Wednesday, December 30, 2009

U.S. Government: The New Growth Industry

(Editor's Note: This article originally appeared in Jason Farkas' November 6 "Weekly Insight" column of EWI's intensive Currency and Interest Rates Specialty Services.)
The United States is facing a lot of problems, but one U.S. industry remains strong. It has access to capital and has increased in size every single year since 2000. Should you invest in this industry? Don't bother -- you already have.
This mystery industry is the U.S. government, and its unbridled growth remains a reason to be bearish on the U.S. economy.
Don’t be fooled into thinking the Great Recession is over because of the 3.5% gain in third-quarter GDP. The only reason for the uptick was the government’s contribution, as seen in the chart (courtesy of the Cato Institute):

Because the government’s size has increased so dramatically since 2000, the U.S. is now closer to socialism than capitalism. A February Newsweek cover hit on that sentiment with its title, “We’re All Socialists Now.” A socialist economy is inherently inefficient. Resources are taken from the private sector and redistributed to a wider group of citizens, which is costly, and those costs lead to a smaller economic pie for everyone.

A chance reading of a book on technical analysis and the Austrian school of economics led Jason Farkas, CMT, to EWI. Prior to joining the firm, Jason worked for 14 years as a futures, options and equity trader. He has been tutored by some of the best investment minds, including legendary trader Dick Diamond. You can read Jason's Weekly Insights every Friday in EWI's intensive Currency and Interest Rates Specialty Services.

Read the entire article =>>here

Monday, December 7, 2009

The Dubai Financial Nuke

The Dubai Financial Nuke
Clive Maund
We got the heavy reaction in gold that we had been expecting for some days on Friday. The problem is that we also got a big important breakout in the dollar, which we had acknowledged as a significant possibility for some time. This is not good news for commodities and not good news for the stockmarket either as it signifies the onset of a flight to cash such as we witnessed last year.

What was really odd about yesterday was that we saw a big dollar breakout, but Treasuries fell heavily. We are now believed to be on the verge of another massive deflationary downwave, similar to last year, but worse. However, this time it is very possible that while we will see a flight to cash, we will not witness a stampede into Treasuries, or at least not on anywhere near the same scale. So what is going on here? - what are the principal underlying dynamics? Anyone who has had the misfortune to watch a nuke exploding, misfortune because you get irradiated, knows that first you see a very bright flash, then there is a period of tranquillity as the flash dies down and the mushroom cloud starts to rise, before the shockwave hits, when things get pretty rough to say the least.

You've seen the flash - now get ready for the shockwave...

What happened in Dubai just over a week ago was the bright flash, and the media have used the intervening period before the shockwave hits to reassure everyone that everything is going to be just fine - "You just relax, nothing will come of it, it's only $60 billion down the drain or whatever - have a cup of tea". The trouble is that it's not $60 billion at all - the reality is that this is a default on a massively larger scale. Dubai was a vast sinkhole into which western banks and governments unquestioningly poured not just billions but trillions of dollars which was then leveraged enormously by means of derivatives enabling Dubai to build itself up into a latter day Rome, with a level of opulence and extravagence that would have made Caesar green with envy.

When people think of Dubai the things that come to mind are the massively extravagent 7-star hotels, the towering record breaking skyscraper, palm-shaped island resort complexes etc and forests of new office buildings and apartments etc. What the vast majority don't realize is that the stupendous leverage afforded by derivatives has in addition enabled Dubai to create an immense global empire of businesses, most of the elements of which are broke, having racked up staggering levels of debt. Dubai is the nexus of the derivatives pyramid and it is flat, stony broke. Where did all the money come from to pay for all these things? - why from taxpayers and pension fund contributors the world over of course, but especially in the US, with Wall St acting as a giant conduit sluicing a torrent of cash into Dubai. The interesting thing is that there was never any accountability - countries and companies vied with each other for the privelege of pumping money into the exalted kingdom, seduced by its supposedly limitless oil wealth, and requesting or requiring guarantees was regarded as impolite. Now that Dubai is broke, the Dubai government has suddenly distanced itself from Dubai World, and the attitude towards the Western banks and governments who have poured trillions into Dubai is "Tough luck - you lose, suckers". What this means is that trillions of dollars which are now counted as assets on the balance sheets of banks worldwide and especially in the US are actually liabilities. So what do you think is going to happen to the stock prices of these banks - and stockmarkets generally, when the world wakes up and acknowledges this reality - when the shockwave hits?? Small wonder that the charts for Goldman Sachs and J P Morgan look very like the market charts before the '87 crash, but that was "small potatoes" compared to what is coming down the pipe this time.

Go ahead, take a good look at it - after all, You helped pay for it!.

If money panics out of commodities and stocks it has to go somewhere. Last year, as we know, it took refuge in US Treasuries, especially short-term Treasuries and it drove the dollar up as massive across the board liquidation went first into cash which was then used to buy Treasuries. While we can expect a similar dynamic to be in play this time round, largely because most investors simply don't have the imagination to think of an alternative to US Treasuries, there is a complicating factor, as highlighted repeatedly by Karl Denninger in his recent highly pertinent articles, which is that the US has been making a mockery of foreign Treasury buyers on an ever increasing scale with its endless monetization and ramping of the money supply - in effect treating them as morons by paying them zilch interest rates and undermining the dollar at the same time. They are right - they are morons, who are one way or another are going to get what's coming to them - after all, who but an imbecile buys the debt of a bankrupt country? However, there is a saying that "you can't fool all of the people all of the time" and foreign Treasury buyers and holders are getting increasingly fed up with their cavalier treatment at the hands of the US, and, in the absence of another deflationary implosion causing a renewed flight into the dollar and Treasuries, they look set to start dumping them, which as Denninger points out would set in train a "death spiral" of rising interest rates one consequence of which would obviously be a crashing stockmarket. So whether we see a rising dollar or a falling dollar it`s "Zugzwang" for the US stockmarket and economy - any move made loses, as does no move.

The rate of advance of the broad stockmarket has been slowing for months. On the 6-month chart for the S&P500 index we can see that it appears to have arrived at the top point of a large "Distribution Dome". If this Dome is valid - and it appears to be so - then we can expect the market to turn seriously lower soon, and we should remain aware that markets generally drop twice as fast as they go up, so it will not have to contact the Dome boundary on the way down - on the contrary, given the parlous fundamentals outlined above it will probably drop like a rock.

Bank stocks look set to be particularly hard hit in the event of a second downwave. This is apparent from their deteriorating relative strength in recent months - they are already very close to crashing key support as is clear on the charts for Goldman Sachs and J P Morgan. These 2 elite companies have had the richest of pickings during the financial crisis - being at the front of the line for everything, which is why their stock prices recovered so well - and because of this they are widely assumed to be invulnerable. They are not expected to be spared during the second downwave however, and their current lofty valuations make them a good candidate for shorting or Put options.

Goldman Sachs and J P Morgan chart analysis and Put option information follows for subscribers.

Clive Maund, Diploma Technical Analysis

Copiapo, Chile, 6 December 2009

No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Wednesday, February 11, 2009

Another Year of Shock and Awe

In their annual forecast edition, the editors of BIG GOLD asked Casey Research Chairman and contrarian investor Doug Casey to provide his predictions and thoughts on issues everyone's thinking about these days. Read what he has to say on the economy, deficits, inflation, and gold…

In their annual forecast edition, the editors of BIG GOLD asked Casey Research Chairman and contrarian investor Doug Casey to provide his predictions and thoughts on issues everyone's thinking about these days. Read what he has to say on the economy, deficits, inflation, and gold…

The $1.1 Trillion Budget Deficit

My reaction is that the people in the government are totally out of control. A poker player would say the government is "on tilt," placing wild, desperate bets in the hope of getting rescued by good luck.

The things they're doing are not only unproductive, they're the exact opposite of what should be done. The country got into this mess by living beyond its means for more than a generation. That's the message from the debt that's burdening so many individuals; debt is proof that you're living above your means. The solution is for people to significantly reduce their standard of living for a while and start building capital. That's what saving is about, producing more than you consume.

The government creating funny money - money out of nothing - doesn't fix anything. All it does is prolong the problem and make it worse by destroying the currency.

Over several generations, huge distortions and misallocations of capital have been cranked into the economy, inviting levels of consumption that are unsustainable. In fact, Americans refer to themselves as consumers. That's degrading and ridiculous. You should be first and foremost a producer, and a consumer only as a consequence.

In any event, the government is going to destroy the currency, which will be a mega-disaster. And they're making the depression worse by holding interest rates at artificially low levels, which discourages savings - the exact opposite of what's needed. They're trying to prop up a bankrupt system.

And, at this point, it's not just economically bankrupt, but morally and intellectually bankrupt. What they should be doing is recognize that they're bankrupt and then start rebuilding. But they're not, so it's going to be a disaster.

Read it all here=>>

Friday, January 23, 2009

Going LongFinding Elusive Gold in This Market

by the editors of BIG GOLD, Casey Research

At this writing, gold is still 15% off its peak, at least in U.S. dollars. Yet at the same time, the metal is cruising at or near all-time highs against a host of other currencies, including the Swiss franc, British pound, Canadian dollar, Australian dollar, and Indian rupee.

That currency disparity means buyers around the world are prepared to pay much more for gold, relative to their own currencies, than is reflected in the New York spot market, which prices gold in dollars.

Demand for gold coins in particular is running so high that there were severe shortages in 2008. Dealers' shelves emptied, mints either rationed their output or stopped producing entirely, and premiums over the spot price rose dramatically. All of which implies that the metal's bull market is far from over. Yet taking advantage of the trend becomes problematic if you can't get what you want.

Sure, you can buy as much paper gold as you like, through the SPDR Gold Trust ETF (NYSE.GLD), which is bullion-backed and will be sensitive to an advancing price. But what if you simply want physical metal and want it in quantity - say, a hundred ounces?

Well, you could buy 100 coins. If you could find them. Or you could buy a single 100-ounce bar.

Take heed: if you are buying in 100-ounce, 400-ounce or 1-kilo sizes, you want a good delivery bar, one that carries a hallmark from a recognized refiner. And buy only from a source you have a good reason to trust. The gold trade has been replete with con artists since ancient metalworkers began hammering on the shiny stuff and found they could increase their profit margins by adding in a little silver, copper, or even lead. With 100 ounces going for upwards of US$85,000, caution is in order.

Once you're ready to commit to a 100-ounce buy, the next logical question is: Is there any way to avoid the big premiums and acquire what you want at spot? The answer, fortunately, is yes. You can elect to play with the big boys and get your 100-ounce bar on the COMEX, where the bullion banks and giant funds do their trading.

Playin' the COMEX

The COMEX is primarily a paper market, with speculators going long or short on contracts for future delivery. 99.9% of those contracts get settled in cash and are closed out before the delivery date arrives, with participants pocketing profits or taking their lumps. Very little physical gold changes hands through COMEX trading.

But some does, because every participant who goes long has the right to pay in full and insist on actual delivery. And every participant who goes short has the right to deliver the goods and get paid. Those trades represent the other 0.1% of the contracts.

The Casey COMEX User's Manual

First, get a little more acquainted with the topic. Log on to the COMEX gold section at ( and have a look around.
Pay close attention to the Current Session Overview. It gives you a real-time picture of trading, with the various delivery months displayed, along with the price per ounce being bid. (With gold, the months further out nearly always have higher prices, a situation known in the commodities trade as contango. The opposite, when near-term prices exceed those down the road, is called backwardation, and for gold it's extremely rare.)
If you decide to proceed with the idea of buying on the COMEX, you have to open an account with a futures broker. To do that, you'll need to answer some questions about your financial status and then make a deposit. We spoke with an agent at Lind-Waldock in Chicago, one of the oldest and most active futures brokers, to learn about their requirements.

First, at Lind-Waldock, you must have a yearly income and net worth of at least $25,000 and $50,000, respectively; anyone who can afford a hundred ounces of gold will surely qualify. Then you must deposit a minimum of $5,000 with the broker. Finally, you choose from among several levels of service, which affects the amount of commission you'll pay.
Once the futures account is in place, you're set to go.

Let's say the bid price three months out is $850/oz., and you like gold at that price. You call your broker and place an order at $850, for one gold contract (which represents a single 100-oz. bar of good delivery metal). As with bidding on a stock, you may not get what you want if the market is heading up and runs away from your price. The alternative is to place a market order, trusting that it gets filled at close to your target price, but that can be risky in a fast-moving market.

Let's assume you get your contract and lock up what you'll pay for the gold, most of which will be due at expiration. What next? There are two possibilities. You can just deposit the full cost of the gold, sit back, and enjoy the wait for your prize. Or you can deposit the minimum amount required (the minimum "margin"), which varies and is set at the exchange's discretion. For a single gold contract at the moment, it's $5,800, or about 7% of the contract's value.

That's how the speculators play the market, putting up as little front money as possible. For you, that won't be a problem if the price of gold rises, since the broker will be crediting a matching amount of cash to your account on a daily basis. But you have to be careful if the price of gold falls, because the broker will then charge your account for a matching amount of money day by day - and to keep the balance from going below the minimum margin requirement, he'll send you a margin call, insisting that you deposit more cash. If you fail to do so, the broker will enter a sale order for you, and you'll be out of the market.

Changes in the value of a futures contract, with their attendant shifting cash requirements, are of critical importance to traders who are simply playing with paper. Since you're only interested in acquiring a physical gold bar, the fluctuations shouldn't affect you. Just make sure you have enough money in your account that you're not inadvertently sold out.

Then, on the settlement date, your account will be charged for an amount equal to the settlement price multiplied by the exact weight of the particular bar that's been assigned to you (a "100-oz." COMEX good delivery bar can actually vary in weight between 95 and 105 ounces). This is when everything gets squared up.

Taking Delivery

If you keep your position open until delivery, the COMEX will hand your broker a warehouse receipt with the details of your specific bar (hallmark, serial number, and weight to one-thousandth of an ounce). The broker can either hold the receipt in your account or mail it to you. (If you take possession of a warehouse receipt, be aware that it's an irreplaceable bearer instrument. Don't lose it!)

Your bar will be sitting in the vault of one of the four designated COMEX depositories, all of which are in or near New York City. If you want to bring the bar home, you'll have to pick it up at the depository or arrange for third-party delivery. If you intend to hold it until gold reaches a certain price and then sell, your best bet is probably to leave the bar in the COMEX depository and leave the receipt with your broker.

We called Scotia Mocatta, which operates one of the COMEX-designated vaults, and were quoted a storage fee of $15/month per bar. If, however, you want the bar in your hands, you'll have to pay a $150 delivery fee to get the bar released by the depository. Then you're responsible for retrieving it, which could be a problem.

Unless you want to put the bar in your suitcase and fly home with it, you'll have to have it delivered. You can't ship a gold bar via the U.S. mail, FedEx or UPS; you have to hire an armored car service, such as Brinks.
Shipping costs depend, of course, on how far your gold will travel from the City. VIA MAT International (USA) gave us a ballpark figure of $150 to transport one gold bar from New York to California - a heckuva lot cheaper than airfare, and you get to keep your shoes on.

One final note: armored carriers won't deliver to a house address. You would have to arrange to receive the shipment at a business, which could be an additional worry if neither you nor a trusted friend owns one. Or you could have it delivered to your bank and slide it into a safe deposit box, provided you don't mind the bank's employees knowing what you're doing.
Will You Need an Assay?

If you leave your gold bar in the COMEX depository, it will be easier to sell. You just go through the above procedure in reverse, going short a contract instead of buying one.

However, if you take physical delivery and later wish to sell through the COMEX (or through a private dealer), you will need to have the bar reassayed. A prospective buyer of such a costly item must be certain that it was genuine to begin with and hasn't been tampered with while in your possession.

The COMEX provides a list of approved assayers on its website. The one we contacted, Ledoux and Co., quoted us $300 per bar for the service.
And that's all you need to know to get gold wholesale.

When it comes to anything gold, the BIG GOLD experts have the inside scoop on it… an invaluable service, especially in times like these, with gold serving as a crisis hedge. For just 22 cents a day, you'll learn everything you need to know about gold, the physical metal, as well as the safest stocks of major gold producers, royalty companies, the best gold ETFs, and much more. Learn more about our 3-month, risk-free trial subscription with 100% money-back guarantee.

Also by David Galland

Sunday, January 11, 2009


As stated before if it hits 81, it should mount a relief rally that takes it back to the 83.00 ranges, if not, it will most likely trade all the way down to the 75-78 ranges. Market update Dec 16, 2008

After trading as low as 78.77 on the 18th of December, the dollar has since managed to mount a decent rally. In order for this rally to gather steam, the following conditions need to be met;

It cannot close below 78.77

It needs to trade above 84 for 3-6 days in a row

If it can fulfil the above two requirements, the dollar will have a very good chance of testing its old highs and possibly putting in a new high before mounting a strong correction that could last till the end of 2009.
A market that has mounted such a strong rally does not simply break down in one shot; the normal course of action is a rapid pull back, followed by a strong upward move (blow off top) and then a more orderly pull back that potentially leads to a series of new all time lows.

The dollar has to stay above 78.70 and rally past 84 to turn the short term trend upward. This whole pattern could take between 3-6 months to complete. Traders who are bullish on the dollar can open up long positions via the ETF UUP (dollar bullish ETF) or short the Euro via DRR, as the Euro usually trades in the opposite direction to the dollar. We must point out that no matter how strongly the dollar rallies in the upcoming weeks and months, this rally will fail and the dollar will most likely end the year on a lower note; it could conceivably put in a new low before the year is out. Thus traders who are bullish on the dollar should look into closing any and all positions if and when it tests its old highs.

"Man who stand on hill with mouth openwill wait long time for roast duck to drop in."
ConfuciusBC 551-479, Chinese Ethical Teacher, Philosopher

© 2008 Sol PalhaTACTICAL

Market In Trouble?

The SP could meander lower over the course of the next 3-4 weeks before a setup for a sharp decline likely occurs before mid-February 2009.

The daily chart of the SP 500 Index is shown below, with accompanying stochastics 1, 2 and 3 shown below in order of descent. The %K is above the %D in #2 and #3 and "appears" to be trying to curl up to cross the %D in #1. Another 2-3 weeks of a grinding declining top prior to a precipitous decline is the most likely event to occur. Upper 21 and 34 MA Bollinger bands are in close proximity, with the lower 21 MA BB requiring another 1-2 weeks in order to rise high enough to "kiss" the index, thereby creating a setup for the next leg down in the pattern.

I must stress that it was important for the S&P 500 Index to put in a low around 780-800 anytime from mid to late December 2008 in order to create a scenario for an extended rally. Failure for this to occur in the presence of a grinding market is increasing the odds that any sort of stock market rally into spring time is quickly fading.

I put in a possible Elliott Wave count that I have not presented yet…a diametric triangle "could" be forming, which would have wave (E) starting a decline pattern that would require lasting until mid-March 2009 before a corrective bounce lasting into early May, followed by a final low established in June/July 2009. Diametric patterns require similarity in time and complexity, not price action, so in order for this scenario to pan out, the S&P 500 Index "must" continue to decline over the course of the next 2 months.

The weekly chart of the S&P 500 Index is shown below, with lower Bollinger bands still declining beneath the index. Upper Bollinger bands are curling down, indicating that any sort of market stability is at least 8-12 months out. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in #1, but beneath it in the other two. The S&P is oversold, but stock market crashes occur when markets are oversold. Avoid going long on the S&P at present, given stock market uncertainty.

Establishing short positions with gradual accumulation is probably the best way to play this.This chart clearly indicates that broad stock indices could be in trouble. It is highly unlikely that a further 40-50% decline in the S&P 500 Index from present level would not see precious metal and energy stocks go untouched.

Precious metal stocks have doubled off the lows and have yet to correct, which likely will occur when the broad stock market declines.

Ownership of gold and silver bullion is the best investment in the present environment…if it can be obtained.

It is important to note that a decline to around 800-810 is a prerequisite in order to have another move higher. Failure for the S&P to have any upside momentum the past few days removes any short-term upside and in turn has set up the likely scenario for 1-2 weeks of downside at a minimum before the 800 level is reached.

There are numerous possibilities presented today and the market will determine which path it follows.

It is important to realize that when the market locks into whichever presented pattern, odds are it will follow the defined path.

The patterns either call for an immediate decline to the lower market depths, or a further "pause" before commencing on that journey. In short, the S&P should make a low anywhere from 800-850 over the course of the next 2-4 weeks…from that point in time, it will become easier to assess whether or not a rally can be sustained into March/April 2009 or if the downward spiral of the broad market indices continues.

David Petch
January 10, 2009

Technically Precious With Merv

For week ending 9 January 2009
Money Supply

The chart below as provided by Gordon Harms.
For the past few weeks money supply has been growing at a sharply
accelerated rate.

Last weeks sell off relieved the overbought condition while NASDAQ new highs increased and new lows on both exchanges fell to the lowest levels in years. Seasonally next week has a strong upward bias.
I expect the major indices to be higher on Friday January 16 than they were on Friday January 9.
This report is free to anyone who wants it, so please tell your friends. They can sign up at:

Saturday, January 10, 2009

Silver News and Views

The Silver Institute just put out a press release which stated, "The silver price, per ounce, in 2008 averaged a strong US$14.98, a nearly 12-percent increase over the 2007 average price of US$13.38; the best average annual price since 1980. A key development in silver's fortune has been renewed investor interest in the white metal, which began in earnest in 2004 and continues today.


Saturday, January 3, 2009

Precautions You Can Take in 2009 to protect your Family

"The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved." -- Confucius (551 BC - 479 BC)

When everything seems normal, and we all feel overwhelmed by the routine rush to earn a living, take care of our family and friends, and try to invest successfully too, it is all too easy to temporarily forget that we are surrounded by serious risks. At times, we might feel like we are working hard at paddling our canoe across a calm and quiet lake, but we do not see the large sharks and alligators which are submerged and waiting for the best time to strike. It has been said that optimists expect the best (and are frequently disappointed), but pessimists prepare for the worst (and hope that the preparations will be unnecessary). This Optimist presents the positive view that we can be happy in the good times, and also focus some effort on being ready for when the times are not so good.

Why worry about personal security?

The way New Orleans morphed into chaos and violence soon after Katrina is a graphic illustration of how calm and peaceful times can quickly deteriorate into traumatic events. Other natural and man made disasters such as crime, floods, wildfires, earthquakes, tornados, and riots offer clear examples of situations which can abruptly transform normal life into a survival test. People whose lives are suddenly immersed into a serious problem situation may discover that it can be very difficult to find a way to move their family to safety unless they previously prepared for how and where to do so.

Who should consider personal security?

Since some of the questions in this topic are difficult, the Optimist is happy that he can respond to an easy one like this. Everyone is at risk of being exposed to serious security problems, so each person should give some thought to how best to handle those problems. Everyone who thinks they have immunity to the serious problems that could affect all of us should consider that Murphy's Law has not been repealed specifically for them, and that things can go badly wrong anywhere.

What bad things could possibly affect me?

OK, you live in a modern suburb that feels really comfortable, and you don't plan to move to New Orleans before the next hurricane season starts, so you are safe, right? Wish it was that easy. Natural disasters can happen anyplace. People who do not look beyond their own neighborhood can suffer great harm when that entire region experiences a major problem. Big storms, earthquakes, wildfires, etc can completely destroy large areas. No matter how secure a neighborhood may seem in normal times, there is always a risk that crime could spiral into a temporarily uncontrollable and seriously unsafe situation.

Consider what might happen if there is a nationwide trucking strike to protest truckers' inability to earn more than the rapidly rising cost of fuel. Most of the food and fuel for big cities is delivered by truck. A disruption in deliveries would quickly leave large portions of all big cities with inadequate supplies. Inner city residents are not likely to suffer quietly and peacefully as their supply of food runs out. Suburbs surrounding the city will also feel the effects. At the same time, a sharp curtailment of fuel deliveries to gas stations will make gasoline unavailable. People who are poorly prepared may find that it is hazardous to stay in their neighborhood, but that they are also unable to leave.

It is not too difficult to stretch one's imagination to questions about what could happen in a big city if the dollar abruptly collapses in international markets. Interest rates would soar, and prices for everything that is imported would jump sky high. Food would quickly be priced out of reach for most people within large cities, and gasoline would be difficult to buy at any price. The short term results could look a lot like the hypothetical trucking strike discussed above. Staying out of debt, and having one's finances invested in silver, gold, energy, and a host of other inflation proof assets is an excellent way to protect our finances, but we should also consider how well our personal security is protected from comparable risks.

How could we improve our personal security?

The first and most essential step in preparing for possible problems is to consider the threats, and to think about how best to deal with them. For example, crime is always a potential concern, and the Optimist previously offered some advice about reducing one's risk of becoming a victim of crime. The bigger picture of how to prepare for possible international events, or natural disasters, or large scale problems caused by people, however, requires the individual perspective of each reader to find an appropriate solution. Since the Optimist does not have the ability to see through the eyes of each of the readers who will consider this commentary, I will need to limit my advice to general suggestions about things each person should consider.

First, if you can't stand the heat, make sure that you have the ability to get out of the kitchen. There are some serious events which could provide even less warning time than hurricane Katrina did. If you wake up one morning to find a tsunami of events has caused a wall of financial or criminal "water" to rush at you, there may be very little time or ability to react and prepare. At a minimum, each person should have a plan about what they would want to take with them if they need to immediately move their family to safety. It is also a very good plan to always have enough gas in the car to be sure that you can at least get away from the city. A good rule of thumb is to never let a gas tank get to less than half full, and then to refill it quickly at any hint of a potential problem.

Second, it's not enough to know when to hold 'em, know when to fold 'em, know when to walk away, or know when to run. You also should have a good idea about where to go. Although a few readers have offered advice about where they want the Optimist to go, I don't intend to share those directions with you. Instead, my suggestion is that each person should consider the possibility that he may need to quickly move his family out of a possible danger zone around many cities, and then he should formulate the best plan for his situation.

Third, be prepared. It must have been really embarrassing, as reported in news accounts, for the guys who absent-mindedly drove off from gas stations and left the wife or one of the kids behind. In times of serious stress, it is very difficult to remember everything. My advice is to plan in advance, and make a checklist of things to take if you need to get in the car and go.

Where might one invest in personal security?

Oh yeah. This commentary is about investing in personal security. For starters, don't let the gas tank of your car get close to empty while you wait for gas prices to drop a little. Top off the tank often, regardless of the price. Make sure that your family has enough food and water at home to last for several days, and rotate that stock so that your emergency supplies are always fresh. Keep in mind that the electricity we depend upon in so many ways might be unavailable for an extended time after an ice storm or other serious problem, and be sure you have food you can eat without electric power if necessary.

People who have an interest in areas away from a big city, and who have sufficient investment funds, might consider combining those elements. For example, a hunter or fisherman, or camper or weekend farmer who really likes an area within driving distance might consider purchasing or leasing a small amount of land there. If the land has a small cabin, or even a place to pitch a tent, then it could be a good spot for a vacation in good times and an essential destination if an escape plan becomes necessary. Although the financial investment returns from owning that piece of land might not make your accountant's eyes glaze over, the value to your family in improved personal security could be priceless.


If yesterday is an inconvenient time for you, then by all means wait until today to begin working on your own what-if plans. Actually being able to implement your plans will take some time, of course. Fortunately, the Optimist sees no problems on the horizon that require any more of a rush than the residents of New Orleans had a day or two before Katrina hit.

So, what about silver?

It has always been a good guideline that everyone should keep some money handy in case it is needed for an emergency. There have been many times in the past when small problems were solved before they grew into big problems by taking some money out of the cookie jar. It is possible that a future event could make a credit card or a check unacceptable for payment. Real money in your hand will buy more than paper promises. In times of rapidly rising inflation, however, it is really painful to keep fiat $100 bills in your wallet, and watch them shrink in purchasing power each day. The simple solution to the problem of keeping money on hand for emergencies, and not losing the value of fiat through inflation, is to keep some silver set aside and easily accessible. Although any silver rounds or bars would be good, the Optimist is partial to U.S. junk silver dimes, quarters and halves dated 1964 and earlier. Those coins are readily recognized and easily exchanged for other items of comparable value.

Although the rising price of silver is slowly solving the obvious problem that you still get too much silver metal for your fiat paper, even $10,000 buys enough silver that the weight and space are significant. Although there are many alternatives for buying paper forms of silver to simplify the weight and space concerns, investors should be aware that a serious financial event could make paper silver unavailable and unusable. When silver is a part of one's personal security plan, it would be worthwhile to consider being able to get access to the silver without permission or assistance from anyone.

It has been said that a good presentation tells the reader who what, why, when, where and how. The Optimist hopes he has succeeded in connecting the dots to present a picture which encourages readers to consider their own personal security needs.


Thursday, January 1, 2009

Mardoff Ecomics-The Year in Review

The Big Picture- When it comes to the good old U.S.A., I believe there's one overwhelming view one must take despite all the political rhetoric and "I'm okay, your okay" from the "Don't worry, be happy" crowd on Wall Street; America is trying to operate on a failed business model. While doing so, Americans have truly mortgaged their futures on a far worse situation than the sub-prime fiasco.

- I threw my hat back into the bullish camp in the waning days of 2008.

U.S. Dollar Index - I've had a constant saying for the last few years that "the only party that doesn't know the U.S. Dollar is dead is the U.S. Dollar. "If I was wrong and it was only sick, trust me the trillions of dollars being created and pumped into the system was its death warrant. Pity the poor souls on Tout-TV who say the Fed will be able to remove these trillions of thin-air created dollars from the system without causing inflation. If you believe that one, you should join those who believe Elvis is still alive and on an island somewhere with Jimmy Hoffa. Look for a test of the low 70s by years-end, if not sooner.

U.S. Treasuries - The one remaining bubble that should burst in 2009 (watch). While the 10-year can still get below 2% yield, the time has come to short treasuries. We may go down before going up, but by years-end I think this strategy can be a winner. Read

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Abridged Read it all here=>>

Warning Danger Ahead

by Aubie Baltin CFA, CTA, CFP, PhD.

Now that the $50 billion Madoff Ponzi debacle is all over the front pages of every newspaper and more importantly, affecting most major charities all over the world, the cry for regulation and Increased oversight has reached crescendo proportions. If there is one lesson that should be obvious, but throughout history has never been learned, is that Making Laws Does Not Prevent Crime. Only by changing the system so that it makes human nature the centerpiece of regulation can we possibly achieve our goals. Have you not noticed that these same types of crimes always come to light only after extensive new regulations lead to a major Economic and Financial breakdowns? Yet after each one, we put a couple of people in jail and pass a few more new laws, yet each new breakdown produces bigger and bigger swindles: Which upon careful examination are due almost for exactly the same reasons as the one before.

Look at this guy Madoff. He allegedly robs $50 billion and yet he is out on bail. If a kid robs a liquor store for $500, chances are he doesn't get bail. How does a guy who could potentially have stolen more money than anybody in history get granted bail? With our entire financial system on its knees, how is it that not one single individual has even be charged? The inequality within our justice system has never appeared more glaring. Nobody seems to be able to figure out what happened or why he confessed so quickly. To me the answer is obvious: He is a 70 year old man and by confessing he is trying to take the spotlight and heat off his 2 sons and wife. Also, where is all the money that he stole? He could not possibly have spent it all. If there is a possibility of "grabbing back" monies paid to innocent investors, can they not seize all assets (money, valuables and properties, etc.) owned by his wife and children since they were all accumulated by the use of ill gotten gains? Or is there something we are not seeing. Is he being paid to keep quiet and that is the real reason for his favorable treatment by the courts?

The coming year, 2009, is going to be much worse for the average American than 2008. Dissatisfaction with our current system could lead to widespread protests, riots and violence which, in turn, could lead to a tremendous loss of our personal freedoms as we fall into a Dictatorship Style Socialism. Every American should be outraged by this atrocious stewardship of our nation's wealth. Our future has been looted by a select moneyed few who are completely free of the consequences that so many millions of others will have to go through. Did any of you ever ask where the $900 million that was spent on the presidential campaign came from and what do they expect to get in return? To these politicians from either party, we are like sheep to be sheared and when necessary, led to the slaughter. And make no mistake, it is the working people of this country who will be paying the tab for these so-called Masters of the Universe. The stark reality of the current power grab and the degree of naked greed on such a grand scale with complete disregard for others is a prelude to the financial genocide of our nation's health. Unfortunately it is creeping Socialism that breeds cronyism and anarchy, which always leads to outrageous theft that a truly Capitalist system would not tolerate. However it will be Capitalism that will get the blame, which is why I am calling for a 20 year Depression as our country turns more and more to French style Socialism lead by our new FDR. Keynesian Messiah.

THE STOCK MARKET: I don't have much to say that is new except that the market is behaving almost exactly as expected and explained in my last two issues. We are in major Wave B of the BEAR MARKET with as long as 2 or 3 more months to go before Wave B is over and the devastating Wave C crash resumes. Continue to build up your cash positions. If you insist on action: Buy stocks only into sell offs - DO NOT chase rallies. REMEMBER to always use STOPS. DO NOT LOSE MORE THAN 10% on any position. You must not get caught sitting on losses when this market turns down and the best shorting opportunities present themselves.

Please Note: This article is for education purposes only and is designed to help you make up your own mind, not for me to make it up for you. Only you know your own personal circumstances so only you can decide the best places to invest your money and the degree of risk that you are prepared to take. The Information on data included here has been gleaned from sources deemed to be reliable, but is not guaranteed by me. Nothing stated in here should be taken as a recommendation for you to buy or sell securities.

Abridged for E.A. read the entire article here=>>