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Archive for November, 2008

Consumers will punish the financial system for governments exuberant money printing – Be careful on equity market ‘rallies’ into next year.

Posted by Adrian on November 28, 2008

Basically by default the consumer will punish the financial system and send the whole world into a harsh, prolonged recession, by simply saving or trying to pay down debt.

The central banks and politicians have become obsessively insane trying to rescue the worlds financial system.

They have however been successful in creating extreme volatility in the global stock markets, confused the markets and now will drain any amount of money left in sovereign funds, governments funds, councils etc. So essentially the are destroying any ability to retain an financial footing in anything.

They will print money and destroy the value of developed countries and their currencies.

Almost a blinded insanity, similar to allowing over leveraging and risky business continue to leverage, like the major banks (Citi group), mortgage giants Fannie Mae and Freddie Mack and the voodoo accounting from AIG. All have been saved thanks to the US taxpayer, via an obsessive economic process, which has become a repetitive nightmare of non resolve. Yet they keep at it! They keep repeating the same crazy ideas that they can ‘bailout’ the world with our money.

The punishment if you can call it that, is despite the governments and their central banks best efforts to keep us spending, we won’t (metaphorically speaking). Business will still de-leverage and shrink or become non exsistant, consumers will tighten and save just to try and survive. So adding stimulus from government accounts to consumers will initiate the opposite; people will begin to horde. Not so much for wealth, but to pay the bills, eat and pay down debt. Spending and over consumption which is the reason we are in this mess, will pretty much not occur.

These stimulus packages and rate cuts are intended for equity markets rallies – a misguided theory on market confidence.

I mentioned in Confused markets, deflation/stagflation threats and our old friend gold. that there will be no extended rallies into 2009. At this point I still stand by that, can US market stage a day 5 rally? Possibly. But at the same time these are ‘bear market rallies’ or a lot short covering. The point being in a market such as the one we are currently in, which is terrible, a sustained stockmarket rally into 2009 is unlikely.

With Japan already in Recession and heading for a deeper one, Asia could implode. Thailand, Indonesia and even China are now showing flash points of civil unrest.

If by nature in oversold stock markets there is stock buying, I would argue in a volatile market that we have; there will be more markets selling. To me the current rallies in the Asian and European, US market are on the back of stimulus talk – nothing else.

The US economy has been shot too pieces, the next shoe to drop for the American economy is the government defaulting on it’s debt.

So economically the world is a mess.

I see some life in the US currency till then end of the year. More so the Japanese YEN, Gold is looking solid. I would be watching a big Japanese/or Asian bank that could be on the brink.

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Posted in Finance and Economics. Strategy and Society | 1 Comment »

Confused markets, deflation/stagflation threats and our old friend gold.

Posted by Adrian on November 25, 2008

The recent rallies in global stock markets occurred from one market report, which was that Citigroup had been bailed out. The ‘too big to fail’ argument was the main driver of the bail out package, which then drove oversold markets from Germany to the UK and of course Wall Street to rally. It is the same market rhetoric from institutional players, ‘restore confidence’, ‘restore psychology of the markets’ and so on. We have to remember as the deal to save Citigroup was revealed to the media, also reported was the US property markets continue to fall (3.1%) and across to Europe where German business confidence is down from 90.20% to 85.80%. I still think continued stock market rallies into 2009 maybe unlikely; and if we talk about stabilization, especially in the market and fiscal stimulus and bank bail outs; the epicenter of the economic collapse in the US stems almost solely from a depressed housing market linked to the credit markets. The equation just doesn’t calculate. So the whole financial system can be bailed out, a trillion plus pumped into the global markets. Yet, if they calculate a fiscal stimulus to just rally the equity markets, fill banks up with cash; then it is assumption, and most probably a misguided one (as they all have been), that a flow on effect will occur to reinflate a depressed housing market. This has not happened, the housing market is still declining.

FTSE, US markets, German DAX all rallied on Citigroup bail out. Markets still 30% and 40% over sold.

In saying that the closest correct calculation (on the premise that throwing money into the financial system is going to work). Would be that the governments of the world should buy every mortgage on the planet and shift them onto their balance sheets – and guarantee defaults (on every mortgage) to keep the markets stable. Otherwise ‘bailouts’ especially for financial institutions is an unbalanced and flawed market assumption. The deluded idea that inflated equity markets will instill ‘confidence’ in the broad market is dangerous, hence the market volatility. But in reality throwing money at the problem is a pointless and wasteful exercise.

I don’t believe in a fiscal stimulus or bail outs, of course ‘the too big to fail’ policy is inevitable part of policy in capital markets. But AIG is a mess and I suspect Citigroup will prove to be problematic too.

The market is still too cautious to believe that a fiscal stimulus and ‘bank bail outs’ is going to work, rallies are somewhat subdued and contained. With oversold markets yes sporadic rallies have occurred, but not significant prolonged rallies going into the end of the year.

Can the deflation in the global market be stopped? I guess this is the global financial experiment that is occurring, with President elect Barack Obama pledging to throw 1 Trillion + into the US economy, the UK with a 40 billion stimulus and every other country doing the same. We shall see.

But of course governments tapping surpluses (commodity producing nations) that they may have had, or sovereign/future funds. They will eventually drain them too nothing, increase taxes and cut public services and health care. So the taxpayer will foot the bill for everything and still get shafted.

As discussed in Watch Global Currency markets. Country bankruptcy ‘endgames’., we are either going to see stagflation come back quicker, maybe at some point in 2009; or there will be a slew of countries going bankrupt; and become deflated, poor economic wastelands. From the middle east through to Europe and quite possible at some point the United States. Either way, destroying their capital reserves and falling into deficit is a recipe for a greater economic disaster.

From an investors point of view I am still bearish on the Euro, GBP and the AUD and all South American currencies. I still think the US dollar has life in it, especially against the EURO and the AUD, PESO (Argentine). But the Yen could be the only currency with sustained buying power on the back of risk aversion into 2009. I only say that the YEN has a buy on it because Japan can’t really go any lower as an economy. Until Europe, the US and major parts of Asia join Japan in a deflated slump; the YEN still holds value against most currencies. One should watch the USD into 2009, still viable against the GBP, AUD, NZD; we could see major sell offs of the AUD and NZD, also the GBP and EURO. If the Federal reserve cuts rates to 0%, then most of the global central banks will cut very aggressively emulating Fed policies (as they all have been timing ‘joint’ rate cuts). The commodity producing currencies will get destroyed against the Greenback.

Stock markets are still volatile, so I am in nothing in stocks. I mentioned Biotech in Brace for a global recession (update 2) – Japan in recession, rest of Asia next. Next stock market bull run 5-8 years., The biotech industry will shrink significantly from lack of finance as will junior miners and the mining industry in general. But with the economic ‘crisis’ still front page material; we are forgetting potential virus related crisis’s. Bird flu could still reappear refer to World Crisis scenarios for the 21st century – Bird Flu (H5N1) and other pandemic Virus concerns, or other pan epidemic virus. I wouldn’t completely live in an arrogant bubble assuming that the economic crisis is ‘the’ crisis. We have a few lining up, and the bio viral threat is one of them.

But our old friend gold has held it’s own, static in the 730 – 744 range now rallying (with the stock markets) to highs of $829. Gold in someways has been solid, not moving much with volatility, nor suffering major sell offs, apart from it decline from the high 900’s in July 2008 down to it’s current trading ranges. Still, when risk aversion is turned on and I suspect it will be right into 2009. Gold may hold it’s upper range, or move further into the 900’s. In light of supply demands of raw materials and gold (miners closing up shop), the scarcity and flight to safety will come into play.

*please note morbius glass does not give investment advice. The following information is for reference only. Trade at your own risk.

Posted in Finance and Economics. Strategy and Society | Tagged: , , , , , , | 3 Comments »

James Bond theme – The Man with the Golden Gun (sung by Lulu)

Posted by Adrian on November 19, 2008

Make no mistake, but I don’t like Danial Craig as James Bond, Casino Royale was an insult to the senses. Refer to The morbius glass schlock, horror, 80’s, grindhouse, sex and violence movie marathon; HP Lovecrafts – Re-Animator (1985) for an intro review of Casino Royale. Look, as far as I am concerned when James bond becomes an immature, whiny, self obsessed, manic depressed, hyper aggressor victim – it’s time to close down the franchise. Sorry, I am not that desperate for entertainment, mind you I do like mindless entertainment. But James Bond movies are not meant to be entirely mindless, right?

Again, a woman (from Casino Royale) tells James Bond (Danial Craig) to wear fitted suits!!! C’mon…

I haven’t seen Quantum of Solace (part 2 of the Craig Bond act), but the soundtrack it’s ridicules. A over the top contemporary operatic mess. Horrible.

Bring bank the humor, the suave, jeez just drop the whole serious Bourne Identity makeover (actually Bourne Identity was a good movie).

I liked Roger Moore, he did his thing with James Bond, He epitomized 70’s and 80’s self motivated ‘I am going fuck everything cool’ wearing an Armani. You gotta give his version of Bond credit for that, it was always tongue placed firmly in cheek. Get rid of this serious cry baby weak male act that Danial Craig is selling.

Anyway The Man With The Golden Gun, Roger Moore’s 4th bond movie and 9th in the franchise – was that kind of bond movie. Great villain (Christopher Reeve) and even better soundtrack sung by Lulu (damn she rocked!). That is what I like, a soundtrack that reminds me of whiskey, cocaine, 1970’s and 80’s, women, sex and suntan lotion. What a cocktail huh? Yet I was only a small child when all that was going on.

Enjoy

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Brace for a global recession (update 2) – Japan in recession, rest of Asia next. Next stock market bull run 5-8 years.

Posted by Adrian on November 18, 2008

Japan officially slipped into recession a day ago (17th November 2008 to be precise); technically Japan has been in recession for about 9 months into 2008. Japanese car exports (mainly to China), was the only positive contributor to their GDP, when everything else was collapsing, property, shares, machine orders, technology and consumer goods – pretty much everything Japan created was now piling up adding to large inventories. As the US slows down more dramatically going into September 2008, Japan’s GDP was also shrinking dramatically (0.1%). Now with China going into recession, thus ultimately effecting Japan, it therefore officially sent Japan into recession. Again there is a false belief that Japan could emerge somewhat less effected in a global recession. We have to remember Japan feeds US consumption from cars to technology. To assume that Japan could survive (retaining a 2nd place as the worlds largest economy) via it’s mass of savings or a re-feeding Chinese demand, is quite deceptive. In the sense Japan is an export based economy, that is not commodity driven, in fact Japan doesn’t mine anything and is an importer of oil. With global consumption slowing sharply throughout the world, a country that ‘produces’ like Japan is in big trouble. It is also a country that has never really come out of two decades of deflation, when inflation comes back; especially on oil and food. This could evaporate any domestic savings after the current ‘slump’. I honesty cannot see Japan rising as a powerhouse economy after this global downturn is through. As for the rest of Asia? Yes, Hong Kong, Singapore, South Korea, Philippines, Indonesia and quite possible China will all follow suit into recession. Joining the US, Germany, UK and the rest of Europe – into a global slump.

The markets know this, therefore there is continuing selling on all market indices. As discussed in The falling Oil price and Treasuries ‘ bank bailout plan’ falls apart. , we may not see significant rallies into 2009. Partly because the start of the recession is here, from a fear perspective it could be a long and harsh economic slump.

If you look at my portfolio, it is mostly made up of index puts on major commodity producing countries and their stock markets, currency put warrants on the AUD, RIYAL, EURO, PESO. Gold and gold shares (bullion), Gold ‘call’ Warrants. No company stocks at this point and I still think the markets have yet to find a bottom; I also think there will be a slew of creative destruction in the market. A depressed global stock market that could last 5-8 years, with sporadic rallies, but no way close to the highs it reached in the ‘boom’. In saying that, I personally see biotechnology stocks (on the premise that bird flu will migrate to human strain), renewable energy and energy stocks (as the next big crisis and more significant one will be energy) as possible stocks to watch. Geo-political turmoil will also occur, especially in Asia, India and possibly China, middle east (if oil drops lower). So relatively safe countries (western) could see some opportunities in real estate from overseas investors (this is very speculative at this point most since most western countries have huge housing bubbles). All in all, the governments of the world will pump the money and pour millions into infrastructure and stimulus cheques for the consumer. Probably too late, since all countries are contracting at the same time. Depleting sovereign funds and emptying reserves will equate to more countries going bankrupt than surviving a recession somwhat intact.

Posted in Finance and Economics. Strategy and Society | Tagged: , , , , , | 2 Comments »

The falling Oil price and Treasuries ‘ bank bailout plan’ falls apart.

Posted by Adrian on November 13, 2008

I have discussed on this blog that Hank Paulson ‘bank bail out plan’, that took congress days to pass, is essentially not going to happen in it’s entirety. The reason, it was from the start an unworkable concept. As discussed in All of sudden the ‘free markets’ don’t feel so free. Wall Street should take the pain. Bank ‘bail out’ bill will be passed, there is no way the market value could be determined on toxic mortgage assets, therefor the Treasury would be taking on uncertain risk with valueless assets which they have purchased at a premium. Meaning, there is no way the US government (using taxpayers money) will know when to sell, especially in a depressed market. If the toxic asset deal was to have gone ahead the banks would unload everything they have onto the US government’s balance sheet; now it seems The Treasury has realized this hence Paulson reworking of the ‘bank bailout’. If however the Treasury decides to purchase shares in financial institutions, they would have done what every other Central bank has done.

So, not only has the Federal Reserve under Ben Bernanake and the Treasury under Henry Paulson caused widespread volatility in the markets, they are also confusing the market. Which will psychologically cause markets just to ‘sell’.

The banking crisis will come back onto the boil and I suspect we will see spreads widen with interbank lending. So essentially risk aversion will come back with ‘sell’ orders on just about everything.

If we to say that the markets could maintain rallies into next year, this most likely will NOT happen; the whole world (as far as the stock/currency markets) could be heading full force into risk aversion, well into 2009.

Remember when oil was $147.00 a barrel? It now sits at $55 a barrel a $92.00 decline. With a major sell off occurring from September 2008 to present. From the 1st of September 2008 to the 15th of September the oil price was showing some instability (refer to charts CCI (2) 3 – using quoted date range); the price of oil then rallied from the 17th to the 22nd September 2008. In which it then collapsed to it’s present price range. Can oil go lower? Yes. If the global recession is deep, hence a depressed global economy, oil could sink under $50.00 a barrel. Oil has yet to find a stable price range, one could argue that $100.00 could be that range. But with oil spiking on high demand, then dramatically been sold off on weak demand, both are neither good for the global economy. If oil does drop below $50 this could significantly effect the gulf countries that rely on oil income.

Please refer to graph (click on graph for larger image)

wti_oil

To think that foolish UK prime minster (Gordon Brown) asked the oil producing gulf states to contribute to the IMF fund. If we do see a further collapse in the oil pice, I suspect Saudi Arabia will be kocking on the IMF door for money.

Posted in Finance and Economics. Strategy and Society | Tagged: , , , , , , | 6 Comments »

Eros Comics

Posted by Adrian on November 10, 2008

With the over-saturation of sex (media based) in an in a excessive consumption based society (which is kinda on it’s last legs, metaphorically speaking), it is a no brainier that a lot of it (porn) loses any real validity as far as sexual statement or otherwise.

Yes it’s commercialization and a money making venture, but let’s face it the ‘porno’ industry is trash personified.

Anyway, there is a cool company out of Seattle in the States that publishes and distributes erotic comics. There is something more relevant about written, drawn erotica/sex rather than the ‘Macdonald’s’ of erotica (modern porn).

I guess at the end of the day it’s up to the viewer.

Check them out: EROS COMICS

Posted in Popular Culture/Culture | Tagged: | 1 Comment »

Obama’s Presidency and the ‘extreme’ Keynesian model will remain.

Posted by Adrian on November 6, 2008

Our leaders, those hopeless flunkies that have their own interests in mind; personified arrogance of creating ‘order’, yes we have heard it all before, so many times in history. That political interest overlapped in self importance and ‘duty’ to control and ‘rule’ over the population. More notably George Bush Snr ‘new world order’ attempt (mimicked by his crazy son). Order in the markets? This is the reason we are all in the mess, an artificial attempt at pumping wealth into society and it has back fired, big time. The thing is, Barack Obama (now the US president, in case you didn’t know) is going to try and control the markets, by utilizing the most problematic economic model possible – which is Keynesian economics

The extreme volatility that’s occurring is a very good example of government, central bank meddling in the markets. The euphoria of a ‘feel good’ stock market rally when Obama gained Presidency was overshadowed when the market sank (the following day), the Dow dropped 486.01 points (9625.28), the NASDAQ even further. Asian and European markets also all went south.

Barack Obama will do everything he can, although inexperienced and possibly naive in regards to the global financial crisis and a looming severe recession, to keep the equity markets pumped. This ‘inexperience’ and ‘naivety’ will of course lead to volatility right to the point of the world falling into sharp slump (going into 2009). The volatility created now and future will be that ‘false’ confidence in the market, money printing and extended bailouts. Taxes will rise and the consumer is going feel the squeeze on continued higher prices, especially food and utilities. The Federal Reserve believes they have inflation tamed, which is of course a false dichotomy, as does the European Central bank. As I wrote ( albeit briefly) You might as well “write off” the whole Japanese economy, Japan could be that economic dead zone that the world is going to face. The concern would be, with a loose money printers and low rate policy from the Federal Reserve (that has created a precedent around the world); it will inevitably be inflation that will flatten economies into dust. That’s the worry, and since government’s are ‘blowing’ their surpluses (commodity producing countries) sending their and/or sovereign funds into deficit on bailout, stimulus payments and so on. Countries will have no cushion to fall back on, hence countries going bankrupt will be a global epidemic. Hungry, Ukraine. South Korea, Iceland, Argentina are a handful that are close to bankruptcy. The exception of Iceland that did go bankrupt. Point is the leaders and their economic advisor’s have failed, Obama will continue to encourage the Keynesian economic model; maybe more so in a extreme way. To aplease a government that is too large with too many players, the US could be be in big trouble – in the sense the country could go broke very soon.

Like japan, the US could go into a slump (economically) that will last decades. This of course will change the whole axis of geopolitical and economic power in the world.

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Blue Oyster Cult – Don’t Fear The Reaper

Posted by Adrian on November 3, 2008

My parents were hippies, memories of dad walking around with his shirt off wearing a necklace with a medaling hanging on it. Can’t remember what it said, but vaguely I think it said (in Latin) ‘go forth and populate’, I don’t know, I think. But mum and dad where essentially penniless hippies, dad liked a certain green herb, mum drank a lot of wine. Good memories, before the 80’s crept up and the 1970’s faded like a cheap pair of denim flares.

Still I guess I have aspects of that era programmed into my DNA (possible?. Don’t worry I aint no evolutionary psychologist advocate; those guys ran up the wrong tree IMHO).

My parents weren’t that into the Blue Oyster Cult, as such I don’t think the BOC were a typified ‘hippie band’, but hey they came out of the 1970’s; me thinks they were ‘trippers’ (the band). The album covers, look, vibe. I head about them in the mid 1980’s. Dad had an album. I can’t remember which one though. Regardless they were a cool band. Yes if you have been on the internet for the last 8 years you would have seen the ‘Gif’ that some nerd has used as their avatar. Which was the actor Will Farrell doing the ‘more cowbell skit’ (Saturday Night live). Very funny with Christoper Walkins who just makes the whole skit work. Still, the virus that is the internet, had that maniacal ‘Gif’ of Will Farrell banging the cowbell on every forum. You have to see it, hard to explain, although hard to find the ‘skit’ on the net. The internet nerds over killed it, as they do.

Anyway, awhile back one of my ex girlfriend’s and I were siting on a couch (my couch in my unit) looking at the stars. I had this cool pad were I was top floor, and the main window (lounge) I could look out at the stars. luckily there wasn’t another block of units blocking the view and the lights (street) were dim. So, you could sit there and look out at the universe.

I had ‘don’t fear the reaper’ playing in the background and a huge piece of space junk came crashing out of the atmosphere. It was an amazing sight, we both could see it (for a split second) breaking up than just vaporising into nothing.

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