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Saturday June 20, 2009 07:08 A CDT
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Waiting For the Market Break
Since this is Saturday morning - and I don't do Saturday updates (save the energy for the Peoplenomics report, which this week will focus on how governments keep control of their subject/citizens/'consumers') I'll briefly point out that the market - as expected - went through a complete yawner yesterday at options expiration. It got so boring that I turned my computer off about 10 AM Eastern and just worked on projects around the ranch. Most days I check 3-20 times during the session but yesterday? Ha!
Next week on the other hand, and actually through mid-July, will likely be another story because we have some potentially market moving events on the horizon.
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For one, the Treasury will be auctioning off $104-billion worth.
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The I-a-Told-yah's are likely to be defied to some extent in Iran, which would be a plus for the defense industry. You saw where the Washington Post had a piece this morning about the twittering behind the demonstrations in Tehran? Strike up the orchestration, if'n you please...
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North Korea either will, or will not, pop off with a missile test which more than a few readers have said "Do they have a suicide wish?" Can't speak to that, although Kim Il Jong has not replied to my questions I sent a while back, so he's not on my list of polite people yet. Oh, they have cut their financial ties with Macau...as the UN looks at expanding sanctions against them.
Frankly, combined this is all side show stuff. The real movers next week are likely to involve fund managers trying to take profits off the table before the end of Q2 in order to hit bonus levels. And, along with that, trying to get ready for whatever is next in the market.
Getting on the right side of the next move will be important if you have any money left from the meltdown in the Dow which once upon a time in October of 2007 was over 14,000. Not trying to run salt in the wounds, but just saying that we have three major paths open to us.
The first is that the country goes into a period of additional deflation. A search of news headlines for the word 'deflation' bring up tidbits like "Bank of Japan: Must keep close watch on deflation" and "Gold gains limited by deflation, dollar: Prechter."
But on the other side, Dr. Marc Faber of the Gloom, Boom, & Doom Report says Hyperinflation could hit US in 5-10- years. And already, around the edges you can see troubling indicators. For example, Austin Peay State University in Clarkesville, Tennessee is looking at a tuition increase of 6-9%. That's be double the official cost of living numbers here lately.
You saw Nouriel Roubini's outlook? No recovery till at least end of the year and then a weak and vulnerable state.
Balancing off the reports is difficult, time consuming, and just plain frustrating. However, since my personal investment goals are a) party on and b) preserve whatever little purchasing power I have, my three-pronged approach is really simple:
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One third in paid for property which has some ag value
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One third in cash & T-bills
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One third in precious metals
In the ultimate worst case either on the inflation side (and where I've been nibbling at long-term silver call options here lately as a hedge) or on the deflation side when treasuries would be the winning bet to maintain purchasing power, I still would be able to eat; something pretty far up there on my agenda.
This is definitely not a 'get rich quick' kind of environment, so I'm not going to waste any of my time or yours suggesting otherwise.
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So while I sit back and wait for the titanic forces of finance to sort out the present mess (and linguistically head toward hyperinflation late this year and into 2010), the real problem is where to move money when a break toward inflation or deflation happens.
The problem, to take the hyperinflationary course, is what do you buy if you see hyperinflation coming? Already gold deliveries are slow and even though I've got a stone and acid for testing quality of coins (along with a micrometer, etc...) buying gold when it's taking off seems problematic.
The alternative I'm considering is purchase of additional ag land that adjoins our property, but the longer term problem there has to do with taxes and that local governments are likely to be finding federal bucks harder to come by (since the federal government has money issues itself) and that means the local folks will come after the landowners.
Seems like there's just no 'easy win' out there, other than to look for a country where you pay the taxes just once when you buy property and then that's it. Simple transfer taxes at sale time work fine in places like the Cayman Islands, but they have the good sense to have Cayman Island dollars that give them a 20% spread over the US dollar.
Effectively, they tax imports this way, something we should be doing in my view, but the wage-rate-differential corpsters would squeal like pigs (for reasons that are porcinely obvious). Then they'd run up the false banner of 'free markets' which means, best I can tell, that it's OK for them to pay a worker in some backwater third world sweat shop 50¢ an hour so they can take the labor rate differential ' betwix thar and here' and buy a new Lexus every year and live in The Hamptons, or whatever.
A break to the deflationary side is also problematic, but less so, since the government will have plenty of paper to sell thanks to the bailout of the banksters.
No, I don't have any grand illusions about changing the world, but with the limited way I can 'vote with my wallet', seems that investing in staples of life (land, food, education, etc) will have at least as good a payback as treasuries or precious metals in the very short term.
Could it be the best possible investment these days is a treadmill? Oh the ponderings. Thankfully it's the weekend and we can all sit back and ask "WTF is going on here?"
Three More Banks Fail
One thing is banks are still failing:
I've given up counting
Terra Changes
Good BBC video on how "Glacier melt chances Italian border..."
Right Kinda 'Tude
Attitude is everything & readers are sometimes geniuses. Take for example the email that came in under the subject line "Write When You Get Rich..."
"Cash for clunkers". Well George, I am rich, just check out my driveway. "
I loved it. Why they couldn't have just said something simple like "Under 18 MPG combined OR has more than 100,000 miles on it and you deserve better..." is just beyond me. But then the "You deserve better could be applied to a lot of things, now, couldn't it?
Around the Ranch: Field Day Preps
Off to a ham radio breakfast this morning - so part of the reason for a short column. Don't forget last Saturday in June is ham radio field day - when a bunch of radio nuts go off into the hinterlands, suffer through mosquitoes and warm beer and try to make as many radio contacts with any many other stations as we can while running on generators, solar, wind, and whatever else we can cobble up in the way of power.
Pound on a Morse code key, or moving pictures around the world without the internet may seem like a dumb hobby, but no more so than 'drowning worms'. Besides, we get to use soldering irons and scopes, LOL.
See you bright and early Monday morning...
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Send comments to george@ure.net
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For Your Money's Worth:
Obama's Reconstruction Problem
This may sound a little odd - to be talking about the reconstruction plans of the Obama Administration, since there hasn't been a big enough disturbance to the economy to require any 'reconstructing' yet. But, since I have a few clues as to what will be in the next predictive linguistics update, and because the second leg down in the derivatives disaster will likely be pulling into view before September, I figure it's as good a time as any to consider how America's future could work out. In the process, I'm guided to some extent by After Collapse: The Regeneration of Complex Societies
