Terror in the Gulf

As soon as news of the gulf oil spill became public, the Russians suggested the only way to stop it was by nuclear detonation on the ocean floor. A suggestion met with skepticism, at best.

First, it seemed odd, to me anyway, that the Russians had any opinion at all, let alone such a quick and controversial response to a problem few understood, perhaps no one. Or, perhaps someone. As the more ominous nature of this spill takes shape, let us wonder openly about a few things:

How many accidents happen where there can be no reasonable establishment of causality? 1 in 100? 1,000? Is there even a way to estimate the un-likelyhood? Even an asteroid strike can be assigned certain cause, a well understood risk lurking in the heavens.

How many oil rigs spontaneously combust?

How many of those gush at the ocean floor, a mile down?

How many of those create a pool of oil in the middle of the most famous hurricane landing point in the world, which also happens to be upwind of the most envied country in the world?

How many of those can amass a giant pool of oil from leak to beach, without leaving enough time to clean it up, just before the beginning of hurricane season?

Not many.

Let's assume the only way to relieve such a deep gusher is by re-drilling next to the site, an act that cannot be physically completed in less than several months. Let's assume such timing is well understood. Let's ponder the potential wreckage of several times the current spill, being repeatedly blanketed atop the southern and eastern United States.

Freak accident? I think the odds against it. Let's pause before taking that all to timely Russian advice.

Economic Breakdown

In USD: Shape of things to Come I posted the following:



At the time, I pointed out that the US Dollar has been in a raging bull market for almost two years, a belief shared by, well, no one!

So equating that EW fractal forecast to today, here we sit, on the naked edge of the most ominous economic disaster in human history:






















Those who understand this blog know that our dollar's unprecedented, years-long bull market, against all other major currencies, has nothing to do with US economic strength. Rather it has everything to do with US economic weakness. There is no "flight to safety." There never is. What there IS is a collapse in lending from US consumer credit exhaustion, and that has drying up the US dollar supply since late 2007. The collapse of US cash supply is what spikes the value of surviving dollars.

Less bank-printed cash sloshing around to compete for assets, means prices will continue to fall, and the fractal indicates a massive spike in $ value looms in our immediate future. That means falling prices denominated in dollars and an acute spike in bank failures. Less US cash in circulation also means each surviving dollar will buy more foreign currency, sending the Euro and EU into a graveyard spin from which it will never recover (not in our lifetimes, nor our children).

The purple arrows, above, show a rough fractal equivalency. Will the EU collapse very soon? Yes. Is it the fault of the EU? Absolutely. They are fully linked to US economic activity due to a stagnant, predominantly socialist economy. But as the world tumbles into the abyss, it is important to understand that the economic driver of the EU's demise is a lack of US bank-printing/lending, eradicating US and thus world-wide liquidity.

Hold on. Sell assets for dollars while you still can (especially unload precious metals). Avoid large banks, especially Bank of America. Hoard US cash and treasuries.

If EVER there was an appropriate time to unleash the fury of Cashzilla, that time is now:

Quick Update

Each time I take a trip it seems to be a market top. No change to the outlook. Will return in June and will try to get out an update before then.

My active Dow forecast remains unchanged (see Open Market Forecasts, below), Dow 3,800 by 2012.

On a side note, Portfolio Watchers will need to some manual calcs. Marketwatch VSE is unable to fix a 1 to 10 reverse split for one of the portfolio ETF symbols. I'll probably move it to a new site, but there is no change to the core stock positions. I updated the overall portfolio percentage on the blog by xls calculation.