What You Should Know - The Real Life Social Network

In an attempt to ever understand mankind's own predictable, herd-like behavior, we frequently spend time looking for information about that behavior. Social networking sites like Facebook, My Space, Twitter, Foursquare, and others are dynamically transforming the internet, and in the wake of this sweeping change people are mindlessly handing over their private information. We believe this information can, and if history is any guide, will eventually be used against the masses--not to mention that every business on the planet will soon be treating you like the mindless animal you actually are.

The presentation below is very informative as it speaks to the social organizational structure inherent in all our brains--the structure that puts us all most at risk to people that want to exploit our unconscious tendencies. We recommend using the information so that you are more informed as you make online social networking decision.

The Real Life Social Network v2

View more documents from Paul Adams.

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One More for Friday - Nassim Taleb on the Fed

This one's self-explanatory. Taleb chastises QE as a high risk move whose risk is being ignored by the Fed.

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Jeremy Grantham Interview on CNBC

We're not particularly big fans of CNBC, but occasionally they produce a gem.  The following videos with and about Jeremy Grantham are interesting, given where we are.  We're not entirely on the same page with Grantham philosophically, on the Fed controlling money supply, or on timing--we're still of the belief in a fairly shallow pullback here in asset prices, then a further run up to a significant intermediate term top next year.  Being Austrians at heart, our take on the situation is quite a bit different, but who are we to question Grantham? :)

Enjoy.

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On Politics...Rights, Priviliges and Freedom

As a general rule, we have little to no faith in politics.  After all, the purpose of government is to govern (at least in theory), and governing implies controlling.  We don't particularly feel the need to be controlled, nor can we, in good conscience, support a system that seeks to control us or others.  We tend to align ourselves philosophically with the Founding Fathers of the United States, which we believe are turning over in their respective graves at the ridiculousness of the conservatives, liberals, Republicans and Democrats--all socialists in our book--and we believe in the book of the Founding Fathers.

You see, the inherent problem in government is that it is supposed to govern.  However, the Founders believed in individual sovereignty--that each person governs himself.  It is quite clear from the Declaration of Independence and the Articles of Confederation (to a lesser extent, the Constitution) that the design of the law of the land was to limit government, not individuals.  Today in American politics, the debate is never about individual sovereignty, it is always about which rights the political system should be allowed to trample upon.  America, as a country founded on the key principles of individualism and freedom has been gone a long time now.  The countries of the world only exist in various forms of collectivist state control, or statism.  Some are more controlled than others, and some are so incompetent that they can't control anything.  Most states are at odds with other states--and this is the central key to our current tenet in living free.  But we digress....

It appears these days that everyone believes that some person or body of persons must dictate how everyone should live.  This is a far cry from the intent of the Founding Fathers, whose philosophy was built on the concept of natural, inalienable rights.  The idea of natural rights is rooted in the writings of John Locke, Thomas Hobbes, Jean-Jacques Rosseau, and the ancient Greek and Roman philosophers including Plato and Aristotle.  Unlike today's typical politician, much less the typical citizen of most any country, the Founding Fathers were well read and used that knowledge to create a minarchist (meaning "minimal government") system of government that revolved around the concept that the individual had natural rights (call them inalienable, God-given, whatever you wish) that supercedes the laws of man, and the only purpose of government was to protect those natural rights.  This is the crux of the problem today.  People that believe they defend freedom and the core values that helped make the United States the most prosperous and free country in the history of mankind erroneously believe that governments determine their rights.  If this is the case, then rights are just laws with no particular meaning and can be changed on a whim.  As the US has become a democracy instead of a republic, then enough people can vote in politicians that change the laws to suite their desires, and the end result is a tyranny of democracy--a dictatorship of the many.

Governments do not bestow your rights.  Governments cannot ever take your rights away.  Governments can only violate your rights, and when they do, they restrain your freedom.  This is in direct violation of the principles of the foundation of the United States.

What exists today is not freedom.  It is not the intent of the Founders.  It is not what made the United States the beacon of freedom and prosperity that it was for a couple of hundred years.

So what can you do about it?  You can become politically active.  You can try and educate yourself and others (good luck with that!).  But the reality is that it is not likely to be effective until the entire system breaks down and the illusions of freedom that people have disappear.  Meanwhile, Americans--as an example--will continue to vote for their favorite red or blue team.  The socialists on the coast will complain about the socialists in the interior and vice versa.  Both groups will call one another names and point fingers while never realizing they are really not much different at all on the important issues.  Eventually the snake eats its tail.

It is our opinion that the best option for people that "get it," regardless of where they are in the world, recognize the reality around them and take action to defend themselves and their families.  Let the statists, of whatever color, fight amongst themselves.  You can live free in an unfree world if you take the time to learn how.  You must learn to protect your privacy and use multinational, legal techniques to protect your economic and social freedoms.  You must learn to exist between the bickering states, maximize your options, and be willing to go where you can do what you want to do.  This is what freedom is: self-governance.  It is possible today.  It may not be possible if you wait too long.  Sign up to our newsletter to learn more.

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Looks Like We're Getting That Dollar Rally

I can almost guarantee that when my stops get hit, that means that my decision was on the money. An updated view of the GLD ETF shows that today's volume spike was large and was a clear reversal day.  It is likely that gold's move down has begun. 

Note that our cycle timing model does not support the notion that this move down will likely last very long.  We're looking at the 1280-1300 range as a possible floor for this move.  Larger downside moves are possible and will definitely come at some stage.  We will keep an eye out for signs of an upward turn.

The HUI (GDX) and silver both confirm the turn.

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Ron Paul on the Fed, QE2, Inflation, Debt Bubbles, Devaluation and Krugman

As usual, there are few voices of reason in government aside from Paul and, to a much lesser extent, a few others.  Our belief is that, while these people are the only hope for the US, they will always remain the minority.  In aggregate, government is a destructive entity that cannot be corralled, controlled, or sustained.  You should take steps to protect yourself and your finances.  It is unlikely you will convince a few hundred million people to vote the right way and make significant changes.  The end of this game will be very, very destructive to individuals.  Either you can spend your time preparing yourself and your family (history shows that riding it out doesn't work in the vast majority of cases) or you can fight to change everyone else's mind.  The decision is yours.  Consider it carefully.  History does not look kindly upon those that make the wrong decision.  Our mission is to use the lessons of history and the regulations available today to help individuals navigate this storm.

There will be no "do-overs" if you're not prepared.  Contact us if you'd like a free consultation.  We work with clients from all over the world--not just the US.

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November 7: Week in Preview....

We'll be launching the newsletter later this next week. The first edition will be be more abbreviated than will future editions as it will only be a couple of weeks before the next edition is released.

To summarize, it appears that the US dollar will be rallying starting this week--either that or a crash is brewing. While the latter is possible, we're not convinced we're there yet. We anticipate a short term pullback in asset prices associated with a dollar rally, a continued run up in asset prices shortly thereafter, then an intermediate term rally near the end of this year or early 2011.

First, a look at the USDX.

From the monthly chart we can see that the trend was and is clearly down from the 2000 - 2002 triple top, with the 80 level serving as the critical pivot point.  The 2008/2009 and 2010 tops near the 88/89 level appear to support a double top, implying that the lows at 70.70 will be tested at some point in the next year.  However, there is an upward trend from the 70.70 level lows of 2008.  The larger configuration is a symmetrical triangle.  Currently the dollar is right at the lows with any further significant breakdown signifying a run toward 52 on the USDX as the minimum objective of the dollar.  There is plenty of room on the RSI and slow stochastic to allow further downward room longer term.

The weekly chart shows a closer look at the upward dollar trend.  The upline has been violated, though the weekly close is above the line.  We take this as a sign of a possible intermediate term rally (though we don't favor those odds) beginning soon, but the uptrend is not strong enough to support a major bottom.  IF we assume that a rally is already in the cards and has started as of Friday, November 5, it's unlikely that the rally would exceed the 80/81 level.  The RSI and slow stochastic are oversold.  We will look to the daily charts to determine when a countertrend rally may begin.

The dollar has completed a bear flag.  A significant move down from here that stays below the 76 level for a day or two implies a large downside move is coming.  If a rally is going to start and be sustained, it will have to start soon.  Our short term dominant cycle model provides some incite.  We use the UUP dollar ETF to provide short term timing using a modified version of a Hilbert transform and a fractal formation.  These models show a possible short term low took place on November 4.

Note the cycle model shows that we should see a turn when the black line at the bottom of the graph crosses the red line.  That appears to be within a few days if the dollar rallies, so we anticipate the dollar rally will be short term, not intermediate term.

The red volume bars in the lower portion of the chart signify points where a turn is likely to have occurred.  The last occurred on November 4.  Based on the additional evidence, we believe that a short term turn has begun.

Do asset values concur?  The evidence there is not clear yet, though it is not uncommon for a turn to occur in one financial security before a highly correlated security makes a turn.

On the weekly charts, you can see gold's inverse head and shoulders breakout.  The intermediate term target of roughly 1400 has been reached.  It would take several days of sustained rally above 1400 to play the momentum to the upside.  At this stage, short to intermediate term pullback appears to be in the cards.  We suspect that the pullback will be short term with an intermediate term pullback coming in spring of 2011.

 

Note that gold is overbought on the RSI for the daily, weekly, and monthly charts.  As we reported last year, whenever  gold has shown up as overbought in all three timeframes, whenever the pullback does occur, it is typically very strong.  We don't expect this strong pullback to come immediately, though we would not be chasing gold here except as a trade.  If the dollar were to continue to fall and gold sustained a run above 1400, it may imply that the dollar move down is becoming disorderly--fundamentals are taking over and hyperinflationary risk is high.

Using GLD as a proxy for the timing model, we see similar timing as we see in the dollar for a turn--implying a short term pullback for gold, not an intermediate term move.

Short term, the S&P is largely overbought.

 

Much like gold, we anticipate a short term pullback followed by a continued by a continued liquidity-driven run up in asset prices.  The S&P has a target of at least 1250 as it executes an inverse head and shoulders pattern.

It is likely that by Wednesday the 10th, we'll either be in a consolidation/pullback mode.  More updates mid-week and more detailed information will be in the newsletter.

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