Oldtent Archives 2010

Buy a self-sustainable farm in the middle of nowhere ——equiped with an arsenal of machine guns——–guarded by vicious Dobermans

www.cnbc.com/id/38481469

 I must’ve woken up on the wrong side of the bed this a.m.

Myths of a Faltering Chinese Economy

By Adrian Douglas

Many observers have expressed concern that Chinese economic growth may be faltering. Chinese second quarter 2010 GDP growth was “only” 10.3% year on year raising concerns that the global recovery driven by Chinese growth was in danger of losing steam. It would appear that there is a mistaken conviction that China needs to maintain 10-13% growth year after year for the global economy to survive. In fact that scenario would be the most catastrophic path for China and the world.

Imagine a company that currently has annual revenue of $5 million. Imagine that it is growing its revenues by $500,000 every year. The chart of its annual revenues is shown in figure 1.

Figure 1

This is a very impressive chart. I think this would be a company that investors would be interested in!

Now imagine another company that has a declining growth rate year on year as is shown in figure 2.

Figure 2

This looks very bad, doesn’t it? Investors may not be interested in this company!

Actually these two charts are for the SAME fictitious company! If revenue growth is constant in dollar terms the percentage growth necessarily declines year on year. Alternatively, if the company were to grow its revenues year on year by 13% then its revenue growth would look like the chart in figure 3

Figure 3

Such a growth rate would be unsustainable over a long period of time. If we consider these charts to be in trillions of dollars instead of millions they could represent two possible growth trajectories for Chinese GDP. Chinese GDP is currently $5 trillion. A constant $500 Billion growth each year with the concomitant declining percentage gain would grow the Chinese economy to surpass the size of the current US GDP by 2028 and grow to be the size of the entire current global GDP in 110 years from now. Despite the declining percentage that would be phenomenal growth. For analysts to be pointing the finger at percentage Chinese GDP growth rates than are declining year on year as a major problem is just plain ignorance. Now consider that China grows at a constant 13% per year. It would surpass the current size of the US economy by 2018 and surpass the current size of the global economy by 2028.

High growth rates are sustainable if something is very small but this is no longer the case for the Chinese economy. China is the world’s biggest consumer of wheat, soybeans, corn, iron ore, copper, nickel, and tin to name but just a few key commodities. Just last week the International Energy Agency declared China to have become the world’s biggest consumer of energy in 2009 surpassing the Unites States.

China’s economy is now so large that its high growth rate of over 10% translates into phenomenal growth rates of demand for the world’s resources. The financial crisis in the Western world over the last 2 years has reduced consumption of almost all raw materials which has offset China’s growing demand. Declarations of a recovery in the western world’s economies are largely unfounded but what is probably true is that the decline in demand for raw materials has stabilized in the West.

Most western based analysts are almost entirely focused on what happens in the US as an indicator of global growth. But the old adage of “when America sneezes the rest of the world catches a cold” is an outdated paradigm. Now that China is the largest consumer of all the key raw materials a US centric view can be very misleading.

For those of us who enjoy financial market sleuthing the inventories at the London Metals Exchange (LME) are giving us some astonishing clues of what is really happening. Table 1 shows the LME stocks of key metals. The inventory is shown 6 months ago, two months ago and on 7/23/2010. The reduction in inventory is shown for the 6 months and 2 month periods in percentage terms. The last two columns show how many months it will take to completely exhaust current inventory based on the 6 month drawdown rate and the 2 month drawdown rate. It can be seen that the inventories of copper, nickel and tin have declined by 24%-44% in just 6 months. The aluminum stocks are very large but it can be seen that the drawdown rate is accelerating as shown by the months to deplete the aluminum stocks.

Table 1

These phenomenal rates of commodity drawdown are unsustainable and yet they are accelerating; this suggest that shortages are just months away. Such a picture indicates that concerns about slowing growth in China are totally misplaced. China’s growth is on a path to cause a commodity market melt up in very short order.

Figure 4 shows that the Continuous Commodity Index (CCI) has broken above its 200 DMA. This is not consistent with views that a bigger global recession or even depression is in the offing. A major confirmation that commodities are going to resume a major bull trend will be when the January post-recovery high of 505 is taken out to the upside.

Figure 4

Caterpillar last week announced Q2 2010 results. Sales increased 31% and profit rose 90%. The earnings blew away consensus by a blistering 28%! Considering that Caterpillar is heavily linked to the equipment required for mining and producing raw materials the analysts were clearly blindsided by a US centric view of raw materials demand. Caterpillar has also raised its full year 2010 outlook.

Note in Figure 4 how the CCI fell 10% in January 2010. This was triggered by China announcing that it was implementing tightening measures to cool growth. But a little advertized development was that in November 2009 a hedge fund called Ebullio had managed to corner the tin market and owned 90% of the inventory on the LME. How convenient that a rout in commodities occurred and the hedge fund lost 96% for its investors. It would be interesting to know who got to own the tin that was liquidated!

To add fuel to the fire, the raw material producers have cutback on most expansion plans as they have also shared a Western centric recessionary view of the world. Relative to the now very large economy that China has become its growth by any standards is blistering. The raw materials producers are unprepared for a resumption of the torrid pace of commodity demand growth that was interrupted by the 2008 financial crisis. China has massive reserves of dollars that it needs to divest itself of and it has an insatiable appetite for raw materials to fuel its burgeoning growth.

The US has been producing a blizzard of dollars to stimulate a disastrously over-indebted economy. When far too many dollars chase far too few resources the results are highly inflationary for commodity prices.

I have written extensively about how existing stocks of gold and silver have been sold many times over through fractional reserve bullion banking. As investors rush to get real bullion instead of paper promises the “run on the bullion banks” will be explosive for precious metals. As if any other driver were needed, it looks, however, that general commodity price inflation will be yet another driver for the price of gold and silver. The coming upleg in gold and silver is likely to surprise even the most bullish.

Adrian Douglas

Editor of Market Force Analysis
Board Member of GATA
July 24, 2010
www.marketforceanalysis.com

Market Force Analysis is a unique analysis method which provides reliable indications of market turning points and when is a good time to enter, take some profits or exit a market. Subscribers receive bi-weekly bulletins on the markets to which they subscribe.

…..we are being monitored….and best to watch our backs….a la Scruffy’s last post

From: Frank Veneroso
July 30, 2010

Today’s story is the downward revisions to the 2009 GDP data, which I have been predicting forever. I expect further downward revisions to a still highly anomalous Q4 2009.

On the new data the recession was deeper and the second half 2009 recovery was weaker

As it now stands the last four quarters of economic recovery have been almost all inventories and final demand growth has been punk, as I have been arguing ad nauseam. This was with mega fiscal stimulus, which is now reversing. The high Q2 rate of inventory change amidst punk growth in final demand is obviously negative for the economy going forward. As is the reversal in fiscal impetus.

One positive: the household saving rate has been revised up substantially.

The near record 80% rally in the stock market had little to do with fundamentals. It was driven by cynical echo bubble behavior by market professionals driven by mega moral hazard.

It is all the clearer now that the U.S. echo bubble stock market is a knife edge that pivots off of the credibility of a mega Bernanke put. The Fed understands the significance of the unfolding U. S. economic data. Expect signs of a launch of the QE-II

-END-

Barron’s
Are the Helicopters About to Take Off?

by Randall W. Forsyth
Friday, July 30, 2010

St. Louis Fed president calls for “quantitative easing” to prevent Japan-like deflation. Why the flip-flop?

IN WHAT MAY BE PREPARATORY STEP for a major shift in the U.S. monetary policy, St. Louis Federal Reserve Bank President James Bullard warned the U.S. is closer to succumbing to a Japanese-style deflation than any recent time, which he urged be countered with “quantitative easing.”

Quantitative easing, or QE, is economists’ jargon to describe the Fed’s massive purchases of $1.7 trillion in Treasury, agency and mortgage-backed securities, a program that started in March 2009 and ended a year later. The purchases were part of the doubling of the size of the central bank’s balance sheet as the key component of the Fed’s efforts to prevent the meltdown of the financial system in late 2008 and early 2009.

Since QE was instituted, the economy pulled out of its nosedive, stocks soared by 70% and the capital markets reopened for investment-grade and junk corporate borrowers.

But more recently, the economy is sputtering after its late 2009 spurt. And despite the stock market’s smart 7% surge for July, it’s still off nearly 10% from its highs reached three months ago. All of which has had any number of pundits wondering when QE2 would be launched to fight a double-dip recession.

And it makes Bullard’s article for the St. Louis Fed’s Review all the more provocative. It follows Fed Chairman’s Ben Bernanke’s description to Congress of the economic outlook being fraught with “unusual uncertainty.” And it comes about a week-and-a-half before the next meeting of the policy-setting Federal Open Market Committee, of which Bullard is a voting member.

Bullard has been critical of the FOMC’s language that it expected to maintain exceptionally low levels of short-term interest rates for “an extended period.” He hasn’t joined in dissenting, however, with Kansas City Fed President Thomas Hoenig, who contends the “extended period” language will hamstring the Fed in raising interest rates when it’s called far to counter incipient inflation pressures.

But in a stunning about-face, Bullard writes that the “extended period” of ultra-low short-term rates could result in a scenario such as Japan’s persistent deflation and recurring recession despite holding short-term rates near zero. Bullard argues that Japan’s experience suggests persistent rock-bottom policy rates can result in falling inflation and inflation expectations. Every economic setback delays the eventual normalization of interest rates, leading everyone to expect more of the same.

The alternative, argues Bullard, is for U.S. officials to react to negative shocks with quantitative easing by purchasing Treasury securities rather than zero interest rates.

Whether Bullard’s theory is correct is arguable. What is empirically undeniable is that his worry has switched to deflation from inflation in a matter of months.

At a meeting earlier this year with editors and reporters of various Dow Jones publications and newswires in New York, Bullard discussed his criticism of the FOMC’s “extended period” of low rates and that the Fed should plan for an exit strategy from the quantitative easing. On the latter score, Bernanke has discussed the Fed’s options for normalizing its balance sheet in the future.

After the meeting, I asked Bullard privately if the expansion of liquidity through quantitative easing posed a threat to future inflation even though much of it has wound up as $1 trillion of excess reserves just sloshing around the banking system. His answer was yes, it did have the potential to cause inflation.

So, the question remains, what transformed this one-time inflation hawk into a dove seeking a new round of QE? What does Bullard know that we don’t? Those concerns helped to knock the Standard & Poor’s 500 down nearly 20 points, or 1.8%, just before noon, when Bullard’s article began to garner notice.

What’s also important about Bullard’s article is that it is the intellectual successor to Bernanke’s famous speech in November, 2002, which earned the then-Fed Governor the nickname of “Helicopter Ben.” In that address, titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” he cited the potential of deflation appearing in Japan affecting the U.S.

Bernanke didn’t think deflation was a threat because “the U.S. government has a technology, called a printing press, (or, today, its electronic equivalent), that it allows it to produce as many U.S. dollars as it wishes at essentially no cost.” By buying Treasury securities issued to finance a fiscal deficit, the Fed was to use Milton Friedman’s metaphor effectively dropping dollar bills from helicopters.

While that’s what’s mainly remembered from that speech, Bernanke effectively gave a blueprint for quantitative easing and other steps to ease policy when short-term rates hit the irreducible zero. Six years later, as Fed chairman, he got to put those ideas into practice.

But it’s ironic that Bullard ignores the concept both Friedman and his St. Louis Fed are most identified—the money supply. The M2 measure of the money stock, which consists of currency, checking, savings and consumer money-market accounts, has slowed to a crawl, only about 2% year-over-year.

The broader M3, which the Fed no longer publishes but is estimated by Shadow Government Statistics, is shrinking at a stunning 6% annual rate. According to Shadow Stats’ chief, John Williams, whenever real (inflation-adjusted) year-on-year M3 turns negative, the economy has always fallen into recession (or if it’s already in a slump, the downturn intensifies) six-to-nine months later. Shadow Stats’ M3 dropped below the zero line last December, it’s not surprising that any number of indicators are faltering, including the ECRI leading indicator. (See “Do You Believe in Technicals or Fundamentals,” July 28 for more on the ECRI gauge.)

Last month, the London Telegraph reported the Royal Bank of Scotland was advising clients that a “monster” QE was likely from the Fed because the global banking system and the global economy teetered on a “cliff-edge.” “Think the unthinkable,” Andrew Roberts, RBS’s chief of credit wrote.

After Bullard’s article published Thursday, QE2 no longer is unthinkable.

 So many in the gov’t cabal that need to be removed .

(edit by FGC)

Casey research did a great email on the grubberment shutting down blog sites and infiltrating others. In it was a  pointer to an article on salon dot com that contained the descrption of the administration infrastructure to control the exchange of information not to grubbernment liking.  I can’t paste the who email, it is too long. Here is an excerpt fro the solon article.

“Sunstein advocates that the Government’s stealth infiltration should be accomplished by sending covert agents into “chat rooms, online social networks, or even real-space groups.”  He also proposes that the Government make secret payments to so-called “independent” credible voices to bolster the Government’s messaging (on the ground that those who don’t believe government sources will be more inclined to listen to those who appear independent while secretly acting on behalf of the Government).   This program would target those advocating false “conspiracy theories,” which they define to mean: “an attempt to explain an event or practice by reference to the machinations of powerful people, who have also managed to conceal their role.”  Sunstein’s 2008 paper was flagged by this blogger, and then amplified in an excellent report by Raw Story’s Daniel Tencer.”

……

“Given that history, how could it possibly be justified for the U.S. Government to institute covert programs designed to undermine anti-government “conspiracy theories,” discredit government critics, and increase faith and trust in government pronouncements?  Because, says Sunstein, such powers are warranted only when wielded by truly well-intentioned government officials who want to spread The Truth and Do Good — i.e., when used by people like Cass Sunstein and Barack Obama:

Throughout, we assume a well-motivated government that aims to eliminate conspiracy theories, or draw their poison, if and only if social welfare is improved by doing so.

But it’s precisely because the Government is so often not “well-motivated” that such powers are so dangerous.  Advocating them on the ground that “we will use them well” is every authoritarian’s claim.  More than anything else, this is the toxic mentality that consumes our political culture:  when our side does X, X is Good, because we’re Good and are working for Good outcomes. “

“Consider the recent revelation that the Obama administration has been making very large, undisclosed payments to MIT Professor Jonathan Gruber to provide consultation on the President’s health care plan.  With this lucrative arrangement in place, Gruber spent the entire year offering public justifications for Obama’s health care plan, typically without disclosing these payments, and far worse, was repeatedly held out by the White House — falsely — as an “independent” or “objective” authority.  Obama allies in the media constantly cited Gruber’s analysis to support their defenses of the President’s plan, and the White House, in turn, then cited those media reports as proof that their plan would succeed.  This created an infinite “feedback loop” in favor of Obama’s health care plan which — unbeknownst to the public — was all being generated by someone who was receiving hundreds of thousands of dollars in secret from the administration (read this to see exactly how it worked).”

The article is worth reading.

www.salon.com/news/opinion/glenn_greenwald/2010/01/15/sunstein/index.html

Marcy Gordon, AP Business Writer, On Friday July 30, 2010, 10:01 pm EDT

WASHINGTON (AP) — Regulators on Friday shut banks in Florida, Georgia, Oregon and Washington, lifting to 108 the number of U.S. banks to fail this year as the industry has struggled to cope with mounting loan defaults and recession.

The Federal Deposit Insurance Corp. took over the banks: Bayside Savings Bank in Port Saint Joe, Fla., with $66.1 million in assets; Coastal Community Bank, based in Panama City, Fla., with $372.9 million in assets; NorthWest Bank and Trust, based in Acworth, Ga., with assets of $167.7 million; Cowlitz Bank in Longview, Wash., assets of $529.3 million; and LibertyBank, based in Eugene, Ore., assets of $768.2 million.

Centennial Bank, a subsidiary of Home BancShares Inc. based in Conway, Ark., agreed to assume the assets and deposits of Bayside Savings Bank and Coastal Community Bank. State Bank and Trust Co., based in Macon, Ga., is assuming those of NorthWest Bank and Trust.

Florida and Georgia are among the states with the highest concentrations of bank collapses and where the meltdown in the real estate market brought an avalanche of soured mortgage loans. The failures of Bayside Savings Bank and Coastal Community Bank brought to 20 the number of Florida banks that have fallen this year. Northwest Bank and Trust was the 11th Georgia bank to fail. Also high on the list of failure-heavy states are California and Illinois.

Heritage Bank, based in Olympia, Wash., agreed to assume the deposits and $329.5 million of the assets of Cowlitz Bank. Home Federal Bank, based in Nampa, Idaho, is assuming the deposits and $419.7 million of the assets of LibertyBank. In both cases, the FDIC will retain the rest of the assets for eventual sale.

The failure of NorthWest Bank and Trust is expected to cost the deposit insurance fund $39.8 million. Estimated costs for the others are: Bayside Savings Bank, $16.2 million; Coastal Community Bank, $94.5 million; Cowlitz Bank, $68.9 million; and LibertyBank, $115.3 million.

With 108 closures nationwide so far this year, the pace of bank failures far outstrips that of 2009, which was already a brisk year for shutdowns. By this time last year, regulators had closed 69 banks.

The pace has accelerated as banks’ losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.

The number of bank failures is expected to peak this year and be slightly higher than the 140 that fell in 2009. That was the highest annual tally since 1992, at the height of the savings and loan crisis. The 2009 failures cost the insurance fund more than $30 billion. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three succumbed in 2007.

The growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, and its deficit stood at $20.7 billion as of March 31.

The number of banks on the FDIC’s confidential “problem” list jumped to 775 in the first quarter from 702 three months earlier, even as the industry as a whole had its best quarter in two years.

A majority of institutions posted profit gains in the January-March quarter. But many small and midsized banks are likely to continue to suffer distress in the coming months and years, especially from soured loans for office buildings and development projects.

The FDIC expects the cost of resolving failed banks to total around $60 billion from 2010 through 2014.

The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.

Depositors’ money — insured up to $250,000 per account — is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul legislation recently signed into law by President Barack Obama.

www.youtube.com/watch?v=xzawencdO64&feature=related

In the mean time I gonna try that oatmeal recipe you posted while back this weekend. Kinda hot to cook for a long time but may not be too bad in the morning. It sounds good. Kool off with some key lime sorbet later lol throw on some clams Italiano or shrimp and avocado salad or smoked salmon mousse. Guess I’m hungry right now making a small shopping list deciding.
Equiz can’t see how cap and trade is gonna solve anything of they can buy credits from other companies who emit less it’s just more talk to pretend their doing something and charging us to do it. Are you one of the people who grow rhubarb? Have you ever tried rhubarb sauce on angle food cake? It’s easy to make too.

…perpetrated by the makers of ’space’. There is void where it is prohibited.

It keeps everything from happening all at once.

“Good Men will stand in the end.”……that is exactly why I told that long story about Block Busting the other night……Oh yeah right …good men will stand in the end…the ones that shouted that crap the loudest were the first to sell out….it was justified as” Self Preservation”..learn from my history lesson and Ororeef and Wanka
I say “Only when one is somewhat removed from the main battlefield can they make rational decisions…because the battle was started by the cabal anyway…so stay removed .so you can think…..till they are weakened…and then return and maybe then you have a chance to rout the cabal…just maybe….

My whole message for a long time was and is “Stay light on your feet…. don’t get cornered.. counter punch quickly and move .move move.. be able to catch that chicken….

Goldrunner…get your butt out of the office and get out of that town for 2 weeks….the peoples teeth are not going to fall out of their heads because you are gone for 10 days or so….and get down here so you know what the heck is really going on……

Everything that has happened or will happen is in the now.”

My teacher often says ‘All time exists simultaneously’. I am not yet able to explain how that can be, nor do I normally live by that law. However, in occassional moments, I experience it and know that to be true.

“Walk in the now”. I yearn to do that more often.

Thank you for those thoughts.

if you liked that last one, here’s another. again, from the s. wilson translation:

We join spokes together in a wheel,
but it is the center hole
that makes the wagon move.

We shape clay into a pot,
but it is the emptiness inside
that holds whatever we want.

We hammer wood for a house,
but it is the inner space
that makes it livable.

We work with being,
but non-being is what we use.

big birthday party here this weekend so time to say goodnight.

Fully - your charting skills are getting quite good. And I remember when you poo-poohed charts.

aurum

Well I hope I got the tail at the top. You know when you deal with these rural elevators they say well the person is charge is gone - but I will enter your order.

My sale would not have changed the chart - what did was everyone who has an IQ of above say 90 saw the fib ratios on the 5th wave and knew we have a dip coming IMO (also a target price was hit). Don’t worry I still have plenty left to sell.

I don’t really know whether my order was executed or at what price - ah rural elevators. Still when you want to store grain they always have room for yours so I am happy with the whole situation.

aurum

The illusion is the mask of complication to the average man…even the creating fools whom created derivatives were just men…masking….rape and greed…nothing more….no special power other than being in a special class controllers outside the realm of law…..when ….to define …

very simple …my friend when you understand…

At dinner was also a 12 year old granddaughter of a friend. This girl was the most amazing person I have ever met - and I am not easily impressed.

When she was gone for a time I found out that she had nearly died of cancer a year or so ago. What reminds me to post this is the idea that she said “walk in the now.” And her just amazing knowledge.

aurum

So you were the one behind this  

Your father was a mathematics professor. We chatted a bit about some confusing mathematical concept for me and I asked you to ask your dad? Or something like that. Or maybe I said explain this in these mathematical concepts for you to explain something to your dad.

Do you remember that some years ago? I wish I could remember the details.

auirum

smile….yes…i would have enjoyed…the walk to define the new world of created wealth from nothing….to really discuss greed…

actually aurum..wishing you well …walk well and enjoy the spirit of life……all else is just an illusion

Something down your alley.

Time is an illusion. Everything that has happened or will happen is in the now.

aurum (time)

we are FUBAR….why? because we listen to what we wish to be true….we were special…what a walk to define that…simple insight…special

or………………… to see many came as free men to leave the old ways …..others were no so well established …the end of the road crew..men and woman and the like….but we wish not share that history….or what was the past ……smile….

I needed you at dinner tonight - I sat next to a calculus professor at a famous college.

I know a bit about derivatives and functions but I needed help. You should have been there.

aurum

Ah retrospect is so perfect.

See how the channel was broken and then retested and then we take off.

aurum (DAG)