Adam Lass - Angel Publishing

The One Answer Smith Really Wanted

There's the talk...

And then there's reality.

That's kind of what this column is all about: big lies — and the dark secrets they hide.

The truth is always out there somewhere, buried on page six of a government report or in the tiny print at the end of a corporate press release.

But sometimes, the truth is a lot closer than you might think...

Too Damned Busy

My wife complains that I am far too solitary, spending my days either gazing at computer screens, or hiking alone in the Appalachian backwoods.

So when she feels that I have become too much of an anti-social misanthrope, she arranges social events for me, in much the same fashion as she used to set up playdates for the kids.

I always grouse and whine beforehand: "I'm too busy... I don't want to dress up... I hate the Smiths*, he's such a fatuous ass... yadda, yadda, yadda.

*Names have been changed, mostly so that my wife's friends will still talk to her.

My wife makes modest attempts to mollify me: "You'll have fun. John Smith is in business (he owns a local car dealership) and loves to talk about that sort of 'stuff.'"

In the end, she just grabs me by the ear and drags out of the house. And thank goodness she does, because this last weekend, I actually gleaned one of those hidden truths I spoke of earlier — and from that ass Smith, no less!

~~SIGNUP_WD~~
Small Talk

After working our way through the usual filler — "Yes, we won't go far in the playoffs with our quarterback running hot and cold... yes, the local politicians are all either incompetent or on the take... yes, I would gladly take a third scotch, a little ice, no water" — I figured we get down to the inevitable question...

"Did I have any hot tips I might part with?"

But this year, things seemed different.

Smith wasn't full of his usual braggadocio re: his newest car, his weekend house, the coolest smart phone, et al. Heck, he didn't even try to pump me for a stock tip this year.

"I gotta tell you, Lass. I'm worried. Oh, I'm moving truckloads of cars again. Honestly, I thank God for all those dealerships that got closed down. My lots are pretty much the only ones left on this side of town now, but it's all just churn these days...

What, with folks price swapping used cars on the Internet, my guys are getting maybe $100 bucks a car if I'm lucky. I used to make it up on the loan, but now that's a wreck, because everyone is upside down on their trade-ins, and the banks won't give us squat.

I just want to know one thing: Is it gonna get better next year?"

The Clue

I figured I owed Smith some kind of a decent answer, since he had just given me a great tip for a change.

Turns out that same churn we've been seeing in the markets — up three hundred points one week, down three hundred the next, crossing back and forth over the year's open ten, twenty even thirty times, but no real progress for all the effort? — it's a top-to-bottom thing.

Just about everyone out there has been spinning their wheels this year. All the action in the world, but a hellish time pocketing gains in the end.

Will It Get Better in 2012?

No and yes!

"Frankly, Smith, the financial side of things is even more of a train wreck than you realize..."

The guys at the top have been lying through their teeth for years now. Forget 2007; these guys have been working over the system — rigging the numbers, bribing the politicians, and raking off the cream — for decades.

And now we are all paying the price.

The dollar's pure crap, and getting worse by the minute. Far more folks are out of work than the Fed will ever admit, and real inflation (you know, stuff like food, heat, light, and gas) is through the roof.

To be honest, I wouldn't throw water on a Wall Street banker if his shoes were on fire — and a lot of them used to be my friends!

But here's the cool part: in the end, none of that matters. Because in the end, we are an enormous country with an enormous desire to do business!

The Best EVER at One Thing

Europe? A bunch of socialist wankers who can't resist a chance to split hairs.

Putin is about to go down Stalin's path of thuggery...

China and India are ginning up a foul brew of the worst of Eastern centralism and Western corruption.

Brazil? One good president, really: "Lula" da Silva. After him? I'm thinking Argentina redux here.

But the United States of America was founded on hardcore biz. Folks came here in the first place looking to escape European classist stagnation.

Screw the banks! Forget about the dollar! Blow them all up, and we will happily trade eggs for wheat and wheat for someone who can spin a wrench and fix the mill.

The Sleeping Giant

A German invented the internal combustion automobile. But Americans created Buicks big enough to lose your virginity in the back seat. Also interstate highways, gas stations, and buxom young girls in short skirts and skates bringing burgers and milk shakes to your car door.

Back during the last Depression, some hot heads in Europe and Asia figured to put a fork in us, as we were done. Took us maaaybe a year to churn out enough tanks and aircraft carriers to bury the rest of the planet.

And then we dotted the eye with rock and roll — and the friggin A-bomb!

Go to our worst slum, and you'll find guys on every corner killing each other for the right to do biz. Yeah, it's crack and whores, but man do these kids pride themselves on their hustle! Our version of "uneducated life-long loser" knows more about profit and loss than most of rest of the planet.

The Next Big Thing

Right now, somewhere in New York City — or maybe Fargo, North Dakota — a young man is working on the next big thing...

I don't know what it is, but I have utter faith that someone will slip him a few bucks to bring it to market, in exchange for a piece of the action.

If the folks on Wall Street get their heads out of their rears, they can join the next party. If not, well then let 'em rot.

Because the rest of the country will still be getting stuff done when they are dead and gone.

That's what I told Smith, and that's what I'm telling you.

Good luck and good hunting,

Adam Lass
Wealth Daily

Will Euro Slosh Drown Gold

I am nominating Slosh for "Economic Input of the Year."

I'm talking about the huge tides of wealth that have flowed back and forth between the U.S. dollar and euro over the past few months.

Here's how I put it in a recent issue of Blue Chip Trader:

Picture your kid in the bath. What happens when they scoot wildly from one end to the other looking to escape the dreaded soapy washcloth? The restricted space creates a miniature tidal wave that ends up sending water up their nose and soaking your shirt.

One moment, it looks like the Euro is going to vanish right here and now, forcing anyone doing biz on the continent desperately seeking dollars. It's not that they love the dollar. They just need practical liquidity.

The next day, the sun rises on Paris and Berlin, and lo and behold: the Eurozone is still in business, the Euro is still coin of the realm, and traders and business men of all stripes have to go out and get some if they want to biz that day.

Nailing the Lid on the Coffin

It kinda sucks to be a generic "European" right now.

Over the past few days, we have seen reports of:

The European Central Bank has cut its 2012 euro-area growth forecast this month to 0.3%.
European industrial production declined 0.1% in October.
British unemployment is hitting a 17-year high.
The next EC Composite PMI Output index of euro-area manufacturing and services activity is slated to fall to from November's 47 to 46.5 in December.
The Kiel-based IfW institute forecast growth will slow from 2011's 2.9% to 0.5% in 2012.
Essen's RWI predicts that European expansion will decelerate from 3% to 0.6%.
And Sweden’s central bank has cut its main interest rate for the first time since 2009, signaling it may keep the benchmark unchanged over the next year.

I could go on ad nauseam, but I think you get the picture.

Strangely enough, German confidence is actually up.

Or Just Maybe, Steps on a Ladder?

The Ifo institute’s business climate index survey of 7,000 German executives beat guesstimates of a drop to 106, climbing instead from 106.6 in November to a current reading of 107.2.

And market researcher GfK SE claims consumer confidence will hold its gains in January as German unemployment hits a two-decade low.

The gestalt here?

I guess it's that old Nietzschean "What doesn't kill us makes us stronger" ethic.

German players are talking about “weathering the storm” with industry-friendly wage agreements and full order books.

~~wd_china~~

Feeding the Short-term Need

If there is to be biz come the morning, the Germans will need an ample supply of currency to feed the need.

And since there is still no Neu-Mark yet, that means that we are sloshing once again from dollars to euros.

As I sit to write to you, the dollar is plummeting compared to the usual basket of global currencies.

Now, let's be honest with ourselves...

So far, this is just a cyclic downturn within the context of a rising trend — in other words, slosh — rather than a genuine dollar downturn.

Eventually, we will have to see if this thing has real legs or not.

But for now, this is a broad rising trend — and this particular cyclic downturn could very well see the dollar lose some 5%, much as it did back in October.

Following the Golden Thread

Now let's take things another step: quite a few assets are doled out in dollars (stuff like oil and gold in particular).

When we look to the charts for the Gold Trust SPDR (NYSE: GLD), the ETF that follows gold, we see the same slosh — with the GLD rising and falling contrapuntally to the dollar's stumbles and spikes.

This not the value argument you might think...

Simply put, gold and the GLD are measured in dollars.

So when the dollar sinks, it requires more dollars to buy the same gold.

Okay, maybe there IS a value argument in here somewhere. I could easily claim gold is rising long term.

If this is indeed a true reversal in gold's resent slide, you would see GLD return to its September high of $185, which would make for gains of 17% just for the STOCK.

280% Bucket of Slosh

But I don't care about value philosophy right now.

I'm making a chart argument today, and the chart for GLD is showing matching short-term cyclic buy signals to the dollar's sell signals.

Right now, I think I can promise you a rise in GLD anywhere from 5% to 12%.

That first target ought to push mid-dated at-the-money GLD calls up some 78%.

Considering the ever-changing state of "slosh" these days, you probably ought to settle for that...

But for those of you who like play in rough seas for fun and sport, a 12% rise in GLD would push that gain to 180%.

And that genuine breakout I mentioned? It would push call gains to 280%.

~~adams_signoff~~

Farmland Blows Up in 2011

"What a God-awful year! The economy's flat, my house is down, and now the damn Brits are threatening to blow a hole in the side of my portfolio."

I hear a lot of whining about the market, but the truth is it hasn't been that bad...

In fact, we remain in a rising market.

Not Half as Bad as It Should Be

Yes, the Dow is still off last summer's highs.

But even autumn's substantial slippage has left us up some 87% over 2009's lows.

Heck, last I checked, the Dow was even still in positive territory for 2011 — not by a lot, mind you, and probably for all the wrong reasons...

But still pretty damn good, considering many of us are arguing about whether or not we are in the next depression.

Historians morbidly joke that in the end, "everyone dies." Even entire civilizations kick the bucket eventually.

But while these are indeed hard times, they are most probably not the "End of Times."

Folks Gotta Eat

Next week, I will resume looking for flies in the ointment and thumbs on the scale. (After all, saying "no" to Washington propagandists and Wall Street con men is my main job here, and I do it with relish.)

But let's take a break for just a moment and assume that the world — and most of its economy — will still be intact come January 1, 2012.

I can tell you one thing's for sure: After a bicarbonate and a couple aspirin, and perhaps a little hair of the dog, 7 billion folks are gonna want a little something to eat...

And that's an awful lot of eggs, bacon, and bagels.

Best Year EVER!

While we were all busy fretting about depressions, Chinese hard landings, and euro crashes, American farmers had the best year in decades.

The U.S. Department of Agriculture says crop sales are expected to pass the $200 billion mark...

2011 farm profits are expected to spike some 28% to $100.9 billion. This is an all-time record.

Remember Steinbeck's Dust Bowl tales of cash-poor farmers losing the family spread to evil foreclosing bankers?

In 2011, bankers may still be evil SOB's.

But American farms' cash on hand is slated to top $100 billion, also for the first time ever.

~~silver_signup~~

Truckin'

There's a wild historical inversion for you: Privileged white kids are protesting in the streets that investment banks ain't hiring and college loans are breaking them.

But the "redneck dirt farmers" back in the home county are paying off old combine loans — and buying new ones with cash at $200k a pop.

Care to guess what the best-selling "car" in America is right now?

Ford's F-Series pickup trucks. Sitting at number two is the Chevy Silverado.

Oil in the Corn Fields

And it's not just a "food thing," either...

Yes, "feeding the need" of growing billions in China, India, and other developing countries is jacking global commodity prices. But skyrocketing crude is driving up ethanol prices, too, turning precious Rockwellian family farms into virtual oil wells worth millions.

Again, we reach into the Department of Agriculture's deep boodle of stats and figures:

• The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $2,350 per acre for 2011 — up 6.8% from 2010.

• Cropland value increased by $260 per acre (9.4%) to $3,030 per acre.

• In the American Corn Belt region, the average value of farm real estate increased 15.9% year over year to $4590/acre.

Stuck in the Mud

So farming is a pretty good deal right now. But farm stocks are still stuck in the mud.

Remember last week when I mentioned uber-trader Jim Rogers was long commodities right now?

Take a gander at the chart for the Ag ETF he founded, Market Vectors Agribusiness (NYSEArca: MOO).

This ETF gangs together major farm-belt players like Monsanto (NYSE: MON), Deere (NYSE: DE), and Potash Corp (POT:TO).

Much like the rest of the hapless Dow Industrials, Moo is off its 2011 highs by some 20%.

But while the outlook for many of these industrial outfits is in some serious doubt, the folks working the farm belt stand a decent chance at record-breaking profits.

Now, I usually feed you option plays in this space. But then again, I am usually a real sourpuss. And you could certainly speculate with a couple of long-dated MOO leaps, looking to make anywhere from 134% to 295%, depending on just how explosive a MOO turnaround might be.

But frankly, this time around, I suggest most of you simply ought to grab some MOO shares and stick 'em in your back pocket for awhile.

Heck, a move back to MOO's 2011 high would still give you better than 20% gains...

And that oughta pay for a lot of Alka-Seltzer.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Jim Rogers Vaporizes Fed

Sometimes I wonder if I am crazy, stupid, or what...

Surely I can't be the only guy who sees what's going down.

The Fed is burying us under a mountain of newly invented dollars.

I trot out chart after chart clearly demonstrating the inflation that inevitably follows...

I warn that the Wall Street wise guys are as crooked as a three dollar bill, parasites who create nothing of value and live only to suck up all this free currency like some kind of demented Dyson...

A Pox On All

And just when I'm about to throw up my hands and damn the world to its well-deserved fate, I read something from one of the heavy hitters out there that confirms every little paranoid suspicion — and then some!

That old loudmouthed stalwart, Jim Rogers (you know, the guy who cofounded the Quantum Fund with George Soros), weighs in on the value of Fed denials: "No matter what you've heard to the contrary, there is QE3, the Fed is pumping money into the system."

Rogers completely disregards the last six months' Fed statements: "They're lying to us. One reason the markets are holding up so well is that they are printing money as fast as they can."

Hold Your Nose

I have received more than a few letters asking why I fight so hard on this.

Why don't I just lay down and accept — and indeed profit from — the fact that the market is being grossly manipulated?

I have one simple answer, and it ain't just about morals and scruples.

Quite frankly, I am not so high and mighty that I'll turn my nose up at an occasional triple-digit gain on someone else's pain and foolishness. But I wouldn't make it my life plan or such.

My problem with Wall Street and Washington's rampant fraud goes straight to the profit motive.

But I'll let Jim take the podium on this one:

"What the Federal Reserve is doing now is ruining an entire class of investors. By forcing rates down and keeping the economy on a flat line, the Fed could cause another lost generation of investments. Suffice it to say, vaporizing those who faithfully accumulated savings over the years is no way to restore confidence in our financial markets."

~~vix-box~~

Short-Term Coin

Short term, there is all sorts of coin to be had off these grand frauds.

For example, right now the markets are riding high on the American central bank's offer to fund Europe's banks for a few more days while Merkel and Sarkozy put in another week of nonstop meetings.

But let's stop for a moment and look at what must come out of all this: Germany is asking the nations of Europe to hand over the reins to sovereign policy. There's a very good chance that a few of those countries will balk and the deal won't go down as promised.

This might just spell the end of the euro.

But more likely, we see another round of cyclic "slosh," as businessmen and speculators rush from euros to dollars and back.

You could bet on a long dollar fund like the PowerShares DB 3x Long U.S. Dollar Index Futures ETN (NYSEArca: UUPT). UUPT picked up some 35% and 24% over during the last two rounds of euro-death panic.

The Catch

Of course, you had damn well better be quick and get the details right. A little luck doesn't hurt, either...

(Even Jim Rogers claims to be lousy at timing these things.)

Because another round of lies and manipulation pushes all the lemmings even deeper into the euro. And it can hurt like the dickens when you get caught on the wrong side of one of these short-term bubbles. (I'm thinking John Corzine-MF Global type pain here.)

At last check, they are still looking for a missing $1.2 billion. And rumor has it former Goldman CEO/NJ Governor/U.S. Senator/and perhaps future penitentiary resident Corzine will plead the Fifth Amendment to any questions that don't come with an offer of complete immunity.

Long Term

Which brings us back to the long term.

Right now, these bandits are flying high on record profits extracted from a moribund economy.

The economy may be dead-flat, but Washington's flood of free money will in all probability allow Wall Street to scarf up its biggest holiday bonuses ever. And quite frankly, they don't give a rat's behind that no one else is sharing in this booty.

However, grand larceny is simply not a scalable business plan. Already, we are seeing both the Tea Party on the right and OWS types on the left glare angrily as their future disappears into Cayman Island-numbered accounts.

JR's Portfolio

Jim Rogers claims things will eventually get so bad that Americans will finally vote for real change and economic progress.

In the meantime, he is long commodities and currencies and short emerging market stocks, U.S. technology stocks, and European stocks.

His logic? He wins if the economy turns up due to commodity scarcity...

And if the economy remains weak, Rogers' short positions will more than offset his long positions.

Pretty damn close to how we are handling things in my Blue Chip Trader portfolio: long-term short overall with short-term hedging calls to keep us in the game while the fraudsters slip and slide about.

So maybe I'm not so crazy after all.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Secret Bomb Under White House

Washington lies: Talk about the gift that just keeps on giving!

Over the course of the past few weeks, we have seen market spikes driven by "early reports of solid 3% GDP growth." Except that much of that growth wasn't real — and was quietly revised downward after the fact.

We have seen market spikes driven by "record-breaking retail sales growth" that was pretty much all inflation: rising prices, rather than rising unit sales.

We got a good little rally cooking by touting foreclosures as fresh home sales.

And Friday, for a brief moment, we saw the market spike on a "surprisingly robust drop in unemployment."

Profit from Middle East Insanity

Right now, we're on the brink of a record run in energy prices. And it's all thanks to a group of guys in the Middle East who, quite honestly, never liked us in the first place.

Fortunately, our resident oil and gas expert Keith Kohl has found a unique way for investors like you to take this terrifying situation and turn it into the biggest profit opportunity of the decade...

Every detail is spelled out for you in this free report.

Washington's Biggest Worry

This last figure represents perhaps the single greatest worry in Washington right now, as it is one of the most powerful predictors of modern presidential elections.

If unemployment is below 4% or above 7%, the party in power loses the White House. Period.

Why such a narrow window of tolerance? Let's start with the bottom because it is not quite as intuitive as our current situation.

Below 4%, and the shortage of available labor allows folks to pretty much write their own meal tickets. After all, if you can't get along with your current boss, you can always just take your talents elsewhere.

This inevitably exacerbates inflation, which is already getting up a good head of steam at this point in the cycle.

Next thing you know, folks are blaming the White House for $5 gasoline, and come election day, the rest is history...

Cash in the Caymans

Now let's look at the top of the window.

High unemployment is, of course, a far more obvious reason to fire the White House's incumbent party. After all, there are entire cadres of folks with a boatload of spare time ready, willing, and able to mobilize against the president and his policies.

But it's not like the 1% is but so happy during downturns like this. Grindingly slow economies usually mean low profits* and crappy bonuses all around.

And so we always see the incumbent party kicked to the curb when unemployment is above 7%.

*That part about profits and bonuses is based on historical norms. Somehow, the guys at the top have managed to bend the rules this time around so that they make even more money when the economy is slumping than when it is succeeding.

They do this by having their Washington sock puppets simply invent trillions of new dollars, which is then pumped directly into numbered bank accounts in the Caymans. This is, however, a different day's rant.

Reality Gap

But now we have stumbled upon an interesting philosophical problem.

This study is based entirely on reported unemployment. But a few years back, some bright young operatives began to wonder if lying about how many folks were out of work might alter their fate.

Was it the facts on the ground, or the electorate's awareness of those facts, that drove these outcomes?

There was, of course only one easy way to find out...

Cooking the Books

So back in the 80s, they began to mess around with the unemployment number. While it's damn hard to monkey with the raw data coming in from the individual states, it was easy to play with the statistical ordering that was done in Washington.

The methodology was alarmingly simple. They started by asking: "Who deserves to have a job?"

Let's say you are a black high school dropout from the slums of Baltimore with a criminal record as long as your arm...

Is it Washington's fault if Legg Mason won't hire you as a stock broker? Heck, Northrop Grumman can't even let you in their lunch room without a clearance.

But that's no reason to kick your boss out of the Oval Office.

This CEO Accidentally Reveals a Big Secret

Experts say North Dakota's Bakken Oil Pool may hold 4-6 billion barrels of sweet, light crude.

But the CEO of the biggest Bakken oil company just let it slip that there's as much as 24 billion barrels.

The thing is, there's very little land left for drilling leases...

And that means Bakken oil companies may be worth 300%-400% more than most investors now believe.

You can watch this CEO's incredible video footage HERE.

Fraud Writ Large

Now it's time to scale up: During a period of prolonged downturn, Washington takes the cadre of job hunters that have been out of work the longest, and declares them to be hopeless deadbeats without a chance in hell of actually scoring meaningful work.

See, they never stood a chance of working, so they are not "un"employed, see...

Just hungry. And angry.

And the best part is, this trick works both ways! Over time, they found they could artificially stabilize inflationary unemployment dips as well by counting bottom tiers back into the officially unemployed during economic booms.

Critical Test

In some 11 months, we will see the ultimate test of this little bit of fraud.

If we arrive at November 5, 2012, with unemployment still in excess of 7%, history tells us the Republican party will retake the White House. But if the jobless rate is back down inside our little window, Barack Obama will keep his perch another four years.

Quite frankly, I don't see a chance in hell of this moribund economy actually creating that many jobs.

So Washington's bean counters are applying their alternative math solution.

Thus, we read this week that November's headline unemployment figure shocked most every analyst by coming at 8.6% — the lowest such readout since March of 2009!

Look Deeper!

When you delve deeper into the numbers, it's a tad more muddled. But when you tot it up, you find that while state and local governments shed some 20,000 jobs, private employers balanced that by netting out a gain of 140,000 jobs.

Now it is accepted that it takes 125,000 new jobs each month just to break even.

So how on earth do 120,000 jobs knock 0.4 percentage points off our massive and intransigent total rate?

Easy! Just go at it from both sides — by peeling 315,000 folks out of the total work force.

Just declare them all deadbeats and idiots who don't stand a chance in hell of any meaningful success.

And if you do this again each month from now to, say, next September, we will be well inside Obama's re-election window — on paper, anyway.

Betting on Inflation... and Gold

Will the scam work? Or will the incumbent get blown to hell in the polls?

(Metaphorically! This is a metaphor, all you Secret Service types out there! So don't even come knocking on my door again. I'm sick of the harassment, damn it.)

We'll see soon enough. What we'll see sooner, however, is the inflation they fight with the backside of this formula.

If they cannot possibly write in cadres, then wage demand will start to climb at the same time that we are already seeing alarming spikes in oil, gasoline, diesel, and kerosene.

And this, my friends, is once again that familiar formula for gold. More on this next week...

In the meantime, you can catch up on any stories you missed from the past week, below.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

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Fed Declares War on Dollar

Europe.

Sigh. It makes my head hurt to think about it.

But here we are, watching and waiting AGAIN as a few overdressed men and women attempt to parse out the fate of the Western world.

The Boiling Point

All this week, we've read headlines giving the euro currency some ten days to live.

One minute, Britain's Cameron, Germany's Merkle, and France's Sarkozy are browbeating one another while isolationists back home propose to dissolve the whole damn European Union...

The next minute, Standard and Poor's is downgrading just about every major financial institution they can find on their Rolodex.

DOA?

And just when you think the situation can't get any weirder, it does.

Here in the States, a pretty wild idea was flying about, started, I believe, by Jeffries' David Zervos: The American Fed should just bypass the ECB and Bundesbank and unilaterally buy up all those high-risk euro bonds.

And when the Europeans default? "Seize all the gold they are storing in Manhattan vaults."

And if they don't like it, they can sail here in ships and try to take it back.

Acts of War

What, you don't think folks would start a war over crap like this?

You know all those guys who preach about "inevitable returns to the norm"?

I've heard it said that war is pretty much the historical norm for Europe.

When you think of European history, the names that leap to mind are always warlords like Wellington and Napoleon, Churchill and De Gaulle, Stalin and Hitler...

Oh, and Archduke Ferdinand — you know, the Austrian royal whose assassination lit the fuse on World War I?

Uber Bankers Step In

Against this ominous backdrop, this morning we finally heard from the bankers. Make that "Bankers" with a capital B.

At 8 a.m. this morning, the Federal Reserve announced they and the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and even the Swiss National Bank were pledging coordinated actions to enhance their capacity to provide liquidity support to the global financial system.

The purpose of these actions: "to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."

Remember a week or two back when I promised you someone would start printing?

Have you looked at this morning's dollar chart? Do you know what this will do to costs here?

This is a war, all right... a war on your wallet!

~~vix-box~~

Swinging Like a Corpse on a Rope

It should come as no shock that the U.S. market hops and skips like a flea on a hot skillet every time these clowns break out of a meeting.

Still, it's worth taking a moment to trace out the connection between our stocks and those Euro-screwups. And it all goes right back to currencies.

Right now, most all biz in Europe goes down in euros. So what happens tomorrow morning if that currency goes up in smoke? Without a viable currency, trade within the eurozone would grind to a halt.

And I'm not just talking about high trade between, say, France and Germany...

Heck, even the knockwurst vendors in the Alexanderplatz biergartens would be shut down.

The Wienerschnitzel Market

Everyone in Europe, banker or street vendor, will immediately need SOMETHING to work with.

So each and every time it looks as if the euro is going down for the count, folks start to swap 'em out for the least-worst alternative: U.S. dollars.

This causes the dollar to spike up against rival currencies, and everything the world measures in dollars — like oil, gold, and American stocks — slides down 10%.

Least Bad

But it's not as if anyone actually loves the greenback.

Our habits here are only a tad less filthy than the Europeans'. Heck, the ratings agencies are simply lining up to downgrade the United States over our own legislature's inability to cope with excess spending and debt.

And so, every few days, folks wake up to discover Europe hasn't collapsed into bankruptcy and continental war just yet.

They all ditch their crappy U.S. dollars for a couple days' worth of euros... The dollar collapses 10% and everything measured in greenbacks shoots up 10%, and the next thing you know, Stateside wags are screaming, "Bull market!"

Slosh

It's not like anything actually changed in value, mind you.

It's all just slosh.

American companies aren't really selling any more stuff or such, as much as they'd like to convince of same. In fact, we've been hearing this exact myth all week: "Sales are up, the American consumer is back! We are saved!"

The whole idea is just a slick bookkeeping trick.

American Cover-Up

Here's how the trick works...

Just this week, the U.S. Census Bureau announced its advance estimates of U.S. retail and food services sales for October — adjusted for seasonal variation and holiday and trading-day differences, but not for price changes — came in at $397.7 billion, an increase of 0.5 percent from the previous month and 7.2 percent above October 2010.

But if you dig into the numbers, the lion's share of that increase came from gas, food, and clothes. And costs for all of those items are up 13%-20% on the year.

Do the math.

If sales in dollars are up 7%, but costs are up 14% of that... then unit sales actually went down 7%. Despite any press releases you read to the contrary, consumers are buying LESS stuff.

The Stony Path Back to Gold

Now, I know this is all getting a tad torturous and twisted, so let me cut away the underbrush and clear a path for you.

Europe is on the brink of a colossal breakdown. Its joint currency may cease to exist at any moment.

And war is the traditional solution for such troubles.

Here in the States, the dollar is oscillating like mad because no one knows how long the euro will last, but no one really wants dollars either;
This is jerking U.S. markets up and down.
And the usual Wall Street shills are spouting the usual lies to cover the lack of any real growth or inherent value.
This lack of growth is leaving us with entrenched production overcapacity...
War is, once again, the traditional solution for this problem.

Sounds like a recipe for chaos (and gold) to me...

And I don't mean options on GLD this time around. While that may be a rock-solid trade, I'm talking physical metals — gold or silver — here.

You simply must protect yourself against this war.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Leveraging the Worst Holiday Season in a Decade

The United States is invading Australia with 2,500 marines. And a couple of battleships. And B52 bombers.

Hard-earned experience garnered over the past 50 years tells us that the Australians will hate us now. Expect a statement of demands from the "Ned Kelly Brigade" shortly.

That's all I've got on Australia, and frankly, I stole that bit from Chris DeHaemer.

But I am desperate. I simply can't stand to start another column with news about blowhard bankers in Europe...

The Turkey in the Room
Oh we'll get back to Europe, Asia et al. eventually. These foreign economies are, after all, the elephant in the room.

But first, this word on the situation here at home — specifically, the inflation the U.S. Federal Reserve doesn't see right now.

The bean counters at Agriculture are looking for food costs to climb some 5% this year and maybe 3% next year.

The American Farm Bureau is less sanguine and has announced Thursday's holiday dinner will cost an American family 13% more this year.

Smoked Recovery for the Holidays?

Speaking of dinner, I know you're in all in a hurry today to get out the door for your annual peregrination to Grandma's place, or maybe you still need to clean up the guestroom before folks start to arrive...

So I'll walk you real quick through this snapshot of the "American Recovery."

The first chart shows the "big increase" in GDP Washington has been throwing at us for a week now.

Problem is it nets out about 20% lower than initially claimed. Oh, and that's not 2% growth in the last quarter, as claimed in most headlines.

These are, of course, annualized figures. Really, growth was a really thin +0.50%.

Next up, we have the 20.62% rise in crude oil futures over the past 12 months...

Two corollaries here:

1. This is a huge chunk of that GDP increase all by its lonesome.

2. This is America, where everything and everyone arrives to market on gasoline and diesel. This means that EVERYONE either has to raise prices accordingly, or lose margin. Period.

We are being told that new weekly unemployment claims are down or flat or something. Woo-hoo!

Here is the St. Louis Fed's latest info on just how it takes to get a new job these days.

This time last year, you could get back to work in some 34 weeks. Now it takes 39.5 weeks to land a paying gig.

That's a bump of 16%, which begs the question: "Why would any boss pay anyone a raise when there are 20 guys lined up outside with their noses against the glass looking for their first job in the past year?"

And the answer is: They aren't.

~~wd_dividend~~

Here is St. Louis's chart showing the past 12 months' 2.88% increase in wages paid:

And here we are at the end of this bumpy road, with a +0.24% annual increase in disposable income, i.e. the money folks have left to spend on the holidays this year.

Connect the Dots

Now let's connect the dots:

GDP is climbing by 2% a year.
Oil is rising 20% a year.
Food is up 13%.
It takes forever to get a job.
Wall Street recorded moderate profits last year, because no one outside the C-Suite got paid.
Now no one has any damn money.

Right about now, you just might be thinking about signing up with the Ned Kelly Brigade, maybe rob a bank or two so as to prep for the holidays...

But seriously, put down that gun for a moment and think like a trader.

Legally Robbery

Okay, here's one last chart for you.

It's the Consumer Discretionary SPDR (NYSE: XLY), the ETF that bundles up all the various retail outfits waiting desperately for the cash most Americans just don't have.

It is loaded to the gills with stacked sell signals:

The long-term rising trend broke back in August...
The short-term rising cycle rolled over in October...
Momentum has gone negative...
MACD fast average has crossed under the slow average...
Volume is well below average...

A 4% drop would be a dream come true for major retail. More likely, we are looking at -20%.

I could go on, but it would just bore/depress you, and I've certainly done enough of that for one holiday weekend...

So here's your handy trading tip: Buy mid-dated at-the-money XLY put options now.

With any luck, you should double your money by the time the holiday bills come due.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Pocket Full of Euro Gold

Someone's gonna print a boatload of money — and soon.

And when that happens, assets like gold and oil will rise in price.

This is not a guess. It is a fact.

We are already seeing the wise guys and speculators get their early bets in...

They will do it in Europe with some kind of ultra-massive TARP program.

The French and Germans have already knocked on every door, looking to borrow the specie they need to keep an entire continent solvent.

It just ain't happening. (Heck, the Chinese laughed in their face and told them to work harder.)

Unsustainable Yields

That's why European bond prices are spiking.

No one in their right mind wants to lend to these guys when a 50% haircut — at best! — is lurking right around the corner.

Seriously, entire governments are falling here, they're not just on the fringe anymore.

And the central bankers who are replacing various heads of states are left with only one last trick: printing trillions of new euros.

This will, of course, dramatically reduce the value of the euro. That's one of the points to the whole devilish exercise (the other being to print the very cash required to pay these bills.)

You borrow a euro that's worth X. You pay back a euro that's worth 3/4X. And your creditor puts up with it so as to avoid a complete default that would net him pennies on the euro.

We're Going to Do It, Too

Now don't go getting all chest-thumping proud and jingoistic about all this. Because we are going to do it here, too.

According to the San Francisco Federal Reserve Bank, the European fiasco now has better than even odds of tanking the U.S. economy in the first six months of 2012:

A European sovereign debt default may well sink the United States back into recession. However, if we navigate the storm through the second half of 2012, it appears that danger will recede rapidly in 2013.

And by "navigate," they only mean one thing: "invent enormous wads of new currency out of thin air."

Print or Die

Forget about terms like QE1 or 2 or 3. Dollar creation is now a permanent part of Washington policy.

The Fed has already declared that it would continue "lending" dollars to American banks at 0% and buying up every bond the Treasury sees fit to print for the foreseeable future.

And that was back when they were only fighting "slow growth."

Now they are "navigating an odds-on recession" slated to hit just as voters are deciding whether or not THIS government will fall.

What's more, when the Europeans start printing, it will force the euro down against the dollar — allowing them to export more easily into our markets and making it that much harder for us to sell goods into theirs.

It is an absolute lock that we will strike back with our own printing presses.

Once again, the politicians have no choice here: It's either print away the awesome burden of our debts (and each and every nickel you save or earn), or face political Armageddon.

The Wise Guys Are Already On Board

Here are charts for the SPDR Gold Trust (NYSEArca: GLD) and SPDR Select Sector Fund - Energy (NYSEArca: XLE).

The GLD is straightforward enough: The ETF owns some $64.14 billion dollars in gold. The XLE follows the stock prices for the major energy players like ExxonMobil (NYSE: XOM) and Schlumberger (NYSE: SLB), and moves in near lockstep with oil prices.

Today, we are not talking about supply or demand for either asset.

We are not arguing about genuine usefulness or lasting value.

Both ETFs are showing clearly defined Stacked Buy Signals because the aforementioned wise guys and speculators know one simple fact: When you push down the buying power of the currency on the side of the chart, you push up the selling price of the asset.

-$ = +Oil & Gold

Dollar down, gold and oil up. Period.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Investors: Quit Screwing Around and Buy Something

Last week, I put out a challenge to investors: "Quit screwing around! If you want me to believe it's a bull market, crank the major American blue chip indexes up and over the 200-day moving average. And not just for a few hours... I want to see them close up there for a couple of days."

Here's the chart for the Dow Jones Industrial Index's latest daily action.

And I must confess that it did hold on above the 200-day average... by a dollar or two... for a day or two... before turning tail like a scared rabbit.

Come on, guys! Are you just doing this to screw with me or what?

Not only was this rally anemic as all get-out, but the Dow is the ONLY blue chip index to make a serious pass at this critical threshold.

The S&P 100 (OEX) smacked that barrier and failed.

The Nasdaq poked its head up out of the hole and gapped down.

The S&P 500 never even came close.

And the Dow Transports — which was freakin' created in the first place simply to confirm or deny Dow Industrials' trends — never even came close. It took a brief look at the 200-day average last month and failed.

Tired of Doom and Gloom

Honestly, I am just as tired of the endless doom-and-gloom scenarios as you are.

As I have mentioned more than once, I do not want a recession, depression, stag-cession, or whatever we call it this time around.

I am really trying to wrap my mind around this supposed 2020 boom that folks are starting to talk about.

But I need some help here, people — a sense that the American economy has some internal strength, that the markets are going to do more than just ride up and down on the latest rumors out of Europe.

And right now, I am still not getting it... not from the charts, not from the news, and not from the report flow, either.

Digging for Clues

Just today, I went digging again for some kind of excuse to get on the boom.

I decided to ignore all the surface stuff, like Greece, Italy and the imploding Euro for a moment, and instead plowed into the "deep numbers": the facts and figures that don't often show up in Wall Street Journal headlines or trip off the lips of talking heads on cable TV.

I gotta tell you, it didn't work out so well...

~~vix-box~~
Shipping Declines for the First Time Since 2009

Instead of some cool clues to the next bull rally, I found a rather worrying report out of UBM Global Trade's PIERS unit, an outfit that tots up international cargo data for detail-obsessed econ and financial planners.

According to PIERS, the volume of shipping containers running the loop from the United States to Asia and back fell some 3.8% in Q3. And PIERS' early reports indicate this slump continued into October. This is the first time PIERS has seen this sort of freight traffic drop-off since the last quarter of 2009.

And it doesn't appear to be some kind of short-term fluke, either...

According to the world's biggest shipbroker, London's Clarkson Plc., the benchmark rate to and from U.S. West Coast ports is off 24% on the year.

This is one of those telling signs, because right about now is when all those Asian factories should be loading up American warehouses with shiny gewgaws for the critical holiday sales that account for 75% of most retailers' annual take.

Knocking Out the Retail Prop

Let's take a moment to parse this out.

One of the last props holding up the U.S. market in the face of all these headwinds out of Europe has been the recent round of positive retail stories.

We've been told repeatedly that moderate increases in Durable Goods sales was supposed to be a "sure indicator that we have turned the corner."

The fact that most every consumer mood and comfort index is at a record low doesn't seem to matter to the cheerleaders: "Folks are knuckling down and buying again!"

Well, I checked in with the bean counters at the Federal Reserve, and it turns out that most of the recent rise in sales was bought credit, which rose 5.8% overall.

But that increase was almost entirely long-overdue major purchases (we're talking cars here) and is unlikely to be repeated in following months. Credit card sales for smaller items — like the sort of stuff you find in a cross-Pacific shipping container — were actually off 1% in September.

Three Sides of the Triangle

So, on the economic side, we have failing shipping and declining credit card sales, indicating a weak holiday sales season...

On the market side, we have the great herd running for shelter every time some politician in Europe makes an ass out of himself...

And technically, we see the blue chips' 200-day average turning into some kind of new "Iron Curtain"...

I'm trying to see the bullish argument here. But it just ain't working out.

As things stand right now, I am inclined to call this a top — and deliver up another round of puts to my Viral Investing readers this evening, looking to turn a profit when the blue chips drop back down to the bottom of last summer's trading range.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

The One Buy Signal That Matters Most

I've just read the most amazing article. It was published on one of the more prominent biz-news sites, and it purports to explain why we have already begun the most fabulous recovery in the history of modern finance and economics.

And quite frankly, I can't decide if it is absolutely dead-on... or totally full of it.

The article quotes half a dozen or so reports out of the White House and the Congressional Budget office, which is reason enough to dismiss them out of hand.

But a lot of the same talking points came up at a recent brain-trust meeting here at Angel, and I actually respect the guys putting them out there.

Millennial Revolt

The arguments start with the presumption that government spending is going to get cut with a chainsaw over the next few years. They start by talking up massive cuts in Social Security, Medicaid, and Medicare.

Now, I happen to know that between 2012 and 2020, spending for same is slated to spike nearly 48% from $2.1 trillion to $3.1 trillion.

This does not bother the predictors in the least...

In fact, they stand this very figure on its head and state that we can't possibly afford to spend another trillion dollars on the poor, old, and sick.

Most polls find that everyone over fifty thinks these "entitlements" are insurance policies that have already been bought and paid for with a lifetime of weekly payroll deductions.

But our prognosticators have decided that the newest cadre in the work force — the so-called "Millennials," who would actually have to foot the bill in this Ponzi scheme — will refuse to cover the tab. This revolt will save us billions if not trillions of dollars.

"Done and done," as they say.

~~wd_dividend~~

Axe the Pentagon

This is supposedly a non-partisan vision of the future, so next up, they carve up the Pentagon.

(This is actually even simpler than telling every cranky old voter in Florida that their monthly checks have been cut for the betterment of the country.)

The Pentagon's budget will "decrease out of economic necessity and a less aggressive U.S. role in foreign conflicts."

Fewer "foreign conflicts" would certainly go a long way toward cutting the budget. At last check, the war in Iraq will hit the $800 billion by its official end come December 30. Afghanistan is over $450 billion, but then again, we haven't "won" there, so it's bound to go a good bit higher — especially now that we will have additional in-theater troops available for "surges."

Currently, the White House and the Senate are wrangling over $26 billion in "details." Depending on how this squabble turns out, the Pentagon will spend either $513 billion or $539 billion for the next fiscal year.*

*Those are "on book" expenses, mind you. If you knew what sort of "off-book" and "black budget" shenanigans go down on a regular basis, they'd have to kill you.

Drones and Droids

Last August's CBO Budget and Economic Outlook has defense spending rising from $708 billion in 2012 to $714 billion in 2014. Then it gets really crazy, with a projected rapid rise to $851 billion in 2020.

But Washington is looking to wipe trillions more off the board via a reduced "boots-on-the-ground" military and the elimination of expensive aircraft carriers, stealthy fighter planes, and mine-proof army vehicles.

Instead, all future combat missions will be fought by cheap robots and drones operated via satellite by pimple-faced 19-year-old Halo-geeks headquartered in a converted mall in Newark, New Jersey.

This will allow the Veterans Administration to focus solely on carpal tunnel injuries.

New Idea: "Mortgage Bonds"

Apparently, the massive savings achieved by the sacrifice of these sacred cows will enable Washington to "implement effective programs," which will rescue the dead housing market.

As things currently stand, prices are down 50% in most markets and 70% in those warm, sunny places where an awful lot of folks like to live: Florida, California, Las Vegas.

It's estimated that the whole freakin' mess has cost the country some $9 trillion. Again, the guesstimators see this not as a problem, but as a massive opportunity to create new wealth by cranking up home values.

The last pass at foreclosure prevention only crammed down rates on some 600,000 mortgages. Now the imagineers are talking about attacking the 11 million mortgages that are still under water with some kind of federal guarantee program.

Who knows, maybe we could divvy up and resell the mortgages as bonds or something?

(Now if THAT horrible old idea doesn't make you spit coffee out your nose...)

The New Bubble(s)

Reinflate the housing bubble, and suddenly you have a jump in employment and real wages go up. Even better, folks' money in pocket will be boosted by huge cuts in taxes harvested from all those spending cuts, so now everyone can start buying 75" flat-screen TVs and massive SUVs again, and retail shoots to the moon.

It goes on and on like this... Every Pollyanna-perfect-world storyline you could possibly imagine has been written into these scenarios — and then doubled, just for good measure.

I'm not saying that none of this COULD happen. Hell, stranger things have gone down in the past week, let alone the next ten years.

I'm just saying that I haven't seen any of them happening yet.

Tired of Talk

I need something solid — some behavior I can see — before I can sign on to this bull market.

I'm not just talking economics here. If the market goes totally bullish because a million people got up this morning and smoked crack, well, that's something I'll learn to live with. I'll grumble. I'll bitch. But I'll go with it. Because it's real.

But I do need (heck, we ALL need) a decent line in the sand, one indicator that it IS or IS NOT a bull market. So this is what I propose...

A Line in the Sand

Here's a simple daily chart of the Dow Jones Industrial Average (DJIA).

I've stripped away all the fancy analytics we technicians love so much: no retracement grids, no price channels, no momentum oscillator, no MACD. That's all great stuff that I use each and every day. But TODAY, I'm giving you one thin blue line in the sand: the 200-day moving average.

This particular aggregate figure factors out all the little daily twitches and spasms, showing instead the market's broad, sweeping moves.

When price goes up and over the 200-day average — and stays there — you are most likely looking at a bull market.

I don't have to like the whys and wherefores. By the simplest definition, that's a bull, and you should buy into it.

Not a Bull... Yet

But when American blue chip stocks can't cut that mustard... when they can't hold on more than a few hours above water without diving right back down again... it's not.

And you should short the market hard and fast.

Again, I don't care if it's because of a bad quarterly report here in the States, some whack job speaking out of turn in Europe, or if everyone just got up on the wrong side of bed this morning...

Economics are great stuff. And they really ought to matter more often than they do. But in the end, actions matter more than stats and statements.

You have to SHOW me before I'll sign on. Till then...

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Brewing a Chinese Banking Collapse

Everyone whines about the Chinese "doing unto us," what with the artificially depressed yuan and all that...

But these days, we are doing unto the Chinese — and right nicely.

Unfortunately, that pain may also flow both ways. And I'm not just talking about Washington's threats to slap on a billion or two in new tariffs.

Let's start our rundown in that grand old port city, Hong Kong.

We have all become quite accustomed to Chinese double-digit growth year in and year out. Indeed, the Chinese are so sanguine, they have structured their entire financial system around the care and feeding of such astonishing gains.

In a recent Bloomberg economists' survey, the median estimate for September was for 6.5% growth. And not a one of the bean counters would guestimate a decline.

Hong Kong Freak-Out

So one can understand why they are freaking out when September sales to the United States and Mainland China fell 8.9% and 7.3% respectively. Shipments of electronics are off 16%, while outflow of T-shirts, undies, and the like fell 8%.

The HK government has described the situation as "bleak."

Asian apparatchiks are not famed for their free use of hyperbole. They prefer vanilla words like "moderate" or "restrained." The last time I heard "bleak" was when the Korean Chaebol were collapsing back in 1997; it was usually followed up by an abject apology to coworkers and family and a quick dive out an upper-story window.

The folks at Morgan Stanley and Daiwa Capital Markets fret that Hong Kong has already tipped into recession in the third quarter, seeing as how it saw its GDP fall 0.5% in Q2.

~~options~~

China Runs Out of Gas

Let's follow this thread back across to the Chinese mainland...

As mentioned a moment ago, the Chinese are literally banking their financial lives on permanent growth.

According to the number crunchers at BlackRock Investment Institute, in 2002, a yuan of GDP growth required roughly 0.17 yuan in credit. A decade later, that figure has doubled.

It now takes 0.3 yuan in loans to generate the same amount of biz.

To give you a sense of these things, that's like discovering your daily commuter car's gas mileage has dropped from a fair 30 mpg highway to an awful 17 mpg. Certainly takes a chunk out of your bottom line, eh?

BlackRock's Neeraj Seth puts it succinctly: "China has become a less profitable place to invest" when "growth requires an ever-increasing quantity of inputs."

No wonder, then, that China's bottom line growth is shrinking...

Screaming Bloody Murder

This decrease in banking profits has all sorts of causes.

On the one side is the immense increase the Chinese are paying for goods.

The most recent reading for Chinese inflation is September's 6.1% per annum — down a whisker from August's 6.2%, but certainly terrifying nonetheless as, once again, we see Chinese industry getting less bang for buck (or rather, yuan).

Beijing did make a show at slowing cost growth. A recent report out of the People’s Bank of China has aggregate financing — including bank lending, off-balance sheet loans, and bond and stock sales — dropping 11.4% to 9.8 trillion yuan ($1.5 trillion) in the first three quarters of 2011.

Can you imagine how loud Wall Street would scream if it lost 12% of its borrowing power and 6% of its purchase power? Well, that's exactly what's happening in China...

In the end, Premier Wen Jiabao was forced to loosen lending curbs. And China's banking regulator announced this week it will allow a higher bad-loan ratio for small companies threatened by the lending slowdown.

Diseased Loans

Finally, let's take a closer look at those bad loans.

Fitch Ratings estimates as much as 30% of China’s banking system loans — some $2.46 trillion all told — could go all "nonperforming" on them.

This brewing collapse harkens us back to the breakdown of the Keiretsu and Chaebol back in the 1990s. While the West's attention was focused primarily on the well-established corrupt cronyism in Japan and South Korea, Beijing was quietly bailing out its four biggest banks to the tune of more than $650 billion.

I'm not the only analyst around who can smell the coffee. International investors have been quietly sliding out the back door on Chinese banks for over a year now.

As of early October, the MSCI China Financials Index had lost more than half of its value!

The New Asian Contagion

Why, when we have so many troubles here in the West, do we give a rat's behind about our chief competitor's banking breakdown?

Over the past four years, China has created 40% of the planet's GDP growth. Four of the world's biggest banks by market capitalization are Chinese, and the country holds 31% of all foreign reserves.

To paraphrase JFK from way back in the dawn of the global age, when Beijing eats that big bullet, we will be Beijingers.

The Play

It's not all doom and gloom, mind you...

While the investor in me is terrified that China's slo-mo banking crisis will plow directly into an already-weakened Wall Street, the option trading half of my brain sees this as an opportunity to rake in put contract gains.

The Asian collapse of 1998 cost the Dow some 21% of its value in a matter of months.

~~wd_options2~~

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

The Next Stock I Am Going to Buy

I may finally have found my one honest man. And because of his honesty, I do believe I will buy his company's shares.

First, I should tell you that his name is not Tim Solso...

After 11 years, Mr. Solso is about to step down as CEO of engine maker Cummins (NYSE: CMI).

Cummins is about as old-school industrial as it gets: The company was founded by Clessie Lyle Cummins in Columbus, Indiana back in 1919. Nowadays, they build everything from turbocharged truck engines to power generation equipment.

And while they still have plants across the United States, they also build in Canada, Brazil, England, Turkey, China, Russia, and Japan.

Brass tacks: Cummins is as good a global bellwether as you could hope to see. In 2010, they nailed down $1.04 billion profit off $13.23 billion in sales to some 190 countries.

The Usual Spin

In a valedictorian interview with Financial Times' Peter Marsh earlier this month, Solso bragged about his company's "tremendous opportunities."

Solso complains that “governments and the press have been too pessimistic about what’s happening in the economy," and claims "the concerns about excessive public debt in Europe and the US, we are probably experiencing greater opportunities for expansion than ever before.”

Then he leaned on an excuse that has been driving me nuts for months now every time any heavy equipment player is queried about slowdowns in the U.S. and in Europe: "About half of the next four years sales growth — slated by Solso to average 14% per annum — will come from India and China."

The End of the China Excuse

That line may have worked the last time the crap hit the fan back in 2008...

But now, China et al. are paying the heavy price for hauling our collective behinds out of the fire.

As I demonstrated clearly over the past few weeks (here and here), China has created banking and real estate bubbles of truly mind-boggling proportions. Growth is the least of Beijing's worries now. Heck, even a soft landing might be a dicey proposition, considering the breadth and depth of the rot.

Can you imagine the look on some poor Western exec's face when he's informed by a Chinese apparatchik that he will be paid pennies on the dollar for the equipment he has already recorded as a profit on his quarterly report? Ooh, Mama...

Sell Solso, Buy Linebarger!

But here's where it gets weird: The guy I DO like — the one U.S. exec who has laid the story out straight and clear — also works for Cummins.

His name is Tom Linebarger. He's currently Cummins' COO and will replace Solso as CEO come January.

And what he told the Financial Times just a few days ago paints a dramatically different scenario:

Europe could drive another global recession pretty easily. Some of the countries in Europe are already in a second recession, or will be shortly. That could get a lot worse.

The U.S. is in much the same spot. We'll find out in three or four months if we are already in recession, but it wouldn't surprise me to find out that the US is already in negative growth, once all the figures are adjusted, or we're very close to that. I'm very concerned about that.

We're seeing the effect of Europe on our business, though what worries me the most is the effect European problems will have on the rest of the world. The US is already weak. If Europe gets a bad cold, the US will get much sicker.

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The REAL China Story

How about that old "sales to China will save us all" storyline?

Mr. Linebarger was refreshingly honest about Cummins' prospects in the emerging world:

In China and India, their economies are doing well but inflation rates are high, so they're cutting back on demand and raising interest rates to get inflation under control, which is hurting our markets," he said. "All those things are near-term concerns of mine.

I don’t think the next six to nine months are going to be terrific, but if you look out over four or five years, I think it’s going to be good over that time. We’ll be in volatility in different markets at some point over the next four years, but over the period I see significant opportunities for Cummins to grow.

A Real Stand-up Guy

In a nutshell, Linebarger is telling us that the next couple of years are going to be really rough — with a lot challenges for CEOs and probably a good bit of stock market volatility.

But in the end, well-managed companies with decent product lines and strong sales forces will win out, and probably even score some decent growth.

WOW!

Now in all fairness, I have to tell you I just recommended short-term puts against CMI in Viral Investing.

I anticipate these contracts will do rather well over the next few weeks. I'm expecting gains anywhere between 30% and 70%.

But when it all really hits the fan — I'm thinking mid-2012 here — I plan to pick up more than a few shares of CMI on most any dip with the intention of holding them for at least the next five to ten years...

Heck, I might even pass them on to the grandkids!

So while you're mulling over picking up some of those short-term puts against CMI for yourself, you might consider browsing the best investment ideas from our editors here at Wealth Daily and our sister publication, Energy and Capital. You can find them below.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Secret Gold Loophole: Twice as Nice
Image a scenario in which you gain 50% every time gold gains 25%... Metals guru Greg McCoach has the details.

Rich Man's Secret: What the Top 1% Knows about Options
Today you have the opportunity to join the wealthiest traders in the world. Their success begins and ends with one options guru. He's been known to pull down 227.06% gains in just four months. Let him line your pockets as he continues to outperform the major market indexes — and even gold.

Energy Stocks at a Discount: Oil M&A, Utility Investment Both Rise
The logic here couldn't be any simpler or more straightforward. Many oil stocks are undervalued.

Magazine Covers, the Contrarian Indicator: The Most Anticipated Weekend for Stocks
Analyst Ian Cooper takes a look at the realities driving the markets higher and downside risks... and offers readers ways to trade the volatility.

Wall Street Protesters Embrace Capitalism: Is This the New Face of Capitalism?
Editor Jeff Siegel discusses opportunities in Slow Money.

The Peak Oil Squeeze: Big Oil's Last Resort
Major oil companies are being forced into unconventional oil and gas plays. Find out how their greed can become your profit.

Leverage China's Collapse: Europe Gets the Headlines, but China Will Hurt More...
You're watching the wrong damn crisis. Why you should pay attention to what's going on in the East — and how you can profit from the Chinese train wreck.

Staring Down the Pension Tsunami: The Next Shoe to Drop
Editor Steve Christ takes a look at the brewing pension fund crisis and the trillion-dollar hole that's going to be put on the backs of the taxpayers.

Mining Strikes in Peru Leave Copper Shortfall: Copper, Strikes, and Dead Euros
I'm not sure if it was Cannes or Marseille, but it was one of those French Mediterranean towns where the houses waltz down to the sea. We were drinking thick coffee and admiring the boats... The largest was the gilded white pleasure yacht of some third son of a Saudi.

Nuclear Opportunities in Japan: Japan's Secret Nuclear Comeback
Editor Jeff Siegel uncovers the latest on Japan's nuclear power industry.

Start Investing Like a Crony Capitalist Today: Gov't and Private Industry Collusion Creates Big Profits for Investors
Government and big business are working together to keep timberland prices high — and push them even higher.

Nuclear, Oil, Gas, Renewables — All on Table: Buy It If It Burns
We are at the beginning of a massive transition in the way we think about, use, and produce energy. It's ongoing and it's slow-moving... but it's happening.

Leverage China's Collapse

You're watching the wrong damn crisis.

Yeah, yeah, I know: For months now, the U.S. market has hopped and dipped almost daily because of the nonsense going on in Europe...

One moment, everyone is worried Germany will finally refuse to fund the PIIGS' debt binge another minute, and the whole damn Union will unravel.

The euro plunges, forcing the dollar — and its hideous Chinese twin, the yuan — up. The great herd freaks, and suddenly U.S. stocks are sinking like a rock.

Next day, the sun comes up over Europe, and lo and behold, Paris, London, and Berlin are still standing and open for business. The euro rallies, the dollar drops, and by the time the U.S. market opens, stocks are a buy again.

Down 300 points one day, up 300 points the next. Talk about your pointless sturm und drang...

The Wrong Recession

I'm not saying the whole euro collapse thing isn't happening.

Just this Monday, my compadré Chris DeHaemer alerted you the Germans are alleged to be printing up a secret supply of "Neumarks" just in case.

And I really don't doubt that European GDP might be about to dip from "not really growing much at all" to plain old "shrinking a bit." Heck, England's master banker Mervyn King already conceded as much, right about the same time he announced a £75 billion liquidity injection.

What I'm saying is that the real "recession" problem is a lot further to the East.

~~vix-box~~

The Right Recession

China GDP has been averaging 10.27% per annum over the past decade, impressive enough on its own, considering the West would give its eyeteeth for 1% growth these days...

But this average papers over China's rather alarming change in trend.

Back in 2007, China was a total rocket ship, growing at an amazing 14.2%. Even in the depths of the global crash that followed, they only dipped down to the mid 9s and 10s.

And thank the heavens for that, because China's growth saved our collective Western behinds...

Just about every time some CEO was forced to trot out in front of an audience to explain how they could possibly survive the next ten minutes, their answer would always be: "Sales to China will save us all!"

That was Then, This is Now

Problem is, there is always a price to be paid for this sort of stuff.

Back in the crash of 2000-2003, Uncle Sam did the dirty deed, fired up the big engine with an ungodly amount of imaginary money, and hauled the world's caboose out of the hole.

In the end, we suffered the inevitable bubbles and inflation — and finished off with one hell of a banking collapse.

Now, China is headed down that same road... and they don't like it one little bit.

China's 13.5% money supply growth has translated into a 6.2% year-over-year increase in their consumer price index.

Suddenly, China is trying to yank on the brake handle — and hard.

Chinese bank lending was slashed 87% between August and September, as per the commands of the central government.

Fiscal Sanity Hurts

This sudden discovery of "fiscal prudence" is creating a real uproar in the hinterland, where corrupt local governments have ginned up thousands of shell companies that circumvent Beijing's attempts at central control.

Former deputy speaker of the People's Congress, Cheng Siwei, complained at a meeting at the World Economic Forum in Dalian that interest rate rises and credit curbs to cool overheating were inflicting real pain on thousands of companies used by local party bosses to fund the construction boom:

The tightening policy is creating a lot of difficulties for local governments trying to repay debt, and is causing defaults. Our version of subprime in the US is lending to local authorities and the government is taking this very seriously.

Everybody assumes that they will be bailed out by the central government if they default, but I disagree with this. It means that the people will ultimately pay the bill for it all, at a cost to the broader welfare. Those who are not highly indebted are forced to help those who are.

Chanos Says, "Duck!"

Can the Chinese find that legendary beast, "a soft economic landing"?

When Kynikos Associate's Jim Chanos (the guy who warned the world about those bastards at Enron), estimates China's debt to GDP ratio at or around 200% and figures on total credit growth equal to 30%-40% of GDP in 2012.

China has conceded that 15%-20% of all new loans could go south. Chanos figures a 50% recovery rate on same, and concludes that Chinese GDP growth would take a 7.5%-10% hit on an after-write-off basis.

Take a second look at the Chinese GDP chart at the top of this article, and you'll see that a drop like that would pull China down pretty damn close to the dreaded zero growth line.

This does not have the makings of a soft ANYTHING.

Rather, it looks to me like one hell of a train wreck for China's engine — and all the rest of our sorry cabooses as well.

Three Ways to Play

There are three ways to play this wreck.

There are, of course, all those American companies that still desperately need Chinese sales to round out their profit reports. In Viral Investing, we have already gone after Caterpillar (NYSE: CAT).

CAT shares have been working their way lower since May and are currently at the top of the price channel, offering a cheap entrance into this long-term down trend.

And this week, I have isolated a particularly sweet victim: a major blue chip banker that could get cut in half when China goes off the rails...

~~vix_3~~

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Wealth Preservation During Depression

There's a viral war raging over our brains and wallets.

Bears are talking up the next depression; bulls are claiming it's a buying opportunity.

I'll tell you who's lying in a moment. I'll tell you who's half right and who's totally wrong. And I'll tell you what you should buy right now to beat these guys at their own game...

But first, let me set up the playing board for you.

Priests of Doom

On the one side, you have high priests of fiscal policy like U.S. Fed Chairman Ben Bernanke, who warned us last week that we might just be slipping away into another recession.

And then there's Bank of England Chief Mervyn King, who shrieked hysterically of "the worst global depression ever."

Their morbid opinion of our current circumstance is backed up by the various professional risk rating services like Fitch, Moody's, and S&P, who are racing each other see who can downgrade the most countries the fastest.

Zombie Army

And on the other side, you have "Goldman's Dark Army" — the legion of corporate cheerleaders deploying the latest round of cooked government stats to "prove" the global economy has "finally turned the corner."

These guys point to such figures as a temporary bump in payrolls and a miniscule rise in summer construction expenditures that — gasp! — "exceeded forecasts" by a percent or two.

Each party is trying to sell their own particular load of horse manure.

A Web of Lies

The central bankers want us to think their fountains of unlimited imaginary money are our sole hope of escaping yawning pits of economic hell. For these apparatchiks, it's all about hanging on to the levers of power any way they can.

The private bankers claim that if we just turn them loose from the stranglehold of post-crash regulation — and allow them to tangle the world in a impenetrable web of insanely profitable derivatives and bonds again — they will plant our feet firmly on the road to financial nirvana.

To these guys, you and I are just foot soldiers and cannon fodder. Our jobs, homes, wealth, and health? Collateral damage.

The Cold, Hard Truth

The truth is we are headed for second technical recession — and quite possibly depression.

The REAL facts are on my side. But do not fear this downturn...

That little bump in employment? Balderdash!

Fully half were Verizon (NYSE: VZ) workers returning from strike. And the others will all get fired shortly.

How do I know? I read honest reports like the one out of outplacement expert Challenger, Gray and Christmas that warns the very people who are trying to suck up your brains (Washington and the banks) plan on laying off 115,000 workers ASAP.

~~vix-box~~

Bright Red Sell Signal

As for that slated rise in GDP that's "just around the corner"?

The guys who set the prices and yields for billions in treasury bonds (again, basically Washington and the banks) quietly disagree. Market yields offer a spot-on indicator that has predicted every U.S. recession since 1970. And it is currently kicking out a bright red sell signal.

The Treasury yield curve — adjusted for the Federal Reserve’s 0.16% interbank rate — has two-year notes yielding 20 basis points less than five-year notes.

This inversion, with short-term rates higher than longer-term yields, has forecast each of the seven recessions since 1970.

The current adjusted spread is putting 60% odds on at least two consecutive quarters of GDP contraction within the next 12 months.

History, Facts, and Logic

Good stuff — and the perfect antidote for the poisonous tripe Washington and Wall Street keep forcing down our throats.

Now, I will tell you the one thing none of these clowns will:

This depression is completely necessary. We absolutely MUST flush away every last remnant of the busted real estate economy before we can ever hope to begin rebuilding.

I am talking scorched earth here. Closed doors. Bulldozed houses, even. Quite possibly riots. Maybe a great fire or two.

I'm not rooting for any of this; I am telling you what must happen, what WILL happen before we "turn any corners."

Blood on the Floor

Junius Morgan made his nut shilling worthless U.S. bonds to the Brits during the post-Civil War crash.

The Rothschilds bought whenever there was blood on the floor.

Warren Buffett never met a collapse he didn't love, because it meant he could suck up every company in the Dow for pennies on the dollar.

And Bill Gates could only gin up Internet trillions after the horrid grind of the late 70s and early 80s.

If YOU want to be in on this next round of empire building, you will need some serious capital. Here is how to build it.

Buy This NOW!

You start by holding your nose and buying select put option contracts all the way down to the very bottom.

When the market puts in dead cat bounces rallies like it did the other day, you don't freak out and wonder if you somehow missed something... You buy more puts!

Here's what you should be buying today: As I sit to write to you, at-the-money Dow Jones Industrials SPDR (DIA) put contracts are currently available for less than $560 per contract.

If all the Dow does over the next few days is drop back to the bottom of the trading range it's been stuck in for months, this play will continue to turn a profit as you ride out the market storm.

And when the true end for this bogus market finally comes, this play will continue helping you secure profit as you ride out the market storm.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Guide to the Collapse of China and Europe

What kind of S.O.B do you folks think I am?

I've gotten some nasty emails lately accusing me of cheerleading for a complete economic collapse.

They claim (rather rudely, in a few cases) that just talking about the sword swinging over us all actually spreads even more gloom and danger...

"Don't I know that those helpful fellas on Wall Street and their sock puppets in Washington are trying jawbone us into believing that Santa and the Tooth Fairy will somehow set us all onto a ladder to the moon... yadda, yadda, yadda."

Damn, there I go again.

NOT Cheerleading

No, I am not "rooting" for a bear market, praying for another recession, or any other such foolishness.

Yes, I have written at length on the sloppy habits we have acquired over the years and the inevitable results of same. And I have reported in detail on the negative technical indications building up in the market charts of late.

And yes, I have set up my readers to profit in quadruple digits from this downturn...

But I simply refuse to apologize for any of this.

Out in the Cold, Rain, and Snow

I may be completely out of stocks right now. But that doesn't separate me from society at large.

Like many of you, my parents are retirees, utterly dependent on their portfolio for income. If this whole mess really comes unwound — if we are indeed on our way down into the next leg of a depression — I will be forced to make room for them here at Liberty Park, chin-to-jowl with my beloved, hot-flashing wife (sorry if that's too much info, but there it is) and rambunctious darling daughters...

And while I love them all dearly, I WILL be spending weekends up in the mountains dining on MREs and sleeping on the cold ground just to keep my remaining shred of sanity.

More Imaginary Money!

As I write to you today, the markets as a whole and financial stocks in particular put in another new low. When the bottom broke, the "blog-o-sphere" began to hum with word of a new bear market.

The only thing that stemmed the bleeding was Ben Bernanke's statement in front of Congress’s Joint Economic Committee that the central bank "will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability."

But can more imaginary money save us from crisis created entirely by imaginary money?

No, it can't.

PIIGS Get Slaughtered

Since the Financials are leading this latest plunge, let's tear back the curtain of bogus talk and look at what's really bedeviling the banks and brokers.

I'm sure you've heard so much about the Euro crisis that you're ready to bang your head against a wall. Unfortunately, I am going to cover it yet again. I will, however, try to be brief.

The PIIGS — Portugal, Italy, Ireland, Greece and Spain — borrowed gobs more than they could ever actually pay.

Bankrupt

Greece is bankrupt and will inevitably default. Some of the rest will follow suit. It looks like Ireland is in the best shape.

The "Club Med" states? It's really anyone's guess which one tumbles next.

This is really more about German banks than it is about Greek teachers. Europe's conservative North — England, France and Germany — are on the hook for the multi-trillion-euro tab. Politically, the citizens of same are inclined to tell the South to go hang. The bankers know this road leads directly to a currency crisis.

The 10 largest U.S. money market funds are desperately trying to get as far away from Europe as fast as they possibly can without actually triggering the very collapse they fear. However, Fitch Ratings warns that Europe's debt still represents some 42% of these funds' total assets.

Let's call this "Wave One": an economic tsunami that has circled around the world and is already washing up against our financial seawalls as we speak.

~~vix-box~~

Wave Two

Now look to the West, because that's where "Wave Two" is coming from.

China led the world out of the first leg of the great recession/depression and has been doing its level best to prop us all. Last year, China contributed more than 30 percent to global growth by and of itself.

But now that engine has overheated.

And once you take away all the hot money that was papering over China's troubles... bad loans to local governments, a fading real estate boom, and slower economic growth are terrorizing most experienced "China Hands," who are now trying to get the hell away from this market without triggering the very collapse they fear most.

Hey, didn't I just write that about Europe? You betcha, pilgrim!

China's Slow-Mo Collapse

The MSCI China Financials Index has lost more than 43% of its value over the past year, with half of that loss coming in the past 30 days.
This is actually worse than the benchmark bank gauges for Europe, the United States, Japan, and the emerging markets.

Jim Chanos, famed for calling Enron Corp.’s collapse, predicts Chinese banks will fall below the value of their net assets for the first time since December 2003.
Grantham, Mayo, Van Otterloo & Co.'s Edward Chancellor warns: “China’s economy is very distorted, and the banks, as ever, are at the epicenter of the distortions. If China runs into problems with the banking system, which I think it will, I cannot see a situation in which foreign investors are the main priority of Beijing.”
HSBC is supposed to be contemplating selling its 8% share of Bank of Shanghai.
Fund managers at Vontobel Asset Management Inc. and International Value Advisers LLC are all reputed to be avoiding Chinese banking stocks.

How big is our exposure to this storm brewing in the East?

Hard to say for sure, as many American financial institutions remain as opaque as ever.

However, I've learned that Bank of America (NYSE: BAC) has been struggling desperately to unload its $20 billion stake in China Construction Bank. Goldman Sachs just downgraded its outlook for BAC shares for this very reason.

Cash Reserves Are Down — Not Up

Those are the waves that threaten to swamp us.

Now let's talk about our metaphorical "seawalls."

As I reported in my most recent Viral Investing column, post the banking disasters of 2007-2009, American banks and trading houses are now supposed to be protected against breakdown with enormous reserves of cash.

Unfortunately, money sitting is money that isn't making profits.

And as we have seen over the past couple of days, no profits quickly translates into share price collapse. If you want to compete at all, you need ALL your money making money.

So it should come as no shock after the most recent FDIC quarterly banking report revealed that American banks' revenues have declined for two consecutive quarters. The banks have cut their loan loss reserves in half over the past year.

Private Rewards, Public Risk

In a speech last May before the 47th Annual Conference on Bank Structure and Competition, FDIC Chairman Sheila C. Bair warned:

[this situation] can only be regarded as a new and dangerous form of state capitalism, where the market assumes large, complex, and powerful financial companies are in line to receive generous government subsidies in times of financial distress.

Unless reversed, we can expect to see more concentration of market power in the hands of the largest institutions, more complexity in financial structures and relationships, more risk-taking at the expense of the public, and, in due time, another financial crisis.

So let's sum up:

Europe is corrupt and headed for systemic bankruptcy and currency crisis;
China is also corrupt, opaque, and headed for collapse;
American banks and trading houses have cut reserves, and are now trying to chew off their own feet to get free of these twin bear traps.

You can ignore these global forces and take the hit to your portfolio when the market fully prices them in... or you can protect yourself.

~~vix_2~~

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Stock Market Pullback

"Dude, where's my market?"

Blackouts and missing days have been a pretty common Hollywood theme as of late. Movies like The Hangover and Pineapple Express are very popular with the populous.

But it's not just a movie plot...

Wall Street is right back to where it was at the start of 2010. We just lost two years — market years, that is.

click chart to enlarge

As I write to you today, the S&P 100 (OEX) has abandoned 2011's gains. Now it is staggering about like a blind-drunk bachelor stoned on Rohypnol, trying to find its way back to the steady gains of 2010.

Two years of blood, sweat, and toil blacked out and gone... completely wiped off the books in one insanely volatile summer.

I am not going to spend another column on which wise guy slipped us that deadly Mickey. The culprits are all too well-known, and really, any effort at detective work is better suited to figuring out what's coming next.

Three Stocks Set Up to Fail

We can come at this issue several ways. I could point you toward various telling reports such as...

Famed über-investor Warren Buffett has claimed that he could find concealed diamonds in the foulest mud pit. But right here and now, when the cheerleaders are touting "record-low P/Es," Berkshire Hathaway (NYSE: BRK-A) can't think of anything better to do with its $47.89 billion in loose cash than to buy back its own shares.

(Irony alert: I am told that even this mealy move is really just a tax dodge, which is pretty damned funny after all of Uncle Warren's scolding re: same!)

Apple Famine?
Apple Inc (Nasdaq: AAPL) has been the stalwart crutch of its sector. There have been many, many days over the past few years when AAPL's strength — and heavy weighting — was the only thing propping the tech SPDRs and ETFs. Indeed, sometimes even the entire Nasdaq seemed to be running on Apple's gas.

Unfortunately, these days Apple has become a bit of a monoculture, depending almost entirely on sales of $700 touch-pad toys like the iPhone and iPad.

My Irish granddad taught me all too well what happens when an entire country comes to depend on a single crop. Do the words "potato famine" ring a bell?

Now it appears we are about to learn a new name for disaster...

Apple is still mum on the subject, but then again, Cupertino is infamous for saying nothing until bad news is beyond obvious (founder Steve Jobs' battles with pancreatic cancer come readily to mind here).

But several of Apple's less close-mouthed suppliers are telling of a 25% cut in parts orders over the past two weeks.

Theories abound as to why — including speculation of pending model changes and tales of Apple's hard-assed ordering methodologies.

JP Morgan, on the other hand, chooses to believe that Apple figures to sell 25% fewer toys in the coming quarters, which include the vital holiday shopping season.

Santa in the Ditch

And speaking of the holidays, here's another item straight off the Grinch's own ticker: Reuters is reporting FedEx Corp (NYSE: FDX) has cut its full-year profit outlook from last June's guestimate of between $6.35 and $6.85, to $6.25 to $6.75 per share, citing high fuel costs and a weak global economy.

Chief Executive Fred Smith does not see the shipper's circumstances changing anytime soon: "We expect sluggish economic growth will continue, largely due to a lack of confidence that U.S. and European policy makers will effectively address current economic challenges."

This disappointment drove shares over an 8.2% cliff. That's sad, but not as worrying as this: FedEx is the perfect iconic proxy for the modern Internet-driven retail sector.

The value of packages handled by FedEx's trucks and planes every year is equivalent to about 4% of U.S. gross domestic product and 1.5% of global GDP...

When FedEx sneezes, the whole damned world catches pneumonia.

Downside Technical Confirmation

I said earlier that there are several ways to look at this looming threat.

If you look back to the chart of the OEX at the beginning of the article, you can see clear technical signs that the wise guys have read the news, packed their Gucci suitcases, and are sidling quietly toward the exits.

Back in August, I pointed you toward the critical long-term sell signal when the blue chip's price ripped down through the 10-, 50- and 200-day averages. That's a flashing red light that precedes a major crash roughly 75% of the time.

Off this one market move in August, readers of Viral Investing made up to 530% gains in DIS, 176% gains in GE, 243% gains in GS, 80% gains in TOL, and 76% gains in COH puts. You have to love making a lot of money when Goldman, GE, and Toll Brothers go down.

That downside move was put on hold as Bernanke was able to hold off the inevitable with the promise of infinite imaginary money. Now that fairy tale has lost its power to hypnotize investors.

There are now stacked sell signals at the bottom of the recent trading range.

~~options~~

The Third Way

I have loaded you up with a truckload of depressing news.

But there is still a third way to look at this pending crap storm...

For the idiots who don't prepare themselves, it will be "the worst thing that ever happened." But for those of you who are able to wrap your mind around what's coming, it is a dozen different golden opportunities.

You go down Warren Buffett's road, hunker down, and preserve your capital for the truly stellar deals that will be lying about in the wreckage after the storm passes.

This is also one of Chris DeHaemer's favorite tricks.

Or, you can try the route Ian Cooper and I hew to — and buy put contracts on the weak stocks that will be decimated as the economy staggers back another year to the 2009 open.

The Next Three to Fall

As I said, my Viral Investing readers just cashed in on the major move in August. They are ready to do it again.

Investors just like you are already carrying put option contracts against major tech, retail, housing and transport players, with the expectation of doubling up on most of these positions by December.

Heck, I'll even tell you the names of three of the companies we have slated to tip over the edge: Home Depot (NYSE: HD), International Business Machine (NYSE: IBM), and CSX Corp (NYSE: CSX).

If you like them, sell now and buy 'em back at the bottom. Or go short and ride them down. Either way, you'll come out on top.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

Is It Really Possible to Ignore the Fed?

I really didn't want write about the Fed, the dollar, and gold again.

Because, to be frank, I suspect we are all sick to death of waiting around for one guy to step up to a podium and announce how he is going to save the world by giving away money. I certainly know I am.

We are supposed to live in a capitalist democracy where every man's opinion is heard and his dollar equal. (At least, that's what they taught me in public school civics class. You private school goodfellas probably heard a slightly less egalitarian version of that lecture.)

Some News that ISN'T About the Fed

I thought maybe I would write instead about the new iPhone 5 that's due out at any moment. Apple (NasdaqGS: AAPL) engineers supposedly "lost" one in a bar... again. Once is an accident. Twice is either a real security problem — or a deliberate leak.

This is not a side issue: As I look to today's charts, AAPL is just about the only thing holding the markets up. Seriously, AAPL is weighted at 14.87% of the Tech SPDR (NYSE: XLK).

The second player on the list, International Business Machines (NYSE: IBM), comes in at about half that at some 8.41%. And Intel (Nasdaq: INTC) is half that again at 3.99%.

Let's face it: The tech sector is nothing more than one big toy store these days. Seems like the grownups have all left the building.

Arrogance and an Epic Tech Fail

Or maybe we could chat about Netflix (Nasdaq:GS: NFLX) CEO Reed Hastings' epic fail. You might have read as to how they lost a million customers when they raised prices. And as of last week, NFLX shares had lost some 30% of their value since mid-July.

Hasting' just wrote an open letter promising to explain it all away. But rather than a return to lower prices (or conversely, somehow improving user experience), he announced instead that he was changing the mail-in service's DVD name to "Qwikster."

I do have to agree with one part of Hastings' letter: He is indeed one arrogant S.O.B. Stupid, too. Post Hastings' letter, investors extended NFLX downside run to -50%. I suspect there is still more downside for NFLX.

My charts show the strong possibility of an additional -$50, and that's just short-term support at the 200-day moving average. A well-played put option could probably pick up 50% to 100% gains in short order.

From Micro(chip) to Macro Market Moves

However, there are interesting "macro" reasons to dwell on Apple's supposed good fortune and Netflix's sudden downfall.

Both companies are in the entertainment biz. Oh, don't even tell me that iCrap gets used for biz. There is nothing genuinely useful I can do on an iPhone or iPad that I can't do better on a PC...

These are toys, plain and simple. And they cost $700. (Seriously, look up what an iPhone will run you when your kid drops it and you are NOT in line for an upgrade.)

Life Without Angry Birds?

And consumers are really, really depressed right now, scared out of their wits that we might be entering another recession — or maybe even lodged in gen-YOO-ine depression.

They have already demonstrated that they will abandon Netflix over a few bucks a month. How long can it possibly be before they decide they can live without a glorified cell phone that plays Angry Birds?

And if you were to take away Apple's insanely overpriced toys, you would be back to a boutique computer company with some 15% market share.

The Next Dell?

If you are looking for a model of a fall like this, you might take a gander at Dell (NasdaqGS), currently trading for $15/share — roughly a fourth of their 2000 high.

Wow. Just for the sake of argument, I ran the numbers on an at-the-money Apple put: a 75% drop in AAPL would drive it to 530% gains. But don't go buying them just yet. Because this whole argument depends on the herd recognizing that we are tipping over the edge into depression — which, I suppose brings us back to...

The Fed, the dollar, and gold. Damn it.

Twisting in the Wind

So we now we are back to sitting and waiting for the Fed to announce its latest "twist," wherein it will sell some $400 billion of its bloated inventory of shorter-dated Treasuries and then buy longer-dated bonds off the market.

The idea here is that lowering long-term bond yields will enable existing homeowners to cut their monthly payments and maybe even pick up some spending cash. And these new lower rates might even spur a jump in the moribund real estate market.

Meanwhile, on the investing side, this move would further destroy the value and attraction of treasuries in the hope that folks might plunk down some change on "higher-risk assets," i.e. stocks, instead.

Before I go any further, I have a question for you fine folks...

~~silver_signup~~

Is It Really About Rates?

You could probably get a 30-year note right now for just over 4%. You could get an ARM (God forbid!) for little more than half that. These are some of the lowest rates I have EVER seen.

So I ask you: Are mortgage rates stopping you from buying right now? Or is it the fact that you can't unload your current house without taking a massive loss?

Let's broaden that question a tad: Does anyone think American industry isn't hiring because it is cash shy?

$256 Billion Stashed in the Bunker

As of the late summer round of regulatory filings, 24 of the Dow Industrial 30 had jacked their average cash and short-term investments by some 18% over the year-ago period.

Some examples:

Caterpillar (NYSE: CAT) reported $10.7 billion in cash — triple a year earlier
Microsoft (NASDAQ: MSFT) is up 43%, reporting $52 billion
Johnson & Johnson (NYSE: JNJ) is sitting on $30 billion in cash (up 57%)
Coca-Cola (NYSE: KO) reports $14 billion in cash — up 38%
Chevron (NYSE: CVX) has hoarded some $18 billion in cash, up 36% year over year

We're talking roughly $256 billion in stashed cash and (very) short-term assets for the Dow 30 alone.

So again, I ask: WHAT THE HELL CAN THE FED POSSIBLY DO TO CHANGE ANYTHING COME WEDNESDAY AFTERNOON?!

Except maybe tank the dollar (again), and jack up gold (again)...

Adding Gold Gains (Again)

Sorry about shouting like that.

But I did say that this whole Fed-dollar-gold roundelay was really getting on my nerves.

And yet, gold remains the best long bet right now.

A recent Schwab survey asked 911 registered investment advisors what asset classes they were telling their clients to heavy up compared to this time six months ago...

They weren't adding tech shares (despite all of Apple's crazy gains). And they weren't doubling down on "solid blue chips," despite all the pontificating about record-low PE ratios and such. There really was only one category these guys were adding: gold.

And so it comes as no shock that gold is the one asset that looks to be building real strength going into the Fed meeting.

If you don't know the drill by now, well, you just aren't paying attention...

A mere $100 bump in gold (a mere 5.54%) would push at-the-money Gold SPDR (NYSE: GLD) calls up some 87%. A genuine gold breakout to, say, $2,000 would see those gains rise to 170% in short order.

Adam Lass
Editor, Wealth Daily

Investment Options in Gold

Welcome to the "great pause."

It's sort of like those noise-canceling headphones that are supposed to be the bees' knees on long cross-country flights.

All morning, the wires have been buzzing with talk of Greek debt default destroying the French, English, and German banks that were kind enough to prop them up. This was supposed to lead to a massive jump in gold and the U.S. dollar and a concomitant collapse in U.S. stocks...

Didn't happen though.

We did see an initial head fake in that direction, but then the whole thing just "paused," puzzling the living, um, "daylights" (oh so polite, eh?) out of more than a few analysts who were already reveling in premature Schadenfreude.

Bad IS Bad

This uncanny pause is created to be the stalemate between two critical memes.

On the one hand we have "things stink — sell everything." This is a fairly obvious position, wherein a banking crisis will evaporate available capital, causing European commerce to shrivel and die.

And on the other hand, we have "things stink SO BAD, the central bank itself will have to step in" and rescue everyone with newly invented euros, much like the American Fed's endless QE123etc. program, which continuously acts to undergird the American economy and market.

As I sit to write, no one know can decide if bad is bad or bad is good.

Let me help them out: Bad sucks. And the sooner you figure this out, the happier you'll be.

Logical Perversion

Some call this whole "bad-is-good" a logical inversion. I call it an out-and-out perversion, the specific poisonous meme that is leading to the demise of American stocks.

Once this thought virus infects a sufficient number of investors, they begin to buy and sell shares — and even entire markets — for the worst reasons.

Once, we envisioned participating in an ownership stake in a company because we felt that said company had intriguing products that competent management could profitably sell to willing customers.

Putting the Mob to Shame

But once "bad is good" sets in, folks only want to trade shares of companies that can fool the public for a quarter or two. By the time the truth is out, these wise guys hope to be long gone, leaving only rubes and idiots holding an empty bag.

I'm not naming names here, because too many of these outfits have insidious legal departments that put mob extortionists to shame. If I was indemnified by one of the really big news channels, I might be braver. But I am a lonely scribe with fantasies of feeding my family, putting kids through college, and retaining some wealth on which to retire.

Thus I resort to such pejorative substitutes as "Wise Guys," "Cheerleaders," and "Axis of Weasels."

Two Scientists Just Made Everything Obsolete

A couple years ago, two Russians unloaded this secret technology in a short paper.

What they described is absolutely shocking...

Oil, batteries, medicine, and more will never be the same again.

In fact, there's too much to describe in this space, so I urge you to take a look at the presentation we recently filmed on this matter.

The Infection Spreads

Left untended, logical infections like this inevitably fester, penetrating deeper and deeper into the crowd's collective psyche.

Every time some horrid bit of news comes out, hordes of stock-buying zombies appear out of nowhere hot to buy up the market as a whole because now the Fed will step in with more free money.

It seldom occurs to folks to ask what these companies will actually do with this largesse. Most simply assume that they will expand their businesses — buy new machines, hire more workers, sell more products, record more profits — ever onward and upward.

The Snake Eats Its Tail

This idea of a genuine expanding economy is a hangover from the days when growing, building, making, and selling were the best businesses a body could be in.

Now, after decades of logical poison, many of the grand blue chip outfits have found that employing workers to grow, make, and sell stuff is a mug's game. It's so much easier — and indeed more profitable — to play banker and use these phenomenally huge wads of capital to trade in U.S. government debt.

Thus the snake eats its own tail, employment dries up, and GDP growth grinds to a halt.

Teetering on the Brink
Today the market has paused as it finds support at the bottom line of the recent sidewards price channel. But it is not "the pause that refreshes" (look it up); rather, it is another of those moments when we teeter back and forth on the brink.

Quite frankly, most of my signals are indicating that the markets will fail here and start down the slide into another strong 13%-15% retracement, readjustment, retrenchment — whatever euphemism for DOWN that floats your boat.

The Fix is In

But maybe I'm wrong. Maybe the Cheerleaders will somehow manage to convince enough of the herd that "bad" is still somehow "good," and we will cycle back to the top of this channel for the third time in as many weeks...

In the end, it doesn't matter. Because the poison has set in, both here and in Europe.

And even the most addled investors are slowly realizing the dire nature of our circumstance.

Now, I have pledged to my publisher that I would never leave you fine folks hanging on dour news like that. Heck, you can get that sort of stuff from any number of editorial pages...

Deployable Intel

Wealth Daily is more than a simple soap box from which disgruntled old guys might spew bile. Rather it is an essential source of usable information. So here's some immediately usable info (larded with just a tad of bragging).

Here in Wealth Daily, I continue to recommend calls against the Physical Gold SPDR (NYSE: GLD).

Some have said that this chant has become monotonous. The heck with them! Every single round of these calls has eventually moved into triple-digit gains.

A Strong Suggestion

Over the past few weeks, I've asked readers of my Viral Investing column to buy puts against an exceedingly well-connected investment bank. This outfit stood at the very center of the recent economic collapse, and now stands charged with all manner of malfeasance by the Feds, their clients, and even their own stockholders.

As I sit to write, those puts have gained over 183% over the course of some 30 days. This is not merely the best revenge one can extract from weasels like this. It is also the best protection against the havoc they have wrought upon us all.

Now, was this gain some kind of fluke?

Over the past few months, every play but one I have recommended to VI readers has generated gains. (And that one "loser" is actually looking pretty good right now, too). Most of those gains are well into triple-digits.

Should the pattern I just showed you play out as predicted, the most recent round of recommended put option contracts against several key retail players will also rise in the same rapid fashion.

I'll show you exactly how to get in on these puts in the next 48 hours.

Whether you join me over at Viral Investing or stay here and just ride along with my gold series, I would ask you again today to immediately add this essential tool to your arsenal.

Adam Lass
Editor, Wealth Daily

Gold's Got "The Feeling"

Jeffrey Immelt has thrown in the towel... just plain given up on America, the world, and his massive conglomerate — a company so large and intertwined in the global economy as to be, for all practical purposes, a market index ETF of sorts.

His statement didn't read like a concession, but then again, I imagine the CEO of General Electric (NYSE: GE) got a whole bunch of professional message massagers working day and night to ensure his speeches always have a happy ending.

But if you hold his latest interview up to the light, you can clearly see that Immelt is basically giving in to this crappy market.

Yesterday, Immelt pledged he would beat the S&P 500 over the next two years, or at least he "feels like (he) can deliver for investors."

Just Not Feeling It

Let's place that bold claim into some kind of context.

Since the start of 2011, the Dow has lost some 4.61% of its value.

This is pretty damned funny considering the big bullish buying idea the cheerleaders were pushing just a few days ago was "Dow up in 2011." (Okay, maybe I'm the only one sick enough to think that's funny.)

But Jeff Immelt isn't "feeling" it enough to promise to beat even that sort of paltry performance.

He's eyeballing the broader S&P 500 — down some 8.13% as I sit to write — as his benchmark for success.

Problem is he's still got a long way to go to reach even that sad goal, as GE is down some 18% in 2011. Immelt credits this horrid showing to such “black-swan events” as GE's first dividend cut since 1938 and the loss of its AAA credit rating.

Now how often does stuff like that happen, eh? May as well buy shares now, as things surely can't get any worse!

But the News is So Good!

One might imagine Immelt would attempt to actually sell us on GE shares with some kind of bold claim regarding concrete gains.

After all, didn't we just hear last week from the Institute for Supply Management that both the overall economy and manufacturing in particular were still growing in August (albeit at a remarkably modest pace)?

And just this week, that same venerable source's (ISM's been around since 1915, you know) non-manufacturing index comes in over analysts' expectations?

We are being told by that same crew of cheerleaders that these reports are cause for celebration — and by "celebration" they most certainly mean we should buy shares of companies like GE.

BlackRock CEO Lawrence D. Fink tells us, “In my personal opinion, at $16, (GE)'s an incredible opportunity, especially if you believe now is a good time to invest.”

Of course, there's the very slight chance that Mr. Fink is merely "talking his book," as Blackrock is the third largest holder of GE shares...

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Lowered Expectations

Apparently, Mr. Immelt isn't the only one setting a low bar. While Jeff promises GE ought to do no worse than the economy as a whole — if not hopefully a tad better — Fink says outright: “If you think global GDP is going to collapse, GE, along with most companies, will not fare well in that.”

Okay, I just can't stand this sophisticated tongue-in-cheek crap anymore!

I will tell you point-blank that the global economy is already slipping into the second leg of the Great Recession, Second Depression, or whatever you personally choose to call this whole mess.

A Global Shift

Yeah, that's right: I said GLOBAL.

This is no mere market hiccough or localized economic disturbance...

As I sit to write to you today, some very serious-minded folks are bantering over the idea that the whole European Union will have to be dismantled if any of its stronger economies are to survive.

This event isn't slated to happen for years to come. But the meme — the IDEA — is scaring the lemmings out of Europe and into U.S. Treasuries (by way of the U.S. dollar), a rotation that has pushed the Dow back down under its 2011 open.

The world is changing. You will either change with it or be crushed by it.

Essential!

The dollar hasn't been the only beneficiary of this shift. Gold futures have hit another all-time high at $1,545.

If you heeded my ongoing advice to trade in calls, you have raked in triple-digit calls repeatedly over the past few months.

Heck, if all you did was listen up when I BEGGED you to buy at-the-money Gold SPDR (NYSE: GLD) calls back in mid-August, you'd be up more than 70% just a few weeks later!

I will tell you yet again that these gold-based tools are an absolutely essential weapon in your "New Depression" arsenal.

No "Values" Anymore

As for GE, frankly, my Viral Investing readers have been thoroughly enjoying shorting same with October put option contracts to the tune of some 176%.

These contracts are due to roll off my listing shortly, as I never recommend holding front month options. (It's a time decay thing.)

But a more recent VI put play against is also moving along nicely today...

Blue chip stalwart International Business Machine (NYSE: IBM) — the "one stock to own" for the past 50 years — just showed up at the top of UBS' "most shorted" list, and our puts are up some 15% today.

It's a new world, people. "Value" doesn't get it anymore.

It's all about fickle stuff like mood, meme, and motion now.

Adam Lass
Editor, Wealth Daily

Invest in Beryllium

Did I just oversleep and miss the apocalypse?

I was on my family's annual mountain retreat when "The Great Earthquake of 2011" struck, bringing heck itself to the East Coast and, particularly, that most self-important place in the world: Washington, D.C.

What, with no Internet or email — and no reason to bother with the little shortwave radio I tote around by habit — we didn't even know it had happened until we descended from the hills on our way home.

On our return to Liberty Park, we checked over the house as best we could...

I told my wife that it almost always looks like a hurricane just hit the joint, so how are we supposed to tell if the earthquake did any additional damage?

The Bakken Bank Account

These days, oil in the ground is like money in the bank.

And with tens of billions of barrels, the Bakken is the best bank there is.

You can pen your "Bakken Bank Account" today for as little as $6.00.

Click here to get started.

Bad Choice of Words

In the end, things turned out reasonably well. When Irene took out the power, I simply brought the storm lanterns, water jugs and gas stoves into the house, and we were as tidy as could be.

So far, the only real damage was to my wife's foot: She dropped a table on it while moving the yard furniture into the garage. Fortunately, I hadn't put away the first aid kit yet.

You see, it's all about being prepared.

You know, the sort of preparatory habits they tried to inculcate in us in Boy Scouts?

If you are prepared for what's coming down the pike, you can sleep soundly through screwy events like earthquakes, hurricanes — even market crashes.

It's the End of the World... and I Love It!

Over the past few weeks, I've tossed out some pretty damn dire predictions at you fine folks, many of which have already come true to one extent or another. That head and shoulders triple-top failure was particularly vicious, especially when its 19% drubbing took the rest of Wall Street completely by surprise.

However, those who prepared accordingly with an array of put option contracts were able to enjoy their own little storm parties, laughing away while the markets unraveled.

Why Are They Laughing?

Well some of them, quite obviously, have had way too much to drink. But my friend Jim K. was celebrating gains of 110%, 62%, 43%, 74%, and 73%. Those gains could have been much higher, but Jim considers himself "a rather conservative investor" and didn't choose to hold any of his positions longer than eight days or so.

(Jim, to answer your question regarding some kind of memetic conference or cruise, I'd say the latter is a damn fine idea (especially once winter socks in Liberty Park), and will gladly pitch it to the boss.)

Jim is one of those brave souls who was willing to beta test my latest investing system, and it has paid off for him in spades.

Not only was he able to make a string of clean profits off the whole mess; he clearly understood exactly what was going on — and what's coming down the pike next. And that sort of clear, calm understanding is worth its weight in gold.

The rest of you fine folks might care to keep an eye on your inboxes for word of Viral Investing's official launch, which is due sometime in the next week or two.

Be Prepared

It's all about being prepared. Speaking of which, let's get back to an interesting little fold in that whole string of East Coast disasters a lot of you may have missed...

There's at least half a dozen nuclear power plants that have been built here on the "safe" East Coast that have suddenly found their basements solidly lodged in an active quake zone while hurricane winds rake over their roofs.

That sort of double whammy is exactly the kind of "unlikely" event that took out the Fukushima plant and irradiated half of Japan.

The best the local authorities could do to prevent a massive disaster was to shut down the plants and hope that standby cooling power would hold up.

Now, some are wondering if this was all a fluke or a dangerous new trend. After all, this series of quakes was actually the second sizable seismic event in this area in the past few months. And just a few years back, there was a veritable hurricane superhighway running up the East Coast, with storm after storm hitting these "safe" cities and towns...

Talk about an uncomfortably risky, unprepared position to be in.

Beryllium Hybrid

The true shame is that this risk is really quite unnecessary.

My compadré Nick Hodge tells me there is a new hybrid beryllium/uranium fuel — already being backed by GE, Hitachi, and Toshiba — that increases the efficiency of the radioactive rods used in this sort of power plant. More importantly, it can absorb and transfer far more heat than traditional uranium fuel pellets.

This transfer mechanism can help prevent a nuclear disaster from happening ever again. The fuel greatly reduces heat transfer if there's ever an off-thermal event, like in Fukushima. And even if water pumps fail — again, like in Fukushima — this fuel's lower operating temperature expands plant operators' critical response window.

No Excuse for Them — or You

Now I know the big utilities will whine that this is not the time to spend on big capital projects.

To be blunt, that's just crap. First of all, wouldn't we all really rather they did this BEFORE a Fukushima disaster hits Stateside? And secondly, it doesn't cost all that much, as this fuel can be used in all existing boiling water reactors without retrofit.

Now here comes the really, really cool part: If you do this right — if you prepare yourself — not only can you badger your local utility into properly protecting yourself and your loved ones, but you can also cash in on the whole deal!

This American Sector Will Lead the World

Just three short years from now, the United States will reclaim something it lost years ago.

This isn't just some title or bragging right — but perhaps the most important factor affecting modern economics and politics today...

By mid-decade, the U.S. will once again be the world's top oil producer.

It will create more new millionaires in the next couple years than we've seen in the last two decades...

If you want to know exactly how it will be done, click here.

A Simple, Profitable Solution

You see, Nick is something of an "alternative engineering geek," the sort of guy who spends waaay too much time tracking down all those odd little companies that turn out to have THE next absolutely necessary pick-and-shovel technology.

I'm pretty damn sure he's done it again.

This time around, he found the company that owns the process that bonds beryllium to uranium to form these super-efficient low-temp fuel rods.

I expect shares of this company will do rather well in the coming weeks, especially once the post-mortem reports on the events of the past few days reveal just how close we came to a Fukushima-style disaster...

I won't burden you with the whole rundown here in Wealth Daily.

I'll tell you point blank that you have no excuse not to be prepared for the next round of disasters.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily