Thursday, December 17, 2009

A Look at the “Recovery”:

By Joshua E. Stone

From film to finance, the internet offers a beacon of innovation for America’s economic future...while the high tech manufacturing sector fights to survive the onslaught of new taxes, America struggles to gain its footing in an uncertain and frothy recovery.

Is the recovery for real? That is the biggest question of the year for many people. Looking back on 2009, it was quite a year. It did not offer up as much historic volatility in the markets that 2008 did, but behind the scenes the monetary policy of the country was something of an epic story. Needless to say it appears that the Bernanke School of Injection has been beneficial for Wall Street. The problems are how long will it be before Main Street benefits, and will Bernanke be able to pull back on monetary support for the system via low interest rates and TARP programs without the recovering economy triggering inflation. How long before the Main Street recovery catches up with the Wall Street rebound? Or will the rebound turn out to be just a cyclical rally in a larger down cycle like some analyst say, leaving the catch up of the real economy lost in a quagmire of fallout from a vanishing fortune in securities. The other three problems that are much bigger and really more important in the long run: will the politicians do anything about the small business credit availability, the debt and energy problems?

Bernanke faces an unprecedented challenge never before undertaken in history. The balancing act he must pull off in the next year or so is very complicated to explain. It will also be harder for him to accomplish than most of us realize.
From what I understand his challenge is to withdraw the TARP funds, thereby reducing liquidity or the amount of money in the system, and keep interest rates at a level that keeps inflation in check and also does not strangle money supply at the same time.
Considering these two facts, he still has quite a heavy arsenal at his disposal. But how he uses them will be completely dependant on the economic data that he gets. Assume for a minute that there will be no more big bank problems and the TARP funds will not be needed anymore, so he will be able to continue to pull back lending. This will reduce money supply. Then assume for another minute the economy does heat up and he has to raise rates to keep inflation at bay. This would be really something and could mean the dollar would be in the lime light once again as the money supply shrinks and it will bring the dollar back into favor. The long term threat to this scenario and the strength of the dollar is the securitization of assets and the structural imbalances between the eastern and western economies and of course the energy policy and the debt. An article that fellow Twitter user Ancient_Warrior found and posted explains much of these problems and others very well.But I think these problems are still at least five years from becoming the end of the world lights out problems that the gold bugs and naysayers believe they are. Yes oil and gold are going very high. But it is going to take another ten years of negligence from the politicians and the voters who put them there before the gold bugs get the 5k an ounce in gold. In short, there is still time to fix this mess.
The stocks are telling us that as well: on a technical level the S&P 500 has retraced 50% from the March low. I continue to believe this level will be a key decider of the recovery. If we get above the 1224 level and hold, it will be very bullish and indicate the recovery will be strong within six months from the point the S&P 500 does decide to make the 1224 area support on a technical level. But really we need to wait and see how January goes to see how the rest of 2010 will go. Analysts are expecting some selling in stocks in the next ninety days, and I tend to agree with this. Also gold has taken a good fall from the highs, and hopefully indicates a period of consolidation is underway. Gold is a great buy at 1000 now. We need to see how it reacts to the former resistance at 1070-1100 to get a better idea of what’s next. So it will be February before we can see how the GDP, NFP Housing and retail data are in Jan to really know more. Anyone saying that stocks will tank in the first quarter or this or that just can’t say that for sure without data to support it. If the economy were to tank, then gold will have to go back to down quite a bit. Just remember, as long as the consensus is that the data coming in is positive for the economy; gold will keep going up a lot.
How long it will take for the recovery to come to Main Street? It all comes down to jobs. When will new jobs be created by this economy?
The outlook is not good sadly; half of the much touted US GDP growth in the third quarter was spurred by the stimulus or the Recovery Act. The drop in unemployment last month was weak, and not a surprise considering the season. Were in the longest period of unemployment ever, that is to say, on average people have been out of work and looking for a job for a longer period o f time than in any other time since they started keeping those kinds of records from what I understand. Also the recent retail data was actually down from last year in some areas excluding food, and energy, like clothes for example. The housing data touted by the drive-by media as recovering, has others pointing like JimBurness who posted an article that points to dire facts that don’t look so rosy. One fact that is very troubling is that one quarter of home owners are in foreclosure, and seven percent are thirty days behind on their monthly payment. Another big problem in housing is that higher end homes are not selling, and most of the sales are in the foreclosure market and lower end homes. So that means the inventory is a long way from being tightened. On a more troubling note, it also means that the people are not moving up from the mid sized homes to the larger ones. This means that the middle class are not moving up. Not surprising to most everyone out there. The data being watched by the experts for the recovery is frothy to say the least.

The two bright spots in the employment arena where I believe we will see the most opportunity and the fuel to help lay a good foundation for jobs are high tech manufacturing, and the internet continuing to reshape industries as we have known them. Of course it goes without saying, but I must repeat the mantra….the politicians have to develop a jobs creating energy policy and deal with the debt also or we face the gold bug scenario of gloom and doom.
The high tech jobs are here, though the work force is not educated enough for them, and the sector has vultures circling in the form of higher taxes.
On the other side of the spectrum the internet continues literally turning industries inside out and has everything from film to finance in turmoil and turned upside down on their heads.
Two examples I can think of on the internet are StockTwits and FansofFilm.
On the financial side Howard Lindzon has created a platform that allows Twitter users to post their Twitter updates into a financial stream that aggregates Twitter updates that are tagged with the “$” symbol for financial related updates. I once saw an update that compared the StockTwits stream with Barrons. My personal opinion is that the StockTwits stream and its blog network have more financial information from more outstanding sources, content (both premium and free) and individuals in one place than I would have ever thought possible even six to nine months ago.
On the film side I am very proud of my brother Michael Palombo and the work he has accomplished for the film industry and most importantly its artists, where he has blown the doors off of traditional four wall distribution, by giving film artist the opportunity to distribute and market their films with the same technology that the giant networks like FOX and NBC use on their sites for video content, an amazing and as yet virtually untapped technology called VOD (Video On Demand). This technology is just now being used by professionals to provide videos on demand to their clients for educational purposes or just plain entertainment as in the case of the major networks. In the case of FansofFilm, the technology is being taken a step further and being used to help artist and producers directly.
Michael Palombo and Howard Lindzon are one of many examples of how folks on the internet are continuing to take the existing technology as they have done for all time, and harnessing it to provide consumers with products they want and more importantly allows them to choose their consumption level in ways that would have never occurred to most of us and still many more can hardly wrap their minds around yet. Just like Google, E-Bay, Amazon and so many others have done over the years.
Google is the ten ton gorilla in this arena. Most folks still don’t get exactly what Google really means and how much it is actually worth.

Though I don’t agree with much of what Richard Florida says in his March 2009 article from the “The AtlanticHow the Crash Will Reshape America”; I do agree with the idea that we face a fundamental shift in demographics and the economy. However, the recession has merely accelerated it; the shift has been underway since the internet came of age in the late nineties and before that with the industrial revolution, and cheap energy has always been the backbone. The internet and manufacturing require lots of energy, so energy must remain cheap for any meaningful economy to manifest. I also think petro can’t be too expensive, as much of the world industry still needs it for basics such as plastic. I also think that folks move less now precisely because of the internet and the new economy allows them to work remotely in more cases now than ever before in the past. It is the bad energy policy leading to high costs for fuel and food that hurt most, and the politics of installing high speed internet. I would say getting internet to the rural areas is about as important as getting the railway built was and has just as big of an impact on a community when it does arrive. The difference between the rail and the net, is in the case of the rail you needed one rail going through a state to satisfy the requirements of transport, and that lead to demographic advantages materializing in the form of suburban and metropolitan development; in the case of the net the infrastructure for the web is possible to bring everywhere and not favor a particular region unless unusually remote. It is not the distance from the city so much that sets back my productivity as much as these infrastructure and energy issues that should not even exist in the first place if free enterprise and the free flow of information were a priority.

So in a nutshell, I guess what I am saying is there is hope, and the future is bright for jobs. It will not be easy, and the biggest threats are economic and energy policy. The hardest thing is the jobs are many months and depending on how things go next year maybe years away. It is truly sad that the Administration has gone on record as saying jobs will be coming back by spring, they don’t have a great record at predicting these kinds of things. We need to do four simple things right away to spark this recovery into producing jobs: first, a jobs creating energy policy, second, get the rules of the game straight for small business, third, draw down the debt and fourth, promote what manufacturing we have with tax credits and less regulation that is actually enforced, and can’t be bought off by lobbies.

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Below is a list of some key point made in this article and links to some of the articles I have read and/or used in this article.

• Securitization of Assets (
• Longest period of unemployed
• Seasonal NFP
• Half of GDP growth was stimulus
• Private sector growth/credit
• Recent recovery data is frothy, ie some sectors (if you exclude autos, food for example) of retail sales were actually down from last year.
• The housing sales are new home buyers and foreclosure market, higher end homes not selling
• The new economy(web 2.0 and high tech manufact)
• Structural imbalances
• Economic Outlook for 2009
• What housing recovery? The Most Important Housing Chart Shows Things Are Still Getting Worse
• How the Crash Will Reshape America
• California losing manufacturing jobs, including high-tech, faster than nation as a whole, according to Milken Institute
• Virginia Business - Opinion: Are you ready for the aftershock?

Monday, November 16, 2009

Recessionary Rally

By Joshua E. Stone

The Dollar is increasingly frowned upon as a world reserve. As of Oct 6th gold surged to new highs. This was helped by the global meetings to talk about creating a new reserve currency not pegged to the dollar. But this comes as no surprise to those following my blog or those paying attention to the “recovery”.
We have a few reasons for these rallies in stocks and commodities: the “psychological” rally, the “recovery” rally, and then there is the “nothing else to buy” rally.
The “psychology” rally is hard to peg, from what I have read it is spurred by the fear of getting in too late and in my opinion is the same as the “recovery” rally or what some refer to as a "recessionary" rally.
The “recovery” rally is a natural cycle seen in recessions called a “recessionary” rally. A recessionary rally can last up to 24 months, I have read. That would mean this rally has some legs still. More interestingly, that would make this rally mature around the next election cycle in 2010. Then there is the “there is nothing else to buy” rally. This is basically a matter of liquidity. What I have referred to in a previous article as the “Bubble Transfer”. With all other investments shrinking on the back of a falling dollar, there is no other place to put money other than stocks and commodities.
Since the recessionary rally is basically a matter of psychology, that is, the idea that the economy is recovering, it will be a matter of psychology that changes the trend from up to down. When this will happen is anyone’s guess but, many analysts are saying they think we have seen the bottom in stocks last March. The technical indications point to this as well, i.e. the strong rally to DOW 10k to name just one item of note, the surging GDP fueled by the FED hijacking of trillions of tax payer dollars another item that has analysts seeing a recovery beginning and other less wise soothsayers claiming we are out of recession already. Try to explain that to the unemployed, however. One problem with techs as anyone who trades knows, they can change just like the fundamentals driving the market can change. On the tech side of the rally many analysts think that the market is due for a pull back from these levels soon. I don’t think we will see a major pull back before year end however.
Still many other analysts are saying that there is no way the economy will recover from the hole were in this time. I guess they think the stocks will go even lower than what we saw in March of `09 at some point. This might be true, however even if this is so, we will not see this happen this year or even next. It will take some time. I think we could even see another bull market ensue before then. This will hinge upon the GDP, Employment and Housing data going forward in 2010.
So that leaves us with the last great bubble and only place left to put our money for secure growth over the foreseeable future: commodities. Since we are seeing some kind of hybrid recovery going on via China and FED magic, there will be a greater demand on fewer resources.
The wealth cycle of bubble transfers is underway and in full force. We have wheat and various commodities trading at depressed levels and even gold is depressed compared to historical inflation measures. As the trillions of dollars of wealth that was harvested from the tax payers and by the corporations dwindles in value and is transferred to the newest bubble of gold and commodities, Main Street will be left with a dwindling middle class as their purchasing power vanishes and is consumed by higher prices for food and energy. While their children will be left with a debt that is to big to even comprehend.
Yet in this process the ultimate goal will be accomplished; to drive up the value of gold, then use the profit to buy up wheat and other staple commodities, sending their value up; thereby securing a food and energy monopoly for the very rich.

Wednesday, September 9, 2009

The Summer of Twitter:

2009 will be known as the summer WEB 2.0 overthrew the mainstream media as Twitter and other blogospheres shatter the Medias own imposed glass ceiling by eliminating the six degree separation of the “experts” from the “masses”

By Joshu E. Stone

What am I talking about? Van Jones of course. The mainstream media is livid that what they are calling the ‘sewage” of the internet has usurped their power and is now the media that decides what the President can say to schoolchildren, who he appoints to his Administration and perhaps even decide what wars are worth fighting like the late legendary Walter Cronkite did in the hey day of the birth pangs of the mainstream media.
Walter Cronkite was not thorough and professional however. He failed to uphold the most basic principle of ethics and integrity in journalism: he did not admit in that fateful broadcast that all but ended the Vietnam War he could be wrong in his judgment. He passed it off as fact: the war was bad and we had to get out. It may have been true, but a responsible journalist who respects the power they have to influence others would have been very careful to report the fact that his facts might not be all there were to the story.
The crucible of ethical and quality journalism is reporting the facts as you see them, and then being clear that you don’t know everything. Cronkite set the bar very low in this very crucial area of journalism, and since his passing I now understand why the mainstream media always acts like they have covered the story fairly and that they know all the facts. In fact they seem to take offense at the mere notion that a population they have said “don’t know what the word euthanasia means” (This Week with George Stephanopoulos) or “most of the population does not even know what plagiarism means” (Rachel Maddow) could possibly have insight or facts they don’t know about. To them the listeners of Amy Goodman and Rush Limbaugh are not educated participants in our democracy, but rather a kook fringe that is too radical to deal with.
Personally what Twitter did for me is eliminate the six degree glass ceiling that separated me from communicating directly with celebrities, analysts and politicians just to name a few. It has given me truly fair and balanced access to all the different sources of information out there. No longer do I have to ask myself, I wonder what Bloomberg is reporting on this story; I can see the story being posted by Bloomberg directly and others reporting the story from Bloomberg or another media outlet all at once.
So here’s to WEB 2.0 , Twitter, Facebook etc., and all the social networks that have turned traditional “drive by” media upside down.

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Analyst Look for Pent Up Consumer Demand to Sustain Recovery:

Stock rally forecasts a strong recovery in Q4, but glittering gold spells out risk aversion and inflation on the horizon.

By Joshua E. Stone

I heard an analyst say something profound this summer: don’t miss the market. Clearly the equity bears have done just that this summer. The question is why the market has shrugged off the bad fundamentals so many have pointed out this year. The answer might be pretty simple: the S&P 500 is a forward looking instrument. It is pricing the health of the economy about six months in advance. Not six years or even six days. According to some analysts, the recovery will be sustained by pent up consumer demand from the savings they have accumulated. At this point Wall Street seems to think the same thing or at least it must be thinking something positive about the economy for the near term.
Keeping this in perspective clearly means the bad news bears are not necessarily wrong. It does mean that those who got in the market this last year have been very happy with the results so far. The fact is by most accounts I read from, the money flow in stocks is no longer long, and the major inside traders are shorting. But they have the ability to stay solvent much longer than most of us as the market acts in what some might think an irrational way. Since the stocks have already priced in a good economy( at least much better than the last few quarters) for the last quarter of 2009, it would make sense that it would start reflecting some rising trepidation as it is now pricing in Jan and Feb of 2010. By the looks of the Sept so far, the first quarter of 2010 is shaping up rather optimistically.
This is not a surprise to those of us who have talked about Obama and how the majority trust him. Though his approval is down, he is still the most trusted politician by a few landslides. I think it’s possible the S&P might be higher than its present level around 1k by the end of the year. In short, Sept and October pullbacks will be another good opportunity to add to longs from lows of this year. The same can be said for gold, oil and the eurusd as well.
The strength of the greatest psychological bubble of all time has been quite amazing and deserves some healthy respect. I am speculating that the psychological nature of this rally may mute the usual Sept-Oct correction. The fact inside traders are mostly short now, could be a reflection of the massive risk aversion out there, especially among professionals as they tend to take more factors into account than the rest of us. They have to; it’s their job to avoid risk. I don’t think this means the inside traders are all expecting a massive meltdown in stocks this fall, only that they are prepared for a correction as historic precedent clearly shows is quite likely this Sept or Oct. If you’re interested in seeing my most recent chart analysis of the various instruments I follow and have mentioned here be sure to look at the frame on the right side of my blog entitled “What I am Looking At”.
All that said, for the bears I have this idea: Sept of next year will be the start of a whole new down cycle of data as the unemployment pains are felt and are channeled out through a massive uptick in foreclosures. If not this Sept-Oct then perhaps the target rich environment will manifest itself next year.
That cycle could be very bad for equities, even lower lows than 2008-09 in stocks might happen. This is the logical conclusion if you look at history for a reference. For example, most recessionary rallies last about two years. That means this rally is in its infancy if the historical pattern is repeating itself as usual.
Since the stocks are predicting an economic recovery by year end and perhaps for the beginning of 2009 already, this brings us to the pressing issue of how is the President going to deal with the crash of the dollar? First of all I think were going to have to see a much bigger loss in the dollar before it gets the Administration’s attention. I guess the fact that it is worth 8/100ths of what it was since the mighty days of the 1800`s is not a loud enough alarm for these drunken sailors in Washington DC. Or perhaps that’s part of the plan. The Administration is on record as not being concerned about inflation anytime soon. I also don’t think the Administration has factored in China properly. China though amazingly progressive for its nature has been doing things their way nevertheless. It is costing everyone. How much will it cost eventually? No matter what happens it will cost a lot, some plans I have read that speculate on revaluing the currencies could put gold well above $2,500, perhaps twice that even. The recovery is strong at this point, but very bad retail sales out of Australia for August could be just a precursor of what’s to come next year in the way of deflation for the rest of the globe if something is not done about the crash of the dollar.
Right now everyone is looking at gold, and its fourth attempt in history to peg 1k. I think it will easily break this level to settle back in above 1k by year end. I have heard other analyst expect this too. My speculation at this point is the dollar will fall a lot more between now and Nov, sparking some debate at least if not action by the Administration to address the crises. The response might very well be worldwide and coordinated. Some analysts are saying they will ban spot forex all together and create at least one or two other new “reserve” currencies alongside the dollar. Many scoff at this idea, the arguments are it’s too hard to get everyone to agree, the logistics are to massive etc. What these same critics might be forgetting is the fact that Obama is the most trusted and liked politician of our time, and if he says follow me, they will follow. They have no choice, they don’t trust anyone else more than they do him, and so who else can they listen to or follow? If you have any doubt about this, watch how some version of the healthcare bill is passed soon, and after that cap and trade. I am not saying all this will happen for sure, I am just reporting on the fact that a few analysts have created a buzz on just these subjects and their implications for the economy and the people.
I guess a reminder is in order here: according to the mass on the left and even Alan Greenspan eluded to it, capitalism is a bad love story and its time to fix it. We have a saying where I come from: “if the wheel is not broken don’t fix it.” When I look at China and Europe I am not a believer in socialism or communism that’s for sure. If anything Russia and China have proven that capitalism does not mix well with government control. There is actually a word for that kind of a system: fascism.
Perhaps I am wrong, perhaps the American people have seen the light and smelled the coffee, and will not be taken in anymore, by Obama or anyone but a bunch on fresh new faces in the House and Senate in 2010. One would think this is the case since even fringe bloggers like me have proven to have more credibility or be more accurate to say the least. There is more than one example of the blogosphere having more credibility than the mainstream media or the current Administration. For instance I reported early this year that many analysts were forecasting unemployment to reach double digits by year end.
I figure another reminder is in order here: the people were promised that unemployment would not go higher than 8% this year by this very Administration that everyone has so much faith and trust in.
Yes We Can!

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Monday, July 20, 2009

Debt and Consumer Savings to Tank the Dollar and Stocks:

Consumers stimulated to save as reality of “recovery act” leaves pockets empty and Wallstreet laughs all the way to the bank.

By Joshua E. Stone

All the railing on the stimulus might be unfair; in fact people talking about it may not have really looked into it very deeply. The funds are directed to very worthy causes in some cases and will certainly spur growth in the economy later in some sectors; however it neglected to take care of the two most important things to spur confidence: a clear and reassuring energy policy as I have repeated many times on this blog already and disposable money in the pockets of consumers right away; so the banks wipeout the 401ks` and the tax payer with one stone. Double wammy!

Simply put the stimulus spends too far in the future to help an economy that all experts said needed an infusion of disposable income immediately. This is the typical kind of oversight of typically overreaching politicians who want power and are not concerned with the plight on the street. The pain and fallout from these policies are not fully realized yet by the masses. But as unemployment reaches double digits and the Congressional Budget Office releases come out in August point to incomprehensibly soaring debt, just as I and many others said these things would happen; it will all become undeniable. Even by adored politicians who face re-election soon. The pain will even be mathematically clear to those not affected directly. With 85-90% employment, its hard to ignore over 10%, after all it was only 10% of the people that supported the revolutionary war of the United States from Britain... On the flip side, most people are working still so it’s not the end of the world. It just sounds like it, and feels like it for 9-10% of us.

Now as for the spending at some point trillions upon trillions of dollars in debt will be undeniable as well. It will be a 9/11 style wake up call is my feeling, a 9/11, but a 9/11 on the dollar. Last year we had 9/18 and that hit stocks. This year it will be the debt that wakes everyone up from their drunken pre 9/11 zombie mode. But again on the flip side...the American pockets are deep and all the sources of money out there are not fully understood, if the policy can change in time, we can save ourselves from the debt too.

Thanks to the tremendous wisdom of the politicians who passed the stimulus, no one has any extra disposable money to spend. In short they sent the children out in the blizzard to get the sleds with no coats. This will have a very negative impact on two thirds of the US economy and shrinking: consumer spending. This in turn will prolong a recession that has already lasted 19 months and shredded 7million + jobs, causing the economy to shrink even further. This is already the longest and most painful recession on record for the US.

The good news is I think the politicians already planned it this way. If they had granted a stimulus that helped the peoples` pockets, there would be no way they would have enough political capital left to convince the constituency another stimulus was required. A stimulus that added to the debt and would be crucial for a strong and healthy foundation for the future of the American economy to insure it competes in the global theatre. In short they had to keep the tax payer hungry to get everything they (the politicians) wanted and perhaps need to keep this country great and competitive in their judgment.

The reason a second stimulus will be passed is because it is required to keep the recovery on track; a recovery that is already threatened by the meteoric rise of looming deficits and fluctuating employment numbers that are not losing momentum. To top it off, the government has borrowed all the money, so the only prospect for growth in the economy will be in the government sphere. The second and most potent reason: the 2010 elections. So where does this leave us? That leaves us in debt; the estimates for the healthcare by the Congressional Budget Office are chilling. The outcry against Cap and Trade is even scarier. So the consumer will retreat and save.

This means we have conflicting signals for the dollar and stocks: the debt scare should send the dollar down and the consumer saving should send the dollar up. I think we will see both scenarios play out by the end of the year. Stocks go up in recessions, by the time the recession is over it is too late to get into them historically. So don’t let this rally lull you into complacency or take it as something indicative of an early recovery. In short 2009 will be a year of revaluation for commodities, stocks, the dollar and real estate. In my opinion the strength in this rally is indicative of the possible strength in the ultimate recovery if policy is executed properly, not an indication the recession is over. If they pass a stimulus before the end of the year for the people in time for Christmas we will see an amazing bounce in the fourth quarter. Already the organic recovery in the economy is doing very good considering all the problems that have been heaped on it and compounded by the bad policy in the last year. Some proper management from the politicians’ could really get things on the fast track to recovering. If the bad policy continues, we`re going to see an even longer recession and my guess is a global depression that will come here to the USA eventually.

Ask yourself a couple of questions going forward: why will congress not join the people in the public program for healthcare? Why it is there is so much big money interest in passing Cap and Trade? Who really benefits from these bills?

Below is my list of items that have my attention:

• 11 trill $ debt /20 trill over next ten yrs.
• Unfunded liability
• 2nd Stimulus
• Consumers’ savings 7%
• Congressional Budget Release in August
• Employment Numbers
• So much bad data
• Game Changer (pre 911 atmosphere)

Below are links to some of the stories I have read and one that I wrote myself:
(medvedev world currency) threadid=3159732&pagenumber=1
(goldman sachs is everywhere) care-takeover/
(cost of healthcare)

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Friday, June 12, 2009

Recovery Underway For Now but Consumer Confidence to Take A Hit

By Joshua E. Stone

The economy has showed all the signs I was looking for when it comes to economic data supporting a recovery. In fact the data coming out of the UK is beyond forecasts for the most part. Since this was one of the first economies to start falling, it makes sense this will be the one to start recovering first. I find the forecasts these days for data releases are very incorrect to say the least. There could be a number of reasons for this I am sure, but I am taking it as another sign that no one really knows what to expect in this recovery.
I see signs on the street myself of a recovery taking place, though some of the big projects in town are still waiting for financing so the recovery is not in full force yet. One of the biggest problems is the way the Washington bailouts have kept all the trash stuck under the water. Housing prices are still too high, the stock market is already over valued; worst of all the inflation is simmering with oil at $70 a barrel and gold near 1k.
I fully expect to see oil and gold stay in this range and perhaps surge to even higher levels this summer or next year or even in the coming weeks. The architects of the recovery are failing miserably and they can’t possibly admit it. They have simply ignored the safety harness. Because of all the debt and the decision by the New Administration to focus on healthcare rather than the real problem, energy, we have been set up for a major depression in the not so distant future. Simply put, the “recovery” is already threatened if not derailed by the coming inflation and debt. My guess is this depression will hit us within the next ten years at best. The worst thing is the opposition party seems to be betting on this happening even sooner by the way they scream the sky is falling everyday. I think they will lose the next two election cycles, 2010 and 2012 because the economy will seem to be doing good enough to keep the current majority in power. This will be accomplished mainly with the help of the mainstream media of course, since they are always six months behind the curve on information anyway. They will not report on the major threats facing the US like inflation, energy etc. It will be all about how the opposition foiled and stymied all the efforts of the wonderful party and president who just wanted to pay for our doctor bills. If they do pass healthcare reform, I would expect the depression to kick in much sooner than ten years from now.

All that said, I feel it’s important to remind everyone of something called the Plunge Protection Team. Basically it means that everything in the markets has been being manipulated for a long time already. So with that in mind, I am sure that the New Administration will make sure that stocks and the economy look good enough too keep them and the current majority in power for the next four to eight years at least. They will also use the same rationale that war time President George W. Bush used in 2004: “We can’t change course in midstream.” They have left no stops plugged for this power grab and they are not going to lose it in a mere two years.

It’s easy to predict this one. Some analysts are already doing so. Consumer Confidence is going to go down again. The recent rise in gas prices, coupled with the enormous debts being piled on the tax payer will start taking its toll soon on the consumer. The New Administration has completely disregarded the advice of so many analysts including myself and totally shut out our cries for a Manhattan Project style energy policy. The repercussions of this dereliction of duty make those of us in the financial and business world shudder. As a result I expect Consumer Confidence to start taking some hits as it starts to ease from recent highs made off the record lows recently set by it. This key data is in great danger of taking another plunge now that the policies of the new Administration are becoming clear. Once the policies start being felt then the Consumer Confidence will start taking a sharp plunge. The effects are already being felt at the pump, but this is an early sign and most consumers only have this at the back of their mind as one of those annoying things they can’t face right away because it is still cheap enough to deal with for now. The most disturbing thing for consumers is how fast prices are moving up already. If oil and gold prices stay at current or higher levels, it will leave no room for lower prices while the recovery is in progress. It may even prompt the Fed/FOMC to act with rate hikes too soon. In short the only thing they could have done to get us out of these crises they have not done anything about: the energy crises.
How long this takes to play out is hard to say, I do know the current majority in power in Washington will do what it takes to stay in power for the next four years at least, no matter what it takes, except make energy and fuel cheap. Once we see Consumer Confidence start to fold, the stocks will start doing the same thing at some point. It is quite likely we will see stocks in the S&P near 40% lower than the bottom seen recently in March of `09. I expect this should play out in the next two years if history repeats itself like it usually does.

To read more articles by this author click here.

Monday, May 25, 2009

Gold Rejects the Key 850 Area:Remaining on the long track $900 proves to be a good level to be in gold.

By Joshua E. Stone

Gold came within just a mere $10-15 of my target in the 850 area at 865 and promptly rejected it and now mere weeks later gold is soaring well above 900 dollars an ounce; validating a previous post suggesting the 900 area is a good place to have longs positioned in the commodity. In yet another post I suggested targets for the golden metal, and the key fib supports identified in my study played out nicely. This is only because the stocks have had a marvelous rally from the lows seen in the first part of this year. I think the gold price would have gone lower if not for this long rally we have seen in stocks. We did not have the anticipated hysteria largely expected by many with the highly publicized so called “stress tests”. Also the behavior of the stock market is reflecting what a good recovery if not rebound we will experience in the economy. Hence the gold has gone up on anticipation of inflation fears even though we don’t have any inflation at the moment. This is not to say we are not still in a bear market and we will not see retests if not even new lows (though unlikely) in S&P and DJIA.
I think gold will continue to play out like it did last summer, moving higher in the next month or so; though clearly we don’t have the one way momentum we had last year in the decline of the dollar. It is a fact the dollar did not fall as fast in the first part of this year as it did last year. This most know is because of the flight to safety status the dollar has enjoyed on the hills of the manufactured crises that the paid off politicians let transpire over the last several plus decades. All with their cronies who make all the money from these periodic scams on the tax payer in the endless plot to hand our sovereignty over to the international banks. This flight to safety will continue to drag on the gold and eur/usd as well as the overall decline of the dollar. To many the question is not whether the dollar will continue to fall; the question is how fast it will fall.
Not only is the eurozone facing some severe headwinds and not so nearly as resilient and fast a recovery as their allies across the pond, the fact is the New Administration has been at the helm of the fastest and strongest recovery in the dollar I have ever seen in my relatively short time trading. I think its safe to say it was an amazing event and all the traders I talk with were all just as surprised by the overwhelming strength that the greenback has flexed with the advent of the crises last year. Many will say it’s just the crises that have resulted in the rise of the dollar. But I don’t believe that’s the only reason. Also the fact remains: the current Administration has enjoyed a strong dollar, as did the previous Administration at times during its eight year term in power. I have even talked with some traders who think the eur/usd is going to go below parity again.
Which brings me back to the point made earlier about how the dollar has done very well under the New Administration. Apparently the trend for the dollar under the new President is favorable for the resilient buck. This is something to take note of in my opinion. It could very well be that it’s all a matter of circumstance and confluence; on the other hand it is also possible it is part of a larger plan to save the dollar from extinction. Another thing I learned in the summer of `07 with the merciless carry trade unwinding: when everyone knows about a trend it is usually over. Everyone is talking about the death of the dollar and has been for some time now. Yet the dollar is actually not falling as much as many have expected it to. Again I know people will point out the crises and the dire straights of the eurozone…I would just gander it is not unwise to wonder if something else might not be at work on top of all these extenuating circumstances. It’s not like some have not seen and been warning everyone about all these economic troubles coming for years in advance.
By now you are probably asking where I am going with this. It’s simple: the Undertakers of the dollar are in for a long haul. If things are done correctly to mitigate the debt and energy problems in the USA; the Undertakers might even be looking at having to resize their coffin for another unexpected and unrepentant client. If history continues to repeat itself this summer or fall will bring something new to the market to shake things up again. What the catalyst will be exactly is hard for me to say as my sources of information are the same as most everyone else’s. I am just going to say that the last two summers were very volatile to say the least and if there is one thing I have learned up to this point is trends do not end easily.
So what else could possibly be out there? To get an idea we need to look to the real and most immediate crises at hand: the massive debts. We need to ask the question: what are ways this problem can be solved? As of the writing of this article the current US President has said “we are out of money”. One’s first and natural reaction would be “the tax man cometh”. But wait, were in a recession; raising taxes in a time like this is not wise. Monetizing the debt is one idea that’s been thrown out there. But wait, were in a recovery; it’s not wise to build a superhighway to hyperinflation in such precarious economic times. What are some other options? I am sure there are more, perhaps many I have not thought or heard of. But one solution I have mentioned in a previous post is revaluing the dollar. How could this be done? Monetizing debt as mentioned before; or valuating the dollar against something else besides the very volatile and unstable price of gold. These are just two possibilities…as I mentioned already. I am sure there are more solutions and ideas out there.
One more note on the debt and all the spending at the risk of being laughed out of the classroom: it’s a hoax and a scam. We have lots of money in the US still. You’re asking: even if that’s true, what do I mean by that? I have talked to a few folks about this subject and found out something interesting that makes sense to me: the Governments in the USA from the Fed to the State have what one could call“asset income”. This is income from returns on investment and existing infrastructure like tolls and fees for museums to name a few. This is how the congress pays things on the spot like bailouts and emergencies etc. After all, have you not ever wondered WHERE they get all that money on the spot? It is not like the Congress decides to unload 750 billion dollars by selling treasuries at that moment. No everyone knows that treasury auctions are scheduled in advance and the revenue from them is used to pay for the debt we have already planned on going into for the future plans of a budget that is projected into the future.
I could be wrong about this, but I have run into this concept in more than one place when talking to folks on the street, traders and non-traders alike. If it’s true, then it adds a whole new dimension to the politics of debt and what really is the motivator behind making everyone think we are out of money.
I think that at some point before the end of the year the New Administration will have no choice but to address this most important of all issues beside the energy crises. Oh yes, the REAL problem: the energy crisis…that’s a story for another time.
Since this post coincides with Memorial Day in the USA, I want to take a moment to extend a gratitude that words can never express to all those who have served and died in the service so that me an others have the freedom and time to twitter, blog, trade and run businesses large and small in this the greatest country on Gods green Earth.

Monday, May 11, 2009

US Economy & Fed What a feeling: how emotions may yet save the economy

By Chrystia Freeland
Published: May 7 2009 20:35 Last updated: May 7 2009 20:35
An influential Democrat who was also one of the world’s top-ten, highest-paid hedge fund managers last year thinks he knows which book is at the top of the White House reading list this spring: Animal Spirits, the powerful new blast of behavioural economics from Nobel prize-winner George Akerlof and Yale economist Robert Shiller.
Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline.
Q&A: Stress test jargon explained - May-07
Interactive graphic: Stress tested - May-08
Banks turn to markets in effort to plug holes - May-08
BofA aims for $34bn in fresh capital - May-08
Morgan offers $2bn in common stock - May-07
US Treasury yields soar on poor demand - May-08
Since mid-March President Barack Obama and his team have mounted a sophisticated effort to brighten those “ideas and feelings”, reassuring the nation with “glimmers of hope across the economy” and the assertion that “we’re starting to see progress”. The much bally-hooed stress tests – whose comprehensively leaked results were fully unveiled after the markets closed on Thursday – are both an important example of this confidence-building campaign and its toughest challenge.
The sunnier rhetoric of recent weeks marked a sharp shift both from the bleak mood of the fin de regime administration of George W. Bush and from the first weeks of the Obama White House. The outgoing president’s political capital was so low in his final months in office that the mere fact of his public appearances seemed to have a depressing effect on the markets. His secretary of the Treasury, Hank Paulson, enjoyed greater confidence, but he needed to convince lawmakers the situation was dire enough to merit his $700bn Tarp programme.
Likewise, Mr Obama needed the nation to be worried enough about the economy to pass his nearly $800bn stimulus plan. And too much good cheer in the first days of his administration could have wasted one of his most powerful trump cards – the country’s belief that this recession is owned by president number 43, not number 44.
But once the stimulus bill was passed, the White House calculated that, as Mr Obama told the Financial Times, lawmakers and US voters had reached their limits. No new money to rev up the economy or revive the banks would be forthcoming until the president and his team could demonstrate concrete results from the first instalment.
Since then Americans have been hearing a decidedly more optimistic vibe from Washington. It has seemed to work. A Google search for the term “economic recovery” turned up 6,991 references to the term in January and 7,831 in February. In the first week of May the phrase occurred 24,443 times.
More traditional yardsticks show the same result. According to a recent ABC/Washington Post poll, Americans’ belief that their country is heading in the right direction has soared from 19 per cent, just before Mr Obama’s inauguration, to 50 per cent, the highest in six years. In what could be a textbook example of behavioural economics, the stock market has followed the same curve, recovering from what rightwing commentators were calling “the Obama bear market” at the beginning of the year to a healthy rally.
Thursday night’s verdict on banks’ balance sheets will also be a stress test of the administration’s experiment in behavioural economics.
Washington has clearly learned the lesson of one of its rare, early failures. In contrast with the disastrous media management of Treasury secretary Tim Geithner’s maiden economic speech, the results of the stress tests have been so thoroughly previewed that by Thursday financial pundits and punters seemed almost bored with the exercise. Ennui is not the same thing as conviction – one of America’s biggest money managers on Thursday described the exercise to me as “the feather tests” and it is hard to find anyone who doesn’t work for the government, or one of the banks, who believes the tests have been rigorous.
But, like Washington, Wall Street really does want the scheme to work and the markets to recover. Over the next few weeks the administration will be hoping those feelings are powerful enough to drive the economic data.

Friday, April 10, 2009

Gold Chart Update.

By Joshua E. Stone

The chart to the left shows gold heading to the key fib in the 851 area next. As mentioned in a prev post , my bias is for gold to fall over the coming weeks and maybe months. It will be a tug of war as the market decides how well the Fed deals with inflation issues. Most think they will be very carefull not to let it get out of control, so thus the price of gold will be a choppy grind to the upside over the next 3-4 yrs.

Tuesday, April 7, 2009

Gold Chart & Comments

First Published: Thursday, March 12, 2009, 9:09:03 AM

By Joshua E. Stone

The chart to the left illustrates the consolidation taking place between the major monthly fib lines.
The 23.6% is now serving as res, and the 38.2 is now support.
My personal bias is we can see more consolidation and perhaps an attempt at lower prices than the 38.2% level over the coming months. That said most agree it’s on its way up over the next 4-5 yrs; so this is an ideal entry area for those who can do it.

Monday, March 30, 2009

Spring `09 Outlook

By Joshua Stone

I wanted to take the time to give everyone a heads up to what most of us all know is coming in the next several weeks; a lot of hysteria.
Probably one of the biggest things coming up right away is the Friday employment numbers; these could be bad, perhaps even sending the three month average down further. The big thing to watch for is the failure of banks as the Fed Stress Tests begin in April.
The coming drop in stocks will be very scary, maybe even new lows, but most of the fundamentals have been calculated into the market at this time, hence the rally from oversold levels. This will present a good opportunity to buy stocks, commodities and to sell the dollar as it hits new record levels on the upside.
Below is an example of a simple chart set-up on eur/usd monthly that with proper money management and patience could give you a good position in a euro long.

You might be saying, “wow, he expects a big drop in the eur/usd,” We will some good support in the weekly levels, perhaps they even hold up. But my feeling is we will be seeing some pretty scary drops coming up in the stocks, and over all quite a bit of volatility as the markets digest all the data we have seen and are still yet to get over the coming weeks and even summer months. My personal hope is we don’t get a repeat of the surprises’ that afflicted the market last summer, that most things will by this summer be on a sideways with up bias trend. But of course one never really knows about the markets and what they plan to do.
I do think that despite the Medias attempts to suddenly turn Obama into a villain, His popularity will actually carry the economy up, as people decide to believe and trust his ability to deal with these crises. Let’s hope so, because if folks actually snap to what’s happened, then we will have a global depression and no chance at all of paying off these huge debts.

Barack Obama and the Strategy of Manufactured Crisis

By James Simpson
America waits with bated breath while Washington struggles to bring the U.S. economy back from the brink of disaster. But many of those same politicians caused the crisis, and if left to their own devices will do so again.
Despite the mass media news blackout, a series of books, talk radio and the blogosphere have managed to expose Barack Obama's connections to his radical mentors -- Weather Underground bombers William Ayers and Bernardine Dohrn, Communist Party member Frank Marshall Davis and others. David Horowitz and his Discover the have also contributed a wealth of information and have noted Obama's radical connections since the beginning.

Yet, no one to my knowledge has yet connected all the dots between Barack Obama and the Radical Left. When seen together, the influences on Obama's life comprise a who's who of the radical leftist movement, and it becomes painfully apparent that not only is Obama a willing participant in that movement, he has spent most of his adult life deeply immersed in it.

But even this doesn't fully describe the extreme nature of this candidate. He can be tied directly to a malevolent overarching strategy that has motivated many, if not all, of the most destructive radical leftist organizations in the United States since the 1960s.

The Cloward-Piven Strategy of Orchestrated Crisis

In an earlier post, I noted the liberal record of unmitigated legislative disasters, the latest of which is now being played out in the financial markets before our eyes. Before the 1994 Republican takeover, Democrats had sixty years of virtually unbroken power in Congress - with substantial majorities most of the time. Can a group of smart people, studying issue after issue for years on end, with virtually unlimited resources at their command, not come up with a single policy that works? Why are they chronically incapable?


One of two things must be true. Either the Democrats are unfathomable idiots, who ignorantly pursue ever more destructive policies despite decades of contrary evidence, or they understand the consequences of their actions and relentlessly carry on anyway because they somehow benefit.

I submit to you they understand the consequences. For many it is simply a practical matter of eliciting votes from a targeted constituency at taxpayer expense; we lose a little, they gain a lot, and the politician keeps his job. But for others, the goal is more malevolent - the failure is deliberate. Don't laugh. This method not only has its proponents, it has a name: the Cloward-Piven Strategy. It describes their agenda, tactics, and long-term strategy.

The Strategy was first elucidated in the May 2, 1966 issue of The Nation magazine by a pair of radical socialist Columbia University professors, Richard Andrew Cloward and Frances Fox Piven. David Horowitz summarizes it as:

The strategy of forcing political change through orchestrated crisis. The "Cloward-Piven Strategy" seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

Cloward and Piven were inspired by radical organizer [and Hillary Clinton mentor] Saul Alinsky:

"Make the enemy live up to their (sic) own book of rules," Alinsky wrote in his 1989 book Rules for Radicals. When pressed to honor every word of every law and statute, every Judeo-Christian moral tenet, and every implicit promise of the liberal social contract, human agencies inevitably fall short. The system's failure to "live up" to its rule book can then be used to discredit it altogether, and to replace the capitalist "rule book" with a socialist one. (Courtesy Discover the

Newsmax rounds out the picture:

Their strategy to create political, financial, and social chaos that would result in revolution blended Alinsky concepts with their more aggressive efforts at bringing about a change in U.S. government. To achieve their revolutionary change, Cloward and Piven sought to use a cadre of aggressive organizers assisted by friendly news media to force a re-distribution of the nation's wealth.

In their Nation article, Cloward and Piven were specific about the kind of "crisis" they were trying to create:

By crisis, we mean a publicly visible disruption in some institutional sphere. Crisis can occur spontaneously (e.g., riots) or as the intended result of tactics of demonstration and protest which either generate institutional disruption or bring unrecognized disruption to public attention.

No matter where the strategy is implemented, it shares the following features:

The offensive organizes previously unorganized groups eligible for government benefits but not currently receiving all they can.
The offensive seeks to identify new beneficiaries and/or create new benefits.
The overarching aim is always to impose new stresses on target systems, with the ultimate goal of forcing their collapse.

Capitalizing on the racial unrest of the 1960s, Cloward and Piven saw the welfare system as their first target. They enlisted radical black activist George Wiley, who created the National Welfare Reform Organization (NWRO) to implement the strategy. Wiley hired militant foot soldiers to storm welfare offices around the country, violently demanding their "rights." According to a City Journal article by Sol Stern, welfare rolls increased from 4.3 million to 10.8 million by the mid-1970s as a result, and in New York City, where the strategy had been particularly successful, "one person was on the welfare rolls... for every two working in the city's private economy."

According to another City Journal article titled "Compassion Gone Mad":

The movement's impact on New York City was jolting: welfare caseloads, already climbing 12 percent a year in the early sixties, rose by 50 percent during Lindsay's first two years; spending doubled... The city had 150,000 welfare cases in 1960; a decade later it had 1.5 million.

The vast expansion of welfare in New York City that came of the NWRO's Cloward-Piven tactics sent the city into bankruptcy in 1975. Rudy Giuliani cited Cloward and Piven by name as being responsible for "an effort at economic sabotage." He also credited Cloward-Piven with changing the cultural attitude toward welfare from that of a temporary expedient to a lifetime entitlement, an attitude which in-and-of-itself has caused perhaps the greatest damage of all.

Cloward and Piven looked at this strategy as a gold mine of opportunity. Within the newly organized groups, each offensive would find an ample pool of foot soldier recruits willing to advance its radical agenda at little or no pay, and expand its base of reliable voters, legal or otherwise. The radicals' threatening tactics also would accrue an intimidating reputation, providing a wealth of opportunities for extorting monetary and other concessions from the target organizations. In the meantime, successful offensives would create an ever increasing drag on society. As they gleefully observed:

Moreover, this kind of mass influence is cumulative because benefits are continuous. Once eligibility for basic food and rent grants is established, the drain on local resources persists indefinitely.

The next time you drive through one of the many blighted neighborhoods in our cities, or read of the astronomical crime, drug addiction, and out-of-wedlock birth rates, or consider the failed schools, strapped police and fire resources of every major city, remember Cloward and Piven's thrill that "...the drain on local resources persists indefinitely."

ACORN, the new tip of the Cloward-Piven spear

In 1970, one of George Wiley's protégés, Wade Rathke -- like Bill Ayers, a member of the radical Students for a Democratic Society (SDS) -- was sent to found the Arkansas Community Organizations for Reform Now. While NWRO had made a good start, it alone couldn't accomplish the Cloward-Piven goals. Rathke's group broadened the offensive to include a wide array of low income "rights." Shortly thereafter they changed "Arkansas" to "Association of" and ACORN went nationwide.

Today ACORN is involved in a wide array of activities, including housing, voting rights, illegal immigration and other issues. According to ACORN's website: "ACORN is the nation's largest grassroots community organization of low-and moderate-income people with over 400,000 member families organized into more than 1,200 neighborhood chapters in 110 cities across the country," It is perhaps the largest radical group in the U.S. and has been cited for widespread criminal activity on many fronts.


On voting rights, ACORN and its voter mobilization subsidiary, Project Vote, have been involved nationwide in efforts to grant felons the vote and lobbied heavily for the Motor Voter Act of 1993, a law allowing people to register at motor vehicle departments, schools, libraries and other public places. That law had been sought by Cloward and Piven since the early1980s and they were present, standing behind President Clinton at the signing ceremony.

ACORN's voter rights tactics follow the Cloward-Piven Strategy:

1. Register as many Democrat voters as possible, legal or otherwise and help them vote, multiple times if possible.
2. Overwhelm the system with fraudulent registrations using multiple entries of the same name, names of deceased, random names from the phone book, even contrived names.
3. Make the system difficult to police by lobbying for minimal identification standards.

In this effort, ACORN sets up registration sites all over the country and has been frequently cited for turning in fraudulent registrations, as well as destroying republican applications. In the 2004-2006 election cycles alone, ACORN was accused of widespread voter fraud in 12 states. It may have swung the election for one state governor.

ACORN's website brags: "Since 2004, ACORN has helped more than 1.7 million low- and moderate-income and minority citizens apply to register to vote." Project vote boasts 4 million. I wonder how many of them are dead? For the 2008 cycle, ACORN and Project Vote have pulled out all the stops. Given their furious nationwide effort, it is not inconceivable that this presidential race could be decided by fraudulent votes alone.

Barack Obama ran ACORN's Project Vote in Chicago and his highly successful voter registration drive was credited with getting the disgraced former Senator Carol Moseley-Braun elected. Newsmax reiterates Cloward and Piven's aspirations for ACORN's voter registration efforts:

By advocating massive, no-holds-barred voter registration campaigns, they [Cloward & Piven] sought a Democratic administration in Washington, D.C. that would re-distribute the nation's wealth and lead to a totalitarian socialist state.

Illegal Immigration

As I have written elsewhere, the Radical Left's offensive to promote illegal immigration is "Cloward-Piven on steroids." ACORN is at the forefront of this movement as well, and was a leading organization among a broad coalition of radical groups, including Soros' Open Society Institute, the Service Employees International Union (ACORN founder Wade Rathke also runs a SEIU chapter), and others, that became the Coalition for Comprehensive Immigration Reform. CCIR fortunately failed to gain passage for the 2007 illegal immigrant amnesty bill, but its goals have not changed.

The burden of illegal immigration on our already overstressed welfare system has been widely documented. Some towns in California have even been taken over by illegal immigrant drug cartels. The disease, crime and overcrowding brought by illegal immigrants places a heavy burden on every segment of society and every level of government, threatening to split this country apart at the seams. In the meantime, radical leftist efforts to grant illegal immigrants citizenship guarantee a huge pool of new democrat voters. With little border control, terrorists can also filter in.

Obama aided ACORN as their lead attorney in a successful suit he brought against the Illinois state government to implement the Motor Voter law there. The law had been resisted by Republican Governor Jim Edgars, who feared the law was an opening to widespread vote fraud.

His fears were warranted as the Motor Voter law has since been cited as a major opportunity for vote fraud, especially for illegal immigrants, even terrorists. According to the Wall Street Journal: "After 9/11, the Justice Department found that eight of the 19 hijackers were registered to vote..."

ACORN's dual offensives on voting and illegal immigration are handy complements. Both swell the voter rolls with reliable democrats while assaulting the country ACORN seeks to destroy with overwhelming new problems.

Mortgage Crisis

And now we have the mortgage crisis, which has sent a shock wave through Wall Street and panicked world financial markets like no other since the stock market crash of 1929. But this is a problem created in Washington long ago. It originated with the Community Reinvestment Act (CRA), signed into law in 1977 by President Jimmy Carter. The CRA was Carter's answer to a grassroots activist movement started in Chicago, and forced banks to make loans to low income, high risk customers. PhD economist and former Texas Senator Phil Gramm has called it: "a vast extortion scheme against the nation's banks."

ACORN aggressively sought to expand loans to low income groups using the CRA as a whip. Economist Stan Leibowitz wrote in the New York Post:

In the 1980s, groups such as the activists at ACORN began pushing charges of "redlining"-claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation.

In fact, minority mortgage applications were rejected more frequently than other applications-but the overwhelming reason wasn't racial discrimination, but simply that minorities tend to have weaker finances.

ACORN showed its colors again in 1991, by taking over the House Banking Committee room for two days to protest efforts to scale back the CRA. Obama represented ACORN in the Buycks-Roberson v. Citibank Fed. Sav. Bank, 1994 suit against redlining. Most significant of all, ACORN was the driving force behind a 1995 regulatory revision pushed through by the Clinton Administration that greatly expanded the CRA and laid the groundwork for the Fannie Mae, Freddie Mac borne financial crisis we now confront. Barack Obama was the attorney representing ACORN in this effort. With this new authority, ACORN used its subsidiary, ACORN Housing, to promote subprime loans more aggressively.

As a New York Post article describes it:

A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.

Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.

Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with "100 percent financing . . . no credit scores . . . undocumented income . . . even if you don't report it on your tax returns." Credit counseling is required, of course.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed "the most flexible underwriting criteria permitted." That lender's $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

The lender they were speaking of was Countrywide, which specialized in subprime lending and had a working relationship with ACORN.

Investor's Business Daily added:

The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical "housing rights" groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama. (Emphasis, mine.)

Since these loans were to be underwritten by the government sponsored Fannie Mae and Freddie Mac, the implicit government guarantee of those loans absolved lenders, mortgage bundlers and investors of any concern over the obvious risk. As Bloomberg reported: "It is a classic case of socializing the risk while privatizing the profit."

And if you think Washington policy makers cared about ACORN's negative influence, think again. Before this whole mess came down, a Democrat-sponsored bill on the table would have created an "Affordable Housing Trust Fund," granting ACORN access to approximately $500 million in Fannie Mae and Freddie Mac revenues with little or no oversight.

Even now, unbelievably -- on the brink of national disaster -- Democrats have insisted ACORN benefit from bailout negotiations! Senator Lindsay Graham reported last night (9/25/08) in an interview with Greta Van Susteren of On the Record that Democrats want 20 percent of the bailout money to go to ACORN!

This entire fiasco represents perhaps the pinnacle of ACORN's efforts to advance the Cloward-Piven Strategy and is a stark demonstration of the power they wield in Washington.

Enter Barack Obama

In attempting to capture the significance of Barack Obama's Radical Left connections and his relation to the Cloward Piven strategy, I constructed following flow chart. It is by no means complete. There are simply too many radical individuals and organizations to include them all here. But these are perhaps the most significant.
The chart puts Barack Obama at the epicenter of an incestuous stew of American radical leftism. Not only are his connections significant, they practically define who he is. Taken together, they constitute a who's who of the American radical left, and guiding all is the Cloward-Piven strategy.
Conspicuous in their absence are any connections at all with any other group, moderate, or even mildly leftist. They are all radicals, firmly bedded in the anti-American, communist, socialist, radical leftist mesh.

Saul Alinsky

Most people are unaware that Barack Obama received his training in "community organizing" from Saul Alinsky's Industrial Areas Foundation. But he did. In and of itself that marks his heritage and training as that of a radical activist. One really needs go no further. But we have.

Bill Ayers

Obama objects to being associated with SDS bomber Bill Ayers, claiming he is being smeared with "guilt by association." But they worked together at the Woods Fund. The Wall Street Journal added substantially to our knowledge by describing in great detail Obama's work over five years with SDS bomber Bill Ayers on the board of a non-profit, the Chicago Annenberg Challenge, to push a radical agenda on public school children. As Stanley Kurtz states:

"...the issue here isn't guilt by association; it's guilt by participation. As CAC chairman, Mr. Obama was lending moral and financial support to Mr. Ayers and his radical circle. That is a story even if Mr. Ayers had never planted a single bomb 40 years ago."

Also included in the mix is Theresa Heinz Kerry's favorite charity, the Tides Foundation. A partial list of Tides grants tells you all you need to know: ACLU, ACORN, Center for American Progress, Center for Constitutional Rights (a communist front,) CAIR, Earth Justice, Institute for Policy Studies (KGB spy nest), National Lawyers Guild (oldest communist front in U.S.), People for the Ethical Treatment of Animals (PETA), and practically every other radical group there is. ACORN's Wade Rathke runs a Tides subsidiary, the Tides Center.

Carl Davidson and the New Party

We have heard about Bomber Bill, but we hear little about fellow SDS member Carl Davidson. According to Discover the Networks, Davidson was an early supporter of Barack Obama and a prominent member of Chicago's New Party, a synthesis of CPUSA members, Socialists, ACORN veterans and other radicals. Obama sought and received the New Party's endorsement, and they assisted with his campaign. The New Party also developed a strong relationship with ACORN. As an excellent article on the New Party observes: "Barack Obama knew what he was getting into and remains an ideal New Party candidate."

George Soros

The chart also suggests the reason for George Soros' fervent support of Obama. The President of his Open Society Institute is Aryeh Neier, founder of the radical Students for a Democratic Society (SDS). As mentioned above, three other former SDS members had extensive contact with Obama: Bill Ayers, Carl Davidson and Wade Rathke. Surely Aryeh Neier would have heard from his former colleagues of the promising new politician. More to the point, Neier is firmly committed to supporting the hugely successful radical organization, ACORN, and would be certain back their favored candidate, Barack Obama.


Obama has spent a large portion of his professional life working for ACORN or its subsidiaries, representing ACORN as a lawyer on some of its most critical issues, and training ACORN leaders. Stanley Kurtz's excellent National Review article, "Inside Obama's Acorn." also describes Obama's ACORN connection in detail. But I can't improve on Obama's own words:

I've been fighting alongside ACORN on issues you care about my entire career (emphasis added). Even before I was an elected official, when I ran Project Vote voter registration drive in Illinois, ACORN was smack dab in the middle of it, and we appreciate your work. - Barack Obama, Speech to ACORN, November 2007 (Courtesy Newsmax.)

In another excellent article on Obama's ACORN connections, Newsmax asks a nagging question:

It would be telling to know if Obama, during his years at Columbia, had occasion to meet Cloward and study the Cloward-Piven Strategy.

I ask you, is it possible ACORN would train Obama to take leadership positions within ACORN without telling him what he was training for? Is it possible ACORN would put Obama in leadership positions without clueing him into what his purpose was?? Is it possible that this most radical of organizations would put someone in charge of training its trainers, without him knowing what it was he was training them for?

As a community activist for ACORN; as a leadership trainer for ACORN; as a lead organizer for ACORN's Project Vote; as an attorney representing ACORN's successful efforts to impose Motor Voter regulations in Illinois; as ACORN's representative in lobbying for the expansion of high risk housing loans through Fannie Mae and Freddie Mac that led to the current crisis; as a recipient of their assistance in his political campaigns -- both with money and campaign workers; it is doubtful that he was unaware of ACORN's true goals. It is doubtful he was unaware of the Cloward-Piven Strategy.

Fast-forward to 2005 when an obsequious, servile and scraping Daniel Mudd, CEO of Fannie Mae spoke at the Congressional Black Caucus swearing in ceremony for newly-elected Illinois Senator, Barack Obama. Mudd called, the Congressional Black Caucus "our family" and "the conscience of Fannie Mae."

In 2005, Republicans sought to rein in Fannie and Freddie. Senator John McCain was at the forefront of that effort. But it failed due to an intense lobbying effort put forward by Fannie and Freddie.

In his few years as a U.S. senator, Obama has received campaign contributions of $126,349, from Fannie and Freddie, second only to the $165,400 received by Senator Chris Dodd, who has been getting donations from them since 1988. What makes Obama so special?

His closest advisers are a dirty laundry list of individuals at the heart of the financial crisis: former Fannie Mae CEO Jim Johnson; Former Fannie Mae CEO and former Clinton Budget Director Frank Raines; and billionaire failed Superior Bank of Chicago Board Chair Penny Pritzker.

Johnson had to step down as adviser on Obama's V.P. search after this gem came out:

An Office of Federal Housing Enterprise Oversight (OFHEO) report[1] from September 2004 found that, during Johnson's tenure as CEO, Fannie Mae had improperly deferred $200 million in expenses. This enabled top executives, including Johnson and his successor, Franklin Raines, to receive substantial bonuses in 1998.[2] A 2006 OFHEO report[3] found that Fannie Mae had substantially under-reported Johnson's compensation. Originally reported as $6-7 million, Johnson actually received approximately $21 million.

Obama denies ties to Raines but the Washington Post calls him a member of "Obama's political circle." Raines and Johnson were fined $3 million by the Office of Federal Housing Oversight for their manipulation of Fannie books. The fine is small change however, compared to the $50 million Raines was able to obtain in improper bonuses as a result of juggling the books.

Most significantly, Penny Pritzker, the current Finance Chairperson of Obama's presidential campaign helped develop the complicated investment bundling of subprime securities at the heart of the meltdown. She did so in her position as shareholder and board chair of Superior Bank. The Bank failed in 2001, one of the largest in recent history, wiping out $50 million in uninsured life savings of approximately 1,400 customers. She was named in a RICO class action law suit but doesn't seem to have come out of it too badly.

As a young attorney in the 1990s, Barack Obama represented ACORN in Washington in their successful efforts to expand Community Reinvestment Act (CRA) authority. In addition to making it easier for ACORN groups to force banks into making risky loans, this also paved the way for banks like Superior to package mortgages as investments, and for the Government Sponsored Enterprises Fannie Mae and Freddie Mac to underwrite them. These changes created the conditions that ultimately lead to the current financial crisis.

Did they not know this would occur? Were these smart people, led by a Harvard graduate, unaware of the Econ 101 concept of moral hazard that would result from the government making implicit guarantees to underwrite private sector financial risk? They should have known that freeing the high-risk mortgage market of risk, calamity was sure to ensue. I think they did.

Barack Obama, the Cloward-Piven candidate, no matter how he describes himself, has been a radical activist for most of his political career. That activism has been in support of organizations and initiatives that at their heart seek to tear the pillars of this nation asunder in order to replace them with their demented socialist vision. Their influence has spread so far and so wide that despite their blatant culpability in the current financial crisis, they are able to manipulate Capital Hill politicians to cut them into $140 billion of the bailout pie!

God grant those few responsible yet remaining in Washington, DC the strength to prevent this massive fraud from occurring. God grant them the courage to stand up in the face of this Marxist tidal wave.Jim Simpson is a former White House staff economist and budget analyst. His writings have been published in American Thinker, Washington Times, FrontPage Magazine, DefenseWatch, Soldier of Fortune and others. His blog is Truth and Consequences..
on "Barack Obama and the Strategy of Manufactured Crisis"


By Unknown

By Unknown
The financial crisis explained in simple terms...Heidi is the proprietor of a bar in Berlin. In order to increase sales,she decides to allow her loyal customers - most of whom are unemployedalcoholics - to drink now but pay later. She keeps track of the drinksconsumed on a ledger (thereby granting the customers loans).Word gets around and as a result increasing numbers of customers floodinto Heidi's bar.Taking advantage of her customers' freedom from immediate paymentconstraints, Heidi increases her prices for wine and beer, themost-consumed beverages.. Her sales volume increases massively.A young and dynamic customer service consultant at the local bankrecognizes these customer debts as valuable future assets and increasesHeidi's borrowing limit.He sees no reason for undue concern because he has the promissory notesof Heidi's customers as collateral.At the bank's corporate headquarters, expert bankers transform thesecustomer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. Thesesecurities are then sold and traded on markets worldwide. No one reallyunderstands what these abbreviations mean and how the securities areguaranteed. Nevertheless, as their prices continuously climb, thesecurities become top-selling items.One day, although the prices are still climbing, a risk manager of thebank, (subsequently fired due his negativity), decided that the timehas come to start demanding payment from Heidi for the debts incurred bythe drinkers at Heidi's bar.Unfortunately Heidi's customers cannot pay back any of their debts toHeidi.Heidi cannot fulfill her loan obligations to the bank and claimsbankruptcy.DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better,stabilizing in price after dropping by only 80%.The suppliers of Heidi's bar, having granted her generous payment termsand also having invested in the securities are faced with a new anddesperate situation. Her wine supplier claims bankruptcy and her beersupplier is taken over by a competitor.The bank is saved by the Government following dramatic round-the-clockconsultations by leaders from the governing political parties. They cameup with a miraculous rescue plan that saved the bank.The funds required for this massive rescue are obtained by levying anew tax on all the non-drinkers..Finally. An explanation I understand.

Monday, March 16, 2009

Why the Economy Might Rebound

By Joshua E. Stone
Though it’s too early to tell from the data coming in there are some signs that things are already getting better in the economy. To site a few of the things I have noticed is the Retail Sales and Consumer Sentiment released last week. Another item of note is the jobs report at the beginning of the month; though far too soon to know for sure shows indications of having reached its peak losses per month at about 650k averaged out over the last three month period. Also, the big one, China will pass a stimulus package for their economy. How this can be is the obvious question. Spending and Government intervention is how we came to this boondoggle, how is that these are the things that are saving us now? The answer is quite simple: it is not.
Then what is going to account for the recovery? What could be the reasons if it’s true that the economy is already recovering? Two things: Psychology and China.
What was the reason for the bank meltdown last summer? The first response naturally is what we have all been spoon fed by the media: That banks were caught up in a bunch of bad sub-prime real estate deals, trying to get everyone a home, the American Dream. If you look harder some media will tell the tale of how the politicians made all this happen, with the help of unscrupulous bankers. But buried deep in the heart of the fire is a word that came out in the heat of the meltdown last summer: Trust.
Trust is the psychology of the markets. Without going into endless analogies, we all know this as fact. The entire system is based on trust. This is why Presidents get elected; the winner is the one who the majority of people are convinced they can trust.
So when people decide there is no hope and they can not believe anyone or trust them with anything, everything breaks down. Nothing anyone says or does will save anything because everyone is just selling what they can and heading for the hills to get away from it all. The new President has restored the trust. People believe he can fix these crises and they trust him to do so. That’s all it will take, with some help from China of course. But it has to be noted, nothing close to trust has developed so far between investors and the banks. This remains a big problem, and Obama will have to address this issue.
China can not be underestimated, the recovery in their economy will provide the octane needed to boost not only the global economy; but perhaps make it take off. We still have yet to see a global economy working in cohesion. This crisis will bring it all together and provide the foundation for a possible run on global prosperity unparalleled in its relatively short history.
These facts combined the reality that this crisis was manufactured and not really that bad in the first place, set the stage for a surprising rebound in the economy. Sadly all of the intervention and massive debt being piled on top of all the problems is setting us up for much larger and very real problems later on down the road. Especially if they pass Cap and Trade; that will insure everything derails and breaks down at the seams eventually. As usual the media is derelict in reporting those sides of the story.
In the end this is all that matters, that people have not given up no matter what the reason, even if it based on false hope, or a source of trust they have placed their hope in that is at the same time insuring there own demise in the long run. So keep that in mind during the next crisis: we will survive, all we have to do is believe we will.


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