Now I've gone and said it: It's NOT time for Gun Control, it's time for Gun elimination!!!

Yes, most everyone has a view on either stricter Gun Control laws or leaving Gun Control laws just as they are. It's that same fight over the 2nd Amendment to the US Constitution, "the right to bear arms". So it's time for me to venture in a comment on the matter but with a new twist.

I never owned a gun in my life. I did own a BB rifle, but almost never used it. I never missed having a gun, quite honestly because I don't believe in owning them. In all the talk about this issue in the wake of the tragic deaths of those 20 children in Connecticut yesterday, why aren't we seeing more people with the courage to say that we shouldn't be allowed to even own a Gun! Let's face the truth here, if people couldn't own guns or have access to guns, there wouldn't be these mass murders. Using a gun to kill someone is much easier than facing a person with a knife to kill them. So don't let me here the arguments that the mentally ill would use a knife instead. Sure they would use a knife, but would they be able to kill 20 kids before they were stopped. Let's get real about this issue. It's time for a US Supreme Court ruling as to whether the second amendment has applicability today.

In the days when it was passed, we had a militia. I'm fine to having the National Guard and other Military organizations having them for their job. But I do like Japan's views on Gun ownership. They believe no one should own a "gun or guns or a sword or swords" and then they make exceptions from that position. They have a very peaceful society and by God, I would like one here too. People are afraid of standing up to others in disputes because they are always afraid the person might have a Gun. Standing up for yourself doesn't mean using violence but having a discussion of your objections. But the NRA wants you to believe you must have a gun or allow anyone to have any kind no matter what.

We're not good at Conflict resolution skills as a society. We need to teach our children in school about Conflict Resolution, as a required course, and not just taught in one grade. What's a lesson for a 7 or 10 year old would be different for what you might teach a 15 or 16 year old. It's time for a new approach about this issue. It's time we don't assume the 2nd amendment has application to the 21st Century. We don't really need to hunt for game. Supermarkets provide all the food we need and they are abundant. Just look at how large our children and people have become over the past 2 centuries! Would our country be that much worse off if all guns were confiscated, just like Gold was for a while in this country? I don't think so. I know, we would never get every gun. I agree. But we might really reduce these mass murders! To me that would be worth the inconvenience! If those men and women out there have a real need to have a gun, then maybe we need to institute forced Military service for everyone. Then you can play with your guns where we may need them. And after you've not only had the chance to use a gun and maybe even killed someone, you might actually decide you don't really need one after all.

 Please leave a comment as I am interested in your viewpoint on this. Let's start the dialogue now!

Market comments for March 21st and the week

It was not surprising this morning that the market is up. The Dow is up 165 in early trading to 12,027 and the S&P 500 is up to 1295, all because of 2 things. First the success with the No-Fly Zone in Libya and secondly because of the fact Friday was Options expiration lat week. Let's face it the news isn't that good with Oil this morning up another $2.00/barrel. Many expect this trouble in Libya to end badly for Libyans. Don't forget we are dealing with a mad man in Gadhafi. And as they say the acorn doesn't fall far from the tree and he does have several sons, who are by his side in all of this mess.

Expect this week that we will form a lower low than we did last week at the Dow will make a try at going below 11,400. We have had 3 strong rallies the past 3 trading days and I think that string of moves is about finished.

Last week I purchased the Agricultural ETF, symbol DBA for $32.60, as I see agricultural commodities rising with oil prices surging on Middle East concerns as well as of Japan's nuclear reactor concerns and recovery from the Tsunami and earthquake. I expect DBA to go to $36 in the short term because of these problems.

And on the political front, the Republicans are not dealing with the debt issues except in very small ways. So the mountain of debt we have is still rising with this republican Congress and this unwilling President who has his eyes only on 2012 and not making any mistakes. He has been absent on this issue for fear of angering constituents. But that's not leading at all, I'm sorry to say!

Market comments for March 17th, St. Patricks Day! UPDATE

I am sorry to say but it appears tonight that the trading tomorrow will not result in a day in the Green, for St. Patrick's day. As it looks tonight, the Nikkei 225 has opened down about 350 points and our markets on Wednesday were accelerating down near the close. As the charts of the S&P 500 and the Dow show, the trend down is gaining speed and suggests more movement down before we get a bounce up.


It is clear to me that we have broken well below previous support levels and by extending previous lows you can see where the next level of support is and they are much lower. For the Dow, it means we most likely are going down to 11,400 and for the S&P 500 we most likely will go down and test the 1160 level. The Put to Call ratio at 7:00am PST this morning was at 1.99 but closed for the day at 1.17, which is still the lowest it has been in some time.

Today the Dow closed at 11,613 and the S&P 500 closed at 1256. When we go down to these levels many are going to wonder if we are on our way to test the 11,000 level on the Dow. The answer is yes, we are going below 11,000 and then we will test the 10,000 level, so be prepared for more losses if you haven't headed my warnings from previous posts. Notice that in the past 5-6 trading days we have wiped out 2 months of gains. That's how quick we can go down.

The data on Initial Jobless Claims will be out at 5:30am PST on March 17th as will Continuing Claims.

In the meantime, please send a contribution to the Red Cross effort to help Japan. It will make you feel good and you will be doing something really good for people who are suffering.

UPDATE: 5:55am PST

Dow Futures are now up 107 in pre-market so now it is anyone's guess where the market will close today. Maybe we will have a bounce up as the Bulls predict, but the data on Initial Jobless Claims came in at 385K, while expectations were for 380K. Surprisingly, the CPI for February came in at +0.5% and that is an annual inflation rate of 6%. That is not a good reading. That was before Oil rose significantly and suggests that March's CPI will be higher.

If we do get a bounce up today, plan it to be still a lower high than before. As I have repeatedly said, we will have lower highs and lower lows. Stay tuned! Happy St. Patrick's Day!

Market comments for March 15th UPDATE

Japanese stocks overnight had a terrible day dropping over 1000 points. The Futures are showing a drop in all US Indexes of about 1.5% to 2.3%. The continuing explosions at the Nuclear Reactors are causing concerns all over the world where Nuclear Reactors are used. Many lessons will be learned here in the next few years but for now panic is settling in all countries, including the U.S. It's hard not to see a connection to the Japanese stock market and the troubles in Japan as the cause of our market drop. But our market started to drop much before the Earthquake in Japan.

I expect the market to drop again and then have a rise but the rise will be a lower high than before and we will continue to make lower lows as I have stated here for a number of weeks. If you don't want to sell your stocks, then buy a hedge like some Ultra Short ETFs like TZA, SOS, FAZ and any others that go inverse of the Indexes they represent. It will help cushion your losses. But again, think if this is a longer drop, it might be better to sell now and take some profit and repurchase much later when stocks are cheap. The chart below is my best guess at Tuesday's action in the Dow. Notice the constant slide of the Dow drop.

UPDATE 5:40pm PST

Here is the actual chart of the Dow after the close today.

G-20 meeting: Effect on markets, Gold and currencies

As most of you know, the past few days has seen the G-20 meeting convene of Finance Ministers and their pronouncements that they would pledge to avoid weakening their currencies to boost exports and to let markets increasingly set foreign-exchange values.. Hopefully that means of the U.S. Dollar as well, as we seem to be on a tare to drop the value of the dollar, as fast as we can. In advance of any stock market trading this week, I thought a few charts were in order. I noticed that the on the last 3 trading days in anticipation of this meeting, there has been a slight shift upward on the ratio of the Dow/Gold ratio, as is seen in the chart below. Whether this is a reversal in trend or not is too early to say, but I will be watching it closely next week.

Now see if you can tell what has caused this movement up. Is it because the Dow has moved up or because Gold has dropped? This is important because Gold is tied to all currency valuations and is reported here in terms of U.S. Dollars. Below are the 2 charts in question.


You know there has been a lot of pressure put on China to raise the value of its currency, the Yuan, as they have kept their currency relatively low for many years. It has risen less than 2% in the past year, while Japans currency, the Yen, has been forcefully dropped by the Japanese recently as a counter to the dollar dropping. You can see from the chart below how the value of the Yen has been rising against the U.S. Dollar going back many years.

So let's assume you have a constant currency value as is the case of China and an ever steady Yuan, in this equation where currency is in the numerator and the price of Gold in the denominator, you can see that the resulting ratio goes lower and lower.

It is difficult to compete with people who get paid less than a dollar a day. Most of the world is finding out just how difficult it is. And yet, we all knew this much before the economies of the world went Global. Remember we too had someone, Ross Perot, who warned us of the giant sucking sound of jobs leaving the U.S. but the business leaders in this country thought somehow they could sell more goods in these foreign lands or at least get cheap labor to build their products here, rather than hire U.S. workers. That began the end of the Middle Class in America. We are all now suffering as citizens because of this folly. Business people do not have real concern for the common person. Their concern is totally based on Profits. That is why the Healthcare system in this country is so messed up save but a few Not for Profit endeavors which struggle every day to survive.

What's going on in the stock market? Market comments on Oct. 2nd.

It's time for charts, plenty of them. I have been looking at where we are regarding the U.S. stock market lately and comparing it to a number of other indicators such as, the price of Gold, the Nikkei 225 stock market index, the U.S. Dollar and the Japanese Yen. All this to get a better picture of the real value of our assets and the implications for the future. I have also been compiling charts on 10 year Treasuries vs. the S&P 500, because all of these measures do have a connection to each other and therefore paint a truer picture of reality.

The average person has no clue as to what is going on. They are too busy using Facebook, Twitter or other Social Media, they don't watch the News either. They work, play, connect and as long as they have some money in their checking accounts, they are happy, sort of. But the country is changing all around them and so far only some have been upset. Those upset have been labeled as crazy Tea Baggers, and while many don't really understand the data, they know what is happening is not only bad, but it is also making them furious. So let's take a look at the charts and see what is going on.

The first set of charts below are of the price of Gold in U.S. Dollars and in Japanese Yen over a 5 year period. The charts show that during this period, the price of Gold went up 172.7% in U.S. Dollars but went up only 107.5% in Japanese Yen. This doesn't mean you could have made a bigger profit if you bought Gold here vs. what someone in Japan made. It means that our currency has devalued much more than Japan's. Or to put it another way, your ability to buy goods and services are being diminished when this happens. If prices of goods and services remain the same here in the U.S. over the 5 years, then this means that the real value of these goods is declining relative to the rest of the world. Japanese Consumers could buy the same goods and services for much less Yen over the same period, than what we must pay. It means our Homes values are dropping more than what is apparent by looking at the current price realtors list homes at. If you add in the depreciation of the currency, the drop is staggering.



The second set of charts below are of the Nikkei 225 vs the Dow and the S&P 500 over a 2 year period. You can see from both of these charts that the spread between the Nikkei and Dow has been widening to its greatest disparity over the 2 year period. The same is true for the S&P 500. Of particular interest is the Sept. 1st point of the Nikkei which was at the lowest point since May 2009. These Indexes have tracked over many years, but lately (since May of 2010) the spread has been widening. Notice that the spread is wider between the Nikkei and the Dow than the Nikkei and the S&P. I have said that the Dow is much more easily manipulated as there are only 30 stocks in the Dow Index.


To show how these 2 indexes have tracked over a longer period I have included 30 year charts on each index. You might want to know why I have selected the Nikkei Index and wanted to show the comparison to our Dow and S&P. It is because Japan has had several decades of similar financial troubles with their economy and tried many of the actions we have tried and continue to try to get out of our biggest recession since the Great Depression of the 1930's. Japan's time has been called the "Lost Decades". So here are the charts, complements of the web site, "Interactive Mathematics". I am going to post their charts below here and also their commentary, which I found illuminating.

Here is chart of the DJIA up to the end of August 2010.

In the late 1980s, Japan had explosive growth in sharemarket prices, similar to the DJIA in the late 1990s. The euphoria in Japan was driven by healthy export growth, but especially by a housing and construction boom. The real estate bubble burst in the early 1990s and the Japan market started to plunge. Japan has been in and out of recession ever since, and the latest stock meltdown from late 2007 has seen the value of the Japanese stock market return to values last seen in early 2003, and before that, in 1983.

Investors who were in the market during the 1980s did very well, but since then, many people have lost a lot of money.

The main stock market index in Japan is the Nikkei 225, which is an index of the top 225 companies in Japan, something like the DJIA in the USA.

The graph of the Nikkei 225 from 1967 to end August 2010 is as follows:

The early part of this chart is quite similar to the exponential rise of the DJIA and it is interesting that both stock bubbles were in part fuelled by real estate bubbles. If the DJIA unwinds over the next 20 years in a similar fashion to the Nikkei, we might see a return to values last seen in the 1980s.

In this next graph, I have superimposed the DJIA (in dark red with red scales) and the Nikkei (in dark blue with black scales). The period from 1970 to the peak in 2007 for the DJIA has a remarkably similar shape to the runup for the Nikkei from 1977 to its peak in Dec 1989.

The wipeout that followed the peaks is also very similar. The Dow's low of near 7500 in Oct 08 corresponds to the Nikkei's low of around 20000 in late 1990.

Since its peak, the Nikkei has basically been on a downward spiral.

Here's an exponential decay model for the Nikkei, from its peak at end 1989 to the end of August 2010. (Note the negative in the exponential term):

Many commentators are saying that the Japanese did not address the issues regarding bank disclosures early enough in the 1990s and that's why their economy has never really recovered. However, the US Federal Reserve has already reached 0% interest rates (like the Japanese did) and have nowhere else to go now except for stimulus packages (like the Japanese have been trying, with little success, for 20 years.)

So are we headed like Japan? I don't know, but many of the actions the Fed has taken is similar and this comparison has not been lost on commentators. The comparison continues to be made. So when you see the indexes diverging to extremes, we could be facing a snap back in our Dow shortly.

It is important to continue to look at charts as they do show what is truly going on. Lastly I will show the Fed's action in managing 10 year Treasury yields through "Quantitative Easing" or QE 2, as it has been referred to. This chart clearly shows that the Dow has lost its tracking to this index and most likely is because of Fed intervention.


In summary, people are unaware of what has happened to their wealth. It has been the biggest transfer of wealth in the history of our country. It is the fault of the Fed and people like Larry Summers, Hank Paulson and others in dealing with these issues in the methods they have chosen to use to resolve them. None will work. In fact, they have made things worse as now the stock market has no real connection and tracking to the real economy. It is being manipulated by Institutional Investors who rely on market gains for their bonuses. It is irrelevant to them that the real intrinsic value of our currency has been declining rapidly. They figure they make so much money, even if it is depreciated in value they are making it up in Volume. Sad, sad days. And if you think a change in the mid term election is going to fix this, you are sadly mistaken. We need a complete mindset change to fix these problems and we aren't conscious enough as a society. Unfortunately change most often happens at the lower levels of consciousness. That is where our society is right now.

Savings Rate vs. Consumer Spending: What will the future bring?

Below, I have a chart of the U.S. Savings rate going all the way back to 1970 and comparing year over year growth, which I read in an article titled, "Global Growth Likely to Stagnate Through Summer". The economy has been built upon Consumer Spending contributing to 70% of our economy for at least the last 20 to 25 years. But now that trend seems to be in reverse, as is shown on the chart. If this is true for our economy, the big question is whether our exports can increase sufficiently to fuel our economic growth and take the place of our Consumer. We find ourselves in the very same place as the Japanese did in the early 1970's, which ultimately led to their lost decade of the 1990's.



No one knows what will ultimately happen here in the U.S. But we need countries like China and India to help fuel our economy and we had better get used to it. We need to build a closer economic relationship with China and that is in our national interest, or we could have our lost decade as well. It isn't going to be easy, as we are not as aligned with China because of their Human Rights record, but we need not to meddle in China's internal affairs as the way of showing our displeasure. We have learned much from the latest trouble in Iran and how technology has given them a chance to raise their collective voices in opposition to what they deem as an injustice by the Supreme Leader and government they trusted. We must let technology do its magic in China and learn to be more patient as a people. Otherwise, we and our children have a dark economic future. We can't keep spending like we have for the past 25 years. It is time to save and it looks like we may have finally learned that lesson.

Pre market outlook for May 20, 2009: More of the same ambivalence!.UPDATE

The market continues to struggle between the Bulls and the Bears. So far it is a tie. Pre Market Futures indicators show again an upward bias, although trading currently in Europe is mixed. Gold holds at $927/ounce in European trading. The Put to Call ratio was basically unchanged yesterday from Monday closing at 0.82, up from 0.78 on Monday's close. However the VIX Index closed below 30 for the first time since September at 28.80, which is not good for those wishing for volatility and wider spreads in prices during the trading day. Just ahead of summer vacations this is the kind of market that can cause markets to drift lower for the longs ahead of the Fall turbulence we have become accustomed.

There were only a few pieces of news worth commenting on this morning. First was what is going on in Japan. Here are a few news excerpts I found noteworthy.

Japan Economy Shrinks Record 15.2% as Exports, Spending Plunge. Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955. “There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.” The failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery.

To read more on this news item above click here.

Another news item was about HPQ ( Hewlett-Packard) and their earnings after the bell yesterday. Here are various excerpts from that story:

Hewlett-Packard Co. said Tuesday that earnings fell 17% in the second fiscal quarter as sales fell across nearly all the company's business lines, most particularly among PCs, servers and printers... -They also disclosed plans to lay off another 6,000 workers -- on top of previously announced job cuts -- as it continues to shed costs... Revenue fell across nearly all of the company's business lines during the quarter. In the earnings call, Hurd said the company is ahead of schedule integrating the EDS acquisition. The company is more than halfway through the planned workforce reduction of 25,000 employees that it outlined last year.

Hurd also said the company has found an additional $500 million in cost savings -- mostly through facilities and other real estate commitments that will be eliminated. H-P also said it will lay off an additional 2% of its workforce -- beyond the number it spelled out last year -- over the next 12 months. That equates to about 6,000 more job cuts at the company.

Many market traders said they see this as positive. I don't know why to be honest. Companies laying off more workers and cutting out costs through restructuring may all sound great but it adds to the overall unemployment rate for the country and those jobs will never be coming back. In my view the real story going on is that Corporate America may survive by cutting workers everywhere but the overall affect on the economy is going to continue to be crippling for a very long time to come. This means more foreclosures down the line, more government help and a lengthening of the time when this thing finally turns around. Markets may move up on selective companies taking dramatic actions to survive, but this is setting up a real plunge in the markets eventually in the Fall unless things change where more jobs are created. With al the talk of stimulus, I don't see it showing up on the jobs front.

Somebody please paint me a rosier picture! You Comment below and I will put it up here for all to see. I continue to hold TZA and FAZ shares.

UPDATE: 4:00PM PST

Markets closed down today. Gold closed at $938/ounce. The Put to Call ratio closed at 0.86. The VIX Index closed up at 29.03 but not until it hit a low of 26.57 earlier in the morning.