Sunday, January 6, 2013

MATH...AIN'T IT A BITCH

I've pulled all the levers I can.....it just won't "fly"
Most of you are quite familiar with my constant reference to Nature's Law, which applies to all aspects of our lives. You may think these laws can be broken but they cannot. The speed of light, gravity, water's boiling point, to mention a few........and math. You know, that little word, math. Nature's law....2 plus 2 equals 4. It is a constant that is not variable just water and oil. You don't mix the two.......its nature's law. Violating these laws have consequences. Last week an almost laughable FOMC discussion supposedly contemplating stopping QE this year was attributed to gold and silver tanking. Fortunately for the Fed most Americans either cannot do simple math or just are not interested in doing a little checking into the debt debacle their country faces. Keeping it simple the average interest rates over multiple decades for the 10YTB should be just over 5%. Over the next few years we will add TRILLIONS more to our debt total, but lets assume the Fed was suddenly able to return the CURRENT 18 Trillion debt to "normal" interest rates of a little over 5%. At only the CURRENT debt the INTEREST ALONE we would pay yearly on that debt would be HALF of our ENTIRE Yearly Budget. That is ONLY if it occurred NOW. Imagine what happens to the economy and GDP if we start paying Mortgages at 7% and car loans are at 10% etc. You have GDP in this weak economy collapsing......you have instant Depression. So in effect the supporters of Bernanke's strategy do have a point. What no one wants to admit however is the effect that a rise in interests on the long bond would have on the 1.5 Quadrillion derivatives market? What about the carrying costs of local and state debt???? INSTANT bankruptcy. So you see, this is all a cruel ruse that is designed to delude the investing community there is an exit strategy from Quantitative Easing....QE to infinity...... There is no exit. At least there is no exit without major default and risks to the very banking system itself. Either way will involve tremendous pain. The intent of the FOMC release was also to temper the rise of commodities and PMs. PMs are a barometer of the health of the currency and they want the CONfidence in the dollar to hold for as long as possible. The dollar is under attack as are many developed nations currencies from currency swap arrangements from developing nations. Our money printing policy will begin to have a strangling effect on the middle class as the rise in prices of essentials begins to stifle the family budgets to the point that NO discretionary spending is possible......just survival spending. These attempts to stifle PMs will continue but their desired effects are lessening. At some point the market forces (nature) will prevail. I do not share Jim Willies profoundly bearish outlook on PM mining stocks but I do give him the respect of noting they could certainly underperform for longer than many of us can tolerate. I have no other "favorite" places to park paper and I am not levered..... so I'll stay invested. If you DON'T have physical metal then again GOOD LUCK!!....Willie, Red and I all agree on that one.... gl

40 comments:

  1. It's going to be nuts when the dollar blows up. I try to envision what things will be like for so many people I know who are completely unprepared. I'm not sure how I will handle it.

    Although I wonder what happens to personal debt (mortgages, credit cards, auto loans) when this goes down?

    Do those in debt get a 'get out jail free' card?

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  2. short of hyperinflation they will maintain most of that debt. Its owned by the bankers

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  3. Envision the 70's on steroid's......

    Stack, shed debt and be nimble....

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    1. YUP........and food,water, energy preps

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    2. To Kli's points..... Envision the week or two after Sandy depending on where you were but much longer!

      Sweet Dreams!

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    3. hope for the best but..........

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  4. Let's see gold is red.......my prediction is it closes up 7 bucks today

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  5. http://theeconomiccollapseblog.com/archives/large-cities-all-over-america-are-degenerating-into-gang-infested-war-zones/large-cities-all-over-america-are-degenerating-into-gang-infested-war-zones

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    1. Just Google "Detroit"...... Nuff Said

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  6. Sorry about the Gloom, Doom and Sarcasm last night, guess I was in a bad mood but it’s really not hard to put 2 & 2 together in this regard as to what will happen with 70’s type interest rates plus having lived through it as a teen in a family that had little makes it somewhat easier for me in any event and not looking forward to that type of life style again!

    Just for a moment think about all those variable rate mortgages and HELOC’s still out there and most stacked interest only for the first ten years and for that matter all the variable rate credit cards maxed out. What do you think life for those folks is going to be……. Even if they can swing the increased payments, the Village or Town they reside in will push them over the edge as they impose higher tax increases as their finances are no better off. How about all those folks with Student Loans…. Think about all those that live on static incomes, what’s life going to be like for them even if they have no debt? We know what’s happening to those that retired and planned to live on interest income… How’s four dollar gas doing for ya and $ 4.25 cent home heating oil? What will five dollar gas be like or $ 6 dollar home heating oil? Food, forget about it, every one that shops knows what’s going on now but what if it goes up two or three fold from here? What’s going to happen when all those on UE & Food stamps get the rug pulled out from them, O’boy now you know why the big push for Gun Control…..

    If we are a “Consumer” economy how the hell will there be anything $$$$$ left to “Consume” anything other than essentials and here to that will be a stretch for many, never mind spending for anything discretionary… Lot’s more unemployment to come in that regard as well….

    Gotta stay nimble and look to your strengths and family, during the 70’s my Dad at one point worked three jobs and was really good at hustling and exchanging favors for favors, didn’t have much creature comforts growing up, matter fact none at all but we got by and we made it. My Grandfathers stories living thru the depression still resonate with me especially the one where he and his brothers caught and cooked pigeons so they had something to eat and they all made it. Bizarre as it sounds today; it can give one an idea of the resourcefulness one possesses when needed. I guess as scary as the future can be given our current situation and depending how far you let your mind wander, it doesn’t have to be if you take the time to set yourself up to the best of your ability…. Depending on your means will determine just how much insurance you can afford in a sense to protect the way you want to live but in reality as a being you really need just a few simple things to survive all the rest is nothing but creature comforts….

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    1. How can there be 70's type interest rates with government debt as big as it is? Wouldn't there be an immediate collapse?

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    2. Exactly, thats why their streatching it out for as long as they can and cant stop printing. Debasement is pushing inflation on essentials now not as bad as the 70's but its getting close. Very few asset classes are appreciating, they are manipulating everything..... Sooner or later interest rates must go up, especially once surrounding nations isolate us from a trading perspective and considering we are screwing them hard with our behavior with the dollar, so as is always the case with Karma what goes around comes around.....

      My point with Sandy was in reference to shortages and all the folks relying on Guberment for there needs that they didn't consider on their own. Not that I had all my chit together but how many folks do you think learned anything from that experience? Not many....

      As for the Gun's all I can say is it is amazing how efficient they are playing our emotions to meet their own ends regardless of what your position may be the coordination and disinformation is again truly amazing...... Just the fact that people are willing to allow the 2nd amendment to be chit canned is mind boggling to me but shouldn't since most never even read the Constitution pr the Bill of Rights.... Stupid is as Stupid does!

      Guess I'm still in a foul mood........

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    3. Actually this cheered me up some, can't tell you the fun it was discussing the "Fiscal Cliff" stuff over the Holiday's......

      http://m.washingtontimes.com/news/2013/jan/6/obama-supporters-shocked-angry-new-tax-increases/

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    4. "Sooner or later interest rates must go up..."

      Why? Can't the Fed just buy more?

      If rates do go up as you and many others state, it won't last very long before the USD collapses.

      Months?

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    5. They are and for how much longer is above me, Kli would be a better person to ask but what is going on cant proceed indefinitely and considering where interest rates are now there is only one direction they can go from here once they decide to slow the presses, if they stopped them well thats something entirely different.


      http://www.secretsofthefed.com/central-banks-risk-bond-market-crash/


      http://www.zerohedge.com/news/ron-paul-country-should-panic-over-feds-decision

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  7. Flipped a coin and bought HL instead of SVM this morning. Hoping that Cup & Handle plays out nicely ;)

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  8. Good post Tom. I think it is healthy to vent from time to time.

    This Gun Control debate is going to be big. More divide & conquer I'm afraid.

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    1. No kidding I've gotten into some arguments with people over this lately. Surprisingly with people I thought would agree with me but this topic isn't as cut and dry as we'd maybe like to think.

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  9. Remember Doc's divide and conquer comment.....it is the age old tool that is used to control the game. They will use it in this gun control issue also. The more violent the reaction to gun control the more it plays into their hand.....its the violent reaction they want.

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  10. interesting gold at lows but 7 miners now green.....accumulation continues VERY quietly

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  11. put up another BRD chart just now with potential trend line reclaimed

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  12. speaking of trading on a day I'm not trading ...i remember buying SKF and SRS in the early days of 2007....they had had a nice little run when I began buying them and I bought into the pullback....It was a long stretch that saw the paper losses mount over a period of several months.......eventually in 08 they turned around and become profitable as i traded out of my positions then traded it throughout most of 08......by October of 08 it was obvious the etf's were rigged to rob the shorts so I stopped investing in SKF but was burned in SRS in 09...point is .....leveraged etfs are only short term trading vehicles and any paper is subject to the casino. Also you have to have patience IF you are playing paper games.....IF you are convinced that your decision remains intact. gl

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    1. That's when I started on the Yahoo boards haha.. man those days were fun. Best trade of my life is still buying SKF $85 puts for a buck each that had 6 months to expire when SKF was around $200. Few big market rally days and I made a killing. Those leveraged etfs collapse FAST when they hit the triple digit range.

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  13. Hearing lots of complaining now about the tax increases...some of our property taxes tripled over the last 2 yrs. Bottom line...peeps remain clueless and continue to think they have control. Yes, can't believe we're saying '08 was the "good ole days"; I knew absolutely nothing and actually made some money (could be a lesson there).

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  14. and you think the banks aren't part of this dance....

    http://www.ironicsurrealism.com/2013/01/04/outrage-bank-of-america-holds-licensed-american-gun-manufacturers-deposits-we-believe-you-should-not-be-selling-guns-on-the-internet/

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  15. Thanks to Doc and everyone for the Julian Phillips comments...having to type on the library computers invites many errors. One of these days, my new one will come! In the meantime, it's been a bitch so to speak.

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  16. Alex Jones on Piers Morgan tonight....ooooboy...that should be good....Morgan is a shark thats why he is there......IMO Alex could get blistered if he falls for Morgan's baiting

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  17. LOL, not to add to the divide and conquer meme, but the comments in this regarding the "unexpected" taxe are hilarious:

    http://fromthetrenchesworldreport.com/curl-obama-supporters-shocked-angry-at-new-tax-increases/30414/

    jd.

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    1. I cannot believe CNBS didn't emphasize this....they didn't have it on their "Rise Above" buttons that all the fat cats that came on their BULLSHIT propaganda show would wear.......watta game

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    2. whats your bet jd on Morgan making Alex look like a lunatic.......sadly I say the Brit beats him up on his home turf

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  18. I'm afraid of that also and am surprised he would fly to NY to do the interview with them being in total control. I would have done the skype thing myself - he actually sounded a little nervous when he announced it on youtube, lol. He's a wildman anyway and am a little concerned it will backfire. He doesn't handle negative and stupid feedback very gracefully - much like myself.

    On the other hand, if they give him enough rein to delve into the issue, it might turn out ok. Personally, although I'm sure he's doing it for the exposure and partly because he's been called out, I wouldn't have done it on their terms. I fear he has much more to lose than gain with this setup. jd.

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    1. I think you will see morgan read some quotes out of context from Jone's previous shows that rattle his cage....once he has Jone's off balance he'll kick him right in the nuts with a real nasty quote that makes him sound completely nuts.....oh well if jones keeps his cool and just stays on message but this is NOT jones format.....so GOOD LUCK

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  19. Silver held its retest, miners continued to slide for the most part. Same ol same ol ;)

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    1. I have four miners that finished green including strong price performance in PAL and AUMN...volume low however...rest of miners not crushed but in red

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    2. SLW the bloodiest thing I see, also one of the more popular ones. PPP looks nice! SVM didn't do too bad compared to others.

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    3. no real movement yet which is pure accumulation.....I have a big physical buy slated in mid March or April so I hope the big up move holds off.........go Cabal...I want my metal cheap

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    4. Random question but whatever happend to Fly from the SKF boards? Didn't you and him used to talk a lot on them? I remember he was one of the few that nailed the turn in March of 09.

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    5. This Fly?

      http://ibankcoin.com/

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    6. Long story but Fly had some heart problems and dropped out of the SKF drama...both of us were having problems with posters

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  20. Goooooo Alex......get'em..............hehehehh the best show in town tonight

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