Monday, May 30, 2011

Is America On The Revolution Contagion Hit List ?

One by one they are being mowed down. First it was the Tunisia uprising, and Ben Ali, regime chief since 1987, flees the country. Then swiftly following is the Egyptian revolution, and Hosni Mubarak, regime head thug for 30 years, flees the country. Now quickly coming to a boil are two more head thugs and their long lived, stable empires - Muammar Qaddafi in Libya, in power since he tangled with Reagan, and Bashar al-Assad in Syria, who together with his father has ruled for 40 years. What the heck is happening? These multi-decade power brokers are being dismantled in a matter of months.

It could be a good bit Iran stirring up malcontent for its own geopolitical advantage as many claim. But they have to have a big groundwork of simmering malcontent to begin with. What is all this malcontent and why is it detonating so easily now? I think a lot of it has to do simply with two things - the food shortage and the tech revolution. How so? Well the basic problem with all these people is that they live under the iron boot of freedom repression and forced poverty. They have been for many years, but now the developing food crisis is touching off violence and the smartphone revolution, which I've been predicting since 2009, is greatly facilitating it. The typical revolutionary in these countries has been described as having "a rock in one hand and a cell phone in the other". The thugs can censor the news and lie all they want, but the average Joe in all these places can now learn and organize via phone, and they aren't taking whatever the thugs are giving out anymore.

So what does all this have to do with a similar revolution here in America? Aren't we richer than that and with a better government? Well, I don't know. We may be experiencing the same thing only at a much higher level of comfort. Instead of Ben Ali's regime running things, we have had Ben Bernanke's regime running things for decades. If you include his "fathers" going all the way back to the 1913 founding of the Fed, these thugs have had their way for a hundred years. And what is the result? - big banks too big to fail (or be prosecuted for crimes against the average Joe). Times are still not too good for main street, but excellent for Wall Street. Our fed induced debt burden is now poised to drown our middle class, and our middle class is grabbing a rock in one hand and a smartphone in the other.

Like the fleeing thugs the global Tea Partiers are targeting, the central banker/economy planner elite of the US :

a) say to the other countries, you need us for stability. It would be chaos without us

b) rule by brute military force

c) have a fast growing share of their country's wealth in the hands of a privileged few - oil revenue in Saudi Arabia, financial weapons of mass destruction in the US

The Tea Party revolution in the last election seems to have said the time for this is up. Real government spending cutters were elected. Wisconsin's state senators fleeing the state over the budget battle feels a little like Mubarak fleeing Egypt.

The average Joe American does not want point (a) above as our economic plan. Point (a) was cleverly illustrated by Peter Schiff's story about Consumer Island. He tells the tale of a shipwreck leaving a group of some Asians, Brazilians, and an American on an island. To survive they had to divide up the jobs. One Asian was given the job of fishing. Another was given the job of hunting in the middle of the island. And the Brazilian was given the job of gathering the fire wood. The American was given the job of eating. So they all had jobs and at the end of the day, they all gathered around and the American would eat. But he would save enough for the others so that they could repeat the next day.

China and many others may just boot the American off the island if we don't soon stop chasing capitalism and the entrepreneurial spirit out from our borders with government-knows-best economy-by-committee Five Year Plans. We are becoming the global village idiots, not just of energy policy, but of every other kind of policy. And this is a prime mover in the bull market in gold and silver. Gold's price is a judgment on the soundness of the reserve currency and the government example being set by it.

I was struck by what Donald Trump said to Piers Morgan recently on his CNN show. I'm not a fan of Trump or his possible run for the presidency. But in discussing his international dealings, Trump pointed out a key problem that he says he, or somebody, needs to fix. Referring to the nations around the world, he kept repeating "they don't respect us".

"A wise and frugal government which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government."
These words could well have been said by anyone on Consumer Island or any Tea Party revolutionary. But they were said by Thomas Jefferson.

Sunday, May 15, 2011

Market Changing Stripes ?

I've generally been pretty bullish on the market since April of '09 with only some neutral danger periods now and then giving me pause. The leader groups I follow, retail (RLX), Baltic Dry Index ($BDI) before the ship overbuild problem, tech, etc. have been indicating continued upside with only typical bull pullbacks. But now its technical behavior is giving me plenty of pause. The leader groups continue to behave well - outperforming and wanting to drag up the rest of the averages. But here is what I'm getting worried about.

If you look at what happens at major moves up and before major moves down, you see this

This was the last half of 2007 and we know what followed. Other bull runs display these divergences toward the end. This divergence trend analysis works better on broad averages than individual stocks, but it is typical behavior there as well:

Here we see Headwaters' recent behavior. Its nice climb from mid last year telegraphed its end with divergence.

What's happening now with the S&P 500 ?

Egad ! It's starting to act badly. I'm not saying a radical decline must follow, but maybe some cooling. Another tell tale marker of a turn is what the "cereals and soaps" do. When they suddenly start turning up and being a standout group, problems with economic growth are being felt by the market. This certainly was the case in late 2007, and guess what, they are becoming a conspicuous group now. Examine the charts for '07 and the current charts for HRL, UN, GIS, K, PG, KFT.

Another nagging problem is market sentiment. It's been too high, which didn't bother me when a horrific selloff was being feared back in February, but the mild 7% correction back then didn't work off much of that exuberance. But now we have these technicals turning. According to the numbers tracked by a blog that specializes in this, the Nasdaq sentiment is at a 5 year high right now. I don't know what fundamentals would be turning the market - angst over the end of QE, trying to raise interest rates with a mountain of debt that we already can't service. I don't know. But the charts have thought it all through, and they know more than I do.

And then there is the monster earthquake coming in a week or two that will split the US down the middle. A small point but I thought I'd mention it. It seems like Mother Nature is throwing a hissy fit of quakes all over the world the last few years. But are they really increasing? And is Mother Nature being helped? (click to enlarge images)

This chart shows that what has really been increasing is the people being killed by quakes - not so much the raw number of them occurring. So if the number of quakes is only rising modestly, why, since about 2003, have they suddenly become so destructive and deadly, as if they started seeking out the heavily populated areas with an evil mind of their own? Well, conspiracy theorists have long held an answer to that - HAARP. The High Frequency Active Auroral Research Program was one of those Star Wars defense plans in the Reagan years that were a big political debate issue. They were pretty much all voted down except for HAARP.

They went ahead with this and construction began in 1993. It is a joint project with the US Navy and the US Air Force, with patents based on Tesla in both high frequency and ELF technology.
The ELF part (extreme low frequency) is of particular interest to the conspiracy claims that, not only do the original patents and technical write-ups suggest this technology will be used to control weather, it will also be used in tomography to probe deep into the earth the way normal frequency transmission can not (your car radio blanks out when you go through a tunnel). The stated intent for ELF are things like mapping underground munitions, bunkered nuclear sites, etc. But many claim that HAARP is being weaponized not only for weather control, but as a tectonic weapon - inducing earthquakes.

Nicola Tesla, the "father of modern electricity" whose patents HAARP is based on, once built what was called an "earthquake machine" in his New York lab, disturbing the neighborhood and bringing the police to investigate. He once had to hammer the machine off to stop a quake he induced. This was a tiny 6 pound machine based on resonant frequencies that could be attached to a building and, with the right frequency dialed in, once induced a quake in a steel skeleton being erected, so that the steel workers at the top came scrambling down thinking an earthquake was in progress.

This was all around 1898, and the hub-bub over such a thing as an earthquake machine has gone away - until now. With the dramatic rise in mass-killer earthquakes since 2004, it's being noted that the massive antenna array buildout in HAARP's Gakona, Alaska facility, by far the most powerful of its kind, coincides closely with the rise of these killer quakes. The facility was completed in 2007. There is some correlation between strong magnetic field disturbances on HAARP's instrumentation on their website and major quakes if you survey activity in the 3 days previous to the quakes (about a 1 in 9 chance occurrence as near as I can figure). Earthquakes induce magnetic disturbances, which is why animals can sense them days in advance. But man-made looking signals, that only started showing up since about 2004, have a hoard of paranoid types blaming HAARP for inducing killer quakes with ELF resonant frequencies the way Tesla did with his crude 6 pound mechanical resonant version.

There are several different geopolitical takes on who may be doing this and why, but they agree on the people involved being heavily into the occult. I am not an expert on occult numerology, but a basic tenet is that there are what they call the "master numbers" - they are 11, 22, and 33- and they believe strongly in planning major events around these numbers.

The conspiracy nut jobs aren't the only ones leery of HAARP. Exonews recently had a story "European Parliament Issues Warnings On HAARP". The European leaders wanted to have more information on what they were doing with this research, concerned about its impact on weather and other things. This parliament action was taken in 1998, the article rehashes their concerns today.

The US Geological Survey's site has a long list of what they call "Historic Earthquakes" basically meaning the most destructive ones. If you refine this list to just the big killers - those with over 20,000 dead, you wind up with a list of five - all five occurring in 2004 and later. Of those five, three occurred on either the 11th or 12th. You can easily figure the math probability of that happening by random chance, 1 in 25.

Added to these happenings not likely by chance is what is happening with the weather lately. Supposedly the bread and butter of HAARP, other than incinerating incoming missiles, is weather control. Radar watchers claim they can spot unusual weather events days in advance by watching for "HAARP rings". These are near perfect, unnatural looking circles; and a huge rash of them popped up clustered in the New Madrid fault system in late April. I was stopped in my tracks the other day when I saw a CNN weather map showing the total rainfall amounts the past month or so. The very high amounts formed a near perfect map of the fault system. The map below shows flood warning counties as of May 6 with the insert showing the damage zones for the New Madrid:

The two satellite photos show the fault zone a year ago (top) and on this May 6 (bottom). Why has it rained so much over just the fault zone? I didn't think there should be any connection between rain and quakes until I checked. If they dam rivers, they often get small quakes. But probably the main attraction for the alleged disaster makers with all the focused rain is soil liquefaction. When the soil is wet, earthquake damage is vastly increased. Shaking wet soil causes it to go mushy. This quake feature happens a lot, but Japan and others lately have suffered severe bouts of it.

I've seen Agri science studies for rice-growing in eastern Arkansas where they gauged optimal "soak time" for the soil in this area of the fault (to get surface applied fertilizer entrained). They found it to be "at least 3 weeks". That suggests maybe an optimal liquefaction window of late May or early June. Conspiracy theorists point out that FEMA has a history of running drills for disasters just ahead of when they actually happen - when they are at the height of readiness. The idea is ever more dependence on the federal government with each disaster. They impose laws to deal with them, but don't take them back once the disaster is over. NLE 2011 is a massive FEMA exercise for a major New Madrid quake scheduled for May 16-21, about the same time frame for maximum liquefaction damage (and at a 22 number - May 22).

How much weight an investor should give to this quake threat depends on how much tin foil you wear in your hat I suppose (these guys claim a lot of things that don't happen). But I've gotten a lot more defensive with my portfolio strategy for a variety of reasons - very high cash. If you want a stock that typically benefits from the increasing earthquake disasters, whether by plot or by nature, take a look at Taylor Devices TAYD. This very small company in New York makes the products that allow buildings to absorb ground movement with little damage - basically gigantic shock absorbers. They routinely retrofit large buildings with these things easily and economically. I don't see what's so easy about cutting off a building at its foundation, jacking it up, and bolting on these things - but they do it all the time! And they have been doing a good business with it:

It's not grossly undervalued, or heavily insider owned (only 6%) but a stable, successful business. Quake protection is all they do, and they are about the only ones who live or die by this one product line. ITT and Kayden are the only publicly traded competition listed by Yahoo Finance, and with them this product is a small side line. TAYD tends to jump instantly in response to major, destructive quakes:

But, of course, if a major quake destruction would hurt the market enough, TAYD might initially react more like it did in late '08 (down like everything). If the New Madrid were to become more active, it would suddenly place a huge area of buildings in the midwest, that were built with little thought about earthquakes, into the market for some quake retrofitting.