Saturday, November 30, 2013

John Mauldin is starting to see things clearly (finally)

I have, on several occasions, taken John Mauldin to task for the fact that he just doesn't "get it".  I've written him emails 1:1 multiple times about this and also posted publicly.  Here is one such post from 2012 that will give you a flavor for my message to him.

In today's edition of his Thoughts From the Front Line email, Mauldin finally came clean.  He writes: "I was wrong when I took the (decidedly contrarian) position that we were in for a mild recession. It turned out to be much worse than even I thought it would be, though I had the direction right. Sadly, it usually turns out that I have been overly optimistic.... 

I am becoming increasingly exercised that the new direction of the US Federal Reserve, which is shaping up as "extended forward rate guidance" of a zero-interest-rate policy (ZIRP) through 2017, is going to have significant unintended consequences.

Welcome to the real world John.  First of all, despite what you just wrote, "muddle through" was not contrarian.  It was and continues to be the main stream view.  Were it not then the stock market (AKA confidence gauge) would not be at its current lofty levels.  When my views truly become main stream, the DJIA will be at 4000 or less.  That is how you will know that the masses have mostly woken up.  Also, while you are finally waking up to the fact that the corrupt and dying global economic system requires perpetual life support lest it collapse, you still have not figured out what is really going on.  You are still so lost in the details that you miss the big picture.

I'll say it once again, Mr. Mauldin, in the off chance that someone forwards you a link to my blog: the reason things are what they are is because the US is and has been running a global debt Ponzi.  It is a scam, a con which is powered by con men who have convinced the people that something for nothing is not only possible, but in fact normal and expected.  The whole world wants to believe in zero point energy, overunity thermodynamics and perpetual motion because it sounds good.  It sounds like people won't have to work so hard or so late in life.  It's akin to lions on the African plain having convinced the gazelle herd that they no longer have to forage each day for food and that they should expect free food to be delivered to them by helicopter each day.  The con game plays on the greed and ignorance of the patsies, just like any other 2 bit con. 

The main energy source of the con is fiat currency and fractional reserve banking.  These scams make it seem as if something for nothing is actually possible since those at the top are clearly benefiting.  The patsies are sitting under the table waiting for some crumbs to fall down (AKA trickle down) that used to happen but is now getting pinched off.  When the credit was flowing, corporations which had access to credit found it easy to expand and to make a profit.  As a result, they were not very efficient. They let a lot of crumbs fall off the table and into the pockets of the common man.  It all seemed pretty good.  But now that the credit is seriously impaired, corporations no longer have access to easy money and so they are tightening the screws on the workers.  The entire concept of pensions in the US labor force has been destroyed.  Corporations are hiring new workers at very low pay rates and in vastly lower numbers.  Robots are replacing unskilled labor.  You really have to be among the best and brightest in order to receive a salary whose buying power reminds you of what was easily available 10 years ago.

No con every lasted forever and it will not be different this time.  The con has been playing for decades and so immediate collapse should not be expected.  What should be expected is that when the collapse occurs that it happen so swiftly as to take most people by complete surprise.  The patsies will be saying "we never saw it coming".

"Now as to the times and the epochs, brethren, you have no need of anything to be written to you. For you yourselves know full well that the day of the Lord will come just like a thief in the night. While they are saying, "Peace and safety!" then destruction will come upon them suddenly like labor pains upon a woman with child, and they will not escape.…"
--Thessalonians 5:2  

Is it just me or do the global troubles seem to be occurring closer and closer together, like a woman's labor pains? 

Amazon shares now going nearly vertical.

The Amazon chart has "bubble" written all over it.  I don't know when it will pop and neither does anyone else but the market eventually hate exponential increases.  Here is the long term chart.  If this is a 5th wave (which it may well be) expect a pull back to the prior 4th (about $180).  Such pullback would likely be a dramatic "vee" style move because the last pullback of this wave degree was a sideways move:

Here is a closer chart which may be showing the shares in the final stages of an ending diagonal.  The revelation of poor holiday sales could easily dampen retailer investor confidence and I think fear of higher health care costs will clearly impact holiday buying. 

Time will tell but Amazon looks frothy even without considering its forward PE of 146 and change:

Friday, November 29, 2013

Solar panels: a REAL investment if you can get in at the right price.

I chuckle when I hear people talking about the stocks and bonds and other paper garbage that they are "investing" in.  These folks don't know what the word investing even means.  They have been brainwashed into thinking that speculating in paper assets or in buying bitcoins because they seem to go up each day as "investing". Of course, these are not investments any more than going to Vegas is an investment.  The only true investment is one where you spend money in order to increase productive capacity.  In other words, you save some of your excess income and INVEST in something that will by its very nature (and not by chance or luck) enable you to CONSUME a lot more while only doing a little more work.

When you build tools, be they physical or software or even mental tools such as specific knowledge, the value of these tools is that they serve as a labor multiplier going forward.  If you need to turn the soil in order to plant crops you can do it with a shovel if you like but a plow and a horse will amplify your labor by perhaps 10x.  Better still, a tractor and diesel fuel will amplify your labor by 100x or maybe even 1000x.  As a result of more apparent labor, your productive output is higher and thus your value generation rate is higher.  This is the basis of real capitalism.  You invest money to acquire productive equipment (capital equipment) which increases productivity and thus enables higher levels of consumption.

I am now in the process of completing my roof solar investment.  I was able to get 68 solar panels, each one of them a Q-Cells Q.base 225 panel, installed on my roof.  The workers just finished bolting them up there today.  That's 15.3 kW DC of rated capacity (actual peak generation will probably only be 90% of that number).   That is a lot of solar for a single family home but since I live in a single story detached dwelling there was enough south-ish facing roof surface area.  Because of the thrifty way I did this (acquiring the panels from a bankrupt solar company over Ebay), I kept my cost per watt way down.  As a result, I expect this system to produce 102% of my annual consumption needs which means that I should not be paying for electricity again at home.  Ever. In doing the math, this investment is providing me a 13% annual ROI.  Even after adding in expected maintenance costs, it will pay for itself in under 7 years and then continue producing electricity for me to 80% rated capacity for another 18 years past that (under warranty).  It will also be keeping my attic more cool since the panels will convert the light energy into electricity instead of warming up my attic.

In truth, I think that it will pay for itself far sooner than that because I expect that Texas electricity rates will begin to climb as the great debt Ponzi continues to collapse.  Our electricity only costs about 12 cents per KWH with all the fees and taxes tacked on.  Under the guise of global warming and carbon credits and with the guilt trip of needing to be "green", our rates will likely begin to climb dramatically in the next 5 years IMO.  I expect 20 cents per kWh to be the average price by 2018.  At that rate my savings will be even more dramatic.  Additionally, a penny of expense saved is a penny earned but without the taxation that occurs on earnings.  In other words, it is far better to pay a lower price for something at your current rate of pay than it is to increase your pay by $1 and then pay $1 more for that same item because corrupt government taxation on your extra earned dollar leaves you with something like 50-75 cents of actual buying power after they rip you off.  That's why governments love inflation - they get a cut of each inflated transaction.    This is also why they hate barter as it cuts them out of the transaction completely.

I am really anxious to get my solar generation capacity online.  I think it should be up and running within 2 weeks.  I'll post some updates on this as the project progresses.

Try Silver, Baby!

Long time readers know I am bullish on metals and that I think metals likely bottomed in June of 2013.  Since then they bounced nicely and then were walked all the way back down to almost (but not quite) that level.  I did not expect such a dramatic walk back to be sure but unless and until the metals could be taken down below the June low, I had to stick with my EW model that June was the E wave of an ending diagonal:

I initially started buying physical silver on the week of June 15th.  The price actually bottomed on the 27th of June so I was a bit early but not too early if you consider that I didn't buy any of it for any of the bear silver market that had occurred from the $50 peak.  I knew that was a short term bubble and told friends and family that I would not make any panic buys thinking the train was going to leave the station.

Since the peak of 1 I have been waiting for 2 to bottom and it has been a long wait.  The head fake breakout that occurred a few weeks ago was meant to break the will of even the strong.  Part and parcel of that was the growing chance that my wave count was going to have to be changed.  One penny below the E wave would mean that I was wrong on that count, something which I stated in these pages.  I also pointed to the growing criticality of the shares meeting the vertex of the triangle.  They generally do something, either break out or break down, before that happens.

Well, we may well have our answer.  Today we had a nice gap up in silver that took it above the
hidden resistance line that runs parallel from the last head fake breakout.  The model below shows this concept in more detail.

In short, we may well have seen a significant (or even "the") turning point for silver, gold, and mining shares.  The odds that this gap up today was another head fake are very low given the wave count of these final 5 waves.  While this indication is certainly "green shoots" in the metals department, it is not high confirmation yet.  That is why I entitled this post "Try silver, baby!" instead of "Buy silver, baby" which itself would be a reference to my recent correct call on Alcoa.

If my analysis is correct, we should expect an upward 3rd wave movement in USLV really soon.  As reported earlier, I have a small money bet on this horse as a way of putting on leverage on top of my much larger physical silver holdings.  I had stops in at $50 (buy price was $62) but decided to pull them off as the chart was likely to make a decision at the vertex and I still thought/think the odds favor a bottoming of some sort here.

By the way, I am also on S+P 500 topping alert for some time now and it would not surprise me to see gold and gold miners go up while the S+P goes down.

JC Penny update [JCP]

In my last post on JC Penny (JCP), I presented a model update whose bottom line was that JC Penny shares had bottomed and were now in a short covering bounce after having completed a mania. Again, I think that JC Penny could very well eventually go bankrupt once the US central bank is effectively forced to discontinue the addition of confidence into the system associated with its printing 85 billion per month.  This is a bit more complex than it sounds.  Right now, the printing is sequestered.  It is supporting leveraged gambling by the banks without actually increasing the supply of money that main street gets access to.  This is why the monetary base is now pushing 4 trillion - nearly 4x the size of 2009 - while the price of milk and bread have not quadrupled:

This money printing is essentially giving more cash and credit to those leveraged gamblers who caused the first phase of the collapse to begin in late 2008.  Do you think they learned any lesson as a result of almost collapsing the global economy?  Of course not.  As Chuck Prince schooled us, the leveraged credit game is one of play or die.  While the music is playing you have to dance.  In other words, if you don't take advantage of the corrupt system of leverage, someone else will and they will put you out of business unless you follow suit.

As Bernanke printed all of this extra money to buy trash assets from the banks, it cleaned up their balance sheets so that they could, ostensibly, loan more money and keep the debt Ponzi spiraling upward.  But they don't want to loan to people who they fear will not be able to repay and so they are gambling in asset markets instead.

We are now at the phase of this scam where the big names are already overbought.  They pay little if any dividend and it is very hard to find greater fools to buy the shares off of you at higher prices.  So the money is now rotating into the garbage stocks like DRYS and JCP.  These companies will likely go BK some day but as long as the federal reserve is giving free money to leveraged gamblers that money has to find a home.  This money is now threatening those who have shorted the trash names to nearly zero.  The result is a predictable (and predicted) government orchestrated short squeeze.

Below is the current chart.  The blue arrow to the left marks Oct 17th which is when I went bullish on JCP for no other reason than the chart pattern.  After many months of decline, my EW model missed calling the exact bottom by only 3 trading days.  I wish the charts for silver and gold were this straightforward.

The chart is now up against top resistance again but it is very unlikely that it will break out on a 1st wave up.  A pullback to at least the 38.2 fib but more likely to the 50 or 61.8 fib will probably happen before the next big, short busting wave up occurs.  Again, this has nothing to do with the underlying performance of JC Penny, inc.   It has to do with the federal reserve trying to save jobs that the economy says it doesn't want.  It has to do with face saving and with propping up the "ye olde guard".  As I said before, JCP will likely BK before the global debt Ponzi collapse is complete.  But it's shares look like they will have another bull run before reality sets in for investors (gamblers).

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