Thursday, 25 June 2009

On the subject of your debt

In my opinion, the best comment posted on the linked article, on the subject of government debt and how we must now work half of the year just to satisfy the goverment's insatiable fiscal requirements, is this one (which is second from bottom):

"And all of that must be paid before people service their own personal debt and mortgages.

What is it about the British people that they think this is a normal state of affairs?

It's insanity

But mention to people, their eyes glaze over and they retreat into denial"

Whoever "UK Debt Slave" really is, I have one word to say to your comment:


Generally speaking, people are not interested and just glaze over until you stop talking, when it comes to thinking about how they are enslaved by "credit" (more accurately named "debt", but people wouldn't fall for it so easily if it was more honestly named of course). But I have something right here to say to people that glaze over and ignore that topic: wise up, because sometime, probably quite soon now, you will be sucked under and consumed by debt if you don't do something about it.

Wednesday, 24 June 2009

Looks like my call for gold/silver drop was over-pessimistic

I thought previously that a pullback to around $880-$900/oz in gold was likely in the short term (and an implied pullback in silver to around $13.50/oz).

It looks like I could have been over-pessimistic, because it only went as low as $916 (silver was around $13.75) and I suspect now that the decline could well be over (silver currently back above $14, gold probing $940 resistance).

In another hour, I reckon we'll have confirmation: either there is a steep drop after 14:00 (UK time) today, when New York opens, and it continues throughout the session, in which case I stick with that earlier forecast for $880-$900; or there is a close above $940 today and in that case likely $1000 is taken out before the end of next week.

[Sharp intake of breath]Bold call, Baron. Bold call.

Tuesday, 23 June 2009

I hope Gordon and Barak can sleep at night

Actually, scratch that. I hope they can't. Our kids, and their kids, are going to be paying for all this Keynesian deficit spending largesse for a LONG time.

Friday, 19 June 2009

More Armstrong. This one on the importance of "sound money" and how best to get back to it.

You may have noticed that my particular pet project is to try to spread awareness of just how unsound "money" is today. To summarise: our money (and nobody moreso than the USA, but all currencies I mean) is backed by nothing. Our governments can "print"* whatever amounts of $/£/€/etc they feel they need. Often they then use these freshly-minted wads of "money" to buy their own debt bonds (Treasuries/Gilts/Bunds/etc). This has the potential to be extremely inflationary, if it is allowed to get out of hand, and it is silently stealing the wealth of the population (and even more importantly, the future population) to do so. I don't know about you, but I class that as immoral and certainly not what I vote for. So perhaps this puts into perspective for you where I am coming from.

Anyway, I have a link to yet another Martin Armstrong article, which is this time on this very subject of "sound money". He goes on to outline what in his opinion can realistically be done going forward to restore the world to a system of true "sound money", but avoiding the shackles of a true and rigid "gold standard", rather than the US continuing to enjoy its -- as Charles de Gaulle so adequately put it -- 'exorbitant privilege', which dollar-debt reserve holders of the world are expressing growing concern about (rightly).

Here is the article. (PDF)

* actually these days they most of the time do it on a computer database as a simple bookkeeping transaction, rather than actually printing up paper notes, but it amounts to the same thing -- theft of the purchasing power of the money in your possesssion. Another "hidden tax".

The end of two-party politics in the USA?

Today we have yet another Martin Armstrong article for you, if you are interested? (This one is shorter than the last couple, so no extra credits this time I'm afraid. :-P )

The topic of this one? Indications are there in his considered opinion for a massive political crisis in the USA in the course of the next few years, possibly with a third party coming to the fore and usurping the Democrats and the Republicans. Seriously interesting (if you ask me). Maybe you all disagree, however... let me know?

Here is the article (in PDF format).

Thursday, 18 June 2009

ChinaDaily announcement post-BRIC-meeting-in-Russia

As I anticipated, there was:

1) no urgent call to dump the dollar as feared, but words of encouragement that the world should work towards that end


2) nations to embrace ways of working together cooperatively to smooth international trade issues

For (1) I read "death to your dollar... tomorrow, when we are better prepared...", and for (2) I read "we are going to setup more currency swaps with as many of our key trading partner countries as possible, therefore bypassing the need to use more dollars". All is as it should be then.

There is an additional implication in "The document called for broader cooperation in the energy sphere, diversifying energy resources and energy transit routes" too. For this I read "China will loan Russia the money needed to construct a gas pipeline to China's border, and China will take the lion's share of the gas Russia was formerly exporting through their pipelines into Europe" (Russia doesn't have the spare cash that it would require to fund such a project, so it has to borrow it from China.) Is it just me, or is it starting to get a bit chilly?

Enjoy the summer. Can you handle the truth about the fall?

You maybe think that I bum your day out oftentimes, but these guys have a whole team of trained and experienced economists, who love nothing more than to spend their days collectively analysing economies and prognosticating what will unfold in the future as a result of what they find. I can't hold a candle to these guys (I'm not an economist, trained or otherwise, I am just a 'filter' who has spent a lot of time reading up on these topics the last few years, has come to understand them a lot better than I used to, and see it as my civic duty to raise awareness) and certainly can't add much of any value except to tell you that they have been pretty much spot-on before and I'll be very surprised if they're not again. So I won't even try!

Just go and check out the public version of their latest report.

But pour yourself a brandy first; you're going to need it.

Brits and Yanks having gold sale parties at home, selling for 30% off, while Germans are tooling up vending machines and are buying for a premium.

Which set of consumers will be shown by the future's history books to have been the Patsies? Who knows for sure, but I have have my suspicions!

I noted with interest a moment ago -- when viewing an article on the Telegraph website which is just another in a long line that were not worth wasting your time -- that their most-viewed economics section story today is about a German company setting up to sell small gold bars from vending machines to the man in the street (or the supermarket) for a premium price. I came across this story a few days ago, but at the time I didn't think it interesting enough to mention. I find it more interesting today because of the fact it is the top rated story; which indicates gold must be beginning to find wide consumer interest in the UK.

This compares starkly with the stories of people here and in the States having the scrap gold jewellery version of Tupperware parties, pawning off their old trinkets for a discount over nibbles and a few glasses of the old vino.

HOMEWORK overtime: Armstrong again, on Caesar and the debt crisis

For anyone out there who found the "homework" article posted yesterday has piqued their interest, here is something for "extra credit". :-)

This one is Armstrong on the subject of Caesar, who in his estimation is the only politician in recorded history who firstly understood a debt problem like the one we face today, and secondly had the conviction to do what it was necessary to do in order to resolve it.

Many people think Obama will be our Caesar. I hope they're right, but unfortunately I'm confident they're not. And Brown? Well, let's just say "don't make me laugh". :-/

If you are short for time and just want to find out what Armstrong thinks must be done now to resolve the debt crisis and avoid civil disruption on a massive scale, you should skip to the final page (for this you will receive only one extra credit though!). To better understand the problem, the background on the real root cause of the problem (which ties-in firmly with yesterday's article), and the full story on why Armstrong believes Caesar was the only Statesman so far in the whole of recorded time to have the right combination of smarts, honesty and conviction to be able to deal effectively with this kind of issue, read the whole thing again -- another 24 pages, and for this you might get three extra credits! (Don't spend them all at once...)

Here is the article (PDF again).

Mervyn King and Alistair Darling clash over banking supervision reforms

In the linked article, Merv "the swerve" King is reported as arguing last night for more teeth in the Bank of England's banking sector supervision role. Later at the same meeting, Alistair Darling told the same crowd he sees no need for the BoE to be given any more teeth -- the private sector bank executives were at fault and need to clean up their game pronto. (He would say that, wouldn't he -- given he is the head of the Treasury, therefore he is 1/3rd responsible for banking supervision... so you can be sure he is going to point the finger at someone else, and hey the voters have been led to hate the bankers right now so let's go with that!)

My own take on this is: Mervyn is fighting for the very slight chance the UK will be allowed to retain control of its own financial sector, if only he can demonstrate the BoE will keep the banks under its thumb in future, while Alistair already knows that we are going to roll over and allow our financial sector to be controlled by Brussells, and he doesn't want to waste any more time, effort and money on twiddling around the edges. I think we're going 'all in', whether we like it or not.

Wednesday, 17 June 2009

HOMEWORK: Martin Armstrong article on Leviathon

Martin Armstrong is a smart guy. So smart that some very powerful people didn't like how smart he was, and what he had to say to people. He is a political prisoner right now, but he continues to put out quality articles in spite of the fact he is incarcerated, has to pass out his articles to a friend to get them distributed, and writes them on a typewriter -- hence the frequent and uncorrected grammatical, spelling, typo and punctuation errors, plus the somewhat untidy presentation that will be immediately evident. You need to put the possible annoyance of these factors into perspective and just think about the substance rather than the style. His specialisation is his "economic wave theory", that everything goes in cycles and in fact major events can be (and are, repeatedly!) predicted to a surprisingly accurate timeline. Anyway, enough background on the author, on to the specific article.

This article describes "the Leviathan" (the State), its incessant need to expand and control at all times and at any cost, for its own self-serving interest, and ultimately to its own destruction since its expansion leads inevitably to the demise of the host upon whom it must feed (you, the public at large). Lengthy historical perspectives are given to back up the theories along the way, filling the document out to a fairly healthy 24 pages in total. This is not something you should pick up in this down 5 minutes you are probably enjoying right now, but something you would more likely want to schedule, perhaps print out, and read when you have a half an hour you can dedicate to the task (maybe on the commute home or something?).

I think you will find it an interesting and rewarding read, worth the investment of a mere half hour or so, if you have even a passing interest in politics and economics (which you surely must, or you would have by now been thoroughly irritated by these posts and ceased being a fan in Facebook, or unsubscribed if you are going native on the blog or RSS feed). Probably goes best with a glass of red wine -- because you're worth it. :-)

Here is the article, which is in PDF format.

If you found this piqued your interest, there is plenty more where it came from! You can probably find it pretty easily yourself, but if you would prefer assistance just say the word and I will be much more than happy to help.

Anyone for a non-partisan strategic view on Iran/Israel/US situation?

Stratfor is an objective, non-partisan, private subscription-based strategic geopolitical analysis service*. However, they do put out a fair amount of free commentary, and if you are interested in such things, but maybe not to the extent of actually paying for it and getting the whole enchillada, they have a free newsletter subscription service. To me it seems to be good value, with a cover price of zero! :-)

An example of interesting(?) material that they make publicly available is attached below, which was in a mailshot they put out today. It is on the topic of the recent Iranian elections, and a view on the Israel situation. Its not exactly a typical Facebookesque diversion from real life, but I figure this isn't what you're expecting from this blog and maybe at least one of you will think it is worth the investment of 8 minutes of your time. I hope so anyway.

*I would add that I am not in any way affilliated with Stratfor, and receive no monetary benefit from you subscribing to them if you choose to do so.

Equal rights in the eyes of the law, for everyone

What if Henry Bellingham didn't want to defend the case of these people because he sincerely believed there was no defence in their case, so he was not the person best placed to act on their behalf? Is he supposed to argue for something he knows is wrong, perhaps even feel compelled to place himself in contempt of court if he wishes to stand any chance of winning, just because the defendant is very stupid and needs looking after? (Implying that quite possibly in turn their kids may also in fact need looking after..?)

Everybody has rights, which need to be defended rigorously. Including Henry Bellingham you'd think?

Invited to a scrap jewellery party?

I would advise against selling your old gold right now, but that is just my opinion and it's probably worth exactly what you just paid for it.

The linked article, describing the new phenomena of "gold parties" where people gather at someone's house for a few drinks to sell their broken jewellery to an on-site dealer at discounted prices, also quotes the World Gold Council making the same suggestion though. Perhaps they are worth listening to.

If, however, you really do need the cash and so want to sell your gold to get it, let me know! :-D I will buy it from you at the current spot price, assuming I have the cash myself of course, rather than 30% off like these sharks!

You would be mad, in my opinion, to sell your gold now! (Or silver, I am also interested if you want to sell your silver btw!) And especially for 30% off its scrap value. Perhaps for 10% or 15%, but not thirty!

Chinese trade protectionism?

Don't make me laugh!

Nations have only two options when it comes to making public sector purchases, just the same as a private sector business or individual. You can choose to either buy the cheapest, or you can buy from your own local producers regardless of the costs (trade protectionism). Trade protectionism is a disaster in all but the short term, it is just suicidal to overpay for things that you can get cheaper and of comparable quality elsewhere.

Now, ask yourself a question: who makes the cheapest.... well, just about anything you can conceive of? I'm pretty confident your answer is "China" to that question.

So in China this issue is a non-issue -- either they buy from local producers or, err, they overpay. That isn't protectionism, that's practicality!

Now the Americans? Well, that's something different. This squawk from the Chinese is pretty clearly just a shot over the bow of the good ship US, who started the protectionist noises a while back as described in the linked article above.

And don't even get me started on the French! (Uh-oh, too late...)

Farm subsidies immediately spring to mind, where the French government pay French farmers to raise crops and livestock, because they wouldn't be able to survive if they were left to compete with non-French farmers. THAT is the very epitome of protectionism.

Plus laws that protect the brands of certain locally-produced wines and cheeses, so that in spite of the fact you can make the exact same product elsewhere and not be able to tell the difference even if you're an expert, you will still have broken French law and they will seriously come after you and hunt you down like a dog with the full resources of the state until you roll over and admit you are wrong and will stop.

Similarly if you run an international business and make the mistake of employing French people. (This is not intended as a slur against the French people by the way, generally speaking I find I like them just as much as any other people, perhaps more, and that they are innovative and creative by nature. No, this is a slur on their politicians' brand of National Socialism and associated rules of law that in truth are counter-productive to the well-being of their populace.) Anyway, back to business now I have that out of the way. If you operate a business, or even a group of loosely-related businesses, in France in addition to some other set of countries, and you need to let some French staff go for any legitimate reason, you will be pinned to the wall and you will be made to give them jobs elsewhere in your operation, no matter where that might be and in spite of the fact that perhaps those people do no have suitable skills, or even speak the relevant language to enable them to operate effectively in that place. I mean, how protectionist is that? You are expected, or should I say forced because they can and will persue you until you bend over, to give them a job in another country at the expense of some poor working spiv already in that country -- in other words the French government expects the government of some other country to pay the cost of another person being unemployed. The reason of course is clear -- they pay massive unemployment benefits in France, which they in truth cannot afford to pay but they have promised it to the electorate, and so they desperately want to avoid having to pay out on that promise if there is any way possible of doing so.

The French are the globe's uber-nationalists. They can't compete, due to their choice of National Socialism and its massive fiscal burdens, and so they have no choice but protectionism to try to contain their budget deficits.

But I don't see an article this morning about protectionism in the States, or France. Or anywhere else for that matter. Only China.

Why is that? I'll tell you why on this one too: its because the Chinese are one of the few nations actually able to compete effectively in the world market, and the leaders of Western nations are rightly fearful of their rise to dominance in the future. The only way we can hold back and slow the rise of the Chinese is protectionism, as the US government have clearly indicated already.

Who'd be middle class?

Deflation? What deflation?

If you are earning above minimum wage, have a house and a car, and like a drink, hey maybe you even still eat fresh food perhaps, then you will have noticed that generally speaking prices of goods that you ever buy have not gone down in your world over the last year. In fact they have continued to go up. You probably found that you cannot afford to take that big holiday twice a year any more, and as much as you'd love to get two grand for your £500 old banger when you trade it in for a brand new motor, you can't afford to buy that car even with this big incentive.

For people on minimum wage/benefits, who are forced to switch to frozen ready meals, yeah they possibly noticed their costs did indeed go down. Lower quality ought to cost less, but guess what the inflation statistics don't measure quality only cost. They also cannot afford those luxury holidays and new cars, but hey they couldn't before so they don't care. You don't miss what you never had.

For people earning mega-salaries, the cost of stocks and shares, cars, holidays and other big-ticket luxury items have generally speaking been deeply discounted. For them, price deflation is a reality. What is more, they are likely the people owning and operating businesses, and their positions are relatively safe too -- they are not uncertain about their futures.

No, as always, its the middle class workers who are getting squeezed to pay for everything. Who'd be middle class? It's like being saddled with two monkeys on your back.

Tuesday, 16 June 2009

Rather than ask 61 of these 30,000 BA staff in the UK who are being asked to work for nothing for a month...

... why doesn't Willie Walsh just work for TWO months for nothing? I'm quite sure he can get by on only £610,000 a year, no?

Sixty of the lowest paid BA employees, let's assume they are paid a grand a month now for the sake of simplicity, being asked to get by on £11,000 rather than £12,000 a year -- now that is a material difference in their ability to get by. That will involve significant hardship.

On what planet does anyone really deserve to be paid £61,000 a month? What could he possibly need to spend that much money on every month? And on top of this salary, you can just bet he gets a non-contributory pension, probably also stock options, and dividends from the stock he already has under his belt. He is just one man and there are plenty of others in the executive earning a pretty penny out of BA too, you can be sure of that. No wonder the company's struggling!

I'm sure last year they were talking of buying up failing competitors. Funny how reality has a habit of catching up on one eventually.

Maybe at this point in the article you're thinking I've gone all socialist now? No, I just don't understand how BA executives, or the executives of any other publicly traded company for that matter, can get away with voting themselves these kind of ridiculous remuneration packages. Why have shareholders not been revolting against this for a long time already? Voted yourselves a ridiculous pay package? Get a shareholder vote of no confidence at the AGM, and it's out on your arse quick-smart.

The people on the ground level in businesses work hard, they are brought in to do a specific job with the promise of a specific (generally modest) salary, and they mostly do it to the best of their ability I'm sure. They are not performance-related positions, and do not get further perks beyond their salary, maybe there is some modest pension contribution if they're lucky.

By contrast, the executive of any business are there to steer the company with an eye on the future and to making changes within the organisation in good time to avert disasters and keep the business in rude health. They should therefore be remunerated on a performance-related basis, atop a basic standard senior-management-level salary to live on month to month. They don't OWN the company, they MANAGE it on behalf of the shareholders. Sure, they should definitely share in the profits that are distributed to the owners, if they have done a sterling job of steering the ship. They certainly should not suck the profit out of the business so that it cannot be distributed to the owners, or better yet kept in reserves for rainy days like these. And certainly not when they are doing so while ignoring the very clear indications about the future of the business and the environment it will operate within. There is no way Willie Wallsh didn't know the airline business was going into tough times the last few years. No way at all. That is, to put it simply, bad management.

I'm afraid... Willie, with no regret... you're fired. (If BA shareholders had any sense, they would tell you that anyway.)

Um crystal ball guess on outcome of heap big powwow today

I'm holding my index fingers pressed against my temples right now, and squinting, trying to guess what the result of the big cheifs meeting in Russia today will be.


I predict there will be an announcement outlining more bilateral trade agreements between the BRIC nations, and that they will settle their trades in their own currencies, rather than in US dollars as customary in the last few decades and very much to the satisfaction of the Yankees.

Most likely, to facilitate the above, there will be pre-authorised currency swaps put in place (large foreign exchange agreements at fixed exchange rates). This will be to minimise currency exchange rate instability, which will sooth any international vendor/buyer uncertainties at either end of those trade transactions.

This is all hugely dollar-negative of course, since US dollars will be in lesser demand than in the past. With growing supply, and shrinking demand, you would expect the value of any given good or service to naturally decline. However, the dollar index will go up rather than down as you might reasonably expect -- because this is not as bad as expected. Many people are anticipating an announcement that will further strengthen the move to a different global reserve currency/currencies, usurping the dollar as the king of global currencies. But I don't think that reality's time has yet come, because key players are not yet sufficiently diversified and will be taken down with the ship if they launch the missiles at USS Dollar right now.

Maybe I'm way off the mark. We'll see soon enough.

Ever thought you could hide from the real world by working in the public sector?

The reality is that public sector workers are paid with money taken from the pay packets of private sector workers, there is no other place for that public money to come from ultimately (even inflating the currency away ultimately steals wealth from the private sector, transferring it from those people to The Chosen Ones within the public sector).

The public sector has been expanding for years, and there have been increasingly generous pay and conditions attached to those positions too. It had got to the point where half of the working people of the nation were on the public payroll, and they were getting packages comparable with the private sector. How could that work for long, given the fact they are all paid by the other half of the nation?

Are those in the private sector supposed to happily fork over 100% of their hard-earned cash along the line somewhere in Gordon's labyrinthine tax regime? (Sometimes it feels like we are, right readers? Or perhaps you have not yet really considered just how much money that was due to you is taken up in taxes of one sort or another, at some time or another... a lot of it you never even knew was coming to you, it was taken out of your pay packet by your employer on behalf of the government. For example, note that blacked-out bit on your P60; this is where the empploye rhas to write in how much "employer's national insurance" they have paid for you in the year. Why do they not want you to know how much they charge your employer just for employing you? The employer would have been able to give it to you otherwise, that's why! And trust me now, in most cases that indirect contribution you make is a significant amount of money each month -- more than your own contribution to "national insurance" (aka "another tax"). This is just one example of how the amount of tax you pay is hidden from you, there are plenty more if you were to stop and think about it more.)

I am well aware it was in Labour's best interests to keep the (mostly unionised) public sector on side, voting for the side of their bread that was most buttered, and that explains entirely why the public payroll got so far out of hand (again).

The bad, bad news for those people looking for a cushy life -- and a job for life with a juicy pension at that -- is that fiscal reality is catching up with Labour and the public sector workers, as it always does. Now there is an implosion in the private sector jobs market, the public sector will have tipped into more than 50% of the working public. At the same time, the public finances are being further strained by those increasing numbers of ex-private-sector-workers now receiving unemployment benefits. This acidic mix is very clearly not just unsustainable, it is impossible.

Given my thinking on this topic, as outlined above, the linked article held little surprise for me this morning when I saw it on the BBC economics news feed, I was only surprised that this elephant in the room was finally being spoken about openly. However, I bet its the biggest surprise ever for the throngs of people in the public sector who are going to lose their jobs; jobs that in many many cases should never have existed in the first place though, since they were simply unaffordable to begin with.

BTW: Those of you reading this in the States, please substitute "Democrats" for "Labour". If you need to see if this is indeed true, take a look at California's state budget deficits, and the results that you are reading in the media right now. Schwarzenegger isn't taking the governor's red pen to the public sector payrolls budget line for a sick fascist joke, he is doing it because it is the only viable option that is open to him. The Californian budget deficits for years on end were a train wreck waiting to happen, he could not get the Democrats in office to stop voting to spend money they didn't have. They need to get real now, and fast! That kind of problem is not going to be limited to the state of California either, so get ready to empty your own trash down at the municipal facilities sometime soon guys, when the unions are out on strike over job cuts near you too.

You can all just write me off as a right-wing evil pig if you like, its no skin off my nose really. But I would much rather you thought about it first -- that is the main reason I bother to write these blog entries after all, in the hope that I can open the eyes of just one person and make them think for themselves -- and that you realised I am in fact just another mild-mannered realist. To be more specific, I am more of a Libertarian, which I know to most people is a byword for 'fascist', but really you need to learn to think things through for yourself in that case, rather than automatically react the way you have been conditioned to. To me, Libertarian simply means I look after myself rather than expecting someone else to catch me all the time and do everything for me. There is a role for government, but it is much narrower than the current assumed responsibilities: to uphold the rule of law; protect property rights; protect the rights and freedoms of all citizens; provide some key services for the greater good of the public. What is so fascist about that? I would argue that having a socialist regime deciding everything we can and cannot do, extorting money from us under threat of violence and imprisonment to pay for it all, monitoring all aspects of our lives, is far more of a fascist concept. But thinking for yourself is so last generation, I realise.

Previous generations fought long, bitter and bloody wars to prevent this kind of socialist evil coming to our shores. Now generally speaking people will argue vehemently for it. How times have changed.

Monday, 15 June 2009

Still expecting to see some sparks off this meeting tomorrow...

Emerging economies are meeting in Russia tomorrow, as previously advertised.

Won't be surprised to see fireworks at the end of it. Or at least a few juicy sparks.

You want to know when the economy recovers. How about 2014 or 2015?

Gulp. Vipal Monga put up an article on on 5th June that I just came across. It has some interesting stats within, which suggest there will be extreme and growing deflationary forces in the global economy, until 2014 when they will recede. I hope he's wrong, but the numbers seem compelling.

Government budget forecasts are predicated on economic recovery later this year, or failing that in 2010. The UK economy is heavily leveraged to the financial markets, moreso than any other country I believe (perhaps Switzerland or Singapore are moreso?).

We live in interesting times. :-{

Paul Krugman thinks UK in best shape across Europe

Apparently, Paul Krugman reckons the UK is in best shape economically within Europe right now.

Likely he's right, on current metrics. Although I doubt the likelihood of some of the assumed metrics that are being used regarding future economic performance, as you'll already know if you've been reading my missives for more than a few days.

If he is right, and the UK has been able to show progressive and effective action while the rest of Europe has been stuck with the straightjacket of inaction that is the Euro system... how can any UK politician stand in front of the nation and declare we will be best served by joining the Euro system? That is exactly what Mandelson is doing, and exactly where he has every intention of taking us by hook or by crook.

It can't be both ways: either we are in Shit Street in the UK right now and we will only be saved by diving more deeply into the European Project; or we managed to narrowly avert massive state failure in the UK while the Euro nations are struggling and withering on the vine still, in which case we were best served by not being too far into the European Project and will continue to be best served by steering that course.

You need to decide which it is: are we doing fine and should continue to stand alone; are we stood on the economic trap door awaiting our fate and should desperately try to gain acceptance to the Euro while we will still be welcome. Then you need to vote accordingly one way or another. (Or, like me, choose instead to look after number one, on the assumption that nobody else is going to. But that's just an old fashioned and out-dated way of dealing with things, to do them yourself because you can't trust many other people to deal with them for you, eh?)

To my mind, this is a critical question that few people take seriously enough. In fact, two critical questions: To-Euro-Or-Not-To-Euro; To-Look-Out-For-Yourself-Or-To-Trust-The-Government-Instead.

Friday, 12 June 2009

Sleepy medium-term "reverse head and shoulders" in gold

Looking at a 2-year daily chart -- courtesy of -- of GLD (a proxy for the gold spot price), I am seeing a clear reverse-head-and-shoulders chart pattern (suggesting the most likely outcome is a dramatic upward breakout in due course). I have highlighted it on the embedded chart image, using red arcs for clarity, and in the process a sleepy smile emerged.

My guess is that a pullback to around $880-$900 or so is in the cards short-term (like, "in June"?), followed by a significant breakout beyond the $1000 barrier-to-date beyond that in the latter half of 2009. Partly this call for a pullback to that area is for the sake of symmetry in the pattern, but also this roughly coincides with the 50-day moving average line (blue), and also a significant area of past support and resistance.

We'll see. Probably I'll be completely wrong and this will turn out to have been a "double top" pattern instead with hindsight. :-)

To school, or not to school? That is not the question

The article is about home schooling and the State's reaction to it. It is an interesting and thought-provoking topic in and of itself -- or maybe that is just because I am a parent, a cynic, and of Libertarian leaning, but in fact perhaps it is entirely tedious to most people, who knows? (Tell me!)

But as the author of the article points out themselves, the principles at play are applicable far more widely than just this one narrow subject. It is about the statist's creeping exercise of control and power over every aspect of life, liberties removed from your Constitutional rights one baby-step at a time, with overspun distortion of argument to make each of those baby-steps seem entirely innocent and justifiable, indeed to most people unquestionably right. But they add up to a Totalitarian state in the aggregate. Beware of baby-steps. From small acorns, mighty oaks grow. Some acorns should be left to flourish and add to the landscape for sure, but by no means all.

Latvian PM is a hero(?)

Let's see about that in the fullness of time I'd say.

Apparently he agreed to cut $1b from their budget in order to get those lovely loans from Europe, by penalising Latvian pensioners rather than the main (voting) taxpayer public.

Cutting public sector workers payroll by 20% is, however, certainly a good step though -- given they are unproductive (they are cost to society, rather than generators of wealth) and are only employed to serve the private sector wealth creating side of the economy. Brown could definitely learn a thing there, rather than continue to have half the population of the UK on the government payroll -- how can that possibly be sustainable in the long term? Its small wonder our public finances are such a mess these days.

SO last year. Now, what about NEXT year?

Last year's financial crisis, resulting in this year's economic crisis, was supposedly at root due to massive CDS (Credit Default Swap -- or "insurance against bankruptcy of the borrower") derivative problems in the OTC (Over The Counter -- or "unregulated") financial markets. The OTC derivates market is ENORMOUS; it massively dwarfs all of the economies of the world combined.

(Apologies to anyone who already knows and understands this background, but you will appreciate most people do not.)

Now, onto the subject of this missive then, finally...

The linked article discusses the matter that the enormous problems we have experienced, due to the failures in the CDS derivatives market last year, may well only be a prelude to the Big Kahuna, if the numbers are to be believed. Because on investigation, the author established that CDS are only a small proportion of the whole OTC market, and in fact he discovered the biggest sector of that market is actually IRS (Interest Rate Swaps -- or "insurance against adverse changes in interest rates, which would cause significant losses on the part of the insured party and are therefore prudent to insure against"). IRS are actually something like 3/4 of the market, according to his calculations.

Recently there has been significant volatility in the interest rates on many important bond categories, but most significantly in US government Treasury Bonds (long term loans to the US Treasury) and Treasury Notes (shorter term loans to the US Treasury). The IRS contracts are highly sensitive to volatility in the underlying bond values/yields, and are very susceptible to invokation if interest rates go the wrong way even by seemingly trivial amounts. Its not really a big deal that the issuer of the contract ("insurance") will have to pay out, which would of course be fair given they have chosen to take on that risk at the time of issue. No, the real problem comes when the issuer is forced to pay out on the contract to the insured party, but finds that they cannot afford to do so. This is how the dominos were felled in the CDS failure meltdown, taking out Bear Stearns, Lehman, and all the others, and resulting in your worrying you are going to lose your job, if you didn't already.

The author is concerned, and I share his concern now, that the CDS meltdown was BAD, but if the IRS derivatives start to meltdown as well any time, the results would this time be CATASTROPHIC.

This is a very serious issue, that is being shoved under the carpet. (Or under a tarp, if you prefer perhaps.) I can understand why the elite would prefer you didn't know about this, and therefore why they would cover it up as much as possible. However, it is doing us all a massive disservice to pretend you not knowing will somehow safeguard you against the results, if the nightmare should come to pass. If you didn't know a potential problem existed, how could you possibly hope to have prepared against such an eventuality? You can bet whatever you have that the elite are well prepared for whatever happens, and they will in fact not just survive but prosper at the expense of those that have not prepared.

To stick with the program you are in -- to keep your head down and concentrate just on your job, the latest sports scores and celebrity gossip, show no interest in finding out what it going on outside of that limited sphere -- and let the elite just look after your interests on your behalf, seems to me to be a recipe for disaster. They will look after their own interests, yours will be secondary at best. That's just the way it is.

Its time to look out for number, because few other people will look after you.

Thursday, 11 June 2009

Latvian do-or-die night is tonight it would seem

I have to point out that much is made in the linked article about Latvia having no choice but to raise their top tax rate to 40%. The alert readers among you will quickly realise that we in the UK have had a 40% top rate of tax for some time, and in fact have recently faced up to this being increased to 50%. Right off the bat this tells you a lot about our own state of affairs, if you ask me.

You might also agree with me it is instructive that again much is made in the article about having to find $1bn of cuts or find themselves unable to receive loans from the IMF/EU (AKA "loan sharks"). I mean really, $1bn? That's chicken feed as far as, for example the UK, is concerned. The Bank of England would print that up without even bothering to meet and discuss it. I know, I know -- the UK economy is much larger than Latvia's, and that is most certainly true. A couple of years ago $1b was a lot of money here too, but these days? Naaah, that really is nothing to our elite now, they routinely announce they're printing up and spending more than that averaged across every day of the year right now. However, in my opinion, the UK economy isn't such an order of magnitude bigger that we can consider $1b to be nothing and just print it up any time we like, while it is a big big deal if they want to do the same in Latvia.

The point I am trying to get you to think about is not Latvia needing to find $1b down the back of their sofa and how that is a big big deal, which clearly it is, but rather why is nobody talking about how we don't have it buried under our sofa cushions either, and yet we are spending money like water? Like it is gushing over Niagara Falls and we can just scoop it up in massive buckets, indefinitely, as it flows past us. We are printing up 100's of billions of dollars worth of pounds this year, expressly just for the purpose of buying the UK Treasury's debts because nobody else will buy them all. That is exactly what Zimbabwe did that caused their recent problems, and so many other examples through history. How come the world is not chattering and worrying about the UK being a big fat domino waiting to fall and take down the world economic system with it? (Hint: outside of the UK, they are.)

Brown and Mandelson are a couple of frauds

Mr Brown has written to the EIB telling them what to do, and Mandelson is chipping in how we should join with them. This is a bit rich if you ask me, given that the UK is not exactly in great shape. I don't know quite who Gordon thinks he is, but I'm confident I mightily disagree with his own mental self-image.

Mandelson talks a good talk about tighter integration into the European structures for the UK, how this is definitely in the nation's best interests given the experience of the credit crisis. To this I have to ask what he thinks would have been better about being within the Euro straightjacket, rather than being able to make independant monetary policy choices? If Gordon has indeed worked another economic miracle as advertised, by devaluing the pound significantly (BTW you took a big pay cut this last year or so, did you realise it yet?), then he would not have been able to do so if we were already within the Euro straightjacket. Look at Ireland and Spain -- they desperately need to devalue their currencies to inflate their way out of their dire economic problems, but their hands are tied because they do not have the luxury of independant monetary policy. They have to do whatever is best for Germany (and to a lesser extent France) and just get on with the consequences.

No, the real stories here are summarised as follows:
  • Brown wants to be head of the IMF when he is no longer the UK PM, and he'll grandstand his supposed economic genius (no no, it hasn't been a global tailwind this last decade or so, it was all due to his stewardship!) as much as he can, while he still can
  • and Mandelson's agenda is to get the UK into Europe's grip for his own personal benefit and in spite of the long-term downside for the rest of the UK population

Couple of classy guys huh?

ECB concerned all forecasts are based on rosey scenario

The ECB is concerned of a proper disaster, due to widespread European (and US for that matter, but that is not really the concern of the ECB) governments rosey assumptions regarding an economic quick-bounce-back ("V shaped") recovery at the end of 2009 or in 2010. They are thinking its more likely there is a "U shaped" recovery instead -- where recovery comes but it is a little delayed.

I strongly suspect we will see more like an "L shape" -- no real recovery for some time. I hope I'm wrong.

All eyes on US, but do not ignore Europe

Justice Little with a great article on the perilous state of things across Europe. The world is watching the US in horror, waiting for disaster to strike again, but as the author illustrates in clearer terms than I could, Europe is likely in worse condition.

Eliot Spitzer has a clue

Good article from Eliot Spitzer on, all about the perilous state of US economic fundamentals going forward, which the powers that be are desperately trying to hide from their voters. Equally (more so?) applicable to the UK's future predicament too.

Wednesday, 10 June 2009

Wrong, Mr Tucker of the BoE MPC. Wrong.

It is most certainly NOT in the interests of the banks, OR the wider economy, for banks to start making rash and reckless loans again any time soon.

The whole mess was at root caused by banks making ridiculous and risky loans, which backfired badly and with truly disasterous consequences (which are still a long way from being washed out, mark my words).

HOW THE HELL DOES MR TUCKER THINK DOING THE SAME AGAIN IS ANYTHING BUT MADNESS? The very definition of madness is doing the same thing and expecting different results, no?

No, the problems that were allowed to build up, over a very extended period of time and with politicians cheering it on and overspending on the back of it, must be allowed to play out one way or another. Trying to resolve them by doing more of the same is a recipe only for bigger disaster. The nation cannot afford a bigger disaster than it already has on its plate; its still highly questionable how exactly it can afford the one it already has.

It is no surprise to me that Mr Tucker was hand picked by Gordon Brown. Nobody stands to gain from this approach but Mr Brown and his buddies. If you think any of these goons are "on your side", looking out for the little guy, you need to get with the program -- they are on their side.

Monday, 8 June 2009

Here there lie fireworks...

"Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues."

Friday, 5 June 2009

If I was a rich man again again

Atlas Pipeline (NYSE:APL)

For a long hold. An income play, and at recent prices very likely multi-bagger capital appreciation one into the bargain too.

Thursday, 4 June 2009

Server sales worst on record

Unsurprising to read that server sales are the worst on record, while not only is the economic environment not conducive for business expansion and investment any time soon, but everyone and their dog is rolling out hardware virtualisation projects to squeeze more juice out of what they already have lying about in the spares cupboard. And rightly so. I love VMware Server; you can't get better value for money than freeware that significantly increases the return on investment in your existing hardware, right?

Dear Santa

Dear Santa,

All I want for Christmas is a new Prime Minister. If Christmas can come early for me, say next week perhaps, so much the better.

Thank you,

The Baron

Wednesday, 3 June 2009

Don't just book it, Thomas Cook it.

I'm surprised to hear today that the group Thomas Cook is part of, is on the verge of bankruptcy.

Not really surprised it is on the verge of bankruptcy, so much as surprised it is the first big big tour operator to announce this kind of imminent disaster.

Glad we don't already have a holiday already booked up for next year, with a sizeable deposit paid, with those guys then.

Presumably, this is yet another "green shoot" of our robust economic recovery that is apparently underway.

The last bubble exploding right now? Bonds

I've been saying for a while now, that the US and UK authorities are going about dealing with the financial crisis the wrong way. They have been thinking they can simply issue more national debt instruments ad-infinitum, and someone, somewhere will always step up and buy them.

Lately, signs of stress in this theory are very evident. The Chinese have started to balk at buying up our long term debts (Gilts in the case of the UK, T-Bonds in the case of the US).

We saw a "failed auction" in the UK for very long-dated Gilts, but subsequently saw filled auctions for shorter duration Gilts and for Index-Linked Gilts (inflation linked -- this tells you just what you need to know ;-) ) and very recently I posted a chart from the latest BoE quarterly report, showing that they were the only buyer of the bonds that were most recently issued; other players were net sellers. This all adds up to investors being highly dubious about the propects of the UK going into the future.

Lately we are also seeing statistical evidence that demand for US long bonds is very much dwindling -- people are preferring to stick to much shorter maturities (2 year), because they are rightly concerned about the future of the Dollar.

The biggest concern is that our governments will continue to insist on issuing debt, rather than addressing the real fundamental economic problems at hand, and that they will buy up their own debts in ever-larger doses and using new money printed up just for this purpose.

That is exactly what took place in Zimbabwe, Weimar Germany, Argentina, Brazil, or indeed any number of other instances you might like to go and find in the history books.

The big, big problem in the case of the dollar though, is that its not just the US that will be sucked in if/when the fire gets lit -- the US dollar is the predominant international reserve currency, the benchmark against which the price of everything in the world is priced ultimately. This will be a vastly bigger problem than anything that has ever gone before.

This is going to be some ride. I don't think any of us will enjoy it. Bummer.

If I was a rich man again

I would seriously consider tucking away a stack of shares in, which seem like a good buy for the long term investor. Just for the port in Equatorial Guinea, but all that other stuff looks like nice icing too.

If I was a rich man,
Teedle teedle teedle,
Teedle teedle tedle,
Teedle dum.

Monday, 1 June 2009

Inflation and war

We've had the inflation, and we're now getting a lot more (aka "quantitative easing"). So how long before we're properly at war?

“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” Ernest Hemingway, “Notes on the Next War: A Serious Topical Letter”, 1935."

More commentary at the Facebook page

Visit the page to find more news, commentary and community... (Like the page and you'll also see comments on links above - jus sayin.)

Twits can also apply here...