Replaying 1929: Business, Financial, and earth change news

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Bear with us:  A Stock Mortem

POST MORTEM - From the Latin, after death.

STOCK MORTEM - From the Ureism, after the Friday close..

 

"It could have been worse" is about the best face that can be put on it, and even that would take a couple of shots of Jack with a beer chaser to blurt out without choking up for most folks, especially among the nearly 'grays' who have bought into paper assets as a means of holding value long-term.  A dodgy proposition, at best, as I've mentioned. 

 

Wrong on much of his work, at least Marx got 'owning the means of production' right.  This was not a good week for the sheep of cannibal capitalism...

 

Besides breaking a 34-year trend line from the 1970's (varies by who's doing the counting, but it's around there), the closing Dow of 11,346.51 compared with last Saturday morning's 11,842.69.  That's just 3.82 points from being a 500-point loss for the week.  Close enough for a Saturday morning chat.

 

The truth of the matter is there's a simple reason for this week's rout:  More sellers than buyers, a condition exacerbated by the end of quarter jockeying as fund managers want to show something other than the truth of this year's performance.  And that is?

 

On December 31, 2007, the Dow closed at 13,264.82, so if you're pushing calculator buttons and worried about your retirement plans going "Poof!", you ought to come up with a drop of 1,918.31 for the year-to-date.  That's only a 14.46% decline in the Dow, but I should remind you (if I can with a straight face) that dividends by the Dow 30 would soften that a bit.  You may have figured out that's about as useful as KY with a locomotive.

 

On the other hand, flipping over to the www.Kitco.com chart site, and not to rub salt around in it, but the close of the 'yellow dog' was $833.30 on December 31, 2007.  That same chart set reveals 926.80, although they may be having an issue with updating.  www.ino.com reports the last trade on August gold was at$930.90 or $931.30, depending if you wand 100 ounces from the CBOT with an August delivery, or a NYMEX August contract.

 

Even using the Kitco figures, lowest of the group and closest to spot, you'd be looking at an 11.2% gain for the year to date.

 

The Blame Game

The conventional wisdom - shunned around here - is that a bear market is a decline of 20% - and to be sure, this market is there,; it's a bear. 

 

Recall the 52-week Dow high is showing as 14,280 and the requisite 20% off that would put the Dow around 11,424...and since the Dow closed well under that this week, you're probably wondering where headline writers are getting their gumption to refer to this as the "brink of bear market"  as in the Bloomberg headline "U.S. stocks slump, Pushing Dow average to brink of bear market". 

 

"Gee, George, Maybe they are talking about the S&P, or something..."

 

Yah think?  Let's test that theory, shall we?  52-week high for the S&P 500: 1,576.09 so 20% off that would be...1260.87.  Take a gold star...that's why it's not officially a 'Bear".

 

Think the market can lose 1.4% next week?  Think McDonalds might serve a burger today?

 

End of quarter portfolio cleaning aside, what's at fault?  Take your pick of the headlines:

• "Credit scores hit by card limits"

• ":Libya's threat to cut oil sends out the jitters"

• "Stocks slump on oil, earnings news"

• "Consumer confidence nears all-time low"

 

On this last, it's the worst levels since April and May of 1980.  But, maybe it was actually worse in the last Depression.  They only started measuring in 1952.

 

Yes, the mortgage market has problems, yes oil is expensive, and yes, the dollar is still overpriced relative to the goods and services produced by America and traded with the rest of the world - especially if you drop out financial products from the mix.  Might want to save some for paper mache, though.

 

Is there a long term fix and a way to get America back on a sound footing?  Oh sure.  Go to a real currency with direct convertibility, and I'm not talking gold and silver.  This weekend for Peoplenomics.com subscribers I explain how a BTU-based currency, set initially based on purchasing power parity and featuring a deliverability attribute, would thin down the Fat Cat Bankster system in no time. 

 

Delivery clauses honesty, and without it you end up with things like....oh, the ABX maybe?

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We're in a world where BTU's are the most important underpinning of society, whether they come from oil, wind, solar, gas, or cord wood and food.  A calorie or BTU-based currency system with absolute deliverability solves a lot of problems, unless of course, you live in Midtown and are a calorie sink.  You might consider honest work, for a change...

 

Packaging financial product with a side order of carbon credits just perpetuates the banker class. What the world needs is honest trade and a BTU/caloric system with deliverability would thin down the banking model which has been on a Ponzi-like run for a long time - but more on this for subscribers.

 

More proof that BTU's rule?  Oil hit over $142 this week.

 

Linguistics: Hugging of the Queen

My commodities broker JB called all excited Friday afternoon to report "I think this is it!  The hugging of the queen in the web bot run...it's a big temporal marker!"  Oh, where metals go climbing and such?  Uh...yeah, sure seems to fit, especially when reports include wording like:

"And Hillary Clinton and Barack Obama, both consummate performers, did their best to milk the venue for maximum political advantage. They stood shoulder to shoulder, hugged, whispered in one another's ears, smiled and waved in unison."

It may be close enough, a check with the time monks this weekend may be in order, but they're on break with the crunch time for the next run, which will focus on coming events out to May of 2009 starts late this coming week - and they deserve some down time to catch up on things before going back to computer screens for 12-hour stints.

 

Other Memes, Other Themes

In Iowa, "them winds' caused the trouble in Council Bluffs.

 

'Them rains' (as we told you were due for a long 3-4 month run linguistically) are making headlines like "More rains hit flooded US Midwest; corn at record. " Sadly, looks like we ain't seen nothing yet.  Never too late to plant a garden, though.

 

A few readers seem surprised, or at least impressed with the predictive work:

"George, Regarding this statement from your 6/27 blog: "A while back I told you that linguistically the outlook (and therefore the personal planning option) included a fair chance of 3 to 4 months of unusual rains in the Midwest, with the resulting disaster for food/encounters with scarcity." I refer you to Jeff Masters site...

 

Where Jeff said, "The jet stream has regularly been taking a major dip southward into the Central U.S. the past two months, putting the favored track for rainy low pressure systems over the Midwest. The jet often gets "stuck" in a high-amplitude trough-ridge pattern which causes drought in one part of the country (California in this case) and floods in another. This "stuckness" often lasts for 3 months." Note the last few words. For three months. Now that's spooky. Did you guys call it or what?

Well, er, uh...Yeah kinda, sorta, would seem so.  Along with the NE Power Outage, 9/11, the recent Chinese quake, the space shuttle disaster, anthrax attack, and the Banda Aceh quake, Dick Cheney's shooting incident and how many other's I've forgotten...and now this, but hey!  This is a garage enterprise.  Only for entertainment.

 

Next BIG 'entertainment possibility' is the window around July 7-9 where a major (read: you don't want to be there if you don't have to when it happens) western US quake might fit the word shifts...but we shall see...water for three weeks and food ready, in case it's right?  No downsize to being prepped that I can think of...

 

Car Insurance Nightmare

'Hail damages up to 30,000 new VW's" in Emden on Germany's north coast.  Wonder if the hail killed any geckos?

 

Anthrax Suit Settled

An "Ex-Army scientist to get $5.8 million in anthrax lawsuit".  That could be a little misleading, though.  The Justice Department gets to buy a 20-year annuity to pay off $3-million of that, which cuts the taxpayer cost quite a bit less.  Assuming a 5% rate for an annuity, the actual cost to the government for that $3-million chunk is likely a bit under $2-million.  Even less if a higher rate is assumed.

 

Travel for the Rich / Elite Department

The headline "Deeper cuts to come in U.S. airline service" has me thinking that more and more companies will go to video-conferencing - Skype and WebEx anyone?

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I can just see what this brings: X-rays and cavity searches before hitting the web...via house calls maybe?

 

All that's missing is a terror-scarer citing 'terrorist use of the web' for government's worldwide to seize and license web use.

 

I knew I liked Spaghetti Department

The headline "US checks if tomatoes caused Salmonella outbreak" has me appreciating locally grown produce from the farmer up the road.  And, I'm reminded why I like simmering a pot of spaghetti on a low boil for hours...

 

Forget RFID tags for animals under the bureaucratic NAIS hype.  Let's get to the real culprits in agricultural health!  RFID tomatoes and spinach!

 

You got questions, we got answers...

 

Pass the Popcorn

"Nuclear missiles could blow-up 'like popcorn' thanks to a design flaw in British warheads.  Quick!  Call Orville Redenbacher...

 

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Coping:  Readers 'Getting It'

The average reader of this site has an extremely high GIQ ('getting it quotient').  Some examples:

"A few months after the New Orleans levees broke (Katrina), I saw a news brief blaming Nutrea rats for chewing, burrowing and degrading the levees. Now, 'they' are blaming muskrats for the levee breaks at the Mississippi. Frankly, I smell a rat....I'm curious, have you seen a rat meme. No political jokes please.

BTW-The Early Show (CBS) just mentioned the bears being out (Wall Street type...probably shouldn't talk rats in one sentence and bears in the next without explanation) in full force and how "lots of people are starting a vegetable garden!" Now I wonder where we heard that before ..............?"

Another says...

"You've expressed interest in underground houses. Here's a link from Cool Tools that I thought might interest you.

http://www.kk.org/cooltools/archives/002906.php "

We have to get this reader another cup of coffee...I had already mentioned that I bought that book plus the book on how to build an earth-sheltered greenhouse, as well...still, worth mentioning again.

 

And the best of the morning is this one:

"George,

I am not someone who typically responds to open questions such as the one you posed earlier this week on the constitutionality of Executive Orders.  However, your post on June 24, 2008, intrigued me being of “legal mind or practice” as a small town lawyer.  I had hoped for more responses discussing this finer point of the law.  In an effort to revitalize your Executive Order question, let me interject some background and comment.  Also, keep in mind that small town lawyers have an adage that if you have two lawyers in the same room you will get three different opinions.   

 

It has been my legal understanding, that executive orders have been used since the inception of the Constitution.  Our Executive Branch was modeled after the English monarch (King).  The King had the authority to issue decrees, proclamations, and the like.  The Constitution abrogated much of this “kingly” power and distributed it to three “separate but EQUAL” branches of government.  Yes, we all know that story.  Unfortunately, things have not stayed so separate nor equal over the years in this regard.

 

It is correct that no where in the constitution does it expressly state anything about executive orders.  However, this power is implied based upon the history of the King’s power from which the Office of the President was modeled, and under Article 2, Section 3 of the Constitution which states that the President shall “take Care that the Laws be faithfully executed.”  In doing so the President, as head of the executive branch, may issue an  executive order directing an agency or officer in his branch of government to this effect.  Therefore, fact that the president may use executive orders to direct his branch is not the problem.  The problem is the ever increasing SCOPE of these executive orders.  Over the years, executive orders have evolved far beyond the original intent into what now amounts to law making.  Since law making is the role of the Legislative Branch of government under Article 1 of the Constitution, therein lies the problem that you so accurately noted.

 

This poses the next series of questions: why does Congress continually abdicate (or delegated) its authority to the executive branch, and what has happened to the system of checks and balances in this regard?  We know the answers, but I leave this to you or another to expound.

[No expounding needed, just follow the money! - G]

 

On a completely separate subject, being the economy.  I have friend who works for ****bank who called me quite surprised after a recent staff meeting about the company.   I thought it would be interesting for you to see how some of the linguistics relating to the economy are coming into fruition at a mid-level ****bank staff meeting.  It was announced that:

·         27% of the company’s home loans are 60+ days in arrear.

·         Credit cards defaults are increasing more than had been anticipated.

·         Interest rates on all products will increase, primarily after the presidential election.

·         Although the last two months have brought some stabilization, signs now show this will not last much longer (now that stimulus funds are spent).

·         Continued high fuel prices are hurting company profits, and the “D” word (depression) was mentioned as a possibility if fuel costs continue to escalate.

·         Employee stock transactions are to be frozen to prevent “insider trading” based upon employee knowledge of the above (no comment on status of stock or option sales for CEOs).

You are correct when you say that the future leaks into the present – that leak is getting bigger.  Yes, thank you, I do have my garden in.

And speaking of planting thing...

 

We are So Screwed Department, III

Oh, the troubles in America, these days.  "Nevada brothels feel pinch of higher fuel prices, report fewer customers" reports Channel 2 up in Reno.