Consarned Market

There's a phrase common in the South that goes "shoot darn" and another that goes "consarn-it".  While we're relatively recent transplants to the Piney Woods Country, these local expressions, which have less correct variations that I'm sure you can fill in, pretty much sum up our view of the Friday market action.  That said, and in the event you were in a coma the whole day, let me put a few facts out on the table and see if it adds up for you:

• As we reported before the open on Friday, the GDP growth began to drop seriously behind the rate of inflation.  Specifically, M-3 (which we'll gnaw on a bit Monday morning) is growing at what could be argued as a 16% annual rate.  So, if GDP is going up at 1 point something percent, it follows that inflation might follow at some whopping percent.

• The clock continues to tick in the Iran nuclear stand-off. Bluster and braggadocio in plentiful supply at Davos, where the world's "haves" are plotting next moves.

• On the health care front, another avenue of inquiry has been opened in the Guidant case.

• United Airlines lost $17 billion - making them more expensive than a shopping trip to Tyler with Elaine by $16,999,999,800.00.

• Oil's back over $67.

Now, to be absolutely fair, there were some countervailing momentary flashes in the pan, but I just don't see them as that big a deal.

• True, Microsoft profits were up 5%, but to me, that's just keeping ahead of monetary inflation.  Or is it - more on this come Monday morning after I get my blood pressure back in bounds.

• Proctor and Gamble profits were "up 29%" driven by the Gillette acquisition. That's a nice report, but when I take 4th quarter earnings, unchanged at 72¢ a share, I get less than thrilled.  While PG is an excellent company to be sure, it's too rich for my blood.  Yahoo reports the book value of the common at $5.491 for a price to book ratio of 10.71. with a forward P/E of a tad under  10.

• Some economists think the GDP slowing was overstated.

So what's the "real deal" here?  Why would the market pop up nearly 100 points by the down and 3/4 of 1% on the S&P 500 on what to a (questionably) rational person would be a ho-hum kind of day? 

Let me propose this answer and see if you buy it:  There's a Wall Street axiom (which is partly BS, as most Street axioms are) that the fate of the market is predictable in TrueType Tealeave fashion.  Specifically, January is supposed to go like the first week of the month goes...and the year (2006) should go as the first month goes.  Given that the year started from 10,717, we have to remember that Wednesday closed at 10,709 - and had this continued, the outlook for the soothsayers for the balance of 2006 would have been sucko.

This way two things happen:  First, the Myth "As goes January, so goes the year" can be laid in huge doses on people who can't think for themselves.  That, and the Power That Be (aided and abetted by easy money from the Fed, will be able to short from much higher levels.  The only issue, is whether some kind of gain will be in place until close of business Tuesday, which will end the month.  At this point, it seems like a shoo-in.

Police State Powers

Go read the latest on supposed power of the Department of Homeland Security to intrude into your private banking affairs (and safe deposit boxes) at today's report from the "Voice of the White House."   Chilling quote:

"Further, the DHA “shall, at the discretion of the agent supervising the search, remove, photograph or seize as evidence…” any of the following items…”bar gold, gold coins, firearms of any kind unless manufactured prior to 1878, documents such as passports or foreign bank account records, pornography or any material that, in the opinion of the agent, shall be deemed of to be of a contraband nature.”

All of which would sound wildly speculative, paranoid to the point of delusional except that an absolutely unimpeachable source sent me this first hand account of his business this week:

"Went to bank today. new placards in window saying the bank is cooperating with Homeland security in id'ing their customers. So all transactions will involve providing at least two sources of id. even if they know you. Now they did not ask for squat as I deposited some small checks, but yesterday when I went inside the bank, and had not noticed the placards, the teller was all over my ass for id as I bought the cashiers check for my ******.  I have banked there since 1980 and have check numbers over 11 thousand now. But she was a new teller so I thought she was just over zealous and really on the job.

Now comes the question of boxes. I asked if there were new rules about the bank box I rent. Have one for paper copies of *************  and some other paper, nothing more. Anyway was told that the teller could not discuss that and that I had to contact the woman in charge of the bank boxes at whichever branch I have the account. So that pretty much tells me that yep, something is up there too. The teller today would not be drawn out about it, so I let it go. "

Of course, you're in a bit of a box here.  If you have cash in any quantity at home, you're subject to robbery by common thugs, or confiscation by power-crazed local police who could claim you are a suspect in narcotics trafficking and that the cash/gold/silver/guns are "evidence" which you can bet your ass you'll never see again even (or this is especially) if you obtained the items in an absolutely legal manner..

Maybe if I send a little money to the local party in power, I can "buy some protection."  What a racket, huh?

Elaine's Search

As you may know, my wife Elaine does occasional executive recruiting.  She's presently doing a search for a board certified dermatologist. If you are interested, or know a great board certified dermatologist who might be interested in moving up the food chain, corporate medical affairs, drop her a note /CV to texelaine@earthlink.net  and she may be able to get things rolling.

Peoplenomics: Verging on Serious

This weekend, our www.peoplenomics.com report will look at a very interesting idea that cropped up on Thursday: Can we accurately imply future economic activity based on current bond prices?  Usually, I stay a little closer to the pocketbook, but this question bothers me. I have no idea what the research will show, but that's what I'm off in search of this weekend. (Subscription is $30 a year)

Another Bargain...

...is our ebook "How to live on $10,000 a year or less".  It's only $0.02739726027397260273972602739726 a day, amortized over a non leap year.  If you're calculator won't handle that many decimal places, just drop by the Peoplenomics.com bookstore and spend $10 on it.

Proclaim Your Innocence

Tell your friends that a sinister right-wing organization forces you to read this site every day but they promised not to harm you if you told all your friends to read it, too...

Friday Jan 27 2006

GDP Failing

After much hype, shuck and jive about how American workers were increasing productivity, the Bureau of Economic Analysis confessional today just plain sucks.  In the fourth quarter, GDP growth was 1.1% annualized.  (Compare this with monetary inflation and you can quickly see how we're sliding backwards - in case you haven't been reading the tea leaves or your checkbook lately.)  This is the slowest pace in 3-years.  Here's a gem of careful text:

"The personal saving rate -- saving as a percentage of disposable personal income -- increased from a negative 1.8 percent in the third quarter to a negative 0.4 percent in the fourth. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from the previous periods."

In other words, you didn't have to dig in to savings quite as much in Q4 to make ends meet...  Wow, what wonderful news, huh?  Let's hear it for the administration and CONgress!

Mass Layoffs

No one else seems to bother, but the combination of outsourcing and drooping sales pushed the mass layoffs back near the 150,000 mark in December according to the quietly release Labor Department report out this week:

War On the Web

I've written literally dozens of times that we could have a Second Great Depression in the USA and that we will know when we reach the modern day equivalent of 1934, in the Second Great Depression, when the federal government makes its move to seize the Internet.  It's along this line of thinking that I draw your attention to Common Cause's "Hands Off My Internet" campaign.

Let me summarize the basics here, so you can have a starting point for developing your own view/position on the issue - one that will be along sooner or later because the internet represents two very frightening things for The Powers That Be: Freedom of Expression (free press) and the potential of freedom loving individuals to spontaneously self organize.

• WHAT:  Although you may love the web, there are likely to be three main avenues of attack by government to restrict publishing rights to the internet for general public consumption:

  • The internet allows "terrorists" to communicate in an environment where interdiction is very difficult.  Two such avenues are using publicly available encryption systems (PGP, for example) and embedded ASCII messages within .jpg files.

  • The internet allows some firms to reduce their effective tax rates significantly by allowing firms to transact business without paying sales/VAT taxes.  Can you imagine the sales tax revenue that an outfit like Amazon or eBay could generate?  Why that's enough put put the glow of greed in any politician's eye!

  • After we get through crashing the economy (later this year, as the second leg down from the tech bubble burst is solidly underway) we can expect to see government and corporate "experts" trotted out to proclaim that the internet is responsible, at least in some large measure, for the worldwide deflation that will happen along after current inflationary attempts fail (I expect mid-year, or so).

• WHY: Government espouses freedom but is all about restricting freedoms in general for what is sold as the common good.  This is why you can't grow certain God given plants on your property without getting thrown in the clink. (Try growing marijuana or opium poppies in your yard, and you'll see what I mean.  "Good enough for God, good enough for me..." ain't gonna fly in court, right?).

• WHERE: Anywhere the internet is, government control will have to follow at least by 2012.  Worldwide.

• WHO:  Governments, which want absolute power for themselves, despite the fact that we have a beloved Constitution that goes to the idea that powers not specifically given to government should stay with the people.

• WHEN:  As soon as the corporate structures can figure out a licensure scheme, it will be popped on the people.

• HOW: Tax cookies, access cookies, and other avenues of taxation/use limits for end users, while tax cookies keep popping up in the background.  For some really excellent reporting, check out Matthew Weigelt's article in Federal Computing Week about Fed's & cookies.

People who write clever blogs on the internet, or folks like me that try to run small alternative news operations, may in the near future find themselves relegated to the same role as radio performers in the 1930's after corporations made the run and seized radio in America.  Prior to that corporate land grab, radio was a Wild West sort of affair - stations went on and off the air, somewhat at random, and anyone could get a foot in the door.  The Federal Radio Commission was a forerunner to the FCC of today.

Not to ruin your Friday, but if you're a professional writer (I try), you might get used to the idea of becoming just a content provider, just as performers became content providers in the wake of the corporate hijacking of free radio in the 1930's  to purportedly "serve the public need, interest, and concerns."  I think about that notion (and how it was systematically trashed by the corp-gov folks) every time I watch soaps and low IQ crap programming aimed at keeping the sheep in line, the kids dumb, and you buying useless but profitable products.

Rent-a-Greenspan

$500,000 an hour is all it takes reports the NY Post.  The People's Economist by comparison charges a modest $100/hour, or pizza and beer money, depending on client.

Those Darn Voters

Good piece in the Chicago Sun-Times this morning on the problems facing the administration now that Hamas has won the Palestinian vote. The headline over Cam Simpson's analysis sort of says it all: "US likes free vote, Not Results."  Gee. I guess the US voting engineers weren't called in on the Palestinian vote, huh?

Waffle of the Day

No, not at IHOP (although theirs are better tasting for sure).  No, I'm talking about Iran cooling on the Russian uranium enrichment plan.

Meanwhile, we find some odd speculation that when an attack on Iran comes, it will be using covert ground forces suggests one article.  Really?  Counted heads in the Iran Army lately? With reserves, 850,000+ and they don't need an airplane ticket to get to the site of a potential battle.

Secrets Disclosed, Please

ABC today reports on a poll showing 75% of us want records of White House meeting with payster Jack Abramoff released.  Who, when, what was discussed, might put lie to George Bush's claim in the press conference this week that he didn't know him, so no, you won't see those records any time soon I expect. 

Speaking of polls, as we've said for a long time, the public is also mighty darn worried about those HUGE federal deficits that George and his pals ("best money can buy") in CONgress are scheming to pass on to our heirs.

Except my kids of course.  They are bright enough to claim any intergenerational transfer of debt to fund government operations is really taxation without representation.  Interesting idea.  But then again, thanks to the shopkeeper economy in this country, they may all have to work corporate farm fields in Mexico when this mess is all sorted out.  Can I help you outsource your job mister?

Silver: $10 Next Week?

I notice that silver (at web time) had been as high as $9.81 now.  (See Kitco chart above) That's a 40% gain from our web bot "heads up" back in July.  Guess?  Sure: $10 next week maybe...

Agent Orange

Korea's war vets have won a major lawsuit over Agent Orange. 

European Humor

An overseas reader sent in this delightful email which might brighten up your day...

As many of you may be aware, in light of the current nightly Disturbances occurring all over France, the French government has just announced a raise in its terror alert level from "Run" to "Hide". The normal level is "General Arrogance", and the only two higher levels in France are "Surrender" and "Collaborate".

 

The rise was precipitated by a recent arsonist fire that destroyed France's white flag factory in an ethnic suburb of Paris, effectively paralyzing the country's military capability. It's not only the French that are on a heightened level of alert: Italy has increased the alert level from "Shout loudly and excitedly" to "Elaborate military posturing". Two more levels remain, "Ineffective combat operations" and "Change sides". The Germans also increased their alert state from "Disdain" to "Dress in uniform and sing marching songs". They have two higher levels: "Invade a neighbour" and "Lose".

 

Seeing this reaction in continental Europe the Americans have gone from "Isolationism" to "Find another oil-rich nation for regime change". Their remaining higher alert states are "Attack random countries (ideally those without any credible military)" and "Beg the British for help".

 

The British are also feeling the pinch in relation to recent bombings and have raised their security level from "Miffed" to "Peeved". Soon though, security levels may be raised yet again to "Irritated" or even "A Bit Cross". Londoners have not been "A Bit Cross" since the Blitz in 1940 when tea supplies all but ran out.

 

Terrorists have been re-categorized from "Tiresome" to "Bloody Nuisance". The last time the British issued a "Bloody Nuisance" warning level was during the Great Fire.

Thursday Jan 26, 2006

News Stew: Preparing for What's Next

We're just about to the leading edge of a bell curve described by the web bot project (subscriptions to the 806 run) which will peak on February 3rd (US time), and although this is a release period, web bot genius Cliff (with understudy Igor) is quick to point out that in a web bot "emotional release period" the world acts like it's operating under a 75-days long full moon period and everything seems a little bit nuts.  No kidding.  Although the real "war" part of the coming conflict period won't arrive till August 31st (we're still in "militancy" linguistically), there's expected to be some foreshadowing event or events between now and the end of March (27th to be precise) which should gently signal to the highly aware how the course of future events will unfold.

One news tipster (link above left) advises us that there was a big story on New Zealand television this week about how a global economic meltdown is a possibility. "I was watching the NZ local interest show that follows the news last night and they ran a piece on how we are freaking doomed and just how bad the coming economic turmoil is going to be with Jim Mellon telling us just what to do. I am sure he must read the Mogambo Guru because he said that we should all... BUY GOLD.  They mentioned buying GOLD! The mainstream media in New Zealand said to stock up on gold and other precious commodities (and food) as advice to weather the coming storm." 

In that regard, we see that prices of gold are down a tad today, but silver, which I specifically commended to you in the $6.94 to 7.25 range in July is trading around $9.50 the past day or two: Which means a 35% gain (before expenses) since our discussion.  In the same roughly 6-month period, I notice that the Dow 30 has also advanced.  From 10,641 the week ending July 25 to 10,710 at yesterday's close, just to put a number to it.  Call it 6-10th's of one percent, but again, that's before fees and if you're smart enough to read this site, you're probably bright enough to figure out without my prompting that the Dow in the same period would need to have posted a 1.6-1.7% gain just to keep pace with inflation let alone a real return to the bottom line.  On the other hand, silver's advance of 35%+ is obviously far ahead of inflation.

---

During this "full moon of the moods" I've gotten a number of emails that go something like this:

HI GEORGE

A FRIEND SUGGESTED SOMETHING THE OTHER DAY I THOUGHT YOU MIGHT FIND INTERESTING

JUNE 06, 2006 =  6 6 6

HUMM

Although interesting, we all know the mark of the beast is really the world wide web, which in Roman characters is WWW which looks a lot like the Roman "666" IV IV IV. 

---

Our sources in Houston report nothing obviously different, but there are a numbers of reports floating around the web lately that suggest Houston or a nearby refinery depot (Bay City) might be on a terrorist hit list.  Houston is certainly quite serious about preparations, say reports.

---

So what would launch such an attack on the US?  One school of thought is that the pending US/Israeli strikes on Iran, would be a nearly instantaneous reaction to any attack on the US, false flag or otherwise.  Today, there's some evidence in German publications that such planning has been underway for many months.

If we watch closely, we can see that the pieces are being moved around the board in slow, deliberate fashion, on both sides.  Iran is pimping the idea that China would be against sanctions at the UN, and we already know how much investment Russia has in Iranian nuclear infrastructure.  Don't forget that the US State Department recently announced that it would not wait around for UN action if it felt a new Coalition of the Willing was ready to go after any rogue state.

Naturally, the one issue which White House planners have to be asking is this:  Suppose for a moment that there is a horrific attack on US soil.  Will the American public again fall victim to a "bait and switch" tactic, like the bait and switch that followed the 9/11 attacks but which was quickly morphed into an "Iraq has WMD's" panic, and that in turn was used to justify our invasion.

Strategically, the presence of US forces in Iraq raises the risk that Iran's much larger (although not as high tech) military could march into Iraq in the event of any bombings by the US or Israel, and in effect, hold our ground forces there hostage.  While it's an interesting theory, the reality is that Iran and Iraq have fought wars before and tensions are still high in the borderlands between the two. That war ran from 1980-1988 and cost a million casualties.

Therefore, I'd expect the neocons and Israeli war planners to point to this sometimes overlooked bit of history, and assert that the West could bomb with impunity.  To a war planner, the 1981 Israeli strikes on then Iraqi nuclear projects in their infancy would be recalled.

Israel's desire to curb Iran's nukes, is likely to be tempered by political developments at home.  As you may have heard, Hamas came up with a very large showing in the Palestinian elections, and this may cause Israel to rethink some of its strategies.

Globally, and in the interests of sustainable economics, a more realistic planning approach would recognize that this isn't 1981, Iran controls the Straits of Hormuz, and an Arab oil embargo, which I personally think would be a likely outcome of such an attack, could leave us all in gas lines and with a crumbling economy, more so than what we've been through recently.  Certainly the feared Sunburn missiles pose a hazard to both navies and oil tankers.

---

In my conversation with web bot parent Cliff yesterday, we got into a very interesting conversation about the larger picture of what's going on in the world.  While Cliff doesn't answer "Why?" questions ("that goes to intent, and how would I know that?") he does make lists of interesting series of facts that seem to play together.  One question we're both asking is "What's out there on the horizon* that is do dangerous to the whole planet that the Bush administration is literally willing to risk WW III to eliminate nuclear sites in Iran?" (*Not to mention the 2004 election shenanigans, etc).  There's plenty to speculate on, quite a few data points, but nothing firm. I think it has something to do with money and control, but the who and how behind the seats of power are elusive.

---

Perhaps part of the answer can be inferred by reading about the numerous splits that exist between countries participating in the World Economic Forum in Davos, Switzerland.

• The US and EU are going at it over trade.  (Microsoft's source code offer is part of this dancing about with the EU)

• The US and France are differing on a Chinese Yuan strategy (it's China's call, but the bluster and braggadocio are all about).

• Turkey and Britain are still arguing about Cyprus.

• And, perhaps most telling of all, a UN official says all that other stuff aside, there's a looming problem in global unemployment.

It's here that we can get a "peek up the skirts" of governments worldwide.  If governments could really solve problems, they might some day actually go away, with nothing to do.  But I haven't seen a unit of government go away yet.  Therefore, I suspect that government actually causes crisis, and no reason why that should be any different today.

The world's at the edge of what the far-sighted Jay Hanson referred to on his web site http://www.dieoff.org/ as a global die-off.  Whether the proximate cause is later defined by survivors as Peak Oil, massive soil depletion, or any number of other candidates (including nuclear war) doesn't really matter.

What does matter is that we live in a world where, as the UN official's remarks underscore, there's a global mindset that people have to work in order to justify being fed/housed/clothed at even some kind of minimal level.  And, that's where companies - and unemployment as a crisis - comes in.

The world has, most believe, some limited carrying capacity, beyond which the population will decline over time as a result of depleting resources. 

While we're in the quiescent period, the aware will use the breather to prepare for whatever is next, and we may get a hint of it in a week to 10-days.  We'll then have a period of some months before the real fallout begins.  For now, it's like we're in a 75-day full moon period.

Wednesday Jan 25 2006

Iran: Warming or Waffling?

One of the big stories out this morning is that Russia's offer to enrich uranium for the Iranians is getting a semi-warm welcome in Iran's official circles.  There's also a report that the UK would back the Russian plan.

There are two of three ways to read today's developments.  One is that since the US is moving men, ships, and fighters to the Middle East (as we have reported earlier) the Iranians are simply trying to play the world for time while they continue their nuclear efforts unabated.  On the other hand, Russia and China with big investments in Iran (reputed holder of nearly 10% of global oil resources) may be influencing Iran to take a more moderate course.  Time will tell, but I suspect Israel has a date circled on their calendars somewhere beyond which stalling tactics won't be acceptable.  And we note gold is rising today....

Attention Asthma and Government Sufferers

If you're used to grabbing your inhaler for a puff or two of epinephrine or Albuterol to get you through a quick onset attack, you might want to be thinking about alternative delivery schemes for the future.  Reason?  The propellant in inhalers may harm the ozone layer says an FDA panel. 

Now, while we appreciate the diligence of the FDA, this is downright silly, in my view.  I've got asthma (as does my son). The People's Economist thinks the FDA has gone completely off scale on this one.  High altitude jet travel is far more damaging to the ozone layer (along with CFC's and such) to such a degree that most thinking folks will  (rightly) conclude that this is likely more grandstanding than science. Worse: I'll go out on a limb and predict that this is a precursor to drug companies coming up with some new way to charge more for delivery of the medications. Like some air-powered nebulizer which will require a doc's prescription to buy it and require periodic maintenance at a certified test/calibration site.  Bet me?

Pipeline Dangers

A proposed Russian oil pipeline to the Pacific (read oil from Russia to Japan and China) poses an unacceptable risk to the environment says Greenpeace.  Not that the corporate powers that be will want to listen, mind you.  Here on the backside of Peak Oil, companies gotta do what companies gotta do or the whole economy implodes. (It's trying, anyway.) Besides, reducing risks to pristine Russian lakes is not part of any oil company executive incentive plan that I'm aware of...

New Federal Police

Several sites around the web are making quite a to-do about the new federal police force which was set up in the re-enactment of the misnamed Patriot Act.  If you read section 605 of the Secret Service is being empowered to set up a Uniformed Division.  While a few see this as something akin to setting up a personal presidential army, as I read the authorization it's not for general country-wide use.  Just areas where the president, veep, and high level foreign dignitaries are visiting (which admittedly could be a big metropolitan area).  Not exactly jackboots, but then again, we've gotten along just fine without such a force for 230-odd years, so why now?

Meantime, Insight Magazine has an article about White House preparations for possible impeachment hearings, something the MSM (mainstream media if you dozed off) has been quietly burying behind whale stories and other non-essential, could-live-without-it stories.

Attorney General Gonzalez has been busy defending the Bush wiretapping excesses before a law school crowd.  Not that he needs to worry: With the pending shoo-in of Sam Alito to the most Bush family picked Supreme Court, the president needs to be less and less responsive to the voters.

Beyond Voice Stress Analyzers

A reader tips us off to a new "spin detecting" software program:

Geez, where can we All download this program. would be the greatest thing for this country since The Constitution.

http://www.newscientist.com/channel/opinion/dn8615.html

Broken Army?

Interesting MSNBC story about how thinly stretched the US army is today.  The News Tipster (see the yellow "Submit News Tip" button top left) who drew this to our attention suggested that all those Ford and Chrysler layoffs could be trained up.

Mexican Invasion

We see that Mexico is printing up more maps to help illegals enter the US. 

Rhyming History

If the current times sound somewhat familiar, especially if you're a Baby Boomer, our friends over at Bull Not Bull offer up this:

Hi George,

I put together a little piece that may be of interest to you and your readers:

It looks like that old malaise from the 1970's is coming back to haunt the economy and the politicians in charge: Rising oil prices, high inflation, a falling dollar, and to top it off, the specter of high crimes and misdemeanors in the White House are back!

How will it affect the stock market? In this article I took a look at the last time this happened: 1973-74, and the results were not pretty. The Dow had its worst bear market since the Great Depression, falling 40% in 21 months. The S&P 500 lost a full 50% of its value.

Will history repeat? Past performance is no guarantee of the future, but pessimism is never good for the stock market. Look at the similarities and differences between ‘73-74 and now in my latest piece, complete with stock market, dollar, gold and interest rate charts:

That Old Malaise: Inflation, the Middle East, and High Crimes in the White House http://www.bullnotbull.com/archive/market-01222006.html 

Take care, and keep up the good work.

Michael

Walking in the Winter Weatherland

Lemme see: We've got 70 MPH+ Santa Ana's going.  Snow closes a volcano tourism spot in Hawaii.  And, it's bloody awful cold in Europe. 70 is due for a high here at the ranch today.  With 2.3 inches of rain in the gauge this week, Texas is looking like a fine-on-fine right-on place to be.  (Pahdnah, yeee haw!!!)

A reader who watches weather loops (and read Scott Steven's www.weatherwars.info site) sent us an interesting loop that he thinks might show scalar weather modification underway off British Columbia.  Run this loop and look at the precise waves in the upper left-hand corner.  Is that instrumentation pixilation or the smoking gun of scalar weather modification to you?

Reader Writes

A reader in Namibia writes in:

Dear George,

I've studied with interest your charts comparing the DJIA of yesteryears with the DJIA, NASDAQ and S&P aggregate of our time.

How does the aggregate DJIA and S&P from 1926 to 1940. compare with the aggregate DJIA, NASDAQ and S&P of 1997 to 2011.

Is there a far closer correlation when the two aggregate charts are compared.

If so could you please send me a copy of the two aggregate charts.

Damn fine question.  Here's the issue:  The data source I have used for some of the studies has been Yahoo's historical archives.  If you go plodding through their S&P 500 data, you'll find it goes back to about 1950, or so.  However, their data on the Dow Industrials goes back into the 1930's.  That's why I haven't done more comparisons - data source issues, plus don't forget that in the 1920's and 1930's as cycles genius Peter Eliades pointed out to me some years back, we had the phenomena of Saturday trading hours.  This means the time-to-turns in the market won't line up exactly because the length of the trading weeks varied a bit.

On the other hand, one of the things I have thought about - and which I will put on the to-do list for subscribers to our www.peoplenomics.com site this weekend, is adjust the normalizing values for the S&P 500 and the NASDAQ Composite in order to see if changing the weighting can get us a closer track to present times.  By seeing what the "best fit" ratio is, we can approximate going forward what the best analog to the 1920's/1930's Dow is.

Remember that back in the old days of the Dow, the "industrials" were a fairly good proxy for the country's economic health.  There were a lot fewer products, fewer companies, and a much more industrial economy.  The justification for development of the Aggregate Index is that we are no longer a country of "things" in the traditional sense, and "semi-things" (C# code libraries, for example) have one foot in industry and another in the intellectual property department.  So in order to compare the eras, we might be able to use the Post-2000 developing New Depression compared to the Great Depression and infer how much "intellectual property" we're consuming. The number of lines of C++ or C# existent in 1940 was zero.

Selengut's Latest

Steve Selengut has sent in another perspective worth reading...especially if you're still banking on a big rally in the market to make you rich...

Wall Street Institutions pay billions of dollars annually to convince the investing public that their Economists, Investment Managers, and Analysts can predict future price movements in specific company shares and trends in the overall Stock Market. Such predictions (often presented as “Wethinkisms” or Model Asset Allocation adjustments) make self-deprecating investors everywhere scurry about transacting with each new revelation. “Thou must heed the oracle of Wall Street”… not to be confused with the one from Omaha, who really does know something about investing. “These guys know this stuff so much better than we do” is the rationale of the fools in the street, and on the hill (sic).

What if its true, and these pinstriped super humans can actually predict the future, why do you transact the way you do in response? Why would financial professionals of every shape and size holler “sell” when prices move lower, and vice versa? Would this pitch work at the mall? Of course not. Now lets bring this phenomenon into focus. Hmmm, not one of these Institutional Gurus ever doubts the basic truth that both the Market Indices and individual issue prices will continue to move up and down, forever. So, if we were to slowly construct a diversified portfolio of value stocks (My short definition: profitable, dividend paying, NYSE companies.) as they fall in price, we would be able to take profits during the following upward cycle… also forever. Hmmm.

Let's pretend for a (foolish) moment that broad market movements are somewhat predictable. Regardless of the direction, professional advice will always fuel the perceived operative emotion: greed or fear! Wall Street's retail representatives (stock brokers), and the new, internet expert, self-directors, rarely go against the grain of the consensus opinion…particularly the one projected to them by their immediate superior/spouse. You cannot obtain independent thinking from a Wall Street salesperson; it just doesn't fill up the Beemer. Sorry, but you have to be able to think for yourself to stay in balance while pedaling on the Market Cycle. Here's some global advice that you will not hear on the street of dreams (and don't get all huffy until you understand what to buy or to sell as well as when to do so): Sell into rallies. Buy on bad news. Buy slowly; sell quickly. Always sell too soon. Always buy too soon, incrementally. Always have a plan. A plan without buying guidelines and selling targets is not a plan.

Predicting the performance of individual issues is a totally different ball game that requires an even more powerful crystal ball and a whole array of semi-legal and completely illegal relationships that are mostly self serving and useless to average investors. But, again, let's pretend that a mega million-dollar salary and industry recognition as a superstar creates Master of the Universe quality prediction capabilities…I'm sorry. I just can't even pretend that it’s true! The evidence against it is just too great, and the dangers of relying on analytical opinions too real. No one can predict individual issue price movements legally, consistently, or in a timely manner. Face up to this: the risk of loss is real; it can be minimized but not eliminated.

Investing in individual issues has to be done differently, with rules, guidelines, and judgment. It has to be done unemotionally and rationally, monitored regularly, and analyzed with performance evaluation tools that are portfolio specific and without calendar time restrictions. This is not nearly as difficult as it sounds, and if you are a “shopper” looking for bargains elsewhere in your life, you should have no trouble understanding how it works. Not a rocket scientist? Good, and if you are at all familiar with the retailing business, even better. You don’t need any special education evidentiary acronyms or software programs for stock market success… just common sense and emotion control.

Wall Street sells products, and spins reality in whatever manner they feel will produce the best results for those products. The direction of the market doesn’t matter to them and it wouldn't to you either if you had a properly constructed portfolio. If you learn how to deal unemotionally with Wall Street events, and shun the herd mentality, you will find yourself in the proper cyclical mode much more often: buying at lower prices and, as a result, taking profits instead of losses. Just what if…

Coming next: Developing a Value Stock Watch List and Profit Taking Targets.

Tuesday Jan 24 2006

Rallies and Diversions

I spoke yesterday afternoon with my old friend Robin Landry, [(405) 275-6162] who you may recall was once a mover and shakers on the Street who decided to "head for the hills" - where he's quietly been bagging 20% returns for his clients ever since.  His reputation keeps growing and besides his office in Shawnee, Oklahoma, there's now an Oklahoma City outpost and discussion of one to come in Alabama - such is the price of success.

Robin's a "show me" kind of guy, in that while he appreciates that the market is bloated, there's still money to be made for his client (in energy, energy services, etc).  Nevertheless, he's begun to roll out of some positions because of his concern that last week's action may be a harbinger of things to come.  "We could see a rally back to the 10,740/750/760 area, and then start down in earnest from there," he suggested.  Judging by the futures, we could see that level approached in today's trading, and a breakdown/reversal downward could begin a run down to the 10,500 support areas.  Once those are breached, how low we go is anyone's guess. Landry doesn't see 10,000 as much of a barrier, and should a breakdown occur, he's thinking that the 10,000 line may provide only a few hours of resistance.

I like pragmatic people - and with yesterday's announcement by Ford that 30,000 jobs would be whacked by 2012, and today the reported cuts coming from Chrysler, it just doesn't seem like the kind of news that would build a huge amount of confidence in solid economic growth. That's 36-thousand manufacturing jobs going bye bye and the market rallies.  Go figure.  Why at this rate (30,000 being cut = a 21 point Dow advance) we only need to lay off an additional (pencil please) 445,714 manufacturing workers to push the Dow back over 11,000!

The whole notion of a strong country, but with a rapidly declining manufacturing base, sort of flies in the face of B-school basics.  Yet, I read every day the "happy talk" reports that position states as "pleased to add jobs, and don't be concerned that we're not manufacturing as much."

On the other hand, we see that in rising economies (take Singapore, for example) manufacturing contributed 28% to that country's GDP in 2005.  I want to recall that US manufacturing was declining toward 9% from 14% not many years back - but I could be off.  Still, you get the point, right?

It's not like the US is alone in this trend.  We can't help but notice that England is also going through a retrenchment, where as Forbes reports manufacturing orders just plain suck.

About here, the People's Economist begins to scratch his head:  "I wonder if in order to join a Coalition of the Willing, a country has to kiss off  its manufacturing base and pursue war through largely checkbook means?"  Hardly a fair question, I suppose.

Looking out on the world (through the fog here in East Texas this morning), one thing is clear:  The places to bet on new manufacturing jobs will be places like China, Singapore and South Africa.

For Landry, who's been a sort of lone voice reason in the wilderness of hype, it all boils down to watching a few dozen indicators and trying to be one step ahead of the market's Grim Reaper, who seems likely to visit as the nation's biggest "product" is now debt.  Speaking of which...

US Yuan Lobbying

It's against this kind of background that we're reading how the Bush administration has sent yet another representative to China to lobby them for "flexibility on the Yuan" - an administration buzz term for "If China decides to screw us, we're toast."  We figure China has its own agenda, namely, when they get developed enough internally, they will turn off US exports, trash the buck, and conquer the world with a well-fed middle class while we sink into Depression 2.  Remember the 1950's when we had a middle class?

Payback

We notice that Ameriquest agreed Monday to pay a reported $295 million (plus $30 million in legal fees to states) in restitution and promises to revise what 49-states had alleged as predatory lending practices. I should remind you that the settlement was accompanied by a disclaimer that "the company acknowledged no wrongdoing." 

So what gives? Generosity? 

Company founder Roland Arnall has been nominated by George Bush to be US ambassador to the Netherlands, and this big settlement means that Arnall's nomination will can now be rubberstamped as all fine and holy by the boyz in CONgress.

Canada's Right Turn

Liberals out, Conservatives in in Canada. 

Mileage Quest

You may remember that I mentioned that Cliff and I were putting "vortex" thingies in our cars on the off chance it would increase gas mileage.  Cliff's experience is better horsepower, although he may have his Trooper dyno'ed again if possible:  He measured 124.6 HP before the installation.  I put mine in our Daewoo and Elaine thinks she noticed some difference, but time will tell.  Meantime, readers are weighing in.  One pointed to a Popular Mechanics article debunking such devices.  Another wrote:

Sir, (I must have been upgraded - G)

I have only recently discovered your internet site and have enjoyed reading your intelligent insights and opinions. I certainly agree that our inflated economy is in deep trouble…

With regard to the "tornado" fuel-mileage enhancement device…

This device could conceivably improve mileage and power by a very small amount in a carbureted engine, or older fuel-injected engine with "throttle-body" fuel-injection.

On any modern (from about 1996 or newer) engine with "port-type" fuel-injection, it is quite impossible for this device to yield any improvement at all, except that, to the extent it will impede airflow through the intake passage, it will act the same as if you simply did not open the throttle as much, which would give a tiny mileage improvement, at the expense of horsepower.

"Swirl" in the engine intake passage is EXACTLY what YOU DO NOT WANT.

These turbulence-inducing devices are based on the premise of creating turbulence in a carburetor or throttle-body-injection engine, where the fuel is mixed with the air as it travels thru the intake. This can help keep the fuel atomized and mixed with the air as it travels to the cylinder, which can make a SMALL improvement in both fuel-mileage and power at any speed.

In modern engines the fuel isn't introduced until the air has already traveled from the air-filter thru the intake to the intake valve.

ANY turbulence in the intake is BAD at ANY speed, from idle to top-end and everything between, under any and all operating conditions.

The only function of the intake system on ANY modern port-type injection engine is to: -Filter the air. -Measure the volume of air-flow (for the ECM to use in calculating the fuel volume to inject). -Throttle the air-flow to control engine speed.

That's it. If you didn't need to do that stuff then you could have an ideal zero-length/zero-restriction/zero turbulence intake.

As air flows through any passageway at high velocity it will naturally tend to swirl around, especially as it flows around bends or otherwise changes direction or is impeded variously by any intake-system components, such as the throttle-blade. It can't be helped.

The engine designers work hard to design the intake in a way that minimizes the "swirl" or any other turbulence in the airflow as it makes it's way along the intake passage. They can't eliminate it altogether, because they have to contend with bends and partial obstructions (the throttle-body blade), and they only have so much budget to work with and limited under-hood room.

But within those constraints they do everything they can to minimize ANY turbulence.

If the air is "swirling" then it's taking more time to get where it needs to go (the cylinder), and there's only a very short time to get as much air as possible into the cylinder.

The guy that invented the Tornado is pretty darned smart, because he invented a way to turn a 50-cents-worth of stainless-steel sheet into $20! (or whatever they charge for his device). If he really does have all those university degrees that they claim in the TV ads then he knows that the Tornado will, at best, rob your modern fuel-injected engine of a little bit of power, just because it impedes airflow.

As is our usual habit, I won't take sides until I get several tankfuls under our belt.  We have been running about 26.5 MPG on our local running about.  If it changes, I will let you know - ditto if Cliff gets time to re-dyno (is that a word???) his truck.

Monday, Jan 23, 2006

That 200-Point Non-Event

Television is amazing. This weekend American audiences were treated to Whalevision as efforts were made (but failed) to rescue a pilot whale lost in England. We're sad to report this morning that the whale is still dead. 

Friday's mauling in the markets, which looks now like it might be a precursor event, was relegated to non-event status by sports items, too.  Kobe Bryant put away 81-points in a single NBA game - second best behind only Wilt Chamberlain in the record books now, and the Seattle Seahawks made it to the Super Bowl.

Off in the background, sure there were a few investors mumbling that Friday's 213-point nose bleed of the Dow might be only a harbinger of things yet to come, but for the most part, the mainstream media (MSM) were content to gloss over it.  Consider that Ford will announce job cuts today, and besides, with the futures up a couple of dozen points for the Dow, the worst must be past, goes the conventional wisdom.

To be sure, we're in earnings season and it's like the old "Anything Can Happen Day" (you'd have to be a really old Mousketeer to remember those) except for the fact that it's Monday, not Wednesday.  Still, despite what we expect will be a pop up at the open, we ought to know soon enough if it's a dead cat bounce, or whether there's some life left in the markets.

Key to my view of things is quality of earnings.  This is an area where accountants in general, and corporate CPA's in particular have been focusing for several years.  My view of earnings is a little different than most in that I look at sales (if they're up, the company's future might be bright, if they're down I get gun shy) and Cost of Goods Sold (COGS) plus SG&A (Sales, General, and Administrative) expense.  Hardly a scientific view, but it's at least a starting point.

To this ultra-simplistic view, a company is a great buy when its stock price has been flat while at the same time sales are up, cost of goods sold is stable to down, and SG&A is growing at the rate of sales revenue growth (or less).  On the other hand, the companies I used to short had ascending share prices, falling sales, rising COGS, and fattening of SG&A.  When such companies showed an increase in earnings, a little inspection of their SEC filings usually found something in the Notes to the Financial Statement that was a tip-off as to where "earnings" had magically appeared from. To the People's Economist, the Notes to the Financial Statement usually tell more than the company's management than entire balance of the document.  The exception being Warren Buffett's legendary reports to Berkshire Hathaway shareholders.

So back on point:  This week's market action will likely be driven as much by energy and resources as earnings.  The Middle East picture is cloudy and there's a hint of growing tensions between Russia and the West over the British using a rock (pet rock?) for spying.  Chinese energy negotiators are spending overtime with the Saudis trying to line up an oil deal. Meantime, the Saudi happy talk department says there's plenty of oil for everyone....

We note that certain media are painting a picture of Bolivia's new leadership as "the Left advances on the US doorstep."  Jingoism for "How dare those twerps try to control their own resources in the face of our corporate agenda!"  

Gas Mileage

Both Cliff at HalfPastHuman and I have read enough reports of those air vortex inserts actually improving gas mileage, that we're putting them in our own cars.  Maybe 1-2 miles per gallon doesn't sound like much, but for $20, I figure it's a device that will actually offer a return on investment and it's oh so much easier than building our own hydrogen plants.  Go to eBay and put in the search term "gas mileage" and look for the star-shaped stainless steel units for about $17.95. 

That said, this is one of those "let the buyer be ware" areas.  A recent test in Popular Mechanics threw cold water on the idea that something could help with mileage. Still, I'm game to try it - and I will report my results.  Cliff's case was on a truck engine, but he swears by his.  Your results may vary...

I figure that oil prices, the price of gas at the pumps and Iran are inextricably intertwined and there's far too much speculation about war or a "surgical strike" on nuclear facilities for something not to happen.  I want to get as much mileage as I can for when the West strikes, I'd like to be prepared for an Arab states oil embargo against the West. For now, Iran says it wants to talk, but doesn't want threats.

In a tit-for-tat, Swiss banking giant UBS AG says it it putting sanctions in place against Iran.  Last week, the Iranians started pulling their dough out of Europe. Speculation is Credit Suisse will also restrict banking with Iran.

The Russians and Georgia (theirs, not ours) are at odds again, this time over a series of explosions that damaged Russian pipelines on Sunday. 

Photo Op

The White House is scrambling to distance itself from pictures of George Bush in the company of disgraced lobbyist Jack Abramoff, currently under investigation.

Arghh Pirates, Matey

The US Navy has boarded an alleged pirate ship in the Indian Ocean.  Piracy has been a big problem in the region in general and off Somalia in particular. Piracy concerns in the post 9/11 world are one reason Elaine and I didn't do our round-the-world cruise during my decade long bout of sailboat disease.  As you can see, I had it pretty bad, but I'm better now, thanks.

Grocery Acquisition

Albertsons is being acquired by Supervalu for $9.8 billion.  I wonder if my Albertson's card will still work?  (Probably...)

West Wing Going

After 7 seasons, the TV show is being axed. Don't get me started on my "lowest common denominator" programming rant.

Screwy Requirement

The University of Florida is requiring that employees wanting partner coverage must claim their having sex with the partner.  We have to wonder if the University administration isn't just poking fun at their employees.

No More Drought

At least in our part of NE Texas.  We had more than 2 inches of rain in 24-hours.  Maybe things will stay wet for a while now... The 31-day dry streak in Dallas wasn't even close to a record.

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