Bitcoins – Coins For the Cryptocracy

People all over the political spectrum are pushing bitcoins again.

I explained earlier why I felt you should avoid them. When I did, I withheld any reasoning except the most logical and self-evident.

Short version:

You can accomplish everything that bitcoins can achieve with good old cash. And you don’t need electricity, internet, computers, devices, and security software when you use cash.

Second, if governments hate cash for its secrecy, why are they ignoring or pushing cryptocurrencies, which are supposedly even more secretive?

Makes no sense, does it?

The problem with bitcoins is they provide a solution for what isn’t a problem.

Secrecy isn’t a problem.

Secrecy can be achieved as is, if you set your mind on it.

The real problem is that every increase in secrecy augments the power of the cryptocracy – the unholy alliance of the spy agencies, criminals, and criminal financial cartels.

These are the forces that actually control our lives.

The criminal ruling class loves bitcoin because they know they have the power to exploit it fully. The ordinary chump just thinks he does.

As for Satoshi Nakamto, there’s no such person. It’s a made-up name, even though it has a meaning. A sinister one that gives the game away.

Don’t let clever people fool you into thinking it’s a real person.

They are probably being compensated for saying so.

Remember, practically every political site of any size on the web is in bed with intelligence. When they are not, they get pruned regularly.

Just see what happened to me here.

Bitcoin comes out of Israeli cryptographic research. The details I don’t know, but that’s generally accurate.

It’s not about saving anyone. It’s about enacting the kabbalist’s vision on earth.

That vision demands that the Anglo-Judaic Western powers rule the world through decentralized systems.

Those who are pushing bitcoin are on board that agenda.

I am too busy recovering from the latest body-blow from the cryptocracy to spell it out better just now.

But I will get to it.

If you want to gamble, go ahead.

But if you adopt bitcoins because you think your life will become opaque to the powers-that-be, you might want to rethink that.

The only way to hide anything done on your computer is to turn it off, smash the hard drive into metal dust, and throw it into a nuclear waste site.

But even then, there are still the servers and the other fellows’ computers.

Not to mention advances in technology or mathematics that will turn bitcoins invulnerability into mush.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Google: Cyberbullying for profit

An anonymous Australian web-site reveals how Google has a financial incentive to cyber-bully people by elevating smear-and-extort sites like The Ripoff Report.

(I will not link to it, but here is Wikipedia’s entry on the Ripoff Report):

[Side-note: One of my attackers on the web seems to have been affiliated with this site,  which essentially runs an extortion racket by smearing people via hired proxies and then asking for money from the victims to remove the smears.]

UPDATE September 20th 2013: Victory

A large number of major companies have removed their advertisements from Ripoff Report.

This webpage contains an overview of the project.

The updated full report can be downloaded from this url:

https://www.adrive.com/public/9u3aau/Cyberbullying for Profit September 2013.zip

A list of examples URLs from Ripoff Report containing offensive material about children, public figures and individuals is contained in an attachment to the report but an also be found here:

This video explains how Google priorities links from Ripoff Report in its search results.

This video shows that Google considers Ripoff Report has unacceptable  business practices. So why does it advertise on its webpages? The answer is…..advertising revenue for  Google (see above).

Overview

The website Ripoff Report and other websites that emulate the business model of ‘cyberbullying for profit’  publish false and offensive information about minors, teenager, adults and businesses and these are often accompanied by photographs and identifying details.   Ripoff Report also publishes extremely racist and homophobic material, offensive material about religious groups, public figures and ‘celebrities’. While the material about public figures appears to be given a low Google page rank, the names of children, teenagers, ordinary people and small business owners ‘reported’ on these websites is contained in snippets displayed at or near the top of the Google search results (SERPs). These snippets contain names and location details couched in terms such as ‘ripoff’, ‘fraud, ‘pedophile’, ‘scam’, ‘whore’, ‘slut, ‘prostitute’, ‘skank’, ‘murderer’, ‘bitch’ ‘faggot’ ‘liar’ ‘drug abuser’, ‘cunt’, ‘stalker’, ‘HIV’ and/or ‘AIDS’ and other accusatory and derogatory terms.  

Ripoff Report earns revenue from two sources – advertising and payments from victims to the website to ‘rehabilitate’ their reputation in the Google search results or remove the false material. Despite the fact that the claims are false, if a person cannot pay their life is ruined because, as stated by Google, their search engine is often ‘the first place people look for information that’s published’ about a person.

Even if the allegations can be proven to be false Ripoff Report will not remove the material unless they are paid a substantial corporate advocacy’, or ‘arbitration’ feeIn response to removal requests, Google provides a number of excuses and victims must find an ‘ex-gratia’ payment in order to ensure the material is removed from the Google index and ameliorate the danger towards their children and/0r save their livelihoods and businesses. Furthermore, Ripoff Report publishes registered trade names and copyrighted photographs without permission. It claims a copyright over the webpages. This business model is enabled by both a high Google page rank  and advertising revenue. The companies and business that advertise on Ripoff Report supply this revenue and support the endangerment and cyberbullying of children, teenagers and adults and the destruction of careers and livelihoods. This project arose out of my own experience with the publication of false and defamatory material on these websites.

Despite the fact that it takes only a couple of minutes to remove links from the Google index, after four years of notifications, pleading with the website and Google, and litigation against Google it has not been removed. ……I sued Google for defamation in February 2011 with the hope that it would simply remove the links and I could then move on with my life. My hope was misplaced. …….

…Despite the fact that Google refuse most removal requests, they have quietly removed links for other victims of Ripoff Report.

[Lila: I have seen Google actively suppress information that exposes the financial mafia,which is to the left, politically.]

“For obvious reasons I cannot and will not publish the names of these people because they likely paid a substantial amount to either the websites or Google to save their families and livelihoods.

However, Google can and does remove websites and links without much effort.

For example, since December 2011 Google has removed almost 90,000 links from its index at the request of Ripoff Report. Many of those links contained registered trademarks and copyrighted photographs but it appears that Ripoff Report is  not questioned about these DMCA issues by Google. My blog, was also removed from the Google index soon after it went online.  If this appears difficult to believe consider that the removal occurred  after I drew attention to the blog by applying for AdSense advertising as an experiment.

In fact, I clearly stated on my blog that I was suing Google. Apparently’ freedom of speech’ only applies unless one says something negative about Google.

My blog was magically re-indexed in the Google index within hours of my public complaint in a blog conversation in which Matt Cutts was participating. The documents showing the removal and reinstatement of my blog in the Google SERPs can be downloaded from this link.

[Lila : Here is a previous blog post of mine, from 2009, where I reference Ripoff  Report and its owner, in the context of describing the nexus of organized crime and short-sellers.]

SAC Case: Should Be About Racketeering, Not Insider-Trading

Previous Mind-Body Politic posts related to Steve Cohen, in reverse chronological order (incomplete):

Rajat Gupta Trial: The other Goldman insider ring, MBP, June 10, 2012

More on Einhorn’s rumour-mongering about Lehman, MBP, April 15, 2010

Third-point, Goldman trading chiefs exist together, Madoff programmers indicted, March 18, 2010

Hedge-funds: top ten earners in 2007-2008, MBP,  January 13, 2010

Steven Cohen: third-biggest owner of Sotheby’s in 2009, MBP, Dec. 30, 2009

Secretive Steve Cohen on talk-show, discussing relationship with ex, MBP,  Dec. 27, 2009

SAC spin-offs fail, even when they succeed, MBP,  Dec. 26,2009

SAC subpoenas former SAC trader Grodin, MBP,  Dec. 25, 2009

Den of Thieves: Hedge-hogs go into SAC remote mode, MBP, Dec. 23., 2009

Sad SAC: Reuters spikes hedge story on complaints from Steven Cohen, MBP.com, December 22, 2009

Ex-Sith lady uses RICO on Sith lord? Mindbodypolitic, December 17, 2009

ORIGINAL POST

In his piece at Deep Capture, “SAC Capital (and Steve Cohen too) should be convicted”, researcher Mark Mitchell is far more sanguine than I am that Preet Bharara really means to go after the chief of the mega-hedge fund SAC,  Steven Cohen, after he puts away  various underlings, like Michael Steinberg and Indian-born Matthew Martoma.

“By fixating on the insider-trading angle in all his cases, Bharara, in my opinion, undermined the whole credibility of his prosecution and opened himself up for charges that he is merely targeting politically-viable low-hanging fruit.

Lila: As I’ve documented thoroughly at this blog, Bharara hasn’t had much credibility in his Wall Street prosecutions for at least a year now, regardless of how successful his other prosecutions might have been in some people’s eyes. I’m glad to see some main-stream voices coming around to my view.

I think I know a little about the Steven Cohen investigation, from my conversations with some of the principals at Deep Capture, where the investigation of Cohen began

Here’s a piece I wrote which they picked up, back in 2009:

Steve Cohen, the anti-Midas (Judd Bagley at Deep Capture):

Here are Lila’s observations on the matter:

1. The high number of SAC traders who seem to have gone off into their own businesses.

You’d think with all that money and the fund’s record as the most consistently successful in the business (only one bad year on record), their traders would stay forever. Quite the opposite.  People seem to have been leaving all the time to form their own businesses.

But SAC was also said to be a very tough environment. You produced, or you left.

So maybe that’s why Lee and Far, Grodin and Goodman, all left to found their own firms?
Could be. But I’m not convinced.

2. None of the spin-off firms seems to have been very successful.

Why not? Why couldn’t these hot-shot traders make money on their own?

The Reuters piece suggests that perhaps the SAC experience didn’t foster business ability. And that perhaps SAC traders flounder without SAC’s huge supporting cast.

But those things are likely to be true of other firms as well, not solely SAC.

Still not convinced.

Furthermore, consider this.

3. A spin-off fund that didn’t get money from Cohen ended up quite successful:

“Healthcor, a healthcare industry focused fund, had raised $3.2 billion by June 2009 since launching four years ago. The fund returned 25 percent in 2006, 18 percent in 2007, and was up 4 percent last year, when the average hedge fund lost 19 percent. In the first 10 months of 2009, Healthcor was up 7 percent.

Healthcor, founded by Arthur Cohen and Joseph Healey, opened without any financial support from SAC. In fact, soon after Cohen and Healey struck out on their own, SAC sued the pair, accusing them of breaching their employment contracts. The matter ultimately was settled. (Healthcor’s Cohen is not related to SAC’s Cohen).”

4. Even spin-offs that were doing well were shut down.

When Stratix started in 2004, it had $60 million given to it by SAC. When it shut down, in 2007, it was up 17% and had $530 million under management. Yet it shut down. Why did it shut down? Those numbers sound pretty good.

Another spin-off, Fontana Capital, started out in 2005 with $50 million of SAC money. It grew to $325 million by 2006.  But sometime in 2007, Cohen pulled out all his money. And in 2009, Fontana was down to $16.1 million, despite being down only 7.69%, compared to the average S&P Financial index loss of 57%. Again, that sounds like it wasn’t doing all that bad.

Reuters quotes someone familiar with the record of ex-SAC traders:

“So many of the ex-SAC people seem to have this model where they attract you with fantastic returns in the first year but in year two or three or four you get annihilated,” said a person who is familiar with several former SAC employees’ records.

Shades of Bernie Madoff….

Someone need to look closely at what happened to the money at these firms…

Lila:

Unlike some, I don’t think the fact that Bharara has an agenda means that Martoma is necessarily innocent, either.

I just think that even guilty as charged, Martoma is small fry.

He’s Cohen’s employee and by every account I’ve read, Cohen kept notoriously tight control of his business and tolerated no dissent.

He was not the kind of hands-off employer who can plead ignorance after the fact, even though that’s just what he did.

So Martoma might be guilty as heck, but it’s beside the point.

Insider-trading, outside the  issue of racketeering, is an irrelevant and minor side-show.

Insider-trading as part of systemic racketeering is another thing.

But Bharara hasn’t shown that, nor does he even look like he’s trying to show that.

He looks like he’s polishing his resume for a move into politics.

Anyway, here’s Mark Mitchell at Deep Capture:

Deep Capture: SAC Capital (and Steve Cohen too) should be convicted….

“During the trial of Martoma, DOJ prosecutors confirmed that SAC Capital traded on inside information provided by a doctor at the University of Michigan, which was all well and good, but as I documented in my book, SAC Capital not only traded on inside information from another University of Michigan doctor, but also profited from short selling Dendreon’s stock after multiple doctors (some of whom had demonstrably corrupt relationships with Milken) conspired to undermine Dendreon’s treatment by convincing the FDA (also corrupted by Milken and his associates) to delay approval of the treatment (which had been proven effective).

Some journalists and their Wall Street sources have argued that insider trading is an essentially harmless offense and that SAC Capital deserves leniency, but their arguments obscure the fact that SAC Capital’s insider trading has involved the wholesale corruption of the FDA and some of the nation’s most prominent doctors, all of whom have (as my book documents in detail) shown themselves more than willing not only to provide Steve Cohen and his associates, including Milken, with inside information, but also to undermine pharmaceutical companies with effective treatments while promoting companies (i.e. companies that are financed by Milken and his associates) whose treatments are actually killing people.”

Lila: Exactly. But then, in that context, Matthew Martoma is actually the lesser offender.

He was after all a portfolio manager, a trader. His employment depended on his getting an edge.

When he stopped getting that edge (illegal, as it turned out), he was fired.  Since Martoma has been attested to be very knowledgeable in his field by the doctors with whom he interacted, it follows that his competitors in the field must also have been getting their “edge” in the same way.

Industry-wide corruption of that kind isn’t best addressed by throwing the book at some representative pawn/small fish in the game.  That only makes the prosecutors’ office look biased or politically motivated.

Which it usually is.

If the nation’s top doctors were engaged in corrupt activities, why aren’t some of them being prosecuted before Martoma?

And, if Steven (don’t call me Stevie) Cohen is a racketeer, prove that.

Then give yourself a gold medal. Not before.

Note: See John Cassidy’s piece at the New Yorker, “Has Steven A. Cohen bought off the US Government?” November, 4, 2013

Pettis Versus Grantham on the commodity cycle

Greenworld Investor has a piece on the debate between Michael Pettis and Jeremy Grantham on where we are in the commodity cycle:

“Two of the most respected market analysts have radically opposite positions on where the commodity cycle is right now. While Michael Pettis thinks that the commodity cycle has peaked and hard commodities will crash by 2015, Grantham thinks there has been a paradigm change in commodities which will keep on increasing in price.

Pettis’s Arguments are based on:

a) First, during the last decade commodity producers were caught by surprise by the surge in demand. Their belated response was to ramp up production dramatically, but since there is a long lead-time between intention and supply, for the next several years we will continue to experience rapid growth in supply.

b) Second, almost all the increase in demand in the past twenty years, which in practice occurred mostly in the past decade, can be explained as the consequence of the incredibly unbalanced growth process in China.

c) Third, and more importantly, as China’s economy re-balances towards a much more sustainable form of growth, this will automatically make Chinese growth much less commodity intensive

d) Surging Chinese hard commodity purchases in the past few years supplied, not just growing domestic needs but also rapidly growing inventory.

Grantham Thesis on Commodities

Global Commodity Parabolic Price Rise Bubble or Real- Is it Really Different This Time

The rise in global commodity prices is fueling inflation everywhere particularly in developing countries where food and energy forms a major percentage of the inflation basket. This has forced countries like India and China to accelerate interest rate hikes to cool down inflation. Rising Food Prices has caused distress in a number of places leading to food riots in Africa and have been said to be a leading cause of the revolutions in the Middle East. Oil Prices continues to increase unabated as dollar decreases with US Money Printing. Commodities are touching new all time peaks as rising global demand, finite resources, money printing by developed countries fuel price hikes. Silver has been increasing in a parabolic manner with other commodities too showing heart-stopping jumps in prices. The rise in global wheat,rice prices has been at a record as well. Almost all commodities have seen sharp prices increase.

Grantham has made a famous call

The rise in commodities is not a cyclical phenomenon but a secular long term one. He says that the rise in commodity prices is different from the past. Note Grantham has done an extensive study of bubbles and is one of the leading minds in the investment community. While every time in the past, the statement “this time is different” has led to a crash, Grantham’s call cannot be taken lightly. He says that the rise in population, shortage of resources, the growing consumption power of massive chunks of prosperous citizens in India and China will lead to a continued surge. Note commodity prices have declined secularly in the last century and since 2000 have managed to erase all their losses to form new peaks. Grantham also says there is a possibility of a massive short term decline which will give a historic opportunity to load on commodities. Jim Rogers is the most famous commodity bull and now Grantham has joined him.”

On the civilizational superiority of the West in regard to women…

The article posted below should be read for the light it throws on the morals, manners, and breeding of some of New York’s most eminent and public financiers.

Wikipedia tells us:

“His father was a partner at the Los Angeles law firm of Irell & Manella LLP and general counsel for Williams-Sonoma. His mother is a historian. Loeb’s great-aunt, Ruth Handler, created the Barbie doll and co-founded Mattel Inc.[4]”

I do not know of a single financier born and bred in Asia who has ever engaged in this sort of thing.

Astute readers will note the close parallels between the type of invective used by this well-known, indeed, adulated financier, and the type used by the denizen of the underworld who has favored me with his obsession.

Note the nature of the victims – female, Gentile, working for/advocating positions antithetical to the interests of the colluding short-sellers.

Note the nature of the invective – scatological (queefs, farts, shit) and sexual (prostitutes,whores, bimbos, pimps); calculated to cause intense emotional and reputational injury by sheer association,  without offering  either reason or evidence, yet evading legal liability, under the West’s servile definition of freedom.

Notice how American “libertarians” (aka licensitarians), who find burqas objectionable, not only never voice any objection to this kind of barbarous public attack, they post the  self-serving rants of their perpetrators, with obvious pride in the association.

Such “liberty” shows itself to be nothing more than servility to the powerful and the malicious.

The very scurrility of the attacks assures this, since most ordinary people, especially women,  cannot/will not  counter with invective in kind, both from moral and prudential reasons.

Judd Bagley at Antisocialmedia.net:

“In late 2005, I spent over four hours interviewing Overstock.com CEO Patrick Byrne as part of a podcast series on entrepreneurship I created.

After I published the audio of the interview, somebody posted a link to it on the Yahoo Finance message board dedicated to Overstock.com.

Seeking the origin of the resulting surge in downloads led to my first stock message board visit.

It was really strange.

What first struck me was the flurry of responses to the original posts in which users with foul mouths and bad attitudes warned that the linked mp3s contained computer viruses.

Of course, no mp3 has ever carried a virus, as I’m fairly certain the posters knew.

These were followed up by all manner of lies meant to discourage others from listening to any of the three Byrne interviews I would eventually publish.

[Lila: And that is evidently the reason for Mr. Ryals’ verbal assaults against me and others. They are intended to thoroughly confuse and intimidate.]

Worse, they posted all manner of lies about Patrick Byrne personally – something I was in a unique position to recognize having just interviewed him at length.

Intrigued, I started examining the posting histories of the most prolific sources of this disinformation, trying to identify patterns that might in turn reveal their underlying motives and, often enough, their real identities……..

Consider the following notable example.

I’ve previously written about evidence received demonstrating that hedge fund Third Point, LLC contracted with convicted stock fraudster Michelle McDonough, whose duties included coordinating the efforts of message board bashers and inducing certain captured journalists to report negatively on targeted companies.

I’ve also written about Third Point founder Daniel Loeb’s well-known history of posting on the Yahoo and Silicon Investor stock message boards under the alias Mr. Pink.

Before getting to the rest of the story, here’s some background.

About the same time I first visited Yahoo Finance, a company called SFBC International (now PharmaNet Development Group) came under a blistering attack by Daniel Loeb, who very publicly announced Third Point’s sizeable short interest in the company.

SFBC got hit from all sides, and its share price withered.

In particular, there was a deluge of libelous (though tame compared to others I’ve seen) posts to Yahoo’s SBFC message board. Most notable were the attacks leveled against then-SFBC Chairwoman and President Lisa Krinsky.

Krinsky responded by filing a lawsuit against ten anonymous posters: Does 1 through 10.

In order to discover the identities of the ten Does, Yahoo was served with a subpoena.

In accordance with policy, Yahoo alerted the posters, giving them two weeks in which to contest the subpoena – an expensive proposition few bashers have the financial ability to pursue.

And indeed, none of the ten Does opted to put up a fight.

With one exception: Doe number 6, known on Yahoo Finance as Senor_Pinche_Wey (which is a slang Spanish term that is as obscene as you can imagine).

A typical post by Senor_Pinche_Wey reads:

…I will reciprocate [fellatio] with Lisa [Krinsky] even though she has fat thighs, a fake medical degree, “queefs” and has poor feminine hygiene…

Doe-6 fought the subpoena, was rejected, and appealed to California’s Sixth Appellate court.

Clearly, Doe-6 had some resources backing him up…to say nothing of a deep motivation not to be exposed.

And, fortunately for Doe-6, his appeal was successful and the subpoena was quashed.

This decision – handed down in February of this year – essentially affirms the First Amendment rights of message board bashers to say whatever they want about the officers of public companies. (An excellent analysis of the decision can be viewed here.)

In their decision, the Court noted:

We likewise conclude that the language of Doe 6’s posts, together with the surrounding circumstances — including the recent public attention to SFBC’s practices and the entire “SFCC” message-board discussion over a two-month period — compels the conclusion that the statements of which plaintiff complains are not actionable. Rather, they fall into the category of crude, satirical hyperbole which, while reflecting the immaturity of the speaker, constitute protected opinion under the First Amendment.

Interesting.

Daniel LoebReady for the other shoe to drop?

I’ve learned, through multiple sources, that the immature speaker in this case, Doe-6 (aka Senor_Pinche_Wey) was none other than Daniel Loeb himself.

As a matter of fact, Senor_Pinche_Wey is one of many abusive message board identities used by Loeb to harass officers of companies Third Point was shorting, often illegally.

On August 12, 2005, Patrick Byrne first publicly accused several hedge funds of working in coordination to illegally manipulate the share price of Overstock.com and many other small, public companies. Within 48 hours, armies of bashers arrived for the first time on the Overstock.com stock message boards across the web, all working off of a the same obvious set of talking points. Among the points these bashers took the greatest care to make, time and again: that Byrne was crazy for thinking that any two hedge funds would ever work together when shorting.

In case there are any doubts left regarding Byrne’s claims, I invite you to look at this message board exchange, between Senor_Pinche_Wey, LaseriumQueen, bobbingbargains, disgustedinvestor, kidstockjoec, jidoo, and Polytechnic_Trader.

What makes it so interesting is that at least 72% of the participants are hedge fund managers shorting the company they’re smearing.

Specifically, Senor_Pinche_Wey belongs to Daniel Loeb, while LaseriumQueen, bobbingbargains, disgustedinvestor, and kidstockjoec all belong to Robert Chapman, founder of hedge fund Chapman Capital.

Polytechnic_Trader and jidoo may or may not belong to Loeb or Chapman…I don’t know either way.

I do know that Chapman also posts under the aliases tautologicaltrader, ghaulty_lodgick, notably_absent, and herniatedgorilla – all of which can be seen, time after time, posting things I’m quite certain Chapman would not dare say in person.

Do hedge funds coordinate their attacks?

Yes.

And as you’ll read in a soon-to-be-published-post, message board bashing is only the beginning.”

[Lila: Based on my experience, I’d say that after the bashing, comes investigation, surveillance/monitoring, threats, and even physical stalking. In short, criminal behavior by criminals. What a shock.]

The Money-Power: The Bankers That Rule The Economy

A report in New Scientist (“Revealed: the Capitalist Network That Runs The World” October 24, 2011) confirms what honest observers of the system (often called banking conspiracy theorists) have said along – a small interlocking group of powerful banks rule the world economy. I blogged about this last year in “The 20..er…4..companies that rule the world” (October 28, 2011)

An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

The idea that a few bankers control a large chunk of the global economy might not seem like news to New York’s Occupy Wall Street movement and protesters elsewhere (see photo). But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs).

“Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.”

Previous studies have found that a few TNCs own large chunks of the world’s economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy – whether it made it more or less stable, for instance.

The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power.

The work, to be published in PLoS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability.

Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. “If one [company] suffers distress,” says Glattfelder, “this propagates.”

“It’s disconcerting to see how connected things really are,” agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.

Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system’s behaviour, he says, requires more analysis.

Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Sugihara says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.

One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, “is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups”. Or as Braha puts it: “The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.”

So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.

When this article was first posted, the comment in the final sentence of the paragraph beginning “Crucially, by identifying the architecture of global economic power…” was misattributed.

The top 50 of the 147 superconnected companies

1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company

* Lehman still existed in the 2007 dataset used

Graphic: The 1318 transnational corporations that form the core of the economy

Comment

This shouldn’t come as a surprise for anyone who’s been reading this blog. I blogged about this in “Nightmare on Wall Street” (2008)

My earlier pieces on Goldman Sachs, were premised on research into this interlocking cartel.

For the power behind the banking cartel, see “The Invisible House of Rothschild” by Zahir Ebrahim.

See also my blog post “The Invisible Wealth Of The Rothschilds,” (2011) citing a piece by Markus Angelicus on the estimated wealth of the Rothschilds, “The Rothschilds, the LBMA and gold” (1997)

The numbers (hundreds of thousands of trillions of dollars) might seem outlandish, and they may well be,  but if you consider the estimate to include the entire holdings of the family in all its branches, and if you consider the family to be the head of what is really a banking syndicate that includes a network of other financial houses, then the figures become more plausible.

Still, other estimates I have seen are much more modest, ranging from a few trillion to a 300-500 trillion.

So that is quite a variance and none of this is documented scientifically. They are more or less speculative estimates based on published figures, since we have no public accounting for wealth held in family trusts or vaults. And they assume that these families’ holdings have not been wiped out, or eroded, as some of them claim.

Additionally, the Rothschilds are the bankers to the Crown and they have systematically intermarried with some members of the Royalty, so the total numbers would reflect the combined wealth of the ruling houses into which they married, as well as their own money.

Finally, here is a report that the Rockefeller and Rothschild families have joined in a business merger:

Rockefeller and Rothschild Dynasties Join Forces, Deal Book, NY Times, May 30, 2012.

Rajat Gupta Verdict: Insider-Trading & IP Theft By The Govt

“Anyone can benefit from insider information but not anyone can afford a supercomputer. They may both provide – with fair certainty – a market advantage but only one advantage will be prosecuted.”

–    Anthony Wile, The Daily Bell

Cyber Wars: Robot Traders Spoof High Frequency Trades

Alexis Madrigal writes at The Atlantic about robot traders that spoof market orders and introduce potentially dangerous “noise” into high-frequency trading that could end up in a flash crash. The spoof trades can be used to coordinate what is effectively a denial service attack on certain nodes in the financial network. Essentially this is the same as what happens in the other DNS attacks in infrastructure critical to national security. It amounts to clogging the system with data so that it slows down and eventually seizes up.

“High-frequency traders have become a target for all kinds of people, but most of them appear to make their money being a little faster and little smarter than their competitors. And if they are playing by the rules, they improve the quality of markets by minuscule amounts trade after trade after trade.

But the algorithms we see at work here are different. They don’t serve any function in the market. University of Pennsylvania finance professor, Michael Kearns, a specialist in algorithmic trading, called the patterns “curious,” and noted that it wasn’t immediately apparent what such order placement strategies might do.

Donovan thinks that the odd algorithms are just a way of introducing noise into the works. Other firms have to deal with that noise, but the originating entity can easily filter it out because they know what they did. Perhaps that gives them an advantage of some milliseconds. In the highly competitive and fast HFT world, where even one’s physical proximity to a stock exchange matters, market players could be looking for any advantage.

“They are moving the high-frequency services as close to the exchanges as possible because even the speed of light matters,” in such a competitive market, said Stanford finance professor Peter Hansen.

Given Nanex’s data, let’s say that these algorithms are being run each and every day, just about every minute. Are they really a big deal? Donovan said that quote stuffing or market spoofing played a role in the Flash Crash, but that event appears to have had so many causes and failures that it’s nearly impossible to apportion blame. (It is worth noting that European markets are largely protected from a similar event by volatility interruption auctions.)

But already since the May event, Nanex’s monitoring turned up another potentially disastrous situation. On July 16 in a quiet hour before the market opened, suddenly they saw a huge spike in bandwidth. When they looked at the data, they found that 84,000 quotes for each of 300 stocks had been made in under 20 seconds.

“This all happened pre-market when volume is low, but if this kind of burst had come in at a time when we were getting hit hardest, I guarantee it would have caused delays in the [central quotation system],” Donovan said. That, in turn, could have become one of those dominoes that always seem to present themselves whenever there is a catastrophic failure of a complex system.

There are ways to prevent quote stuffing, of course, and at least one of the members of the Commodity Futures Trading Commission’s Technology Advisory Committee thinks it should be outlawed.

“Algorithms that might be spoofing the market are something that should be made illegal,” said John Bates, a former Cambridge professor and the CTO of Progress Software. But he didn’t want this presumably negative practice to color the more mundane competitive practices of high-frequency traders.”

“Flash Crashes” Suggest Market Trouble?

Update (Sept 29, 5:54 PM):

Just a thought. Could a DHS cyber security exercise scheduled for this week have had anything to do with these two market “accidents”?

According to this report, the following sectors (among others) were to have been targeted for several days this week:

“This year’s exercise will be the largest yet, including representatives from seven cabinet-level federal departments, intelligence agencies, 11 states, 12 international partners and 60 private sector companies in multiple critical infrastructure sectors like banking, defense, energy and transportation.”

The markets aren’t specifically mentioned, but then you’d expect that if they were the chosen target…

ORIGINAL POST

Peter Cooper at Arabian Money argues that an apparent Google “flash crash” last Friday signals a market correction in the offing:

“It also seems pretty clear that Wall Street insiders flicked the sell switch at the weekend. That would account for the ‘accidental’ Google flash crash last Friday (click here). You bet against this crowd at your peril.

On this reckoning the gold pit action is just a last burst of optimism from latecomers to the party. For the gold price will surely dip (if not to much more than $1,150) in a big sell-off in financial markets, and silver will also fall back below $20.”

Meanwhile, Rick Ackerman points to a mini flash crash that apparently took place on Tuesday night in the gold futures market…..and explains why Bob Prechter has been wrong for the last 18 months – he’s an expert in real markets, not completely rigged ones…

I’ll admit that I’m glad to see this because of my own market bias, which has left me a bit lonely waiting for some kind of correction in the gold price.

Years of making my very own patentable blunders have made me much more comfortable being wrong on my own rather than being right in a crowd…..

But there does seem to be some technical evidence that a correction might be due.

Gold Reacting To Anxiety, Says ECRI Chief

Lakshman Achuthan, managing director of the influential Economic Cycle Research Institute, has said he’s sure the economy is “rolling over” but can’t definitively call it a recession yet.  Today he adds that the elevated price of gold signals anxiety more than inflation concerns. ECRI has a good track record as a trend predictor, from all accounts. On the other hand, it’s also true that gold is hitting new highs and the financial media has to put a good spin on that. Wall Street doesn’t like physical gold, because whenever it dominates the news stories, it undermines the stock and fund selling on which the Street mainly depends. Continue reading

Gold, Silver, and “Suspicious Foreigners”

Mark Mitchell comments on the CFTC hearings and the manipulation of trading of gold and silver derivatives (read IOUs):

“Maguire added: “What’s going to happen, if you’re an Asian trader, or a non-Western trader, who has no loyalty, or doesn’t care about homeland security or anything else, who says, now wait a minute, if I can establish in my mind that there is 100 ounces of paper gold, paper silver for example, for each ounce of real silver, than I have a naked short situation here that I can squeeze and they can go on the spot market which is basically a foreign exchange transaction, short dollar, long silver to any amount they want – billions, trillions — whatever they want, and they can take this market, squeeze this market, and blow it up…”

In other words, the problem isn’t just that criminal naked short sellers manipulate the metals market downwards. It is that they have created a condition where a foreign entity can merely demand delivery of real metal to induce a massive “squeeze” that sends the price of metals skyrocketing, putting huge downward pressure on the dollar. Meanwhile, says Maguire, with prices rising, “for 100 customers who show up there is only one guy who is going to get his gold or silver and there’s 99 who will be disappointed, so without any new money coming into the market, just asking for that gold and silver will create a default.”

This would be a point, except…except..

1. This kind of fraudulent activity in the markets in the West is going to be seen by most foreigners as a direct act of financial aggression against them, not just domestic market participants. You can’t admit that your entire market system is rigged in favor of US and European banks, and then expect that the rest of the world is just going to stand there and not retaliate in some way…with justification.

Turnabout is fair play. Defense is not offense.

2.  I doubt that Chinese, Saudis or any other foreigners are interested in squeezing the dollar, since they are the primary holders of dollars. In international markets, the dollar is still the reserve currency and most people save in it. Nor is the American middle class, loyal or disloyal, going to want a weaker dollar. They earn their money in dollars. The only people likely to attack the dollar are speculators, who will do it because they see a gain to be made from it. And the people most likely to do it successfully are the same people who are involved in manipulating it in the first place...the corrupt bankers and financiers who’ve got the most to gain in this and the least to lose.

Nothing that Paulson, Greenspan, Geithner, Summers, or Bernanke have been doing adds up to anything like a “strong dollar” policy. They’ve done everything but shout “bail” to dollar holders.

Hedge Fund Lobby Steps Up The Lobbying..

The hedge fund lobby is stepping up the..er… whining and dining in DC, says, Crain’s:

“With all the political and media focus on healthcare reform over the past few months, the financial industry enjoyed a brief respite from attacks and, as would be expected, spent its time and money wisely.

The hedge fund lobby, called the Managed Funds Association, doubled its spending during the last three months of 2009, according to data recently released by the Federal Election Commission. The MFA strategically sprinkled more than $1 million around Washington in the fourth quarter, compared to just $520,000 spent during the same period in 2008.”

Apparently, the hedgies don’t mind registering. What they’re kicking at are some other things:

1. Treating compensation as regular income (with its higher tax rate) rather than capital gains (with its 15% tax rate)

2. The banning of proprietary trading by banks, until now a lucrative source of income, the so-called Volcker rule.

The part I found really interesting in the Crain’s piece is that industry CEO Richard Baker apparently thinks there is a “growing alignment between hedge funds and millions of Americans.”

Oh yeah.

That would be that trader-activist mystique thing where Loeb, Paulson, and Chanos are really doing it for the little guy…….the money is just a side dish.

Um. Yeah. I get that.

And talking about side dishes, I hear that Rachel Uchitel’s interests are just aligned with  Joe Six-pack’s too. She isn’t an extortionist and a gold-digger. Oh no. That’s just what it looks like. She’s a conjugal activist. She trying to get Tiger and all those other rovin’ eyes out there to be better husbands…..

Roubini: Significant Risks Of Gold Correction

Downside risks to gold, writes Nouriel Roubini at The Globe and Mail:

“But, since gold has no intrinsic value, there are significant risks of a downward correction. Eventually, central banks will need to exit quantitative easing and zero-interest rates, putting downward pressure on risky assets, including commodities. Or the global recovery may turn out to be fragile and anemic, leading to a rise in bearish sentiment on commodities – and in bullishness about the U.S. dollar.

Another downside risk is that the dollar-funded carry trade may unravel, crashing the global asset bubble that it, with the wave of monetary liquidity, has caused. And since the carry trade and the wave of liquidity are causing a global asset bubble, some of gold’s recent rise is also bubble-driven, with herding behaviour and “momentum trading” by investors pushing gold higher and higher. But all bubbles eventually burst. The bigger the bubble, the greater the collapse.

Gold’s rise is only partially justified by fundamentals. And it is not clear why investors should stock up on gold if the global economy dips into recession again and concerns about a near depression and rampant deflation rise sharply. If you truly fear a global economic meltdown, you should stock up on guns, canned food and other commodities that you can actually use in your log cabin.”

What David Einhorn’s Holding

From Market Folly comes a break down of controversial hedge-fund manager David Einhorn’s portfolio:

Top 15 holdings by percentage of assets reported on his 13F filing

Pfizer (PFE): 7.64%
CareFusion (CFN): 7.32%
Cardinal Health (CAH): 6.86%
Teradata (TDC): 6.56%
URS (URS): 5.78%
Gold Miners ETF (GDX): 5.58%
Wyeth (WYE): 5.35%
Einstein Noah Restaurant (BAGL): 4.97%
EMC (EMC): 4.75%
Aspen Insurance (AHL): 4.22%
Travelers (TRV): 4.04%
Microsoft (MSFT): 3.39%
Everest Re (RE): 3.22%
McDermott (MDR): 3.17%
MI Developments (MIM): 2.93%
Note:

This doesn’t include:

1. Cash
2. Short postitions
3. Non-US equities

Other things to note:

1. Health care holdings, CAH and HNT, both got larger allocations (friend and colleague, Dan Loeb also added HNT to Third Point’s portfolio) and a new position was opened in CFN (CareFusion). Taken together with the fact that the largest holding for both Einhorn and Loeb is PFE (Pfizer), this makes medicine/health their biggest play.

2. Einhorn sold out of energy and upped his stake in MSFT (microsoft) a lot.

3. Besides GDX, Einhorn is also in physical gold, which is one of his largest holdings. It’s invisible in the list above, because it’s not disclosed in 13F filings.

4. Short the rating agencies, credit-sensitive financial institutions and REIT’s with cap rates of 6% and dividend yields of under 5%.

5. Greenlight, like Steve Cohen’s SAC and Soros, is also jumping into the anti-Euro trade, reports silobreaker, citing the Wall Street Journal.

As for Greenlight’s past performance, here’s a chart in percentage terms of Greenlights performance, from Gurufocus:

YR        GL(%)   S&P     Excess Gain

2009     32.1    26.5.    5.6

2008    -17.6   -37      19.4

2007    5.9      5.61      0.3

2006    24.4    15.79    8.6

2005    14.2    4.91      9.3

2004    5.2      12        -6.8

What’s interesting in this chart is Einhorn’s bad showing in 2004 and 2007, years in which most people did well, or at least, stayed out of trouble, since the market was still receiving the benefit of Federal “juicing.” Also notable is  2008, when, had it not been for the controversial and possibly criminal Lehman raid, Einhorn would’ve been even worse off. He would probably have been as much down as the S&P.

Finally, without the johnny-come-lately piling onto gold, last year, 2009, wouldn’t have been a good year for Einhorn, either.

Soros: Gold In Bubble; But Keep Stimulus Going…..

Always nice to see people talk out of both sides of their mouth.

Here is currency speculator George Soros (ex of legendary hedge-fund Quantum) at the World Economic Forum at Davos:

“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”

So far so good. Mis-price money (cheap interest rates) and people don’t want to keep their savings in it. They want it in something that isn’t subject to mis-pricing (so they hope) – hence gold.

But then Soros shows how disingenuous he’s being by adding this:

“I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. Some countries, like the US and European countries, have plenty of room to increase their deficits. The political resistance to doing so increases the chances of a double dip in the economy in 2011 and after that.”

That is, he’s suggesting running more deficits and keeping the money spigot going, just the thing that’s caused the gold price to rise.

So how do we understand this?

Gold is due for a technical correction, but it’s also probably responding to deflation in the general economy. It’s not going down that fast, because a lot of people are also buying it speculatively.

That’s the tug of war.

Meanwhile, who know what Soros’ holdings are and who knows what his motivations are in making such contradictory statements.

But anyone who takes these sorts of pronouncements as any kind of lead for their own investments/speculations, should be prepared to part fairly soon from their money.

Maverick Managers Say Short the S&P, Bonds, and Goldman

A Barron´s interview with Bearing Asset Management´s Kevin Duffy and Bill Laggner, via Lew Rockwell:

“Do you see the S&P 500 retesting its lows of this year?

Duffy: It’s difficult to know. It depends on how much money gets printed. In real terms, can we get cut in half from here? We think so. S&P earnings are distorted because of accounting changes for banks and brokers; if banks were marked to market, S&P earnings next year could fall to $45 a share. Bullish sentiment is rivaling the 2007 top, and volatility has fallen dramatically. We like the VXX, an exchange-traded note that’s based on S&P 500 short-term volatility as measured by the VIX index. It’s down 67% this year, and fits into the whole idea that complacency is very high. Continue reading

SEC To Look At High-Frequency Trading and Naked Access

From Reuters, a report shows sharp rise in “naked access” to markets after 2005:

“NEW YORK (Reuters) – A report says that 38 percent of all U.S. stock trading is now done by firms that have “naked sponsored access” to markets, the controversial trading practice said to imperil the marketplace, and which faces a regulatory crackdown.

Naked access gives trading firms, using brokers’ licenses, unfetted access to stock markets. The firms, usually high-frequency traders, are then able to shave microseconds from the time it takes to trade.

Aite Group, a Boston consultancy, found that naked access accounted for just 9 percent in 2005.

The U.S. Securities and Exchange Commission is set to make changes to naked access and less risky forms of so-called sponsored access, when it releases a document expected next month.

The document is also expected to look more generally at high-frequency trading — where proprietary trading firms, brokers, and others use algorithms to make markets and profit from narrow market inefficiency.”

Gold Sinks Further, Dollar Surges..

We will need to see a few more days of supporting action, but as of now, it looks like gold might be beginning the long-awaited correction.

How deep that will go is anyone´s guess, though the recent central bank buying is supposed to lay a floor for it above $1000. Now, normally I wouldn´t bet the house on that, but I´ve come to see that pronouncements from insider analysts (at GS) are no longer just market analysis to be weighed. They are announcements about the course of action the banking cartel is going to be supporting.

The trigger for this? I think it´s that upbeat jobs number, which is probably taking some speculative money out of gold …especially as gold is technically very overbought and institutional buyers want to lock in profits before the year end.

Dubai is more important than most commentators think, even Marc Faber. They say the numbers involved are  too small.

But, as I blogged earlier, they´re  not seeing the contagion possible.

Here´s what they´re discounting:

1 We don´t know what the numbers from Dubai really are.  We can´t be absolutely sure. They keep changing them.  $125 billion (the highest figure I´v heard) may not be enormous in a global context, but we don´t know how its tied up with investments and where. A firesale of Dubai Worlds real estate could have unsettling effects all over the world.

2. Dubai has an impact on the property market, not just in Dubai, but in London and New York where Dubai Worlds has holdings, and also in India, where real estate and employment could take a hit.

3. Banks have leveraged exposure through derivatives, beyond what they are admitting in public.

4. These are banks that are already broke, for all purposes.

5. When the banks involved are not themselves broke, they are backed by governments that are broke, or near-broke.

6. The government with likely the most exposure is Britain. Britain is on the verge of sovereign default.

7. This happens just as the second down-leg in real estate is unfolding, and along with it the just-as- leveraged commercial real estate market (see the recent zero hedge post on an ongoing  CRE failure in Chicago), where there´s little pressure for the Feds to step in.

8. This happens after a 10-month run up in the stock market in what is essentially a bear rally, according to many experts.

9. This happens when the government has escalated an unpopular war in Afghanistan, calling for more troop commitments and more money

10. This happens after massive further government commitments in health care and other social spending.

Would the dollar move up just on the back of an employment number that was widely acknowledged to be misleading? I don´t know.

Do I know if gold will sink below $1000? No.

But CB (central banks of India etc.) buying is said to have set the floor. Me, I  think that was a bit of help given by the RBI (CB of India, Sri Lanka, etc.) to the IMF, seat of power of the globalists. Even the IMF admitted it got lucky.

Will that bit of market manipulation to the upside be enough to stave off the deflationary effect of develeraging asset derivatives?

I don´t know, but I suspect it won´t.

I’m anticipating  a rush into the dollar like we had in 2008…maybe not as strongly…
maybe gold will sop up some of the rush this time. I think that´s what the CB´s are hoping will happen.

But again, one can´t be sure, for the simple reason no one knows how much more bad debt there is and where it is.

Gold Down On Biggest Volume In History..

Via Economic Policy Journal:

“The exchange-traded fund, SPDR Gold Shares, that holds gold bullion was down 5% Friday afternoon on record trading volume as the gold price fell. More than 70 million shares have traded hands with an hour of trading to go. It’s the highest volume in its history. The gold ETF was launched in late 2004 and has assets of more than $40 billion”

China Beware: Gold Price Skating on Thin Data (Update)

Update (November 14, 2009)

This isn’t an update so much as an additional note on the Van Eeden excerpt below.

*Van Eeden has a good track record, but he’s also a disbeliever in any CB or Fed conspiracy to intervene in the markets. Since that intervention is not conspiracy but fairly well-documented, I’m less confident of his opinion.

*Faber, on the other hand, seems to have his ear much closer to the ground.
For instance, he called the RBI one of the best banks in the world on November 6 (see my blog post).

That was just before the Indian bank’s gold purchase. Now, doesn’t it look as if he knew something was coming up? Either that, or he is doing some clever PR for the IMF.

*Faber’s recently (Nov 11) called $1000 the floor for the gold price and has said that it won’t be breached to the downside again.

[However, just a few days ago, on November 6th, he also said gold could drop to $800. I don’t know how to explain this sudden change. It wasn’t the IMF gold sale to the RBI, because that was completed in mid-October and went public on November 3, before both of Faber’s comments].

*Faber argues for much higher inflation than Van Eeden…who doesn’t believe we have inflation..yet.

Now, Faber’s analysis might be overblown, but his conclusion could still be right. Since he’s based in Asia, he could be privy to information that American money managers might miss.

Conclusion: while Faber’s analysis doesn’t seem as sound to me as Van Eeden’s, Faber might just end up being right because he’s factored in market manipulation.

*In response to a reader comment below:- I know Eric Janszen has also called for very high inflation in the 4th Q, which would indicate a high gold price.

************************

From Paul van Eeden:

“The Chinese Communist Party apparently learned from America that debt financed consumption was not a sustainable economic model. Their solution, it seems, is even more absurd: debt financed production in the absence of demand…..

Earlier we reached the conclusion that interest rates could potentially start increasing and cause the US dollar exchange rate to strengthen, which, in turn, would cause the gold price to fall. We can now add that the massive inflation of China’s money supply can cause the renminbi to collapse and send another currency crises rippling through financial markets. A collapse of the Chinese renminbi could also result in a stronger dollar and lower gold price…….

What would happen if China were the epicenter of an economic collapse? What happens when the gold and commodity bulls realize China cannot continue to consume at an even greater pace than it had been when the world was buying its goods, but, instead, now has to work down the excess inventory it built up? It would be a good bet that the US dollar would rally and the gold price would fall.

Given that the gold price is trading at a 25% premium to its fair value and that we can imagine several scenarios whereby the US dollar could rally and the gold price could fall, it seems to me that betting on a higher gold price right now is merely a bet on the Greater Fool Theory.”

SFO Magazine Picks Mobs as Top Ten Trading Books of 2009

Stocks, Futures, and Options Magazine will be out with an article in December on its top ten trading books for 2009 – the list includes Mobs.

This really tickles me, because at heart, I’m a trader, albeit an amateur. Nothing like watching the charts – the heart-beat of the great capital markets. There’s a real romance to it. Had I been born some place else, I think I’d have run away from school and gone to work in one of the exchanges.

I also just saw that Mobs was on the list of top ten best-selling finance books on Amazon for 2008. That’s great news, but a bit of a surprise, because there were so many books published on the economy that year, I thought it would get edged out. Hopefully, the book will sell well this year too, because it really does have a lot of good information for anyone who trades/invests.

I’d advise you to especially read Chapter 16, which is a mini-manual that’s as insightful a look as you’ll find anywhere about what it takes to make good decisions on trades (It’s my co-author’s work, so you know that’s an honest opinion, unbiased by my problems with the book’s promotion, about which I’ve written at length before).

My contributions – such as they are – to “trading psychology” are Chapters 10 and 11 of Mobs, where I deal with “herd mentality” and how it affects and eludes quantification in economics. It’s more of the macro view. I think parts of that can be found on the web in articles I wrote for Endervidualism..

The rest of Mobs is more historical and less immediately relevant to trading per se. although the history of the housing and credit bubble will help give you the background you need to understand what’s going on now.

Gold Action Vindicates Caution

All the bugs who were rah-rahing and telling people to buy gold over $1000, instead of cautioning them to take profits and watch out must be feeling subdued. Despite the thrust upward to yearly highs, the gold action this year never struck me as spectacular at all. Considering everything that’s gone on, it’s been rather staid.

The most common explanation for that from the gold bug community is manipulation.  GATA has recently got confirmation of Federal Reserve gold swap arrangements that would certainly fall under the category of market intervention.

A second reason is that we still haven’t come out of the deflationary movement of the economy. We had the first wave of contraction last year, followed by an artificial bounce provoked by stimulus money and a lot of happy talk from the pundits. Now the second contraction has begun. Gold might do well in a deflation relative to other commodities, but so far it’s tended to sink when the market sells off, and that’s precisely what happened yesterday. No surprise there for me at all.

But it seems to have been a surprise to some traders out there. Rick Ackerman at Rick’s Picks expresses his puzzlement over the rush to dollars – it’s a rush to the Titanic, he argues.

Well – that’s why fundamental analysis is something you need to put on the back-burner when trading. I don’t care how bad fundamentals are. Nothing moves in a straight line down or up. Besides that, Ackerman, like many American commentators, assumes that his view of the dollar is the world’s view. That simply isn’t so. The dollar has terrible problems, but at least for now, there aren’t that many currencies that are free of problems – some of them worse than the dollar’s. And since the dollar is the currency used in a majority of transactions, moving out of them (which would be the case if you felt the economy was contracting) would entail buying dollars. It’s simple logic.

Finally – never pile onto a trade that has too many people on one side. That’s logic too.

Gold rose, but only wishful thinking would call it as powerful an upthrust as the gold experts have claimed it was. If you watch gold prices regularly, you’ll know it’s nothing for gold to move $40-50 in a day. It’s volatile. That’s its nature.

Add to its inherent volatility, the other things going on – the G20 meeting, much talk about altering the SDR’s backing, Bernanke’s comments about the recession ending, international tensions over Iran, the fact that September is usually a strong month for gold, Chinese comments about walking away from derivative contracts, China’s instructions to its population to buy gold — put all of that together and it’s not surprising that gold should have moved up by about $70.

If you bought earlier, you should have taken profits and you should be watching to see how things play out. I didn’t buy earlier, so I’m just watching.

I still firmly believe we are due for a correction – and a relatively big one. I’ll buy then (with reluctance – since I think it’s a terrible industry in many ways).  But what if we don’t correct, and gold shoots up?

Well, what if? Then I’ll be out. So what? if it goes up, it’s likely to go to $1200 or so. That’s a 20% upside. It could also go down to $800. Equal downside.

That’s not a good ratio of reward to risk. There are any number of stocks which will give you that kind of movement if you like gambling. But if you’re investing – and not gambling – then you should act like an investor and ask if you really want to buy at prices that high at the end of a long upthrust.

It doesn’t make investing sense.  So wait and buy on dips.

That said, I’m prepared to eat my words…

PS: Seems like Ackerman is in the deflationist camp (along with Shedlock, Prechter and others) – as opposed to the hyperinflationists like Schiff. [Correction: I accidentally had this in reverse, with Shedlock as inflationist. I’ve posted on why both Schiff and Shedlock are correct – and why that sort of face-off is misguided. Deflation in some areas and over a certain time frame can certainly take place with inflation over other areas. But if you consider inflation to be only the kind that shows up in CPI and on the grocery shelves then obviously, we haven’t see the kind of hyperinflation that gold bugs are waiting for. One thing I fail to see from a lot of people is an awareness that what’s anticipated from the Fed might already be priced into the dollar.]

Rick Ackerman’s Response:

RE: gold and the titanic?
From: Rick Ackerman
Sent: Fri 9/25/09 10:00 PM

Hey, Lila!

I’m using a $1074 target for Comex December Gold and have told my subscribers, many of whom are hard-money guys, that I can’t promise them any higher than that, at least not based on the evidence of GCZ’s daily and weekly charts. My gut feeling is that this is not the rally cycle that will take gold into the Promised Land, assuming it gets there at all. I’m still a hard-core deflationist who believes hyperinflation must ultimately play out, but not in time to save 80 million underwater U.S. homeowners from going through the ringer.

No matter what happens, the Baby Boomers’ retirement plans have already been deflated away to nothing. And concerning the dollar, I’ve moved beyond the idea that the currency is fundamentally worthless, accepting the reality that it trades, simply, as a share in USA, Inc.

With kind regards,

Rick

That’s a pretty good take on things from one of the more astute traders around.

The Carbon Credit Scam – Another Public-Private Boondoggle

“Dr Alison Doig, senior climate-change advisor at Christian Aid, says, ‘Live’s investigation highlights exactly what’s wrong with this flawed system, which is focused only on exchanging carbon credit globally, with no accounting for other environmental or social damage. All carbon credits are doing is making some companies rich, while doing nothing to prevent global pollution. It needs either abolition or total reform.’”

That’s a quote from a piece on how the much-touted carbon-credit trading scheme actually works on the ground in combating pollution. The idea of the scheme is to give industries a cap below which they have to operate. To exceed the cap, they have to purchase carbon credits from manufacturers in the developing world, who receive them in exchange for every cut in emissions they make.

The credits trade in private and international exchanges like any security, one ton of CO2 emission being equivalent to one Certified Emission Reduction (CER).

Carbon trading was one of the fastest growing sectors in 2006 and 2007, doubling in value, but like everything else, when the market took a hit, it took one too. With manufacturing output falling, emissions also fell, and with them carbon, making it more profitable for companies to pollute and buy the credits rather than cut back on emissions from fossil fuels.

And how does the scheme work on the ground? As Carbon Trade Watch documents in this revealing account by Nadene Ghouri, a company can actually be receiving tax-payer funded “green reward points” from the UN, and using the money for operations that are highly polluting – which is  what GFL (Gujarat Fluorochemicals) was doing.

Gold Spike Related to Chinese Derivative Contracts Busting?

Here’s a zinger that might explain gold’s sudden spike since yesterday:

“Some of the State Owned Enterprises that stated their potential intentions to default were Air China. China Eastern and Cosco. Mainly in part because they took major derivatives losses over the past year but also, concerns are arising that the derivatives that they were sold by these foreign institutions are garbage, underwater and may never see the light of day. So why continue to pay for them? So the concern in the financial world is that holders of these losing products may just walk away, not unlike a home owner with a $600,000 mortgage on a home valued at $475,000 deciding to just hand in their keys. However, read on…this has nothing to do with morgtgage backed products.  This time, the concern may be over Oil.

They (Reuters) cited 6 foreign banks. Where the story gets really intriguing is that among the major derivatives providers according to Reuters but also widely known in the industry, are Goldman Sachs, UBS and JP Morgan.

Here is the looming problem. These products are worth billions. One report that a good friend of mine did showed that if  Goldman Sachs for example were to take this one up the rear, they could stand to lose 15 billion dollars. (This number is by no means confirmed)……. I would imagine that China, being the biggest purchaser of US debt, could surely collapse the US institutions that were at one point deemed too big to fail if they decide to go ahead with this plan.

This is why I don’t take tonight’s news that China purchased 50 billion dollars of IMF bonds lightly. In fact, I take it very seriously. This is why I take the buzz on the floor over the past two days very seriously as well as I do the incredible spike in Gold today. Most importantly, I do not take lightly the recent 25% correction we have seen in the Chinese Stock Market. Can all these events be interconnected some how? Is the Chinese stock collapse giving us a hint?”

More here.

The Muddled Market

The market is talking out of all sides of its many mouths:

  • USD/JPY is rallying and most currencies strengthened against the dollar, except the pound, suggesting a return to the risk trade.
  • But……the pound sank..suggesting risk aversion
  • But…the stock markets are up, suggesting an increase in risk appetite
  • But……. the bond  market is teetering as long bond yields are soaring, an indication that bond traders are skeptical about the future outlook
  • But…..gold and silver prices are hitting resistance and falling back, suggesting either technical exhaustion or some return of risk appetite
  • But….gold and silver prices are still high, especially for the season, which suggests widespread uncertainty about the economy
  • But….jobless claims are down, which is good news for the economy

What does your earnest blogging-trader do on a day like this? She sits on the sidelines and spends the day printing charts of the indices. She also reviews her most recent trading sins and repents. Here’s her mea culpa.

I repent that I entered a trade with panic rather than reason.

I repent that I entered it on a Friday morning before a long weekend (last week) when the markets were thin and volatility greater than normal.  I also didn’t calculate the spread and bought higher than I should have.

I repent that I forgot about position size and just dumped whatever I could into it

I repent that when the trade moved in my favor, I didn’t sell the whole position but left half in

I repent that I didn’t do the fundamental analysis but did a multicultural trade – picking 12 currencies that sounded good to me.

I came out alright, but it was pure fluke.

Your blogging-trader did not lose money. She made a bit. Enough to pay some pressing bills. She should be thankful, but being a trader, she knows that making money on a bad trade, is not the way to go.

Update: Non-farm payrolls came in at negative 345k after an expected negative 525k – signaling that the recession could have bottomed. This should feed the risk trade, which means my multi-currency trade (Koruna, Nordic currencies, and Singapore dollar) should end up alright (I’m a bit in the red now).  The time frame is one more week or two)

Currency Conundrum: Where Do You Hide?

The big currency story of last week was the dollar meltdown, taking the dear old greenback (or the wicked insignia of imperialism, take your pick) down from over 83 to under 80 on the USDX (dollar index – an index measuring the dollar’s strength against a basket of currencies). Everything strengthened against the dollar – pound, yen, loonie, aussie, kiwi, rupee, gold, silver..

And only a few weeks ago we were within striking distance of 90. When will I ever learn not to try and pick tops? My perfectionism gets in the way of money-making. I seem to want to  be a soothsayer rather than rich.

But weeping aside, we saw this same sort of slide last year, only in spades. The dollar sank almost to 70 in March 2008, a move unequaled since the USDX began. After that, it resurrected itself, near miraculously, and continued treading water for the rest of the year. I’d hoped dollar-holders would see 90 plus. But 89 was as high as we got and then went back into the upper 70s, a 12.17% drop (11/21/08). Right now, we’re roughly at -8.9% (approx 10 points down from 89.6%), with the momentum to the downside still strong.

Last week’s swan-dive has the sweaty, knuckle-whitening smell of 2008 all over it. Chuck Butler of Everbank cautions against chasing the move, but who wouldn’t be tempted to have a go? The momentum is there, the fundamentals are there, the news supports both – so says the ever insightful Kathy Lien at GFT Forex.

The next crisis will be in currencies, points out Jim Rogers, rather redundantly.

But even he confesses to being baffled over where to hide.

The big driver behind all this is a statement by Bill Gross, Pimco’s manager, that the US could see a downgrade in its credit rating.

This struck me as rather odd. Especially, seeing as how dear old Pimpco was the charity child of the Fannie and Freddie group-hug from the government.

I wonder…I cogitate…I roll my eyes….

After all, the credit rating agencies (S&P, Moody’s Fitch’s) were talking about the UK heading for a ratings downgrade, not the US. They didn’t say anything about the US. And the UK’s debt -to-GDP is worse than ours (it’s near 100% GDP). Correction June2, 2009): I should clarify that I’m referring to public debt as a ratio to Gross Domestic Product, and checking the figures, I think I got this wrong. Will repost the figures.

Who the heck is listening to these ratings racketeers anyway? Weren’t they the same folks who put gold stars on some of the stinkiest pieces of manure being sold on the market?

Hmmm. What have we here? Could it be a little PR stunt? A little one-downmanship among friends to make a bit of pocket-change all around? A little game of push-the-buck- over-the 200-day- MA-cliff?

On the other hand, forgetting my cynicism for the moment, there are lots of real reasons for this weakness, besides trial balloon-floating from Mr. Gross, the main ones being the bounce in the stock market and the relatively smaller size of the quantitative easing in the Eurozone.

Add to that a thin trading day, which exaggerates any move, and the anticipation of the long weekend…

Insiders Selling the Rally

Insiders are selling this rally like crazy, so says The Pragmatic Capitalist:

“I recently wrote about reports that insider selling was at record highs and buying was practically non-existent.  The selling has become even more alarming in the last week and the buying has slowed to an absolute trickle. Below you’ll find the list of latest insider buys and sells.  The sells are staggering with the amounts ranging from $3MM to $63MM (and I was only able to copy one page).  The buys, on the other hand, are meager and range from $100K to $635K (the $800K purchase is a few months old and shouldn’t be in the data).   You’ll also notice that the screen came up with just 18 total purchases vs 170 total sales (the lowest of sell screen data were sales of over $400K which is not shown here due to the large size of the results…”

My Comment

Wall Street, as well as the administration, both want to boost the market for reasons that partially overlap. The administration wants to be able to justify the bail-outs and retain some of the shine of of the pre-election rhetoric of “change”.  But too much optimism will work against legislation/reforms that need a certain amount of panic to be passed.

Wall Street, on the other hand, doesn’t want panic at any price. It wants stability and optimism. And is eager to jump at any positive news it gets.

Mike Martin at MartinKronicle has a long and interesting interview with Victor Sperandeo (of “Trader Vic”), who calls it – as most informed commentators do – a bear market rally.  Sperandeo’s voice is a bit hard to follow but Martin’s questions are searching and cover a lot of ground.

Two points:

Sperandeo (like nearly everyone else) thinks currency depreciation is inevitable and massive inflation around the corner.

He’s pessimistic about the Middle East situation and anticipates more friction with Iran.

Dollar Surprise

From Chris Gaffney, Vice-President of Everbank:

“As most would predict, the Mexican peso (MXN) has dropped significantly, moving down almost 3% versus the U.S. dollar overnight. Fears of a global pandemic have driven investors out of the high yielding currencies of New Zealand (NZD), Australia (AUD), and Brazil (BRL). Risk aversion seems to be back in vogue, with investors moving funds back into U.S. Treasuries and the Japanese yen (JPY).

I read a story over the weekend that suggested the U.S. dollar would continue to strengthen no matter what happens in the global economy. The story said that the U.S. dollar would increase if the administration’s efforts to stimulate our economy worked, and that we would lead the rest of the globe into the recovery phase. On the other hand, it said that the U.S. dollar would also strengthen if the global economy continued to weaken, as investors would purchase U.S. Treasuries as a safe haven.”

My Comment:

This insight about the performance of the US dollar has also been mine.

De-leveraging (which is the collapse of asset values as they’re sold to pay off debt)  is going on now all over the world in different asset classes. And de-leveraging mostly needs the US dollar.

In spite of a few sharp corrections downward, that’s what has held the dollar index (DX) up for a bit longer than dollar bears had anticipated.

Holding up, of course, is not the same as “bull market”.

The dollar’s fundamentals are still bad.

I  don’t have hopes for any currency tied to a government behaving so recklessly. I hesitate to write this, but some of the high-level corruption we’ve seen is actually beyond third-world.

I say this with no schadenfreude. It’s deeply, traumatically, disturbing to find so much rot at the heart of the global financial system. At the very core of the “international community, ” if you will.

The worst criticism of imperialism, or of statism, or of financial corruption didn’t prepare me for this.

And it makes me very afraid.

What example does such behavior set? What message does it send to a world which takes its cue from the West, and from the US in particular. Can we really expect better from other governments?

Jim Rogers Likes Farmland…

An interview with commodities guru, Jim Rogers, in Newsweek, April 11,2009 :

“Does the future growth of China factor into your bullishness?
China is tiny in comparison to the U.S. economy. Anyone who thinks that the commodities story is driven by China needs to do more homework. In the 1970s, everyone was in recession, and you still had declining supply [in oil] and higher prices. Asia wasn’t even in the game then. China was run by Mao. But now, of course, there are those 3 billion people in Asia who are in the game. It’s just another factor.

Are we going to see another food-price spike sometime soon?
Definitely. I think you should move back to Indiana and marry a farmer. There are times in history when the money lenders have been in charge, and we just came through one of those periods. But it wasn’t always that way. Wall Street was a backwater in the ’40s, ’50s, ’60s and ’70s, and it will be again. Farmers are going to be the ones driving Lamborghinis, and the traders are going to have to learn to drive tractors.

What about technological advances? Another green revolution could easily drive prices down …
Sure, there’s always something that will end a bull market. But if you think we’re anywhere near that point now, think again. Even if everyone in the world decided to put a windmill on their head, it’s going to take decades for that to really change things. In the meantime, you’ve got to put your money somewhere. And as we’re already seeing, even the value of cash can be wiped out.

I guess that’s one reason the Chinese are so worried …
Well, if I were running the Chinese central bank, I’d buy oil, wheat and zinc. Which is what folks there are already doing.”

Update:

Jim Rogers is involved with two direct farmland investment funds: Agcapita (Canada) and Agrifirma (Brazil), according to a comment.

Comment

I agree with Rogers on this and always have.

Unfortunately, until recently it was hard to invest in commodities without going through a trading platform. Now you can buy and sell commodities as ETF’s, although their risks and performance can and will vary from the underlying commodity, so you can end up being in the right sector and still losing money.

But nonetheless, trading will work for a while. Who knows what happens after.

After that, yes, you might think of getting some nice little fruit or veggie farm, where you can stomp around, pull beets out of the ground and milk your pet goat…

At least, that’s the fantasy.

Meanwhile, however, you could do worse than get a rental property near the water. Where is the question.   Forbes tells us that Florida is one of the worst places to buy now

But don’t believe everything in Forbes.

When you see block houses for $50-60k near water and when your hear the Obamites are going to be putting money (or rather credit) into infrastructure, and and every effort is being made to reflate the real estate bubble and create jobs programs in select cities, I’m afraid follow the trend makes sense…

Just make sure the numbers work and your horizon is more than 5 -7 years.

Trader Psychology: Freezing from Fear

Today, I’m trying to recall the worst episode of fear I’ve experienced trading.

It was in August, 2004. I blame a certain newsletter for it. The writer had built up a frightening picture of how the US economy entirely depended on the Japanese PM’s good will for it to continue.  I forget exactly why. But the short of it  was that one day the old man would roll out of bed and decide to pull the plug on us, the writer said. He painted an apocalyptic picture of the day. Unemployment lines, factories shuttered, houses boarded up, foreclosures, stock markets crashing, the dollar worthless, oil prices so high no one could drive any more….

When the market plunged that fall, I thought the moment had come. Everything was down – my pension, some etf’s, long-term positions, short-term plays. I had put a lot into some tech stocks (Juniper, Nvidia, Foundry, Nortel – yes, those – remember? –  all of them), because I thought they were due to go back up. And in the beginning of that year they started out promisingly. But then an upswing… that didn’t turned into a downswing… that did. 

And kept on swinging down, lower and lower. I stopped looking at my positions. I was sea-sick every morning. Literally.

Which was stupid because there were several times the swings went up and I could have sold out for a smaller loss than I feared.

I didn’t. I was simply unable to face what was happening. The market wasn’t going back up. It was going lower. And I didn’t want to see that. I couldn’t bear feeling that bad. By not looking at the numbers, I didn’t have to feel the loss, so I didn’t. I procrastinated. I wanted to wake up one morning and see the numbers up in black as though they’d never been down.  And I wanted to sell at a profit. A plus, however small.

I waited so I could exit without any loss. Wanting the perfect exit, I missed all the good ones. Then even the decent ones. When I exited finally, in August, it was at what turned out to be the very bottom. After that, there was a three-year uptrend.

But I wasn’t on it.

I was in shock for months after seeing the ticker plunge for the last time and jumping out. In shock from having sold everything – the bad, the not-so-bad and the hardly-bad-at-all.  I didn’t want any more of it. I didn’t want to have my stomach churning every morning. I didn’t want the the false hopes of paper profits that disappeared before you took them and the constant drain of paper losses that drew blood because you couldn’t hold on any more.

I thought about how hard I’d worked to save the money. It wasn’t ‘easy come’ at all. But it was easy go, alright.  I thought about how I’d scrimped on food, weighing things for a difference in a few cents, skipping a meal to save a few dollars. I thought about how I’d done without things I needed so I could pay back my debts. How I’d been hard, not just on myself but on my family.

I’d curl up on my bed, a kind of silent whimpering inside me. I cursed myself and blamed myself for being greedy… for being in the market at all. How could I be so stupid.  Trading was for cleverer people than me. It was for people who had money to throw around, not for people who’d always had to be careful.  But inside I knew it wasn’t greed at all. I’d never been a greedy person. Fear was my problem. And habit. The habit of not ever thinking about something so tedious as money.

If the bank had paid even 1% more than inflation I’d have left my money in it and forgotten I had it. But it wasn’t. And it hadn’t for a long time.

So it was fear, not greed. Fear that I’d never be able to keep up with things costing more and more. Fear of always struggling and getting less and less. Money in a savings account was like a continuous leak, a bleed you couldn’t staunch. Houses had tripled where I lived. I might just as well not have worked for the past three years. I told myself, I should’ve been a bum. I ought to have gone into flipping them myself, like the people next door.  I didn’t. I thought it was wrong to. And now who was the fool? Just trying to make enough to keep up, I’d lost everything I’d made in three years. And all the interest from the ten years before.

A loss that large isn’t something you cry about. It stays somewhere in the background of your mind like the distant shrieking of a gull or the beating of waves in a seaside town.  You’re never really far from it.  It’s something that’s always going to be there, from now on.  Like a scar from an accident. In one moment you become someone else. Some one else who’ll always have this rip across your face, this twisted leg, the odd droop to your mouth. You forget how it used to be before the accident.

That first big loss is like that. The feeling you had before it goes forever.

The feeling of being whole. Of doing well. After that, there’s a kind of a gash. A sense of being on the wrong side of things.  Of being a loser. A kind of raggedness.

For a year I couldn’t press a sell or buy order on my screen without second-guessing it dozens of times. It took me two years before I could buy anything without wanting to jump out immediately…..

Only after a long while I began to understand, really understand, that trading isn’t about money. Even money isn’t about money.

It’s about emotions.  And success at trading is about understanding your emotions and being able to handle them.

You don’t overcome them but you know what they are. And what they’re making you do.

There’s no place for self-deception if you want to stop losing money trading.

Gold Forming A Base for Future Rise

From the Aden Sisters

“If there was ever a doubt that gold‘s bull market is forming an eight year low, it’s gone now. The Fed’s action guarantees that gold has much further to rise in the years ahead. So far, gold’s four week intermediate decline we call B has been moderate, but it’ll remain underway if June gold again declines below $953. Gold will stay firm above $880. Keep in mind, gold has been much stronger than most markets over the last several months, which means the other markets are poised to outperform gold for the time being...”

 Comment

I still think (and this could be wishful on my part) that gold will go lower than 880 (and under 750). But, as always, the price action dictates my opinion.

Meanwhile, supporting my cautious hopefulness about the stock market, here is Investor’s Business Daily on the often repeated assertion that this is a replay of 1929. IBD  suggests that our 1929 has already happened. What we have now is 1938:

The Nasdaq’s price action since the 1990s, like clockwork, closely parallels, tracks, and eerily replicates the Dow Jones Industrials’ wild speculative run-up to its 1929 bubble peak, the ensuing three-year, 88% collapse to the Depression lows in June 1932, followed by the recovery run-up to 1937 and the ensuing sharp correction. Based on historical data, today’s market is likely to be a repeat of 1938 — not 1929.

The only problem with that scenario is 1938 was a year before World War II began. I hope IBD isn’t pushing that parallel too hard.

File IBD’s report as Wall Street boosting the market…

Avinash Persaud – The Currency Expert

34 year old Avinash Persaud,  Managing Director and Global Head of Research for the Global Markets Group of State Street Bank and Trust Company. in England, one of the world’s leading financial services for institutional investors ( nearly 12% of the world’s securities under custody), is a top ranked analyst in  global surveys of currency research. Persaud has won the major awards in international finance including the Jacques de Larosiere Award from the Institute of International Finance and an Amex Bank Award.

Some career highlights:

During 2000/2001, the first private-sector, Visiting Scholar, of the IMF.

Non-Executive Director of the Overseas Development Institute.

In 1999,  Head of Currency Research at JP Morgan.

Mr Persaud and his Morgan team developed an indicator for currency crashes in emerging markets which predicted a Russian devaluation four months before it occurred and a “regime machine,” which gauged which macro-economic factors and behavioral sentiments were most influencing currency movements at a given point in time.

Graduate of the London School of Economics

Former governor of the LSE as well (19988-1989).

Comment:

(Check back later)

Revisiting the Financial Media, March 2007

“The DJIA numbers, which is what most people mean when they talk about the market being up or down, are seriously misleading because they don’t represent the whole market — only a handful of very highly capitalized, very unrepresentative stocks.

 

It’s the DJIA that has been hitting new highs since 2006 — to cheerleading and pom-poms from the press. But a lesser-known index, the Standard & Poor 500 (S&P500) shows what’s going on much better. A 10-year chart of the S&P 500 shows that it’s not hitting any new highs but is actually buckling as it struggles to regain its 2000 heights. In the process, it seems to have formed the two ominous peaks that symbolize what is known as a Double Top to stock traders. A Double Top is a classic signal of a potentially drastic reversal in the offing. And as if to underline where things could be heading in a hurry, Goldman Sachs bank, the fountainhead of financial speculation in the economy (Goldman’s former boss, Hank Paulson was hired as Treasury Secretary), has taken a wallop too. Goldman, note, is heavily invested in China and in the US housing market.

 

Moral of the Story: Anyone with their pension funds or children’s college money riding on this market shouldn’t bank on living too happily ever after….”

 

That’s from  a piece I wrote in March 2007:  “Fairy-tales from Grimm that just got Grimmer”

Two years….and how much has changed.

 

Trading: Nadeem Walayat On What to Accumulate

“Q. Where to invest during 2009 ?

A. Strategy here rather than stock picks. The strategy is clear, to accumulate stocks with stop losses in the decimated long-term growth sectors, the mega-trend sectors remain as I pointed in the October article are the Energy sector, that’s crude oil and natural gas (hit fresh lows), Water and Agricultural Commodities, add to that Biotech, Health and Tech stocks. Continue to avoid the financials, they are insolvent. It appears the central banks are attempting to fiddle the books with regards proposed ‘changes’ to mark to market valuations so as to give the illusion of solvency. Yes financial stocks WILL soar, BUT like the penny stocks that they have become, they will exhibit much volatility where 50% gains one week could easily turn into a 50% loss the following week.

Again remember to use stop losses on ALL positions. i.e. you place the stop under the most significant low where the market cannot trade if you are right ! For you only get stopped out if you are wrong. The maximum for a stop on a stock is 20%, and you never move a stop against your position. ONLY in the direction of the position. It is such a strategy that turns a portfolio to cash during a bear market without seeing bull market profits turn into bear market losses.

Your Stealth Bull Market Accumulating Analyst.

 Nadeem Walayat

Comment:

I’ve followed Walayat’s commentary for some time now and I find him to be pretty useful. I agree with his assessment of the current pessimism about the market and the advice to sell into every rally. That might have been right until now, but about now is probably the time to begin to accumulate. Even if in a worst case scenario, we go down to 5000, the upside from there is a lot greater than the downside. If you aren’t prepared to take that pain, the other thing to do would be to nibble at dips and hold through without selling into the rises. Nibble again when it dips. That way if the rally is just another bear market rally, you won’t have too much pain until the bottom. And if it’s the beginning of something better, then you’ll not have lost out.

Today’s action, GLD and dollar index down, seems to bear him out. With stocks up, investment money (which is largely what’s holding up the ETF) flows out of gold into the market. The same for the dollar, which was at the favorable end of the risk averse trade until now, ever since it became clear that Europe and Asia were slowing down just as fast (or faster) than the US.

I still think the dollar uptrend is not broken..yet…

But I’ve nibbled on Aussi and Kiwi (up today) and may add to my positions. Like Walayat, I think you have to ignore fundamentals and just think of price – it simplifies things a great deal.

(BTW I am not a professional trader but I’ve been managing my own savings since 2004 with no worse results than some of the top professionals around – I beat Peter Schiff hands down last year (not hard to do – a Schiff portfolio would have been down more than half last year) and Bill Miller too  – and with better predictions of price levels than most of them. My worst point is I’m overly cautious, trade only with a very small part of my savings, and have lost out from holding my money in dollars – mainly because, for logistical reasons, I haven’t been able to put down roots anywhere I think is really safe. In other words, I’ve a good idea where things will go but usually fail to act – the Hamlet syndrome…)

Stocks Up, Dollar Down as Market Expects Investor Friendly Changes (Expanded)

“The stock market has rallied the past three days for any number of reasons, chief among them it was due for at least a technical, “dead-cat” bounce after hitting 12-year lows on Monday. One fundamental factor in the rise is Wall Street’s increased expectation for at least some help from Washington D.C. on two issues: mark to market accounting and the uptick rule.On Thursday, the House Financial Services Committee held a hearing on mark to market, during which Robert Herz, the chairman of the Financial Accounting Standards Board (FASB), agreed provide more detailed guidelines on the controversial accounting practice within three weeks.”

More by Aaron Trask at Yahoo Finance

Comment:

Never make a public pronouncement. You’re sure to eat it. Having affirmed my short-term faith in the dollar (at least until its hits 90 or there abouts on the index),  I’ve had to second-guess myself.

The dollar’s taken a hit since yesterday and gold’s popped up a bit, part of that just the usual bounce after a leg down, but also because of several things:

1. The perception that the stock market may be due for a bit of a rebound (or, at least, a dead-cat bounce). That makes cash less attractive.

2. Signs of the revival of the uptick rule, which would require short-sellers to sell only on ticks up of the price and would probably prevent cascading short-selling…at least to an extent…

Signs also that mark-to-market may be in for some reexamination. Mark-to-market is seen by many banks as unfair, since it requires the mark down of perfectly sound assets to current (fire-sale) prices.  One alternative that’s been proposed is to go to a 3-month rolling average.  Again, that makes equities look more attractive than cash and is dollar-unfriendly.

3. The sale of the Swiss franc by the Swiss National Bank (SNB)to bring it down against the euro. That’s sparked fears of currency wars and simultaneous depreciation of all currencies, which in turns, reduces the dollar’s attractiveness as a safe-haven.

4. Increased flows into the gold ETF (GLD) to a record  1,041.53 tonnes, making it the 6th largest gold holding outfit in the world, overtaking the SNB. (I have to look up the flows and will add a link and a note here later)

5. Unexpected rise in consumer confidence from the preliminary March data.

6. Announcement by Citi (as well as JP Morgan Chase and Wells Fargo) that it’s showing profitability in 2009. (Why don’t they start paying us back then?)

But until gold shows conviction in going through resistance in the 930-940 band, I’ll stick bull-headedly to my belief that the dollar will chug on or at least bounce around 87-89 for a bit more before coming down.

Mind you, I’m not wedded to that opinion, and if I see signs of change I’ll start stock-loading food, buying up gold coins and foraging for wild roots in the backyard…I’ll let you know..

Obama Tanks the Dow

More here

Comment:

Going further,  the Deal Journal gives the President some tips on how to make nice to the market and stop being Obummer.

The budget numbers are out, and they aren’t pretty, projecting a $1.75 million deficit for the year and including a provision to auction off permits to exceed carbon emission caps (frankly, this sounds like the sale of indulgences by popes during the Middle Ages – only now, we’re all so much more enlightened...).  This might tank the Dow even more,…

Especially if it also takes a look at  GM’s horrible numbers (a $9.6 bn Q4 loss and a decline in its cash position from the previous quarter of $2.2 bn ($16.2 bn to $14 bn).  And let’s see what London’s FTSE will do now that Royal Bank of Scotland has announced the biggest annual corporate loss in UK history ($34.2bn/24.1 bn BP)

Gold Double Top?

“When gold hit $1000 for the first time ever on Friday March 14th 2008, silver hit a high of $20.88 but now it can only muster about $14.50 when gold breached $1000 again. Why the dismal performance? The answer is because silver is a more recession sensitive metal compared to gold and decrease in industrial demand is acting as a dampener on the silver price. As said before, when the unemployment figures peak then and only then does silver become a multi-year buy. What is going on just now is a trader’s market.”

Gold Up But Dollar Up Too

“THE SPOT PRICE of physical gold bullion touched an 8-session high early in London on Wednesday, turning lower from $927.50 an ounce as world stock markets slipped following Wall Street’s shock 5% slump overnight.

Treasury-bond prices rose despite a record $21 billion auction of new 10-year notes due today, while crude oil slipped below $38 per barrel.

The Bank of England said in its latest quarterly Inflation Report that the UK economy is now in “a deep recession.”

Business confidence across the 16-nation Eurozone worsened for the 18-month running in Dec. according to the Ifo Institute in Munich, falling to the survey’s lowest reading since it began in 1993.

“We have to be cautious on gold short term,” says Phil Smith in his latest technical chart analysis for Reuters India.

“The near term signals are still bullish but are looking like they may turn. Overall still a bullish chart, but with near-term downside risk.”

From Adrian Ash

Comment:

GSax has been saying gold will be up above $1000 in 3 months. Considering that it’s around 900 plus and that over spring it often moves up, they didn’t need Nostradamus to come up with that. Not when they have their guys stashed in every corner of government.

Some people might still think a 15% upside is a good deal. But I think buying on the dips is a better idea. I’m still of the school of thought that the price may have to go way back…maybe even below 700…. before it resumes the next bull leg.

But that’s just my no-account opinion.

Financial Follies: Dollar Uptrend

From a trader whose predictions I’ve liked, Nadeem Walayat: 

“U.S. Dollar Forecast 2009

TREND ANALYSIS – The correction following the November peak was more severe than expected this implies a weakness, however the US Dollar did hold above the previous low of 75 before resuming the up trend. Immediate resistance lies at 88, given the violence of the correction this implies choppy volatile trading in the region of between 80 and 90, this is inline with the conclusion of October 2008 with regards trend expectations for 2009.

PRICE TARGETS – The upside price target for USD remains at 90 and then 92. The USD has significant resistance above USD 92 and therefore suggests the USD will find it tough to sustain a breakout above USD 93. This suggests a trading range with an upward bias. The key here is for the USD to continue making higher lows, with the last low being 77.7.

MACD – The MACD was extremely oversold and has helped contribute to the U.S. Dollar turnaround, how-ever the MACD has some way to go before it reaches what could be termed as an overbought state and therefore implies more immediate term U.S. Dollar strength.

SEASONAL TREND – The USD Rally into January is inline with the seasonal tendency, which suggests a corrective February.

ELLIOTT WAVE THEORY – Octobers elliott wave analysis proved accurate, given the power of the corrective wave, this suggests a more complex sideways elliott wave pattern during 2009 rather than a breakout higher.

Madoff With It: Did Bernie Siphon Off Money Through Primex?

FINRA has found no evidence of trades by Bernie Madoff on behalf of his private investment fund through Bernard L. Madoff Investment Securities, a commercial brokerage founded in 1960.

This appears to be a brick in the wall of ‘rogue trader’ status. He could do it himself because he made no trades at all.

However this was not Bernie’s only commercial operation in the securities business, in addition to his now nefarious private fund.

Primex was registered as Primex Holdings, L.L.C. in NYS in October of 1998. Primex is a joint venture involving a digital trading auction which operates out of Bernie’s 18th floor office at 885 Third Ave.

Madoff’s business partners in the Primex Exchange were Citigroup, Morgan Stanley, Goldman Sachs, and Merrill Lynch.

Did Bernie give any business to this joint venture? Did any of the above brokers have any investments or losses with the Madoff Fund? If not why not? It was one of the most successful funds, on paper, on the Street?

More questions than answers. Let’s hope this one does not disappear down a black hole like the enormous put option positions placed on the airline stocks just prior to 9/11.

See Jesse’s Cafe Americain

Comment:

Haha, Jesse. Did I hear 9/11 put options?  In DC-think that’s, “I am a certifiable loon, a gun-clinging survivalist-creationist with neo-Nazi leanings. Please ignore my ravings and leave me to dribble here in my corner.”

Trader Psych: Incredible Dollar-Swissie Reversal

“USDCHF – Recent US Dollar/Swiss Franc price action is a testament to the effectiveness of Speculative Sentiment Index-based currency forecasts. Forex trading crowds had remained heavily net-short the USD/CHF since July, and the pair went on to mount an impressive multi-month rally. Most recently, that same crowd capitulated and actually went net-long the USD/CHF near the 1.2000 mark. The US Dollar subsequently went on to post its biggest monthly loss against the Swiss Franc in history—incredible by any standards. Looking to very short-term trading, the crowd is currently net-short the pair, with short positions outnumbering longs by 1.08 to 1. Such a flip gives us reason to look for a reversal, but a sharp drop in open interest gives us little conviction in our forecast. Our forex trading signals previously went short the USD/CHF for sizeable profits, but the strategies now hold a weaker bias….”

– trader, David Rodriguez 

Comment:

This was quite a move up for the Franc and it shows why trading currencies in a regular (non-trading) account is hard to do.

I had planned to buy Swissie at the end of last week and then decided that the dip in the dollar from 86 – 83 on the Dollar Index had already priced in a Fed cut. So I held off, waiting to do it on Monday.

Then came Madoff. And on Tuesday, a Fed rate cut that was historic.

And as a result, from Monday to Wednesday, the dollar lost more than half the gains it made this fall. The Swissie shot up. A great trade on Friday looked almost risky by Wednesday. What if the Swissie fell back after that surge? Trader sentiment switched to shorting the dollar.

As if to confuse sentiment again, at Thursday close, the dollar had recovered some of its footing against the majors.

In Forex, trying to look for a bottom (as I was trying to do with the Swissie) takes just a little too much time for action that quick. Crowd sentiment out there is as volatile as it could possibly be.

Now the crucial thing is if GLD (the ETF, as a proxy for the spot price) can hold above 850 and the dollar over 80 by Friday close. If they do, a trend reversal of the pair will be confirmed technically.

Note: I am talking about GLD and the dollar as inversely correlated, once again. They had decoupled for a while but have returned to their inverse relationship recently.I don’t know how long that will last though. Not very long, I suspect. Notice that GLD is moving out of synch with other commodities. Oil, for instance, is down at 41/2 year lows. GLD’s move, in step with the Swissie, typified a rush to safety.

Bank Wars: Market Machinations – Update on Bush

“The US House of Representatives voted in support of the Wall Street bail-out package. As the vote began at 1:00pm, Europe’s equity market gains of +1.5% across the board had been locked in, but the US equity markets started to plunge, down -4.0% in the final three hours of trading.Was this a message from Humungous Bank & Broker that the Paulson Package was not a Wall St bail-out after all? You betcha. Deceitful stuff, this. And when Europe opens well down on Monday, will that be a message from HB&B that they want the same bail-out from the governments there? You betcha.

Interventionists are now in full control of the global equity market. Paulson has won. The banks have won. The people’s representatives caved in and the people can take a hike for all the banks care at this point….”

That’s the excellent Bill Cara who agrees with my take that this crisis was exploited to pave the way for mega-bank consolidation at the expense of the weaker banks.

Comment:

Giving credence to that view, the fight between Citigroup and Wells Fargo heats up. The NY State Supreme Court blocked the incipient merger of Wells with bank-in-distress, Wachovia. Then Wachovia successfully appealed the decision. Now Citi, which has an exclusivity contract with Wachovia, plans to appeal the appeal.

Meanwhile, Wachovia has gotten a restraining order from a N. Carolina judge to prevent Citi from enforcing the exclusivity contract, charging that following the Wachovia-Wells merger announcement, Citi had taken steps to force Wachovia’s collapse.

The Citi offer (for $2.2 b) has the backstop of the FDIC and would cannibalize Wachovia, taking over only the banking operations, not Wachovia’s asset management or retail brokerage. Wells Fargo’s deal, on the other hand, would leave the bank intact and would give it $15.1 b.

Over at the postmortem for Lehman, unsecured creditors have filed a claim that JP Morgan prevented Lehman from accessing its assets, causing the bank to collapse.

And at the Congressional probe into AIG’s contribution to this mess, documents seem to show that AIG’s auditor, Pricewaterhouse Cooper gave a confidential warning that internal overseers weren’t allowed proper access to the highly-leveraged desks. (Of course, if you go back to 2005 and earlier, you’ll find Pricewaterhouse itself was being questioned for its behavior).

Secrecy has been the complaint for years over at Goldman Sachs. What beats me is why no one called these firms on any of this.

Crude Oil Decoupling from the US Dollar

“Crude oil has detached itself from movement in the US dollar. Movement in crude oil prices suggest that the options markets has a big role to play and a part of the rise in crude oil is attributed to covering by option sellers. Frankly, very few traders and investors expected crude oil prices to rise near $125 at this time of the year. Long term investors will exit their investments once crude oil breaks $150 as incremental returns will fall over $150. Investors have made over 100% returns when crude oil prices rose from $50 in early 2007 to now. Crude oil over $150, investors will not get 100% returns in twelve months once crude oil breaks $150. If crude oil prices float over $200 for a long time whether in 2009 or 2010, there will be real evidence of a global slowdown. Even emerging markets like India where petrol and diesel prices are subsidized, the government will start reducing subsidies. The rise in crude oil prices may last another year and a half and thereafter the pace of the rise will fall….”

Chintan Karnani, Asian Metal Markets

Part II Riding the Gold Bull at the Daily Reckoning – or How She Missed Conquering the Rock 5/17/2006 (reprinted)

Here’s me in Buenos Ayres rushing around checking out house prices in 2006 while trying to jump on and off the gold bull (scroll down for the note):

Wed, May 17, 2006 12:41:28 PM

From:

The Daily Reckoning

Subject:

Today’s Daily Reckoning

The Conquest of the Rock

The Daily Reckoning

St. Michael’s, Maryland

Wednesday, May 17, 2006

———————

*** Having the courage to grab the bull by the horns…how do you know
when it’s time to get in, and time to jump off?

*** GM lays off thousands of Americans – and hires in India…an economic
“Code Red”…

*** The perfect ingredients for a plunging dollar…it’s all about
timing…and more!

———————

The only thing more frustrating than a long bear market is a long bull
market. Riding a great bull market is like riding a real bull. You are
always in danger of getting thrown off. And once on the ground, it is hard
to get back on.

(See colleague Lila Rajiva’s attempts to get into gold, below…)
*** Lila Rajiva, trying to climb onto the bull’s back:

“Bill: As a faithful believer in the doomsday scenario for the dollar and
the final revenge of gold, I admit I am not having an easy ride. In fact,
I think I have had a bit of a mauling. With some nervous selling across
the board in the metals, and options expiration at the end of the week,
the ride gets stormier.

“Of course, I’m still a dollar bear. What’s not to hate?

“Massive trade deficits, staggering debt at all levels, a tumescent real
estate market hissing into an inevitable slump, saber rattling in the
Middle East, a war of words with China, oil bubbling steadily around $70,
and inflation simmering under the cooked-up numbers the government spews
as it sees fit…it’s all a recipe for a plunging dollar.

“And way back in 2004, it seemed the dollar was taking that ride in a
straight line down as it fell nine percent against the Euro. Some of us
opened Everbank accounts and got ourselves a basket of mixed foreign
currencies or other exotic goodies. Buffet was betting against the damn
thing – how could we be wrong?

“But in 2005, Buffet and the rest of us sinners, had to dine on crow. The
dollar strengthened, if it did not actually flex its pecs, erasing half
its losses against the backdrop of continuing tight money policy and
higher interest rates in the United States versus the euro area and Japan.
The dumping of the European Union’s Constitutional Treaty in France and
the Netherlands, also stiffened a few rickety vertebrae in the greenback’s
spine. Of course, it was merely a touching coincidence that corporations
got to repatriate earnings in stronger dollars, courtesy of a convenient
window created by Congress.

“Even the trusty little GLD ETF, which was supposed to cushion my dive
into the big bad speculative world of metals, stayed down the whole year.

“Naturally, as a newbie I’d bought it just when it came out in November
2004. And naturally, after being heralded like the Second Coming, it sank
almost immediately. On sundry Web sites, reports surfaced hinting darkly
at dire manipulations, the lack of verification of its holdings, and all
manner of sinister machinations calculated to strike terror in the heart
of someone’s whose last encounter with the metal was buying an ankle
bracelet at a souk in Dubai. Equity bulls of our acquaintance cast a
derisive eye at us. Gold? Had we forgotten that stash of 850 buck ingots
from the eighties still moldering in our basement? I was ready to cave in
and sell for what I’d bought it.

“But then as the year ended, the metals minuet ended and the action on the
floor became hot and fast.

“Sleeping Beauty leapt out of her coffin and darted ahead almost 25% in a
matter of weeks. Too much too fast? It seemed that way to me. I wasn’t
going to wait around to see that thing fall back just as fast as it had
shot up. A profit is only paper, until you book it, right? I booked it.

“Yeah! Wait for the correction and ride it right back up again like a
Ferris wheel. But market timing is never as easy as it sounds, which is
why some gold bulls, like Doug Casey, of the International Speculator,
will tell you that this isn’t a market you can trade – the moves have been
too fast. You drop out when it drops and you’re liable to be left
standing. You miss the big profits.

“And that’s how it’s been. The first correction came in February as
expected, but the next leg up was so fast and furious that by April we
were hitting multi-decade highs with hardly a pause along the way

“Too bad I wasn’t on board. I was still figuring out the right moment to
buy… and clearing the dust out of my eyes.”
Continue reading

Trader Psychology: The Dash for Trash…

“The most important thing to do is to stick with the processes that have served you well, but appreciate that the environment we are operating in may be altering. If in doubt, as I wrote last week, inaction and hence holding cash may well be the safest bet.”

Read more by James Montier in Mind Matters.

Comment

Montier is talking about 20%-40% cash.

He also recommends purchasing value stocks with good dividend yields, rather than growth stocks, since he thinks valuations of US stocks – while off from their bubble peaks – are still far too optimistic.

As the piece indicates, Montier is no fan of the “decoupling” thesis – the idea that global growth can continue despite a recession in the US. He asks how it is that the same people who once talked most enthusiastically about globalisation are now endorsing decoupling – just as enthusiastically. He calls it cognitive dissonance.
He has a point.

On the other hand, I happen to be a fan of cognitive dissonance. Mainly because our cognitions aren’t as pure and simple as we think they are. They are just points of view.

To assert both globalisation and decoupling at the same time strikes me as quite plausible. Certain aspects of trade are global. Others are not. Some countries depend more heavily on the US consumer – either directly or indirectly. Others do not. It makes perfect sense that US stocks should be overvalued and not likely to go anywhere for years……and that emerging markets stocks, even if relatively overvalued and due for a correction, should do better – even much better – over the long-term.

But the piece is still worth studying for those investors in whom hope for their favorite growth stock springs eternal….