TRADING ALERT - Full Wave 2 Retrace

This is a perfect second opportunity to short the market if you missed the short entry at the 8192 peak of the diagonal.

Also a fractal diagonal peak.

Washington on Notice

When, in the course of human events, it becomes necessary for one people to dissolve the political bonds which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security. --Such has been the patient sufferance of these colonies; and such is now the necessity which constrains them to alter their former systems of government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute tyranny over these states. To prove this, let facts be submitted to a candid world.

He has refused his assent to laws, the most wholesome and necessary for the public good.

He has forbidden his governors to pass laws of immediate and pressing importance, unless suspended in their operation till his assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other laws for the accommodation of large districts of people, unless those people would relinquish the right of representation in the legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved representative houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the legislative powers, incapable of annihilation, have returned to the people at large for their exercise; the state remaining in the meantime exposed to all the dangers of invasion from without, and convulsions within.

He has endeavored to prevent the population of these states; for that purpose obstructing the laws for naturalization of foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of new appropriations of lands.

He has obstructed the administration of justice, by refusing his assent to laws for establishing judiciary powers.

He has made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.

He has kept among us, in times of peace, standing armies without the consent of our legislature.

He has affected to render the military independent of and superior to civil power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his assent to their acts of pretended legislation:

For quartering large bodies of armed troops among us:

For protecting them, by mock trial, from punishment for any murders which they should commit on the inhabitants of these states:

For cutting off our trade with all parts of the world:

For imposing taxes on us without our consent:

For depriving us in many cases, of the benefits of trial by jury:

For transporting us beyond seas to be tried for pretended offenses:

For abolishing the free system of English laws in a neighboring province, establishing therein an arbitrary government, and enlarging its boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule in these colonies:

For taking away our charters, abolishing our most valuable laws, and altering fundamentally the forms of our governments:

For suspending our own legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated government here, by declaring us out of his protection and waging war against us.

He has plundered our seas, ravaged our coasts, burned our towns, and destroyed the lives of our people.

He is at this time transporting large armies of foreign mercenaries to complete the works of death, desolation and tyranny, already begun with circumstances of cruelty and perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the head of a civilized nation.

He has constrained our fellow citizens taken captive on the high seas to bear arms against their country, to become the executioners of their friends and brethren, or to fall themselves by their hands.

He has excited domestic insurrections amongst us, and has endeavored to bring on the inhabitants of our frontiers, the merciless Indian savages, whose known rule of warfare, is undistinguished destruction of all ages, sexes and conditions.

In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury. A prince, whose character is thus marked by every act which may define a tyrant, is unfit to be the ruler of a free people.

Nor have we been wanting in attention to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our separation, and hold them, as we hold the rest of mankind, enemies in war, in peace friends.

We, therefore, the representatives of the United States of America, in General Congress, assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the name, and by the authority of the good people of these colonies, solemnly publish and declare, that these united colonies are, and of right ought to be free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain, is and ought to be totally dissolved; and that as free and independent states, they have full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent states may of right do. And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

---

New Hampshire: Josiah Bartlett, William Whipple, Matthew Thornton

Massachusetts: John Hancock, Samual Adams, John Adams, Robert Treat Paine, Elbridge Gerry

Rhode Island: Stephen Hopkins, William Ellery

Connecticut: Roger Sherman, Samuel Huntington, William Williams, Oliver Wolcott

New York: William Floyd, Philip Livingston, Francis Lewis, Lewis Morris

New Jersey: Richard Stockton, John Witherspoon, Francis Hopkinson, John Hart, Abraham Clark

Pennsylvania: Robert Morris, Benjamin Rush, Benjamin Franklin, John Morton, George Clymer, James Smith, George Taylor, James Wilson, George Ross

Delaware: Caesar Rodney, George Read, Thomas McKean

Maryland: Samuel Chase, William Paca, Thomas Stone, Charles Carroll of Carrollton

Virginia: George Wythe, Richard Henry Lee, Thomas Jefferson, Benjamin Harrison, Thomas Nelson, Jr., Francis Lightfoot Lee, Carter Braxton

North Carolina: William Hooper, Joseph Hewes, John Penn

South Carolina: Edward Rutledge, Thomas Heyward, Jr., Thomas Lynch, Jr., Arthur Middleton

Georgia: Button Gwinnett, Lyman Hall, George Walton

Congressional Fax Numbers by Zip Code

TRADING ALERT

Here's what I think at the moment.

Reason: Looks like we have a smaller fractal 1 (starting about 10:45 EST) following the completion of the 2 from yesterday. The sharp price fall at open leads me to believe we'll drop substantially from here, as forecast. We received a clue or two as to how far, but the fall needs to happen before those are validated.

Splitting price hairs is for sport only. Fractal self-similarity is never exact, the smaller waves often distort and twist as the greater trend arrives. The important point is that a new down leg appears to be unfolding.

EW Insight - TRADING ALERT

Most traders think Elliott Waves are bunk. I thank God for that every day. Those with an open mind quickly learn that EWs are not only an undeniably correct accounting of how nature operates, but an indispensable trading tool.

Here is a little varsity level analysis that illustrates the power of the EW insight. EWs are not magic, but rather a graphical recording of how groups behave (assimilate and divide) in similar fashion from large to small sample sizes, and from small to large sample sizes.

In early 2009, I called the beginning of wave 5 to the day largely based on an EW fractal equivalency. Wave 1 and 2 of that wave could now be appear complete. Here they are and why I think that could be the case:

2009 (Daily Chart)



All Wave 1 "personalities" should be self-similar at all degrees (sample sizes) within a wave. So whenever I expect a new leg to begin shortly, I am always scouring the daily chart for a fractal equivalency to the first leg in the larger fractal pattern.

Today, we got it.

From today's high around Noon EST, we probably saw the first minute (as in minuteness, not clock minute) wave 1 of 3 and the completion of wave 2. Do we have Wave 1 self-similarity at different degrees? I say, yes we do:

Monday, April 27 (1 Minute Chart)


One way to confirm an EW insight like this one is that the wave of lesser degree ALWAYS ends the day at the same spot that the larger picture ends end the day. They sync up, exactly, at close, to deny one "certainty" of the future. That is the case here.

By watching what happens on a smaller sample stage tomorrow, we will gain insight that we may apply to the larger picture.

Today's strong fractal equivalency implies that the proper labeling of this tricky little leg is 1 & 2 of wave 5 now complete, with a wave 3 of 5 beginning. Let's not get too caught up in the precise labeling, as it will resolve in the future. Rather, by any label, it appears that a new leg down has begun.

Obama's Price

To Obama Campaign, Payments 2008

1	University of California	$1,481,065
2	Goldman Sachs	$1,037,395
3	Harvard University	$848,270
4	Microsoft Corp	$809,799
5	Google Inc	$796,564
6	JPMorgan Chase & Co	$703,358
7	Citigroup Inc	$681,618
8	Sidley Austin LLP	$604,938
9	University of Chicago	$601,589
10	Stanford University	$586,204
11	Skadden, Arps et al	$564,345
12	Time Warner	$544,601
13	UBS AG	$537,469
14	Wilmerhale Llp	$526,992
15	IBM Corp	$525,857
16	Columbia University	$517,399
17	Morgan Stanley	$513,623
18	National Amusements Inc	$506,751
19	Kirkland & Ellis	$501,335
20	US Government	$483,956

To Obama Campaign, Payments 2006

1	University of Chicago	$156,054
2	Kirkland & Ellis	$143,138
3	Henry Crown & Co	$79,500
4	Sonnenschein, Nath & Rosenthal	$74,950
5	Northwestern University	$72,930
6	Exelon Corp	$71,850
7	Sidley, Austin et al	$71,432
8	Mayer Brown	$69,960
9	Jenner & Block	$62,710
10	Soros Fund Management	$61,605
11	Goldman Sachs	$61,500
12	Clifford Law Offices	$59,550
13	Simmons Cooper LLC	$58,500
14	Tejas Securities	$57,250
15	JP Morgan Chase & Co	$56,600
16	Ariel Capital Management	$55,650
17	Skadden, Arps et al	$54,071
18	Winston & Strawn	$52,450
19	Piper Rudnick LLP	$45,600
20	Holland Capital Management	$43,350

Total Political Payoffs (Dollars, To Dem%, To Rep%)

1	AT&T Inc	$40,838,395	44%	55%
2	American Fedn of State, County & Municipal Employees	$40,690,630	98%	1%
3	National Assn of Realtors	$34,635,003	48%	51%
4	Goldman Sachs	$30,878,682	63%	35%
5	American Assn for Justice (Trial Lawyers of America)	$30,103,429	90%	9%
6	Intl Brotherhood of Electrical Workers	$29,684,341	97%	2%
7	National Education Assn	$29,624,876	93%	6%
8	Laborers Union	$27,797,489	91%	7%
9	Service Employees International Union	$27,363,922	95%	3%
10	Carpenters & Joiners Union	$26,789,808	89%	9%

Note:

AIG TOTAL

$9,342,839

50%

50%

Elliott Thumbnail

With the last blue "4" of our last EW thumbnail in mind (in the green area on the right side of the chart under the number 8000)...



We can have a closer look at the development of the latest leg...



The purple arrow is a near term target given the green ascending diagonal, and the beginning of the leg that brings us back to its origin (just beneath the 7500 line). This is a minimum development, in other words, the Dow may fall lower.

The options from 7,500 are to continue lower to resume the 5th wave down, or a possible zig zag one more time up into the 8100 range as a final completion in the 4th wave, then resume the 5th wave lower. This is my preferred count and it should take us back to 6,500 or lower.

Another interpretation is to call the leg starting at 6,500 the first leg of a higher order ABC correction that leads us into a bigger 3 wave of C down. Remember, October of 2007 is really the start of a large C wave down. There are basically two options here since the ascending diagonal has already signaled a return to the 7,500 range. After we return to the 7,500 range (or lower), we call that a B, then get a C wave up. If the C wave goes up but does not exceed 8,100 or so, then it really won't matter what you call it, either an extending 5th or a 3 of C lower. If the wave after 7,500 shoots significantly higher than 8,100 mark, then we should label it an ABC of higher order, and we know that a very severe 3 wave down will ultimately follow.

What does it all mean from a trading perspective?

Near term (monthish): 7,500 or lower
Medium term (months): Unclear
Long term (years): Disastrously lower

I will let my last Elliott Thumbnail speak for silver/gold, no changes there.

FDIC = Systemic Banking Failure

I guess this should be obvious, but I have read nothing of it, so I'll be happy to say:

The FDIC is the root cause of our systemic bank failure.

I hope it is obvious that the private FDICorporation is destroying our banking system. Bank stocks are down 75% - 100%. Jack-booted thugs blitz more banks every weekend.

There are many reasons that having an FDIC inevitably results in systemic failure of the banking system, here are some:

1) By promising to pay banker losses from any wild speculation, bankers would be crazy not to throw the sum total of their deposits, plus 40 times leverage, "on red."

2) With their implied taxpayer bailout (now real, the Dodd Bill will funnel the first $500B of $15T to his campaign contributors), the private FDIC has no reason to collect insurance premiums. So they don't. Current FDIC reserves are short by a mere $15T.

3) Because the FDIC is always stone broke, they have to use legal power as a substitute for money, so they force bank consolidations instead of paying depositors as required by law. By rolling up bank failures into bigger and now less stable banks, instead of paying their obligations, the FDIC loots the larger bank's shareholders as they must absorb the failed bank. The FDIC is eager to raid the stock market as their primary funding source.

4) By raiding the stock market (or by spiking taxation via TARP 1, 2 , 3, 4...) instead of paying their legal obligations, the FDIC destroys the collateral underpinning all bank loans. This forces the now bigger and weaker banks to stop lending as the FDIC intentionally disintegrates their balance sheets.

5) By collapsing bank lending, the FDIC causes prices to plunge from currency starvation. This results in inevitable bank risk realization, through default and foreclosure.

6) A tiny private company like the FDIC (half the size of Facebook) can't insure everybody in the nation/world. The idea is so fundamentally stupid, only the government would promise to buy it.

7) Insurance companies' interests are always inimical to the interests of those insured.

So I'll say it directly:

Without the FDIC, systemic bank failure would be impossible. The existence of the FDIC is the single most causal factor of our mega-depression. Without the FDIC, banker behavior would actually have to make sense.

Federal Reserve Needs Bailout Money

Looks like the Federal Reserve underestimated their own depression and bought distressed assets way too early and paid way too much. Now they need bailout money. Seems the mortgages the Fed seized from BSC, using nothing but counterfeit paper, have depreciated further. How could that possibly happen?!?

“The numbers basically confirm that Treasury is going to have to take some TARP money and reimburse the Fed,” said Whalen, whose financial-services research company analyzes banks for investors. “It is essentially up to the Treasury to get the Fed out of this.” - Bloomberg (click here)

Surprise, surprise, AIG is on the hook for at least $27B of the Fed's $74B sucking black hole. Same article:

"AIG Counterparties

Maiden Lane II contains almost $11 billion of outstanding subprime mortgage-backed securities from the AIG transaction that the Fed said lost $180 million so far. The fund also contains $6.2 billion of Alt/A adjustable-rate mortgage-backed securities that the report said has $936 million of unrealized losses. The Fed values $11.4 billion of assets in Maiden Lane II with mathematical modeling, the same methods used by banks and AIG itself.

About 19 percent of the mortgage-backed securities are rated speculative grade, or BB+ at Standard & Poor’s, according to the Fed. About 40 percent are given the top rating of AAA.

Maiden Lane III has lost $2.6 billion after being created Oct. 31 to buy collateralized debt obligations from AIG counterparties, according to the Fed. CDOs in this unit include three parts of a high-grade asset-backed security known as TRIAX 2006-2A, totaling about $3.2 billion. Maiden Lane III also has two parts of a commercial mortgage-backed CDO called MAX 2007-1 A-1 with a face value totaling $7.5 billion. The fair value of those two is less than half that much, or $3.3 billion, according to the central bank.

A third of the amount outstanding in the Maiden Lane III CDOs are speculative grade, or deemed by ratings companies as having a greater chance of default. Another 27 percent are rated AA+ to AA-, the second-highest tier of S&P’s scale, the Fed said in its report. All but $155 million of the $26.8 billion in CDOs are classified as Level 3 assets, or those valued with mathematical models instead of market prices."

Translation: Banks are still self-valuing subprime junk portfolios at a $180M discount per $11B!

Gee, I wonder why AIG was deemed too big to fail by royalty snatching your money? This all sounds a bit familiar:

"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a Government board, has cheated the Government of the United States out of enough money to pay the national debt. The depredations and the iniquities of the Federal Reserve Board and the Federal Reserve banks acting together have cost this country enough money to pay the national debt several times over.

This evil institution has impoverished and ruined the people of the United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through defects of the law under which it operates, through the maladministration of that law by the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it."

- Louis McFadden, Chairman of the House Banking Committee, June 10, 1932

No Surprise to These Readers

Reuters:
"SHANGHAI/BEIJING - China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes - or a pot worth about US$30.9-billion - and confirming years of speculation it had been buying."

Reference: 1c) & Flowers and Weeds & Obama Troop Buildup

Follow the Bushbama drug money. We really need to start over in D.C., wipe the slate clean. And I loved this line:

"Gold prices jumped on the news of Chinese buying"

I think they meant, "on the news of finding 750 tons of secret supply." Total annual mining production is about 2,300 tons, that means almost 6 months worth of global gold supply just "appeared," dumped into the picture at $0/oz.

Elliott Thumbnail

USDEUR
GLD (Gold Proxy)

(Click Chart to Enlarge)
Notes:
- The "Gold Peak" and "$ Low" are "all-time."
- Both the $ and Euro are deflating/strengthening together.
- Nothing prevents gold from rising a bit, or the dollar from falling a bit, before hopping on the future trend arrows.

Traders vs. Investors

It is always interesting to watch the media try to influence traders who think they are investors (they butter traders up by calling them "investors"). No doubt, this is an integral part of the grand rip off known as the stock market. Who are they targeting, and why?

If you "invest" for cap gains instead of cash flow, in other words, if you intend to buy low and sell high (or vice versa) you are a trader. You are not an investor. Most traders lose because they don't even know enough about trading to know they are doing it. Most investors win, because investors generally understand the big picture, they look for cash flow from an asset class such as business ownership (not to be confused with the stock market), which is a value play not a price play.

Who am I? I am an investor turned trader for the price decline. Why? Because by selling high and buying low you can reap the paper gains those of who've entrusted unmonitored piles of money, namely IRAs and 401Ks, to reckless trading.

Another way to look at market cycles is to note the Trader:Investor ratio. At the peak, the ratio is very high, and in the troughs the ratio is very low. One way to objectively quantify the ratio is to look at the average dividend payout, right now we have the lowest dividends ever registered--the market is still peaking.

That shouldn't be too surprising since the Dow is more expensive today than ever before in terms of total index earnings. Several times higher. The advertised P/E is extraordinarily high at 31, but that is only achieved by disregarding any index components running horrendous losses. The true index P/E with earnings reduced by losses is near triple digits.

The advertised Dow P/E ratio has only breached 30 twice before: October 1929 and 1999.

It seems the T:I ratio is actually increasing, not declining. Trader bullishness is reaching a frenzied pitch, the precise opposite of the requisite market-wide, global trader macro capitulation that needs to occur to shift the ratio to vast-majority investor dominance, 1932-style.

Also interesting is a shift in mindset of gold traders. Gold used to be traded as an inflation play, the strategy was simple: stocks up, real estate up, prices up, gold must go up. And it did, about 50x over. That has mindset has recently shifted to a deflation play: stocks down, real estate down, prices down, gold must go up. The MSM has played some role in shaping the shift by funneling inexperienced gold traders toward gold, but many prominent gold traders have also changed their tune.

Traders' markets can get very volatile and/or collapse at any moment, so keep your eye on the big picture or do the smart thing and stay in 100% cash. Ironically, at the price bottom the media may morph into something worth a listen, as traders will have been eaten, dividends will rule the day for stock buyers, and identifying solid cash flow investments will be all the rage.

TRADING ALERT

I would be remiss if I didn't post this warning. We sit at a rather amazing point from an EW perspective, and also from a common sense perspective (Freddie in chaos, mortgage nationalization perhaps weeks away, GM shutting down for the summer or maybe forever, the usual disgusting D.C. crime, a president who is all but asking for a terrorist attack, etc.).

We have a wave count that is interesting, to say the least. It boils down to this: we sit at one of nature's fractal EW branching points, and some branches have the potential for extreme ugliness:

1) One possible branch is a short-term dip to 7500, followed by a delicate month's-long medium-term rally probably into the high 9Ks, followed by a long-term breakdown (fast or slow).

2) Another possible branch is a short-term dip to 7500, followed by a climb to around 8.1K (c of 2 of 5 of A), followed by an acute extended 5 of A that moves down fast.

3) Another possible branch is that we are starting 3 of C now. This has the potential to be devastating in the near term.

(2) and (3) are "once in a millennium" ugly, so be prepared if you aren't already. (1) is bad too, but in the longer term and it's probably slower to develop down the road. Some insurance here is not a dumb idea: a year or two of cash in-home, some gold and silver coins, some way out of the money options, etc, and the other obvious things you can do.

Goodbye GM, Hello GS

As forecast: GM Eaten Alive by D.C.

Washington has successfully and intentionally bankrupt GM so their fraudulent financier-owners, with never a fleeting thought of collecting long term interest, can capture billions upon billions upon billions in cash loan guarantees from the taxpayer. All purchased with a few $1000 in campaign contributions--quite a deal. Now it's time to rape the taxpayer ten fold, by forcing them to borrow unlimited counterfeit cash at predatory rates to place GM on perpetual life support, and to hold the country and the world hostage.

Bushbama's plan: "rape-the-poor to stuff the bursting pockets of the rich" is running like clockwork. D.C. conjured crime is mind-blowing.

Nevertheless, Dow Jones will finally have to admit another bankrupt casualty in the long, long line of spectacular failures we characterize as "blue chip" stocks. The ripoff parade marches on...

So, let me be the first to welcome Goldman Sachs into the Dow. Another $110 bucks of utterly worthless paper junk destined for absolute zero. Just when you thought the market couldn't go any lower, they recharge your short sellers gift card.

Creating Viable Double (Triple) Shorts and Longs

Several people have asked me to explain how to set up a double-short or triple short that works. At the risk of being verbose and still incomplete, here is a quick discussion on how to do it. Remember, anytime you are learning something, set aside "tuition money" and only play with that amount until you grant yourself a diploma.

Let's start with an example of a double-short position that clearly didn't work: SKF (double short financials)

October 2007 - $80/share
April 2009 - $59/share

What a crime. One reason is obvious, up-moves can be higher in percentage terms than down-moves of the same size, see: http://fdralloveragain.blogspot.com/2009/04/msm-stocks-up-25.html.

So how do you set up a double-short that works? There are an infinite number of ways to achieve this goal using long (purchased) and short (sold/written) options, or combination of both. For the purposes of this discussion, I'm going to assume little options knowledge to keep it simple and straightforward.

First, options are not for everyone - blah blah blah - disclaimer. But there is a GOOD reason that options are not for everyone, they are generally a scam, just like the stock market. The reason they are a scam is because 80% of contracts (so the anecdote goes) expire worthless. What does that mean? It means 80% of contracts returned 100% profit for the options writer(s) and a 100% loss for the contract buyer(s).

Side note - that does not always mean the option buyer "lost." Intelligent option buyers may buy contracts to hedge or insure larger positions. In other words, just because your house didn't burn down doesn't mean purchasing an insurance contract was money poorly spent.

In other words, the house has a tremendous advantage on the majority of options contracts written. There are two lessons here: (1) don't rule out writing (sell/shorting) options contracts (being the house)--stats show it is the way to go. This usually requires meeting minimum equity requirements or covering the position. (2) if you elect to buy, try not to dwell where most options contracts are written: near the money.

I am not going to discuss (1) right now, because this article will get too long and the risk involved can range from extreme to much lower than simply buying the underlying stock/ETF. That said (1) is a place you should explore if you want to trade the market because it is where you can develop your largest advantage over those taking opposite positions. For example, buying any stock or ETF makes little sense in most cases compared to shorting a put at the money, but that's for another day.

So let's talk (2), (intelligently) purchasing options to achieve limited-risk leverage.

The first thing you'll notice when examining any options chain is that your broker, or price quoting service, will almost always start by flashing up options that are "near the money." That is because these options are the ones where the buyer (you, in this case) has the largest disadvantage. Buying options near the money can be great money makers in rare cases, but like I said above, they lose about 80% of the time if held to expiration.

Let's start with why most options buyers lose:

1) Options sell at very high premiums that often offset gains
2) Most options buyers are unsophisticated, lottery-type gamblers
3) Options incorporate a time element in order to win

We are going to reject ALL of those paradigms when creating positions.

What is an option? It is a derivative. What is a derivative? Essentially, any third party legal contract written between people where the outcome is derived from some other market behavior. It is "side-show gambling," "off track betting," or, for those who don't like negative labels, "insurance underwriting."

Options are simple:

The option-buyer purchases the legal right to buy or sell shares of an underlying stock (or ETF, commodity,etc.) at an agreed-upon price, at an agreed-upon time.

A Call is an agreement to buy a symbol at a certain price (called the strike price) and time in the future. A Put is an agreement to sell the symbol at a certain price and time in the future.

That's it.

The buyer of the option contract hopes that a positive price differential develops during the given time period. The seller or writer of the option contract hopes that no differential develops, or if one does, that the sales price of the contract more than covers it.

A quick example:

Jane wants to profit with leverage if IBM stock goes up. Perhaps she is hedging a majority-short position. Maybe she doesn't want to commit a lot of money into a shaky market. Or, maybe she is a gambler who just likes the leverage.

Bob thinks IBM is going nowhere.

So Jane and Bob pay a someone to broker a Call contract. The contract states that for a fee of $13, Jane may buy 100 shares of IBM stock at a price of $100/share (the Strike price) on or before the third Friday in January 2010.

The actual symbol for this Call is +WIBAT

Here is what might happen:

Let's say that on January 15, 2010, IBM stock price is $111.

Jane was right, IBM stock went up. She is able exercise her option contract (or sell it to someone who will). She can now buy a stock worth $111/share for $100/share. Profit: $11/share.

So, Bob won. Bob charged Jane $13/share, he only had to pay her $11.

Note, in our above example the contract did not expire worthless, so it isn't in the 80% statistic, and the buyer still lost. If IBM closed at $94.68 (anything less than $100.01) on January 15, 2010, Jane's Call would expire worthless.

For those interested, I'll will cut and paste to create the "Put version" for reference:

Jane wants to profit with leverage if IBM stock goes down. Perhaps she is hedging a majority-long position. Maybe she doesn't want to commit a lot of money into a shaky market. Or, maybe she is a gambler who just likes the leverage.

Bob thinks IBM is going nowhere.

So Jane and Bob pay a someone to broker a Put contract. The contract states that for a fee of $11, Jane may sell 100 shares of IBM stock at a price of $100/share (the Strike price) on or before the third Friday in January 2010.

The actual symbol for this Put is +WIBMT

Here is what might happen:

Let's say that on January 15, 2010, IBM stock price is $91.

Jane was right, IBM stock went down. She is able to exercise her option (or sell it to someone who will). She can now sell a stock worth $91/share for $100/share. Profit: $9/share.

So, Bob won. Bob charged Jane $11/share, he only had to pay her $9.

Why did Jane lose? She paid too much for a fundamentally correct position. Keep in mind, it doesn't matter if you are right or wrong, what matters is that you make money.

With that quick lesson in mind, let's create a double-short on the Dow, right now. We want a position that will produce roughly 2% for every 1% of downward movement. An ETF that tracks the Dow (divided by 100) is DIA. If we buy a DIA Put, we should be able to achieve our goal. Let's find the right Put.

Right now, DIA is selling for $80/share (Dow 8000/100). Let's use a 100 point move lower as a test parameter. If I buy DIAQF (the right to sell DIA for 110 on May 15, 2009) it costs me about $30. If DIA drops to $79 (i.e. the Dow fell to 7,900), my Put will go up by $1.

My return?

Base ETF moved from 80 to 79, a loss of 1.2%
DIAQF goes from from 30 to 31, a gain of 3%

We have created our double-short.

---

Notes:
- As the index moves in the desired direction, leverage decreases somewhat.

- Subtract the cost of the option from the (strike price - symbol price) to asses all fees. The difference between the option cost, and the straight difference, is the total premium you are paying for the option should you hold it to expiration. By staying "well into the money" (strike price of 110 while the symbol is trading at $80 is a full $30 in the money) the premium paid for the option contract can be reasonable.

- Options trade in lower volume than stocks, so you will typically pay the Option Broker and the Options Exchange about 5 cents per share per contract (a total of about 10 cents per share per contract) in addition to your own broker fees. This is another reason to stay well in the money, since 10 cents per contract is a much lower percentage of a $30 Put than a $5 Put.

- For the purposes of this post, buying a Put or a Call option contract (not writing them), one would "buy-to-open" then "sell-to-close."

- Total risk when buying a contract is 100% of the capital placed at risk, much like buying a stock, but with some amount of additional leverage to accelerate losses or gains.

- American options exchanges allow selling option contracts, at current market value, to another person at any time prior to expiration. This includes both long and short positions. Much like stocks.

- For those interested in better understanding the current financials meltdown:

Imagine selling (not buying) Puts on real estate prices for years and years and years on end to generate cash flow from premiums. Real estate prices "always" go up, so your Puts "always" expire worthless, granting you, the derivative seller, the entire premium someone else paid to purchase your Put.

This is called selling "insurance." (perhaps your firm's stock symbol is AIG or BSC or GS?)

Since the risk of a 20% real estate meltdown was assessed to be very low to impossible, let's say that you were able to sell $80 (strike price) Puts on an existing $100 price basis for something like 2 cents per contract. Essentially, you are agreeing to insure losses below a 20% decline, matching them dollar for dollar starting at $80, for a fee of 20 cents.

Year in and year out, you pocketed your whole 2 cent premium, pure, 100% profit. So easy was the money, that your infinitely-stupid culture evolved to assess sucha deal as "risk free money."

Then, oops, some real estate prices fell 70%.

Your total loss exposure? The media would have you believe is perhaps 100%. It is not. It is the current real estate basis price of $30 ($100 after a 70% fall) subtracted from your insured (strike) price of $80, over your per contract sales basis of 2 cents each, or $50/$.02 -- a loss of perhaps 2,500 times your company's usual income -- a margin call machine.

Now you know a key reason why "bailing out" these so called investment banks, banks, and insurers is a never ending money pit.

Only the government is dumb enough to buy these contracts from them. The free market price to transfer the risk is $0, not because no one in their right mind would pay for a worthless contract, but rather, no one in their right mind will pay money for a 250,000% liability. Except you, the government, or so they think.

Prosperity vs. Control

As I occasionally dial into a financial channel for ideas on what not to do, I can't help but be stuck by the futility of the current banter. So with the hope of creating instant world peace, here is why people seem incapable of understanding one another:

We have group (1) who want increased control
(Bush-Frank-Dodd-Paulson-Obama-Geithner).

We have group (2) who do not want to be controlled
(no leadership).

Group (2) is in seeming disbelief because group (1) keeps doing things that result in increased struggle and pain. Group (1) is listening to group (2) only to make sure their their plan is working. The more complaining by group (2), the more encouraged becomes group (1), and so on.

As a member of group (2), I would like to request that we stop telling group (1) why their plans won't create prosperity, because it only gives them confirmation that their plans won't create prosperity.

TARP Can Work

I know how to make TARP work:

1) Government buys most of the common shares of the failing banks (which is all of them) with our kids' credit cards. The more the better (they won't mind, half of them aren't born yet).

As soon as the sales close...

2) Government announces that TARP(X) is over, the government will no longer be running the economy, and that the free market is back.

3) Sell at a huge profit.

4) Set up short positions in the same banks with the same borrowed money plus all the profit.

5) Announce TARP(X+1).

Repeat until everyone is rich.

TRADING ALERT

Dow should touch 7,500 in the short term (< month or so), entered small +DAVQH @ 7.35. Silver/Gold remains the higher paying short sale in the medium term.

Update: Rapid Global Cooling

It's like 1979 out there.



The following chart doesn't have the latest data, you need to add a dip to the 1979 low:


1900 = few cars (+1.1 degrees)
1979 = 150M cars (-1.0 degrees)
2008 = 300M cars (-1.1 degrees)

Conclusion? Cars could be the cause of the global cooling, we might not have much time.

FDIC: National Emergency

Sheila Bair, chairwoman of the private FDIC, has introduced another non-recourse loan program (meaning no repayment is ever required; another daylight rape of American Citizens) that is "equivalent in size to TARP2" according to the NY Times.

How are they doing it? By invoking a special provision in the FDIC Charter that, they say, allows them to do anything they want when a documented "emergency" exists that presents systemic risk:

13(c)(4)
(G) SYSTEMIC RISK.--
(i) Emergency determination by secretary of the treasury.--Notwithstanding subparagraphs (A) and (E), if, upon the written recommendation of the Board of Directors (upon a vote of not less than two-thirds of the members of the Board of Directors) and the Board of Governors of the Federal Reserve System (upon a vote of not less than two-thirds of the members of such Board), the Secretary of the Treasury (in consultation with the President) determines that--
(I) the Corporation's compliance with subparagraphs (A) and (E) with respect to an insured depository institution would have serious adverse effects on economic conditions or financial stability; and
(II) any action or assistance under this subparagraph would avoid or mitigate such adverse effects, the Corporation may take other action or provide assistance under this section as necessary to avoid or mitigate such effects.

If, in fact, the FDIC and 2/3rds of the Federal Reserve Board, the President, and the Secretary of Treasury have agreed in writing that a National Emergency exists, we need to see that document immediately. The FDIC's website says the document does exist:

Temporary Liquidity Program. The FDIC issued its Interim Rule following a determination of systemic risk pursuant to section 13(c)(4)(G) of the Federal Deposit Insurance Act. As a result of this systemic risk determination, and in an effort to avoid or mitigate serious adverse effects on economic conditions or financial stability, the FDIC is establishing the Temporary Liquidity Guarantee Program.

The existence of such a document is critical, because it fundamentally alters the FDIC's mission. The reference to ignoring (E) in passage (I) above, removes the only law preventing the FDIC from funneling unlimited funds to the world's wealthiest bankers (item (II) below) at the direct expense of payment to depositors:

(E) Deposit insurance fund available for intended purpose only.--
(i) IN GENERAL.--After December 31, 1994, or at such earlier time as the Corporation determines to be appropriate, the Corporation may not take any action, directly or indirectly, with respect to any insured depository institution that would have the effect of increasing losses to the Deposit Insurance Fund by protecting--
(I) depositors for more than the insured portion of deposits
(determined without regard to whether such institution is liquidated); or
(II) creditors other than depositors.

In summary, the actions of the FDIC reflect the declaration of a documented National Emergency, one of systemic risk, and that fundamentally changes their charter from protecting depositors to protecting creditors. In televised interviews, Bair stated that bank account holders have nothing to fear as long as they get all account balances under the FDIC insurance limit immediately.

In related news, Christopher Dodd introduced a laundry bill to pay the private FDIC $500B in non-recourse loans backed by the taxpayer, presumably anticipating at least that much in FDIC losses over the coming year.

Trading Manias

Manias are great counter trades, because premiums are so exaggerated on the way up (though you have to be careful because the upside is, by definition, irrational). This makes trading manic options particularly profitable, as written premiums (short contracts) are irrationally high, and long prices (meaning buy-to-open, either puts or calls) anticipating the flip side of the mania are markedly depressed, right up to a sharp turning point.

As Justice Potter Stewart once said, I can't define pornography but I know it when I see it. I think the same applies to manias, but they usually have a few things in common:

1) They are often counter fundamental, or heavily overshoot the fundamentals

2) In EW terms , they usually manifest in extended 5th waves

3) There is virtually 100% consensus that it is not a mania

The reason I bring this topic up now: the gold mania.

This is one I am particularly fond of, as many know, because I helped create it by riding the upside for a long time. Riding the upside is important, because you get a much better sense of the price action--how labored the gains come when the bandwagon is mostly empty, and how easily they flow in the later stages of the the mania, as the majority try to squeeze in.

I suppose that is a good secondary theme to this post: don't marry your positions.

With the very first paragraph in mind, let's look at the PM mania by the numbers I've outlined above--before it enters consensus breakdown, that way I'm not a just another Monday morning quarterback like all the big financial sites.

For the purpose of the next few paragraphs, gold = silver = gold.

1) I think I've beaten the deflationary fundamentals of our depression to death, but as a quick recap: crumbling commercial bank leverage is extinguishing paper currency at an alarming rate. The PAPER to ASSET ratio = the PRICE.

No, the Fed can't print paper without creditworthy borrowers to launder it. Saying they can do so is a load of crap to retain their "Wizard of Oz" status while prices plunge. Oh, but not as much as they would have plunged without men behind curtains. Yeah right, gee, thanks a lot.

This is illustrated by a few things that gold follows in macro terms: (a) real estate prices which are in free fall and accelerating; (b) the proverbial price of mens business attire; and yes (c) street prices on the multi-$trillion global heroin/coke black market.

1a) Three months in a row, RE starts down 50% YOY. Foreclosures hit another all time high. Banks have stopped lending, not because they want to stop, but because there are so few worthy borrowers relative to yesterday. That forces lower overall leverage ratios (the amount of counterfeit cash they can print) which means they may be much more discriminating on the margins lent out. In high leverage markets, like CA, prices are down 50-60% state-wide with big losses to come. To figure your home's price in 2020, take a zero off the 2005-6 peak.

1b) The traditional gold ounce to a man's suit/belt/shoes is nothing more than an excellent gauge of business/banking activity.

http://www.josbank.com/IWCatSectionView.process?IWAction=Load&Merchant_Id=1&Section_Id=1000&ViewAll=1

A $1000 (peak) suit is solidly down 50% to 67%, which very roughly equates to $350 to $500 per gold ounce at this point in our depression.

1c) It is no coincidence that HSBC is the GLD ETF bullion key master. This is nothing more than a way for them to monetize gold with paper. GLD ETF shenanigans are a strong contributing factor to the gold price run-up, in my opinion. In other words, HSBC and cohorts in crime can sell GLD shares at increasing premiums but with an increasingly small fractional bullion reserve. In this way, they loot the underlying metal while making a mint on the paper (which they will short harder than any of us) like any ponzi scheme. A close reading (more like legal parsing) of the GLD prospectus essentially admits they do this.

China still does business the old fashioned way, for payment in specie. HSBC and friends need the hard money. Do the math. That is why the China historically possess a lot more gold than "analysts" think they have, and why western banks fronting to them almost always possess less.

Some will say this should make the gold price soar, and they are right, it already has. Like any ponzi, as it breaks down, shares become worthless because supply of paper pricing the stuff is discovered to be way higher than the supply of the underlying stuff itself. That is ideal for the GLD runners, because as share prices are shredded, they can afford to reset their scheme without discovery.

A sharp increase in drug violence south of the US border is a good indicator of financial stress in shady circles, which will flow right back through the gold price. In case you aren't sure what I'm saying: lower street prices for heroin = lower gold prices since a pound of 70% opium on the Hong Kong black market traditionally commands an ounce of gold. Less drug money = less gold demand. Leave it to the black market, actual capitalism, to retain a functional gold standard.

2) In EW terms, gold best counts as a very large 5 wave cycle starting in in the early '70s. This coincides rather exactly with the 5th of the 5th in the macro inflation bull. The early 1980s spike is the 3 peak. The 2008 spike is the 5 peak, albeit only a 1.26 fib higher than wave 3.

Many g-bugs like to point out that the price of gold today should be in the $2000-3000 range, accounting for inflation, but that just goes to show what a poor inflation hedge gold really is. Over the same time period, paper stocks gained 13,000 Dow points, about 1300%. Paper assets are obviously the place to be to hedge paper inflation--hard money, not so much.

At any rate, it's a long bull, so chances are it will take a little while to fully unwind. The basic guideline for any mania break down is an initial stop in the vicinity of sub-wave 2 of the previous 5th. Or more generally, the previous 4.

That is about a $680 target for the fifth wave, which is why I picked $680 as the intital stop as I called the top in gold in early 2008. That has already been achieved. A wave B of some lower degree is likely in place:


Next stop, albeit not instantaneous by any means, should be the next higher degree wave 2 of 5, plucked from the 1980s chart, below. That said, we could certainly get a high wave 2 of C rise in the short term, especially if stocks dip. That is no big deal to those who account for the possibility. The more likely scenario is a quick breakdown.



The EW guideline is a good match to the other fundamental guestimates, $400-450 (the price in Jan-04).

A related, common question is how do you to call the top. The best way is to count out the 5ths of ever-diminishing degree. As RNE states, the turn happens at the 5th 5th of diminishing degree, and it almost always does. That doesn't guaranty a jump off at the highest price, just at the orthodox high.

3) No discussion required.

TRADING ALERT

While I still believe there is at least an even or better chance of seeing a new stock market low before a significant upturn, silver & gold appear poised for major declines.

Stocks show potential in either direction short term, probably a small upside in the medium term, and staying long-term short is a no brainer. But I do not like to sit at the Black Jack table and play recreationally. It's best let another person's hand develop to a point of a high percentage bet, then focus a bet. Contrary to virtually all conventional opinion, it is much better to focus than diversify.

In my opinion, short silver & gold remains the best risk:reward, as well as the largest short term potential gainer (including stocks moving in either direction). Additionally, shorting silver & gold is aligned with macro fundamentals.

NSGWP

It isn't hard to identify the talking points of the modern day New Socialist Global Workers Party:

"These are not just a single collection of actions, this is collective action people, working together at their best. I think the New World Order is emerging, and with it the foundations of a new and progressive era of international cooperation. We have resolved that from today, that we will together manage the process of globalization to secure Responsibility from All, and Fairness to All." - Gordon Brown, Prime Minister of England

"America must play its role in ushering in a new era of peace. What is required of us now is a new era of Responsibility – a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world." – Barack Obama Inaugural Address

The world's richest men expect your money because you recognize "what is required:"

Working collectively
Collective action
Working together
A New World Order
A new era of responsibility
A new and progressive era
A new era of fairness
A new era of peace
Duty to your yourself
Duty to your nation
Duty to your world
The process of globalization
Responsibility from All, Fairness to All (a paraphrase of the Communist Manifesto: "From each according to his ability, to each according to his needs.")

The New Terrorist

The Washington Times broke an amazing FOUO document yesterday. In it, President Obama, acting in conjunction with the Dept of Homeland Security, has defined "rightwing extremist radicalization" (sounds like a kooky communique coming out of N.Korea) as "any group that rejects federal authority in favor of state or local authority."

That's funny, because that includes all of our Founding Fathers.

They went on to label any "single issue group" such as those "in opposition to abortion or immigration" as well as "disgruntled veterans" as extremists.

The report surmises (linked, because any normal person would think I'm making this up) that "The economic downturn and the election of the first African American president present unique drivers for rightwing radicalization and recruitment."

White House spokesman, Nick Shapiro, went farther, classifying anyone who disagrees with the Presidents agenda as a domestic terrorist, saying "The President is focused not on politics but rather taking the steps necessary to protect all Americans from the threat of violence and terrorism regardless of its origins."

In the latest strange and chilling twist, the White House unleashed droids to catalog gathering Americans:

Tea Time

As millions of Americans take to the streets to protest the socialist coup that has gripped our nation, it seems like a good time to reflect:

In 1768, a John Hancock, a Son of Liberty and shipping merchant harassed by the British for importing/smuggling such things as low priced tea, started a colonial boycott of the East India Trading Company (you remember them, Elihu Yale's opium trading front).

Over the next few years, the company's tea sales to the colonies dried up. To protect the company and keep money flowing, the Bank of England financed a plan to help create a tea monopoly in America, by exempting the company from paying British customs duties, this lowered the price of British tea to the colonies, while leaving the American tax in place to raise cash.

The term "cash" is pidgin-English (the choppy language of the England-India-China opium trade) for forms of monetary exchange between plundered opium producers in India, the English shippers pushing the drugs on China, and Chinese merchants laundering the money into tea for sale around the world. The "business" produced huge inflows to the crown without significant expenditure of British capital. Taxes and customs duties levied on the tea were the British government's cut. The British East India Trading Company became fabulously wealthy, and created the first modern government corporatocracy.

The opium/heroin trade and eventually led to the Opium Wars that plundered China, built modern Shanghai, and financed the fortunes of little banks like HSBC (Hong Kong Shanghai Bank Corp), Barclays, the British Bank of the Middle East, etc.

The colonists saw through the plan, and British East India Company ships were immediately turned away from New York and Philadelphia. When three boats docked in Boston, locals refused to pay the British duties on the consigned (monopolized) tea. On December 16, 1773, the Sons of Liberty dressed as (American) Indians, supported by around 7,000 locals, boarded British East India Company ships docked in Boston Harbor and threw a large consignment of tea overboard. The British responded by closing the port of Boston. The rest is history.

Green Coffins

Some people have a hard time believing their government lies to them relentlessly and habitually to steal their money, even if it means killing them. Here is an example of how much your coddling government really cares about you.

Our government acknowledges that safety is important by mandating expensive and profitiable new automobile safety equipment. Yet, the same "safety conscious" (when it is profitable) government encourages the most dangerous trend in automotive history: downsizing to starve green plants of life-sustaining carbon.

The government supposedly "crash tests" cars to convince you that small cars can be just as safe as larger cars. Is that true?

No.

It is a brazen lie to steal your money. How do they try to injure or kill you and your family for money? Simple, they don't crash test cars, they crash test car.

By "crash testing" into infinite mass (an immovable wall), the tests are deliberately designed to trick you into buying the least safe newer vehicles. The test favors least safe, because safe large cars and trucks tend to do the worst. Imagine crash testing a very safe, but seat belt-free school bus into infinite mass; oh, the carnage. The test favors new, because new sales = money for campaign contributors, lobbyists, and tax collectors, when in fact bigger older cars are generally safer to drive.

To illustrate, let's crash test two cars, for real, right now.

First, we know a few facts. The NHTSA and OSA crash cars head-on into an immovable barrier at 35 mph to derive their safety rating. A 5-Star rating means you have less than a 10% chance of death. Their 4-Start rating means you have less than a 20% chance of death, or twice the chance of dying. 1-Star means 50/50 dead/alive.

So here we go, in the green corner:

2009 Honda Civic:

Crash Ratings: Driver 5-Star, Passenger 5-Star

In the red corner:

2009 Toyota Sequoia:

Crash Ratings: Driver 5-Star, Passenger 4-Star

So the Civic is twice as safe on the passenger side, right? Let's crash them and find out. To figure the impact severity as it is distributed between two inelastic cars (meaning they crumple instead of acting like billiard balls) traveling at the same speed, all you need to do is compare each car's mass to the total mass involved:

m1v1 + m2v2 = m(1+2)v(1+2)
5680(35) + 2588(-35) = 8268v
21.9 = v

In other words, after a 35 mph head-on, both vehicles wind up traveling at 22 mph in the + direction. The Civic passengers experience an impact equivalent to 35+22, like a 57 mph slam into an immovable brick wall (I hope that red goo isn't my friend). The Sequoia passengers experience a relatively casual 13 mph impact (did we hit something, mom?).

Your real chances of survival?

Civic passengers go from 35 mph forward to 22 mph backward ~ virtually 100% chance of death. Sequoia passengers experience 35 mph forward to 22 mph forward ~ virtually no chance of injury, their air bags won't even deploy.

Moral of the story?

Don't swerve to avoid a head-on collision with a green car, or you could die. Hit the dead man head-on, hop out and run to the nearest phone to call an ambulance.

Goldman Sached

The market rebuked Goldman Sachs today, proving once again that the self-anointed ones are some of the the dumbest among us.

To meet their government margin call, Goldman priced a $5B new public offering at $123, a whopping 76 cent discount (so they thought) to their stock price. The company was trying to pay back a fraction of the $22.9B taken to avert bankruptcy several months ago. Traders sached the stock, humiliating Goldman and squelching any irrational dreams of survival.

Look for Goldman to pump (watch for the news) then dump assets soon to ward off the thugs calling their money back. They will look to what still has liquid value, their metals portfolios and their very best real estate assets at fire sale discounts.

GS is about to figure out that the real Mark-to-Market is a lot harsher than any pie in the sky rule they systematically ignored from the outset.

---

End of Day:
Goldman Sachs Group Inc. GS (NYSE)
$115.11
Change: -15.04 (-11.56%)

---

MSM: "Stocks Up 25%"

...and the average return, below, is +13%

Start with $100
-50% = $50
+75% = $88
-50% = $44
+75% = $77
-50% = $38
+75% = $67
-50% = $33
+75% = $59

California Going to Pot

In December 2007, I called California's $4B to $10B budget shortfall the biggest (ignored) news story in the country, which means in the world. $10B doesn't sound like much anymore, but it was and is a significant fraction of, what used to be, the budget of the world's 5th largest economy.

Today, CA's budget shortfall stands at a shocking $42B under a $130B budget, and it is skyrocketing. Higher taxes (CA income tax, alone, pushing 11%) are causing revenues to dive, as the additional economic stress breaks the back of what little healthy economic activity is intact.

California's official unemployment rate is almost 11%, but that doesn't include chronic unemployment. The official U.S. rate is only 8.5%, but jumps to over 20% if you consider the chronically unemployed and reinsert pre-Clinton adjustments. CA's numbers are likely disproportionately high, probably placing them in the 25% total UE realm.

The L.A Times is reporting over 530,000 announced layoffs in 2009. I find myself wondering how many small businesses "announce" layoffs to the L.A. Times?

The official numbers certainly do not add up, but what else is new in the land of government incompetence? CA had about 10% official UE at year end '08, which translates to about 1.3M out of 13M personal income tax returns filed. Add only the lost jobs that the L.A. Times knew about in the first two months of 2009, and you have 1.83M out of work for a best case of 14.1% UE, even at the understated, shorter than chronic, post-Clinton rate.

To make things more insane, 2009 finds marijuana to be CA's largest cash crop, more than doubling the grape and wine industry. According to MSNBC, Marijuana accounts for 2/3rds of the remaining economic activity in Mendocino County, where empty housing complexes have been converted into a sprawling degenerate drug dealer metroplex. The county has legalized the growing of marijuana to supply people (many are using FedEx) who meet the following condition(s):

a person whose physician has recommended the use of marijuana to treat cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief

(I hear it does wonders for diaper rash)

with the following (funny if they weren't so pathetic) restrictions:

1. Section 9.31.050 makes it a public nuisance to cultivate more than 25 marijuana plants on one legal parcel, regardless of whether the plants are grown indoors or outdoors, or whether the person growing the plants is a qualified patient or primary caregiver.

2. Section 9.31.070 states that the 25 plant per-parcel limitation applies regardless of the number of qualified patients residing on the parcel. The limitation also applies to marijuana cultivated or possessed by a primary caregiver for multiple qualified patients.

3. Section 9.31.090 prohibits the cultivation of marijuana in any amount within 1,000 feet of a youth oriented facility, school or park; any school bus stop; or any church. The distance is measured from the boundary of the parcel containing the marijuana to the boundary of the parcel containing the designated facility.

4. Section 9.31.100 requires marijuana grown outside to be fully enclosed by a fence at least six feet in height, with a lockable gate that is locked at all times when the patient or caregiver is not in the immediate area.

People are fleeing the state in droves, and who in their right mind wouldn't with drug dealers calling the shots?

The problem:

CA used to be the USA's cash cow. Without CA paying ever increasing taxes, the exploding U.S. budget simply cannot survive. Our nation will go bankrupt quickly, as we did during the 1930s. Without the ability to coin money (congress abdicated their constitutional duty to the Federal Reserve, and the Fed will only issue more currency if a profit can be made) there is no other outcome but an extension of the hyper-deflationary Depression already in progress.

We Made it to the Sun

If the $10T dollars in taxpayer cash, spent or guaranteed to the world's richest bankers over the past 12 months presumably to maintain Dow 14,000, were laid end-to-end they would reach the Sun ... 10 times over.

Interestingly, it only takes a little less than $1T per trip.

Mars is a lot closer right now, we could connect the Red Planet to Earth with only $350B.

Goldman Sachs Sues Taxpayers

The U.K. Telegraph is reporting that Goldman Sachs is entering a new line of business, trying to squeeze money from bloggers to prop their failed investment banking business.

Like it is the blogosphere's fault that Goldman Sachs decided to become America's poster child corporate welfare case, and now owes their precarious survival to the taxpayers who form the blogosphere.

Message to the clowns running Goldman Sachs into the ground:

We don't want to own your failing business, we paid way to much for your worthless paper because you forced the sale.

Can't wait til you replace GM in the Dow, fresh meat for shorting.

On a Cross of Tin (More Imagery of Deceit )

Happy Easter everyone. I wish I had a happier message than, "we find ourselves at war," but, we find ourselves again at war. Best of luck to all people of God, peace and faith as we contemplate a charge of renewal. While enemies can't get past the Tin, Silver, or Gold, we focus on what is important. Teach your children well.

=====

The Frost Bank Tower was the first American skyscraper to rise after 9/11. It is located in Austin, Texas, and on its crown resides America's highest sign. Here are two artist renditions presented during the architectural approval process, along with the official news release (the Frost Bank suns that form the sign is absent from the renditions, see photos below):

"Cousins Properties of Texas is developing a 33-story (515’) office building with 525,000 sq. ft. (leasable), including street level retail. Tenants include Jenkins & Gilchrist, Winstead, Sechrest & Minick, and Constructors and Associates.

Architectural Amenities:
This 515-foot tall structure has been sculpted to create a building form that begins at its rectangular base and steps into a square point tower at its crown. The ground floors of the building base are expressed in a honed finish limestone. The office tower will be clad in a low-e glass skin with a spandrel glass to match in color. The column covers and accent mullions will be light in color to unify and enhance the verticality of the structure. The tapered massing of the building will culminate in a translucent glass crown. The layered, folded panes of the building corners gently step back and inward to create the segmented pyramidal form. the luminous volume of glass at the top will provide a clearly recognizable symbol in the skyline of Austin. Construction began in January 2002 and will be completed in January 2004." (source)

The artist renditions looked pretty nice. They didn't reveal the freakish occult symbols that now violate the Austin skyline:























The owl, Eye of Providence, and 515 are all favorite symbols of the all-boys clubs that own much of America's government-corporatocracy.

The owl's name is Moloch, a pagan god worshiped when parents sacrifice their children in fire.

The Eye of Providence (also in the National Press Club logo) traces it's roots to none other than the Sun, which early pagans viewed as the all-knowing eye of god. Halos are derivatives, because whoever is standing in front of the Sun, which then produces the halo, is trying to be elevated to a divine or messiah-like, all-knowing status.

Reuters Photo


The symbol 515 comes from Dante's Divine Comedy. Dante's Inferno, Purgatorio, and Paradiso all have a total of 33 cantos, or sections. DXV (515) was the symbol given by Beatrice, Dante's ideal women, in Purgatorio 33 to identify the harbinger of Armageddon. She is (translated in Walter Arensberg's "The Cryptology of Dante") "the great whore that sittith upon many waters, with whom the kings of the earth have committed fornication, and the giant by the beast that carrieth her whose number in Revelation is 666."

Logo of British Intelligence - MI6

A new Bank of America Tower is currently under construction. At 900 feet tall, it will eclipse the Frost Bank Tower as Austin's tallest skyscraper. It's address: 515 Congress Street. Gee, I can't wait to see how it turns out.

More trivia:

The Frost Bank building houses some of the fastest elevators in the world, contracted by ThyssenKrup of Germany. Some might remember the owner of one of Germany's richest family dynasties, Fritz Thyssen, from my post Flowers and Weeds. His WWII era US companies were run by Prescott Bush, W's grandfather. They were shut down in 1942 for laundering huge sums of money and shipping industrial supplies to Nazi Germany.

Hitler was a member of the German "Brootherhood of Death." German "Brotherhood of Death" member, William Russell, founded Yale's "Skull and Bones" club, and was also American heir to Elihu Yale's global opium trafficking business. German Brotherhood of Death members were total wackos who all claimed to be "born again."

Here is the logo of "Skull and Bones" compared to the flag of Hitler's Brotherhood of Death "Brownshirts." The Brownshirts were the political and civil arm of Hitler's fascist movement; lauded by the American press during the 1920s. That is why Obama's bill HR 1388 to create a "Civilian National Security Force" is often referred to as the Brownshirt Bill.

Yale's Skull and Bones logo (notice the quaint fascist touches on the crossbones, Mussolini was also beloved by the American press in the 1920s):


Hitler's Brownshirts insignia (called such because they wore brown shirts with Totenkopf "Skull and Bones" caps):








Hilter's SS wore the same symbol of allegiance as George Bush's entire family lineage, as well as many democrat Bonesman, like John Kerry.
SS Uniform

The Socialist German Workers Party used the "Skull and Bones" symbol (Nazi is short for National Socialist, or Nationalsozialistische ):

Which looks a little too much like the clouds and Sun/EoP in this Emporis rendition of how the Frost Bank Tower (owl orientation) will change the Austin, Texas skyline:

Emporis claims the Frost Bank Tower has a tin cross embedded in each floor. The cross of tin is a symbol of Christians with no money. They claim burying tin crosses in buildings is "following tradition." I've done some research on that tradition and can't find any mention of it. Maybe they have us confused with someone else?