Real Estate, Iran, and The Markets

I’ve been busy watching the markets in the short-term.  Is day trading for the foolhardy?  Perhaps, but I’ll admit that there is a sense of excitement that is fun.  Before you go jumping to conclusions have I actually been trading?  NO  About the most I’ve done is move a few positions around a bit and make sure that I’m covered on the downside.  This market is so volatile, and we are in options expiration week, which just amplifies matters much.  

Besides learning about charts and indicators real estate and a possible war between Iran and Israel are on my radar.  A while back I sent a question to Elliott Wave wondering if they have done a wave count on the Case Schiller index.  After patiently waiting I received a response, and here you go…

 

Elliott Wave count Case Schiller

Elliott Wave count Case Schiller

Yes, you are reading this correctly in that there may be another 20% decline or more before the housing downtrend finally abates.  Elliott Wave is based on Fibonacci and social moods.  In many instances they have been spot on +- a bit of time.  Additionally, if their forecast about the market is correct the downtrend isn’t complete.  

As for Iran I’ll do another post about that.  However, if war does break out or a tanker is sunk in the Hormuz Straight a whole host of problems are going to hit the world.  For one oil will skyrocket, gold will skyrocket, and the dollar will most likely tank.  How real of a possibility is this?  Hopefully a long shot.

Your Vote?

I’ve been trying to educate people why voting for candidate A or B isn’t the only option.  This article  explains it nicely.

Constitution Party candidate Chuck Baldwin recently published an article entitled “A Wasted Vote,” in which he expounds the virtue of voting on uncompromised principles, viz. voting for Chuck Baldwin, as opposed to casting one’s vote for what Chuck calls “the evil of two lessers.”

Here, I would like to offer an addendum to Mr. Baldwin’s points; I have a couple of observations of my own with regard to the old “wasted vote” argument I often hear when I make it clear to well-meaning McCain and Obama supporters that I do not intend to participate in perpetuating the American two-party duopoly this November:

1. In the grand scheme of things, in a national election, one’s vote is insignificant. That’s right, your vote is insignificant. The notion that a single individual’s vote might sway a presidential election one way or another is completely out of touch with reality. In reality, an individual’s vote has virtually no say over who gets elected president. With that in mind, on an individual basis, why would one not vote for a candidate one actually wants to be president, as opposed to a candidate one imagines has close to a 50% chance of winning and who kinda sorta represents one’s ideals, or who is perhaps a little better than “the other guy”?

2. Voting for a losing candidate has ramifications beyond the immediate outcome of an election. In other words, winning isn’t everything. Granted, as per the above point, the impact your vote will have is an infinitesimally small one, but nonetheless it will have an infinitesimally small impact. The support third-party candidates receive is duly noted by the Democrats and Republicans. Votes garnered by “far left,” third-party candidates–Ralph Nader, for example–are incentives for the Democrats to “move left” in an attempt to obtain those votes the next election cycle. Likewise, votes garnered by “far right,” third-party candidates–Chuck Baldwin, for example–are incentives for the Republicans to “move right” in an effort to secure those votes. On the opposite side of the coin, if you cast your vote for an establishment candidate, you are essentially assenting to the status quo via the voting booth. You are sending a message to the Democrats or Republicans that you accept the candidate, however lukewarm or otherwise terrible, that they have presented to you this election cycle, and that you will complacently vote for more like him or her in the future.

America FOR SALE… Foreclosed?

United States for SALE

United States for SALE

The United States’ Commerce Department’s Bureau of Economic Analysis (BEA) will stop publishing a key report tracking foreign direct investments (FDI) into the U.S. Through the discontinuation of the BEA’s “New Investment Series,” the U.S. government and the American public will no longer be able to distinguish between FDI used to acquire existing U.S. assets from FDI used to establish new U.S. businesses.

-Article Link

I really want to be surprised that we will no longer be able to view how many of our assets are being sold off to foreign countries. Before we know it we are going to be owned by everyone else.  Imagine… the once wealthiest and powerful nation in the wold was auctioned slowly auctioned off to foreign bidders, and hardly anyone said a thing.  

We no longer are able to track the actual amount of currency in circulation via the M3 indicator, and now this.  Soon we won’t even have the M1 and M2 figures to look at, which would enable even more credit expansion because nobody could question what the Fed is doing.  

This is looking more and more like a systematic power grab by banking institutions.  Let’s see who ends up surviving the carnage in the years to come.

Credit where art thou?

GMAC is reducing the amount and number of loans they will be issuing.  The best part is that they will only be issuing loans to people with a credit score above 700, who represent 58% of the population as stated in Bloomberg.

So, this just get more and more fun… Seems that the feedback cycle continues amidst a sprinkler system of liquidity.  Regardless of what central banks do there will be a contraction in credit if people don’t want to lend.  Even if credit is created and guarantees issued… short of holding a gun to banks heads they may just want to hold onto that cash.  People already feel poorer, and they also causes a contraction in the economy.  

Throwing a ton of liquidity at the problem isn’t going to solve the current crisis, that is what got us into this mess.  I’ve been waiting to see what the outcome will be with regards to inflation and a recession/depression.  Time will tell.

Banks win with T.K.O!

If I had to place a bet on who would win… The major banks or the taxpayer… The BANKS win!!  Hooray the institution is saved!  Round after round of talks end in someone getting bailed out or should I say supported or prevented from failing so the whole economy doesn’t come tumbling down.  The markets seems to be happy with the results of the weekend’s coordinated world-wide effort to support the financial industry.  The Dow is presently up 585 points and we are green across the boards.  

However, treasuries are losing ground quickly and Jim Rogers is shorting them.  I took that position earlier, but was too early and also got out too early.  Live and learn right?  I plan to reestablish that plan shortly.  Additionally, I don’t see how this is the “bottom” of the current crisis.  At every point along this decline since last October every time there is intervention the market rallies and then continues in is downward trajectory.  

I’m not watching CNBC, but I imagine everyone is talking about how last week was bottom and we are off to the races.  For a bottom to be in place we needed much more despair and hatred towards the markets.  Regardless of the long-term outlook (just wait for earnings season to really kick in) there is no point swimming up a waterfall.  Therefore I closed out a large position of ultra short index ETFs.  My bias is still short, but I’m not going to be surprised if we see an intermediate rally followed by the final shit storm of destruction.  Remember the fundamentals haven’t changed, only the fact that the world’s leaders are trying to hold things together to avoid a complete collapse.  This weekend only restored confidence to get people lending to each other again, and to prevent runs on the banks.

And alas it’s my 30th Birthday!  What a month to have a birthday eh!  I couldn’t have asked for a more excited, and hairbrained ride…

End of day Friday

The volatility over the last 20 minutes and still continuing is crazy.  At one point today we were down to 7884 then up to 8900.  That is over a 1000 point differential.  Then when we hit about 8030 at 2:55pm the market started to rally.  Over about 30 minutes we went almost straight up.  Very similar looking to the opening over the past couple days.  I have to wonder if there are forces at work trying their best to make this market close in positive territory prior to the three day weekend.

With 10 minutes of trading to go I just don’t it happening unless there is some major miracle (intervention).

Lehman CDS auction

The Dow is off its lows for the day, and we are awaiting the results of the Lehman CDS auction.  The market is looking hopeful, but it could intervention that we keep seeing.  Look at the open of today and then the sharp rebound.  As an investor would you actually purchase a long position at the moment?  Depending on the results from the auction we may have a serious bounce, free fall, or complacency.  I really don’t know… If I did I’d choose the respective position and make a killing.

The auction is going to provide some clarity to banks as to the true value at present of all this “worthless” paper they are holding.  One good thing regardless of the market’s reaction is that now people will have an idea as to their worth.  Up until today there has been no market and pure speculation as to what they are valued.  I’m not going to partake in a transaction if what I’m buying has no market and no exchangeable value.  

Thus we are awaiting the results of the Lehman auction.  See it here.

SkyDiving without a Parachute

 

People keep wondering when we will hit bottom, where is support, etc…  I’d say after the last couple days “what support”?  Panic YES, more PANIC YES, and so we go DOWN.  Perhaps we will get a rally, but the overall trend is down and has been down for about a year now.  The dollar is treading closely to a precipice as well.  Credit is frozen, which if this continues means shortages in supermarkets, shortages in everything that is purchased on credit.  What is bought on credit?  EVERYTHING  

Yes, I’m concerned… So, we have a choice.  Either we can freak out and panic and run around with our shorts at our ankles falling all over the place or we can take a deeeeep breath and think about what weand I can really do.  

Can we stop the market decline?   NO
Can we unfreeze the credit markets?  NO
Can we rescue failing banks? NO
Can we stop layoffs? NO

However, there are a few YES’s out there.  What are they you ask?  

Can we get a three month’s supply of food to have on hand?  YES
Can we hold Gold and Silver in case the dollar or the banking system collapses or goes on holiday?  YES
Can we better get to know those in our communities?  YES
Can we stop getting further in debt?  YES

So, eventhough our world may or may not look like is does presently there are things we can do to prepare for the what if scenario.  Really it is no different from preparing for a potential hurricane, tornado, flood, or earthquake.   If you live in an area with one of those potential natural disasters isn’t up to you to be ready for the unthinkable?  YES 

I don’t know about you, but I don’t want to wait for the National Guard to come in and save me.  It is up to us to be responsible, and prepared.

Might this all blow over?  Sure  And what if it doesn’t?  Then what?

-Trevor