Thursday, April 30, 2009

One Enchanted Evening


For those of you wondering what happened to Wednesday's show, Here it is
Today's show is linked to the headline above as usual.

Early in the show the market handed us a beautiful short @ 884.50 / as we were wrapping up, our final observation was that should the market manage a rally back up to 875 we would short it into the close. It did, we did, and the world is a better place for it.

Tuesday, April 28, 2009

Why The Economy Will Recover


I believe that Newton's first law of motion is the reason we will emerge from our current economic woes. That law states that an object at rest tends to stay at rest and an object in motion tends to stay in motion with the same speed and in the same direction unless acted upon by an unbalanced force. How does that relate to the financial #$%*storm we're now cowering under? Allow me to explain. There are slightly less than seven billion people on this planet. Assuming that roughly half that number are either too young, too old, too lazy, or too loaded to work, that still leaves almost three and a half billion people getting up in the morning to chase the almighty dollar, the transcendent rupee, the zen yen,the dear ol' euro, the what's goin' on yuan, the... well, you get the idea. Now, call me crazy (and many have called me far worse), but I happen to think that three and a half billion motivated people is one big darn object in motion. And the only thing acting against that object is the friction caused by a small bunch of greedy, Ivy League pot stickers (the unbalanced force). I therefore assert that the unbalanced force (you know who you are, shame on you), will eventually be overwhelmed by the object in motion (three and a half billion people with pluck, aka pluckers), thus allowing the object in motion to continue its relentless journey forward, thriving and conniving until it is once again slowed down by other unbalanced forces, or a very large meteorite. Or a plague. Or islamo-fundamentalists with nukes. Or atmosphere-eating nanobots. Or a super volcano. Or Skynet. Or Cylons.

No Trade Today / Our Divine Ms. M failed to materialize....

Monday, April 27, 2009

Keepin' It Real In Eminiville


Some days you miss. (that's the truth about trading)

We attempted to buy 860.25, we waited, and waited, then shot from the hip and bought 863...

Not sure how much Twittering we're going to do but if you want to follow us - cfrn
Look right here on the blog to catch the last few tweets.

Saturday, April 25, 2009

Back In The Saddle


It's great to be back! On Friday's show around 11am exchange time we entered an order to buy 860 on a limit with a potential target of 865.25 We waited patiently and the market never pulled back quite far enough to fill us. About 11:40 exchange time we shifted our strategy to a bracket order - Sell 865.25 /Buy 860

As you can see from the chart below we got filled on the sell side for a nice little slide south.

Wednesday, April 22, 2009

God & Capitalism

The essence of democratic socialism is this re-written version of God's commandment:

"Thou shalt not steal, except by majority vote."

"Economic democracy" is the system whereby two wolves and a sheep vote on what to have for dinner.

Christian socialists and defenders of economic planning by state bureaucrats deeply resent this interpretation of their ethical position. They resent it because it's accurate.

When Christianity adheres to the judicial specifics of the Bible, it produces free market capitalism.

On the other hand, when Christianity rejects the judicial specifics of the Bible, it produces socialism or some politically run hybrid "middle way" between capitalism and socialism, where politicians and bureaucrats make the big decisions about how people's wealth will be allocated. Economic growth then slows or is reversed. Always.

Free market capitalism produces long-term economic growth. Socialism and middle-way economic interventionism by the state produce poverty and bureaucracy. If your goal is to keep poor people poor, generation after generation, you should promote socialism. But be sure to call it economic democracy in order to fool the voters.

The Bible is an anti-socialist document. Socialist propagandists for over four centuries have claimed that the Bible teaches socialism, but we have yet to see a single Bible commentary written by a socialist. If the Bible teaches socialism, where is the expository evidence?

When I say that the Bible mandates a moral and legal social order that inevitably produces free market capitalism, I have the evidence to back up my position. My critics -- critics of capitalism -- do not.

The next time you hear someone say that the Bible teaches anything but free market capitalism, ask him or her which Bible commentary demonstrates this. You will get a blank stare followed by a lot of verbal tap-dancing about "the ultimate ethic of the Bible" or "the upholding of the poor in the Bible." You will be given a lot of blah, blah, blah. Blah, blah, blah is not a valid substitute for biblical exposition.

(read more)

Happy Earth Day!

Tuesday, April 21, 2009

Ten Principles For A Black Swan-Proof World / My Take / Gold & Silver Update From The DR

I'm almost home... 2 sleeps and a wake-up will put me back in Phoenix, add1 more sleep and a wake-up and I'm back in the studio. The whole plan to pontificate over endless espressos' and my laptop from a shady street-side cafe while sending you deep, insightful, meaningful posts pretty much went down in flames, but hey, Chin Up! it's not your fault, not really...

Before we get to the 10 Principiles, let me say this...

I miss trading but I do not miss sittitng in front of the screens all day.

I still don't trust CNN, I trust CNN Europe even less, yet somehow I quite enjoy it, perhaps because of its Disneyesque nature.

The world is a big place and I think we all owe it to ourselves and the world to see as much of it as we can as often as we can with people we love.

No matter where you are right now, or where you go tomorrow, do your very best to brighten that corner of the world. (I learned that from a wise man - thx david)

See ya' Friday morning LIVE from the underground studio of CFRN!

Bon Jour

Ten principles for a Black Swan-proof world

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

In other words, a place more resistant to black swans.

The writer Nassim Nicholas Talebis a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable

Silver Taste. Base Metal Money.

By The Mogambo Guru


04/21/09 Tampa Bay, Florida Dominic Frisby of writes, “According to Jeff Christian of commodities research firm CPM Group, investors bought 70m ounces of silver in 2007; 100m in 2008; and based on current trends, they’re on track to buy 180m ounces in 2009.”

Mr. Frisby goes on that demand for silver is so great that the Barclays iShares Silver Trust has “completely filled up all the storage space foreseen in its custodian agreement with JP Morgan Chase, London. In fact, as of this past week, SLV reported its silver holdings exceeded the amount of silver JP Morgan is obligated to store for SLV.” Wow!

Demand is so high that they ran out of room to store the stuff! Yow!

Mr. Frisby apparently sees me taking this fact and going directly into a Screaming Mogambo Rant (SMR) about how people should be buying silver because it is such a raging, screaming bargain, but they are not, proving that they are idiots. Idiots, I tells ya!

Cleverly heading me off, he says, “Goodness knows where SLV are going to put all that extra silver, but the point is, investor demand is soaring and the price is not” which is usually enough to again get me predictably bellowing that the price of silver is insanely, insanely, insanely low before getting right in your face to demand to know why you are not buying some silver right now.

And then, if I don’t like your answer (“I don’t have any money!”) or your attitude (“Go to hell!”), I will subject you to a scathing examination of your intelligence, or lack thereof, hopefully in front of your kids so that they will learn a…Read more…

Bounce to Nowhere?

By Rob Parenteau


04/21/09 San Francisco, California The message from the March/early April macro news continues to be one of the free-fall phase ending, while the economy remains in a severe recession. Retail sales, for example, though disappointing in March, are stabilizing on a year-over-year rate of change, while the six-month rate of change is struggling back from an over-20% pace of contraction. Consumer spending is looking like it will grow 1-1.25% in Q1 real GDP, and a sequential 5-5.25% retrenchment in Q1 real GDP will mark a small improvement from Q4 2008.

To be sure, the larger theme we believe will dominate the consumer sector is the need to reduce leverage, which will require a higher gross saving rate than households previously achieved. In a recent issue, we introduced a base case estimate that $1.2 trillion of household debt would need to be paid down over the next three years to return the household debt-to-income ratio to the pre-housing bubble trend. French banking group Societe Generale, however, estimated that a return to the trend of the past five decades would require nearly twice that level of pay down we expected. The key point here is that the consumer contribution to any future recovery is likely to be muted by these debt head winds, regardless of the degree of fiscal and monetary stimulus applied. Equity investors using the regular playbook and running into consumer discretionary stocks should make sure their long-run earning growth expectations reflect this…Read more…

Getting in the Spirit of the Depression

By Bill Bonner


04/21/09 Buenos Aires, Argentina Just got back from our trip to the ranch. (About which, more below…)

As near as we can tell, the financial world conveniently remained on hold while we were gone. As of Sunday night, little had changed. Gold, stocks…economists…politicians – they’re all about where we left them. That is to say, the bear market rally on Wall Street continued. The feds continued to pervert the economy with their bailouts. Economists continued to call a spade a petunia. And politicians and commentators continued to blab and bluster about nothing.

But yesterday, the rally on Wall Street got smacked in the chops. The Dow fell 289 points. Oil dropped to $45. Investors were selling stocks – mostly financials – and turning to the dollar and gold for safety. The dollar rose to $1.29 per euro. Gold returned to $887.

The most important fact still sits like an alien spaceship on the White House lawn – so monstrous and dumbfounding that people don’t know what to make of it…so they simply ignore it. The U.S. government is spending $13 trillion – nearly an entire year’s output – to ‘fix’ the problems caused by the worldwide financial meltdown. Of course, they can’t actually fix anything. Companies that are losing money are still going to be losing money. Investors are still going to take losses on stocks and bonds that were overpriced. Bad debts are still bad. Bad investments are still bad. A kiss is still a kiss. A smile is still a smile. Time goes by just like it always did.

But this $13 trillion of extra spending is bound to have some big effect. What?

A…Read more…

Sunday, April 19, 2009

An American In Paris

Paris - You either love it or hate it or both. It's been a frustrating week. They don't speak English, my $60.00 electricity converter doesn't work, my laptop battery lasts just about long enough to boot up, the "free" wi-fi our hotel promised only works if you sit by the window with the wind blowing in your direction, and by the way... they don't speak English.

On the other hand, they don' hate us nearly as much as we were led to believe. The Metro (subway) will take you anywhere in the city quickly and cheaply. The history and beauty of the city is enormous. My leftist political and off the hook musical knowledge are greatly increased as we only recieve MTV and CNN in English. (did i mention they don't speak english?)

Anyway, we ran the numbers and the results are in - we love it more than we hate it. In fact, Ms. Anne's current plan is to find an apartment in the city and live here 3 months out of the year and rent it out the rest. Guess which 3 months?

I have lots of video to share but for now I'll just share this one before my battery runs out. We've spent a bit of time at The American Church in Paris. Here's a taste of today's Praise and Worship service.

Blessings from Paris

(it's been 8 hours and the video still won't upload / may have to try the free wi-fi at the park)

Wednesday, April 08, 2009

Obama Team Seeks Somali Pirate For Arse Kissing Ceremony


OK. The American Apology Tour is officially over.

We have kowtowed and geneflucted to the world, apologizing for our arrogance while bowing to foreign royalty. I guess all that's left to completely humiliate the United States and fulfill the leftist agenda would be the primo photo op of Michelle's husband kissing the arse of a Somali Pirate while humming "Swing Low...."

Look out you crazy Frenchmen, here I come....

On today's show we took our tidy profit and left for "Vacances!" on a positive note.

One last reminder, I'm gone for 2 weeks. I will post to the blog while in Paris but there will be no live show or podcast. (unless i get the itch)

aka - CT

Tuesday, April 07, 2009

Countdown To Spring Break, Gold Update, And More Sunshine From Bill


Tomorrow will be the final broadcast until April 24th. I will post random notes and interesting thoughts from Paris but I don't have any plans at the moment to key up the mic while I'm away.

Here are some thoughts from Bill Bonner whom I do hope to run into...

"Cramer: The Depression is over," says a headline. Jim Cramer says the bottom has come and gone. That's all we need to know. If Cramer thinks the worst is over...well, it must be so.

Even Nouriel Roubini, according to Forbes, thinks there is "light at the end of the tunnel."

Japan says it's going to announce another $100 billion stimulus program this week. That should do the trick. After 17 years of bailouts and stimulus programs, the Japanese should be getting good at them. But it's a little like a guy who's getting good at suicide - if he's so good at it, you'd think he'd be dead by now.

But no...the Japanese economy is still one of the worst performers in the world; their bailouts and stimuli have done no good...maybe they've even made the situation worse.

No matter, there's a rally on...this is not the time to ask questions. Our instinct tells us this rally is going to carry the Dow back above 9,000...possibly above 10,000. Why? Because people do not go directly from believing nothing can go wrong to believing that nothing can go right. The kind of delusional optimism that took stocks up to 14,000 on the Dow...and doubled property prices...and had sober bankers buying billions' worth of ticking debt bombs doesn't disappear overnight. It has to be killed like Rasputin - many times. Stab it. Shoot it. And then douse it with gasoline and set it on fire. Maybe then, it will finally die.

That's why this rally is just a trap for the unwary...a suckers' rally. Investors are getting back on their feet just so Mr. Market can whack them again. So, if you're playing this sure to keep those stops moving up behind your stocks.

So far, this rally has recovered less than 20% of the previous losses. Typically, at least one good rally in a bear market will recover more than half of the losses. Looking at the long term, the Dow rose from the low in the early '30s of only 41 points to the high in 2007, when it was over 14,000 points. This bear market wiped out more than half of the capital gains made by investors during that whole 76-year period. A 50% bounce from the January low would put the Dow back up close to 10,000.

But we gave you our forecast yesterday. Bulls, bears, spenders, savers - our guess is that Mr. Market intends to paddle them all.

The bulls will be whacked when the Dow falls another 50% from its low - down to, say, below 4,000. The bears will be whacked when the Fed seems unable to stop deflation...and the prices in the mining and commodities sectors collapse. Then, the spenders will be trapped in a burning house of debt - with the door barred by deflation. Later, the roof will fall on the savers too - when the feds finally manage to get an inflation backfire going. The fire will get away from them immediately, we predict, burning up trillions worth of savings overnight.

But let's go back to the cheerful tidings out in the press. Sallie Mae says it is ADDING 2,000 jobs. But wait...2,000 jobs isn't really very many. And who are they employing? Debt collectors?

"Consumers fall behind on loans at record rate," says a headline in USA Today.

"A record number of consumers are falling delinquent or into default on their loans, a problem that some economists say will only get worse this year.

"A record 4.2% of consumer loans were delinquent at least 30 days in the fourth quarter, the latest data available, according to the Federal Reserve. Another 4% of consumer loans were in default, meaning they'd been written off by lenders.

"Recent data from the American Bankers Association and Moody's rating agency show the same sobering trend: More consumers are paying late - or not at all - on home, car and credit card loans.

"Job losses are closely correlated to loan defaults, economists say. And as more people become unemployed, they're increasingly giving up on loan payments."

Even sports stars are taking pay cuts. The "incredible shrinking payroll," USA Today calls it. Nearly half the baseball teams in the major leagues have cut their salary more than $10 million each. The San Diego Padres, for example, took $20 million off their payroll expense.

"The wheels have fallen off the economy," says James Chessen, chief economist for the American Bankers Association. "There have been significant job losses, and that translates into people having a hard time paying their bills."

Employers cut 663,000 jobs last month. That puts the official unemployment rate at 8.5%. It will probably be 10% by the end of the year. Since December 2007, 5.1 million people have lost their jobs, more than 2 million of them this year alone.

But "the worst is likely yet to come," continues USA Today. "Chessen expects consumer loan charge-offs and delinquencies to continue rising through the end of this year."

Move up those trailing stops, dear reader.

How Long Will We Have to Wait?
by Jeff Clark
Rockland, California

You are traveling through a desert in search of a famed oasis and its promise of riches, rest, and drink. But your journey has grown long, you are weary, and you begin to doubt the oasis really awaits you. But then signs appear from those who have gone before you that your course is true, and the reward you seek in fact lies ahead. Your spirit is renewed and you press on.

Does this describe your journey with gold?

Although gold's had a good run, rising from a monthly average of $760.86/oz in November 2008 to $943.16/oz in February 2009, when will it take off? That's still going to happen, right?

Wimpy, Popeye's burger-loving pal, was always looking to get what he wanted today with a promise to pay tomorrow. Sound familiar?

In their thrashing attempts to get their economies going again, governments around the world have pounded interest rates into the floor and flooded their banking systems with liquidity.

Interest rates are at historic lows, an artifact of the robust, worldwide efforts to debase currencies. M2, one measure of money supply, is up in all G7 countries, which signals that tomorrow's inflation is being baked in the cake today.

Further, bailout numero dos, with a rich pork filling, has been signed, sealed, and is about to be delivered, including an endowment for a "bad bank" that will buy up the loans that troubled commercial banks would like to deny they ever made. In addition, it guarantees hundreds of billions of dollars in bank assets - all on top of bailout numero uno. And don't forget the estimated $493 billion the Treasury Department will have borrowed by the end of the first quarter 2008; that on top of $569 billion the government borrowed in Q408, an unprecedented amount for any quarter, ever.

The word "unprecedented" seems too weak to convey just how much money is being printed and/or borrowed to buy off the recession. So, when will all this money start showing up as higher prices at the supermarket and shopping mall? And when will gold react to this bumper crop of paper?

The historical record indicates that a surge in money growth has its peak effect on economic activity about 9 to 18 months later. Add another 12 months or so for the peak effect on consumer price inflation. In other words, the Federal Reserve is always driving with a loose steering wheel. Most of the experience behind those numbers is with relatively tame ups and downs in the business cycle - not the kind of financial violence we've been seeing lately - which adds another variable. And on top of that, the numbers are about peak effect, not initial effect.

So the timing remains uncertain. But what we do know is that there are clear and unavoidable consequences to wildly energetic money creation, including, sooner or later, rampant price inflation.

We're beginning to see interest in gold from the mainstream, which is encouraging. And enthusiasm from the general investing public will be what ultimately sends gold to the moon. Here's what we've observed over the past 30 days:

1. A number of mainstream economists and fund managers are openly expressing interest in gold. "The government can print endless money, but they cannot increase the supply of gold," said Michael Pento, chief economist at Delta Global Advisors Inc. "Anything the government cannot replicate by decree, I want to own." The firm, with $1.5 billion in assets, is doubling its gold holdings to 8%. We saw very little of this six months ago.

2. The mining industry has recovered its ability to raise capital. Take a look at the recent financings for some gold companies:

# Newmont $1.2 billion
# Newcrest $476 million
# Kinross Gold $414 million
# Agnico-Eagle $290 million
# Red Back Mining $150 million

Compare this to the financial woes we hear continually about banks, brokerages, and government agencies. The only capital they can attract is government handouts.

3. While there are much better ways to turn gold into cash, Cash4Gold (who advertised during the Super Bowl) and similar businesses bombarding the airwaves with their pitches have sensitized the public to the topic of gold. Expect the interest in the yellow metal - and its price - to increase in a serious way.

4. January's Cambridge House Investment Conference in Vancouver was well attended, with the second day setting a record. Every session was packed, standing-room-only for most speakers, including Casey Research's Louis James and Marin Katusa.

While no one was emphatic about the timing, most speakers agreed that at some point gold will be sought as a safe haven by the masses, who will catapult the price to new highs. Here is a quote from John Embry, chief investment strategist, Sprott Asset Management:

"The average retail investor has little or no investment in gold and no understanding of how important it will be. The year 2009 will be volatile, but volatility is a small price to pay for where gold is headed. An explosion in gold and silver is inevitable in the years to come."

The overriding theme was clear: Gold is going up. Period. It may or may not happen as quickly as you want, but the recent range trading hasn't defused its explosive potential.

So when will gold take off? The signal won't be inflows to ETFs (although they are indicators), or jewelry sales (the '70s bull market had nothing to do with bracelets), or even sales of physical bullion (we had that in '08 and gold was up 5.5%, hardly meteoric). No, the payday rise in gold will occur when there is a significant shift in the psychology of the general public.

And whether the glory days are just months from now or a year or two away, it's clear that the oasis is real and lies ahead. Is your cup ready?


Jeff Clark
for The Daily Reckoning

Monday, April 06, 2009

No Live Show or Podcast Monday Apri 6, 2009

See ya Tuesday!

Sunday, April 05, 2009

Monday's Must Know Stock Play - SFEG Santa Fe Gold Corp


We The People Stimulus Package


(thx Ron B.)

No Live Trade on Friday's Show

Thursday, April 02, 2009

Cramer Proclaims "The Depression Is Over"


We take that as a sign the top is in........(for now anyway)

On today's show we sold 841.25

Globex Update - 22:00 Exchange Time
Selling 835.50 on a limit

Globex Update - 24:00 Exchange Time
Market trading 833.50 which is a 2 pt profit / move stop to 835.50
Now you have a free trade / target 828 (while u sleep)

Globex Update - 1:40 Exchnge Time
Market trading 831.00
You have 4.50 pts profit
That's a 45% gain (do the math)
Keep in mind we are now in a Free Trade Zone
If you choose to hold to our target of 828 or perhaps the afternoon low of 826, lock in profits on the way (unless you're asleep and your platform is on auto-pilot)
If you should be a Londoner or an insomniac, watch 820 - 818

Remember 818?

The market can easily bounce out of the 818-820 area. If 818 fails, it's no different than last night -

Sell It Like You Stole It!

Wednesday, April 01, 2009

Overnight Update

If the ES trades down through 818 on the Globex session (currently 821.75)

Sell It Like You Stole It!

Trade Update -
We did not get stopped into the trade. But you have to love the beauty of this chart. Our call was that a break of 818 would be a significant event. Look at what happened...

Russia Backs Return To Gold Standard


On today's show we bought 801.50 and sold 804.75