The Recession is Now Defined... Don't Make me Laugh

Last October Floyd wrote "we have entered a recession. By the time the government is willing to admit the recession exists a year will pass, and we will have moved to deflationary recession, or turned the corner. We are led by economists and politicians with no sense of reality, and we will be punished for allowing this." At Blue Chip Options, our sister site, we sold off most of our speculative positions at 14,100, and more at 11,400, and we are buying stocks again. www.bluechipoptions.com

So with my angry babbles on "we are in a recession".....

Guess I was right. The government today told us we are in a recession. The market dropped to 8100, right to our projections, and our Dec350P hit 9.40, up over 200% for the day, and returning most traders 50 to 100% returns.

I will remind the many traders that wrote me last week "why puts in such a good market," and "I think you're taking a great risk in such a strong market to bring up puts."

The market was NOT strong, just euphoric over Thanksgiving and Obama's moves, and a bit of reality set in.

I would like to repeat, just to make sure we know the issue, what George Bush said in September, and McCain confirmed while running: "The economy is sound."

And to think, this is only the 12th time in our history that the market has dropped over 50% in a day, and six of those times have been this year.

I simply laugh out loud that "the recession is now defined."

__________

Most people understand Eastern religion "karma" as "what will happen, or "good or bad karma." Actually, every thought and act you have is karma. Karma is what is. When one meditates, or hears a mantra (a tonal sound, such as I am, OM, or God)...the tonal sound helps to reduce the mind's desire to constantly think. Meditation is trying to stop your mind from thinking. I am is thusly the ultimate mantra, as I am is what God, OM, and all come to.....the many meanings of the same word. The "mantra" we hear from Eastern Religion has no real purpose, or karma.. The mantra is the surrender of what you have made "what is."

White does not always win, and black sometimes does win. This is life.

And black is not always black, nor white white. This is hard for readers to understand, as your lives have been taught around black and white, and what is obvious. Our definitions of something (what black is, the absence of light) are what we know, but necessarily all that there is. This is the statement black is not black, nor a rock hard.

Having faith in God, or Jesus, is fine. You are using scriptures (interpretations) to believe. If you allow others to believe, or not to believe, you are a true person of faith, as you have faith in what you know, and by living your life show what you believe.

It is when we KNOW that we are right that it is wrong,as we do not know that we are right. We can believe, and we can have laws, but our interpretation and openness must always prevail

I repeat again: if the children of the adults that led Hitler to power had questioned authority (or law, or what was right) Hitler would not have prevailed. White could have won:)

As you have your rights violated going through lines of security, wherever they are, recognize the incompetence of the action for what it TAKES from you.

__________

As always, we are not learning from history. In late 1989 Japanese stocks on the NIkkei average peaked at just under 40,000. Much like our Dow at 14,100 nothing could stop Japan, banks began offering 100 year mortgages, and at the peak of the bubble the Emperor's Palace and its surrounding hills in Toyko were worth more than the entire state of California. Of course, the bubble burst. Today the Nikkei is at 9000. It is 17 years later.

Japan is the world's second largest economy. Japan, however, are savers, and even during the bubble they saved. They did not have the Bushian Debt in the trillions to lead off the mess, and this is a dfiference.

Another difference is the massive consumer, corporate and government debt that did not exist in Japan. These are variables that lead to the deflation spiral now permeating our country.

Oil and gas dropping is good for our economy, short term, BUT the price trend could be a phenomenon of the future, where more and more commodities fall. They've already fallen 42% July thru October. These are more signs of deflation occurring.

Obama will now try to spend money. First print it, then spend out, and build our economy out of its shambles. More public works, more unemployment benefits, more bail outs. None of the facts provided him will be clear, and he knows this. His job is to create smart teams of people that can manage the chaos that is created and sort out the quickest remedy.

It would be smart if we could learn from the history of Japan.

And from reader RC, an article of value:


Interesting reading:



"I've been doing a little thinking this morning before the kids get up, and it occurred to me how drastically the markets have changed in the past 12 months...and how much more change is still ahead of us.

Some of it, obviously, we can control, but a large part of it we cannot-particularly when it comes to the markets. While many investors, preferring the controllable, will lament that, history shows that it's the uncontrollable events that actually produce the biggest opportunities.

Like the following:

There's a 1994 law that limits a bank from controlling more than 10% of the deposits in the United States. So what happens when, in a post-bailout world, regulators realize that rule has been violated 6 ways to Sunday? There are obviously loopholes that have been overlooked or deliberately winked at in the rush to stabilize things recently. But when the smoke clears, we could see the "new" banking landscape change dramatically if banks are forced to divest billions in deposits to comply. The winners will clearly be cash cows, while the losers...
Another thing I wonder I'm wondering about: what happens when banks (which are still hoarding cash by the way) are weaned off the US government's special lender's list and no longer have virtually risk-free capital available to them? You can bet the concept of "capital formation" will take on an entirely new meaning both here and abroad. International cash flows will become more important than ever before.
Speaking of which, what happens to US Treasuries when foreign purchasers - aka China, Japan and South Korea - figure out they can get synthetic Treasuries at higher rates by purchasing any of a half-dozen bailed-out banks offering debt at higher-than Treasury rates and being collateralized by the Federal government? We could see inflation spiral out of control, creating legendary opportunities in currencies, metals and other assets that most investors presently don't give a second thought to!
And annuities? Nobody at CNBC or CNN dares ask this question. But what happens when people figure out that the companies selling these things don't have anything remotely resembling enough underlying investments to meet even the minimum guaranteed returns? Short city!
For investors who are interested in collecting stocks as opposed to harvesting returns, the answers will no doubt be unpleasant. But for those of us who are willing to ask the tough questions, we have an opportunity to laugh all the way to the bank."

(Not sure of our subscribers source on this, but very interesting)

__________

And lastly, a Floydian question: if oil prices raised the cost of transportation and fuel so exorbitantly that food prices, etc were FORCED to go up, why is it that prices are not going down now? It's an easy answer: corporation falsely perceive that advantage can be taken of the consumer in a "short cycle" down and this is a time to build profits.

Of course this makes sense, but is any part of you feeling truly violated? Any part of you wondering why gas could lower this much? Any part of you suspicious?

I hope so.

Question authority.