Please read the following article where the newest genius in Wisconsin states anything but the obvious. Michael Moore profoundly declares that "America is not broke".
As usual Michael Moore is seeing America through his own distorted lens, but this time he is just flat wrong. Oddly, I usually feel some sort of respect or admiration of Michael Moore in each project he does for no other reason than he really believes earnestly in his views and is willing to put them out there. I can usually even put on a raging liberal hat and see his perspective despite my absolute disagreement with him. In this case however, I just have to declare that he is completely off his rocker.
Later in the article he notes that "America is not broke," Moore said "the country is awash in wealth and cash ... It has been transferred in the greatest heist in history from the workers and consumers to the banks and the portfolios of the uber-rich." Once again, Moore gets some of the truth out there and then goes to work to distort the facts. First, Americans were broke well before the financial crisis in 2007 and 2008, the media and the markets were too busy believing the lies and watching "Flip This House" to believe that we weren't rich. Second, the same banks that Michael Moore claims are rich are actually completely bankrupt, leaving me to wonder who really is rich there Mike?
What this really is about is Michael Moore interjecting himself into Wisconsin politics on the side of unions. Wouldn't it be great if he actually did a story about the destruction of the middle class due to unions creating uncompetitive landscapes for companies? Wouldn't it be great if Michael Moore exposed the corruption of the unions? Wouldn't it be amazing to see this guy on the right side of any angle?
If Wisconsin and all the other states aren't broke then I am not sure what constitutes being broke. Unfortuantely I think we will ultimately see what happens when a "not-broke" country like Greece. Ireland, Portugal, or a US state like Wisconsin does end up being exposed as broke. When at long last the endless money supply and unlimited debt comes to an end, we'll see that the conditions that are being displayed by Wisconsin are in fact an indication that America is broke.
FINANCIAL CONDITIONS INDEX - http://www.bloomberg.com/apps/quote?ticker=BFCIUS:IND
Once again the Bloomberg Financial Conditions Index moved up close to 0.5 and then got slammed back. Recall that a level above 0.0 is considered expansionary, however I'm not convinced this is a real expansion given that we cannot get passed 0.5 ever.
Finally, just an update. I have scaled out of my shorts on PIN and FXI as I've done really well over the last two days. No reason to push my luck.
One parting thought. If you were a central banker and had policies underway that were not effective and were actually putting you in a box, wouldn't you use the Mid East riots and Libyan oil issue as an excuse for stopping your QE II operations? We know they would never come out and say they made a mistake, but this would be perfect cover for Bernanke to drain the liquidity swamp and blame it on oil prices that were inhibiting the effectiveness of him flawless (lawless) policies.
This could be one great time to unplug the printing presses and watch the markets fall.
Be Careful!
A reader, let's call him P.T., sent me an email this weekend and I wanted to respond to his questions on FXI. Here is P.T's question. -
Hi Goatmug
"Just wanted to ask a question about FXI. I saw a post on your site about FXI and China markets. I was waiting to take a LONG position (long term) on FXI few weeks ago but after i saw your update i changed my opinion and wait and see mode. I noticed FXI going up from last few days and now trading above 200 DMA; I was wondering if you still had your short position on short side ? Would you still continue to recommend shorting FXI ?"
First of all PT, thanks so much for reading and thank you for sending an email.
Here was my response to PT -
"In my opinion we are in no-man's land with FXI right now. You are correct we are above the 200 dma which is right at $42 (where I was looking for a downside break). Having said that, this only gives you about $1 upside to the 50 dma which seems to be pretty good overhead resistance. Personally, I wouldn't enter a long or short till we break out of either of these moving average bounds. If we pop over the 50 dma, it may be a good long candidate.
The surge over the last couple days does have me confused though, and I'm wondering if the increase from $42 the other day is more attributed to a currency move rather than a fundamental improvement of China prospects. They did increase rates and this would normally put a damper on the upside of stocks in general, but as with everything in the emerging market area it may be a result of a relative value play (in the sense that the US growth prospects are lower and even a China with a government attempt to trample down overheating hot money is perhaps more attractive). The biggest concern I have is that China and the other emergings may get so serious about inflation and combating it that they simply crush all speculation and over do it and pop their bubbles. I think this Bloomberg article underscores my view about the risks. http://www.bloomberg.com/news/2011-02-20/hsbc-says-avoid-china-s-equities-until-second-half-on-inflation-measures.html
Having said all that, I still believe that FXI is just one to avoid going long, or better said is still a short from a fundamental perspective.
I hope that helps."
TRADING UPDATE - 2/22/2011
Well wouldn't you know it, after writing this response we see that markets are a bit shaky this morning and all emerging markets plays are weaker and gold and silver are up quite nicely based on the unrest all over the world. I've captured a couple of screen shots of what I'm watching and I have resisted on doubling down on my FXI short that I have held for a couple of weeks. I have been underwater in that position all of this time, but since the open this morning I am now even and have clear momentum on my side. If we get through the next hour and look weak I may add to my put position, but frankly I doubt it. We have seen so many wacky reversals that there is no sense in getting crazy. The key here is that FXI is now clearly under the $42 area that I was targeting and I see some minor support at $40 on this descending channel and also more support around $39.00. A move through those areas brings $36 into play.
Weekly Chart - FXI
Another weekly chart with the 14 ema and the 40 ema - (long term indicators). The 14 day ema has not crossed over the 40 yet, but it is really close. If it does, that would be a significant long term sell alert.
Here is another chart I am watching with the same macro-themes, but with the added issue of concern that Bangladesh is a next door neighbor to India. In Bangladesh the populous is outraged and investors are rioting about the collapse of their stock markets. In one day their stock market was down over 9% and has been down over 30% in recent weeks. If this unrest comes to India watch out! From a technical perspective, PIN (Powershares India), the 14 EMA has crossed down below the 40 day EMA which is very bearish.
$23 is a great stop for a short and $20 is a good short term target.
Here is a video I found on YouTube by a guy named Alexiscom1. It is interesting because he actually shows the impact of inflation on your currency in a realistic and meaningful way. In the first couple of minutes he really gets to the money shot which I quote below.
Alexiscom1 states -
"It reminds me of the Soviet Union in 1990s, where all fundamentals were for the collapse, but you couldn't actually see it because the mainstream media would convince you everything was fine -- and people hope, and wait, and do nothing..."
Sound familiar? This goes really well with the post I made yesterday about Politics of Deception where the media is used to tell the story that we are to hear.
If you watch the entire 9 minutes of video you'll also find that Alexiscom1 underscores the need to prepare for the events in other ways than just financial preparation. He implores you to store food and also learn new skills to enable you to deal with radical changes.
Good stuff, but I felt the quote was great and the overall message was spot on.
I've been thinking about the following topic for about three weeks now and the discovery of the following video from FOX NEWS spurred me to actually put my thoughts down here. Before you roll your eyes and click over to some other blog because I'm going to go deep into my political rants, stop, wait, and hear me out. I'm going to briefly highlight this because it is important and is going to help us today and in the future.
Watch a few minutes of Fox here where they put together two years worth of video and created the illusion that Ron Paul is booed vehemently as he is announced the winner in 2011. The only problem with the video is that he wasn't booed in 2011, the boos were provided in 2010! Fast forward to 4:45 in the video to see the actual reaction to the announcement at the 2011 convention.
The CPAC attack on Ron Paul by Fox News is just an example of how we live in a world where "what they show us" becomes reality. This is why state run media in Russia, China, Iran, and North Korea is so effective at framing a picture of reality for their people. After viewing the video you walk away with the idea that Ron Paul may have won, but he sure is a poor candidate because he has a lot of people that are not supporters.
Readers of the Goatmug Blog know that as a history buff I relish the views of thinkers like J.R. Nyquist who writes on the geopolitical landscape with an emphasis on Russia, the plague of Communism, and the tactics used by them to obtain power and achieve their goals. Mr. Nyquist's latest offering provides details about the possibility that the Egyptian revolution may have been hijacked or at least sponsored by people that didn't have a genuine quest for liberty.
In his post, Nyquist reveals that bloggers from the Ukraine couldn't find a majority of people that supported the uprising and in fact could find many Coptic Christians that felt a transition could be a bad thing.
I've found the original blog post he referenced from the Ukranian bloggers and have translated the text with the help of a translator (it's still a bit rough).
"Domestic and international media broadcast the one-sided interpretation of the U.S. government concerning the events in Cairo. Most reporters in the hotel for security reasons, and looks at what is happening through the eyes of CNN and the BBC.
We visited Egypt and study in detail the situation on the ground. Having talked with hundreds of residents of Cairo and other Egyptian cities came to a single conclusion: a nationwide uprising against President Mubarak does not exist.
Most of the population, even if it does not support the current government, a negative attitude toward anti-presidential parties shares. In particular, the Copts, are the largest Christian community in the Middle East believe that, if successful coup significantly worsen the situation of Egyptian Christians. And why the Copts are not allowed the protesters to their quarters.
In fact, the Egyptian rebellion is limited to one area of Cairo. Statements made in Tahrir Square can not be considered massive - they account for up to twenty thousand members, but for the millions of Cairo is extremely small.
The Egyptian army is not against the protesters, not because Mubarak has lost his grip on power but because the position of Mubarak - not to irritate the Americans. Participants in the uprising - nice people, but their protest, they rely solely on the support of the U.S. government."
What if this was true, that the revolt was led by a small group of minorities that had more sinister reasons yet were championed by naive reporters in the media? We need to keep in mind that the reporters want and need juicy stories that play well for the camera. The need for a good story line is why you kept hearing that these were "youths" rallying for freedom. Where was the coverage of the Muslim Brotherhood that cried for an Islamic state for Egypt that could unite all Muslims under one rule? That is what we heard from the Muslim Brotherhood leader Monday. Interesting that we didn't hear that before the fall of Egypt's leader. We wouldn't want the global media machine to let facts get in the way of an inspiring story would we?
What were the angles we received in the reporting? We consumed lots of the following;
Egyptians were casting off the yoke of economic hardship
The youth were breaking the chains of those that are heartless leaders
While there is truth to this, think deeply, these portraits seem to have been constructed for our eyes, ears, and hearts to compel us to support this version instinctively.
Given the fact that we see a rumored "conservative" media outlet splicing video and creating their own version of an event we must question what that means for us as investors and participants in this "democratic" country.
As Amerikans are pushed to the brink in the near term and the future don't be deluded to believe that all of them are violent terrorists. Many folks like you and me will be forced to stand up against financial tyranny and the lack of representative government in the office of the President, the Senate, and Congress. The disconnect between our "leadership" and the desires of the people is growing, not shrinking. When Amerikans simply cannot stand it any longer you can expect to see edited videos and disinformation about their actions and their message. Amerikans won't riot because they see an erosion of their personal liberties and a decay in their ability to protect and express themselves, no, we are fat sheep. Amerikans will watch idly by as the poor waste away, but citizens will finally rise up when the middle class cannot afford food and gas or something terribly essential like cable or cell phones. When Amerikans do come to their senses and stand up, you can be sure to find the media reporting that these people are trouble makers, quacks, and opposition forces rather than freedom fighters demanding that their government listen. Sounds like how the Tea Party has been characterized doesn't it?
Second, our own government will use the media to continue to lie to us. Ben Bernanke lied right in our face with his testimony that attempted to claim responsibility for the "asset price increases" in stock markets, but dispel any notion that he has the power to lift commodity prices and food prices around the world. How is the Fed all powerful in the one situation but entirely powerless in the other? Doublespeak at its finest! I haven't read 1984 by George Orwell since high school, but I will read it again because these are the days we are living in.
Here are a list of the lies I could find just in this testimony and a quick listening while I was typing.
1:10 in the video - We are not monetizing our debt because it is temporary (there is no way they can reverse this)
3:30 in the video - The US is not responsible for inflation worldwide.
5:25 in the video - We have 1% inflation in the US
In conclusion, I want you to know that I am not a conspiracy theory junky who sees attacks coming from everywhere and evil plots lurking around each corner. I do believe that Amerikans believe what we are presented and we cannot continue to consume the political and economic gruel that is being served. The Fox News story absolutely worries me as Ron Paul is someone who is an enemy of the Fed (at least in the way he speaks, let's see some action), and it is clear that editors at Fox News purposefully framed this to hurt his political support and momentum. I would expect those actions from MSNBC and even Dan Rather with CBS, but it simply puts me on alert to question everything. We already question every statistic released from China, why don't we do the same for statistics from the US?
If everything we see from the media is true, it is a certainty that US citizens will act like these peaceful Iranians starting at :50 in the final video clip where clerics demand the death of imprisoned leaders that called for uprisings in Iran.
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