As of 5/29/2009, the CPI adjusted 2000 dollar is worth 79.23¢, and the CPI + lies adjusted dollar is worth 50.73¢. The world purchasing power value has dropped by 10-20% more (based on other measures of dollar value), for a drop of 45-65% (otherwise known as inflation) since 2000, and more since 2002 when the dollar value peaked.


Our comments & predictions...
... as things change and develop




The Great Depression tight parallels... busted

6/28/2009
An update and additions to our article and comparison work regarding the Great Depression and now, including commentary on the recent work of Barry Eichengreen & Kevin O’Rourke.

"There can be no doubt that besides the regular types of the circulating medium, such as coin, notes and bank deposits, which are generally recognised to be money or currency, and the quantity of which is regulated by some central authority or can at least be imagined to be so regulated, there exist still other forms of media of exchange which occasionally or permanently do the service of money. Now while for certain practical purposes we are accustomed to distinguish these forms of media of exchange from money proper as being mere substitutes for money, it is clear that, other things equal, any increase or decrease of these money substitutes will have exactly the same effects as an increase or decrease of the quantity of money proper, and should therefore, for the purposes of theoretical analysis, be counted as money". (emphasis ours)
-- Friedrich Hayek, Prices and Production, 1935, p. 96


Update 7/2/2009 - Update on the possible 1987 parallel

Update 7/3/2009 - Note: almost all charts have been created normally this week, but some data (like M2 and monetary base) has been estimated based on last week's growth rate. Charts will be re-created again on Monday when actual data is released by the Fed, etc. COT charts are from last week and will be published on Monday after they're released by the CFTC (the data has not been estimated for this week).




The Great Depression parallels... busted

6/21/2009
Although there are some things that are behaving similarly to the 1930s like the Dow and unemployment, there are *many* stats that aren't, especially the monetary and fiscal ones. See the new charts on our Great Depression page that show how different it is now.

Also see our new article: Great Depression parallels... busted, which includes the three new charts.






Whipsaw?...

6/14/2009
Some day the various markets like stocks or metals will break out of the short term whipsaw patterns and show the real trend, although as usual the first move will probably be the reverse of the eventual trend. Quad options expiration this week, plus a CPI expected to come in around +3.5% has us slighly biased to stocks being down and metals and ag commodities being up this week.

Update 6/15/2009 - We're looking at hedging some of our gold position, the trend has clearly changed ( Same chart, long term )

Update 6/17/2009 - CPI surprises us and comes in significantly lower than expected, but is still running at 3.2% annualized, with PPI at about 6% annualized over the last two months. Probable stock breakdown ahead, with our preferred window between 6/25 and 7/18.

Update 6/18/2009 - Zero credibility




Bounce...

6/7/2009
Looking at a dollar long position, and less probable ag shorts. On a much more momentous note, we're also making plans to close most of our futures accounts and exit speculation of any kind.

Preferred measures of velocity ,   Same, but since 2000

Many updates to the U.S. vs. Weimar hyperinflation page

Update 6/8/2009 - New charts - TIC flows, major classes - 1978 to date

Update 6/9/2009 - Updates to the U.S. vs. Argentina hyperinflation page

Update 6/10/2009 - Additions and updates to our Weimar Germany hyperinflation period charts

The BLS birth/death model, chart & data since 2001

Relative gold vs. stocks performance during the Weimar hyperinflation


Critical week...

5/31/2009
We're very close to seeing a crossover in the 50 day and 200 day moving averages in the dollar index - the next few weeks should resolve whether we bounce or not. We're still mildly short, and still long soybeans and other ag commodities. It'll be interesting to see what the probable upcoming IMF gold sale will do to the market...

U.S. Treasury Supplementary Financing Program (SFP) vs. central bank swap lines

Energy costs per millions BTUs, since 1976

Update 6/1/2009 - Green shoots... of inflation
The CRB commodity index and CPI correlation
(same chart, long term)

Update 6/2/2009 - The Carbon Trade and Enron: An Inconvenient Truth, a tour de force on "show me the money".

New charts of U.S. witholding tax receipts

Update 6/3/2009 - 9:12 AM PST, covered all but a small USDX short, exited 2/3 of ag longs and tightened stops on the rest.

Update 6/4/2009 - 8:05 AM PT, added back to USDX short and about 1/2 of ag longs.

Update 6/5/2009 - stopped out of dollar short and exited ag long positions added yesterday at a small loss.
Regarding unemployment and the 'surprise' smaller drop in payrolls, note that the BLS' birth/death model added over 220,000 phantom jobs. Without that adjustment, the 345k loss would have been 565kk. With tongue firmly in cheek, we suggest aborting/euthanizing the BLS birth/death model.




Bear markets & inflation...

5/24/2009
Bear markets & inflation, three new charts showing various bear markets and their percentage drops, displayed as nominal, CPI adjusted and CPI without lies adjusted. One probably surprising fact - the loss in the Nasdaq since 2000 was almost identical to the maximum loss in the Dow during the Great Depression - after a full inflation correction is done. The new charts are based an extension of our combination bear market chart initially published in mid 2007 and our long term inflation page.

Probably another choppy week ahead, still bullish on most ag commodities. Watching for a dollar bounce, or lower probability follow through.

Update 5/27/2009 - New chart on the real estate page - House price to rent ratio, 1983 to current.

Another new chart on the CPI is a lie page - the Case Shiller home price index vs. the BLS Owners Equivalent Rent (OER).




Ups & downs...

5/17/2009
The USDX pause was more short lived than expected, and the bounce back up is very near the down trend line. We expect the down trend to continue this week with an eventual short term target of 80. We expect Monday to be an up day for US stocks, and then the rest of the week to be level to slightly down mostly due at least 3 POMO scheduled auctions... and as always, won't fight it if our best guess is incorrect. Last week's CPI release showed food price increases, and we remain generally bullish on most ag commodities.

The definition of the CRB commodities index changed in 2005, and it's now much more heavily energy weighted. Any comparisons using the CRB index both before and after the July 2005 change are invalid. The CCI index maintains the old definition. CRB vs. CCI since the definition change in 2005

Martin Armstrong's latest, a large PDF of about 8MB and 31 pages long

"... ask not what your country can sacrifice for your politicians — ask what your politicians can sacrifice for your country."

Update 5/18/2009 - stopped out of long PM positions, added mildly to USDX short. No stock positions, small bean long.

Update 5/19/2009 - Good examples of the problems with using 'median' prices to judge housing or other markets

Update 5/20/2009 - Six more charts added to our new Confidence & sentiment page.

Update 5/21/2009 - 5:55 AM PT, took profits on 1/3 of our dollar short and tightened stops on the remainder. 10:09 AM PT, took profits on another 1/3 of the dollar short.




Odd times...

5/10/2009
We're looking for a bounce and pause around 81.5-82 on the dollar index, and still believe US stock markets are overbought and over valued. Soybeans, corn, sugar and other ag commodities likely have further up moves ahead.

Interview with George Selgin about free banking, etc. - long but quite good. The first decent treatment of free banking which does not come from the Austrian school.

We've added new charts for COT gold and silver options on the COT page.

SPX 90 minute trend line


Potpourri...

5/3/2009
We're still looking at October 2009 or so as an 'official' end to the current recession, and also feel that the chances of a 'W' shaped recession like what happened in the early 1980s is an over 50% possibility. They key negative factor that will rule it out is a currency event.

At least two POMOs (Treasury purchases by the Fed) scheduled for this week, and four for next week. Since early March, about $70 billion of Treasuries have been monetized and the Fed's System Open Market Account balance has grown from $515 billion to just under $1 trillion at $979 billion.

"... ask not what your country can sacrifice for your politicians — ask what your politicians can sacrifice for your country."

Update 5/6/2009 - New page, chock full of charts - Confidence measures

Correlation between the Dow and various miners indexes since 2000:
 HUI    XAU    BGMI 
.60 .56 .64





Battle Royale and a zoo...

4/26/2009
Quite a trading range run in the S&P around 850 ±25, so whichever way the breakout goes will likely be explosive. We favor the downside for fundamental reasons, but haven't entered a trade due to a wary feeling about behind the scenes influences. We expect an up week for silver and are looking for an entry point in the low 13s or high 12s, basis spot.

12:17 PM - silver hit our buy point, but is still trending down - no entry yet.

New page, chock full of charts - U.S. households, asset mix and positions
New chart - Senior Loan Officer Survey from the Fed

Howard Ruff interviews John Williams of shadowstats.com

Update 4/30/2009 - Cassandra
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)
*deep sigh*

Flawed Credit Ratings Reap Profits as Regulators Fail - excellent




Housing, etc...

4/20/2009
Housing Activity Forecast
Simple summary, with which we agree - new home sales close to or at a bottom, existing home sales have a ways to go, prices are far from bottoming.

goldmansachs666, great blog Virtually any blog sued by GS deserves some support

Ten principles for a Black Swan-proof world

The Armstrong cycle is in its turn period. Our best guess is that its a dollar value related turn, but our confidence level is below our 70%+ action level.

Stopped out of all soybean longs.




No comments...

4/12/2009
Under the weather. Hope to post some views & opinions later in the week.
One 'new' chart - the fuller view of money supply with credit, debt and CPI w/o lies, since 1900.

Update 4/14/2009 - Martin Armstrong's latest, about 700k and 19 pages long




Mixed...

4/5/2009
Nice moves in beans & corn and other ag commodities last week, likely to continue since they're still under the radar of most. We continue to be very leary of the US stock markets and the dollar and are, as usual, staying away from "front page markets". Extreme volatility continues to show in our long term financial crisis chart and large or highly leveraged trades are still anathema to us.

The Quiet Coup (The Atlantic)

Destroying Capital Formation (Martin Armstrong's latest - 3 MB pdf)

The Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank announce swap arrangements("... these arrangements would support operations by the Federal Reserve to provide liquidity in sterling in amounts of up to £30 billion, in euro in amounts of up to €80 billion, in yen in amounts of up to ¥10 trillion, and in Swiss francs in amounts of up to CHF 40 billion.")
Our translation - early warning for the dollar to drop below 80 again.



Update 4/7/2009 - Operation Twist from the '60s - the actual effects, and an actual paper with the facts about the Fed's Operation Twist.. The factual bottom line is that it worked as the chart shows, and as some spin-meisters and dubious journalists avoid.

It's not unlike the fondly held but virtually completely false belief that currency intervention does not work, as proven by historical facts such as the actual results of the Paris & Louvre Accord in the '80s, as well as many other documented and successful currency dintervention results before and since.

Financial warfare is also an idea with a history. During the 1956 Suez Canal crisis, for instance, President Dwight Eisenhower used market pressures to keep the UK and France from attacking Egypt. So he "ordered the Treasury Department to dump British Sterling on the international market. This depressed the value of the British pound, causing a shortage of reserves needed to pay for imports," write Yale management professor Paul Bracken. "The message quickly got through to London, which, along with Paris, soon pulled out of the Canal."






Reality check...

3/29/2009
Since their respective bottoms in the last 6 months:


Concentrated shorts proven to suppress gold and silver (Pirates of the COMEX)

POMO FAQ(hat tip JesseL)

Update 4/3/2009 - Total job losses since the low in October 2007: U3 (official rate) - 4.97 million, U6 - 9.72 million & our U7 reconstruction, 11.1 million. Unemployment rate definitions & charts




Recession update...

3/22/2009
Data changes have caused us to add a close second to the expected end of the current official U.S. recession - February/March 2010. We still feel that October 2009 is the more likely period for the NBER to call an end to it... and also believe that the *real* recession (defined as avoiding the use of bogus government stats) will continue well into 2010 and probably beyond.

We expect next week to be a down market for most US stocks, but are not yet certain enough to go short.




Not buying in...

3/15/2009
None of our major signals or work show that the stock market has put in the final bottom yet, and we remain on the side. A possible turn on the 18th or 19th is on our radar.

Update 3/17/2009 - The turn on the 19th could be pushed out to next week by options expiration.

Update 3/18/2009 - More Fed direct monetization, up to $300 billion: Statement Regarding Purchases of Treasury Securities

Update 3/20/2009 - InsiderScore.com buy/sell ratio (hat tip - Russ Winter)




Real estate update...

3/8/2009
"The temporal ordering of the spending weakness is: residential investment, consumer durables, consumer nondurables and consumer services before the recession, and then, once the recession officially commences, business spending on the short-lived assets, equipment and software, and, last, business spending on the long-lived assets, offices and factories. The ordering in the recovery is exactly the same." From: Housing and the Business Cycle (pdf)     Source: Calculated Risk
Simple summary - watch Residential Investment & PCE for recovery signs.

We're still of the belief that the general US real estate market will bottom in early 2010 (or early 2011 as a close 2nd), as we have believed since we first predicted and pointed out the factors in 2006, and then clarified in late 2008. See our real estate page for more details and other tools to help determine a bottom, as well as another view of the stages of "real estate cycle".

Lessons from Swedish bank resolution policy

Martin Armstrong's latest from 2/19/2009 1.5MB PDF, 19 pages




Steady, but tighter stops...

2/22/2009
Still long silver, and looking for an opportunity to add back. We may short the S&P on any reaction, and are still looking for a sugar reaction but will likely short it due to a probably H&S forming.

Now that the "stimulus" plan has been passed and the 2009 portion size is known, the Fed is again expanding the size of their balance sheet. The implied message is that the Fed doesn't think there was enough "stimulus" in the plan.




Steady as she goes...

2/15/2009
Still with silver positions, but got stopped out of the sugar & TNote positions. We'll likely get back in both on Tuesday, and will also add to silver positions again. Platinum continues to out perform gold.

Update 2/20/2009 - will be lightening up 30-60% on all longs, pre weekend (as of 9:30 AM PT, 20%)(total as of close, 50%).




Dabbling+...

2/8/2009
We've had multiple queries about out the fall off in our Fed & Treasury total money chart. and it having peaked. Our take is simply that the Fed is allowing for the $350 billion TARP remainder, and the ~$800 billion stimulus package, to do some of the work to re-inflate.

Still with silver, sugar & TNote positions. Sugar has broken out of it channel. Silver is up about 45% since its bottom last year. All stops tightened to both protect profits and guard against an expected high volatility week ahead. We expect a down week in US stocks as the new administration's PWG/PPT begins to show its hand, both privately and publicly, but are on the side since we prefer the risk/reward picture elsewhere.

The dismal record of Investing via Media Market Timing over the decades.


Stock bear, bottoming in some commodities...

2/1/2009
Dabbling here & there in corn, wheat, silver, platinum & sugar etc. on the long side and looking for an entry on shorting 30 year TNotes.

Update 2/3/2009 - backed off on dabbling with everything except silver, sugar & TNotes.




And the beat goes on...

1/25/2009
Nice moves in both gold & silver last week, as well as in oil. We're still mulling over an end of the 'official' recession call for late this year, and watching the actual facts as they develop. USDX wise, we're also watching for a shorting opportunity and remain quite concerned in the area of "currency events".

Major reasons for gold price changes, in no particular order:
  1. Limits in supply, "peak cheap gold"
  2. Changes in demand (investment, jewelry, manufacturing, central bank etc.)
  3. Inflation direction & speed of change
  4. Real interest rate direction
  5. Fear - social, political, "financial system"
  6. Changes in confidence of money or a given currency or the "financial system"
  7. Manipulation/control by central banks and others
  8. Mania
  9. Technical analysis factors
This is not intended as a complete list but at least provides a framework within which to judge price action.

Deflationists get the facts wrong about Japan


Update 1/27/2009 - we're now calling for the end of the 'official' recession in October/November 2009, while the 'real' recession (as measured via use of John Williams SGS CPI and his CPI corrections, etc.) will continue through at least August 2010. It's too soon for us to predict, but the possibility of another 'official' recession starting in mid/late 2010, ala the 19870-1982 period, is far from zero.

Inflationists vs. Deflationists: Economics as Bread and Circuses: another good one from Jesse.




Kinder, gentler week at beginning...

1/18/2009
We're looking for an entry point after a reaction within the next 7-10+ days to buy gold & silver and perhaps platinum... as well as some agricultural commodities like corn or beans. M3 has bottomed, velocity continues to look like it's bottoming, the CCI appears to be basing and the ESF recently sold some gold.

We're also strongly entertaining thoughts of the official US recession ending in the August-December 2009 time frame (best guess October), and please do note our use of the word "official". Please see the bolded text on our recession prediction and recovery chart for part of our reasoning on calling the recession end late this year, and a big hat tip again to Paul Kasriel of Northern Trust. Also note that this does *not* preclude another official recession starting in 2010 or 2011.




Nothing much...

1/11/2009
Still mildly bearish on US stocks. On the side on everything, under the weather.

The factual story of deflation and Japan since 1990, and the same, but part 2
Deflation, debt, monetary base & lags since 1990 in Japan


Commodities bounce...

1/4/2009
We're long cattle and corn as per last week's note on decent reaction entry points, and holding gold & silver longs from earlier. The CCI's down trend line has been broken, same with both the CDNX and the BGMI (mining indexes).

We repeat this from last year: The risks involved in the "creeping corralito" in the US are substantial. If you're a US resident and do not have money in non US assets, it's our opinion that the risk is significant to "events" that may prevent reasonably unfettered access to your funds, or worse. The chances are not low for a "currency event" this year. Extra cash on hand is also not a bad idea.

Now a total of five comparison charts - Monetary & fiscal stat comparisons, 1929 and now, and the continuing picture of relative deflation: An exercise and theory showing deflation in 'total money supply'.

Update 1/5/2009 - stopped out of gold & silver positions overnight at an overall small profit. Tight stops on both corn & cattle and may be stopped out on the open.

Update 1/6/2009 - added back some gold & (mostly) silver longs, still holding corn & some cattle with tight stops, and also added a USDX short this morning. Looking at copper longs...

Update 1/7/2009 - stopped out of gold & silver positions overnight again at an overall profit. 8:39 AM CT - long copper, small position. Took profits on 1/3 of USDX shorts. Our US stocks bias has switched to bearish. Stopped out of cattle long and half of corn long, momentum weakening in corn.

Regarding global fiscal stimulus: "What we need is more than 1 percent, we certainly need at least 2 percent, and some of the heads of government were arguing even that we need more than 2 percent. But you know in the IMF we're very conservative so 2 percent seems to me the right target. What we're trying to organize is this coordinated action plan to have a boost in growth starting from a [global] fiscal stimulus of 2 percent [of world GDP]. Some measures have already been taken by some countries, and we are looking for a result of an increase in growth of also 2 percent." Source: IMF




Prior years blogs

2008

2007