DID YOU CATCH THAT MOVE IN RATES?

I must begin this post with an apology and an explanation.  Unfortunately I have not posted in almost exactly one month.  I have had a family emergency that has required almost all of our attention.  Events like these make me realize how important family is and at the same time how much the blog has connected me to so many great people that I've never met in person through this thing called the web.  Another great aspect of writing the blog is that it does connect me with the rhythm of the market.  When I am not writing, I feel like I am not in sync with what is going on.  Things seem to be calming down with the family situation, so thanks for coming back to read posts.

BIG MOVES
Did you see that huge move in 10 year treasury rates?  All I can say is, "Wow!"  Does a move like this suggest that the treasury is done and is going to be trashed as an asset forever?  No, in fact, if we stick to the plan that I laid out in Confidence Lost - 13 for 2012 this move in treasuries is simply a warning to us that we are getting close to the next major move in markets that I suggest will  happen in May of 2012.

This move in treasuries is simply a wake up call that there is a market force out there that could shatter all the serenity and peace of an equity market that goes up every day.  A 30 or 40 bps move in treasuries is a massive move and I can only imagine the damage it did to currency traders.  Remember back about a year or two ago when we discussed the Fed's balance sheet DV01 or their risk to a 1 bps move?  I believe the DV01 at that time was close to $1.5 Billion.  So last week's move could have cost the Fed around $45 Billion in losses or more based on those old estimates.  That has to leave a mark.

TREMORS
Just like the small tremors that for months have preceded the big 7.4 magnitude earthquake in Mexico yesterday, moves like these in the treasury world are indications that some stuff is brewing.  I anticipate that the equity markets will shrug off this move in yields and push higher for another month, but this should shake us and cause all of us to begin examining positions that have made great gains in the last 6 months.

SYRIA, IRAN, ETC....
Oh yes, what a mess.  This isn't going to get better anytime soon.  Where is our political leadership?  Where is the outrage for Syrian atrocities against its people?  Syria is even more critical as a removal of that regime further isolates Iran which is clearly in the world's interest.  My guess is that our administration will not move to take a stand on Syria since it just makes too much sense.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

WHAT IS AUSTERITY LIKE? THE GREEK PERSPECTIVE

If you haven't watched the previous embedded video called "Century of Self" you are missing out! On this non-trading President's Day I suggest that you take an hour or two or four and watch the four part series I've put into one video.  It is really good and really scary.  I have taken a ton of handwritten notes over the course of watching the first 3 hours and I will summarize them soon.

I keep speaking to people that have no sense of what is going on in the world.  I had a conversation the other day with a health insurance client that was talking about buying a $85,000 sports car.  Yes, he is wealthy, but not THAT wealthy.  I finished the conversation with the notion that this gentleman has learned nothing from the financial crisis and he'll be the first one to cry about any catastrophic event that happens in his life.  He is clearly enamored with his wants more than his needs.  In fact, he is the perfect living example of what the Bernays wanted to create in America as highlighted in the video.

What is life like in Greece?  We hear words like austerity and see the riots, but what is the business of daily life like?  I've presented 3 stories below.  The NY Times piece is pretty good and optimistic while the other pieces....not so much.  Enjoy

THE HUMAN TOLL

The Way Greeks Live Now
I found an interesting article in the NY Times the other day about life in Greece and how the financial crisis has changed people's lives.  Some of the information presented in the story seemed to conform to my understanding of Greek life in that there were several brief interviews with families that had lost jobs and were changing their life-styles to cope.  While this information was in line with my way of thinking, the author, Russell Shorto, seems to spend most of his time highlighting successes in the midst of the Greek tragedy.  Several of the article's subjects are doing extremely well and actually increasing business.  Even as he covers the sad stories of families he suggests that since most have family homes in the country, there is still a way out for many that face hard times.

AUSTERITY AIN'T SO BAD?
While I am an optimist, I don't buy all of the good feelings that Mr. Shorto describes as being the normal outcome in what I would describe as a worsening environment.  Since this was one perspective, I wanted to present some other ideas.





The 3 minute piece from RT.com gives us more details about the austerity measures and how they are changing daily life.  Medical services are becoming more limited and citizens are turning to help organizations to meet their needs.  RT clearly has an agenda and a bias, and so it is important to highlight that as well.  They are trying to show that the military has not endured many consequences resulting from economic cuts and the people have endured full force of the results.  There are political realities and deals being made in the process and it isn't surprising to note that Germany and France are tying aid to Greece with back room deals that demand that military purchases be made with proceeds of each life saving infusion of funding.

The New Poor
Unlike the first written piece from the NY Times, this article from Der Spiegel gives us insight into the trends Greeks are seeing that are not improving.  The article highlights how many singles have lost their jobs and then quickly lost everything else.  The homeless shelters and soup lines are seeing waves of "new" seekers looking for their services.

PULL THE BAND-AID OFF ALREADY!
As we begin to hear more and more about a coming Greek default, these stories will get worse.  Upon default the human toll will be more worse as the cost of everything imported will become amazingly expensive.  Imported fuel, food, and everything else will be too costly to many.  Greece will become in time a very affordable vacation destination for richer Northern European countries as Mexico had been cheap for Americans for years.  While this will be painful, it is better to do this now and retain some national assets before selling them off and then defaulting after all the assets have been striped away and lost to global creditors.  Like everything in life, it is better to own up to responsibility and face consequences for actions early as a delay magnifies the damage and only serves to make the outcome more painful.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/ 

THE CENTURY OF SELF - MANIPULATION AND DEGENERATION

It is a rainy weekend and I've had this video in the hopper for a while so I thought that I would share it with you.  I've often written about "the post" I've been working on that highlights where our US society is going, and along the way I discovered this video.  Ultimately, I think it fits into the theme of the degeneration of our country and grapples with the notion that as citizens that are engaged 24 hours a day, 7 days a week in some sort of mass media, we end up believing the stories that are presented to us.

BEHAVIORAL MODIFICATION THROUGH FILTERING
Think about this for a moment.  The messages that we hear and see drive all of our decisions.  I think a perfect example is that of our current leadership in the White House.  When President Obama was elected he had little real political experience and no foreign policy experience and ran based on a campaign to end all wars and stop all military efforts abroad.  Suddenly, upon election, he refused to end the Iraq conflict, continues to remain in Afghanistan, helped topple Egypt through lack of action, deposed Libya's dictator through the UN, and now looks focused on efforts to engage Iran.  All the while he has kept Gitmo open.  What happened?  How did a pacifist anti-war Constitutional Law professor like Obama become a war-mongering imperialist?

My opinion is that there are two reasons for the changes we've seen with Mr. Obama.  First, someone shared with him that there really are bad guys in the world.  Second, he is probably receiving a steady diet of feedings about how evil folks are by the machine, and reality becomes what the organization wants the President to see and know.  In a way, we are all like this, and this is why I want to present this documentary to you.  We receive filtered information and thus we can be manipulated into believing just about anything.

MAKING ME WANT WHAT THEY WANT ME TO WANT
The video is about creating needs and wants in target subjects and controlling their behavior through the most basic manipulation techniques.  I think I've done a pretty good job with my kids as they have grown up asking them probing questions as commercials are presented to them on kid shows.  They are aware that companies are attempting to sell them stuff they don't need or want.  I hope that their ability to recognize these tricks sticks!

I know the video is long.  Just act like you eating an elephant....and take it one bite at a time.  Come back to the site when you need a break and make sure to shop in our Amazon box at the upper right because you deserve some plastic crap from China or a book or game that only can be obtained through my search box....hurry there is only a limited amount of time to get the best deal!  Maybe click and ad or two and check out our Google Ad sponsors!  (Ok self-serving commercials are over!).

THE CENTURY OF SELF




HERE'S THE STORY, NOW THINK THIS.....
Finally, please check out this story about a software program used by Forbes and a few other outlets. The program actually writes stories and then compiles data and adds pictures.  AUTO-PILOT JOURNALISM

We now have the ability to automate and create stories with depth based on events that happen.  In other words, the computer software that a media giant actually uses creates stories and adds a bias to them without human eyes needing to manage the process.  Now, to make this even more conspiratorial, think about this software in the hands of a totalitarian regime like North Korea or Russia.  Isn't it an easy leap to believe that it would be a great tool to control the masses?

Just something to think about when you feel like putting your tin-foil hat on during this rainy weekend.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/ 

LET PAPER BE OUR FUEL! - GASOLINE UPDATE

AMPLE PAPER FOR EVERYONE!
The seasonal gasoline trade has been my target for the last two years and so far they have been quite profitable.  I've highlighted trades in WNR, VLO, and UGA and all have done well.  As I have laid out previously there is a seasonal component to this trade, but it is also one based on the view that Benny has our back and he and his central banker pals are finding ways to goose the global financial system through their respective liquidity providing measures.  (Explicit or not).  As they go to work making sure that no civilization is ever short on paper or electronic currency, this forces things with real tangible value like commodities to move higher.

THE GLOBAL FEDOLUTION
Last year around the time the Tunisian riots began to break out I suggested that our Fed could be directly and indirectly to blame because global food prices were sky-rocketing and starving people have little choice but to rise up and take action.  I coined the phrase the Fedolution as we can give the credit or rest the blame for the Arab Spring's spark largely with the Federal Reserve.

As we fast forward, incarnations of Fed action have resulted in a continued liquidity driven asset frenzy that has spilled into other commodities.   Since early 2011 we seen hard asset prices bounce around, but thanks to a significant rebound in December 2011 and January 2012 we see that almost all commodities move higher significantly.  Our economic measures suggest that price inflation is really almost non-existent according to the Fed's definition, but somehow we find that domestic gasoline prices are at the highest level for a January ever.

Average January Gasoline Prices

DEMAND SURGING?
There are legitimate reasons for gas prices to be high including refinery maintenance and supply bottlenecks, but I'm not sure this tells the entire story.  We automatically may tend to jump on the notion that the US economy is rebounding and we are seeing a rise in demand.  Unfortunately that isn't really true as US domestic gasoline demand is at it's lowest point in more than 175 months!  Clearly the US driver is not expressing any positive views on the economic situation by filling up more!

Zerohedge does a nice job of describing why gasoline consumption is tanking here - Zerohedge

NO NEED TO DRIVE
While our cars are more economical, this too isn't the reason we are not using gas.  Frankly, I believe we are not using gas is that we have a huge portion of our labor force shut in and they are simply don't need to or can't afford to drive since they don't have jobs.  Despite my assertions on why gas consumption is low, we still see gasoline prices moving higher and the prospects for even steeper fuel prices are pretty good according to Joe Petrowski, the CEO of Gulf Oil.





There are some really good items in this interview that we need to highlight.  Joe mentions that financial issues in Europe are having some impact on refiners there (remember, Swiss refiner, Petroplus filed for bankruptcy in late January) and this is causing a pricing issue globally.

Summer prices for gasoline could be as high as $4.00.

Brent crude could go as high as $130 in his estimation.

Higher gas prices are impacting C-Store retail sales!!

An Israeli / Iran conflict would driving prices to the point where there would be a rationing effect (I think he is suggesting that demand in the USA would crater due to pricing pressure rather than a rationing scenario where the government would limit your ability to fill up).

Every $.50 increase in gas prices takes $150 Billion out of GDP or about 1%.  A price of $4.50 or $5.00 will result in massive cuts in demand.

BRINGING IT TOGETHER - WHY IT TURNS NASTY
I'm concentrating on this gasoline topic purposefully as I am trying to draw together for you my original thesis regarding how the year will play out.  I do see gasoline prices moving higher over the next few months (UGA probably won't rival the 7/2008 peak of $65.00) but as it moves higher, we will get a forced slowdown in our economy as a result of the gas tax on our economy.  The dramatic impact these prices will have will serve to stifle any potential growth and actually cause our economic momentum to swing the other way.  This is why I feel strongly that we will see the market highs for the year in late April or early May.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/ 

PLAY IT LIKE THE BANKERS....DISTRIBUTION AND GIDDINESS

I can't stand it.  Like I said yesterday, with all of my favorite analysts coming to my view regarding the set up for the rest of the year, almost everything in me wants to find holes in that theory.  Sometimes it is better to be alone with a view rather than to feel like you are in a crowded trade!

Despite this new revelation that smarter guys than me have been convinced that I'm heading in the right direction, I'll still stick with my outlook, but I did take some time to look for compelling reasons why we'd have a pull back here, and I found several.  I'll share at least one with you below.  As a side note I saw a rumor that there has been a leak that the ECB has a firm date set for a Greek default and it is about one month away (around March 20th).  If I were a bankster, I'd probably need one more blow off top rally here to unload all my goodies on the masses to prepare for the rumored coming Eurozone breakup .  So, I will reiterate my sentiments from last night, if you have big profits take them, and if you are in new positions, make sure that you have stops on them.  You could potentially make a tub full of cash here in any last gasp surge, but make sure to realize profits when you end up making a bunch too quickly.

Check this out.
BULLISH % INDEX ON SPX

And this one too.
SPX

Admittedly this is a bit hard to see on the blog, but the top chart is essentially a quantification of bullishness in the market.  The second chart is the market.  What we see here is when the top chart is over or hits 85, it signals a period where investors are just too excited and everyone seems to have jumped into the boat.  The problem with these times is that no one is left to buy and propel things higher, so the rallies fall and sometimes fall quite far.  WE ARE NOT THERE YET, but a couple more days like today will seal the deal.  At the closing level of $84, the $BPSPX is near a signal, but be patient, and play this like the bankers.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/