 days are any indication, I think their plan has failed miserably. Worldwide markets have plunged about 3 to 6% on average over these past 3 trading days, and our markets are set to open in about 45 minutes and the DOW futures are down about 136 points and still loosing ground. Overnight foreign markets across the board are in a freefall.
    There is talk already of MORE RATE DECREASES from the fed.. This is one tool many of us had brushed under the rug for now. The current overnight rate is at 2% and the Fed borrowing window is at 2 1/4%… Alan Greenspan was able to successfully lower rates to 1% and 1 3/4% respectively back in the 2002/2003 timeframe. This of course setoff all the problems that we now face(BUBBLES GREENSPAN, we called him back then), but it had the affect of saving the economy at that time and guaranteeing that George W Bush won the US elections in 2004. If the economy had not made the stunning turnaround it did, the economy would have done George Jr. in as assuredly as the economy sunk George Sr. in 1992.
    I have not been this fearful about the state of our economy since the weeks before Bear’s Sterns. At that time I was assuming that they would play by the rules and the rules as they existed just 8 short months ago, said they were out of options and reality would once again have to rule the markets. Of course they didn’t play by the rules; they just literally made things up as they went. I have been very calm(relatively calm at least [​IMG] ) over the intervening 8 months as now I see that they can just make shit up as they go. So seeing the economy in that light I was able to calm down and then see what tools and saves they could use, even if they had to make them up as they went. After Bear’s Sterns it was all but obvious that F and F would eventually be nationalized and that they would bail anyone else out that posed a systemic risk to the worldwide market.
    I am now feeling very antsy for two reasons. One is that my personal finances have taken a turn for the worse. This is putting me in a very depressed state of mind, so keep that in mind as you read some of this. It’s possible my own finances are causing me to be overly pessimistic about the current plunge. Two is that I don’t see a way out for them now. Even if I get out of the “legal” and “ordinary” box and I just start making shit up in my mind, I still don’t see an end game where this has a happy result. I expected it to take a year before I’d see a nationalization of F and F, I expected that any nationalization would result in happy happy time for another 6 months or less, and then we had straight up printing of money from the Treasury and cycling it directly into the system in a bout of horrible Hyperinflation. I thought this could drag on for 18 to 24 months at a minimum. But things are happening way faster than I had imagined.
    Obviously there could be outside the box ideas I have no idea about, and they are currently waiting for the right time to spring them on the markets. So this very well could go on for many more months or years. But as I look out over the market as I see it now, I think we are fast approaching a dead end. Something is going to have to give again and soon. So I am putting us all back on a Danger Zone alert [​IMG] …. No wait wrong emoticon [​IMG]
    Monday September 8th 2008​
    Well it happened at the later part of my “danger zone” window but it did happen. I never quite know what “IT” is, but I can always feel it coming. Whenever the markets start acting in strange ways you can all but guarantee these days that something BIG is on the event horizon and this weekend it happened. I’m sure that unless you are a Weather Channel junkie and haven’t turned on a TV in the past 2 days, you already know that the government has seized control of F and F and with it all but guaranteed the nearly 3 to 5 trillion dollars worth of mortgages that those two giants underwrite. This represent almost 50% of outstanding mortgages in the country.​
    This doesn’t necessarily mean that the government will have to dole out 4 trillion dollars but it does mean that they will now backstop the rest of this collapse ON YOUR DIME and the first payment due is going to be about 200 billion dollars. How does our “free market” friends on Wall Street and all the other markets in the world react TO THIS SOCIALIST INTERVENTION IN THE MARKETS?? Why you guessed it, they are up on average about 3 to 5% this morning and the US markets which open in 45 minutes are up a stagering 260 points in premarket trading which will probably equate to a 300 to 500 point gain on the day.
    You see watching charts can be a good thing for you [​IMG] .. The markets crossed over a very important mark on Thursday and that signalled to me that something had to give. As usual I BET ON THEM DOING THE RIGHT THING FOR ONCE and as usual I was proven wrong. Instead of just letting reality finally rule on the markets and to let the blood flow, they once again deferred the pain and they bailed out the Chinese and Japanese and all the other 60 some odd National Banks. NOW DO YOU SEE why the dollar went up and why I called it manipulation. This was a tit for tat move that has been in the works for weeks now evidently.
    YOU MUST UNDERSTAND NOW THAT YOUR MONEY IS NOTHING TO THEM!!!!!!! The money sitting in the markets right now is nothing more than pure unadulterated GAMBLING and cannot be considered any thing close to an investment. Investments are good things that help to pave the way to the future. They are conservative uses of money and are meant to build a future that is bright and optimistic. If you have money in the markets(and that includes your 401k money) you must understand that it is nothing but a gamble at this point. If they, with the wave of a pen, can do what they have done this weekend, what do you think they can do to your “investments”.
    Your 401K’s will get one hell of a bump in the coming weeks. There is enough forward momentum from this move to probably propel the markets WELL PAST the 12000 mark and on past the elections. But understand that this is the next to last move that they can make. Once this wears out it is straight to the Treasury Department and direct inflation as they will start printing money directly out of the mints and pushing it into the markets to keep it going. There is no other move they can make after this.
    So once again, enjoy the pretty fire that the fed has created by pouring gasoline on the fire. It will flare high and brilliantly over the next 3 to 5 weeks, but when the fuel runs out, just like in a camp fire, it will go from brilliant to dark in a very quick time frame. Once the flames die from this move they will move on to the last move they have available and that is direct injection of money into the system. The only question mark is HOW this is accomplished. I expect a HUGE check from the treasury department to be announced some time after the election but before inauguration in February. Expect it to be a number about 2 to 3 times the size of the last one. Mine was 1800 last time so I exact a number about 3500 or more. This will more than likely be tacked onto the Tax Returns for next year. Some kind of bill will be passed to tack on some kind of mandatory tax rebate portion onto anything you’re already getting.
    I just hope that if you’ve been sitting on the fence(YES I AM TALKING TO YOU LURKERS!!!!!!) that you understand exactly what just happened this weekend. There is NO POSSIBLE WAY you can still be sitting on the fence anymore. Just like we said ALL THE WAY BACK IN AUGUST OF 2007, this has all come to pass right on queue and according to what we have said here. It didn’t happen in the exact timeframe nor was the fallout as bad as some of us said it would be, but understand that there is no place to go after this one. All the Federal Reserve’s bullets are used and the next stop is the American Tax Payer and you will pay one way or another. Either though Hyperinflation(As opposed to the HIGH INFLATION that has been used to this point) or direct taxation of your wages. But guess which one they’ll opt for? At least with in your face tax increases we have the possibility of keeping hyperinflation at bay. People will moan and bellyache about it, but I think they will fall into line. An across the board 20% to 30% increase in all taxes for a 10 year period would go a long way to moderating the inflation and the horrible infrastructure damage that would occur if we went the hyper-inflationary route.
    Inflation is already taking its toll on the infrastructure as the amount of money pouring into the transportation department is crashing and with it will be the needed repairs to our bridges and tunnels and then next comes a GRINDING HALT to interstate trucking and our food distribution system. Same goes for state and county budgets and the needed improvements to our water systems and electrical grids.
    PRAY they take the taxation route and not the hyperinflation route…. Either way start digging now and get your garden beds ready, start getting small while it is still a choice and you can choose the manner in which you get small. Otherwise 6 months from now the situation will be forced on you..
    If you do a history on my posts I have done in depth explanations as to why inflation and hyper inflation is so much more dangerous in the long run to a society than deflation or taxation..​
    In case you don’t want to search(I didn’t want to [​IMG] )… The quick and dirty goes this way. With inflation, then high inflation and then ultimately hyperinflation you are in fact just delaying the point at which the masses of people realize how ****ed up the system is. People will read about F and F and then they’ll see the DOW go up 1000 or 1500 points(my guess) and then they will go back to sleep and figure that things are OK.
    But what they don’t see is that the money flowing into the Treasury Department is drying up. As gas prices and food prices and anything of a NEEDED nature goes up, this means that people aren’t buying new cars and new toys, which are where a good portion of our taxes are coming from. Locally we’ll see this dynamic play out, but IT WILL BE MUCH WORSE. Because localities and states can not print their own money and they must balance their budgets. They will do this in one of two ways, either cutting services or raising taxes(or raising fines/fee, etc, which is still taxation). But in the end the amount of money will start to dry up that is going to go the county/state/federal and guess what will suffer?
    Do you think they’ll stop paying SS payments? Do you think they’ll pull back on military spending, do you think they’ll stop building prisons? No, history has shown over and over and over again, that the first thing that gets ignored in any budget is UPGRADES and SAFETY INSPECTIONS.. Why? because they are invisible to the average citizen. A bridge that you drive over every day means nothing to you. You drive over and you assume that it is safe. WHY? because bridges don’t just collapse on themselves. But as we saw in Minnesota it does happen, it just doesn’t happen very often.
    So the first thing that will be cut is the number of safety inspectors and their recommendations for needed improvements to the infrastructure will go unheeded and will be ignored until they are so bad that the average citizen starts to notice. Of course by then it is too late. Like a home that has been abandoned in foreclosure there is only a certain amount of time it can remain unoccupied before the damages and neglect get so bad that the house is no longer salvageable.
    Our infrastructure is the same way. It can only be ignored for so long. On the surface the infrastructure will look OK and it can stay that way for a good long time. But with every season that needed repairs and upgrades are ignored the ultimate price tag to do it goes up by factors NOT PERCENTAGES. Once a bridge goes past a certain point, you can no longer just retrofit a fix, it needs to be replaced. Once a sewer system degrades past a certain point, you can no longer just go in and replace a troublesome section, the whole thing needs to be ripped out and replaced.
    Once the neglect becomes apparent to the general population and they demand there to be a fix, it will be to late. The water systems, the transport systems and our electrical grid are at the VERY BOTTOM of the pyramid. If those degrade everything built upon them will fail(which is EVERYTHING)… Hyperinflation is the worst outcome here as people will continue to ignore the obvious until a fast crash happens and there is nothing you can do about it.
    Taxation is the best outcome at this point. Basically a hard nosed near dictator is going to have to take the reigns and force what remains of the productive capacity of this country(which is still IMMENSE) to put it’s efforts towards the really important things and that is; ENERGY, WATER, FOOD PRODUCTION, TRANSPORT. How this happens is out of my ability to foresee. But something like this will have to happen if we are to survive as a 1st world country(let alone a LONE SUPER POWER)…. Our entire lives are based upon the bedrock of the pyramid and that bedrock is, water, food, transport, electricity.
    As to them raising taxes AND giving us the stimulus checks, it won’t happen that way. The two are mutually exclusive. They will choose the stimulus check route if I had to bet my life….
    Commodities are the wild card. If they can keep oil/gold/gasoline under control until after the election, then this will work in the short term… The long/medium term is all but guaranteed. This is playing out exactly like Jeromie and others on the Financial pages have predicted.
    Friday August 22nd 2008​
    I saw IOUSA at the theaters last night. This is my critique of the movie and the round table after the movie.​
    I really like David Walker and I think he is one of the very few people in the power circles who gets what’s coming our way. Evidence Warren Buffet and his “just grow the pie” bullshit answers and you’ll understand what he means by a “leadership deficit”.​
    It is not the fault of the baby boom generation that there were so many of them born in such a small amount of time. But it is their fault that they and the WWII generation did absolutely nothing to stop this Juggernaut. And my generation(X) has entered their 30’s and 40’s now and we were just as willing to play along as if nothing is wrong. WE THE PEOPLE are at fault, but just not the way they portrayed it.
    The rest of this I guess is spoiler alert stuff, so be forewarned, but to be honest, there is nothing in this movie that is groundbreaking to people here. Actually I was very disappointed on many levels with this whole thing. Very long on WHY’s and very very very short on How’s.
    But back to my point about we the people. We have taken all the bribes over the last 40 years or longer and turned a blind eye to how those bribes were being given to us. At first the bribes were coming from our own pockets. We had oil money and a great economy, but then the non stop wars(cold,Korea,Vietnam) and then peaking of US oil production and the erosion of US manufacturing. But the bribes didn’t level out and get smaller, on the contrary they kept growing at exponential rates even as the reality on the ground was telling a loud and different story.
    This problem IS NOT NEW. Carter and Ford were talking about this shit in the 1970’s and nothing was done about it, other than small band aids. And to even get those band aids into place took a political miracle. Imagine taking benefits away??? Imagine ending Social Security??? Do you really think those are ideas that will fly? But that is exactly what needs to happen. It was a multi generational tool of THEFT. We have stolen from the next two generations(MY CHILDREN and their yet to born children) an America that should have been more prudent and less greedy. We all bellied up to the bar and ate like pigs. The United States of America and our two neighbors should have had enough energy and resources to keep us at a very high level of prosperity for many generations and we should have had the intellectual ability to slowly grow our way off of petroleum without a huge problem.
    Instead we ate like pigs while the slop was in the buckets. And people like the AARP crucified ANYONE who tried to take that bucket away. Because lets be honest here, it is the retirement system and Medicaid that is at the heart of this problem coupled with our insane foreign policy. If you look at those three things they take up like 85% of the budget in less than 3 to 5 years.
    To be honest I think David Walker is soft pedaling all of this. He needs to tell an even harsher truth to American’s and it is this.. A GOOD LIFE DOES NOT MEAN TIVO AND AN IPOD AND 3 ****ING CARS.. A good life is a stable economy upon which everyone can play(at whatever level), and a tax code that doesn’t punish families and encourages savings and prudence NOT CONSUMPTION AND SPENDTHRIFTNESS. These are things that are easy to accomplish. All it takes is a rewrite of the code and the flipping a few numbers around.
    IT IS TRULY THAT EASY. What is hard is convincing 250 million people to give up what they now view as a birth right. And that is the birth right of having everything right now and without cost. That is not reality. I’m sorry to say this but a 25 year old who hasn’t saved or done anything to get himself ready, SHOULD NOT BE ABLE TO OWN A HOME! I bellied up to that bar when I was 31 years old with almost no savings and a minimal 3% down payment. It was a huge mistake and one that could have ruined my life and my marriage.
    But on the other end of that spectrum is the old people. They CAN NOT EXPECT TO SUCK OFF SOCIAL SECURITY TILL THE DAY THEY DIE FROM THE AGE OF 63 YEARS OF AGE! It is ludicrous in this day and age where the majority of older people are living well into their 80’s and living a much healthier lifestyle.
    There has to be ideas that can be forced into the system that would address the problem of older people living longer. Maybe an incentive program to keep working. I have no ideas right now, but our society is ass backwards right now. We are pretty much FORCED by reality to not save. Saving is really for loosers right now as inflation is eating any and all benefit of saving. THIS HAS TO CHANGE RIGHT NOW. And this can be done by raising interest rates to levels not see since the early 1980’s. IN ONE YEAR Paul Volker yanked the overnight borrowing window from 10% to 20% and almost all bubbles were popped and the savings rate of this country rebounded to the 10% range. The problem was that Regan decided to use the breathing room that was attained by growing both the social obligations of this country and spending trillions of dollars on an insane foreign policy that continues to this day.
    This movie is a good primer for those that don’t have a clue. But those that don’t have a clue WILL NEVER SEE IT, hence why they don’t have a clue [​IMG] . The movie made NO MENTION of our energy problems and in my mind it makes it DOA in my book. This is a movement they are starting here and it should be watched closely. There are monied interests behind this guy and this foundation. They have the ears of the wealthy and the powerful and don’t assume that since they know the problems that they have the answers. Adolph Hitler knew all to well the problems that faced 1920’s Germany and he struck a chord and he got the ear of the power elites and we all know how that story ended.
    I am not saying that is what they are doing here, but I am very leery of any group that strikes so many truthful chords YET still is missing the core of the problem. And it isn’t just peak oil that they are missing. They are missing any meaningful critique of the Federal Reserve and the banking system as a whole. THIS IS NOT just the people’s problem in that we are a bunch of consumers and not savers, it is the fact that we are born into a system that encourages that behavior at every single level of our life. From the age of 6 months and the Baby Einstein company to Death and the Miller’s Funeral Home arrangements, we are taught to not save or have economic knowledge. Those subjects are NERD subjects and it is better to spend your time and money on an I-Pod and download “cool” music and buy “cool” stuff.
    There was no mention of Frugality and a repudiation of the consumer mindset that has taken over this country since the end of WWII. For those reasons I give this whole effort a reluctant “F”
    Thursday August 21st 2008:​
    Haven’t done an economic update in a while, because honestly there has been no need for one. As expected we entered a period of stability and have been playing safely inside some very clearly defined ranges. The only ones that were breaking, were the ones breaking to the positive side(at least if you weren’t invested in them ). Well things appear to be changing and I am sending this update out to those that don’t pay close attention to economics. This is redundant for those that pay attention, but for those that are being heavily distracted by Olympic fever, Russian aggression , or the start of the Fall lineup, this is your wake up call. We are once again moving in a direction that I believe indicates that we are entering a time frame of great uncertainty.​
    The last time I made this call was back after Bears Sterns had calmed down for several months and we entered the late spring early summer time frame. I was off by about 3 weeks, but as most here are now painfully aware of, any UPSWING is just temporary and it is really easy to call a DOWNSWING. The trick is the WHEN. I am seeing things swirling around the world that are starting to take some form in the way of serious headwinds. There is just a whole host of things lining up that when added together, spell trouble in my book. Let’s take a quick look at some of the major things going on. As usual I stick to my 4 major indexes as they have not steered me wrong yet. The four I watch like a hawk are Gold/Silver, Oil/Gasoline, Dollar/Euro/Dollar Index, and US/European/Asian markets.
    Obviously I read about a whole hell of a lot more than that. I read about the geopolitical problems and OPEC reports, Federal Reserve Reports, Government reports and a lot more. But I watch those 4 major things to understand WHEN things are starting to go south. So lets see what’s been going on.
    GOLD: obviously it has been the center of a lot of attention. Gold entered a bear market and went down as far as 780 dollars at its lowest. This was from a point just weeks ago that was starting to push near 980 again. This is a stunning reversal and caught I think many by surprise, me included. I expected some pull backs but not that bad. Gold is now pushing over 831 and has been gaining momentum for at least 2 or 3 days. Silver is coming right along for the ride.
    OIL: has firmed right up. After hitting lows near the 111 mark, oil is now trading above 120 and has been gaining traction, even as reports show an increase in above ground storage. Political turmoil is being blamed this time around. Though I am reading stories about how 75% of the oil contracts are still in the hands of “speculators”. I don’t think that excuse has worn out yet and may be good for another few months of blame. Mostly the Russian situation is being blamed though. Even though the Georgian pipeline is within days of being reopened due to fire several weeks ago.
    DOLLAR: Had a phenomenal recovery over the last 3 to 4 weeks, hitting well into the 77 range. The Euro spread got almost back to “normal” levels for awhile. But as quickly as it had strengthened, it is now weakening again. Dollar/Euro Spread is at 1.48 and the Dollar Index is at 76.22 from a recent high of about 77.5.
    MARKETS: have been playing very nicely inside the range that most of us expected. The new range is 11200 to 11800. It has neither gone below or above those numbers though it has made strong moves in either direction. I think a breakout is very near and I feel strongly that it will be to the low side. Once this happens it will be back down to 10700 to test that low. Overall the markets have been pretty calm at least by recent standards. The losses have been in the 100 to 200 ranges and the gains are equally subdued. Asia has been all over the place and Europe has pretty much been following our lead. Small ups and small downs. Playing inside a pretty tight range.
    So what does this mean? It means that we are moving towards instability again, and probably pretty soon. Again I’ll say 5 to 15 days or so and we’ll start to see the big swings in the markets and substantial gains in the commodities and big losses for the dollar. WHY? Because so many things are coming unglued again. We saw the biggest PPI(Producer Inflation) numbers we’ve seen since the early 80’s, housing is still tanking and it’s gaining momentum. There were some good housing figures but much of it can be attributed to foreclosure sales. This is EXACTLY what needs to happen to stop the bleeding in Real Estate. The longer that sellers wait to capitulate on prices, the more drawn out this is going to get and the WORSE its going to get. Honestly; if you want to know what your house will sell for 6 months from now, look at the latest foreclosed house that sold on your block. Maybe add some more back onto that number if the foreclosed was trashed. But I will be honest it won’t be that much more.
    Until the real estate market finally looks in the mirror and accepts the reality of what is going on, we are going to go from 11 months of properties on the market to 13, even as there are more sales. Because the incoming inventory is going to swamp anything that is going out the front in the way of foreclosure sales. This can end if the market would just CLEAR ITSELF, which means that sellers are going to have to take it in the ass. And any move by the government to keep people in their homes is just going to make this process that much harder and that much worse. Much like the asinine measures that were used during the Great Depression we are just making a really bad economic situation that much worse. Because the longer this goes on, the more ENTRENCHED the deflationary mindset will get.
    PULL THE BAND AID OFF now before everyone gets on board with the deflationary mindset and this starts spilling over into everything. Though we may already be to the point where that needs to happen. I have always felt that we could collapse this thing in stages and hopefully avoid a catastrophic Deflationary Spiral. If we could just POP the real estate bubble fast and mercilessly we might avoid everyone running for the exits in other things all at the same time.
    I fear the time to have done that, has passed. I can feel all around me the subtle hints of deflationary thinking. It is VERY far from mainstream but it is getting there. I am hearing lots of talk about “simple” and “paying off debt” and “credit bad”. These are just ideas right now as the majority is still in a buying mood, but the deflationary meme is gaining traction. I think if we can phase in a deflationary mindset, we can avoid a deflationary spiral, where EVERYONE pulls in spending at the same time. If we can collapse spending in stages, I think it will be much more humane that just yanking the rug out from everyone at the same time.
    Whatever is coming, the next wave is forming in my opinion. And it will be crashing down on us in the next 1 to 3 weeks(again in my opinion). This isn’t THE END. I feel like I have to always say that. This will be another wave and it will more than likely be bigger than the last one. It will knock more off of demand and knock a few more people off their economic ladder rung and it will EBB and then decrease again.
    So we will see. Keep your eyes open..
    EXTRA: I responded to my post on another blog and here was the response I wrote.​
    Excellent points BK. Even just looking at the last 14 days and not the entire correction, nothing has changed, yet they want us to believe that Polland is making all this uncertainty in the markets. As tanks were rolling on Tbilisi and the big pipeline, oil prices plummeted and the dollar strengthened.​
    If anything the threat is subsiding as it is now clear that Russia is not interested in cutting the Pipeline and they are going to pull back for now. So if anything prices should be falling even further. But the reality is that this was a bear retraction in a secular BULL RUN(In energy that is). The 4 year BULL MOVE has not been stopped, not by a long shot. This was a pullback that is seen in chart after chart in everything from stocks to coffee prices. I also think demand is starting to tick up again. Anecdotal at best, I am seeing in my area lots more activity at the stores and on the roads. Lots more people moving around. Again, this is just from my vantage point, its hard to extrapolate that out to everywhere.
    DR DOOM: You are a man after my own heart. Go back and read some of my stuff from the end of 2007 and how I was calling for deflation, even as the PPI and CPI numbers were accelerating. I understand how deflation works and that you can have both occurring at the same time. The PPI and CPI inflation is already in the pipeline and has yet to be worked out yet, but DEFLATION is now solidly set into the furthest ends of the supply pipe. Money is being destroyed at an ever increasing rate and nothing they are currently doing is stopping it. ONLY by getting more people to belly up to the credit bar and getting them to sign on the dotted line, is going to change this outcome.
    But IT CAN NOT BE DONE ON THE BUYERS SIDE. Those that are gumming the works up are the sellers. For over a decade home sellers have been given the false belief that they set the price for their home sale. This is flat assed wrong! Buyers set prices, end of story. And buyers are now content to sit on their hands and wait for the sellers to lower their pants and lube it on up, before they’ll come back into the market in number BIG ENOUGH to offset the fast dissapearing dollars in our economy. And EVERY SINGLE move to delay this outcome(stupid governmental legislation) is just going to make the problem that much worse. Those that are going to lose their house need to get the hell OUT OF THOSE HOUSES and get the money system freed back up for now. We have moved way past a normal correction and are now DEEP in the midst of a deflationary spiral in housing. The housing price declines we are seeing in my opinion are now strictly being caused by stupid ass governmental interference and a MSM that wants to blow smoke up sellers asses(SEE THAT DUMB ASS CNN.COM ARTICLE FOR PROOF!!!) that if they just hold out another 6 to 12 months all will be good again. But it won’t, in 6 months they’ll be that much further upside down and the spiral will continue, until somebody has the good sense to walk these people out into a field and shoot them in the economic head and END IT. And there isn’t one politician in the world who would do the deed that needs to be done.

    Another addition;
    I am talking cold REALITIES here. Those people you are fearful for, have in reality already lost their house. What they are holding on to now is hope and nothing more. Reality has to win out here and finally enforce market realities. Those people will lose everything and in the end they will get shafted. Most never even saw it coming and they never had a chance. But so long as we draw this out, the market will get worse. The absence of reality in the market isn’t just making things static, it is making it exponentially worse with every single quarter that slips by. With every month there are 100’s of thousands of more people like Puchia who are getting scared and sitting on their hands. Once this mindset becomes the norm it is game over for the economy.
    Now granted, I feel it is game over either way, but there are different ways of getting from point A to point B. One way is to just leap off the cliff and break your neck, the other way is to jump from ledge to ledge maybe injuring yourself on the way down, but at least when you get to point B you’re still alive.
    By giving the seller’s false hope that things will be OK in just 6 months, is going to be the equivalent of throwing this economy off the cliff. If the Fed were to use the tools at its disposal, or HELL MAKE SOME NEW ONES UP, why the hell not, and force rates to go up and change the rules so that the mortgage companies can get people out of their homes a hell of a lot quicker than 6 to 12 months, then the process can work towards clearing. Once we see houses on the market go from 11 months to a more normal 3 to 4 months, then prices will finally firm up. They won’t go up for many years after that, but at least the bleeding will stop.
    This bleeding is at the heart of all the financial problems we are seeing everywhere. This is also true of SUV’s and Credit Cards and everything else. We have to move to collapse the bubbles and deal with the outcome of that action. Because it is going to happen anyways, but if we wait it will be that much worse, because the number of people involved will get worse and worse. Right now I feel the economy could deal with the reality of millions of people getting kicked out of their homes and having to rent. There is enough liquidity out in the system and abroad to buy out those houses at 20,30 even 40 cents on the dollar. Then turn around and rent them to the millions that are in need of a home.
    The reality of this would be hard to swallow, but the reality is going to enforce itself one way or another. We fed at the trough of easy money for almost 30 years(at these crazy levels) and now some reality is going to have to rule for awhile.
    I have no doubt that the current path could continue for several more years, but at what cost? Once we hit a tipping point and a certain number of people decide that they will stop spending all at the same time, the result will be an almost instantaneous crash of the entire system. That is the ultimate weakness of any ponzi scheme(or fiat money system). The system can handle a certain number of people realizing it is a scam, but that number can not grow to big. The strength of the fiat money system is built upon the loose sands of TRUST. Once trust in the system is undermined the whole thing collapses and fast.
    The PTB have to have the courage to see the obvious future that awaits us all and do what needs to be done now. They need to jump to the next ledge while its still a choice, before the choice is taken from them and the whole economy just jumps off the ledge to point B.

    Tuesday August 19th 2008
    I haven’t read this much about nuclear war and strategies since I was a very young man. I used to be obsessed with the idea of Nuclear War and the resultant doomsday that would follow. It is a big part of my doomer personality I think. I remember reading “Alas Babylon” as a teenager and then finding out later in life how incredibly stupid the premise of that story was. The story revolved around a full scale nuclear war against the US and the USSR and a band of people living in Florida and how they survived. The whole story turned out to be stupid because they took no consideration of nuclear winter and fallout patterns and a dozen other scientific facts that weren’t available when the story was written(sometime in the 1950’s).

    How the times have changed since my first introduction to Thermonuclear War in the guise of books like “War Day” and the movie and book War Games. These movies and books got me incredibly interested in the concept of war and how we might survive in a nuclear wasteland. Not the usual clap a teenage boy is supposed to like. I spent my time reading books about World War II submarine warfare and the mentality of the Silent Corps. I left that part of my life when I graduated high school and my interests went elsewhere.

    The past two weeks have re-ignited my passion for reading about the concept of Nuclear War and what it might look like if we were to fight one here and now. With all the action going on in Central Europe and China, it would seem my studies will not be for naught. I have not heard talk about nuclear war or its possibility at this level for almost 25 years. I think it would be a good exercise to consider some WHAT IF scenarios about the win ability of a full scale nuclear war and in this assumption I am going to say the United States of America would instigate this war and the POSSIBILITY of it being an ultimate good for mankind and the planet.

    So first a primer on where the nuclear forces of the world stand. Thank you to SEA HORSE for that incredible piece from the Council on Foreign Relations (found in the other thread). It was as if this guy was reading my mind(Or I his, seeing as that he wrote it in 2006), but his whole article is a much clearer and well written piece on the exact ideas I was espousing in a thread just a few days ago. It revolves around the idea of American Nuclear Primacy and the important question of “What do we do with it?” In this post I am going to make a lot of educated assumptions. I am going to try and keep them realistic, but I am sure some of it will be just flat wrong. So let’s start with the United States and its arsenal and what they are capable of.

    The US bases its nuclear deterrence around something called the Triad. It is a trio of deterrents based around Submarines, Long Range Bombers and land based ICBM’s (Inter-Continental Ballistic Missiles). The first part of the Triad is our large platform submarines which are capable of hitting any target on the planet and at very close range. They are capable of launching both ICBM type missiles as well as surface skimming Tomahawk nuclear tipped cruise missiles. I have no doubt that the Tomahawks are now made of the same stealthy material and designs as our Bomber force. The Submarine force is both a perfect defensive and offensive weapon. IF an enemy were to attempt a first strike on the US, our Silent force would be our ultimate ace in the hole. We always keep a minimum force of “Boomers” out to sea and tucked away in hidden places. If a first strike were to render the Land based portion of our Triad impotent, they would still have to deal with the retaliation of our Sub based force which is capable of raining hundreds of war heads down on our enemy.

    But as an offensive weapons system it is truly menacing. Those subs can park nearly anywhere on the planet and with very little warning; launch an attack upon our enemies. Our Bomber wings are also a great offensive and defensive force, though they are fast becoming an offensive only option. To keep wings of bombers in the air at all times plus to keep more in a near ready state is horribly expensive. I think that the war planners have given up on this being a realistic defensive measure (meaning retaliatory after a first strike on the US). Their only purpose now as I see it is as a first strike weapons system. They should be a devastating first strike weapon if they even do 75% of what they are promised to do. The B2 has the ability to deliver Nuclear tipped cruise missiles right into the heart of just about any country on the planet. Even with a 50% failure rate due to downing by enemy air defense, the stealth bombers should be able to deliver a large amount of ordinance into any country. And finally we have the ICBM force located in the heart land of our country. These have the ability to strike anywhere on the planet with zero chance of them being downed. Only the possibility of mechanical failure or human error on our part would make these weapons fail. The problem with the ICBM as an offensive weapon is that they take a long time to get to their targets. Realistically the ICBM portion of the Triad is for defensive purposes only.

    So for this article I am only going to consider the truly offensive systems as a potential for a US first strike upon China and Russia. After a decade of improvements on the triggers of our nuclear weapons, they are now much more deadly at close range. Instead of the idea of “close enough for horse shoes and nuclear weapons” these new systems are able to explode at near ground level and with the GPS systems and other guidance systems, these weapons can hit their targets with nearly pin point accuracy. With our ability to map large portions of the planet nearly at real time and super computing technology which has the capacity to look at these maps and identify nearly anything on them. This gives the United States a distinct advantage in identifying high profile targets and keeping track of them for long periods of time. This would be essential in any first strike by the United States. The strategy would have to revolve around declawing BOTH the Russian’s and Chinese, meaning they would have to have nearly NO ability to launch an in kind response to our first strike. Their nuclear forces would have to be nearly eliminated in the very first phase of this attack.

    Why would this work? Because the level of their nuclear forces is in a state of disrepair and has not been upgraded in many decades (in the case of Russia) or their technology is just not up to par with the other nuclear armed countries (China). Russia has let its deterrent degrade to the point of being nearly worthless. Anecdotal evidence points to the possibility of a 50% failure rate or worse on their ICBM force. When we sent international inspectors over to the former USSR to make sure they were complying with the Salt II treaties (and others), they found that many of the ICBM silos were filled with ground water. Or the doors were sealed shut or the missiles weren’t even fueled. Currently the submarine forces of Russia are located at port in only a few locations and their bomber wings are grounded most of the time now and are not even on ready status(meaning UNARMED). China is not much better. Their ICBM force is small and is incapable of using MIRV’ing technologies. MIRV is an acronym for Multiple Re-entry Vehicles. This technology allows one single ICBM to carry upwards of 10 individual war heads, capable of hitting 10 targets in different geographic areas. The ICBM hits apogee in space and the big warhead opens up and 10 smaller warheads are revealed and launched from space. Once an ICBM “MIRVs” it would be nearly impossible to intercept all the war heads. Especially if Russia were to launch 100’s of these ICBM’s.

    The key to declawing both China and Russia would have to revolve around a first strike at a time when all their forces are at their most vulnerable. And the only time they would be vulnerable would be in a time of relative peace and when they are not on alert. But time is working against the United States. China is rapidly improving its ICBM technologies and it is just a matter of time before they try and perfect submarine based launch capabilities. The United States still has a huge advantage on every single platform. We still have the men, materials, and systems to initiate a first strike or withstand a first strike from our enemies and retaliate with such force, that they would never consider doing it.

    This leaves us in a very dangerous point in time. What does the United States of America do with this advantage? Let’s take all the moral and personal ideas out of this for now and focus on a cold hard calculation of what happens if the US does not act upon this advantage. China will eventually overtake the United States in technology and Russia will use its energy dominance and money to re-arm itself and upgrade its retaliatory nuclear deterrent. It will mean a three way arms race and it will be one where the United States will be getting weaker and weaker and the others are getting stronger and stronger. Few people understand how incredibly expensive and complex it is to keep a nuclear deterrent. It bankrupts EVENTUALLY every country that has tried it. The United States is not immune from this phenomenon. At some point the economic realities of America are going to make themselves known and the massive amounts of men, material and resources will not be available to us and as a result our forces will stagnate and eventually deteriorate just like the Russian’s are currently doing.

    So we find ourselves with the distinct possibility of having to use or lose our nuclear offensive capabilities. Now to tie this back to the top of this article; I said a first strike by the United States could actually be an eventual “good” for the planet. I no longer buy into the idea that the US of A is a perfect country and in some ways we are a very dangerous country. But compared to the system that we would live under if China and Russia were allowed to rule the planet, I would take our imperfect system every time. So, how would this first strike be a good thing? It would once and for all mean the end of nuclear weapons as tool of war and could conceivable mean the end of war as we know it. Once the United States has declawed the two countries which could realistically retaliate and or initiate a first strike nuclear war, it would mean that the US of A would have total nuclear dominance of the world and having proved that we would use that first strike capability, we could use that leverage to remove all weapons from other countries.

    The United States of America would stand nearly alone at the top of the nuclear heap and no other country, rogue or not, would consider building or using those weapons again. It would once and for all end the possibility of nuclear war.

    What would the cost be? The numbers I have read are surprisingly small. The Russian’s are thought to possess about 175 ICBM missiles in silos throughout their country. They have perhaps a number quadruple that in storage areas that are used for tactical nuclear weapons such as artillery shells and to place upon bombers. Their sub fleet is nearly incapable of getting out to sea and would be an easy target if caught by surprise. So our first strike would hit their 175 silos and we would have to hit dozens of ship yards and air fields where their first strike capabilities were housed. If we attained a 90% or greater kill ratio, this would leave the Russian’s with almost no offensive capability. It is possible that they would consider not launching the last of their offensive weapons if given a reason to do so. After a first strike it would be apparent that they would have no chance of surviving a full scale US assault upon their countries. They could launch a handful of ICBM’s and attempt to launch conventional forces (or unconventional WMD’s) upon their areas of influence. They could cut NG and oil lines to the west. They could attack oil producing areas to try and cut off our fuel.

    But the reality would be that we would have them by the short hairs. If they made moves to do this, we would now have the ultimate leverage against them. If they attack our interests in Saudi Arabia or wherever, we have the ultimate hammer now to force them to stop. Since we have proven that we are not afraid to use our nuclear forces they would have to take any threat of retaliation upon their cities as credible and probably likely. This fear could keep a lid on a conventional war from spiraling out of control.

    Obviously this last part is all fantasy at this point and could go horribly wrong. But the end result COULD be the end of the scourge of nuclear weapons or at least the daily fear of them being used in a massive attack.

    An attack on Russian and China from the US of A as the board is currently setup, would not have to be massive. On the contrary it would be very selective and because we would minimize the use of Airburst nuclear detonations, the amount of fallout and collateral damage could be very limited.

    Whatever happens; the United States of America is standing at a very dangerous crossroads. We now have the theoretical possibility of successfully launching a first strike nuclear war and there is a reasonable possibility of the entire planet NOT suffering the consequence of an all out nuclear war. This possibility has not existed since we held the only nuclear bombs on the planet and we decided to NOT use them against the USSR in the 1940’s. Instead we let the genie out of the bottle and now nuclear weapons are popping up everywhere.

    Eventually someone is going to use those weapons, the question is, HOW and with WHAT consequence?


    Monday August 18th 2008
    We will defeat China and Russia the same way we defeated Russia the first time. LET THEM KILL THEMSELVES. That is if we don’t kill ourselves first. The way we beat the Russian’s was with a combination of M.A.D. and economic warfare.​
    The first idea was the ability of either side to WITHSTAND a first strike of the other or M.A.D. Without the MOST IMPORTANT FIRST STRIKE SURVIVAL component of MAD there is no MAD and therefore your strategy must move to first strike winability or a use it or lose it strategy.
    The United States has for moronic reasons decided to upset 60 years of MAD strategy. They have put the Russian’(and soon the Chinese) in the position of not being able to respond to a US first strike(or at least they see it that way). The statement that “we have subs in the water and thefore the Anti missels in Poland are not a threat” idea is flat assed wrong. Our subs are a first strike capability out missiles in Poland are an ability to stop a retaliatory strike emanating from Russia.
    So if we launch a first strike using our subs and possibly short range missiles planted in former USSR states like Georgia and Poland, then the ability of Russia to respond is greatly reduced. The Russian’s know their Nuclear arsenal is not nearly as good as ours and is COMPLETELY dependent on MIRV’ing technologies. If we find a way to shoot these things down before they hit apogee and before they can MIRV then their retaliatory threat to us is greatly reduced.
    So what does this mean to Russia? It means they now must start making moves to NUMBER ONE make sure we can’t plant short range nukes on their door step(invading Georgia and threatening Poland). And number TWO they must now consider the possibility of using a Nuclear first strike before we do it to them AND NUMBER THREE they will more aggressively start attacking the US’s interests around the world to keep us off balance and occupied. Expect Iraq to start “acting up” again and we are already seeing problems in Pakistan. I’d expect this to mean that the Russian’s will start a Quid Quo Pro with us in Afghanistan and extract some payback for what we did to them in that country.
    ALL OF THIS was a result of the idiotic Geopolitical strategy that was started with Bill Clinton and brought to fruition under this president. That is what I mean when i say we are at fault in all of this. GEORGIA is just a reaction from the Russian’s to over 15 years of provocative moves on the part of the United States. What did they think would happen. I think the writting was on the wall the day Putin took the oath of office.
    I laughed my ass off when Bush said “I looked into his soul” Bullcrap. Putin is former KGB and is a staunch Soviet Nationalists. Now instead of a Vodka swilling patsy in the hot seat of Russia we have a chess player master. If we had played our hand just a little more lightly back in the days of Boris Yeltsin we might have gotten a little more advantageous result for ourselves some 14 years later. Instead we have a staunch communist in charge with the mental capacity to reignite the Cold War.
    Of course that was probably the end result they were looking for wasn’t it? The unipolar world is turning out to be just a little much for the Socialist Corporations of the ONE WORLD to handle.. Now its back to the old ways. Massive military spending on both sides and duck and cover drills in all our schools… Stupid ****s!!
    Friday August 15th 2008
    Sorry up front for the vulgar language.​
    EDIT: here is the Rush Limabaugh site with appropriate link
    I have finally calmed down a bit, but I am going to try and get myself pumped back up again. This is breaking news in my mind(move if you disagree) as the disinfomation campaign has just take a completely SUREAL turn for the worst.
    What am I talking about? I am talking about the rewriting of history BEFORE it even has a chance to become history. I was just listening to Rush Limbaugh commenting on the UK story about the version of the Georgian war that is being fed to the Russian people. The story goes that Russian’s are being told that Georgia attacked Russia in an attempt to get John McCain elected. And of course the right wing propaganda machine has jumped all over this story.
    But the stupid ****ing jerk left out one important fact AS IS THE ENTIRETY OF THE US MAINSTREAM MEDIA!!! Georgia did attack Russia and though the response was overwhelming and over the top, the fact still remains that Georgia attacked Russian citizens for whatever reason(and I don’t buy the “to get McCain elected bullshit). But our MSM has now decided to erase history that just happened 7 freaking days ago. I feel like I’m living in a god damn fairy tale here. The average American who doesn’t have a chance to read like I do, are going to buy this ****ing shit.
    In another week the majority of this country is going to be convinced that Russia attacked Georgia completely unprovoked and that will now put THOSE OF US HERE as aligned with the Russian’s. This propaganda is beyond dangerous at this point. I can feel the walls closing in around me and I am getting scared to spout off like I used to. This is tapping into a deep well of hatred for America. Those of us that are 37 years or older remember vividly the propaganda used against the USSR in the late 70’s and throughout the 80’s. Do you remember RED DAWN and the cry of “WOLVERINES!!” and a thousand other more subtle ways of getting us to hate the USSR.
    That is a deep well of potential propaganda to exploit and they are going to do it in full swing. Remember that it was the UNITED STATES that decided to put ICBM killing technology in Poland and Yugoslavia. It was the US of A that started interfering with former USSR satelite countries and started joining them up with NATO and pushing Russia into a corner. All of this has happened in the last 8 years and can be laid at the moronic foreign policy team assembled by GWB.
    Condie Rice is supposed to be a Russian expert and her fingerprints are all over this one. They are purposely trying to provoke the Russian’s into a response and BOY did they get one. I don’t know what the end game is here yet, but it sure as hell isn’t as STUPID as to get McCain elected president. Obama=McCain and either way the power structure gets what it wants.
    There is something much bigger going on here it just hasn’t made itself clear to the laymen like us, YET…. Watch how they spin this over the next few weeks. Anyone who points out that Georgia attacked Russia will be lumped in with the idiots from and the like. People who think that EVERYTHING is some kind of conspiracy to stop Obama from being president need to open their damn eyes and realize the stakes are a whole HELLL of a lot bigger than another bought and paid for schill sitting atop the American Locomotive.
    Tuesday August 12th 2008​
    I haven’t posted in a while mostly because I’ve been very busy and to be honest I was burned out. Things have taken some dramatic turns over the past 3 weeks since I last posted. On the surface they are all fundamentally good. And I won’t be a typical bear and just start shooting every single good news story in the head because it runs contrary to my doomer point of view, though in my defense I have always maintained that this could take years to play out. I have never considered myself an Uber Doomer and have firmly held to my belief that this will likely be a slow grind out, and that basing your preparations on a fast crash was a mistake. The current situation is a perfect example of proof that we are on a long, slow grind out on the economic front (and by connection the energy front). So let’s check to see how fast things can turn around in the world of economics.
    GOLD: the movements in gold have been dramatic, but as I will show in the following chart, not nearly as dramatic as you might think. After YEARS of almost constant gain, gold seems to have finally broken its upward momentum. Sure there are all kinds of ‘theories’ regarding how the price has been manipulated down (and there is SOME merit to those theories) but I think looking at the historic chart reveals that we have been LONG overdue for a correction in the price of gold. We’ll start with the chart.
    This is a 5 year and 10 year gold price chart. Look at how quick we’ve gone from the 400/500 mark to 1000. It happened in less than 3 years and especially note the last 12 months and the almost parabolic line UP. This could never have been sustained and is now coming down (though some firming has taken place this morning). Does this mean all that gold you bought as 902 an ounce is now worthless? Not at all, it just means that it may take longer for you to recoup your money. This is what I warned of about a year ago when gold was pushing past 900 for the first time. I had said it might be good to just go ahead and cash out and use the money for something a little more solid(like food preps). But if you held on, don’t worry, I think we will see 1000 before we see 400 an ounce.
    OIL: ‘Oil has collapsed’ goes the MSNBC talking heads every night. ‘The president’s ideas on offshore drilling are working’ says Kramer and Kudlow every night now. Well let’s start with a little truth in advertising first. Let’s look at the historic chart shall we?
    This one is even more dramatic than the Gold chart. Almost the entire recent rise in prices has happened inside the last 8 to 12 months. Again this type of action could never have been sustained, EVEN during the opening stages of Peak Oil. The current crisis in Georgia is proof positive to me that we haven’t crossed over the really nasty side of Peak Oil yet. I think by definition we have crossed over peak oil, in that world wide production has NEARLY stalled. Sure there are some spikes above the Peak level, but they don’t stay there. Demand destruction is in full swing now and it was caused NOT by true scarcity but merely by getting close to the demand/supply level. World wide demand got about as near to supply as it ever has in history and the result is easy to see in the chart above. To me the really scary part happens when demand crosses over supply. It doesn’t matter at what point it happens. Let me give you a for instance. Let’s assume that we have hit Peak Production, but demand has been beat down to a level well below that peak for now. So let’s just make some numbers up. World wide production is at 85 and demand WAS at 83.8 and the price skyrocketed and demand was beat down and the cushion of supply was re-attained. So now production is at 84.5 and demand is at 81.5. This is a level that we were at just a few years ago. This would mean a cushion of over 3 million barrels and in reality could produce an oil price that is significantly lower than what we are seeing now. Possibly even below 70 bucks a barrel. But what happens if the economies of the world start ramping back up again? Well obviously (assuming a belief that peak oil is already here) you’d see demand start ticking back up and as that 3 million barrel cushion disappeared, prices would immediately start to spike again. SO LONG AS the market is allowed to price oil at staggering levels, I feel we will never cross over the supply/demand level.
    Only through stupid legislation (like mandatory maximum levels for diesel and gasoline prices for instance OR 1000 dollar gasoline rebate checks) will we see things tip out of control. Only through economic stupidity will we see demand outstrip supply and cause a complete disconnection in prices. I truly hope this doesn’t happen. Because if we can continue this up and down action, we could possibly ride this down for years, assuming no major increases in depletion levels.
    US Dollar: This was a complete reversal of fortune for the US Dollar. Against almost all major currencies the US dollar has done a complete 180. But how BIG is this turnaround? Agains let’s look at historic charts to put it all in perspective.
    Again we are looking at a slow grind out in my opinion. Since 2002 and the start of Easy Allan Greenspan’s easing of interest rates, the dollar has plummeted in value. Only in the last 4 weeks or so have we seen a long bout of recovery. This is the longest recovery in the dollar in many years. But look at the chart, does that paint a picture of strength? It doesn’t to me. This looks like a picture of capitulation and was bound to happen eventually. Remember that there are no straight lines in economics. The plunge in the dollar got ahead of itself and people like me added fuel to the fire with our predictions of the US dollar’s death. Like oil and like gold, the dollar has a long way to play this out. We could see the dollar rise above 80 or higher and then resume its downward plunge. Or something could happen in Europe (like having their NG turned off by Russia in the dead of winter) and could cause the Euro to plunge and the only alternative would be the dollar. So again; I think that this could play out for a number of years.
    MARKETS: The markets to me are the most worthless of all indicators but they have to be watched to get a sense of current market sentiment. The current collapse of the markets has been significant but as you will see in my last chart, it wasn’t that bad. And you’ll see off the left side of that chart what REAL fear looks like. For now we are safe and warm in the middle of that chart and we could be a long way from plunging off the right side of that chart. It all depends on ENERGY and how it is played in the coming year or so. Here is the chart.
    Using the DOW as the most recognizable of the market indicators, you can see that we are down from the most recent records, but compared to 2003 we are a long way from the danger zone.
    Conclusion: what does this mean to you and me? It means we are all susceptible to panic and that panic can cloud our judgment. BK and others have said over and over again that their NON belief in the doomsday outlook of many on this board does not negate the seriousness of Peak Oil. I for one let a certain amount of panic interfere with my logical conclusion that we are still several years away from what could be termed as TRUE panic.
    The past 6 months have been some of the worst plunges I’ve seen since my Peak Oil awakening. Many indicators that I had been looking for came to pass in the last 6 months. The biggest of which was the collapse of Fannie and Freddie. I have based all my preparations on the idea that we will continue this up down action until SOMETHING happens to unhinge it. And what could that ‘something’ be? It will be something I fear from the political side of the world. As this current reprieve works its way through the world and economies start to recover. They will start to expand again. How quickly this happens is hard to say. But it took about 12 months after Katrina and the plunge after that event, before things started to cook again and it took about 18 to 24 months for things to fall apart again and leave us where we are now.
    In my own mind I feel that we might see a 6 month period of calm and reclamation and towards the end we’ll see significant growth in our economy again, it will last less than 12 to 18 months that time and the spikes that come after that will be even worse than this time. Even if we have a hurricane in the gulf or the Georgian pipeline is cut, the amount of cushion that is building in the system will be able to cope with those types of smaller events. The demand destruction that has been gained by this current plunge is enough to keep the markets from going upside down. Once growth re-enters the picture that will all change, so if you’re looking for a good indicator as to when things will get crazy again, I’d look at GDP figures and once they get back to the 2 ½ to 3% ranges, we’ll start to see the fireworks again.
    That is unless the political side of the equation changes. Let’s say that Mr. Obama gets his way and forces the oil companies to send us all 1000 dollars to buy gasoline with? What happens to demand? It will spike up, now granted with only 1000 dollars it probably won’t go up to much, but it gives you an idea of how quickly unintended consequences can change things. What if Mr. McCain has the bright idea to cap diesel and gasoline prices at 3.50 a gallon? What do you think would happen to the supply/demand equation? As the market would be pushing for price increases to once again put the smack down on demand, the political structure would be opening the spigots wide open and people would just continue to use those products until REAL scarcity forced the issue. Once demand goes over supply, the whole dynamic changes, so I will be watching for that, as long as supply stays above demand I will try and not panic. Though I know I am always good for a few !!!!!! every once and awhile.. That’s just the way I am 
    Monday August 4th 2008​
    Finally had some original thoughts and some new content to post. Sorry that I haven’t been keeping up with things here. Hopefully you find this both interesting and entertaining.​
    IN PRAISE OF ANARCHY….By Robert Denner​
    I used to joke about this point, but as time has progressed I truly believe it is something every thinking man and woman should be striving for. It can be summed up in one word…​
    The word conjure up thoughts of hell on earth, people killing people and complete CHAOS, which of course is now used in conjunction with the word ANARCHY..But in reality the word anarchy is just the absence of a central authority. All the other adjectives are just put there as a way to reinforce the fact that without a central authority(anarchy) there would be CHAOS.​
    That is where the left/right bullcrap comes from. The left wants control of your money and through the use of that money they will create a better mankind, the right wants control of your SOUL and use it to make a better mankind, NIETHER can fathom a world that DOES NOT NEED THEM. I tried to make this point with some friends that are very liberal but just waking up to the peak oil concept.​
    We were sitting at a wine bar, that was outside and had about 100 people milling about. There were NO COPS, NO GUARDS, nothing to prevent a few people from just taking over and stealing and pillaging. We were on an island and there were probably a total of 10 cops on this entire island.​
    I threw the idea out. THIS IS ANARCHY!! It isn’t fear of the cops, or fear of prison that keeps 99% of these people in line, it is just the way people want to live. Some are loud and stand on chairs and whoop and yell, others sit in the corner and talk and make fun of the chair dancers(our group) and others play horse shoes. That is society. It does not take a central authority to make it so. People I truly believe want to live in peace and relative harmony, it is only the 1% that **** it up for everyone. It is because of this very small amount of people that we need the left and the right to protect us. We have voluntarily given up all our rights as citizens just to protect us from that 1% instead of standing up and doing the things WE KNOW NEED DOING..​
    Instead of just sitting there waiting for a guard or a cop to tell the lady to stop dancing on the table(because she was destroying private property) why didn’t I or someone else just calmly ask her to step down? Maybe she would realize what she was doing and she’d just stop(the 99% of the people) or maybe she’d tell you to **** off and kick you in the teeth(the 1%), either way the problem should be solved in 99% of the times right then and there without a huge state infrastructure to deal with it.​
    Realize that the WHOLE REASON for the big infrastructure, both left and right is just a control mechanism to STEAL YOUR LABOR and nothing more. It is a way to force you to give up your God given rights as an individual to make your own decisions and to compel you to more times than not, work against your own best interests and to work for the best interests of others(the 1%).​
    Most people when given the opportunity to do so, will do the right thing. The “right thing” might not happen in the exact way that you wanted it to happen, but in the end it takes care of itself.​
    ANARCHY is what all of us should be working towards and we should all realize what TOTAL CONTROL freaks look like and work actively against them at all levels, starting with the Federal level and working down. 99.9% of all problems can be solved before they reach even the STATE level, let alone the federal level. It is just a matter of getting people to realize that THEY have the power to make the changes in their lives and that they don’t need others to do it for them.​
    And this isn’t some Randian rant that you don’t need people, you are alone and must fend for yourself in some dog eat dog world, where you either GET YOUR’S or someone else will get it, on the contrary, I would consider her one of the 1% of problem makers. She assumes everyone is like her and just wants to GET HER’S before someone else does. Most people are CONTENT to have what they have and are not power mongers. Most people will hold out a hand and help others.​
    We just need to realize WE ARE THE LARGE MAJORITY OF PEOPLE and that the 1% of people who don’t see society as we see it are the problem. They are easy to spot in any situation both small and large. They are the people who are never content to just leave well enough alone. They are the ones who always are trying to create a problem WHERE THIS ISN’T ONE. They are always trying to pit one friend against another(or group). If you are NOT one of those 1% of people, you know exactly what I’m talking about. You sit quietly in the back of the conference room as 1 or 2 of these types go at it, trying to vie for some piece of the power pie while YOU just don’t give a flying ****. All you want to do is get back to your desk and get back to work, while it seems all they want to do is argue minutia and page and verse of a bullshit document.​
    We all see these people around us, yet we do nothing, we NEVER stand up to them, because it seems so pointless. But it isn’t. STAND up on the smallest levels of your life to these people. They are quite childish when they are stood up to, they get very angry and they will almost always shoot themselves in the foot when confronted. They will get angry and those that were listening to them will have second thoughts about following them(because those people are LIKE YOU and NOT THEM).. That is the only US and THEM that I see anymore. US are people who just want to be ****ing left alone to live our quiet boring lives in peace and harmony. THEY are the people who just won’t leave well enough the **** alone. Sometimes apathy is the correct answer. APATHY does not EQUAL IGNORANCE, sometimes apathy is just the recognition that things are OK now and don’t need to be “improved” by some power hungry One Percenter.​
    Friday July 25th 2008​
    Just adding this old story I wrote from back in December of 2007. Sorry I haven’t posted in a while, but life is getting a bit hard right now and my mind just isn’t in the right place to post. I am going to be plagerizing some of my own stuff and posting it here. This piece was written almost 6 months before the Fed actually started allowing invesment banks to start borrowing directly from the Fed Window. I found it to be pretty spot on.​
    Well I guess it was just a matter of time before this happened. To be honest I never thought it’d go this far, though I wrote about it many times a few years ago. It’s the idea of monetizing our debt.​
    It’s a fairly easy concept to understand, though the way they describe it, it mine as well be in Chinese. If you were to look at what their doing this way. It’s a very simplistic explanation but it’ll at least give you some frame of reference. It’s always easiest to understand a concept when you start with the individual. So here he is, he’s the billionaire REX.
    Rex was a billionaire. His family worked very very hard and saved money and invested wisely. His dad only had one son, his name is Rex. Rex is spoiled rotten. One day his mom and dad are killed and ALL the money is given to Rex. ONE BILLION DOLLARS.
    The money and his family’s good name SHOULD ensure a lifetime of prosperity and good fortune for him. BUT he’s a spoiled rotten little snot. He starts spending money like a drunken fool (which he is a lot of the times). Rex is a God send to all the business’ that he buys from. He pays CASH and is always looking for something expensive. He buys houses with cash down and cars and lavish parties. Everyone loves Rex because he is a cash cow.
    Well after 30 years of this lavish lifestyle Rex has finally run into a problem. He has TONS of stuff; like houses, cars, land and jewelry. But he is running dangerously low on CASH. So he goes to his favorite jeweler and wants to buy something. His credit card doesn’t have enough money.
    Now Rex at this point is smart enough not to go into debt to get his jewelry. So he goes and sells some land and re-infuses his bank account with cash. Another 10 years elapses and he has blown through the majority of his STUFF. He now has a really nice mansion and a really nice car. He still has stuff but not nearly as much of it. He is getting less and less willing to sell his stuff to get OTHER stuff. So he goes to his favorite jeweler again and this time the jeweler says “just open a line of credit. Jesus you’re my best customer, how can I not take care of you??” So he goes around to all the places he frequents and gets a line of credit. The party place, the car dealers even the jeweler. He gets all kinds of NEW stuff and it’s all charged to his accounts.
    All he has to do now is KEEP UP WITH THE PAYMENTS!! This is much easier at first than it was paying cash for everything. But after a few years it gets harder and harder. He can’t just sell stuff now because they have liens on them. His cash is getting very tight again and he is getting forced into a corner. He goes back to the jeweler and is surprised to find that the jeweler will work with him.
    “Man you’ve been my best customer, how can I not take care of you??” He opens another account with him, but this time the terms are a lot harsher. Before he had GREAT credit and a great name, but now he has missed a few payments and his debt load is really piling up. So now all his creditors want better terms with him and start charging more interest and bigger penalties for non payment.
    Rex is really up against it now. He still has his house and car. He still has some stuff, but now it’s getting harder and harder to find people to throw his parties. It’s getting hard to buy new jewelry to show off to all his friends. He is starting to get worried that people will notice he is going broke. THIS CAN’T HAPPEN!
    Rex is a rich man no matter what the books say. There has to be a way out. So back to his jeweler friend he goes. The jeweler has an ingenious plan. WHY NOT just take out a bunch of credit cards. Sure they’ll have bad terms, but it’s a whole new source of Cash (liquidity). So what you do is take the cash from the credit cards to make the minimum payments on all your other stuff and then use the remaining balances to buy new stuff.
    This time it only keeps Rex going for a VERY short time as the interest and the payments and penalties all snow ball out of control. Rex Ends up in bankruptcy court where it all comes to light what he’s been doing the last 35 years? He has accumulated 10’s of millions of dollars in debts as well as having blown through ALL THE MONEY and all his stuff is in hock up to the hilt. REX IS BROKE AND PENNILESS and now has nothing.
    End of the story. WE as a nation are standing on the edge between when Rex was selling off his most valuable assets and then starting to take out credit cards to pay off minimum payments on our debt. MONETIZING the debt is just that. The federal reserve is going to start allowing banks to DIRECTLY borrow from the federal reserve through the discount window instead of borrowing from each other(because the BANKS WON’T LEND TO EACH OTHER FOR FEAR OF BANKRUPTCY!!!). The inability of the banks to lend to each other is the CORE problem right now. They don’t trust each other not to screw them over. SO in comes the Federal Reserve with a handful of credit card application and a sweetheart of a deal. BORROW THE MONEY DIRECTLY FROM US AT ONLY a 1/4 of a percent penalty (usually its a FULL PERCENTAGE POINT) and you can have all the liquidity you want.
    IT’S DIRECT, IN YOUR FACE INFLATION!! They aren’t even going to bother trying to hide the inflation anymore. They’ll just start printing the money AND DROPPING IT FROM HELICOPTERS… Hence the term Helicopter Ben Bernanke. Ben Bernanke was quoted as saying this before he became Fed Chair.
    He said almost verbatim when asked “What would you do if the banks stopped lending to each other and the lowering of rates didn’t help?” He answered (of course being funny) “that we could directly inject money into the system by dropping money from helicopters if we had to”. Basically he was stating a belief that any liquidity problem could be solved by FRONT LINE INFLATION or direct injections of money into the economy as opposed to the much more HIDDEN way of doing it by facilitating bank loans between privately owned banks.
    This is a HUGE story that no one is picking up on yet. It’s just another nail in the coffin of my theory that they are going to try and save the dollar. IF they go through with this, I’ll have to give up on that line of thinking..

    Friday July 18th 2008​

    Well what a difference a week makes. As pointed out by many on these updates, the world hasn’t ended and a bottom seems to have been reached. I have hinted over and over again that this is always a possibility and that there are no straight lines either down or up in economics. We failed to take out the 10700/10800 level and we bounced to a close of just over 11200 two days ago. Yesterday convincingly took us over the 11200 mark and we’re now at 11446 and this sets us up to go ahead and test the next level on the up side and that is 11870. I warned that this was a possibility even as I was very bearish at the time. I thought that the downside would go longer given the fact that F & F are such a big deal. But in retrospect the fact that they shored them up was probably the biggest drag on things in the current environment. Once they were thrown a lifeline the big money players decided that the water is clear for now. So expect a serious testing of the 11800 mark very soon.There may be a few down days in between now and then, but the momentum is definitely UP. How high can it go? Well that depends on a lot, but there is a body of thought that says there will be ONE MORE big blow out rally called the Crack up Boom. Things will go up to a level that will amaze everyone followed by a big collapse. You can look at chart after chart and see this action to a greater or lesser degree. I will use one very famous chart and a few others you may not have seen. FIRST the grand daddy of crack up boom charts. The US great depression.’s hard to see but just to the left of the biggest peak is a smaller peak. This chart is compressed compared to others, that’s whey it makes such a good example. Prior to the top reached in 1929 is a smaller peak and a blow off. I’m sure there were people saying, THIS IS IT, in 1928 and were made to look like absolute fools as the market rebounded to a high even the BULLS couldn’t have expected. Falling off the other side though is a suckers rally. After a substantial fall off the right side of the peak it finds its legs. NOW if you were an astute gambler you could have made a ton of money of that suckers rally. Look at how high it rebound, just before it falls off the cliff for the last time. That is a classic Crack up Boom move.Now let’s look at Japan. notice the peak hit on the left side of the major peak. There is a big blow off only to regain and hit the ultimate peak almost 2 years later. IF we are on the left side of the Peak right now, BK and others could be exactly right. We could be poised on the verge of a major move up to a crack up boom peak. BUT notice the right side of the peak and the suckers rally. It plunges straight off the right side of the peak only to recover a serious amount only to plunge again. Again, if you have balls of steel and money to lose, a lot of money could have been made on that suckers rally.Let’s look at Argentina. for the long link, you will probably have to copy and past into a browser. But this is another classic example of a crack up boom, though much more complex than the simple Japanese and Great Depression charts. You have MULTIPLE false peaks to the left side of the Major peak and then the ultimate blow off and several sucker rallies on the right side of the peak. I think this is more like us, only we’ll be even more complex. Given the fact that we’re now the reserve currency of the world and the tools that are available to us now as opposed to us in 1928/1929 or to any of the other countries I’ve illustrated.I think we’ve gone over the top now and we ultimately will end up like those charts. The timeline is the only thing I’m arguing at this point. I think we have started one more sucker rally and it’s possible it goes up quite a bit, but I think the BOOM has happened and we are now in the CRACK UP portion of the move. Combine this with Peak Oil and all their other converging problems and I don’t’ see how you can have a long term bullish outlook. History just doesn’t support it.Robert

    July 14th 2008

    Sorry I haven’t posted in a while. I have been very active over at the LATOC website but I haven’t had the time to get some of that knowledge over here.

    Well things are getting very surreal out there. So I think that a calming post may be the best thing that I can do. Mind you my idea of calming is to see reality for what it is and then come up with workable solutions that you can actually use. I WILL NOT pull any punches anymore on my posts. With the failure of Fannie and Freddie I am now convinced beyond any doubt that my world view is correct and therefore my future beliefs are equally correct or at least a hell of a lot more correct than ANYTHING you’ll hear on the nightly news or CNN. Let’s just do a little side by side comparison on exactly WHY THE HELL anyone listens to the main stream press anymore.


    MSM: When Katrina struck at the end of 2005 the MSM was telling everyone it was a supply problem caused by the Hurricane. It may be months of high prices, but rest assured that the idea of 100 dollar oil was the most ridiculous thing they had ever heard. MAYBE we might hit into the high 70’s and gas may “touch” 3.00 a gallon for a while, but the prospects of 4.00 dollar gasoline and 100 oil was to ridiculous to entertain.

    ME: I said that there would be a pull back on oil following Katrina; because we were being fed oil by the Europeans per our contracts with them. So as the months that followed Hurricane Katrina went by, our oil capacity was brought back online and the amount of oil being release to us via our agreements with Europe was kept steady, the price of oil fell down into the 50’s range. Even the peak oilers were saying we would go straight to 100 a barrel. I disagreed. Oil hit bottom at about 57 a barrel and has been on a one way road to 147 over the past 3 years. NOT ONE MSM source would ever make that claim. To the contrary as oil broke every single record in the books, they still want to tell you it is “speculators”, “OPEC”, “ENVIRONMENTALIST BLOCKING DRILLING” or any other excuse except the DAMN OBVIOUS!! Peak oil is setting into the system. It doesn’t mean we are running out of oil, it means that demand is going up and is near to crossing over SUPPLY. We haven’t even crossed the mark yet, and look what it’s doing to prices and the world economy. Just wait till we actually cross over, you think it’s bad now? Just wait another 18 months, you have no idea what bad is.


    MSM: Housing will start its turnaround some time in the 4th quarter of 2006, NO WAIT 2007, NO WAIT 2008 and now they say sometime in mid 2009. That anyone even listens to these people is beyond me. ONLY ONE THING will cure the housing crisis. When prices finally drop to a level where buyers can buy them and feel secure about the long term value of that investment. And guess what? We aren’t anywhere near that point.

    ME: I said that in 2005 that we were heading into a bubble of epic proportions and that if you wanted to get out of any marginal properties, the time to do it was then. Because the economic fire doors were being barred and anyone caught on the inside of those doors were going to get burned big time. The MSM kept saying a turn around was just coming into focus, I SAID that it would eventually start leaking into the banking system and by 2006 I was telling people that Freddie and Fannie were going to go belly up. The MSM thought the idea of Fannie and Freddie going under was ludicrous, yet there it is, in black and white in your newspaper and in full color on your favorite TV news program, FREDDIE MAC and FANNIE MAE are to be bailed out using YOUR money to help a bunch of crooks and scam artists. They were aided and abetted by those in the Financial News industry to keep you asleep at the wheel while they robbed you blind. Score TWO for me.


    MSM: The press kept reporting that the US TREASURY was pursuing a strong dollar policy going all the way back to Allan Greenspan. They said the idea of the US Dollar coming under such pressure that it might cause a failure of the US Dollar system was LUDICROUS and strictly for the Tin Foil hat crowd and Gold Bugs. Even as the obvious stared them in the face with every single rate cut and the subsequent tanking of the US dollar on foreign markets, the press still sat with a straight face and told you that a strong dollar was the policy of the US government. EVEN NOW they are still spreading the lies of the Treasury Dept (Hank Paulson) and the Federal Reserve board (Ben Bernanke) and they tell us all that the dollar is stable and is strong.

    ME: I warned people years ago that IF peak oil comes on to fast and the powers of this country choose to ignore its ramifications that it would lead to a fast ECONOMIC decline in this country. While the radical peak oilers were preparing for a Mad Max scenario of no oil and no gasoline, I was imploring people to get their financial lives in order. To buy ON CREDIT the things they absolutely needed, like a house in a good community and a GOOD CAR that would last and get them around in their lives when they really needed it. Because if you listened to me, you’d already be living closer to the things you needed and closer to work. Because even a Toyota Prius that gets 40 MPG on average is going to get horribly expensive once gasoline hits 7 bucks a gallon. The only logical response to that situation is to DRIVE LESS and stay home MORE. Get comfortable where you are, because you’ll be spending a lot more time there in the near future.

    I’m sorry for the crass tone of my post today. I am normally much easier going in my tone. But I am done hedging my thoughts here and on the LATOC website. I have allowed myself to fall into a very complacent state and have not followed much of my own advice. I have allowed myself to slip back into some bad debt and I have allowed WAY too much of our money to go out the door without any productive result from it. I don’t mind spending money on a vacation or taking my kids some place new and mind expanding. That is an investment in THEIR FUTURE as they may not have the opportunity to do those things as they become young adults. But I have been spending too much on CONVENIENCE in my life. Spending a little here and a little there and getting very sloppy with our budget. It’s time to start sharpening the pencils boys and girls and slashing things from your budget in an attempt to stay ahead of the curve (or wave) that is fast approaching. Here are my thoughts as to what to expect over the next 12 to 18 months. It’s funny that it is pretty damn close to what I wrote down on a Word document about 3 years ago on the running on empty 3 website just as I was becoming very peak oil aware..

    Now the question begs; what do we do now? Well let’s assume you didn’t hear me on the nightly news 3 years ago, or didn’t read my thoughts in your favorite financial columns 18 months ago. Let’s assume you are just now waking up and you need to get going from a complete standstill. Here are some very basic ideas to get you out of your paralysis. These aren’t original and are really just good ideas all around.

    1) Get out of debt if at all possible. Two years ago I would have said to take a good portion of any liquid cash you had on hand to eliminate the worst of your debts. NOW I would strongly caution against that course of action. Now is the time to preserve your personal liquidity. IF you have 6 months to a full year of savings on hand in a nearly liquid form, like a regular savings account or a short term financial vehicle, then I would take anything else on top of that and pay down all bad debt. Pay off credit cards sell any vehicle you don’t need or can’t see helping you 18 months from now as gasoline hits 7 bucks a gallon and pay off the “GAP” that probably exists on that loan. Don’t throw good money after bad and trade in your SUV to get a hybrid. You’ll just be going further into debt for a car that probably won’t help you in the long run. Your best bet is to buy as cheap and as good a USED vehicle as you can (if long driving is your only chose at this point) and use that for daily driving. Going into debt for a vehicle is probably not the best thing you can do, but if it gets you a vehicle that will last you a long time then make sure you get as good a deal as you can.
    The bigger point here is MANAGEMENT OF YOUR MONTHLY expenses. Get your monthly costs well below your monthly income and keep it there. Reevaluate all the time. Don’t assume inflation is not eating you alive, because chances are, IT IS… I have been budgeting an amount now for almost 18 months, that we’re supposed to buy groceries and go do stuff with. That number just isn’t cutting it any more. It’s like 25% to low in my estimation. A lot of that is just plain wastefulness on my part, but it’s also inflation of everything around us. I need to really get into that number and figure out where I can save us some money. Just keep your monthly liquidity flowing and don’t get yourself caught short by circumstances, because then you’ll be forced to make bad decisions based on short term thinking. My muffler just went out on my Kia and it’s not really drivable as it’s beyond noisy (I’d probably get a ticket for it, making the situation even worse), the cost to fix it… 1000 DOLLARS!! I was not expecting that. But because I just bought another vehicle and made sure it was in good condition, we have an out, PLUS I only live 3 miles from work, so biking is a very good option as well. I HAVE CHOICES. I am not going to be forced to throw 1,000 dollars at a car that I have paid off and was supposed to be my work clunker.
    Run scenarios against your financial life. WHAT IF I lose my job? What if I get my hours cut in half? And then figure out NOW if you can live in your current life at those levels.
    2) FOOD STORAGE must be a priority at this point; even if you just view it in light of the financial advice above. Think about it this way. WHAT IF you lost your job today and WHAT IF you had 6 months of basic foods stashed away in your home pantry? Would that be a life saver or would it just be “nice”. For most it would be an absolute God send and might mean the difference between keeping your house while you find a new job(or create one) and watching your house stripped from you as your family watches. The home pantry used to be a natural part of being an American. You never relied entirely on the stores for your everyday well being. You stored during the good times and drew from those stores in the bad times. Also; supplementing your home pantry with home grown food is nearly as important as a 6 months supply of food. Instead of having to spend 3 bucks for green peppers or 50 cents for a single can of Tomato paste, wouldn’t it be nice if you could just make it for nearly free from your home garden.
    But you can not wait for these things, you have to start now and get good at it NOW… If you wait until you need it, it will be too late. So take some of your savings from above and get busy on these items. They will pay dividends in just the amount of worry it will remove from you shoulders if things get weird. And even if things don’t get bad in your own life, wouldn’t it be nice to be able to help others around you who are having problems?
    3) COMMUNITY. I’ll admit this is the hardest thing for me, and I haven’t done anything down this path. I really don’t know my neighbors that well, I haven’t been active in the local village government and I don’t really know what’s going on in our community. I spend way too much time focused on the macro, high level problems and I haven’t’ spent ANY time on the micro end and trying to build community solutions. The time to start that process is now. People are listening now and people are scared. GIVE THEM a direction that is positive before politicians and greedy bastards get a chance to start moving them in destructive ways. Only through community and family will we see this through to a better day. Much like the Great Depression, the answers WILL NOT be found at the national or even state levels. They will be worked out at the individual and local level. Get to know those around you again and see where they stand. Will they be a good neighbor when push comes to shove? Will they trade some of their things for your things (like veggies from your garden for a ride to the store?). Think WIN/WIN and you’ll find that you can build a good circle of friends around you. The more people who get on board to help, the easier the load will be for everyone.
    Just start with those 3 things and start NOW. Do not wait for the buzzer to go off saying “THE END IS HERE, IT IS NOW TIME TO PANIC”, because the warning will never happen. The failure of Freddie and Fannie are a huge problem, but it won’t be the end of the world. Oil prices will eventually hit 200 a barrel (sooner than you think) and gasoline will hit 6 bucks a gallon, but it won’t be the end of the world. WHY? Because humans are the most adaptable of all creatures; when push comes to shove, people will come together.
    UNLESS they are lied to. And that is my biggest fear. During times as these, is where we see the worst of the scum of this country and world rise to the surface. They preach easy answers and SCAPEGOATS. Fear these people and actively work against them. There are NO easy answers for us, only through hard work and mutual sacrifice will this country work through these problems.
    Unlike Great Britain and Germany before them, WE STILL HAVE A LOT of infrastructure and resources left in this country. IF we accept the reality of the situation and make the hard decision now, we’ll be able to use those GOD GIVEN resources to make the bridge to a better day. But to continue to waste those precious gifts is to spit in the face of God. Because if we continue down the road we are traveling people are going to die. The infrastructure that we have built over the course of the last 100 years was bought with a HUGE price tag and it will not be easily changed out for something else. IF we choose to continue our wasteful lives and choose not to turn from this path, I fear that God will not intervene. I have two small children and I truly fear for their future.
    Not like the fear of my parents as to whether I’d go to school or whether I’d meet a nice girl(I did :) ), but whether the government will take them from us and throw them on the front lines of unjust and immoral wars in an effort to prop up our wasteful way of life. It is a fear that they may know the fear of hunger or privation right here in this country in a way not seen since the 1930’s. IF we make hard decision now while the sun is still shining, this future will disappear. It doesn’t mean our children will have our lives, but that wouldn’t be a bad thing would it? Our lives (assuming you’re over 30 and younger than 70) was shaped by a wasteful lifestyle given to us by the miracle of OIL. It was a GOD GIVEN allotment of oil that should have lasted humanity HUNDREDS of years, but it lasted less than 100. We wasted it on one of the biggest misallocations of money in the history of mankind. The SUV, the Shopping Mall, Mass consumerism, the suburban build out and a hundred other wasteful ventures. Well the party is winding down and unfortunately for them, it will be our children who will do the clean up. We can help them by not DIGGING ANYMORE. The first rule of holes is “WHEN YOU’RE IN ONE, STOP DIGGING!!”
    Our society is digging full steam and not one person in a place of power is telling them to stop. They will keep going until something forces them to stop. And our leaders (including our great choices for president) have proven to be cowards of the worst stripe. They refuse to share the knowledge they must possess at this point, and that is THE UNITED STATES OF AMERICA IS BANKRUPT. They have known this for the better part of 30 years, but they have hid the notices from us, they have told us the phone calls are just wrong numbers and now the sheriff is banging on the door and STILL they lie to us. The lying must stop and we must see reality for what it is.
    I’ll end on this note. I’m not sure who is credited for saying this, but I think its simplicity is wonderful. “Things will continue, UNTIL THEY CAN’T”. We can choose to see the brick wall coming into view and at least try and slow the car down, or we can pretend nothing is wrong. Either way we WILL stop, the first way at least gives us the possibility of avoiding a crash, the other guarantees it.

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