The Market Perspective

A 1987 Analog

Weekend May 18 2013

Does the FED do more harm than good?

A P/E multiple of 22 is historically rich. But in bull markets stock valuations often go through rich on their way to stupidly high; the S&P's P/E reached 28 at the dot-com bubble's peak in early 2000.

Dot-coms aren't novelties now, and the economy's overall debt burden is higher than back then. Moreover, the Fed has recent experience on how badly things can go wrong after valuations hit stupid levels. So there is a possibility, though no certainty, that it will act sooner to curb excesses.

In the meantime, though, until inflation hits its target, rich valuations are something it can probably live with.

Heard on the Street Weekend WSJ Page B 14

A Look Back at Our Commentary - Weekend November 24 2012

For new readers we exited positions September 18. We began buying partial positions back at Election Time exactly one week too early. We improved by noting   mood change Friday November 16, indeed the market has rallied since culminating in Dow 176 points up November 23. We reiterated the similarity between the sell off of March to June with September to November this year in stocks. We remain focused on that similarity. If a rally of similar magnitude, June to September,  occurs it would take the SPX from 1340 to 1540. We ended the week at 1409, less than half way there. Commodity stocks rallied this past week. 

Since then markets have soared past our 1540 target. But our point is that when everyone was worried about the Fiscal Cliff, we got the turn correct!  It is now a near precise six months from that November 16 date.

The first quote from the WSJ Heard on the Street column like many blogs and talking heads, suggests it is different this time and we are headed for higher stock prices. Maybe, but in the meantime what is the bond market telling us?  My analogy to 1973-74 is working out well in the political arena. I am beginning to wonder though if we should examine 1987 as an analogy for what might happen if indeed stock prices push higher. Why -

closed end municipal bond funds are starting to trade at a discount to NAV, this one a hefty 3.3% discount

we noted the rise in the thirty year bond yield last week end putting 3.4-3.6% as the resistance yields needed to overcome

the Dollar put on quite a show this week, getting strong sending gold down seven days in a row.

Let's start with The Dollar

The dollar has risen to its highest level in over two years. The black line is the Aussie Dollar which moves quite opposite the US Dollar. At bottom the weekly MACD has room to run before hitting a top. 

Weekly Thirty Year Bond Yield

For the third week in a row, yields marched higher. Note the two MAs flattening out. Resistance remains at the 3.4-3.6% area. I noticed this week Barry Ritholtz remarked that one should not be afraid of the stock market as the alternative was 1.8% on the ten year note. Barry has made a lot more money than I have but that sort of automatic assumption that rates cannot rise is typical of turn of the market thinking. 

The bond market is typically much more sophisticated than the stock market, it often acts as a DEW Distant Early Warning Indicator something is wrong. We will monitor this development to see if that is the case. 

MYD Weekly Closed End Muni

So far this is the biggest correction since late 2010. Is this just a correction or the start of something bigger?  Money is moving out of relatively safe municipal bonds and into stocks.

Daily MYD

On the daily chart a neckline of sorts seems to be forming at 15.7 or so. Bond prices move opposite yields so this chart is the reverse of the Treasury yield chart.

1987 Stocks versus Bonds

It was 26 years ago almost to this very day in May. Bonds and stocks both hit a low. Stocks take off into an August high. Bonds tank 16% all the way into October. 

Let' lok at just how fast note  hields rose in that period of time, and what was the dollar doing?

Ten Year Note Yield 1987

The correlation in dates is truly uncanny don't you think?  yields shot up 150 basis points in two months from May. At bottom the Dollar, then as now, was rising. The Dollar and stocks rose into August. the Dollar tipped its hand by heading down after August. 

I don't know if this scenario will play out again but I find some of the parallels fascinating. This is worth following. And with October just a short five months out, and August only three months out, we shall see. 

The Stock Market

Weekly High Low Indicator

We went back to the Oct 2008 low for emphasis. This indicator is the highest it has been in five years, hardly the way a new bull market begins which is what many are claiming. If this is a new bull market in stocks it would also mean the 18 year cycle has been repealed 13 years in from Year 2000 which I also doubt. but as we saw in 1987 stocks can advance into October. 

SPX

Many sites have this same five wave count from the Nov 18 low, exactly six months ago. The SPX is near 200 points over its 200 day MA. Our socionomic take is that consumer confidence has risen to a six year high. This would be in keeping with a new peak in stock prices. 

The runaway collapse in gold and silver continues. Gold appears to be in the third wave of a fifth wave of the large third wave if that makes any sense. Multiple readers have sent articles noting that George Soros owns $25 M worth of call options on GDXJ. I am not able to determine the expiration date on those options, If anyone knows or can tell please e mail me. 

HUI Gold Bug Index Monthly

The 200 month Moving Average for HUI is right here right now, notice it is just appearing at far right where we put the blue arrow. At far left the 200 month MA is  254.16. Price just overshot that at 246.07. Monthly charts change direction at glacial speed. But the top back in 20110 is clear now. RSI is not as low as on the first move down. 

Weekly HUI

With 250 giving way however, I don't see much support here until 150, do you?

An alert reader notes Central Fund is closed Friday at a 5.3% discount to NAV. So we have gold and bonds on sales for less than face value. But the stock market shows no fear...

GLD Two Hour Chart

GLD has not hit bottom yet, MACD still falling on the two hour chart.

HUI Gold Bugs index Ratio to SPX or

It is Blackest Just Before Things go

Pitch Black

The ratio of the HUI Gold Bug Index of Mining Stocks to the SPX has taken out the October 2008

low, This just goes to show that market can get further out of kilter than one ever imagines. It also shows how wildly optimistic the stock market is that the FED has everything under control.

Crude Oil

Crude oil remains in a triangle which could break either way. 

The Bottom Line

A six year high in consumer confidence has driven stocks to new highs, just what a socionomist would expect. Investors are exiting the Safe Harbor of municipal bonds. This prompted a comparison with 1987, right to the day when the market did the same thing. We will watch this closely. A collapse in municipal bond prices is something we have been anticipating, and would welcome as a buying opportunity.  Gold continues to fall along with silver. Crude oil remains a question mark. 

Socionomics

The Great Gatsby  was Scott Fitzgerald's signature work. Written in 1925, it was poorly received. Fitzgerald died in 1940 thinking himself a failure. But during the war interest was revived. Today it is rated as a classic American novel. We read it in one of  my English classes in college. It has been made into a film version some five times. The latest features as have the earlier versions, the top male stars of the day, not DeCaprio and Maquire. Joe Morgenstern gave it a terrible review last week. But it has arrived at the very top of the market. Fitzgerald wrote the novel reflecting the upscale lifestyle he encountered on Long Island in the early 1920s. 

I checked all five. The 1926 version is not rated but this latest got the highest viewer score at a measly 7.5. As with Stephen King it is apparently difficult to bring the written word to the screen. 

Still we have to give the producers credit, the timing with a celebration of the 1920s Jazz Age with the

current highs in the market

 exotic automobiles priced in seven figures

the return of Mansions formerly Distinguished Properties in the WSJ

endless expensive mechanical watches for sale in the WSJ

peak optimism in consumer sentiment

as bond prices drop

 

well it's one for the record books. 

hanks for reading The Market Perspective

[email protected]

 

 

 

 

The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance ands no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks.  Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned.  Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital.  No guarantee can be made to the accuracy of text or charts.

 

 

The New Normal

Thursday May 16 2013

A few weeks back we declared The Great Recession had begun. Let's scan the headlines in the WSJ today

Housing Starts Slide 16.5%

European Recession is Longest Since War-that would be WW II

Wal Mart sees Tough Quarter

Editorial Page - Russia may be a has been power but it sure has the Obama Administration's number-this refers to the continued war in Syria which Russia supports - this mirrors the collapse 40 years ago in SE Asia of American power

A key feature of the 2008 collapse was the drop in pickup slaes, now American Falls Back in Love-this is a sign of a top

Investors jump in to Below Investment Grade Loans

HSBC to Cut 14,000 Jobs

Deere Cuts Sales Forecast for Next Year

Yes Japan is finally doing better after a 23 year absence but it is doing so on even cheaper stimulus than ours

 

Dividends =Danger?

Wednesday May 15 2013

One fund manager notes Utilities and other so called safe stocks are trading at very high multiples.

1973-74 Analog - Re live those events with the Watergate Timeline

Our analogy to 173-74 is working out amazingly well at least in the political sense. Nixon got into trouble not over the break in of the Watergate Building but the cover up that ensued. As one Republican put it, what did Nixon know and when did he know it?  The parallels are now here with Bengahzi, the IRS probe of conservative groups, and the DOJ use of Associated Press e mails, and lack of preparatin for Obamacare. In each instance government officials are admitting events but denying culpability. This has not turned markets down thus far. 

After scanning the Watergate Time Line linked above, read this article. Note that a financial not political consultant is quoted. Note that one third of committee is already being spent on investigating scandals, just as we experienced at the start of the Watergate era. As per usual, the media gets it wrong suggesting that negative news might turn the markets. Indeed it is negative sentiment that is driving the scandals on both sides of the aisle, and there is plenty of that to fuel this fire. 

I have been discussing this 1973-74 analog for a year or so. Today Neal Cavuto showed a graph of hte DJI during the summer of 1973, and the Watergate analogy was discussed at length. Charlie Gasparino was not able to answer Neal's question about why the market was still headed up. 

How do we make money from this?  it should instill a sense of vigilance and caution. 

Other successes

Recall we recommended GM at 20 which brought some negative e mails. It closed today over 32. 

I also mentioned Globalscape GSB  as a way to participate in the current tech mania. it closed up 10.26% today on a good earnings report yesterday. 

After being on the wrong side, we got on the right and short side of the gold trade. Gold dropped $28.60 today It is in the fifth wave of a large third wave. 

GLD

The gap in the chart suggests a third wave the strongest is now underway. 

Thanks for reading TMP.

Oil is Slippery Stuff

Tuesday May 14 2013

Our headline is a quote form Alan Abelson who wrote for Barrons. He passed away last week. 

IEA reports no shortage of oilThis article also notes OPEC production is up. Again my take is that oil prices are hanging around with stock prices at very elevated levels. 

US Dollar

If this count is correct, the Dollar is about to experience a third of a third wave up. That would coincide with the fifth wave down in gold so it makese some sense. Friday and Monday were ceertainly impressive up days.  If this count is wrong, the dollar will not get through 84. The rest of the week will tell us which is correct.

Japan is providing a lesson in how Bernanke has goosed the stock market higher by doing the same thing.

The red black bars represent the 60% move in the Nikkei Index since last fall. The Black line is the falling value of the yen. A cheaper currency floats all stocks higher with no change in earnings. 

All the Central Bankers are now engaged in the same shenanigan. The idea is that a cheaper currency makes one's goods less expensive. As currencies trade against one another this is why the US Dollar is rising. 

 The Dollar and Oil

Here is another real world implication. Last September the Dollar in green and red made a high and oil sank to 856. In February oil in black  was still 85 and the Dollar soared again. Now the Dollar and Oil are at the same level. This will not last. If the Dollar continues to surge, the logical level for oil will be a return to 85. 

Tech Update on Gold, Oil, Dollar

Monday May 13 2013

This analyst agrees with our analysis this weekend. If the Dollar breaks through 84 gold will slide further. 

This analyst wonders about the viability of higher oil prices.

No one in the gold camp has believed the Dollar might rally. The Club Med economies still deeply in debt need dollars to pay the bills, so the dollar rallies. And I see oil is under $95 again on the same concerns. 

I seem to be the only person in the oil field concerned about this. 

US Dollar Rallies, Bond Yields Increase, Aussie Dollar Collapse

 

 

Weekend May 11, 2013

 

 

 

 

An alert reader of TMP sent us these images, bullish sentiment below left is through the roof while bears are in the minority. I have been saying the market was overbought but it just keeps getting more so!  These types of magazine covers are classic indications of a top formation, had they appeared in mid 2009 they might have been accurate and helpful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We suggest readers begin by reviewing our charts and observations on the bond market in last weekend's Market Perspective.  The expectations we had were born out this week, and Friday, yesterday, was a pretty big story. 

 

FED Maps Exit Strategy

Officials are focusing on clarifying the strategy so markets don't overreact about their next moves. For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings.

"I don't want to go from wild turkey to cold turkey," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. "I think we ought to dial it back." Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank's easy-money policies.

 

Actually I would think the FED would want a steady uniform process. But that is not what they are likely to get, as readers will see when in our next graph. Once the rates are headed up, the  genie is out of the bottle, Mr. Bernanke will find he is a player rather then THE player at the rate roulette gaming table. The bond market is the one I had the most experience trading in the 1980s, as rates head up it does not tend to look back. We noted Apple's record sale of bonds at all time low rates this month might well mark a watershed events in the thirty year bull bond market. 

Bill Gross' poor track record or predicting a bottom in bond yields is detailed in the second section of the Weekend WSJ, please read it. He is once again predicting a bottom in yields, sooner or later he will be right out of just the sheer frequency of predictions. 

Thirty Year Bond Yield

What a week!  The move from 2.85% to 3.104% is a 8.9% advance in rates in five trading days, this is huge, the sort of move (but in reverse)  that happened as rates fell in 1985. Notice rates took out all the daily moving averages in this one week. As we detailed last week this continues the pattern of higher lows on the daily chart. 

 Weekly Yields

Here is an update on the inverse weekly head and shoulders formation. The neckline breakout seems to be about 3.4% and that is where we put the red green resistance line. At far left you can see the rapid drop the FED engineered for the rate decrease, they won't need to work nearly so hard to engineer rate increases. Everyone will be guessing just where the line in the sand is located, that would allow one to say rates are headed up!  But for now 3.4-3.6% looks like a tell tale level.

Weekly 30 year Bond Price

Is htis as  high as Ben can goose the bond prices?  the break of the uptrend of the last two parabolas, the rapid break through the various moving averages to the downside, the MACD collapse at bottom, suggest that rates are headed up and prices down. See currency section next. .....

Currencies

We intentionally overlaid the Aussie Dollar in purple versus the US Dollar to show the degree of collapse this week for the Aussie. Last week I suggested oil was kicking off the summer commodity rally, and oil did come back yesterday, more on that later. But commodities will be trudging uphill priced in US Dollars as this continues. The Aussie fell much more than the Canadian dolar (not shown)  but this puts the housing and mining booms in both countries in question. 

Weekly Dollar

For the time being the dollar needs to take out 84. 

The clear break out in the Dollar has implications for all the other markets. 

The Stock Market

Stock market internals likely peaked in early February. That is in keeping with our 1973-74 analogy when stocks peaked early in the year. The weekly version of this indicator looks topped out. 

 NYSE Summaiton Index

The Summation Index jumped this week but is at a level which suggests selling not buying. 

Crude Oil

On the strong dollar crude oil had a huge range Friady of $2.87. It managed to close down a mere 21 cents. But we wonder if this  is not whistling past the grave yard. Internationally oil is settled in dollars. The lower highs since February pretty well match the weakening internals of the stock market. Recall that we have questioned the high price of oil, there is no shortage after all. It appears that oil simply rallied with stocks. Weaker prices here will threaten the oil shale booms underway in North America. 

Gold

After falling to 1418.50 gold managed to regain much of that loss, as did oil, closing down $10.50.  GDX did no go lower which suggests it may be ready for a move up this week. But big resistance looms at 1525-1550. The gold bug story has been that Central Banks flooding the world with paper currency would eventually have to back their promises with gold. The action the last few weeks has called that theory into serious question. 

"The ability to rebound Friday suggests that gold may have its lows in place for the summer rally we have been expecting. If so momentum needs to pick up this next week, and quickly. 

 The Bottom Line

Stocks will likely top this month.  The 3.4-3.6% yield on the thirty year treasury seems a potential important level for the bond market. Oil and gold may manage a rally here for a few weeks despite the stornger dollar. But longer term lower prices appear in store for gold and oil. 

The New Civil War

The Ten Worst States for business according to CEO magazine. 

Our New Civil War Theory Pits southern right to work states against northern union shop states. We spotted this survey which supports that theory. California currently leads the country in the number of cities in bankruptcy. Some of these states lost representation in the Congrees as citizens and businesses leave for more favorable locations. 

hanks for reading The Market Perspective

[email protected]

 

 

 

The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance ands no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks.  Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned.  Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital.  No guarantee can be made to the accuracy of text or charts.

 

I Had It Right...

Friday May 10 2013 Posted 8:12 AM CST

After hem hawing and doubting myself, I had it right two weeks ago. 

Gold dropped $20 yesterday and today makes $55. So our original thinking was apparenlty correct;  that a fifth of the large third wave down is udnerway. Notice oil has joined in the fall. Recall I wondered on this blog why oil was as high as it was. Interestingly this seems to have completely escaped the notice of those enthused about various shale plays in the US. If this analysis is correct it suggests a final target for this move below 1300 for gold. 

If oil starts to follow the waterfall decline in gold, the Shale Boom will be in trouble. Is gold starting a world trend of a giant deflationary collapse?

Investors Dive Into Junk

Thursday May 9 2013

The Great Recession Begins

In his column today Dan Henninger notes the dismal jobs picture for young people. He goes on to note that the US begins to look like Europe, awash in diplomas, and with high youth unemployment for years. 

The Center for American Progress study is a straight-ahead description of the grim employment status and diminished earnings prospects of whites, Hispanic and especially younger blacks. The official unemployment rate for people in their late teens and post-college years is around 16%, but add in those who've given up looking or taken jobs flipping hamburgers (underemployment) and their home-alone status moves past 25%. For young blacks—the most politically misled people in America—the out-of-work number is between 40% and 50%.

Stampeded int Junk Bonds at MarketTop

The stampede into junk bonds passed another milestone, showing investors are casting aside concerns about the health of the U.S. economy for a shot at padding their pocketbooks.

The Barclays U.S. Corporate High Yield index fell to a record low of 4.97% Tuesday, marking the first time the benchmark tracking debt issued by weaker U.S. companies dropped below 5%. On Wednesday, it fell to 4.96%. The yield on the index has lost more than a percentage point this year, in a sign of hefty demand for income-producing securities. Bond yields fall when prices rise.

Yields on junk Bonds Reach New Low Page C1 WSJ Today

Weekly Junk

Here is the big picture on Junk prices since the Financial Crash. This is the weekly version. Volume is in the lower part of the graph. No one was buying at 18, but look how volume expanded at 36, twice the price at the market lows. This weekly graph also reveals the various MAs kicking in all to the upside. 

Investors always buy into the lowest yields and the highest prices at the wrong time. We noted Apple's shrewd decision to cash in on all time low rates in the biggest bond offering ever. 

A junk bond is really just a high yielding stock, the issuer and borrower each bet on continued earnings to finance the pay out. This is a reliable sign that stock prices are at peak levels. 

 Monthly Junk

The monthly graph shows an even more pronounced move into Junk. At bottom volume has steadily increased as buyers shrug off  the memory of 2008 and associated risk of JUNK. At top RSI is the most overbought ever. Oh that reminds me, did anyone notice that the Hedge Fund owning Nieman Marcus is considering taking it public?  The fund issued bonds to finance its purchase of the high end retailer. They had best hurry or the window may close. 

The mania for stocks is so strong that it may well last into the Fall as it did in 1987.  In short we could see the markets pull back to sideways through the summer and then enjoy another run up in seasonally strong August. 

Rackspace RAX

RAX recorded $362.2 M in revenue up 20% from a year ago but just 2.6 percent from last quarter. Analysts expected $367 M, a mere $4.8 M difference or shortfall. And so the stock dropped 16% or over twelve  points.

RAX stock price has collapsed over 50% in three months while earning millons of dollars.  if this can happen to RAX in three months do not think the entire market is immune. 

I offer this example as support for my contention that

The Great Recession has begun

This will mimic 1973-74 when companies made lots of money but stock prices collapsed anyway.

Politically we continue to mimic that era. Nothing is getting done in Washington. But then perhaps that is not a bd thing.

 

 

 

 

Our Analogy Continues

Tuesday May 7 2013

It appears our original theory was correct, gold is down again today. 

Kitco shows gold down 19.80 at 8:36 AM CST in the USA on Tuesday May 7 2013. Above it looks, again like the fourth wave may be ending. This has been a cat and mouse game in a narrow channel between 140 ahnd 142. Breaking that 50 bar MA will turn things down for sure. At top RSI has dropped below 50, again. GDX and GDXJ did drop below their 50 bar two hour MAs this morning. I suspect a return to below 1400 will cause another mass exodus from ETFs like GLD putting even more physical gold on the market for sale. This weekend I suggested that the turn up in the summation index was telling us there was more upside to come in stocks. 

The black line represents bonds via TLT. They are turning down as more money pours into the stock market. Hmm again this reminds me of 1987 when stocks started advancing against bonds that spring. 

Crude oil remains incredibly resilient. Apparently the frothy mood brought on by the new tide of production from North Dakota to Texas has buoyed expectations, We still look for USO to pull back. 

I see corn prices are lower. Recall that during 1973-74 corporations made plenty of money, but price earnings ratios dropped the entire time. Art Hill quoted a slew of positive economic indicators yesterday.  We really have two economies going here. There is the economy for the 48 million on the Supplemental Nutrition program and those working part time jobs. Then there is the economy for those at Amazon and Google and in the oil field now,  which is just great. 

As noted in the Weekend Update, bond prices are falling. Hmm, that started in March of 1987 and ended badly that fall as well. 

One reader asks if this is a repeat of the 1982 experience with stocks moving sharply higher. There are several differences.

That was nearing the end of the 1966-1982/84 period of stagnation, we are about 60% through the current period. 

Bond prices finally began rising and yields falling, so high dividend stocks had appeal for investors. Now we are near a 30 year low in yields. With Bernanke buying $85 B of bonds a month that will perhaps causes bond prices to be elevated longer than otherwise. If anything eventually the opposite will happen now with bond prices falling and yields rising. 

Another Prediction Coming True

I noted this weekend that two of my predictions were coming to fore. Demand for college education is in fact elastic as private schools lower tuition. Colorado and Washington have legalized 'recreational use' of marijuana. This marks the official kick off of the end of the disastrous War on Drugs. The President will eventually realize as will other governors that there is revenue in legalization and far lower prison costs. 

Now our third prediction. On the front page of today;s WSJ, 

City Hit by SEC Fraud Charges -Harrisburg, PA already in bankruptcy

As one observer notes, this isn't just Harrisburg, there are lots more issuers like this. 

Cities will eventually have to choose who takes the heat for their unfulfilled promises, citizens, bond holders, or employees

Imagine this headline in 2014 - Texas Debt Holders Stunned at Houston's Dilemma

Even though Susan Combs, Texas Comptroller, had warned of Houston's $2.4 Billion unfunded pension liability, all assumed that this champion of Sunbelt CIties would shrug it off. Yet with oil prices finally declining, the city council is considering the unthinkable, delaying interest payments to bond holders. It would not be a bankruptcy but a re structuring according to City officials. Houston bonds were quoted down to $700 from a $1000 par value as a result.  Elsewhere city officials in Los Angeles and Atlanta were eyeing this strategy for a way out of similar difficulties....

The Road Ahead

We are expecting a low in commodity prices in the next few weeks. 

That should lead to a summer rally in commodity prices including oil and a rebound in bold. It now appears that t rebound in gold will be from much lower levesl than today's 1450. 

And that would then open us to a low in commodity prices this fall. This means a peak in oil prices this summer much like the summer of 2008.

 

Socionomic Observations

Weekend May 5 2013

The seeds of discontent at already being sown. The future is being shaped demographically. 

In Spain, a small town mayor masses $24 million.  Perhaps she and Rita Crudwell of Dixon Illinois  can co write a book on their experience. Such corruption is in the news but will be front and center stage as the Arab Spring discontent spreads world wide in the next two years. 

Russia  faces a lower than replacement rate of births, lousy health care, smoking and drinking on a large scale. Another article in the Weekend WSJ makes it clear it is really too late for Putin to do anything. Most Russian women do not give birth after age 30. As the population shrinks, the chances of improving the situation grow worse. 

The situation is the same in Europe. This virutally assures larger economies in China and India. 

The sleeping giant of China wakesn from its slumber. One of the stunning scenes in the Bond film Skyfall is a night time shot of Shanghai, truly an amazing transformation. 

I think this is the first time I ever agreed with Froma Harrop on anything but her column on pot legalization in CO and WA is probably the front wave of things to come. She notes legalization means more money earned for the state and way less spent locking non violent people up. FDR realized he would make more from legal than illegal booze and so prohibition was repealed. Watch for more states to get on this bandwagon.