01.23.08
“Gristle”
“Gristle” - n. cartilage, especially in meats
Admit it. Most of us have eaten at the now bankrupt Ryan’s Family Steakhouse. We hit the buffet. We loaded up on those steaks because our budgets were tight or we were on the road for business or vacation. We carved into the steak with that knife and cut a piece of meat out with that A-1 dousing it. And of course chewed. And chewed. And chewed. And of course got a chunk of gristle in it. That’s a pretty nasty thought but heck, it’s reality. Well, when a bear eats a bull it runs into a few of Kudlow’s old toupees, maybe a few of Cramer’s old Street.com buys of stocks that plummet 70% after he runs his mouth, and of course, gristle. Today the bear spit out some gristle. But take a step back. Listen to what’s been said this month. And understand that a bear market rally, just like a gold market run down or up, can be nasty and ugly if you don’t read the history of our markets and just what is coming up next. There are some undeniable facts we all have to accept and that’s why I’m here. To gross you out before dinner and keep you thinking.
Undeniable Fact#1
Despite all of the best efforts of the Bubblevision crowd, the reality is we are in the early phases of a major bear market. Until we get that final flushing sound of all the weak hands and a lot of the strong hands, this is a long, long way from being over. There has been no capitulation, no desperation, no lines outside brokerage offices televised and no reports like we heard in 1987 about angry customers confronting their brokers in a terrifying manner. The reality is that this is nothing. And until we see a massive roll over to hit the 20-30% downside targets in an average recessionary decline. In just 15 days of trading this year though, we have managed to set the plate for some serious ugliness to come. Please, please, please, that a broker’s primary duty is to rook you into “trusting” their judgment and churn your account until they give you that whopping 5% return you could generate on your own then reduce that by 3% after fees. They are used car salesmen with bad ties by and large and most (not all mind you) prefer to act like you need their products. Of course when they give you bad advice or make a mistake, you’re screwed. So remember these undeniable facts as we progress.
Undeniable Fact#2
Interestingly, the yields on the U.S. Treasuries has sparked some interesting and very disturbing questions. Glenn Beck actually had a guest on who “gets it” and posed this point to the audience. Steve Cordasco was on and pointed out that if anyone is paying attention, the bond yields on our long term debt has dived.
Steve pointed out on the radio show that huge amounts of money from institutional investors was pouring into these markets and THAT was a disturbing fact. He also pointed out that the billions that have been parked in U.S. Treasuries indicates that there is another shoe or two to drop. In my opinion, it’s not another shoe. It’s an iron boot from the Hillary collection. What one has to see is the flipside to these charts. Why would supposedly smart investors park billions into low yielding U.S. Treasury instruments after seeing this chart:
Using the official government statistics, you can see an annualized inflation rate of 4.1%. The yields on the 2, 5 and 10 year bonds are all under the inflation rate. This means that these investors are willing to take a loss on their investment by parking it there instead of playing the big casino. The 30 year was close to the “official” rate of inflation. But if you use the real, original formula for inflation, all these investments are yielding way under real inflation and that is disturbing. Why is big money piling into a losing investment and what news are they expecting in this first quarter that will be so destructive to our markets, they are willing to park there instead of one of the high quality losers Cramerica touted at his Tupperware party last night?
Undeniable Fact#3
You can shoot it, you can stomp on it, you can scream at it, you can call it useless like the two Bubblevisionista networks do, you can deny it exists as a hedge, you can proclaim it’s dead, you can deny it’s been used as a store of value for over 4000 years, but guess what gang? No one has killed this bull market yet. The accumulation by the communist Chinese government, Russian Central Bank, Arab banksters and sheiks, and of course India continues unabated and no one wants to ask “why”. The why is obvious. And with more and more investment advisers on the mainstream media advising a ten percent hedge with gold in your portfolio, this should concern everyone. I’m not trying to argue for or against this bear market rally. But if you look at all the “safety” hedges, there has been no dramatic liquidation or shift since the last quarter of 2007. Let’s see where gold ends this year before saying it was just a “hedge” because in my book it tracks with the chart from www.shadowstats.com above on inflation. I fear that gold is your warning sign that inflation is about to get considerably worse and I stand by my “Shadowstats” guesstimate and prediction of 18-22%+ inflation by year end.
Undeniable Fact#4
There is no fear, just bewilderment. Last night’s two hour Bubblevision special should spell one thing out to everyone:
Propaganda pays
I have no ax to grind, no sales pitch to offer, no profit from what I write or say (want to hire me?). But the great disturbances in the force that I feel are based on historical studies. These rallies like today are just that, a bear market rally. There will be a lot made of this by the Bubblevisionista crowd on CNBC and FBC. Please, play safe. This is a market for pros. If you know what you are doing, have fun, make money and don’t be a pig. In the mean time, take advantage of dips in the precious metals for one more trip to the store to load up. Once we crack the $1000 and $20 on gold and silver respectively, the next leg up will be just as violent as the stock action today. And to prepare for the news that is going to hit the rest of this year requires the ultimate hedge; the currency that has survived emperors, kings, war and peace, bubbles and depressions. This is not the time to be a hero.
Or dinner for a bear.
Greg Marsh said,
January 24, 2008 at 5:16 pm
Appreciate your perspectives John!
Thought I would add some thoughts of my own…especially since I work for a large grocery/retailer.
One of the unusual things I have noticed in the last two weeks has been the shrinking volume of certain products. By this, I mean, the 24 pack of bottled water that sold for 4.98 now has 20 BOTTLES in the case…for the same price of 4.98
Another example: 10 packs of boxed juice now only have 8 PACKS…for the same previous price as the 10 packs.
Smaller volume….same price. Maybe this is how the grocery retailers are gonna attempt to mask inflation.
By my calculations, I think its about a 16% rate of inflation.
Interesting times we live in…enjoy your website much!
Regards,
Greg
Paul Kiker said,
January 24, 2008 at 6:25 pm
I agree with all of what you are saying exept that all brokers are churners. I serve the risen Lord Jesus Christ and ask for his wisdom in guiding clients.
To my own hurt I have moved clients over in protection mode. My fees go with it, but it’s the correct thing to do. They are in international bonds, Gold, and treasuries.
Please next time note that there are those who serve the savior and not the Deity of the average american. My father told me when I was a child that Bankers are the greediest people you will ever meet. I think that’s true for the financial services industry. But a mighty God has placed some in the midst to protect his people, if they will look for him.
I am an advisor who walks a different path and those I serve will know I serve a great God.
Outside of letting you know there are those of us who are different I have no complaints.
Keep up the good work warning the oblivious Americans.
The Pastors aren’t doing it and that’s a shame.
Paul Kiker Jr.
Georgia
david g. jardy said,
January 24, 2008 at 6:44 pm
I agree with you on this.
vinny said,
January 24, 2008 at 8:24 pm
I am willing to bet and I have, that the market have no doubt have turned Bear but they will continue to rally throughout the election and into next year. When the oil production gap becomes exposed in 2009 and the real crap hits the fan there will be no place to hide! This is a major paradigm shift and once exposed things will never be the same for the money-changers. We are only in inning one or two of the game there are going to be many, many more revelations unfolding.
Administrator said,
January 24, 2008 at 10:35 pm
Paul, not all brokers are of that ilk, but most sadly are. My FIL is a good Christian man and would never churn people’s accounts. Unfortunately so many of the members of the Merrills, Citis, and others have destroyed a once respectable industry and the boiler room tactics have been shameful. It’s nice to see good Christian advisers like yourself out there as that is what the world needs more of.
I would be more than happy to have you post your email up on this thread or if you would like, for people to contact you for help, as I do not provide financial advice and think certified advisers like yourself are the route to go.
Bless you sir!
Herbert Brown said,
January 25, 2008 at 3:28 am
John
I greatly value your site and your posts. I hope you continue this labour. There are many of us who watch, who read, who listen, but do not speak. So many around me are totally asleep, no idea what is happening. Like those folks on the Titanic just before the water hits their ankles. I’ve tried to tell them, “get out of equities, store some food, buy some gold and silver, buy ammo and gardening stuff.” They give me that “deer in the headlights” look, like I’m some kind of nutbag would be prophet. But make no mistake, some of us are paying very close attention to what is happening around us. Your postings reassure me that I’m not bonkers.
Regards
Herb
tuco22 said,
January 25, 2008 at 5:56 am
Regarding the smaller volume/same price in grocery stores, it isn’t just the juice, etc, I also noticed it with sugar. Sugar used to come in 5 lb bags, now it’s 4 pound bags. Again, same price, less product. They did the same thing with coffee awhile back. I wonder when they’ll get around to flour.
And regarding those with the “deer in the headlights” look, I run into that, too. I think generally speaking people just want to think that things in the US are going to continue on the way they have been for the past 200 years, with some minor bumps in the road. After all, they say, we’ve run into tough times before as a nation and always bounced back. Yes, but then they had mechanisms to recover and leaders who cared about the country, at the very least, who believed in the same things the average bear did. Now we have no recovery mechanisms and no leaders who care about the country or believe in what it used to stand for. When I watched the lemmings at the Hillary and Obama rallies, I thought that those poor people, taken in by the slogans like “change we can believe in,” didn’t have a clue what’s in store for them. Did any of them even bother to figure out what that really means, anyway? What exactly has to change? Have you ever listened to what either of them, or Bush, for that matter, has to say? Try it sometime, the next time they show a clip from one of their rallies where they make some sort of campaign speech. Then go and watch some of the old documentaries featuring Hitler’s speeches. It’s the same empty, useless rhetoric and sloganeering. Only the topics are different. They talk a lot, but they don’t say anything. God help this country, with people like that for leaders.
John Edward: Killen said,
January 27, 2008 at 3:07 pm
John…………
referencing the article about the shrinking volume in the package size vs price increases to mask inflation.
A friend pointed this out about 3 years ago to me and we have been watching ever since. It is true that most manufactures have chosen to shrink the size of the portion or offer less portions in the package ( less water bottles in the case or less food in the bag or change the weight measurement ( metric vs Standard).
This shell game has been going on for at least 3 years actively and for several years before that on a reduced level…………..all ya gotta do is to be aware and use your eyes and that comes from prayer and the Holy Spirit guiding His Children.
The government/industrial complex is doing every thing in its power to hide/ remove/ twist/ skew/manulipate the truth on EVERYTHING that it reports including out right lies with the biggest lie leading the pack being the INFLATION RATE.
We the People thank you for your Efforts Mr. Galt in bring forth the Truth of the Matter. Yah bless you and yours
John in St. Petersburg from the Land of the Hanging Chads ( Floridugh)