McAlavany Weekly Commentary, Dec 30, 2009

2009: The Year in Review Part 1

December 30th, 2009

Below is a list of the guests from the current show.
To listen to their entire interview, click on the link beside their name.

• An Interview With Marc Faber » Listen
• An Interview With Alan Abelson: Barrons Market Commentator for 57 Years » Listen
• Meltdown: An Interview With Thomas Woods Jr. » Listen
• An Interview with John Embry » Listen
• Hernando de Soto: Second Interview » Listen
• An Interview with Ambrose Evans-Pritchard » Listen
• An Interview With George Friedman of Stratfor Intelligence Service » Listen
• Bert Dohmen: Deflation Today, Hyperinflation Tomorrow » Listen

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Top 1 Percent Control 42 Percent of Financial Wealth in the U.S.

Many Americans are not buying the recent stock market rally. This is being reflected in multiple polls showing negative attitudes towards the economy and Wall Street. Wall Street is so disconnected from the average American that they fail to see the 27 million unemployed and underemployed Americans that now have a harder time believing the gospel of financial engineering prosperity. Americans have a reason to be dubious regarding the recovery because jobs are the main push for most Americans. A recent study shows that over 70 percent of Americans derive their monthly income from an actual W-2 job. In other words, working is the prime mover and source of their income. Yet the financial elite have very little understanding of this concept. Why? 42 percent of financial wealth is controlled by the top 1 percent. We would need to go back to the Great Depression to see such lopsided data.

Many Americans are still struggling at the depths of this recession. We have 37 million Americans on food stamps and many wait until midnight of the last day of the month so checks can clear to buy food at Wal-Mart. Do you think these people are starring at the stock market? The overall data is much worse: (more)

Money Managers: U.S. Debt Is Giant Ponzi Scheme

Eric Sprott and David Franklin, of Sprott Asset Management, say that government debt issuance is turning into an investment scam.

“Our concern is that this is all starting to resemble one giant Ponzi scheme,” the two write in a report to customers.

They note that the Federal Reserve bought $286 billion, or 15 percent, of the new Treasurys issued in fiscal 2009.

“We are now in a situation . . . where the Fed is printing dollars to buy Treasurys as a means of faking the Treasury’s ability to attract outside capital,” Sprott and Franklin write.

Meanwhile, buyers the Fed calls “The Household Sector” purchased $528 billion of Treasurys in the first three quarters of fiscal 2009. (more)

Chinese firm says won't pay Goldman on options losses

Goldman Sachs (GS.N) was one of the foreign banks, along with Citigroup (C.N), Merrill Lynch and Morgan Stanley (MS.N), blamed by the state assets watchdog for providing "extremely complicated" and difficult to understand derivatives products. [ID:nPEK242617]

Shenzhen Nanshan Power (000037.SZ) (200037.SZ) said in a statement that it received several notices from J. Aron & Company, a trading subsidiary of Goldman Sachs (GS.N), for at least $79.96 million as compensation for terminating oil option contracts.

"We will not accept the demand by J. Aron for all the losses and related interests," said Nanshan, in line with the stance it took last December. (more)

BNN Squeeze Play- Long Term Bear Market?

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HuffPost says, "Move your money"

The folks at The Huffington Post have come up with a simple, novel idea that might help right some of the wrongs of the last year, a year that has seen Wall Street faring much better than Main Street since the economy hit bottom over the summer - move your money from a big bank to a small community bank. The video below was produced to help make their point.

Having just watched It's a Wonderful Life again last week, this message rings true - today, the big banks are a big part of our nation's problems and you can't count on Congress to fix this on their own. Go to www.moveyourmoney.info to learn more.

Decade’s Worst Funds Never Recovered From Technology-Stock Bust

U.S. stock mutual funds with the biggest losses in the past 10 years, a list topped by Fidelity Growth Strategies and Vanguard U.S. Growth, were crushed by the market sell-off at the start of the decade and never recovered.

The Fidelity fund fell 67 percent and Vanguard’s lost 50 percent, according to data from Morningstar Inc. The 10 worst- performing diversified funds that still manage at least $1 billion tumbled an average of 43 percent in the decade through Dec. 28, about five times the decline of the Standard & Poor’s 500 Index, a benchmark for the biggest U.S. stocks.

The group’s performance underscores the lasting damage from the March 2000 to October 2002 bear market that followed the collapse of Internet stocks. Fidelity Growth Strategies, which oversees $1.93 billion, hadn’t recouped the 86 percent loss incurred during the technology bust when stocks started falling again in October 2007 amid the onset of the housing crisis. (more)

Peter Schiff On Liberty Fannie & Freddie, Fed and Housing

An Introspective Look at the Future of America

As we close out 2009 and look forward into 2010 and beyond, this has been a year of near financial catastrophe and monumental change, none of which benefited America or ordinary Americans. Late in 2008 and throughout 2009, events have happened in the US which would have been labeled unfathomable just a few short years ago, and yet already these monumental changes are expected to be filed into the memory hole and Americans are expected to believe nothing has changed.

As we exit the year, we are told the US is a laissez-faire free market economy and yet the US government is now the largest owner of housing in the US as well as the owner of last resort for some of the largest and completely insolvent US corporations. The Federal Reserve, a privately and anonymously owned and controlled corporation chartered with issuing the nations currency, were given the green light by themselves to transfer to themselves and their shareholders the people's wealth in the form of their future labor. The FED balance sheet has ballooned to become a junk bond warehouse as they overtly and covertly buy their own debt, immune from any sort of oversight, regulation or auditing and operating above the law. Along with that, increasingly coercive brute force measures are now routinely necessary to manage and manipulate so called "free market" asset prices which are cheerled by so called "financial news media" whose board members and management are all the same people who transferred the people's wealth to themselves. The corporate media party line idea of a "free market US economy" now seems like a distant memory and it all feels like systemic fraud, corruption, malfeasance and organized crime at the very highest levels. (more)

Jay Taylor: Turning Hard Times Into Good Times

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Japan: Slowly Going Broke

We reported that the US government would need to roll over $2.5 trillion worth of debt next year. We probably erred. The number was right, but it was meant to be over the next two years. During the next two years also, worldwide, banks need to roll over $7 trillion. Whether it is over one year or two years, we’re talking big money.

Most people who bother to think about it are coming to the conclusion that this is very inflationary…and very bullish for gold. They think the Fed will need to “monetize the debt” directly, or indirectly. One way or another, they say, the central bank will have to increase the volume of money so that the government can finance its deficits.

Paul Krugman, Nobel Prize winner in economics, suggested that the Fed add another $2 trillion to the nation’s monetary base, partly to accommodate federal borrowing…and, he believes, to stimulate employment. (more)

Treasuries Set for Worst Year Since 1978 as U.S. Steps Up Sales

Treasuries headed for the worst year since at least 1978, as the U.S. stepped up debt sales to help spur growth in an economy recovering from its deepest recession in six decades.

U.S. bonds were little changed on the day before today’s sale of $32 billion in seven-year debt, the last of three auctions this week totaling $118 billion. The Treasury sold a record-tying $42 billion of five-year securities yesterday and $44 billion in two-year notes on Dec. 28. U.S. government securities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, the worst annual performance since at least 1978, when Merrill began collecting the data.

“This is the largest expansion of fiscal deficit in a single year other than in wartime and depression,” prompting the large loss in Treasuries, said Christian Carrillo, a senior interest-rate strategist at Societe Generale SA in Tokyo. “There is genuine expectation of economic recovery and eventual monetary tightening priced in. It could have been a lot worse.” (more)

Investors Swamp Exchange Funds Bullish on Dollar

Strong demand for instruments that take bullish positions on the dollar prompted one such exchange-traded fund to be halted after it recently ran out of shares.

DB Commodity Services, which offers the U.S. Dollar Index Bullish Fund, said in a prepared statement that it had asked the Securities and Exchange Commission for permission to create 240 million additional shares of UUP in order "to manage exceptional investor demand."

The fund faced a similar situation in November when trading of the fund was halted as it filed to create 100 million new shares.

"With UUP, we've just seen such a flood of assets that this is now the second time this happened in two months," Bradley Kay, an ETF analyst at Morningstar told The Wall Street Journal. (more)

How China Might Buy More Gold Than America Owns

China has a long way to go before coming anywhere near America's gold reserves.

Yet apparently it's on their to-do list and a must, at least according to the country's China Gold Association.

Commodity Online: In 1981, China had 395 tonnes of gold holdings; it increased to 500.8 tonnes in 2001, and 600 tonnes in 2002. In April 2009, China officially announced that it has increased its gold holdings to 1054 tonnes. Since then, Chinese officials and People’s Bank of China have been meticulously chalking out plans to build up gold reserves in the next one decade.

According to Zhang of the China Gold Association (CGA), India’s decision to buy IMF gold has been the real boost for China’s recent spirited moves to step up gold reserves.

“In view of the declining US dollar value, it is paramount that China steps up gold reserves. How to do this is the only question that China is debating these days. The possible steps include opening up new gold mines, aggressively going for gold mining, buying gold from the open market etc. All said and done, it is imperative that China needs to buy more gold,” Zhang points out.

Free Republic: “We recommend that China’s gold reserve should reach 6000 tons in 3~5 years, and probably reach as high as 10,000 tons in 8~10 years,” according to Ji Xiaonan on November 28 at the third Chinese Industry Stability Forum. He is the head of the supervisory committee at the state-owned Assets Supervision and Administration Commission.

Why we must nationalize the Federal Reserve

Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions — including the privately held Federal Reserve. Banks create the principal but not the interest to service their loans. To obtain the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures. (more)

Fannie / Freddie - What Does Treasury Know?

On Christmas Eve one would think you could have a nice evening with your family. Little did I know what Timmy Geithner had up his sleeve:

The two companies, the largest sources of mortgage financing in the U.S., are currently under government conservatorship and have caps of $200 billion each on backstop capital from the Treasury. Under the new agreement announced today, these limits can rise as needed to cover net worth losses through 2012.

I see. But I thought housing was getting better? That's what I heard on CNBS Tuesday when existing home sales came in "above expectations."

But then Wednesday came around and, well, new homes? They're just not selling. (more)

Peter Schiff On The Glenn Beck Show: Will Gov't Get Out Of The Way In 2010?

Tanker Glut Signals 25% Drop on 26-Mile Line of Ships

A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That’s below what Frontline Ltd., the biggest operator of the ships, says it needs to break even.

Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet. (more)

Even as the US economy recovers, a decade of joblessness and flat wages could lie ahead

The decade ahead could be a brutal one for America's unemployed - and for people with jobs hoping for pay raises.

At best, it could take until the middle of the decade for the nation to generate enough jobs to drive down the unemployment rate to a normal 5 or 6 per cent and keep it there. At worst, that won't happen until much later - perhaps not until the next decade.

The deepest and most enduring recession since the 1930s has battered America's work force.

The unemployed number 15.4 million. The jobless rate is 10 per cent. More than 7 million jobs have vanished. People out of work at least six months number a record 5.9 million. And household income, adjusted for inflation, has shrunk in the past decade. (more)

Home equity lines have dried up across U.S.

Borrowing on the home for quick cash is a lot harder than it used to be in the United States, and it's causing headaches for homeowners, banks and the economy.

During the housing boom, millions of people borrowed against the value of their homes to remodel kitchens, finish basements, pay off credit cards, buy TVs or cars, and finance educations. Banks encouraged the borrowing, touting in ads how easy it is to unlock the cash in their homes to "live richly" and "seize your someday."

Now, the days of tapping your house for easy money have gone the way of soaring home prices. A quarter of all homeowners are ineligible for home equity loans because they owe more on their mortgage than what the house is worth. Those who have equity in their homes are finding banks far more stingy. Many with home-equity loans are seeing their credit limits reduced dramatically. (more)

Barclays: Central Banks Will End Dollar Rally

The dollar’s recent rebound will peter out by mid-2010, as foreign central banks diversify to other currencies and the Federal Reserve reverses stimulus slowly, according to Barclays bank.

The Fed will raise interest rates at a slower pace than the market expects, Barclays analysts say.

“We see the dollar strengthening in the first six to nine months of 2010 when the focus is on liquidity withdrawal and tightening of rates,” Steven Englander, chief U.S. currency strategist for Barclays, told Bloomberg.

“Once the market gets past this initial fear of tightening, the reality will be that the Fed isn’t going to be tightening very fast, and we’ll see dollar selling again.” (more)

Morgan: Treasury Yields, Mortgage Rates Will Soar

Morgan Stanley predicts 10-year Treasury bond yields will jump more than 40 percent next year, while 30-year fixed mortgages may surge more than 50 percent.

The exploding budget deficit will do the damage, David Greenlaw, Morgan Stanley’s chief fixed income economist, told Bloomberg.

“When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after yourself,” he said.

“Market signals will ultimately spur some policy action, but I’m not naive enough to think it will be a very pleasant environment.”

The firm predicts the 10-year Treasury yield will reach 5.5 percent next year from about 3.85 percent now. (more)

Oil Price Pattern

“If 2010 follows the pattern of the past 15 years,” notes Frank Holmes of U.S. Global Investors, “we are approaching the start of a seasonal climb in the price of crude oil that could present a good investment opportunity in energy-related stocks…

“As the 15-year chart above illustrates, much of the recent drop in the price of oil can be explained by commodity price weakness that typically occurs from October through December, and thus does not represent a cyclical downturn.

“These seasonal factors include a reduction in driving during the fall and more moderate temperatures between the summer cooling and winter heating seasons. During the 15-year period, January has typically been the month in which the seasonal oil price trend starts back up again as markets prepare for the summer driving season.

“It is interesting to note that, while crude oil prices are usually soft during this time of year, energy stocks begin to strengthen in December, offering nimble investors an opportunity to capitalize on favorable seasonal strength to come.”

NIB to stop handling cash

One of the country's larger banks has told to its customers that it is to stop handling cash in its branches.

National Irish Bank says it is moving to a Scandinavian model of "cashless banking" - with an increased reliance on ATMs and debit cards.

NIB has told customers that its branches will no longer handle cash withdrawals or lodgements, nightsafe lodgements or foreign exchange cash.

They are instead urging customers to use ATMs or get cash back on their laser cards if they need notes. Branches will continue to accept cheques and postal orders.

The bank says the idea of "cashless banking" will be rolled out over the next 18 months, and that the model is that used by its Danish parent company.

NIB says Irish dependence on cash is amongst the highest in Europe.

Gerald Celente top 10 Predictions for 2010!

ShadowStats.com founder John Williams explains the risk of hyperinflation. Worst-case scenario? Rioting in the streets and devolution to a bartering s

Do you believe everything the government tells you? Economist and statistician John Williams sure doesn't. Williams, who has consulted for individuals and Fortune 500 companies, now uncovers the truth behind the U.S. government's economic numbers on his Web site at ShadowStats.com. Williams says, over the last several decades, the feds have been infusing their data with optimistic biases to make the economy seem far rosier than it really is. His site reruns the numbers using the original methodology. What he found was not good.

Maymin: So we are technically bankrupt?

Williams: Yes, and when countries are in that state, what they usually do is rev up the printing presses and print the money they need to meet their obligations. And that creates inflation, hyperinflation, and makes the currency worthless. (more)

Goldman Sachs and Others Investigated for Betting Against Securities They Created

Betting against their own securities has prompted numerous investigations of Goldman Sachs and other Wall Street institutions. Prior to the financial collapse, Goldman and others figured out a way to package risky securities, such as subprime mortgages, and sell them to investors who were told they were buying sound investments. Little did the investors know that the firms selling the synthetic collateralized debt obligations (or CDOs) turned around and bet that the CDOs would fail—costing pension funds and insurance companies billions of dollars.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.” (more)

Fannie and Freddie to Get Unlimited Aid…and Huge Executive Bonuses

The Obama administration made like Santa Claus just before the Christmas holiday, enlarging the potential bailout of mortgage giants Fannie Mae and Freddie Mac—and approving Wall Street-like compensation packages for their leaders. On Thursday, President Barack Obama unilaterally raised the $400 billion cap on emergency aid to the companies, which were heavily criticized for helping bring about the housing crisis.

Prior to the announcement by the White House, the Federal Housing Finance Agency approved $42 million in salaries and bonuses to the top 12 executives at Fannie Mae and Freddie Mac. Fannie Mae chief executive Michael J. Williams and Freddie Mac chief executive Charles Haldeman each will receive a base salary of $900,000 and bonuses and incentive payments of up to $5 million for running companies that might have collapsed had it not been for the federal government’s rescue in 2008. (more)

S&P Retraces Half of its Losses

The S&P 500 closed at 1126 this week — 5 points over the 1121 level.

Why is that significant? Because 1121 marks the midpoint between the index’s 2007 peak of 1565 and its 2009 low of 676. If you prefer to use intra-day peak and trough numbers — 1576 and 666 — you still get 1121 as a midpoint. (Bloomberg has the 50% mark pegged as 1,120.84).

As the Barron’s Trader column points out:

“Enough traders watch this to turn it into a self-fulfilling prophecy: Failure at this key juncture foments doubt, but surmounting it will mean the stock market has recovered half of its bear-market losses, which might validate the recovery and beget more buying.”

A classic “If it goes up, we are going higher, if it goes down, we are going lower” type of analysis.

Renminbi set to replace US dollar for trade in Asia Pacific

The Chinese renminbi is taking on an increased role in the Asia-Pacific region, and is expected over time to replace traditionally dominant currencies such as the US dollar and the euro for certain transactions.

Chinese government policy changes have enabled Asian corporates to settle trades with their Chinese counterparts in renminbi. And increased intra-Asian trading volume may lead Beijing to also consider allowing other trade-related insurance and derivatives denominated in renminbi to be done offshore, according to bankers and regulators in Hong Kong

Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority (HKMA), said Beijing is studying the idea of introducing more renminbi-denominated investment products in Hong Kong, expanding on the authorities’ approval for renminbi-denominated bonds issued by mainland financial institutions being made available for Hong Kong investors. (more)

Is This A Good Time To Get Back Into Gold And Mining Stocks With Your Money?

Please imagine a private room at a posh downtown restaurant. The guest list is invitation only and limited to the wealthiest clients of Bank Edmond de Rothschild, which specializes in private banking and wealth management. Rothschild is legendary with a reputation that has made the name synonymous with banking for several centuries. The family-owned bank has been passed down through generations and kept its reputation and solvency despite political turmoil, wars, persecutions, revolutions and market upheavals. It has done so with what the Rothschilds like to call "instinctive caution."

Two leading in-house experts were flown in to meet with the clients at the posh restaurant to deliver a year's end economic report and a look at what's ahead.

The title of the talk was "Back to Growth, But Not Yet Back to Health." (more)

GEITHNER'S SECOND WAVE MAY BE A TSUNAMI

"We're not going to have.... a second wave of financial crisis..... We'll do what is necessary to prevent that.......and that is completely within our capacity to prevent."

The above statement was made by Treasury Secretary Timothy Geithner when interviewed on NPR's "All Things Considered" program in the last few days.

Apart from the Treasury Secretary's dismal record to date, there are three problems with his statement:

• The phraseology indicates that a second wave is coming and
• He does not spell out what he would do if the second wave did appear.
• Finally, if the Fed cannot spot bubbles forming in the economy, what chance does it have of spotting waves when its back is turned on the ocean? (more)
  

Technically Precious with Merv

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HUMOR- FREE Nobel Peace Prize

BNN: Gold Outlook- Rob McEwen, CEO, US Gold Corporation.

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Obamacare To Cost Middle Class Families $15,000 A Year

Families struggling in the midst of a deep recession who earn a combined total greater than $88,200 and don’t have their health care covered by their employer will be hit with a mandatory annual fee of about $15,000 according to the Congressional Budget Office’s analysis of the final Senate Obamacare bill.

As we highlighted yesterday, the health care bill would introduce a raft of new taxes that would inevitably lead to higher costs that would be passed on to the public. A Boston Globe analysis revealed that there were at least 19 new taxes contained in the legislation which is set to be passed on Christmas Eve. (more)

US home foreclosures top one million mark

The number of US homes in foreclosure topped the one million mark for the first time ever, according to figures released this week by federal agencies. The continued deepening of the housing crisis is being driven by the relentless economic squeeze on working people, confronted with declining wages and persistent and growing mass unemployment. (more)

Can shoplifting really be justified? Why violating civil law is not always immoral

The Church of England's Archdeacon of York Richard Seed has issued a statement on their website in response to the controversy surrounding comments made by priest Tim Jones suggesting people shoplift when in a desperate situation

The statement, dated December 22, read:

• Statement on shoplifting
• Fr Tim Jones, a vicar from York, has been in the media recently, advocating shoplifting if people are in desparate circumstances.
• The Ven. Richard Seed, Archdeacon of York said, "The Church of England does not advise anyone to shoplift, or break the law in any way. Fr Tim Jones is raising important issues about the difficulties people face when benefits are not forthcoming, but shoplifting is not the way to overcome these difficulties. There are many organisations and charities working with people in need, and the Citizens' Advice Bureau is a good first place to call." (more)
  

The stock market is feeling mellow, but the bond market is sensing inflation

As of early this morning, the yield curve -- the difference in yield between a 2-year Treasury note and a 10-year Treasury note -- sits at a record 285 basis points. Fork over your money to the gubmint for two years and you get a paltry 0.88%.

But 10 years? You get 3.73%. Yes, that’s paltry too. But it’s hard to ignore the gap being this wide. Bond buyers expect a substantially higher yield if they’re going to lend money to Uncle Sam for the next 10 years. That means they sense the value of the dollars they get back will be diminishing.

At least that’s what they sense right now. We hesitate to suggest the bond vigilantes are back; we’ve been down that road before. That said, there’s evidence the mortgage vigilantes are out in force. The spread between 10-year notes and 30-year mortgage rates is also widening, and also points to growing inflation expectations for 2010.

World Financial Report, Dec 24, 2009

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Trade of the Decade

As we approach the end of the decade, we take stock of our “Trade of the Decade.” You know it by heart, right? “Buy gold on dips, sell stocks on rallies.” Bloomberg News has now furnished pictorial evidence of this wisdom…
Gold comes out on top among all asset classes over the last 10 years. Stocks lost ground, even before inflation.
As Bloomberg put it: "A $100 investment in gold would now be more than $380 while the same sum in commodities would have grown to about $357, according to the Standard & Poor's GSCI Enhanced Total Return Index."

George Carlin - The American dream

McAlvany Weekly Commentary, Dec. 23, 2009

The Big Bond Bust Revisted

December 23rd, 2009

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Linda Bradford Raschke – 50 Time Tested Classic Stock Trading Rules

1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don’t take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.
11. Limit your losses – use stops!
12. Never cancel a stop loss order after you have placed it!
13. Place the stop at the time you make your trade.
14. Never get into the market because you are anxious because of waiting.
15. Avoid getting in or out of the market too often.
16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
18. Always discipline yourself by following a pre-determined set of rules.
19. Remember that a bear market will give back in one month what a bull market has taken three months to build.
20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
21. You must have a program, you must know your program, and you must follow your program.
22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
23. Split your profits right down the middle and never risk more than 50% of them again in the market.
24. The key to successful trading is knowing yourself and your stress point.
25. The difference between winners and losers isn’t so much native ability as it is discipline exercised in avoiding mistakes.
26. In trading as in fencing there are the quick and the dead.
27. Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
28. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
29. Accept failure as a step towards victory.
30. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don’t let ego and greed inhibit clear thinking and hard work.
31. One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door.
32. The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed.
33. It’s much easier to put on a trade than to take it off.
34. If a market doesn’t do what you think it should do, get out.
35. Beware of large positions that can control your emotions. Don’t be overly aggressive with the market. Treat it gently by allowing your equity to grow steadily rather than in bursts.
36. Never add to a losing position.
37. Beware of trying to pick tops or bottoms.
38. You must believe in yourself and your judgement if you expect to make a living at this game.
39. In a narrow market there is no sense in trying to anticipate what the next big movement is going to be – up or down.
40. A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss – that is what does the damage to the pocket book and to the soul.
41. Never volunteer advice and never brag of your winnings.
42. Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss.
43. Standing aside is a position.
44. It is better to be more interested in the market’s reaction to new information than in the piece of news itself.
45. If you don’t know who you are, the markets are an expensive place to find out.
46. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word – Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen.
47. Except in unusual circumstances, get in the habit of taking your profit too soon. Don’t torment yourself if a trade continues winning without you. Chances are it won’t continue long. If it does, console yourself by thinking of all the times when liquidating early reserved gains that you would have otherwise lost.
48. When the ship starts to sink, don’t pray – jump!
49. Lose your opinion – not your money.
50. Assimilate into your very bones a set of trading rules that works for you.

The decade in markets

This decade in markets has been turbulent to say the least. The markets have absorbed the technology boom ending, the effects of the September 11 attacks on the United States and the subsequent invasions of Afghanistan and Iraq. Markets recovered and were inflated by the boom times of high house prices and record corporate results only to be shocked by the credit crunch, sending indices around the world sharply lower and instilling fears of a second great depression into the hearts and portfolios of investors. The 2000s ended on a hopeful note that recovery had firmly taken hold and growth would continue.

click here for interactive chart

NIA Declares Silver Best Investment for Next Decade

We are less than three weeks away from entering the next decade. The most important thing you need to know entering 2010 is that silver is the single best investment for the next decade. In our opinion, investing into silver is the only sure way to tremendously increase your purchasing power over the next ten years.

Throughout world history, only ten times more silver has been mined than gold. If you go back about 1,000 years ago between the years 1000 and 1250, gold was worth ten times more than silver worldwide. From year 1250 to 1792, the gold to silver ratio slowly increased from 10 to 15 and the Coinage Act of 1792 officially defined a gold to silver ratio of 15. The ratio remained at 15 until forty-two years later when the ratio was increased in 1834 to 16, where it remained until silver was demonetized in 1873. (more)

Small-business bankruptcies rise 81% in California

The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing.

As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy.

"While bankruptcies are up, overall, small-business closures are up even more," Headd said. (more)

U.S. Commercial Property Falls to Lowest in 7 Years

Commercial property values in the U.S. declined in October to the lowest level in more than seven years as unemployment reduced demand for apartments, offices and retail space.

The Moody’s/REAL Commercial Property Price Indices fell 1.5 percent in October from September to the lowest since August 2002. Prices were down 36 percent from a year earlier and are 44 percent below the peak in October 2007, Moody’s Investors Service Inc. said in a statement.

Values are dropping as U.S. unemployment climbs and consumers cut spending. Office vacancies may approach 20 percent next year as employers hold off hiring, commercial property brokers Jones Lang LaSalle Inc. and Grubb & Ellis Co. said last month. (more)

Bankers fear sovereign risk in 2010

In normal circumstances, the question of how banks manage their collateral deals with other financial players is not of interest to ordinary mortals.

However, these are not normal times. In the past couple of years the risk managers of the world’s largest banks have been forced to confront a series of shocking situations, as seemingly remote events, or “tail risks” as they are dubbed, have come to pass.

So, unsurprisingly, those same risk managers are now scouring the horizon for any fresh potential shocks. And as they run scenarios for 2010 – or “try to imagine six impossible horrible things before breakfast”, as one says – an issue that is causing more unease is the matter of sovereign risk, and the related issue of collateral.

Until quite recently, this was not something that banks worried much about in the western world, since it was widely assumed that the credit standing of European countries and the US was ultra secure. (more)

Jay Taylor: Turning Hard Times Into Good Times

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Hulbert: Don't Bet All or Nothing on Stocks Now

Mark Hulbert says investors should be wary of timing the market in the next few months.

In his MarketWatch column, Hulbert gives data on how market timers have performed during the past five to 20 years.

“There is today virtually no difference in the consensus stock market forecasts among the best stock market timers and among the worst. That is, the market timers who have successfully timed the market in the past are neither more bullish on balance than the worst timers, nor more bearish,” he said.

Hulbert said the difference is merely two percentage points “between the average recommended exposures of the market beaters and market laggards.” (more)

The Ponzi Decade: A Lost Decade in Stocks, Industrial Production, U.S. dollar, and Housing

It is fitting that we end the current decade just like we started it, with the bursting of bubbles. In the early part of the decade we were dealing with the fallout of the technology bust. That was quickly replaced by the even bigger housing bubble and that has now popped as well. The trillions lost by average Americans is incredible but in reality nothing was technically lost because the entire decade was one enormous Ponzi scheme and like all Ponzi schemes the wealth created is false. Bernard Madoff was simply the mascot of a decade built on phony money spewed out by the corporatocracy of Wall Street. What is even more troubling is how the actions taken by Wall Street are not being prosecuted in the same fashion as our justice system took on Bernard Madoff. The reason for that is the corporatocracy has legalized national bank robbery. (more)

More prime mortgages default in 3rd quarter

Troubled home loans continued to mount in the nation's banks in the third quarter as even once-solid borrowers increasingly fell behind on their mortgage payments.

For the first quarter ever, the number of homes in foreclosure with mortgages serviced by U.S. national banks and savings and loans topped the 1-million mark, according to figures released Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

The percentage of prime borrowers whose loans were 60 or more days past due doubled from the July-to-September period a year earlier. And more than half of all homeowners whose payments had been lowered through modification plans defaulted again. (more)

Unemployment funds going ‘absolutely broke’

The recession's jobless toll is draining unemployment-compensation funds so fast that according to federal projections, 40 state programs will go broke within two years and need $90 billion in loans to keep issuing the benefit checks.

The shortfalls are putting pressure on governments to either raise taxes or shrink the aid payments.

Debates over the state benefit programs have erupted in South Carolina, Nevada, Kansas, Vermont and Indiana. And the budget gaps are expected to spread and become more acute in the coming year, compelling legislators in many states to reconsider their operations. (more)

Bernanke Tightens The Noose Brace Yourself For A Hard Landing

Ben Bernanke has been a bigger disaster than Hurricane Katrina. But the senate is about to re-up him for another four-year term. What are they thinking? Bernanke helped Greenspan inflate the biggest speculative bubble of all time, and still maintains that he never saw it growing. Right. How can retail housing leap from $12 trillion to $21 trillion in 7 years (1999 to 2006) without popping up on the Fed's radar?

Bernanke was also a staunch supporter of the low interest rate madness which led to the crash. Greenspan never believed that it was the Fed's job to deal with credit bubbles. "The free market will fix itself", he thought. He was the nation's chief regulator, but adamantly opposed to the idea of government regulation. It makes no sense at all. Here' a quote from Greenspan in 2002: "I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We have tried regulation, none meaningfully worked." Bernanke is no different than Greenspan; they're two peas in the same pod. Everyone could see what the Fed-duo was up to. (more)

Forget the Happy Talk: Longer, Deeper Recession Lies Ahead, Execs Warn

If you google “recession easing,” you will find articles all the way back to April quoting Federal Reserve Chairman Ben Bernanke as saying that the recession is easing, and that the economy is “improving modestly.” Newspapers and TV news programs too, on their own, have run rose-tinged stories about how things are bad but getting better.

Spins get put on every hint of good news, as when last month “only” 11,000 jobs were lost (a story that was quickly followed by an “unexpected” jump in new unemployment claims by 474,000 in early December).

What didn’t get widely reported was a report by the Association of Financial Professionals, a trade association that includes CFOs, treasurers, comptrollers, and risk managers of mid-sized and large corporations, which asked over 1000 of these executives the question: “When do you expect your company to begin hiring again?” (more)

Fund Boss Made $7 Billion in the Panic

In this comeback year for investors, David Tepper may have scored one of the biggest paydays of all.

Mr. Tepper's hedge-fund firm has racked up about $7 billion of profit so far this year—with Mr. Tepper on track to earn more than $2.5 billion for himself, according to people familiar with the matter. That is among the largest one-year takes in recent years.

Behind the wins: a bet worth billions of dollars that America would avoid a repeat of the Great Depression.

Through February and March, Mr. Tepper scooped up beaten-down bank shares as many investors were running for the exits. Day after day, Mr. Tepper bought Bank of America Corp. shares, then trading below $3, and Citigroup Inc. preferred shares, when that stock was under $1. One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks. (more)

Schiff Report Dec 21st 2009 - interest rates, death tax, health care

HUMOR

As Financials Fade, S&P500 Loses Momentum

TIPS Give Way to Inflation as Deflation Yields Drop

The market for Treasury inflation protected securities is showing Federal Reserve Chairman Ben S. Bernanke won the battle with deflation, paving the way for him to start withdrawing cash pumped into the economy since 2007.

The gap between yields on Treasuries and so-called TIPS due in 10 years, a measure of the outlook for consumer prices, closed above 2.25 percentage points four days last week, the longest stretch since August 2008. That’s the low end of the range in the five years before Lehman Brothers Holdings Inc. collapsed, and shows traders expect inflation, not deflation in coming months, said Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford, Connecticut.

Bernanke has cited tame inflation expectations for keeping the target interest rate for overnight loans between banks at a record low range of zero to 0.25 percent and the unprecedented stimulus that prevented more bank failures during the worst financial crisis since the Great Depression. Now, TIPS show the improving economy may change sentiment and spark further losses in bonds. Yields on the benchmark 10-year Treasury note hit a four-month high of 3.62 percent last week. (more)

Jim Sinclair’s Latest Interview On KingWorldNews.com

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What’s Next for the Stock Market?

“A nightmare decade for stocks,” says a headline in The Wall Street Journal.

“Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade.”

The 1990s was the best calendar decade in history for stocks, with an annual gain on average of 17.5%. This decade, by contrast, was the worst calendar decade for stocks going all the way back to the 1820s…

Which gives us a sense of triumph…you know, that’s the thing that comes before a fall. Ten years ago, we warned readers that the US stock market was going into a bear market that would be like the Japanese market following the stock crash in Tokyo in ’89. It would be “long, soft and slow” we said. (more)

The Coming Shortage Of All The World's Most Important Industrial Metals

There's beena a lot of dicussion lately about so-called peak gold.

But as gold's fans will tell you gold isn't a commodity, it's a form of money. Gold isn't actually intended to be used in anything.

But what about metals that are meant to be used in industrial purposes.

In an excellent presentation, André Diederen presents an argument that all of the world's important industrial metals are dwindling, and that despite increasing explortation budgets, our sources of them are becoming rare and more concentrated. (more)

Weapon of Monetary Destruction

In an extended propagandistic interview in Time magazine, Ben Bernanke is finally asked the crucial question:

Q: So, I'm a fringe economics type, I'm not personally, but I'm saying a reader picks up TIME Magazine, and they see this and they go, oh, my God, Ben Bernanke, low interest rates caused this whole thing. He's just an extension of that devil man, Alan Greenspan. Low interest rates, this is the whole cause. What's your bullet answer to that?

A: It's hard to give a bullet answer.

Q: Myth-busters answer.

A: Monetary policy in the early part of this decade was accommodated for good reasons. There was a recession in 2001, there was the jobless recovery, inflation was very low. Keeping interest rates low to get the economy back on track was a reasonable thing to do. I think there are a lot of forces that led to the crisis, a whole range of things were relevant there. I don't think that monetary policy was a particularly important source of the crisis. (more)

Dollar Carry Trade at Risk

Borrowing the dollar cheaply to fund purchases of higher-yielding assets was a no-brainer in 2009, thanks to the Federal Reserve's repeated assurances that U.S. interest rates would stay low "for an extended period."

The "carry trade," as this strategy is known, may not be as sure a bet in 2010, though, particularly if fears of deflation in Japan and unsustainable deficits in Europe escalate, making the dollar's path unclear.

Investors received a sneak preview this month when the euro retreated from a 16-month high above $1.51 to a 3-1/2-month low below $1.43.

That was in sharp contrast to the "sell-the-dollar" trend that persisted for most of 2009, as the greenback shed over 15 percent against major currencies between March and November. (more)

Massive Hike in Military Spending Financed by Cuts in Health and Education

With overwhelming bipartisan support, the United States House of Representatives on Wednesday passed a massive $636 billion military appropriations bill for 2010.

The bill includes some $128 billion for the wars in Iraq and Afghanistan, but it does not fully fund the Obama administration’s escalation in Afghanistan, making likely further appropriations for war spending next year.

The deployment of 30,000 additional US troops is expected to cost $35 to $40 billion a year. On Wednesday, the Pentagon announced that the first of the new troops ordered to Afghanistan have begun to arrive.

All told, US military spending in 2010 will be close to $700 billion. If one adds the hundreds of billions of dollars in military-related spending included in the budgets of other departments, the total is as much as $1 trillion. (more)

Goldman Sachs Imploded The Housing Market

Jim Rogers Bloomberg December 2009 - "More Food Shortage Coming" P1

S&P 500 May Climb 6% on Santa Claus Rally: Technical Analysis

The Standard & Poor’s 500 Index may end the year as much as 6 percent higher if a typical December rally drives the gauge past a key resistance point, according to technical analysis by Bell Direct’s Julia Lee.

The index, which closed yesterday at 1,096.08, has climbed through December in 16 of the past 20 years, said Lee, an equities analyst in Sydney. Further gains this month in what’s sometimes known as a Santa Claus Rally could push the gauge past 1,121, the 50 percent retracement level that Fibonacci analysts identify as a point of significant resistance.

“The 1,121 level is the 50 percent retracement from the high of the bull market in 2007 to the low of the cycle in 2009,” said Lee. “It will be a challenge to break past that, but if it does, my guess is that the index will drift even higher to 1,160. If it doesn’t, we’ll probably just see a sideways movement.” (more)

US Dollar Index Weekly with MACD

Inflation, Interest Rates and Gold

Unemployment Decreased in 36 U.S. States in November

Unemployment decreased in 36 U.S. states in November, with Kentucky and Connecticut posting the biggest declines from a month earlier.

Kentucky’s jobless rate dropped to 10.6 percent from 11.3 percent the previous month, the Labor Department said today in Washington. Unemployment in Connecticut dropped to 8.2 percent last month from 8.8 percent. More states reported reductions in payrolls than increases during November.

Unemployment close to a 26-year high is a blow to states, whose budgets have been strained by the recession that started two years ago, as tax revenue slows and more is paid out in jobless benefits. The U.S. unemployment rate is forecast to exceed 10 percent through June, limiting consumer spending as the economy recovers. (more)

Gerald Celente - 2010 Prepare for the Worse - Goldseekradio.com

Final Copenhagen Text Includes Global Transaction Tax

The final Copenhagen draft agreement which was hammered out in the early hours of Friday morning includes provisions for a global tax on financial transactions that will be paid directly to the World Bank, as President Obama prepares to bypass Congress by approving a massive transfer of wealth from America into globalist hands.

As Lord Monckton, Alex Jones and others warned, the notion that the globalists would achieve nothing at Copenhagen has likely been a ruse all along. The elite look set to ram through the lion’s share of their agenda, which would include a massive global government tax at a cost of at least $3,000 a year for American families already laboring under a devastating recession, double digit unemployment and a reduction in living standards.

Hillary Clinton arrived yesterday to rally global leaders around a resolution and Barack Obama is set to be portrayed as the savior of the world by rescuing what was pitched all along as a conference doomed to fail. (more)

UK hit hardest by banking bailout, with £1trillion spent to save the City

The burden of the banking bailout has been heavier in Britain than the rest of the western world, according to alarming figures published today.

The UK has committed public funds worth almost 75 per cent of national income, or around £1trillion, to saving the City, according to the Bank of England.

That compares with bailout costs worth just 30 per cent of gross domestic product in the Euro Zone and 50 per cent in the United States. (more)

Greenspan: Threat to U.S. Fiscal Stability Larger Than Ever

Former Federal Reserve Chairman Alan Greenspan said in prepared testimony the threat to U.S. fiscal stability is larger than ever, mostly because of rising medical costs.

Averting a situation where the U.S. struggles to finance unprecedented budget deficits "is more urgent than at any time in our history," he said in testimony Thursday before the Senate Committee on Homeland Security and Governmental Affairs.

Mr. Greenspan argued that the problem of large projected shortfalls in Medicare and Medicaid can't be wiped away with more appropriations from Congress. "It is a physical resource crisis," he argued, which will suck more of the U.S. labor force and capital investment into the medical sector.

"A dollar of the nation's scarce savings employed to finance a new medical technology investment is a dollar not available to fund other critical, non-medical, cutting-edge technologies that enhance our material wellbeing," he said. (more)