Follow the money

Monday January 25, 2010
Issue 3682
The King Report

This week, Q4 Preliminary GDP will be reported. +4.6% is consensus. This, of course, is a lark. US Treasury tax data continues to tumble.

For Q4 2008, US Treasury ‘receipts’ are: Oct. $164.829B, Nov. $144.769B and Dec $237.786B. For Q4 2009, with only Dec not yet revised, receipts are: Oct. $135.294B, Nov. $133.564B and Dec. $218.919B.

Q4 2008 receipts total: $547.384B – and this was when the end of the world as we know it almost ended.

Q4 2009 receipts, subject to Dec. revision: $487.777B, a decline of 10.89% from Q4 2008. Now reconcile this with +4.6% GDP.

This is why the populace is furious.

What is more shocking, our spooks are shocked and surprised?, or Fail Britannia, Londonistan calling?

By Con Coughlin
telegraph.co.uk

The failure of British security officials to alert their American counterparts to Abdulmuttalab’s radical activities while president of UCL’s Islamic Society has led to increased tensions between Washington and London.

While in London Abdulmutallab regularly presided over debates that denounced Britain’s involvement in the war on terror and America’s Guantanamo detention facility.

American officials now believe Britain poses a major threat to Western security because of the large number of al-Qaeda supporters that are active in the country.

Two years ago Jonathan Evans, the head of MI5, estimated that there were 2,000 Al-Qaeda sympathisers based in Britain – the largest concentration of al-Qaeda activists in any Western country. But American officials, who regularly refer to “Londonistan” because of the high concentration of Islamic radicals in the capital, believe the figure is growing all the time. They point out that recent al-Qaeda terror attacks planned in Britain have been the work of British-based Muslims, many of whom have been trained in al-Qaeda camps in Afghanistan and Pakistan.

“The level of al-Qaeda activity in Britain is becoming a major source of concern,” said a senior State Department official. “The organisation’s ability to use Britain as a base to plot terror attacks constitutes a serious threat to the security of Britain and other Western countries.”

American officials have been shocked by the resurgence of al-Qaeda’s terrorist operations in recent weeks which have seen it mount a series of attacks on U.S. targets. The recent surge in al-Qaeda terror attacks has led U.S. officials to conclude that al-Qaeda is planning a series of new attacks later in the year, some of them in Britain. Abdulmutallab is reported to have told his American interrogators that there were another 25 fully-trained al-Qaeda terrorists ready to carry out similar terror attacks against Western targets.

The ease with which al-Qaeda has managed to launch attacks against American targets has taken many U.S. intelligence officials by surprise. Recent analysis by the world’s leading intelligence agencies shows that al-Qaeda can call on operatives all over the world, although the various terror cells have different capabilities.

“The threat from al-Qaeda and its affiliates remains high, though not on the scale of bringing off another 9/11 attack,” said Peter Bergen, the last Western journalist to interview al-Qaeda leader Osama bin Laden before the September 11 attacks, and a leading expert on al-Qaeda. “But al-Qaeda militants can still pull off attacks on commercial aircraft and other key elements of the global economy.”

They have also been shocked to discover that many of those responsible for strengthening the terror capabilities of Al-Qaeda in the Arabian Peninsula are former inmates of the U.S. Guantanamo Detention Facility in Cuba.

A recent study by BBC journalist Peter Taylor of a 15-strong batch of Guantanamo detainees who were returned to Saudi Arabia under President Bush in 2007 showed that six of them had rejoined al-Qaeda in Yemen, suggesting that the percentage of former Guantanamo inmates returning to terrorism is far higher than estimated by the Pentagon.

“Whichever way you look at it Yemen has now emerged as one of al-Qaeda’s top training grounds for its global terrorist network,” said a senior U.S. intelligence official. “And what really concerns us now is the number of British-based Muslims who are traveling there to take part in the training. This represents a serious escalation in the terror threat the West faces from Islamic militants.”

(Britain as a failed state. What is more shocking, our spooks are shocked and surprised?, or Fail Britannia, Londonistan calling? -AM)

A history rhyme, the truth sublime, through the lookingglass fractal ...'tis trading time

'Time, see what's become of me
While I looked around for my possibilities.
I was so hard to please.
Look around
Seasons change with the scenery,
Weaving time in a tapestry.'
- Simon & Garfunkel

'If I could save Time in a bottle
The first thing that I'd like to do
Is to save every day'
-Jim Croce

'Who forces time is pushed back by time; who yields to time finds time on his side.'
-The Talmud

'Time is making fools of us again.'
-J.K. Rowling

Have always prided myself on going where the facts led me, regardless of ideology, assumptions, opinions, precepts, dogma, or theories of faith. It is the method of an empiricist to let experience, especially that of the senses, divine knowledge.

No one said it was easy. But no one ever said it would be so hard.

It is a process of unlearning...

For most of my life have been convinced that fate was random and that the future was in no way connected to the past.

Now I recognize that to be mindful is a discontinuous process and although hard work and skill can 'help' get you a seat at the craps table, we are all lucky fools.

Determinism? Perhaps better described as opportunism, i.e., be mindful of when the coin flips in your favor but do not mistake the flip as random nor yourself as the 'flipper'. Translation: Life comes down to a few moments. Choose wisely.

My journey started when I did a Roberto Duran in 2000 and told my consiglieres 'no mas' and shut down my phone company instead of levering up for untold riches that were due all of us thanks to the new paradigm. The Greek chorus proclaimed me a fool. Time did not.

Once settled down in a new enterprise the journey continued with readings. Time and price and form and sacred geometry (oh my!): circling squares and squaring circles, golden spirals and spirals of growth and decay, vectors and ellipses; a financial algebraic geometry as it were, the pursuit of geometric structures that might shed light on the market's underlying formulas.

Will readily admit that this well-trodden path was transversed quickly thanks to mi amigo Senor Google. Still as in all growth it came in fits and starts. Moving through Baumring and Cowan in a week for example, while lingering on Gann for quite a while.

Elliot, Dow, Demark and Gann. Gann though, was the trigger. The mysterious W.D. Gann. Time and price equivalence results in a turn when they are in 'balance'. And how did you track time Mr. Gann?

Google Gann and astrology and you get a lot of speculation which can be summarized in the observation that Gann had a good astrologer.

And how did you track time Mr. Astrologer?

This is where the journey ended. Then I asked for some help from a 'mysterious' source and the help came fast.

A history rhyme, the truth sublime, through the lookingglass fractal ...'tis trading time.

And trading time is based on a 6 day week.

When you look at any market wearing your polarized time glasses that break down temporality into fractals of 6 days you can see the turns.

It's about time. Literally.

Don't believe me? No worries. Believe your own eyes. Go to www.thedanielcode.com and read it for yourself. Follow it for a couple weeks.

It is what it is.

Have always prided myself on going where the facts led me, regardless of ideology, assumptions, opinions, precepts, dogma, or theories of faith. It is the method of an empiricist to let experience, especially that of the senses, divine knowledge.

Had no idea that the knowledge I was seeking would be so divine.

Personal disclaimer : Am not a religious fellow, (pause with a laugh), at least not yet!

Pay it Backwards

Caught Fleck on Bubblevision this morning.

Fella is one of my favorite 'set-up' artists. No one knows the future but the great ones can decipher the set-up, that is, knowing why something is going to happen without knowing exactly how it will play out. Generally spot on, with the specifics left to fate.

Fleck's summary : what were they thinking when they allowed such leverage against illiquid assets? Eventually reality will mark the assets regardless of the Federales' efforts.

Truth that.

The Fed is at 43 times assets to capital. WSJ reports that the Fed's equity could be wiped out by just a 2.8% drop in the value of its Treasurys and securities.

So a leveraged hedge fund with a book of derivatives that have a notional value of about 2%, that is not valuing its' collateral at market rates, golly better hope that hedge works. What? There is no hedge?

So for a normal hedgie the risk is 2% but for us 2% is the risk? Ruh-ro.

And that is why ladies and gentleman this humble blogger thinks the venerable Mr. Grant may be as incorrect about his zippy V as he was about his AIG call ... and for exactly the same reasons.

The fundamental question of these times : Were they criminally stupid or stupidly criminal? My gut says both.

At the same time, to channel Chris Rock ... I understand.

When the barbarians are at the door you save the silver first, 'tis an entirely human response.

That reality need be balanced however with another; without prudent regulation Marx was right.

A summation of our 'I Can't Believe It's not Capitalism' plan in response to the 'What just Happened' crisis?

Pay it Backwards.

The next generation is paying us to paper over the inevitable creative destruction that must occur and that will occur.

It is our destiny.

Wait for it.

Star gazing, market razing, knowledge grazing ... glimpse into the amazing

'They say there's gold but I'm looking for thrills.
I don't care if we get there on time.
Everybody's searching for something, they say.
I'll get my kicks on the way.'
-Pink Floyd

'If I promise you the moon and the stars
Would you believe it?
If I`m telling you the truth right now
Would you believe it?'
-Alan Parsons

'To everything - turn, turn, turn
There is a season - turn, turn, turn
And a time for every purpose under heaven

A time to be born, a time to die
A time to plant, a time to reap
A time to kill, a time to heal
A time to laugh, a time to weep'
-The Mamas and the Papas from Ecclesiastes 3:1 to 3:4

'Many have dedicated large parts of their life in the search for the twin Grails of trading: price and time. That they are the same thing juxtaposed on different axis is not a new concept. WD Gann, under the tutelage of his mentor, the British astrologer and numerologist “Sepharial” advanced this proposition in 1935. But Sepharial camouflaged his observations by claiming that they were related to astrological cycles. Indeed they are, but he scrupulously avoided saying that all of these cycles are of Biblical origin. What do you think the wise men, sages and prophets of Biblical time were looking at on those myriad of long nights as they sat outside their tents? They observed the stars and the heavens. And they wrote down, sometimes in code and sometimes openly, the great cycles of the heavenly orbs. Sepharial used that knowledge but fudged naming the source because it wasn’t cool.'
-John Needham

The Bradley model was invented by Donald Bradley in 1948 as part of his book “Stock Market Prediction — The Planetary Barometer and How to Use It” and is based on the movement of heavenly bodies. As a result, it can be calculated months and years ahead of time.

The signals, which are discerned by a siderograph, or star chart, are called Bradley turn dates, and are indicators of trend change not direction.

A proponent of the Bradley method and one of the most mainstream astro-harmonicists is Arch Crawford of the newsletter Crawford Perspectives.

Arch Crawford's prognostications have run hot and cold. Although Mr. Crawford was named as "Market Timer of the Year" by Hulbert's Financial Digest for 2008, he also was one of the 10 worst-performing letters of 2006.

For some historical perspective here is an excerpt from the New York Times, originally published in March of 1995:

'Early last month, Mr. Crawford's forecast was "instability, big time" for March 5 and 6 -- the start of the currency crisis as it turned out. Two months ago, he predicted earthquakes for the days that brought the Kobe tremor. He kind of predicted the 1990 start of the Gulf war: "expect some major catastrophe Aug. 2-7," his newsletter warned, "Mars opposite Pluto suggests coercion, force." So far, forecasting the October 1987 stock market crash is his biggest triumph. "Be out of all stocks by Aug. 24," he warned clients late that summer. And -- win some, lose some -- he has made a number of miscalls, like the market collapse he envisioned in late '82 that turned instead into a record rally.

Mr. Crawford's view of the stars is severely statistical -- or tries to be. "What I do is totally science," he insists, "but in the process some very strange stuff, weird magic, comes to light." Believing that heavenly events affect human events that sometimes affect financial markets, Mr. Crawford calculates percentage changes in the Dow Jones back to 1897, relates that data to astronomical events like sunspots or solar flares and, aided by 28 conventional market indicators, fits the whole into a cyclical prediction line.

What unnerves more conventional stock analysts is Mr. Crawford's latest ranking by the Hulbert Financial Digest, based in Alexandria, Va., which is widely considered the most rigorous national observer of financial-newsletter performance. Of the 42 market timers assessed over the last year, Mr. Crawford is No. 2.'

AM here: In his most recent newsletter Mr. Crawford is suggesting that something wicked this way comes. He is calling for one of the greatest calamities the world has ever seen to occur around July 27, 2010.

January 11, 2010 Vol. 10/01
By Arch Crawford

The year ahead appears to us to contain the most powerful planetary alignments in centuries, not just decades. These are likely to change the world as we know it in ways that we can see only through a glass, darkly.

It is our fervent desire and hope that the extreme energies released upon the Earth this year will lead to an evolutionary leap in human consciousness. The concern is that they are rattling the fabric of our familiar universe, unraveling the ‘strings’ that have held together the internal, external & geopolitical appearance of our daily lives.

Our Mormon brothers and sisters are required to keep 2 years worth of food and water in their homes. Adopting such practices may save some of us from the developing exigencies?!

Although we are not expecting deep retracements until after the Bradley Astronomic Model turns down during March, and perhaps until other cycles peak during May, the near term is losing some of its multi-month forward motion, & there may be a larger dip ahead now.

Our prediction of higher highs in March are consonant with the recent historical perspective, and are confirmed by higher positive planetary combinations. If, after the March Equinox, market indices begin to erode, breaking trendlines, moving averages & various support levels, we will “Hit the Bid”!!

We have a dichotomy of ‘timing’ staring us in the face this year. It would be considered a ‘done deal’ or a high probability that World Markets will Crash again during 2010. The point of greatest exactitude of the general ‘meanness’ will show itself in late July and early August. During that period Mars will conjoin Saturn, both opposing Jupiter conjoining Uranus (you can joke all you want, but THIS is no laughing matter). Pluto will form a square angle to all four, making a T-Square pattern of extreme animosity.

The dichotomy arises from the Bradley Model showing the Crash period as down from March and culminating with this configuration. On the other hand, our Mars/Uranus Crash Cycle portion of their synodic period, which has contained Every Crash for the last 100 years, bodes the Crash period AFTER the completion of the massive alignment.

We will do everything but guarantee you that stocks will crash worldwide within three months of August first (that is between May 1 and November 1). It is expected that technical market analysis of data generated by current market action will assist in pinpointing most danger/opportunity as critical moments approach. The fate of the world is in the balance!

The augury of markets, tis leading or lagging? ... For the folks in Peoria, in truth 'tis just nagging.

A member of my extended family is considering a run for state representative.

In a fairly animated conversation over a marvelous holiday spread he decried a story on how job openings for shipbuilding in Norfolk were going unfilled because there were not enough applicants.

We agreed to disagree as to the cause while agreeing on the effect; he blamed the applicants, your humble raconteur blamed the role models.

Valuation by page views, suitcases of cash to fight proxy wars, deficits that don't matter ... past gospels that have been crushed on the shores of reality are more than just tales of past hubris, they are causes of our current woes.

Don't blame the player, blame the game?

How about blame both? While the chattering class bemoans the counterproductive 'populism', and wait for it ... blames the victim for the crime ... might it also be appropriate to consider that lies and their derivative actions have consequences?

If the custodes are given a free pass on propriety and sobriety why should we suppose that the great unwashed won't look to achieve the same notoriety?

What the heck collect a check.

Strategic default cause it ain't my fault.

Scam I am.

The American Dream as American Scheme.

It's back to the last start of a century, the difference being that America then was a start-up on the international scene as opposed to being now, let us say, a stumbling front-runner.

The augury of markets, tis leading or lagging? ... For the folks in Peoria, in truth 'tis just nagging.

Few of my friends or relatives understand what a derivative is, what NSA means, what hedonic imputation references, what a benchmark revision signifies ... but they are thoroughly convinced that the system is rigged.

Thoroughly convinced.

Put that into your econometric black box and the 'social fabric' punch card that will pop up will be riddled with holes.

Change we can believe in is like a jobless recovery ... learned helplessness leads to cognitive dissonance and the combination therewith results in cognitive helplessness and learned dissonance.

Generation Zero

'The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.'
-Winston Churchill

'If you look for truth, you may find comfort in the end; if you look for comfort you will not get either comfort or truth only soft soap and wishful thinking to begin, and in the end, despair.'
-C.S. Lewis

'The truth, of course, is that a billion falsehoods told a billion times by a billion people are still false.'
-Travis Walton

'Whenever you have truth it must be given with love, or the message and the messenger will be rejected.'
-Mahatma Gandhi

'The first reaction to truth is hatred.'
-Quintus Septimius Florens Tertullianus

Posted previously, a top ten list as to why this ends in tears or (hopefully not) fireworks:

10. Nancy Capitalists in a Sovereign Democracy that are Hell Bent to Seek Rent.
9. Although we walk through the Valley of Debt we fear 'No Easing'.
8. Socialized Guts will lead to diminished glories.
7. Failure to liquidate the insolvent banksters has led to the liquidation of a large part of the productive economy.A taxpayer financed bailout of rich folks' bad speculative bets has resulted in zombie banks and zombie customers... a fiscal tide that lifts no boats.
6. The cold hard fact of our age is that the bankrupt ideology of the rich that had greatly succeeded in drafting the inner monologue of regular folks so that they would vote against their self-interests is colliding head-on with a Mr. Market that is a bit pissed off that we've inflated it out of the business cycle for the last quarter century.
5. Mr. Hand's strong dollar policy is the chimera of currency debasement masquerading as America's wealth exporting machine that is regularly promulgated by our leaders as an exceptional example of America's resiliency.
4. Yes Virginia, there is no collateral.
3. The government is 'all in' and can't pull out.
2. Employment, inflation, productivity, GDP, and other sundry stats are massaged into irrelevance ... the markets are rigged.
1. After World War 2, our blessed leaders, impressed by German 'organizational' skills crafted a policy of manufacture of consent.Over time these techniques moved to the economic realm in an attempt to manufacture content.Federales now risk the manufacture of contempt, for it is only a Great Depression if they say it is.

Will reference these as 'AM rules' as the next few years unfold.

Rule#2 was on display with the latest unemployment pablum. All you really need to know is that the labor force declined by over 660,000. To provide the proper scale that is about the population of Alaska. The latest disappearance of folks being counted that started with the Clinton Administration. Without this blue pill stat the U3 measure would have been 10.4%.

Unemployment is of course not 10%. If we were to measure unemployment utilizing the same metric as we did during the Great Depression we would surpass the high water marks of 23.53% in 1932, 24.75% in 1933 and 21.6% in 1934.

That is empirical and irrefutable.

The debate is not inflation versus deflation it is debasement versus deflation. Your money Mr. Federales has no velocity here for the band of The Hand can only conjure a Potemkin demand. Organic wage growth, absent for the last decade, comes from ... wait for it ... the productive allocation of capital when a free market pins winners and chooses losers. See Rule #8.

We have doubled down on a lost decade in order to, hopefully, achieve a generational workout. The banksters are too bankrupt to go broke, the rot is deep and pervasive. The Big Lie which is always in plain sight, is institutionalized, and needs to be perpetuated ad infinitum lest the foundation is found to be sand not rock.

Outrage may coalesce into a third party, yet history shows, that such a movement will quickly be co-opted into one of the majors. A new election, a new page being turned, a new burst of optimism ... cyclical bravado without secular substance.

Truth be told, this time is the same. The story is that of empire. Empire stretched by foreign adventurism and debt. The decline is inevitable.

As a red-blooded American cognizant of how the financial freedom afforded to me is a function of receiving the blessings of being born in a country where with guts and sweat one can create whatever life one desires, there is still optimism that great opportunities await our children. Yet we are making it so much harder on ourselves than it need be. Success teaches one little, failure displays true character. The collective failure of our Amerikantura to realize that with great power and wealth comes great responsibility has shown our solons to be weak, greedy, and venal.

According to quantum mechanics somewhere in the multiverse there is a reality where the upcoming State of the Union would go like this :

'Mr. & Mrs. America the greatest war we face today is a war with the future. To secure victory I hereby announce a 20% across the board cut on the federal budget and ask you to mobilize behind me to inform your representatives that unless they support this initiative you will fire them. Furthermore, we will break up any bank too big too fail, institute financial reform that is clear, unambiguous and without loophole, remove all American troops save from current theaters of war, and bulldoze K street. In other words, long Constantine and short Nero. For those that feel these measures are too tough, may I remind you that two billion folks live on less than 2 bucks a day in this world and one billion folks live on less than a buck a day... so please spare me the tales of woe. 'Tis time to cowboy up lest this great nation of ours rides into the sunset in the manner that all empires before us have done. We will make this coming century the greatest American century because we can and because we must. Make no mistake that in this war with the future we will be victorious.'

I had a dream that a progressive liberal intellectual would institute reform. Either Barry finds it within himself to be a hero, or it is generation zero.

Mah money is on the latter.

Administrative note

Postings will recommence next week.

Almost through my 'holiday readings'.

Hope you will be entertained by some of the posts that will follow.

Time and space/price and form ...oh my!