My Trip to Kingsbridge Road

I can calculate the movement of the stars, but not the madness of men.
– Isaac Newton

A brave man dies once, a coward a thousand times.
-African Proverb

The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion.
-Albert Camus

A Chance Encounter with William A. Weber
In early February of this year, I was having a brutal day in the markets and, as I often do on such occasions, I stepped outside for a moment to get some fresh air and collect my thoughts.  Within moments along came an old man with a walker and a kind disposition.  I had noticed him around before, but we had never exchanged more than a friendly smile and a quick hello.  I am not always the most talkative person in the world when I don’t know someone (particularly if I am in a bad mood); however, for some reason I felt compelled to spark a conversation with this old man and he was more than happy to oblige.

I realized pretty quickly that I had come across someone special.  From the moment he started talking there was a light that shone from his eyes and an energy that radiated from his being that was simply unmistakable.  His name is William Weber, and as he described it, “I am 93 years young.”  He told me a little about his life.  He started off by telling me how he has worked at the University of Colorado at Boulder since 1946.  It was also in 1946 that he founded the University’s Herbarium.  Rather quickly, our conversation progressed into his background.  Like me he was born in New York City.  The only difference is he was born exactly 60 years before me, in 1918.  He told me about his days in The Kingsbridge Road section of the Bronx.  He then mentioned that he has been trying to find someone to take pictures of all the childhood places of his youth.  Coincidentally, I was set to travel to NYC the following week and so I volunteered to make the trip and take the photos for him.

My Trip to Kingsbridge Road
The first step was to get a list of the destinations.  He emailed me them rather quickly, and I must admit, I was a bit overwhelmed.  The list was longer than I thought, but the first item on the list immediately drew me in.  It was Edgar Allen Poe’s cottage, which William wrote “was a favorite place for me to visit, because of the raven that sat on the mantelpiece.”

As for me, I grew up in Midtown Manhattan.  My parents still live in the apartment I grew up in.  I went to high school in the Riverdale section of the Bronx, which is a quiet, tree-lined neighborhood in the northern section of the borough, nothing like what you would imagine an area of New York City to look like.  Let’s just say my familiarity with Kingsbridge Road was limited.

The Sunday afternoon that I decided to take the subway ride to Kingsbridge Road was cool and clear.  I debated whether or not it would be a good idea to bring my Nixon D90 SLR camera or not.  In the end, I decided to take it and if I felt unsafe I would just leave it in the carrying bag and take the pictures with my iPhone.  The subway ride felt pretty normal at first.  It was the same train you would take to go to Yankee Stadium.  However, as the stations passed by the crowd started to change as did the entire energy in the cars.  Gone were the last of the yuppies with the carefree looks on their faces.  In came the serious faces, the faces of people with serious problems.  People that have to scramble each and every day of their lives to survive.  The clothing was generally worn and cheap and the conversations I overheard were cryptic and heavy.

Once I got off the train I attempted to orient myself in what seemed like a strange land despite it being the city of my birth.  I quickly realized it would not be a great idea to take out my large camera and wear it around my neck everywhere.  This isn’t a popular tourist destination.  Once I was able to get my bearings, I started walking over to the Edgar Allen Poe cottage.  It was right along the Grand Concourse, which is a major thoroughfare.  I really started to grasp that the area I was in wasn’t as safe as the areas I normally frequent when I noticed the door was locked.  A few moments after ringing the bell a timid, gentle British man opened up the door and rushed me in.  He locked it back up behind me.  This was about 2pm.

The cottage tour was fun but I had places to go.  This is where things started getting a little tricky.  To get to the apartment he grew up in, the public school that he attended and the homes of relatives he wanted me to photo, I had to go into the heart of some neighborhoods rather than just hang around on near the main road.  Here, the streets weren’t crowded at all.  More importantly, there was a general heaviness that permeated the air.  In the neighborhoods I normally frequent, whether here in Colorado or in NYC, there is a general vibrancy to everyday life that emanates from the surroundings.  There was none of that apparent here.  People seemed beaten down and hopeless.  It was palpable and very depressing.  One other thing that stood out was the fact that there seemed to be brand new cars everywhere.  It seemed completely out of place with everything else I witnessed in the environment.  At first I wondered whether it was related to illicit activities, but I have since realized it is probably just a manifestation of all the subprime auto loans going around.

The rest of my journey went off without a hitch.  I was able to find and photograph pretty much every place he requested.  As it got later in the day, I recall really wanting to get out of there as soon as possible.  Particularly as the sun starting to grow lower on the horizon.  I felt really awful about what I had witnessed.  It wasn’t the material aspects of the neighborhood that affected me.  It was the depressed energy of the community.  It felt very third world.  It was extremely sad.

As I waited on the subway platform for my train home, I remember it seemed to take forever for it to arrive.  Once I got on and started back home I recall a huge sigh of relief.  What really got me though was exiting the subway station at Grand Central Station.  Walking out into the street with the gleaming Chrysler building shooting skyward made me feel a massive sense of wealth as well as modernity’s inescapable presence.  The contrast absolutely blew my mind, yet the place I had just been was only ten miles away and in the same city.  The city of my birth.  The city of William Weber’s birth.

Take the Journey for Yourself
I had considered writing about this journey several months ago, but I clearly never got around to it.  The reason that I decided to finally write about it was because I had the idea to recommend others take the same trip.  I know that many of my readers live in and around the NYC area, and so I request that you consider taking the time to retrace my steps one weekend.  I think you will find the thoughts and feelings that you experience on such a trip to be well worth it even if they aren’t the same as mine.

Furthermore, I wouldn’t dismiss taking the trip just because you have visited many “poorer” places.  So have I.  I have travelled extensively in Central and South America and my brother was in the Peace Corps in Guatemala.  When I visited him I stayed in his tiny village for a bit.  The key thing is that this is right in your backyard.  It’s a few hours.  Give it a shot.

I also would ask that those that do take the trip post their experiences in the comments section or send me an email.  I’d love to hear them.

So without further ado, here is the William Weber tour, in the words of the man himself:

My birthplace. When I was small, there was a hemlock forest in back of it. The Grand Concourse was the first street to the west. 2789 VALENTINE Ave. The apartment house where I was born, is on the west side of the street. 

Across the street from 2789 a small private house is sandwiched in between apartment houses. There is still a small garden plot in front which when I saw it some years ago, is now painted  red. One day when I was playing with Helen Wack, she accidentally pushed me off the stoop and I fell on my head on the concrete border. I got a depressed fracture which is still visible on my left forehead

The Edgar Allen Poe Cottage was a favorite place for me to visit, because of the raven that sat on the mantelpiece. It was or is at the junction of Fordham Road and the Grand Concourse.

P. S. 46   was a few blocks south of my home. I believe it was on Briggs Avenue which parallels Valentine.

My aunt’s house was a private house with a front porch, at 2665 Briggs Avenue. Josie was my favorite aunt, and I spent a lot of time devouring the magazines of natural history on the bookshelves of her living room

My father was a pharmacist. He worked at Atkins Drug Store, which was on 199th Street and Valentine. It had become a Latino food store when I last saw it.

Finally, here is a great story on William from a local paper that discusses how they have named the Herbarium after him.

Peace and Wisdom,
Mike

The Most Important Chart in the World

Fill your bowl to the brim and it will spill.  Keep sharpening your knife and it will blunt.  Chase after money and security and your heart will never unclench.  Care about people’s approval and you will be their prisoner.  Do your work, then step back.  The only path to serenity.
– Tao Te Ching

It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness.
–  Karl Marx

Keep away from people who try to belittle your ambitions. Small people always do that, the really great make you feel great too
–  Mark Twain

The Most Important Chart in the World
Back in my Bernstein days, I never really took a large amount of presentation materials to most of my meetings.  However, there was one chart that I always printed out and brought with me and I called it “The Most Important Chart in the World.”  It still is.  The chart I am referring to is the ratio of the Dow Jones Industrial Average: The Gold Price.  In a nutshell, charting this ratio demonstrates the “real” return on stocks adjusted for inflation or currency debasement.  As we all know, the Zimbabwe stock market essentially went up to infinity during their hyperinflation but did anyone get rich from that?  Of course not, the shares were denominated in a currency that was on its way to worthlessness.  At the moment, with many U.S. stock indices hitting new post-2008 highs there seems to be a general view that stocks as an asset class will do well in an inflationary environment.  As a result, whenever there is actually QE or even the mention of the potential resumption of Fed balance sheet expansion there is a rally in equity prices.  In fact, I think the entire investor class in the U.S. has been lulled into a sense of sleep and complacency at the moment.  There are two things I want to point out to people when they are considering whether to increase exposure to equities broadly or not.

1.  Allocation of Portfolios from the BRICS and Europe:  When you look at how well U.S. Treasuries and German Bunds have done this year, it becomes pretty clear that investors have shifted massive amounts of bond capital away from the formerly high growing areas of the world (that are now in serious collapse) into those nations perceived as “safe havens.”  While Germany doesn’t have its own currency, the U.S. obviously does and given concerns surrounding a Euro breakup and the extreme difficulties in the Chinese and Indian economies, many investors have decided the dollar is the best house in a bad neighborhood, at least temporarily.  This has led to a flight to U.S. equities generally, but also specifically into large cap U.S. centric names with dividends.  This is THE crowded trade of 2012 and three prime examples are Wal-Mart (WMT, +22% YTD), Target (TGT, +26% YTD), and Home Depot (HD, +36% YTD).  If you ask me, this trade is extremely long in the tooth.

2.  Strong Performance Concentrated in a Few Stocks:  I have hit on this theme many times before, but the key point is that if you weren’t in the right names this year there is a good chance you have underperformed the market significantly.  While you can say that this is normally the case, this year has been far more extreme as is evidenced by reports of horrible hedge fund performance this year relative to the benchmarks.  Apple (AAPL), of course, is the prime example.  This giant now sports a market cap of $623 billion and is up 65% YTD.

An Inflation Hedge?
The point I am attempting to make above is that those are the two main reasons for U.S. stock outperformance this year.  More than anything else, it has been about reallocation of global portfolios away from former high flying regions into those regions that are deemed safer.  I believe this has been exacerbated by the fact that the relative performance of the U.S. economy versus the BRICs caught a lot of people off guard.  That being said, I also think that the complacency that exists today is partly a function of investors’ belief that stocks will provide a good hedge against rising inflation and so why sell.  After all, if the Bernank is going to print at the first sign of weakness I should be sitting pretty with my stocks.  However, is this a correct train of thought?

My view, and one that was borne out in the last big inflationary period in the 1970s, is that high inflation is not good for stocks.  Not even in nominal terms.  PE ratios shrink as there is little real investment, confidence is shattered and the outlook becomes cloudy.  Some companies have pricing power but many do not.

Here is the chart of the SPX from 1970-1980.

See that.  Nothing done.  That’s ten years of zero, but with some really nice tradable swings.  The reason I bring all this up now is because we are likely to see a significant upswing in inflation as we head into 4Q.  Gasoline prices have been on a tear as of late and are now showing +9% on a year-over-year basis.  Recall that prices at the pump only adjust with a lag, so this will be impacting people for weeks to come.  The bigger issue though will be food.  Largely as a result of the severe drought in the U.S., corn and wheat prices have jumped 50% in the past two months.  This will affect consumption one way or the other.  The reason I am really concerned with the food situation is that the lag on passing on that is even longer, so we really haven’t seen any of it yet.  Furthermore, consumer product and food companies have already utilized almost every trick in the book up until this point.  Shrinking package sizes, putting less in the same packages, etc.  So I envision a scenario coming where the food inflation will be much more overt and in your face and this will further depress psychology.  Particularly amongst the newest members of the food stamp club, who were formally part of the vanishing middle class.

So to me, stocks broadly will not provide the protection assumed by many at the end of the day.  The only way I could see it happening is if we totally destroy the value of the currency (very possible, but I do not see evidence of that trade being in effect yet).  There is one major component missing to the “dollar becoming worthless” event.  One way it could happen would be an outside force dumping dollars (treasuries) aggressively without regard for price.  The second, and more likely scenario, would be a further expansion of the Fed’s balance sheet (QE) but this time directed at the public at large.  The key thing so far has been that the Fed’s actions have really only benefitted speculators as they have borrowed cheaply and purchased assets (hence the rally in markets).  The real inflation will come once the money is handed out at the street level.  This may be coming and if it does, I don’t suspect the names that have benefited so far this year will be the stocks to be in.  Yield chasing will be shunned and inflation protection investing will be en vogue.  I would start to prepare for this eventuality.

Back to The Most Important Chart in the World
Sorry, got a little sidetracked there.  So, the key thing with the Dow/Gold chart is that it perfectly mimics the various social moods and massive secular trends that exist in the economy over very long periods of time.  It is just as effective in periods of deflation as in inflation in telling you the true story.  Let’s take a closer look and examine what it has looked like from 1920-Present.

Monthly Chart of DOW/Gold 1920-Present

What this chart shows you are secular swings in the economy.  You see how stocks ran up in real terms into the 1929 crash and then plunged versus gold.  You see how they ran up in the next great post- WW2 period into 1968 when they once again plunged versus gold.  Then you can see the great secular bull market in stocks from around 1982 to the bubble peak in 2000.  In both of the prior two periods (one deflationary and one inflationary) the DOW/GOLD ratio got down to about 1:1.  It has been my contention for many years that we will see that same ratio once again.  That would imply another roughly 80% drop in stocks to gold and I expect that this next leg is beginning now.

Dow/Gold Two Year Chart
Of course for active investors and traders, timing is important and you can have massive counter trend rallies within a larger, secular trend.  I believe we have just completed one of those.  As you can see in the chart below, the Dow/Gold ratio has just had a massive 44% rally in past year or so, but it looks as if it may have formed a serious top.  Incredibly, it is one of the biggest counter-trend rallies of the entire secular bear period for stocks since 2000, registering at around 44%.  While very painful for those who didn’t see it coming, it is no coincidence that it happened in an election year.  My sense is this chart is currently in reversal mode and I think the ratio could hit between 4-5 from the current 7.8 over the next 12-18 months.  That is a huge opportunity if I am correct.  As always, decide for yourself.

Dow/Gold Two Year Chart    

Back in Colorado
In case you are only on this email list and haven’t seen anything from me in a while, it is because I was traveling and also focusing on my blog: http://libertyblitzkrieg.com/ where I have been posting daily.  If you haven’t signed up to get the blog updates via email, it is very easy to do so on the right sidebar.  Also, I have started using twitter actively and I find it extremely effective.  You can also follow me through twitter on the right sidebar or just find me @libertyblitz

Until next time.

In Peace and Wisdom,

Mike

Reality Bites

The difference between [socialism and fascism] is superficial and purely formal, but it is significant psychologically: it brings the authoritarian nature of a planned economy crudely into the open. The main characteristic of socialism (and of communism) is public ownership of the means of production, and, therefore, the abolition of private property. The right to property is the right of use and disposal. Under fascism, men retain the semblance or pretense of private property, but the government holds total power over its use and disposal.

Under fascism, citizens retain the responsibilities of owning property, without freedom to act and without any of the advantages of ownership. Under socialism, government officials acquire all the advantages of ownership, without any of the responsibilities, since they do not hold title to the property, but merely the right to use it — at least until the next purge. In either case, the government officials hold the economic, political and legal power of life or death over the citizens.

Needless to say, under either system [socialism or fascism], the inequalities of income and standard of living are greater than anything possible under a free economy — and a man’s position is determined, not by his productive ability and achievement, but by political pull and force. Under both systems, sacrifice is invoked as a magic, omnipotent solution in any crisis — and “the public good” is the altar on which victims are immolated.

– All Quotes by Ayn Rand

Reality Bites
The thing that I disdain more than anything else with regard to the government bureaucrats and Central Planners, is the inexplicable and unjustified confidence they have in their abilities.  As much as I bash Wall Street, I would rather have a good investor (not a crony, government welfare baby investor like Warren Buffett, but a legitimate one), in a leadership position rather than the lifetime academics and politicians (lawyers) that are running things today.  Why?  Because anyone that has worked in the real world of investing has made so many mistakes it is impossible to count.  I want to make clear that none of this applies to the TBTF banks, which absolutely couldn’t make a dime without government handouts and bailouts, or the buy-side firms that are in bed with the government (you know who you are), but legitimate “eat what you kill” investors and traders that have no help and must be right more than wrong to survive.  These folks are consistently humbled, week after week and year after year by the market and forces beyond their control.  They are constantly reminded that failure is just around the corner.  In many cases, folks do fail and then they have to pick themselves up off the ground, shake away the dirt and fight to win another day.  This of course doesn’t merely apply to investors and traders, but to all those out there in the private workforce trying to create a new business, climb the ladder from line cook to store manager at McDonalds or Wal-Mart, or those spending hours upon hours in a garage or lab trying to discover the next game changing invention.  The people it does not apply to are the people running the planet at the moment, which is why there is no doubt they will run the entire global economy straight into the ground.

We need to understand that there is a war raging outside.  A war between the parasite class and the productive human.  The parasites have total control of all levers of power at the moment, and they intend on using the ultimate implosion of the system to further consolidate their gains in order to create a neo-feudalist society where productive humans will become serfs that exist merely to produce for the pleasure of the parasites with no hope of escape for themselves or their children or grandchildren.  We cannot allow this to happen, which is why the most important thing is to inform as many people as possible of the game plan ahead of time so that they are unable to manipulate humanity to acquiesce to its own bondage in the middle of a crisis.

The most dangerous people on the planet are the lifetime academics and these are the folks in charge of the most powerful institutions in the world today, the Central Banks.  These lifetime academics have been coddled their whole lives within the “prestigious” institutions that define the paradigm that we live under.  In rising high up in academia, these folks never really experienced failure.  Sure, they may have received a B+ on a paper once instead of an A, but they have never experienced that crushing failure that only the real world can deliver.  As I mentioned earlier, I would put all of the leaders of TBTF banks/brokers in the same category.  They have been bailed out at the taxpayer’s expense so many times that they do not live in reality either.  When they fail they get bailed out, when they succeed they take all the gains and then buy everyone else off around them.  This is not a novel point, but it is extremely important to fully internalize because these are the people (academics and TBTF executives) that are in total control of all economic, social and political policy in the Western world today.  It is because of them that we are in the situation we are in and it will be because of them that we will crash and burn.

So What Will The Maniacs in Control Do?
Mario Draghi’s (The head of the European Central Bank) statement today, is a perfect example of how delusional and dangerous these characters are.  Amongst other things, he stated that “the ECB is ready to do whatever it takes to preserve the euro,” and that “believe me, it will be enough.”  First of all, whenever a bureaucrat says “whatever it takes” images of red flags should appear all over your field of vision and you should immediately turn around and run the other way as fast as you can.  He also stated that the European Monetary Union is “irreversible.”

Ok, so let’s dissect these statements.  First, nothing in life or human society is irreversible.  I am sure the Pharaohs of Egypt and the Emperors in Rome said similar things right before their civilizations came crumbling down.  There is no need to make such statements when a civilization is functioning well and the populace flourishing.  Such statements are the last refuge of weak leaders in failing systems.  How about the “whatever it takes line.”  Notice he didn’t say he would do “whatever it takes” to create a better system, or to empower humanity.  No, he said whatever it takes to preserve the Euro, despite the clear fact that a breakup of the euro prison would be the best options for all of the PIIGS.  So what we can take away from the statement is that once again they will do “whatever it takes” to preserve the big banks and the status quo.  If 99.9% of humanity goes down in the process, that is merely collateral damage to these guys.

This brings me to the final point.  We are right now about to enter by far the most dangerous period since 2008.  The reason I say this is because I believe the Central Planners realize that their theories were nothing but eloquently written academic nonsense and have completely failed in practice.  Rather than ever admit this and change course, I know how these clowns think and they would rather burn the world to the ground than “lose.”  I think it has been about a year since The Bernank realized his whole life’s work will be relegated to the trash bins of history, but in an attempt to save face, he and all the others will lie, cheat (manipulate behind the scenes) and steal.  They have been doing this for all of 2012, and with the U.S. now in recession they will do more.  So brace yourselves.  If you don’t already realize this is war, you will soon enough.  The parasitical system of control is breaking down all over the place and TPTB are getting increasingly desperate.  An increasingly desperate power structure is a dangerous one.  Get emotionally ready for the trying days ahead.  It will not be easy but free humanity will prevail.  For some more in depth thoughts on what I see in the days to come please take a listen to this in-person interview, “Don’t Live in Fear,” I recorded while at Freedom Fest a couple of weeks ago.  I think it is one of the best interviews I have ever done.

Peace and wisdom.

In Liberty,

Mike

Go Back to Sleep

Whenever the legislators endeavor to take away, and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any farther obedience.
– John Locke

When it gets down to having to use violence, then you are playing the system’s game. The establishment will irritate you – pull your beard, flick your face – to make you fight. Because once they’ve got you violent, then they know how to handle you. The only thing they don’t know how to handle is non-violence and humor.
– John Lennon

When the power of love overcomes the love of power, the world will know peace.
– Jimi Hendrix

Go Back to Sleep
Most of you that are taking the time to read this have already experienced some level of “waking up” over the past several years or longer.  Most of you have also probably felt from time to time that the knowledge you possess is a burden and have fully appreciated the meaning of “ignorance is bliss.”  I know this because I have felt these very same emotions at times.  The most important thing to remember; however, is that we are just awake individuals within a wave or cycle of awakening.  There were those that came before us and there will be many, many more to come after us.  Last Thursday, I was at Freedom Fest in Vegas for a brief stint and I had the honor to meet and break bread with some of the most influential minds in the Liberty Movement.  As I sat there at the table at Delmonico’s, thoroughly impressed with the intellect, commitment and total sense of purpose of the people around me I became more sure than ever that TPTB don’t stand a chance.  The problem for those control freak clowns is that ten years ago they had at least 95% of the American populace completely asleep.  I would estimate that number at the moment to be around 75%.  If I am  anywhere close to being right, that means that 25% of the population is at least somewhat aware that things aren’t as they appear to be.  They are asking serious questions and looking for serious answers.  Breaking it down even further, I would say that 5% of the population can be described as fully awake and somewhat committed to fully committed.  This is something like 15 million Americans and is more than enough.  Most importantly, once you are truly awakened you never go back to sleep.  In my five years or so in this adventure I have seen the transformative process of many, many people within my personal circle of friends and contacts.  Not ONE, I repeat not ONE of them has ever fallen back into the matrix mindset.  It just doesn’t happen and it reminds me of quotes about truth and lies.  As Mark Twain said “If you tell the truth, you don’t have to remember anything.”  Then there is the counter quote from I can’t remember who that “lies require commitment.”  Believe me, they are committed!  That said, too much is coming out now and what TPTB are doing in the markets is desperately manipulating everything so that another wave does not wake up.  There are terrified that this next wave of people will be the tipping point for their control structure.  They are correct but it is coming soon to smack them in the face no matter what they do.

Obama’s Executive Orders…Connecting the Dots
While we all know about the NDAA, which Obama signed into law late last year that opens the door to the incarceration of American citizens without a trial, what is a little less known are a series of Executive Orders signed by our Noble Peace prize winning Assassinator in Chief.  Of particular interest to me are Executive Order 13603, or “The National Defense Resources Preparedness,” and Executive Order 13618,  “The Assignment of National Security and Emergency Preparedness Communications Functions.”  You don’t need to be Sherlock Holmes to get what these EO’s are all about.  The first one basically gives government control of any and all resources it needs (and seemingly the ability to nullify or suspend existing private agreements) “if” there is a national emergency, while the second one does the same for communications.  So essentially our wonderful government that cares about us so very much is setting the stage to take total control (natural resources and the means of communication) whenever this national emergency that they seem to be fully anticipating comes to fruition.  A good summary of all the EO’s can be found here.  They expect the sheeple to be in such a catatonic state of fear and shock that they will beg for daddy government to take away all their rights and ignore the Constitution so that their EBT cards work.  Why else do you think the government is desperately trying to get as many Americans on food stamps as possible?  See my post “The Government is Encouraging More Food Stamp Usage, Calling it “Stimulus”.

Obama Tells Americans “Your Success Wasn’t Yours”
Regular readers understand that I do not believe there is “free market capitalism” in America today.  Sure there are remnants of it left, but increasingly there is simply crony capitalism in which the Federal government partners with large corporate interests to allow them to grow bigger, more powerful and importantly, more dependent on the government itself for its profits and influence.  This is deliberate, just as it is a deliberate plan to get more people on food stamps.  It is all about power and control.  That said, there are still many small businesses and also large business owners that got to where they are through their own blood, sweat, tears as well as intellect and vision.  While the 0.01% financial oligarchs and crony capitalists all over America should be exposed and called out for the traitorous parasites that they are, this should not mean we just lump all successful people into this category.  Yet, this is exactly what our pathological liar President did in his most recent demonstration of verbal diarrhea.  I am sure everyone has already seen this clip, but I am mentioning it nonetheless because it is so significant.  He stated:

Look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there… If you’ve got a business — you didn’t build that.  Somebody else made that happen.         

I mean every time I think this guy can’t hit a new low he manages to achieve one within a week.  No mention of the fact that a top campaign contributor to him, Jon Corzine, is a thieving crook.  Nah, nothing to see here folks. Meanwhile, if you read between the lines of his little tirade (look how angry he looks in the video),  it is clear what he is trying to say.  You are a nobody.  You are nothing without the state and without the good graces of the political elite.  We own you.  If the political leaders in Washington D.C. that produce absolutely nothing but hot air and then steal from you left and right say that you do not even own your own success, then indeed you own nothing.  This fits in perfectly with the Executive Orders I referred to earlier.  The game plan and meme here is obvious.  You are cattle.  The government owns your land and its resources, your success and ultimately your mind.  Are we going to let them have them?

Peace and wisdom,

Mike

Where Food Stamps Go to Die

Anyone who has the power to make you believe absurdities has the power to make you commit injustices.

No snowflake in an avalanche ever feels responsible.

Common sense is not so common.

I have never made but one prayer to God, a very short one: “O Lord make my enemies ridiculous.” And God granted it.

In general, the art of government consists of taking as much money as possible from one class of citizens to give to another.

The sovereign is called a tyrant who knows no laws but his caprice.

All murderers are punished unless they kill in large numbers and to the sound of trumpets.

– All Quotes by Voltaire

Where Food Stamps Go to Die
We all know the economy sucks.  We all know we are headed in the wrong direction.  We all know our leaders are corrupt, immoral, greedy and violent.  You don’t need me to tell you that.  One thing that I have noticed recently while watching the financial markets is that despite the fact most stocks charts I pull up look awful, the major indices continue to hang in or grind higher.  While it is not new news that a few large cap stocks are holding the major averages up, I want to focus on one in particular.  Wal-Mart.  Yes we all know Wal-Mart.  Everyone has an opinion; whether you love it or hate it.  In this instance, I’m not so much interested in the company itself, the stores or disturbing images of some of the people seen shopping there.  No, in this case I want to take a look at the stock and ponder what it tells us about the state of affairs in both the U.S. and the global economy as a whole.

Wal-Mart’s stock is up 14% YTD, which is triple the return of the S&P 500.  The stock also packs a dividend yield of 2.3%, so the total return is even better.  In the last month or so the stock has become a real powerhouse as you can see in the chart below.  Crushing any and all shorts under the weight of its rapid appreciation.

Wal-Mart Three Year Chart

I think the above chart, in particular the move in the past month or so, speaks volumes to what is happening on a macro level.  First, from a purely flow of capital perspective, the U.S. economy was the last one to hit recession (most money managers still have no idea).  With Europe in a situation where monetary and political chaos appears likely here and now (and inevitable ultimately) and the BRICs in total free-fall, we have seen a rush into perceived safe havens.  We all know about treasuries and bunds, but at some point people don’t want to continue to funnel money to instruments yielding negative real returns.  So what has apparently happened is global money managers have been allocating more dollars to very large cap U.S. shares as an alternative to treasuries and bunds.

There’s more to it of course.  Nothing exemplifies the ghetto status of the U.S. economy more than the success of Wal-Mart in the face of the ongoing destruction of what was once a vibrant and strong middle class.  In case you missed it, Marion Nestle, Professor in the Department of Nutrition, Food Studies, and Public Health at NYU, came out with some interesting tidbits regarding the food stamp program.  One of them is extraordinarily disturbing.  She shows that Wal-Mart’s gets as much as 25% to 40% of revenue at some stores from food stamp dollars.  This says it all folks.  Food stamps are or course the perfect business for Wal-Mart and JP Morgan, which as I pointed out previously makes a lot of money running the program and keeping the populace in perpetual serfdom.  Meanwhile, guess what another of the best performing stocks this year is?  Corrections Corp of America, ticker CXW, up 41% YTD!  Guess what they do?  Yep, you guess it.  They lock up the serfs that get out of line.  This is the Bloomberg description of CXW.

Corrections Corporation of America provides detention and corrections services to governmental agencies.  The Company owns correctional and detention facilities in the United States and the United Kingdom. Services include design, construction, ownership, renovation, and management of new or existing jails  and prisons, as well as long distance inmate transportation services.

There you have it folks.  What sectors are leading the American economy in the “recovery”: Food stamps and Prisons.  They are actually perfectly complimentary.  If the food stamps don’t work the prisons will.

Meanwhile, in the real economy we have the latest earnings blowup.  Ryder System, a company involved in the leasing, rental and logistical business of trucking lowered its forecast and the shares were smashed.  Too bad you can’t lease a truck with an EBT card, although who knows, that might be in the next stimulus package.

Ryder Three Year Chart.  Thanks for Playing!

The global economy is currently staring into a cyclical recession in the midst of the biggest structural debt and derivatives ponzi scheme that mankind has ever witnessed.  The desperation to keep things looking decent into the election continues at a frantic pace and now there are only four more months left.  As I have said before, if they do not allow pressure to be released until after the elections the comeuppance is going to be way more awful than I care to think about.  Prepare accordingly.

Peace and wisdom,

Mike

TWISTED

Zealotry of either kind — the puritan’s need to regiment others or the victim’s passion for blaming everyone except himself — tends to produce a depressing civic stupidity. Each trait has about it the immobility of addiction. Victims become addicted to being victims:  they derive identity, innocence and a kind of devious power from sheer, defaulting helplessness. On the other side, the candlesnuffers of behavioral and political correctness enact their paradox, accomplishing intolerance in the name of tolerance, regimentation in the name of betterment.
– Lance Morrow

It is unclear how disarming law-abiding citizens would better protect them from the dangers and threats posed by those who would flout the law. It is at just such times that the constitutional right to self-defense is most precious and must be protected from government overreach.
– Rick Scott

TWISTED
In my email of two weeks ago I wrote the following:

Barring a market catastrophe in the next two weeks I do not expect the Fed to act at the June meeting.  With rates where they are and stocks where they are there is little upside to action; however, this lack of action is precisely what will set the stage for the massive action that must come later.

Well the Fed meeting came and went, and in my opinion, they did less than zero.  The extension of operation TWIST is the biggest non-event, nonsense move in the history of the Federal Reserve.  In fact, it does more harm than good on several fronts and it would have been smarter to have done nothing at all.  Most significantly, the fact that they felt the need to “do something” should tell you something.  With stock prices near their highs and the 10 year treasury at 1.60%, or just shy of record low yields, what is the rationale for any action?  The answer to this question of course is that many of the world’s economies have been in recession for much of the year and as I have said for weeks, publicly and privately, I believe the U.S. joined the recession club at some point in May of this year.  I think The Bernank understands this but dares not say it.  Just like he rambled on about how “there was no housing bubble” and that the “subprime crisis was contained” back in 2007/08 as the world tipped into financial implosion, he employs the same strategy today.  The core strategy at the moment, as I mentioned previously, is “talk up the economy, talk down printing and pray.”  While this is all well and good, the biggest problem that the Bernank now faces is that the financial markets are such a distorted hologram that all asset prices are vulnerable to flash crash type moves.  No one believes in their positions (other than people that hold hard assets like precious metals outside of the banking system and will not sell until the system is reset), rather investors and traders are forced to be involved in positions as a function of their mandates.  Their decisions are no longer driven by economic or business prospects but rather by some view on what the Central Planners of the world will do next.  The markets seem calm but there is a storm brewing beneath them and the pressure will be released one way or the other.  We are now in the crucial six week period between Fed meetings.  The reason I think this is such an important time is because not only will investors come to grips with the reality on the ground (recession) but it is also earnings season.  As I pointed out during the last earnings period, stocks that had even a whiff of weakness in their numbers or outlook were decimated.  Even names that had good results did not break out.  This sent a clear signal that too much goodness is priced into many shares out there.  Today we see a similar sign with Bed, Bath and Beyond.  Another high flier returns to earth…

Bed, Bath and Beyond Chart       

The Saudi Stimulus
In my recent piece titled Saudis Pump All Out as the Global Economy Crumbles, I outlined how the Obama administration and the Saudi government clearly came to an arrangement.  Bascically, the U.S. and other OECD nations would not release SPR (strategic petroleum reserves) oil in exchange for the Saudis pumping all out.  Of course, when faced with an SPR release the choice for the Saudis was pretty simple.  At least this way if prices are headed lower they can sell the volume.  I believe that with the Bernank terrified to act given the populist backlash (and rightly so) agaisnt the Federal Reserve, this was the “stimulus” that the administration agreed upon.  It was a very crafty move.  This is because 99% of investors out there have no idea what is really happening in the oil market and all of the geopolitical forces involved in the recent manufactured crash.  As a result, your average investor, and more importantly, your average computer algo just sees oil collapsing and thinks this will be some boost to the economy.  The following chart sums up this brain-dead trade perfectly.

Oil vs. the SPX

Disneyland Lives!
No ladies and gentlemen, oil is not falling from the sky like manna from heaven.  No ladies and gentlemen, the Bakken shale is not a global oil supply game changer.  Yes, the Saudis are purposefully crashing the price.  Yes, demand is plunging as the world economy tips into recession.  So where does this leave us?  In a very, very bad position.  First of all, just like all of the other “stimulus” this is a band-aid kick the can down the road move.  Sure the Saudis can live with low oil prices for a while, but certainly not forever as their population is young, restless and needs consistent payoffs.  Second, all of the new sources of supply are expensive, such as oil shale, oil sands and deepwater.  Projects will be canceled en masse at these prices.  Then, when the Central Planners of the world finally give in with the Big Print oil will skyrocket higher as confetti money meets supply declines and any economic recovery gets stopped dead in its tracks once again.  Also, what about the fact that oil shale has been one of the highlights of the U.S. economy over the last few years.  You think it is just a coincidence that North Dakota has the lowest unemployment rate in the United States at 3%?  Of course not.  The oil boom has been the one bright spot in this disaster financial ghetto economy we’ve got, and at $80 oil that doesn’t work.  The oil shale workers can sadly now join the ranks of Obama’s food stamp nation.  Oh and I’m sure green energy will really be stimulated at these prices!  Great work guys.  You are killing an entire nation to maintain your petty little power structure.  But it won’t work because we are in the Forth Turning, and when it all blows up, trust me, we will never forget who’s responsible.

Peace and wisdom,
Mike

Remember the Words of Joseph Stalin

Everyone imposes his own system as far as his army can reach.

Ideas are more powerful than guns. We would not let our enemies have guns, why should we let them have ideas.

It is enough that the people know there was an election. The people who cast the votes decide nothing. The people who count the votes decide everything.

– All Quotes by Joseph Stalin

Know Your Enemy
I recall wanting to read Mein Kampf as a young kid, although to this day I have only read excerpts.  I wanted to know what made this guy tick, what his thoughts were.  How could someone justify such horrific actions. As I have progressed into adulthood I have only become more and more convinced that books written by psychopath killer dictators should be required reading for every single human being on the planet.  In a similar vein, I remember hearing the argument back in high school that people should not read Machiavelli’s The Prince.  The argument was that if people read a manual on devious thoughts, and the application of ruthless behavior to achieve one’s selfish ends, that it would permeate society and lead us all into a darker place.  As soon as I heard this, of course, the first thing I did was head to the book store to buy it.  I recall my reaction to the treatise vividly.

I remember thinking how absolutely asinine the argument for shielding this book from society really was.  The conclusion I came to was that anyone with a truly sick, sociopathic mind wouldn’t learn anything from this book.  Their minds already intuitively thought that way.  Those that could be persuaded to think in that manner as a result of reading such a book were just dangerous sheeple that would sell their souls to work with a sick system.  They would end up doing so anyway.  Those people don’t scare me so much as the naturally devious mind does.  They can be easily outmaneuvered by smarter men and women.  If I am correct, then the worst possible thing we can do as a society is to pretend that this extremely small percentage of the population doesn’t exist or pose a threat to us in our everyday lives (please read my related article here).  I think that most of the population of the United States (aka Disneyland) has been duped into thinking that somehow the Hitler or Stalin personalities of the world no longer exist!  That somehow they just disappeared from the earth after World War 2, or more importantly, if they exist they are in some remote African country or Middle Eastern nation that just conveniently happens to have oil!

If Americans can indeed be convinced that such people roam the streets of the US of A then they are likely the one-off serial killer we hear about every now and again, or some homeless person that ODs on bath salts and eats some other homeless persons face on the side of a highway in Miami.  The big secret is that the smart, devious and ambitious minds do not lock middle aged women in basements; they go into politics.  More specifically, they pursue power wherever it can be had.  This is why I refer to Washington D.C. as a the world’s largest cesspool.  I think at this very moment there aren’t many places on this earth with a higher concentration per capita of twisted, immoral, inhumane creatures that somehow still refer to themselves as human beings.

So in this context, the awakening that is happening across much of my nation is really just the citizenry realizing what most of the world already knows all too well.  The Siren’s song of Disney has been strong but its effect is wearing off.  You can’t defeat your enemy unless you know your enemy.

Remember the Words of Joseph Stalin
As we head into the Greek election this weekend, I thought it would be appropriate to recall the words of Joseph Stalin.  Particularly his observation about elections and vote counting.  I find it hilarious that the Greek authorities suspended polling heading into the election.  I mean, that tells you everything you need to know.  This is exactly what you would do if you were thinking about rigging the results.  The worst thing that could happen would be to have Syriza soaring in the polls into the main event.  If that was the case ,it would be much more difficult to arrange a more “favorable” outcome.  This way they can just claim “wow, unexpectedly the bankster parties won!”  I’m not predicting that will be the outcome, I’m just saying the suspension of polling was a huge red flag.*  Here is the chart of the last polling results and some excellent commentary.  Greece is extremely important as it is a key testing ground for TPTB.  Everything that is happening in Greece will be attempted elsewhere if they can get away with it there.  This gives the country a great deal of significance.  That said, even if Greece is lost there is no way TPTB can win this thing.  It is taking them more than two years to roll up tiny Greece.  Even if they succeed, do you think Spain and Italy will go so easily.  Then what about the U.S. with hundreds of millions of guns everywhere?  There is no chance.  The globalist agenda is already dead in the water; however, as we can see it doesn’t stop them from continuing to try.

What TPTB do not appreciate are the lessons we are all learning from Greece.  We must learn many more lessons though.  We must admit to ourselves that there are truly evil geniuses out there, and in most cases these characters have taken control of the power structure (corporations, politics and factions of the military in most of the nations we reside in).  The necessary action is not for good people to bury their heads in the sand and pretend that such people do not exist.  We must get inside their minds.  We must acknowledge and accept their presence as well as their power and then work tirelessly to relieve them of it.  As Irish statesmen, author and philosopher Edmund Burke so eloquently stated: “All that’s necessary for the forces of evil to win in the world is for enough good men to do nothing.” Let’s just do it already.

Peace and wisdom,
Mike

* Note, a reader has informed me that a polling ban ahead of Greek elections has been in place for at least several years.  This doesn’t take away from any of the main points of the piece; however, I felt it significant enough of an oversight to correct.

China Will Blink and Gold Will Soar

Republics are created by the virtue, public spirit, and intelligence of the citizens. They fall, when the wise are banished from the public councils, because they dare to be honest, and the profligate are rewarded, because they flatter the people, in order to betray them.
– Justice Joseph Story

When it becomes serious, you have to lie.
– Jean Claude Juncker, Luxembourg PM and Head Euro-Zone Finance Minister in 2011

The Game Continues
I have no idea why anyone is making a big deal about The Bernank’s testimony to Congress today.  There was no way he was going to come out with anything meaningful.  The only thing our favorite Keynesian sorcerer wants to do is get through the session in as painless a manner as possible.  It would be completely foolish to rock the boat in any way during such testimony, as it would just invite all sorts of aggressive questions and make the entire thing more of a spectacle than it already is.  It would also increase the likelihood of a verbal blunder, so there is just no need.  In fact, I am 100% certain that The Bernank merely wants to toe the line as carefully as possible and at the same time get some nice propaganda out there to the sheeple.  In that sense, I think he achieved his goal.

Mapping the Next Five Months
Everyone has an opinion and on days like today people really like to come out and spout theirs so I suppose I may as well join the club.  In a recent article, I wrote that The Big Print is Coming and in this piece I want to follow that one up with exactly how I think it all will manifest between now and the election.  Of course, no one can predict the future, but what I want to do is attempt to outline how I think Central Planner policy will unfold from now until the U.S. Presidential election in early November.

Ok so let’s start with the FOMC meetings.  Between now and election day there are four.  The first one as everyone know is June 20th, followed by August 1st, September 13th and then October 24th.  Many pundits claim that if the Fed is going to act they may as well do so well before the election so as not to appear to be “influencing the election.”  I’m not so sure about that.  Maybe in times past, when the power structure was a bit more reserved and less blatant about their corruption and manipulations.  They don’t hide that stuff anymore.  The “elites” in America today are simply gangsters.  We have already been officially christened as a Banana Republic.  The criminal behavior that now governs our political and economic system is now all out in the open for anyone with eyes to see.  They don’t care.

What I want to make clear in this piece is that just because I think a massive wave of liquidity is coming from the Central Planners, that doesn’t mean I expect it to happen in June.  There is no doubt that The Bernank is now doubting all of his academic theories of the past and is scared out of his mind to “do more.”  He is afraid it won’t work, he is afraid of the demand for physical gold and silver that it might spark, and he is also afraid to use the bullets now with asset prices where they are.  He wants to save it for when he needs it and he knows he will need it.

So the game continues.  Talk up the economy, talk down printing and pray.  The beige book and today’s testimony represented textbook Fed strategy in 2012.  Strategy that I have discussed many, many times in months prior.  They can talk all they want and give all the reassurances they want but talk from monetary magicians does not alter the reality on the ground.  As I have stated repeatedly in the last two weeks, I think the Fed is more behind the curve than at any point since 2008.  Back then, The Bernank assured us that there was no housing bubble and that subprime was contained.  Big bank CEOs were pimped out on CNBS to claim their solvency weeks before going under or needing a bailout.  The only strategy left was to lie.  Despite the fact that it didn’t work then doesn’t stop them from trying now.  Why?  They are insane.

Barring a market catastrophe in the next two weeks I do not expect the Fed to act at the June meeting.  With rates where they are and stocks where they are there is little upside to action; however, this lack of action is precisely what will set the stage for the massive action that must come later.  One of the main things that has allowed the Fed to kick the can down the road as long as it has is the fact that ever since 2008 they have acted aggressively on the first hint of weakness.  While the beige book pointed to relatively rosy conditions for the U.S. economy, I think that is because they were looking at data from early April through late May together.  If you look at the U.S. economic statistics, the data didn’t start turning for the worse in a serious manner until late in the second half of the month of May.  The Fed knows this but they are purposefully misleading the market.  In reading a Bloomberg article about the beige book the following quote stood out to me:  “’The Beige Book is clearly at odds with the hard data we’ve been seeing,’ said Millan Mulraine, senior U.S. strategist at TD Securities in New York. ‘We’ve seen a dramatic slowdown in economic growth momentum that you’d think would be reflected in a few, if not the majority, of districts.’”  Move along folks…nothing to see here.

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Saudis Pump All Out as the Global Economy Crumbles

It is a mindless philosophy that assumes that one’s private beliefs have nothing to do with public office. Does it make sense to entrust those who are  immoral in private with the power to determine the nation’s moral issues and, indeed, its destiny? …. The duplicitous soul of a leader can only make a nation more sophisticated in evil.
– Dr. Ravi Zacharias

 A reasonable action on the part of the majority is very rare, while the evidence of mob stupidity and brutality is overwhelming. The majority in power make laws for their own financial benefit, disregarding the interests of the minority, and when the weak minority, by adding to its numbers, becomes powerful, it, in turn, does the same thing; thus, by appealing to power to settle their conflicting interests, the conflict would go on forever.
– Charles T. Sprading

A little government and a little luck are necessary in life, but only a fool trusts either of them.
– P. J. O’Rourke

Saudis Pump All Out as the Global Economy Crumbles
In an election year where The Bernank is afraid to print more money despite his understanding that he must in order to keep the ponzi going (if only for a few more months), Obama has been given a gift by the Saudis in the form of purposefully flooding the world with oil.  Specifically, the Saudis are now pumping 9.9 million b/d, which is the highest level in at least the last 20 years (see chart below).  This increase in output has come at the exact same time that much of Europe has fallen into depression and as China and many of the BRICS have collapsed from higher than average growth rates to what I believe is barely positive real GDP growth (if we actually had reliable data).  This oversupply of crude has led to a severe correction.

I think the realization of the situation in Europe and the emerging markets accounted for the initial 10% or so drop in Brent crude from $125/b to $110/b.  The most recent 10% plunge to just below $100/b as of today can, in my opinion, be explained by the sudden understanding that the U.S. is not the Goliath the presstitutes in the mainstream media would have you believe.  Rather, as I mentioned in my email from last week, I believe that May represented the tipping point into contraction for the domestic economy.  A process that could unfold a lot faster than most anticipate.

Saudi Crude Oil Production 1982-Present

As you can see from the above chart, Saudi oil production is at its highs.  The fact that they continue to flood the market is no accident.  It is a favor to Barack Obama and the United States generally.  The idea was that if oil supply flooded the market and knocked down the most important commodity in the world, this would serve as a hidden “stimulus” in an election year.  It would represent something of a tax break to the American consumer and thus make things look better into November.  That was the plan.  Unfortunately for them, it is not working.

The reason it is not working is because we do not have a healthy global economy.  We have a giant house of cards built on debt and derivatives, which market forces desperately wants to blow away so that the system can reset.  The ponzi has gotten so gigantic at this point that a little extra Saudi oil isn’t going to do the trick.  As I have been saying for a while and made clear last week, when the forces of nature start to roll over again there will be no stopping the train wreck.  It will be so catastrophic and overwhelming that asset prices will do things pretty much no money manager out there is anticipating at this point.  While The Bernank and his minions can go out in public and lie about the state of the economy and claim they do not need more QE, the only thing they are doing is setting the stage for a seismic price readjustment in assets classes globally.  It is a readjustment they will not be able to accept, and the global Central Planner response will have to be so massive just to keep things together it will send gold to at least $2,500/oz.

The other thing I would point out is look at where Saudi production was in the summer of 2008.  It was at a high of 9.6 million b/d right before the entire global financial system melted down.  Is history repeating itself in crude?  If so, what is the downside?  My sense is the downside is much, much higher than in 2008.  Back then Brent crude got to just below $40/b.  There are many reasons for this, but I think one of them relates to the fact that there was a commodity bubble going into the decline at that time.  Not so in 2012.  Furthermore, the marginal cost of oil has only been moving higher and higher as conventional supplies have peaked and the world is relying more on higher cost shale, deepwater and oil sands.  My guess is that even if the global economy goes into a depression like state, I do not think oil will sustain itself much below $70/b.  In fact, my guess would be somewhere in the $60s/b will be the low and that will only happen if the Central Planners play things too cute and do not act until this fall.

The last point I want to make is that commodities are way ahead of stocks in the U.S., and the sell-off in equities we have seen so far may have quite a bit more to go.  The dominoes this time are falling in reverse to what happened in 2008.  Back then, it was the U.S. that cratered first and later commodities joined the show.  There were dreams of BRIC decoupling in the air.  This time Europe and the BRICS went first and there are new dreams of decoupling – this time centered upon the U.S. economy.  This dream, like the prior one, will turn out to be a nightmare.  Brent crude has already corrected by about 24% from the highs.  The Dow Jones Industrial Average is only down 8% from the highs.  24% would put it at about 10,000.  Decoupling didn’t exist in 2008 and it doesn’t exist now.  Plan accordingly.

Peace and wisdom,

Mike

The Big Print is Coming

We are discreet sheep; we wait to see how the drove is going, and then go with the drove. We have two opinions: one private, which we are afraid to express; and another one – the one we use – which we force ourselves to wear to please Mrs. Grundy, until habit makes us comfortable in it, and the custom of defending it presently makes us love it, adore it, and forget how pitifully we came by it. Look at it in politics.
– Mark Twain

Humanity’s most valuable assets have been the non-conformists.  Were it not for the non-conformists, he who refuses to be satisfied to go along with the continuance of things as they are, and insists upon attempting to find new ways of bettering things, the world would have known little progress, indeed.
– Josiah William Gitt

The media I’ve had a lot to do with is lazy.  We fed them and they ate it every day.
– Michael Deaver (Former top aide to President Reagan)


Has The Fed Waited Too Long?
Those that know me understand clear as crystal that I don’t approve of massive money printing.  I think it is theft, plain and simple, and represents an egregiously deceptive manner of transferring wealth from the poor to the wealthy and from the productive to parasitic financial oligarchs.  That being said, the world we live in is being led by a bunch of crooked banksters and the Central Planners that do their bidding.  At the top of the Central Planning global ponzi pyramid, is our very own Federal Reserve, headed by master Keynesian magician, the Wizard of Eccles, Ben Bernanke.  For the vast majority of 2012, the Federal Reserve has been playing a very, very dangerous game.  This game has been to pretend that they will not be printing any more money in an attempt to get commodity prices down as low as possible before they proceed with the inevitable.  While they have done this on a smaller scale many times in the past, this particular game of chicken has in my opinion gone dangerously wrong.  You see, ever since the 2008 debacle the Fed has been quite aggressive and more or less “ahead of the curve” when it has come to feeding new liquidity into the system…until now.

All of the prior programs were ready to go at the first hint of economic weakness.  Even if they weren’t launched right away, the intention to print was made clear and this stabilized the system in the short-term.  Not this time.  This time the Fed realized that their models weren’t working.  Employment continued to be weak as inflation picked up.  Everyone was starting to complain about gasoline and the public was increasingly making the connection between Central Banking/fiat money and the rise in their cost of living.  Occupy Wall Street emerged on the scene.  All of these things put Bernanke and all his other vampire brethren on the defensive, and indeed in a box.  They increasingly had to rely on less effective, more opaque means of providing liquidity.  The Fed swaps to Europe was one example.  The European LTRO was another.  All of this has been done and all of it has now proven to be a failure.  The periphery of Europe is in mired in an all out Depression and many of the BRIC countries are much closer to being in a collapse than many want to admit.  That said, there is still this consensus that the U.S. is experiencing decent growth that will continue and perhaps accelerate into 2H12.  Not only do I not agree with this, I think there is a good chance the U.S. is now experiencing negative growth.  I think May represents the first month of real domestic weakness.

Stocks are Collapsing on Bad News                        
What I have noticed this quarter more than in any other in recent memory is that names are vaporizing on even the hint of bad news.  Let me show you some frightening examples.

Fossil  

Dell

Cisco Systems

JC Penney

If the market was confident that this was just a blip I do not think these stocks would have responded this way and then barely rebounded.  Similarly, there are many names that have put up strong results, only to have sold off on the news.  HD, COH and RL come to mind.  To me this is evidence of the market sniffing out economic weakness ahead, and more importantly a Fed that is behind the curve for the first time since 2008.

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