Free Money

Fannie and Freddie
Sister and Brother?
Chalk and Cheese?
Sodom and Gomorrah?

Or

The Apocalypse?

First let us job back a few days.

The action by the US Treasury to effectively nationalize the two biggies in the American mortgage market at a potential coursed of all are $5 trillion, is either the panacea for other financial problems of the world or applying sticking plaster to a festering sore that needs some strong antibiotics or even an amputation!

On the plus side the market seemed, in the initial 48 hours, to endorse the action but there is no doubt that this was a desperate action -- there was really no alternative -- and somewhat eased the despair in the US mortgage market but easing despair is not a very solid foundation to build on. The intention, no doubt, was to commence restoration of confidence which was of course vital.

Central bankers, on whose recent performance are not known for of their sagacity, or even an ability to think ahead, will have had a collective sigh of relief but with fingers crossed. Being the contrarian that I am, I still see the negatives continuing to obscure the positives.

We cannot divorce the action on that Sunday from the rise in the U. S. dollar in the weeks preceding and a consequent depreciation in the other currencies -- from the Euro to the Yuan. This suggests concerted action by central banks and governments which in turn raises the question of why action then - and not much earlier?

The optimism of a few short weeks ago has become an overwhelming pessimism and fear after Lehman Brothers filed for bankruptcy. You will recall that in my first Blog on Banks I pointed out that Lehman was leveraged 38 – 1.

This aspect should greatly concern investors and Governments – including our own – as nobody ,and I emphasize nobody, has any real idea of the counterpart risk for other institutions, municipalities, pension funds etc. One of the figures which leaves me totally mesmerized is that, excluding commodities, the derivatives market is put at $455 Trillion. Even a small part of this proving uncollectible will guarantee financial mayhem for the world financial community with increasing impact on you and I.

A further reference to Merrill Lynch – The Thundering Herd – in Blog X11 also demonstrated the risk to their solvency – now they are, most likely, being taken over by Bank of America to save the largest firm of its type in the US.

I looked at my Car insurance policy today and find that it is insured by AIG who are desperately looking for $50 billion to tied then over. You can see where the actions of gi-normous firms in distant countries can affect us at the most personal level!

Make no mistake we are not yet in sight of the worst part of this Market and Currency Turmoil, and as I have voiced frequently, your safety is in the precious metals and cash for the foreseeable future. Gold and Silver have had a vicious pounding, particularly since the US$ recovered somewhat, and the two things are not unrelated.

There has been, since the late 90s the belief in some quarters* that the price of gold and silver was in someway manipulated by governments and large banks, including Central Banks and additionally influenced due to hedging by gold producers themselves. The advent of Hedge Funds has given impetus to large scale speculation in commodities and gold/silver.

With manipulation it is impossible to say what the true value of the precious metals is but my guess is that this true value will turn out to be many multiples of current quotations. This applies to many mid-tier producers in particular.

Put it this way, would you prefer your savings – or at least a sizable proportion – to be in any currency that is diminished by inflation and constant printing by Governments, or in a precious metal which is in constant short supply and cannot be manufactured by the same Governments and is regarded as the ultimate safety net?

* see La Metropole Café . Com

Robert Mooney is a contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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Banks - Where does the buck stop?

In talking about banks some figures are worth considering,

Fresh capital raised by banks and brokerage houses since January 2007 - $357 billion

Write offs to date - $500 billion

Anticipated additional write offs – this is a very suspect figure and possibly on the low side - $650 billion

As you will see the total write offs are way beyond additional capital raised to date.

A few possible scenarios

• Western Banks will have to raise further additional capital by way of rights issues, or a placing with Sovereign Funds in the Middle East or Asia. A possible result from the latter is more control passing from West to East.

• Can Banks continue to pay or, even more ridiculously, increase dividends against this background?

• If dividends are cut - who suffers? The shareholders of course! So they face a triple whammy – lower dividends, a possible call for capital and a decimated value of their shareholdings.

• Regulation must be tightened but at what cost?

• Regulators to date have shown little ability to regulate and, in some jurisdictions, the legislators have compounded this failure by buying into the absurd requests from the self same banks who are now writing off these huge sums of shareholders wealth.

• Who regulates the Regulators? In effect nobody and if they fail in their duties or don’t see the warning signs in time - who suffers? Businesses, the shareholders and the ordinary person who needs a mortgage or a loan.

Central Banks

We talk about the Central Bank of Ireland or other Central Banks in the Euro Zone but in effect they have little power and are merely Agencies of the European Central Bank.

As we pointed out in an earlier post, Ireland has little control on its Interest or Inflation Rates as borrowers will be only too well aware. In turn the ECB rate has little relationship to rates being charged by Banks in Ireland or other European countries.

An extract from the website of the CBI perhaps puts this in greater perspective:

Financial stability is an abstract concept that defies measurement and is often defined by its absence – the occurrence of a financial crisis. The bank’s role involves both domestic and international developments and highlighting potential areas of concern relative to the Irish financial system.

And now for the early Warning on US Banks – have we such a menu for Europe?


This is reprinted with thanks to Martin Weiss Ph.D of money & markets.com**

Banks are listed with the largest at the top.

Column B is TheStreet.com's Financial Strength Rating, which covers capital, asset quality, liquidity, earnings and more. This is a key input in helping us form our opinion, but not the only input.

**This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com/.

Robert Mooney is a contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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Tom Clancy and Banks

Seems like an unlikely combination but as I like Tom Clancy’s books and am writing about BANKS I thought I would demonstrate where they have a commonality!

Pull out the TC book “Debt of Honor” published first in 1994 and one of his best.*

The plot is somewhat complex but in it he shows how the villain of the piece screws the US Stock Market and as a result the Banking System there and in Europe.

His book is fiction but demonstrates how unprepared the institutions were to handle this catastrophe. There is an uncanny resemblance to the current global meltdown but, while he had a hero and solution, there seem to be no heroes around now, just a bunch of so called financial leaders who prevaricate and seem to make matters worse with each passing day.

The Reserve Bank of St. Louis has an interesting chart on its site under Series – Borrow – Total Borrowing of Depository Institution from the Federal Reserve. The chart looks scary but I have not seen a similar item from the ECB but have no doubt that – over a shorter time span – it would look equally disturbing.


The above was drawn to my attention by the GOLD MONEY website and I would recommend that you look this up – very well written and topical.

Now back to Banks.

When you see Merrill Lynch apparently selling some of its CDO book at knock down prices and when all the 2nd quarter figures are in, it seems that we are only some way to resolution on the whole Sub Prime fallout. Probably 20% of the way!

So what does this mean for Bank shares?

I have looked over the Annual Reports of some Irish and European banks and their chant over the years has been “we are profit driven because our raison d'etre is to enhance Shareholder Value”.

How many banks have achieved this objective – I submit that per the various reasons mentioned before - they have diminished shareholder value in 18 months at a faster rate than they grew such value over the last 10 years.

Either way is this stupidity or greed and should the same Management in these banks continue in – expensive – office? Up to now the only the Shareholders have taken the hit.

I drew attention the dead cat bounce then under way in Bank shares.
There is still some bounce there and it has a little further to go so take this to heart and lighten up or sell as opportunities arise. This is where the Zignals Stock Alert can really come into its own.

Over the next 5 years investors will have many opportunities to buy in at advantageous prices and with a little more certainty as to the outlook.

Irish and international banks are currently high yielding and on absurd historic PEs. But the question is by how much earnings will decline, and whether they will maintain their dividend rates and so deprive themselves of an opportunity to rebuild their Balance Sheets.

Caveat Emptor.

* the final part of the book predicts 9/11 in an eerie way!

Robert Mooney is a contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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BANKS – How do you describe them?

(With apologies to Shakespeare and Shylock!)

The description that has grabbed my eye was “Modern day Shylocks”

In one form or the other banks have been around for a very long time but the earlier and current versions have one thing in common.

They often fail, cost their depositors and shareholders considerable sums of money, and largely treat their moral obligations to society as of lesser importance, by far, than their alleged duty to Shareholders.

It is interesting to observe that while failures in the 1800s were large for their time the impact on 80% of the population was minimal. As the development of banks and savings and loan associations progressed, more and more of the population became within the ambit of these organizations.

Now practically everybody in the developed world has a relation with Banks, S&L Associations, either through direct relationship or through the investment aspect and Pension Funds etc.

To put the current world situations in perspective the current rate of failures and value diminution is even greater than that of the 1930s. In the US the traumas of Fannie Mae and Freddie Mac are well known. Between them they owe or guarantee about $5.2 Trillion or $5,200,000,000!

The situation in the US now is much more serious than the late 80s bailout of the S&Ls or the case of the Japanese banks some years later. The impact on share values in both cases was dramatic.

A look at bank share prices in Europe, the US and of course Ireland gives some insight as to what happens to banks (and their share prices) when

a) they lose investor/customer confidence
b) their lending excesses catch up with them
c) the CEOs do not know, or understand, what their dealers, traders or lending officers are doing.
d) Their greed makes them lose sight of prudent practices or the lessons of history.
e) the globalization of financial services spreads the canker through society.

In the 1980s banks and institutions in the USA were considered highly leveraged at a 5-1 ratio. In the recent past Lehman Bros was leveraged 38 – 1.

If banks fail there are certain options open to the Authorities, Central Banks, The Federal Reserve in the USA (by the way - a private organization not owned or controlled by the US Government), or in the last reserve – Governments. These can range from bail-out (Northern Rock) to forced mergers (Bear Sterns) or liquidation (over 1000 banks in the USA in the 1930s).

In the US your general accounts/savings are insured for up to $100,000 but in Ireland the figure is up to 80% of E20,000 per individual.

Check your bank balances and spread the risk!

When you look around the developed world it is surprising to realize that the various international type organizations such as the Fed(see above), the BIS (Bank for International Settlements), the World Bank are not Government owned organizations but essentially controlled and run as private operations.

On consideration one wonders if this is good or bad as governments and public or privately owned financial institutions seem capable of the same general errors of vision and management.

We have all heard of the “dead cat bounce” and the last few days have seen this in operation in the Airline industry and the Banks here and across the Atlantic.
It seems to me that the former have a more rational reason for that bounce than the latter.

However every market shares the factors of overbought/oversold and irrational exuberance or fear and dread.

My personal feeling still remains, like that of a person in Florida who hears a hurricane warning, when will it strike me?

Play it safe and hoard cash safely. The ultimate protection remains the precious metals.

Robert Mooney, is a contributing author to Zignals.com the free stock alerts, market alerts, and stock charts website
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Future History - an Oxymoron? Eurogold

Past/Present Events

The Euro

The Pros:-

The Euro is 10 years old and there are plenty of reasons to celebrate it birthday.

Its launch enabled the concepts of some of the originating founders of the Treaty of Rome to be realized.

It also brings the day of a Federal State of Europe that much closer and binds the individual member countries into a tighter Union.

The common currency and the economic policies which accompany it, means that the major reason for wars in Europe – economic power – becomes less likely.

As recent currency movements, particularly in the US dollar, show the world will seek a strong currency to be used as a Reserve Currency. It is quite
unusual that a currency of such recent vintage could now be considered by many to be the alternative to the US$

The Cons:-

A common interest rate structure for different countries and economies is not always a good thing.

Ireland for much of its boom years did not need a low interest rate environment.

It can be argued that low interest rates imposed on this country caused the absurd overvaluation of the built environment – land, houses and offices and as a result the Stock Market particularly the banks, would not have reached the extremes they did.

It can also be argued that if our own Central Bank had the power to influence domestic rates we would not have arrived at the situation that the country now faces and that the expenditure plans of a spendthrift government might have been better controlled.

Europe has had many of the detrimental traits of the USA in expanding money supply and in the process created the inflationary environment which all European countries face, along with most of the rest of the world.

As mentioned above the day of the Federal State of Europe is coming closer – unless derailed by those dammed low intelligence Irish voters - when all power will be subsumed into the centre and the peripheries will trail along like the tail of a dog.

Gold

The past

Tutankhamen – buried with his possessions and gold ornaments
A Baby 2000 years ago – welcomed with Gold, Frankincense and Myrrh
Any Museum - gold torcs, figurines
Coins - Sovereigns, Kruger Rands, Gold Eagles
Female adornment - Gold, silver and diamonds

Gold has been around for longer than any other form of value, save perhaps for the oldest profession!

The future

Why is it the subject of media comment- and awakening investor interest - now, when it was forgotten as a store of value up to about the beginning of this Millennium?

Gold is a store of value at all times but is only recognized when the fear of debased fiat currencies (paper money) enter the general physic. One of the best indicators of inflation and inflation perception is measuring other forms of investment against gold. Using this yardstick it is possible to identify investment bubbles, fear in the populace and the likelihood of war, retreat to a safe haven, and of course the desire for personal adornment. Few other value measurements have all of these qualities.

The price of gold has, for the last 100 years or so, been measured in US dollars but it can be measured in terms of: -

oil and other commodities such as silver and base metals

the relative strength of other currencies,

and other markets such as stocks and shares and even property and land.

Gold and its sister precious metal – Silver – have begun to receive the recognition of the market place as a true store of value in these very difficult times. Herein lies the message for investors, as in a storm you retreat to a solid structure, now is the time to at least leaven your wealth store, pension fund and portfolio with an adequate level of these two metals. As mentioned before, various commodities should also be represented in your portfolio

If your motto is Safety First think precious metals


Robert Mooney, is a contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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Future History - an oxymoron? Consequences

Apologies to all as this was posted out of sequence with the last article.

Recent events in Ireland, in rejecting the Lisbon Treaty, set me thinking about the events that have happened and could happen in the future and the implications for investors.

First to past events:-

The Millennium Bug was anticipated with dread in that the year 2000 was going to bring about the failure of all computer systems worldwide with consequent impact on all our lives.

The consequence
– Replacement of old systems by worldwide businesses to the benefit of computer manufacturers and the sector in general.
- Businesses increased their capacity to do business and control outsourced work to the cheaper Far East with loss of jobs in the West
- A total collapse of the technology sector in early 2000 with huge loss to investors and the demise of 1000’s of computer related companies.
- Some 8 years later the technology sector is still trying the recover

Some 20/30 years ago China adopted a one child policy

The consequence
- Currently in the under 25 age bracket a ratio of 118 male to 100 female
- Now a liberation of women in education to make up for the shortfall
- A potential shortage of wives in certain social strata in China
- The next generation of leaders of government and business will have a totally different outlook, as single males growing up, with no way of calculating the fall out.

Cheap energy for decades

The consequence
- Enormous growth in western economies and the rise of US influence in all spheres of industry and finance
- The inevitable backlash by oil producers who wanted more for their precious product
- The accumulation of gigantic US$ holdings by the oil producers and the necessity to recycle outside of their own economies.
- The delight of bankers to deal with task and to invent even more esoteric methods of deploying the $.
- The financial bubble that resulted and the subsequent bursting of that bubble

The stockmarket in 1972/74

The consequence
- A collapse of the UK Index from 500+ to 146 at end 1974
- A foreseen collapse of the wealthy class in Britain
- Jim Slater (a leading investor guru at the time) suggesting that all you needed to survive the apocalypse was – tinned beans, gold Krugerrands and a gun!
- A robust recovery when the depth of gloom was inevitably
reached and this is the lesson for investors – buy when all others are
selling!

Resources:
China census 1990: IIASA figures
How bearish is the FTSE?
Jim Slater's recommendations in 2006.

Robert Mooney, is a contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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Future History – an oxymoron? Cycles

We talked about past events and the consequences so now to

Future Events

A Rider - The world has a funny way of turning predictions on its head like the apocryphal story of how a writer/economist in 19th century London predicted that, if the horse traffic increased at the previous rate, the streets of London would be 8 feet deep in horse manure by 1900.

Peak Oil -
Dr Colin Campbell – who incidentally lives in Co Cork in Ireland-, has been a major proponent of the “theory” of Peak Oil. His seminal work* – published in 1997 - sets out the groundwork for the belief that the era of rising oil production in the world has ended.

He may be right and certainly growing acceptance that his beliefs, and those of others, may indicate that we are heading that way.

Consequences
- The world has gone crazy for alternative energy sources
- The price of oil and related products have latterly, gone through the roof
- Inflation, always present but unrecognized, has risen worldwide
- Car and truck manufactures have had to redesign their gas guzzling
monsters.
- With the craze for ethanol this has impacted on global climate (through
Burning forests to release land for cultivation) and on inflation (due to
higher prices for many grains)
- The contra is that alternative sources of energy for nuclear to thermal to
Photovoltaic and wind will impact, albeit slowly, on fossil fuel usage.
- Improved deep water technology will bring with it the prospect that
deep ocean sources will be discovered and exploited. Brazil, China
Seas, offshore Ireland etc
and the laws of supply and demand will apply once again.

Climate Change

Having been around for quite some time I reckon I have gone through at least 5 climate changes since boyhood! This is not all a joke as some fantastic work has been done on Climate and its Cycles. Much of what I have read is empirical research done long before the giga computers now available to meteorologists who analyze trends way out into the future, based on historical data.

One of the works I have read, and reread, was based on the research of Prof. Raymond H Wheeler and on the cycles research of Edward R Dewey - long regarded as the father of Cycles Research.

The clear implications of the Wheeler papers were that climate was the key to understanding human behaviour and the relationship to Business Cycles.**

The brief outline of this research was

• The existence of three long-term climatic cycles each a multiple of 100 years.
• Important turning points in history, whether, cultural, political, military or
demographic can be timed by these climate cycles and vice versa.
• Periods of economic prosperity have regularly alternated with period of
depression since recorded history began.
• Measured by decades, climate and business conditions correlate closely.

Source

Consequences
– Might it be that the extreme climate changes forecast will in fact not
come to pass but are just reflections of the cycles of the past, albeit with stronger short term impact?
- Is the world literally “getting its knickers in a twist” just like the fears of the
Millennium Bug?
- What are the investment consequences if that particular experience is repeated?
- Can the world afford the cost of the programmes outlined to save the planet or will the cost bring about just as certain a destructive outcome?

* The Coming Oil Crisis – C J Campbell 1997
** Climate: The Key to Understanding Business Cycles (With a Forecast of Trends Into the Twenty-First Century) – Michael Zahorchak

Other reading:
Cycles: The Science Of Prediction
Climate, the key to understanding business cycles: With a forecast of trends into the 21st century (The Raymond H. Wheeler papers)

Robert Mooney, contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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Future History - an oxymoron? Cheap Money

Two headlines* caught my attention

“US rogue trader jailed for 10 years”

“Mexico issues shark warning – for swimmers”

Following on my “ideas” concept this started me thinking on how far up the line in companies and institutions the idea of jailing the Chairmen and COEs goes.

My conclusion – not very far. Normally they leave with fat lump sums and inflated pensions.

Scams and incompetence – or downright fraud - have been around since fiat money was invested but the last 100 years, should cause us to stop and think.

So is there any way the individual investor can spot the dangers?

I remember a London Stockbroker friend telling me many years ago that when a company paid consistently high dividends and came to shareholders frequently for funds – watch out!

His recommendation was to sell Rolls Royce which, in less than a year, went bust!

Has this lesson been learned by Banks around the world? – look at the billions of rights issues by British, European and American banks.

Will Government always bail out offending funds and financial institutions? Think of a list - Northern Rock (UK), ICI (Ireland), Bear Sterns and LTCM in the US and many others.

But the opposite also applied when the thousands of banks failed in the US (in the early thirties) and in the UK in the ‘70s and ‘80s. The US and UK governments were then in no position to help or perhaps, in the UK, a conscious decision was made not to intervene.

Much has been learned by Governments since the Depression but for all the studies of the period by “Helicopter Ben” the current situation in the financial world is bad and most likely will get considerably worse As we know the current solution is to paint the world with US$, £stg or Euros (which provides cheap unending money to the banks) but this will either work or lead to ever increasing inflation.

Investors should opt for safety over return for the bulk of their monies. As suggested in my latest blog the way to leaven this caution is to put a portion in precious metals, commodities, and food and certain energy related investments.

Robert Mooney, contributor to Zignals.com the free stock alerts, market alerts, and stock charts website

* Sunday Tribune 1/6/08
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Future History - an Oxymoron V

Finalising a Theme

A song called “Day got t’a come” from the Sinner Man album by Brendan Quinn has a certain resonance for investors at this time. The song, as you can imagine from the title, is to do with the future and the Lord’s judgement. In this and other songs while we suspect that we will all be judged on our last day we don’t have a clue what might hit us in the intervening period.

So it is with markets and as investors we should be really clued in to understand where the real markets are right now.

Volatility is the current trend.

• The Irish market fell by 40% in 2007,
• The FTSE fell by 20% between July 07 and March 08. From its low point it subsequently recovered by 13% to time of writing.
• The S&P 500 moved from a low of 1273 on 10th March 2008 to a high of 1426 on May 19th - a movement of 12% in just over two months.
• Shanghai fell by 36% in the last five months.
• Conversely the Brazilian index was up 40% in the last year.



If that’s not volatility - then I don’t know what is!

In my previous post I said I would talk about specific ETFs – so here goes.

---------------------------

While many stockbrokers have information on their sites one of the most informative I have found is on Wikipedia. Specialist blogs like the ETF Expert, Trade Radar, and ETF Trends are also an excellent resource.

The advantage of ETFs as a market tool is that you can be a Bull or a Bear; you can track markets, sectors, countries, currencies, commodities and precious metals. New EFTs come to the market frequently and you can add leverage if you are really a risk taker. But beware, like any market tool, these have their small print so read before you dive.

Two institutions that provide ETFs covering a wide spread of sectors and indices are

• iShares See ishares.com
• Powershares See powershares.com

Others such as Streettracks and Vanguard are sources for specific products.

Zignals do not provide investment advice so I can only express my personal preferences when contemplating investment in the current climate. I would preface this by saying that, as a contrarian the credit crunch, and its fall out, is far from over while the continual debasement of currencies is likely to continue way into the future.

On this basis my preference is for investment in

• Precious metals (Gold and silver) – Physical and shares
• Energy – in general, with a bias towards gas and uranium producers while not ignoring the Solar and Geothermal sectors.
• Food producers and food producing economies

That should provide some choice for you.

Robert Mooney, contributor to Zignals.com the free stock alerts, market alerts, and stock charts website
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Future History – an oxymoron? Part IV

Men haven’t changed much in the last 2000 years and, in consequence, we must still learn from history

Kenneth Clarke

Our starting premise is “Future History” and the “Power of Ideas”

Earlier blogs were, by definition, general in nature so to extend this theme – for the moment – can we turn ideas into something more practical?

Precious metals:
You can invest in these in three principal ways

 Physical
 Stocks and shares in producers and related companies
 ETFs (Exchange Traded Funds)

The market place has changed radically in recent months as ETFs have become the handiest ways of investing. This has lead to increased volatility and underperformance in the shares of mining related companies – particularly the mid-tier and juniors.

Each of the three options has their merits, for general investors, traders and specialists.

Food and Commodities:
Again a few different ways to invest

 Futures – a specialist method - not for the general public
 Stocks and shares in producers and related companies e.g.
fertilizers, refiners etc
 ETFs

The rise in the price of this group has been multi-faceted: - Lower production in main producing countries due to lower yields, shortages, internal pressures and of course growing world population and wealth. On this latter point, as the poorest part of society spend proportionately more of their income on food, any rise in such income – at least in the early stages – goes on more and better food.


Another factor is of course inflation and so we have the circle of - shortage - leading to price inflation - to a fight for available resources. (Some may argue that these three are in the wrong order if so, let the argument commence!)

A word on ETFs
These instruments have been created to cover sectors, individual resources, countries, indices etc etc. while some are leveraged and also inverse.
They provide a neat way of playing your Bull or Bear tendencies in an increasingly wide spread of investment options - or even as an each-way bet if you are so inclined!

Next - specific recommendations

Resources:
Latin America: Food expenditures and Consumption
Prospects for the Future: Nutritional, Environmental and Sustainable Food Production Considerations - Changes in Cultural and Consumer Habits
Farmers guarding their crops
Africa Health

Robert Mooney discusses topics around investment strategies, ETF investing and Market Sentiment for Zignals
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Positive Thinking - Euro style

The US Market is one market subdivided into Bull and Bears, Shorts and longs, optimists and pessimists not to mention 1000+ companies - and nearly as many sectors. BUT one currency.

Europe has most of these characteristics but many markets.
So with 20 +/- markets, all the aspects covered by Jack McHugh as quoted by Barry Ritholtz, "Postive Thinking vs Skepticism in the Markets", are amplified many times over.

Instead of one economy as in US, Europe has many conflicting and divergent economies and (a limited) number of currencies

Cycles occur always and everywhere and do not necessarily converge across economies. I suggest Jack's comment probably has little relevance to the current state of Europe and its markets.

Remember the definitions of Company Reports we saw after Arthur Anderson.

EBIAT - earnings before irregularities and tampering
CEO - Chief Embezzlement Officer
CFO - Corporate Fraud Officer
EPS - Eventual Prison Sentence
NAV - Normal Anderson valuation

On other news:
The latest Strategy Lab article was hosted by StockPursuit.com over the weekend.

Robert Mooney discusses topics around investment strategies, ETF investing and market sentiment for Zignals
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Future History – an oxymoron III

Last I talked briefly about Food.

In plotting investment strategy we need to look ahead to what might be: -

• The next big trend
• The fashion in investment circles and how this is going to be sold to the
punters.
• If broadly similar circumstances arose before how they can be,
or should they be, applied to the future
• Is there a cycle that has sufficient regularity to be of use?
So back to food

The world needs more now and will require even more out into the future.

• Why – the world population will grow ( barring a catastrophe or
Wide spread disease or war)
• Asia, Latin America and later Africa, in moving from an income of
X per day to 2 X, will eat more and want a more varied diet


• Climate change will, most likely, periodically impact negatively on food
production from some traditional food suppliers.


• Politics and World Trade Agreements will inevitably distort the
production of food in the developing countries.

As we said last time – Follow the Food Trail.

Has the time of GM food finally come?

Resources:
GNI
Health Impacts caused by Climate Change
Climate Vulnerability; Oxford University
Guardian newspaper: Food crisis more pressing than climate change
Telegraph newspaper: Embracing GM foods
The case against GM foods for solving Food Poverty

Robert Mooney discusses topics around investment strategies, ETF investing and market sentiment for Zignals
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Future History - an oxymoron II

Ideas can be big or small but the impact of either can be world influencing.
How about the Paper Clip or the Theory of Relativity?

In dealing with fundamental ideas, commodities and precious metals typically grab the headlines, but of considerable (and often neglected) importance is food and water.

Food and water – something we take for granted - especially if you live, as I do, in Ireland, that tiny island off Europe.

The world has over 9 billion - 9,000,000,000 - people with one quarter living in India and China.

To feed and water so many requires great effort – so where can such effort come from?

Many countries are self sufficient or could be with proper organization. The big breadbasket countries will need to increase production to keep pace BUT the bugbear here, in recent times, has been the weather.

The investment implications are many – follow the food trail to South America, Australia, Vietnam, Thailand and of course the US and Canada.


Where will Europe figure in all of this? Producing surpluses of wine and olive oil (and perhaps politics) won’t help, so has the time come for a fundamental change in agricultural policy?

It would appear to be an issue of great urgency

Resources:
http://www.ifpri.org/2020/visuals/VISUALS.HTM
http://findarticles.com/p/articles/mi_m0EUY/is_8_12?pnum=2&opg=n16086406

Robert Mooney discusses topics around investment strategies, ETF investing and market sentiment for Zignals
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Future History – an oxymoron?

Nailing something to the mast is a common expression – so let me do the same

[1] I am a contrarian
[2] I believe history can help forecast the future
[3] Individual ideas – not/or ideologies – drive the world, and we need these ideas to progress, not government dictat

Have I alienated half the world? If so at least I have a potential audience of the other half!

History is in the past; one day, one year, one millennium.

Today is tomorrow's history, so it is with markets, humans and ideas.

But which of these three influence the future?

Humans do so by their actions and their ideas. Actions stem from ideas - perceived or submerged - and so ideas are the influencing factor into the future.

In 1999 it was my belief sectors of the market were dangerously overvalued – companies selling for 100,000 their forward revenue. So I trawled for markets which were not overvalued and were ignored by the general punter.

I found it – with a very few others - in commodities and precious metals. I expect this same sector to produce an even better performance over the next 10 years


That’s how an idea turns into action.

Robert Mooney discusses topics around investment strategies, ETF investing and market sentiment for Zignals
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