Friday, May 22, 2009

A Fork in the Road

The markets are more or less at a fork in the road. It only really makes a difference for the short term.... meaning months.

I will be speaking about the markets referencing Elliott Wave theory. You can find a graphic of an idealized Elliott Wave here Just flip it upside down for a bear market.

About a month and a half ago I began to believe that everything which has happened since November was a Wave IV, meaning that we still have Wave V down before we get a monster rally in the late Fall.

I was a bit bothered that I was the only one who seemed to have this particular count. Now I know I'm not alone. The following is an excerpt from today's posting by George Ure at Once again, I don't think Ure is a genius or anything. Sometimes he's downright weird. But Robin Landry is someone I pay attention to:

To get to the point this morning: I had a call on Thursday afternoon from a very, very worried Robin Landry, who was returning my call from earlier.

"George, you were asking about the short-term outlook? It's bad...really bad. Things that should not be happening in the market have been happening the past couple of sessions."

For instance, the Dow has been coming down, but at the same time, treasuries have been dropping, too, gold has been going up, and oil has been climbing.

So there's a possibility...and it's only a possibility that the market could go straight down from here..."

Now, Landry's worried that based on his market modeling that he's been using for nearly 30 years - and which has been good enough that as a one-man money manager he's driving 9-digits around the markets from his office up in Shawnee, Oklahoma - because of the way various wave counts are stacking up along with technical indicators.

"Robin, the way I've been hoping this would work out is that we'd still work up to the Dow 9,600 level, such that the decline from the October 2007 high (14,198 and change) would be the all-time high, which would make last year's 6,626 low the larger Wave 1 down, and that we'd last until mid-August of this year before we crash to your long term Dow 770 target in the 2010-2011 timeframe...."

"Well, that's been Bob Prechter's count too. My work says we're in a five wave decline and this week we finished four. As you know, crashed happen in the 5th waves down so if we take out 7,800 on the Dow in the next week, or so, then Katy bar the door...."

We then played with numbers for a few minutes.

Ultimate downside risk? Dow 770 (Landry) or 1,020 (mine). But, Landry's got interim targets in the Dow 4,400 area first which we'll get to in a minute.

The next best Elliott count is that we finished 5 intermediate-degree waves down in March and are currently in the midst of some variation of the three-wave correction that always results after that.

If we finished Wave IV last week, then the rally is over and we should head down through the summer and into the fall and make substantial new lows. From there we will see a powerful multi-month rally.

If we've finished five waves down and everything since March is a three-wave correction, then we will head lower for the next few days to weeks, possibly retesting the March lows and then rocket up to 9500 or so. It's possible for it to go even higher than that. A larger Wave II correction can retrace up to 100% of the previous decline, though it cannot go higher than the peak. In that case, we are in the midst of the aforementioned powerful multi-month rally, which should last through a good part of the summer before we turn south and head to new lows this fall.

We are still in the beginning stages of a depression. Do not listen to the officials who are saying that the bottom has been reached and happy days are just around the corner. They are not and they will not be for years. I've said before and will say again. The markets crashed in October of 1929. By March of 1930 they had retraced 50% of their losses, and important people were saying that the hard times were over and recovery was just around the corner. That talk lasted until about July of 1930. The Dow didn't bottom until 1933, after losing 90% of its former value. It did not reach 1929 levels again until the mid 1950's.

Stay the course. Do not make foolish, long-term decisions like debt encumbrance. Save money. Pay down debt. Cut expenses. Live frugally. If you're a two-income family, live on one income and save the other. My wife and I did this from the late 1990's on, and when it was time for us to go to one income, we were debt free and were able to live on less than half of what we had made before. You could very well be going involuntarily to one income in the near future.

Monday, May 18, 2009

'Recession Apocalypse': Preparing for the End of the World

Economic Survivalists Hunker Down for Doomsday; Recession Triggers Movement Toward Self-Sufficiency

BUSKIRK, N.Y., May 15, 2009—

In the serene hills of rural upstate New York, Kathie Breault is hunkering down for doomsday. It's not an all-out Armageddon that the 51-year-old grandmother is convinced of, but an imminent economic apocalypse.

A few years ago, Breault began reading about what happens when the world surpasses "peak oil" -- a point where we will use more oil than we can produce.

"I was afraid that any day that oil would disappear, that gas would start to disappear, that I wouldn't be able to get to work, I wouldn't have money, I wouldn't have food that I needed," she said. "It was frightening -- the picture that was painted."

Breault and a growing number of so-called "economic survivalists," are convinced that when oil supply wanes, the world will head for calamity; governments and the global economy will dissolve into chaos and collapse, the group believes, changing life as we know it.

"Everything that we do in our lives is dependent on abundant, cheap energy -- all the clothes we wear, the food we eat, the transportation. We've lost everything that we know about how to live in a different way," she said. "I'm totally dependent on a system that I think isn't going to be there in the future."

To prepare for a looming catastrophe, Breault began eating healthier, walking four miles a day and biking. She lost 100 pounds as a result. Getting rid of her TV and credit cards, she slashed her monthly expenses and now heats her entire house with a tiny wood-burning stove.

"It gets cold, I wear a hat to bed and I wear lots of layers. I wear long underwear all winter," she said.

Breault's survivalist lifestyle marks a radical departure from the consumer-driven life she used to lead. "I was in the malls -- big Christmases, big holidays. Every weekend, I was entertaining my family, we had great get-togethers, lots of food. I took trips to Mexico and Ireland and across the country, conferences. Eat, drink, have a good time," Breault said. "I had a wonderful life. I traveled where I wanted to, I did what I wanted to, and I bought what I wanted to. And I overconsumed."

Some Survivalists Stockpile Food and Guns

Breault isn't alone in her transformation. Thousands are hunkering down for an economic apocalypse and share comments about converging catastrophes on Web sites and Internet message boards, like

Some survivalists have moved to rural homesteads, or what they call "doomsteads," where they can live off the land, raise their own livestock and grow their own vegetables. Others are stockpiling food and guns in case widespread panic breaks out.

While fellow survivalists online are convinced, Breault's family isn't.

"She was going a little bit too far. She was really worried; I think it kind of depressed her a little bit," said her daughter-in-law, Jenny Breault, 30. "And I was kind of scared a little bit -- just because I thought she was taking it too far."

Breault's husband, Michael, 58, didn't support her lifestyle change, and they divorced in 2006.

"My husband was convinced that this wouldn't happen in our lifetime and that things would be worked out and we'd be OK. And we just really disagreed about this," she said.

Despite her family's hesitations, there is evidence that the sluggish economy, rising food, fuel prices and uncertainty about the future have triggered a movement toward conservation and self-sufficiency.

As a result of the recession, people are staying closer to home. In March, U.S. airlines saw passenger traffic fall by 10 percent, and Americans have driven fewer miles for the past 14 consecutive months.

The National Gardening Association says 7 million households will plant vegetable gardens this year, up 19 percent from last year.

Breault gets most of her food from Cedar Hill Farm, a local farm in Bennington, Vt., tended to by Lisa MacDougall and Chuck Currie.

"We try to grow everything from artichokes to zucchini," Currie said.

MacDougall gave the rest of the farm's grocery list. "Strawberries, eggplant, red peppers, leaf lettuce, spinach, onions, sweet potatoes, potatoes, beets, carrots, onions, celery, turnips, broccoli, cauliflower, cabbage."

Layoff Forces Breault to Become More Self-Sufficient

Since ABC News sat down for an interview with Breault earlier this month, she was laid off. That means she'll have to cut back even more -- eliminating some of the few frills, like juice, she still indulges in.

"I get myself a treat every once in a while," she said. "I don't feel guilty about it, I just think I don't need to do it anymore and that'll stop with my job loss."

Breault sees unemployment as a good thing -- an obstacle that will force her to become even more self-reliant. Eventually, she hopes to sustain herself entirely from fruits and vegetables grown on her own lawn.

"It's been probably the most difficult years of my life, but I feel like I've come through and I'm really in a good place," she said. "I'm happier, I'm healthier, I feel better, I have a good relationship with my grandchildren. ... I'm in a much better place now."

Copyright © 2009 ABC News Internet Ventures

Thursday, May 14, 2009

Stupid Is As Stuipd Does

Well, the PPI (Producer Price Index) was released this morning and is being touted as evidence that we have avoided deflation. This story ties together in a nice, neat little package all the things I've been speaking about recently. Below is an excerpt from the New York Times article on the PPI.

"Wholesale prices in the United States rose slightly in April, the government reported on Thursday, as falling oil and gasoline prices leveled off and food prices rose the most in a year.

The Labor Department reported that prices received by producers of finished goods rose 0.3 percent last month, further blunting the prospect that the economy was veering into a vicious cycle of lower prices and lower wages known as deflation."

Okay, notice the assertion: Rising prices for one class of goods are evidence that we are not descending into deflation, which is defined as a "vicious cycle of lower prices and lower wages."

Now, notice the assumptions behind the assertion. The assumption is that rising prices in one class of commodities are evidence of inflation.

That's simply not true. Rising prices for raw food products are evidence of no such thing. Inflation is an excess of money and credit which causes too many dollars to chase too few goods. Demand for food, considered simpliciter, is relatively inelastic. Eggs in particular was one class of food commodity which has increased in price. Tell me, have you found extra money in your wallet and said, "I'm going to go out and just buy a bunch of eggs!" I'm willing to bet your egg consumption has changed very little in the last 24 months. What this is evidence of is the poor harvests due to the worldwide drought (which I wrote about before.) There is less food to go around, so the price went up. That does not prove inflation. It does suggest the possibility of famine in less developed countries and a further strain on food budgets in developed countries at a time when we can ill afford it.

Deflation is not simply falling prices and falling wages, any more than a cold is simply a runny nose and a cough. A cold is a virus that causes a runny nose and a cough. Deflation is a shortage of money and credit that causes demand (and thus prices) to fall. When demand and prices fall, profits fall, so companies cut production and thus wages.

Now, I offer this into evidence for my assertions that:

1. The government lies in its statistics reports by burying data in the reports and highlighting and twisting whatever it wants to in order to suit its purposes.

2. The news media is, at best, stupid and incompetent, and at worst is colluding with the government when it simply peddles this propaganda. Or both.

3. The U.S. population is too apathetic to care and too incapable of basic reasoning skills to discover the ruse if they ever did come to care, which is just exactly where the Powers That Be want them to be. The commercials aren't far off. Your television is turning you into an idiot.

4. We have been programmed to accept a system that silently and systematically destroys our ability to store and utilize the fruits of our labor. The dollar you earned in 1980 is now worth about 40 cents in today's money. Inflation (which the article takes for granted is a good thing) is nothing other than theft from you and me and everyone who holds paper money. Click on the chart below to see what the U.S. Government's inflationary policies have done since 1983:

5. It has not yet been proven by any means that we are not falling into a deflation. I think we are, for the simple fact that there is more debt than there is money on the planet by a 600 to 1 ratio. The Powers That Be are terrified of a deflation because it means an increase in the value of your money. If you have any, that is. So they instituted a policy of cheap money and credit to get you to load yourself up with debt. In a deflation, debt will kill you. Therefore the banksters get to keep themselves in power.

Don't go into debt. Get out of debt. Save money. Be frugal. Plant a garden. If you have cash in hand at the bottom, you will be able to acquire the basic tools to build a multi-generational fortune. That's a lot better than a new laptop or a used car, isn't it?

Sunday, May 3, 2009

Some Resources For the Frugal Life

Well, I started my garden preparations for the Spring. Most of you have gotten your gardens in a month ago or more. Up here in western South Dakota you have to beware of frost until Mother's Day or thereabouts. It froze last night, for instance.

I'm moving to a raised bed system that promises to be easier to care for, easier to weed, and which promises denser cultivation and thus more produce in less space. The system was developed by an urban gardener and is called "square foot gardening." I'll post pictures and updates soon.

I want to provide resources for frugal living, but start at a more philosophical level. None of these is a Christian source of information. Do with them what you will and exercise the discernment God has given you.

Your Money or Your Life by Vicki Robbins and Joe Dominguez is a classic in the field. One of the co-authors, Joe Dominguez, lived on less than $10,000 per year. Yes, that is quite possible.

A similar outlook can be found in George Ure's Ebook "How to Live on $10,000 per Year or Less." I must warn that George has some whistles in his head. He's a bit eccentric. I read him on a regular basis on his other website, He's got some.... interesting... ideas. I do not endorse everything he says by any means. But his ebook seems sound to me for the most part.

Another place to find resources (once again, not specifically Christian and thus a mixed bag) is the Simple Living Network. There are many useful things to be found there.

The stock market correction thus far has been a "flat" which means that the markets have moved sideways for awhile in order to work off the positive sentiment. I get the feeling that they are recharging for a fresh run upwards through the month of May. Once again, I do not believe we're done with our declines. This is a temporary period of optimism. Use it as an exit stragtegy for any stocks you want to get out of. I expect the rally to end before the end of May.

Jack Kemp

The New York Times informs us this morning that Jack Kemp has died from cancer. He was 73. Many of you will probably have forgotten him. I never will. He was Bob Dole's running mate in the 1996 election. I remember hearing him speak at the Republican Convention. He said, quite forcefully, that every child, regardless of race or family income, had the inherent and inalienable right to maximize his or her God-given potential, free from the chains of racism or social stigma, and also free from the crippling "compassion" of government programs as they then existed and now exist. Programs that give just enough money (or not quite enough money) to live on, but immediately take it away if the recipient does any work and earns any income, are going to produce laziness, immoral behavior, poverty, dependency, crime, and cheating. They always will.

Mr. Kemp was a professional football player turned politician, winding up his career with the Buffalo Bills. He was an ardent opponent of racism, and sought to broaden the participation of African Americans in the Republican party, often saying, "I can’t help but care about the rights of the people I used to shower with." He was elected as a congressman for New York in the 1970's and 80's, where he embraced supply-side economics and championed radical, across the board tax cuts. In one floor speech he said the nation suffered under a "tax code that rewards consumption, leisure, debt and borrowing, and punishes savings, investment, work and production." His ideology on taxes made a profound impact on Regan, and was a major component of the Regan Revolution.

The thing I will always remember about Mr. Kemp, though, was the way he treated me. After hearing his RNC speech, I began to mull over issues of racism and social justice. I was convinced that Mr. Kemp had a point that few in the Republican party were seeing at that time, and which was an admirable answer to the policies of the Democratic platform. In 1998 I began to toy with the idea of a career in politics. I wrote Mr. Kemp a letter and asked him to mentor me. He wrote me back, thanking me for my interest in his ideas. His time commitments would not permit him to have a mentoring relationship with me, but he encouraged me to continue to explore the possibility of a career in politics.

He could have just as easily ignored the letter, but he didn't. He wrote me back and encouraged me. I have since decided that politics is probably too blunt a tool and a politicians life is too fraught with compromises for me, but I've always remembered his kindness.

I do not know if Mr. Kemp was a Christian. I hope he was. I do know that he will be missed and I mourn his passing. My prayers are with his family.

Friday, May 1, 2009

Hanging Out on the Porch

I am one of the contributors to the Rapid City Journal's religion blog. This week we were asked to write about the fear of death that is being manifest in our response to the Swine Flu outbreak.

I've been reading the Stoics on and off for about a year now, starting with Marcus Aurelius, moving to Cicero, and then to Epictetus. I have found Stoicism to be quite interesting. What follows below is my response to the question put to us by the religion editor. I offer it for your edification, criticism, or discussion.

I am a Christian. But I am also a student of philosophy, and especially ancient philosophy. By far my favorite philosophical system is Stoicism. It has been said, and well said, that Western Civilization rests on the twin foundations of Christianity and Stoicism.

Like many things, Stoicism is misunderstood in our day. It does not teach the extinguishing of emotions. Rather, it teaches that we must not be mastered by our unruly passions. Stoics believed that the world is ordered by a pantheistic god, (sometimes called "god", sometimes "providence" and sometimes simply "nature.") All that happens comes from this god and is somehow what is best. The Stoics taught that we must pursue a life of virtue, defined as a life that is in accord with nature or providence. Thus, we are to calmly and rationally change what is in our power to change, and we must accept whatever is not in our power to change. So the Stoic philosopher Epictetus writes,

"We must die, but must we die whimpering? We must be imprisoned, but must we whine as well?"

And the modified Stoicism of Cicero teaches,

"Consider, for example, the man who is morally imperfect enough to feel distress. Then he is also certain to feel fear as well: since fear is the anxious anticipation of distress to come. And if he is likely to feel fear, that is the same as admitting that he is susceptible to every sort of panic, faint-heartedness, hysteria, and cowardice. In other words, he is the sort of person who will get the worst of everything… the man we have in mind will be defeated; he is bound to be reduced to a state of slavery. Whereas moral goodness, according to my interpretation, is essentially something free and undefeated: the whole point of morality is its independence."

Now, this is essentially a sub-Christian philosophy, but it is a manly and admirable one. And it has some congruence with the Christian faith. Devout Presbyterian Civil War General Stonewall Jackson was noted for his utterly calm demeanor in the heat of battle, tranquilly riding about the battlefield giving orders as the bullets whined all around him. When one of his captains asked him about this and he replied,

" 'Captain, my religious belief teaches me to feel as safe in battle as in bed. God has fixed the time for my death. I do not concern myself about that, but to be always ready, no matter when it may overtake me." He added, after a pause, looking me full in the face: “That is the way all men should live, and then all would be equally brave'"

The Christian should live with an absolute trust in God who has ordained all that comes to pass and decrees the end from the beginning. Well does the Psalmist say, “All the days ordained for me were written in Your book before even one of them came to be.” (Psalm 139:17) Because Christ has died and risen, for the Christian death is a vanquished enemy. It should be treated as a kind of rough joke. The Christian should not fear death, but rather view it with a keen anticipation, as a mother views the birth of her child. There will be labor pains, but the end result is joy. There may well be bitter death pains, but death is the passage to glory, where our fondest hopes will be fulfilled and all our sorrows and trials will be at an end.

According to my religion, the non-Christian has no such hope. Therefore it would be false of me to simply peddle Bible verses to everyone indiscriminately which were only intended for the hope and comfort of the Christian. I believe in Hell, and I believe many will go there. But if a man or woman refuses the free offer of the gospel, then from the perspective of this life only, it would be far better to learn calm fortitude, courage, and acceptance of adversity from the ancient pagans. To run around like panicked ninnies as we do today is the worst of both worlds. Thus we have neither Christian hope nor pagan fortitude and find ourselves in a most despicable predicament.