Voting with Your Feet

The US migration map for 2017 is out. Here are the trends since 2011 to present day:

People are leaving high taxed states in droves. Some, I bet, are taking their philosophy with them. They can’t seem to understand their voting habits and thinking created a nightmare in the state they are leaving behind.
Others have had enough. It takes a lot to pick up and move from one state to the next. You leave behind family and friends. You have to pull your children out of school. It would be more interesting to see the demographics of the people moving.
Questions to ask yourself:
Do you own real estate in the outbound states?
Should you buy real estate in the inbound states?

The Excess Reserves Problem

The Federal Reserve created a lot of digital currency in 2008. Ben Bernanke hit the CTRL-P button a few trillion times to buy worthless OTC derivatives. The banks have taken that money and deposited it back with the Fed. We now have a mountain of excess reserves. About 2.1 trillion (Whats a few billion between friends). Take a look see:
The federal reserve now pays interest on excess reserves (IOER). Banks have not lent out this money. Why not? Well, they get money risk free. They do not feel it’s worth it to loan out this money…yet.
As interest rates begin to rise banks will be tempted to deploy this cash. This will affect the money supply in a huge way. There is not a single person on the planet, least of all the people at the federal reserve, who fully understand how all of this is going to play out when they try to unwind there massive balance sheet.

Donald Trump Wants to Block Out the Sun

Rumors have it that President Donald Trump is asking “Where are my tariffs?” Tariffs are taxes. We are told by the RNC that all taxes are bad. Tariffs are somehow different… only in name. Frederick Bastiat wrote the candlemaker petition. It was published in 1845. Since that time no one has said,
“Frederick Bastiat you are wrong because of this”.
It was a satirical piece.  The candlemakers and tallow producers write a letter to lobby the Chamber of Deputies of the French July Monarchy. The candlemakers and tallow producers have an unfair foreign competitor. The government must help the candlemakers and tallow producers. The government must save jobs. The foreign competitor is….. the sun!!!! The government must create laws for everyone to block out their windows with curtains and use candles.
That will make you think. It will make you reflect. Something isn’t correct with this “Tariffs are good” idea. Of course a tariff on steel will help the steel makers in the USA.
The questions is: At the expense of whom?
Answer: Everyone else.

H&S

Small Head and Shoulder Continuation Pattern in the USD. One of my favorite trades to make.


1- It is a continuation pattern. I like to go with the trend.
2- This H&S looks very neat. It had a clear break below the trend line. Both shoulders are the same size and height.
3- It has been developing over a nice time frame. I don’t like trades that play out less than 12 weeks.

The Exact Opposite of a Top

Below is a long term snap shot of HUI gold mining index.

This sector is pretty much hated by everyone. Since 2011 it has been battered and bruised. Even the hardcore gold bugs have thrown in the towel and abandoned  this poor sector. This catches my interest. I like to be where everyone is not. With an all in sustaining cost to produce an ounce of gold at about 850$ per ounce and a gold price at 1300$ per ounce this makes for some pretty hefty profit margins. Mining shares seem to come roaring out of the gate in the beginning of each year. Which is why we opened a few positions in the red headed step child of the financial sector.
Looking closely, we see the HUI is where it was at in 2008. That’s when everyone thought the world was coming to an end. Don’t worry about them crashing. They have already done that.

 

Me, Worried?

Mr Stockman has an excellent article posted. It should be read from top to bottom. It has a lot of numbers and pretty graphs. To summarize in one sentence: The US government will have red ink from now until a default.
I agree with his assessment. Here is the difference:
He sees disaster. I see opportunity.
The US government will not be able to fund itself. This is a good thing. It will have to sell off assets to pay for grandpa’s prostate exam. Once it gets very bad, they will pull the plug on poor old grandpa. In other words, they will default on the sacred cows: Medicaid, Medicare and Social Security.
Here is our opportunity. The opportunity to capture the hearts and minds of the public. The opportunity to say “We were right. You were wrong”.

The right people will have to be in the right places to articulate the right ideas. Will we succeed? Probably not. The masses will blame the political party in charge. They will blame the president. They will blame everyone except themselves. They will not look in the mirror and write down what they see. A person who tried to vote themselves prosperity at the expense of others.  I call this theft by the majority. The masses call it democracy.
I am very optimistic about our small chance to capture the future. Our only weapons are to keep reading, keep writing, keep talking.

Why I Beat up on Bitcoin

There is no denying that Bitcoin has gained popularity with libertarian minded people. This has caused self proclaimed libertarian’s to spread the word about Bitcoin. When this fiasco ends in tears do you think this will advance the libertarian agenda?
Libertarian philosophy has gained a lot of ground since 2008. One reason for this is that Austrian/libertarian economist were pounding on the table about the housing  bubble until it burst in 2008. Some of us actually called it in real time. The internet has given us a platform to say “We were right”. This has given us credibility. We stand to lose philosophical ground because libertarians have not read this or this.

Dark Clouds on the Horizon

First, Money supply growth has been steady, which is unusual for this time of year.

Second, The yield curve is crashing.
If this does not change the yield curve will go negative sometime in 2018.
Third, the Federal Reserve has made empty threats (so far) to reduce their balance sheet. They have not started in any major way.

There is no reason to panic at this point. However, if these trends continue it could spell doom sometime in the next 18 months. When I believe a recession is coming I will sound the alarms. Right now we are holding our positions.

The Bitcoin Holiday Pop

The holiday pop occurs just after a holiday break. Its the sign of a mania. The  sheep go back to the family/friends and tell them how easy it is to get rich. The family and friends all bright eyed, buy it hook, line, and sinker. They buy. Than you see a jump in prices as the last fool attempts to buy at the top. Bitcoin had a holiday pop after thanksgiving. I suspect we will have another holiday pop after Christmas and New years.
I had some one at my family gathering talking about bitcoin.
“Just buy bitcoin and relax. It’s going to $150,000. Didn’t you read the latest article?”
This is despite the fact the author of the article is unknown with no track record.
“No, this guy is an expert with cryptocurrency. I listened to him and bought 6 weeks ago and have already doubled my money”
You have not doubled your money. You have a profit on an open position. Until you sell that’s all you have. But why would he sell? He thinks its going to $150,000. You also know what I think about “experts“.
I showed him the market watch website:

I told him this was a danger sign. This is the sign of a top. This is a sign that you are not buying low and selling high. The fact that we are all here talking about bitcoin is another danger sign.
Watch for the holiday pop. If it does not take out the old highs it is a top. I believe we have seen the top. I said so here. This price action looks like an exhaustion of buyers.