Posts Tagged ‘risk’

​Courage: what is it and how is it valuable?

June 24, 2015

​Courage: what is it?

Courage is related to fear, right? It’s not ignoring fear though.

Ignoring fear is foolishness, no matter how popular or common that is. If you are driving and other people start honking their horns, they are promoting extra alertness or caution. Wouldn’t it be foolish to dismiss a bunch of honking because “those people are probably just afraid, which is never wise?”

Fear (or fright) is a sudden shift of attention to a possible risk. In other words, the purpose of fright is to produce caution. Lack of caution (carelessness, negligence, complacence) is certainly not courage.

People who reactively condemn the display of fear or distress are reacting in distress. People only condemn what disturbs them (what terrifies them).

People who are hysterically terrified of social criticism can attempt to pretend not to experience fear, but it is fear that leads them to withdraw in to exclusive clusters (like an anti-fear church). I respect the potential value of withdrawing in fear and shame. It is wise to quickly withdraw from potential distractions and complications out of fear (out of commitment to other priorities). It is certainly valuable to precisely assess possible threats. It is also understandable to lean toward caution or conservatism.

I also respect that, in deep shame, some people may attempt to confuse courage with withdrawing in shame to an exclusive cluster of like-minded people (“safe” people who are also paranoid about displaying fear, so the whole group can all repress the display of fear). When the display of fear is socially shamed, such as in certain churches, then even simply displaying fear can inquire a surge of courage (and even going outside of one’s familiar social circles). By avoiding fear, many people who call themselves “spiritually-advanced” are also avoiding courage (and caution, too).

Courage is also not just taking action after precisely measuring danger. Just because someone measures risk, that does not suddenly guarantee that any action taken after the measuring of risk is automatically courage.

So what is courage? It could involve doing something that is rarely done, like something that gets no social rewards or approval (or even something that can lead to loss of privileges or punishment).

Is it rare to condemn others who disagree with you? To me, that is extremely common. What could be rare is to respect those who have other perceptions.

Courage involves a respect for perceptiveness in general. In particular, courage is about precisely perceiving risk and opportunity.

It is foolish to act without awareness of risk and opportunity. It is even more foolish to know better opportunities and lower risks, yet act anyway in spite of that knowledge. That is self-sabotage (self-destruction).

However, because of social anxiety, it is quite common to act in disregard of risk and opportunity. People may want to avoid the experience of being perceived as unusual. An extreme paranoia about risking social criticism can lead to people taking actions simply because they are popular or familiar, in contrast to taking actions because the actions have been assessed as reliably producing relevant results.

Since I called the paranoia “extreme,” one might presume that I mean rare extremes of paranoia. However, I consider extreme paranoia quite common.


The courage to recognize common paranoias as paranoid

How does extreme paranoia get to be so common? I think that public schools are a primary contributor to extremes of social paranoia.

Imagine that a child goes in to a classroom with lots of other kids and the teacher says “I am going to present some ideas to you and you will memorize them so you can be rewarded for repeating them just as I presented them to you.” Then the teacher may say “what is important to you is to stop your body from making any substances that poison all of you, such as this one:”

C24H40O5

How many students ask about why the teacher is saying that  “C24H40O5 poisons all of you?” They are all busy trying to memorize answers for their upcoming test. If they think that they may be tested on how many atoms of hydrogen are in that molecule, then they will focus on the number of hydrogen atoms.

They are memorizing the teacher’s assertions about science. They are not learning science (at least not by memorizing something that would be trivia to them if not for the bait of being rewarded if they do well on a test).
Since children are naturally competitive, they seek the teacher’s attention (especially approval). What happens when the teacher asks “what is the chemical formula of the substance that every liver on the planet makes to poison the organism that makes it?”Just as they have all been trained, the students raise their hands eagerly, hoping to attract the attention and approval of the authority figure. Then one gets called on by the teacher and promptly says “C24H40O5!” The teacher says “yes, very good.” Several other students seem disappointed that the other one got the teacher’s approval and mumble “I knew that, too!”

Again, what just happened is not the teaching of science. Science (as I understand the term) is not the practice of memorizing unexamined assertions.

Of course, students are being programmed with reflexive hysteria about a particular substance, but even that detail is secondary to the general pattern of unquestioning acceptance of the assertions of the authority. The authority makes a claim. The students (usually) focus on memorizing the claim (without considering for even one moment the accuracy or precision of the claim). Then, there is a social validation of the students who most effectively repeat on a test a bunch of the claims in the curriculum. The general pattern is social anxiety in competition for the approval of the authority (which is scarce / conditional).

But what about students who do not show sufficient enthusiasm for blindly repeating the teacher’s claims? What about students who question the relevance of the lessons? What about students who even question the accuracy of the claims made by the teacher?

Of students who fail to be enthusiastic about blindly repeating the teacher’s claims, there are a few types. All of them can be disciplinary issues for the smooth managing of a classroom.

The students who are perhaps too smart to be caught up in the drama can be put in to gifted programs (or can skip a grade) so that they can be amongst students and content that is more challenging for them. Students who are just too wild (anxious) for the typical classroom can be drugged (subdued pharmaceutically). Students who are too slow to compete with their peers can be put in to special classes with a different levels of competitiveness.

Students who respond relatively well to the common levels of test anxiety promoted in their classroom can stay in that classroom. Their natural curiosity can be diverted by the curriculum and they can be taught that science is blindly repeating unexamined assertions (among other trivia).

The ones who do quite well (in terms of excelling at blindly repeating memorized claims) can go on to be Teachers, Professors, CPAs, or Medical Doctors. Their social anxiety might be even more extreme than for most people. Why? Because their incomes (careers) rely on the idea that their skill at memorizing and blindly repeating claims is generally equivalent to merit.Of course, if a governing institution hires people based on certain factors, then those factors are relevant to getting hired. However, for any other purpose being getting hired by a government, those same factors may be quite irrelevant.

Governments thrive on compliance, especially to tax laws and other methods of redistribution from the masses to the government elite. So, governments measure compliance and reward it.

When there is a social context of rewarding compliance, that can lead to shaming anyone’s lack of enthusiasm for mastering the art of compliance. That can lead to a vilification of non-compliance (as in a vilification of courage).

However, non-compliance with tax laws, for instance, may be foolish rather than courageous. Courage is not acting in spite of risk.

Courage is first about recognizing opportunities that the masses are too distracted (by their extreme paranoia) to notice. Many will even dismiss an unfamiliar opportunity just because it is embarassingly unfamiliar to them. In fact, if the opportunity involves a method that is contrary to a method they have been using, they may be terrified of the idea that they may have been naive in their blind compliance with popular practices (typically, those marketed to them through mainstream media and schools).

If some MD has been prescribing statin medication for a few decades with the sincere presumption that the statin drugs are beneficial, it can be quite shocking to read the actual medical research on the subject. The idea with statin drugs is that they attack the functioning of the liver, which impairs production by the liver of certain substances which are presumed poisonous. What if those demonized “poisons” are not actually poisonous? Wouldn’t that be a challenging emotional experience for that person to even consider? Why not just react with dismissive, antagonistic hysteria? In other words, why not come up with an excuse to flee from the subject of the scientific accuracy of their sacred presumptions?

It would take courage to admit to prior errors (especially prior naivete). It could take courage to question the scientific credibility of any of the sacred presumptions of “mainstream science” (even just to question it in private).

Note that by “mainstream science” here, I do not mean what scientists do. I mean what teachers and the media program the masses to believe about what scientists do.


Note that the above references to C24H40O were intentionally misleading. That was cholic acid. Pictured directly above is cholesterol (C27H46O) which many scientists claim is a substance made by every healthy liver on the planet as part of a healthy organism. Also, these “so-called scientists” claim that they have observed that when tissue deteriorates, cholesterol is sent to the area to promote repair of tissue. So, they have measured that cholesterol levels are correlated to certain states of poor health. However, the claim that cholesterol ever causes tissue damage is a completely distinct idea. Even if it ever causes damage, does it always?

The value of courage

So, first it is valuable to recognize opportunities that the masses may be too distracted or paranoid to consider. Further, there is a similar issue with risk. The masses may be driven by mainstream programming in to such enthusiastic manias that they believe things to be safe simply because the government did not call them dangerous.

What if some people relied on science itself rather than government claims about science? What if people assessed what is relevant to them independently of mainstream programming?What if people assessed risks directly (rather than just repeating mainstream slogans about risk)? Some things that people may have been programmed to consider risky (such as “poisons” made by their liver) may not be as risky as they presumed (because they were rewarded for providing that answer on a test in school). Further, some things that people may have been programmed to consider safe may actually be risky.

What if people assessed relevance, risk, and opportunity directly (such as using their own logic applied to their own observations and measurements)? Many things that they were programmed to relate to as great opportunities might not be. Some things that they were programmed to relate to as risky could be safe and reliable and beneficial. Other things that were never referenced in mainstream curriculum could be the most relevant opportunities of all.

What is the value of courage? One value is to intelligently assess the actual relevance of anything that mainstream programming presents as relevant, plus be responsible for what one identifies as relevant (as a priority). Another value is to assess the risks of mainstream complacency (in general and in particular cases) and then minimize or avoid those risks. One more value is to assess opportunities precisely (whether the mainstream ignores or adores those topics).

Briefly, courage allows us to develop precision in our assessments of opportunity and risk, then reduce or eliminate risks and maximize opportunities. Even more briefly, courage allows us to let go of the crippling chains of social paranoia that we have been trained to cling to hysterically.Knowledge alone does not set anyone free. Note that many may people flee from knowledge in shame.

Courage is relevant. Courage exercises freedom and develops it.

If you were open to experiencing a new level of courage, what would you do? If you were willing to experience a huge and sudden relief from social anxiety, how willing could you be?

On the best way to agonize

February 3, 2015


Consider that agonizing could be an interesting pattern of behavior. It would be most interesting to those who are experienced with it and/or who frequently witness it practiced by people of importance to the observer.

I mentioned that agonizing is a behavior. Agonizing involves words and verbal concepts, so that means that agonizing is one type of linguistic behavior.

Agonizing can be categorized as a type of distress, a mild form of hysteria, or even a borderline form of panic. So, the WAY that language is used when agonizing can be very limited and also notably inattentive.

Agonizing has a specific purpose, which is to interrupt prior momentums of activity. It does that quite well. For most any other purpose, it is entirely inappropriate, ineffective, and disappointing.

So, it can be important to understand agonizing and how it works. Since the behavior of agonizing can build in to a tremendous momentum, it can also be intriguing to know how to notice it early and interrupt it effectively, whether momentarily or completely.

One of the most common forms of agonizing is the formation of a dilemma. Two options that are understood to be exclusive (as “either/or” alternatives) are contemplated with a general mode of anxiety.

Note that agonizing produces increases in anxiety, even to the point of agony (which is the root word of AGONizing). Again, that agony can serve a valuable purpose of interrupting existing patterns of behavior and avoiding almost all new explorations- except for those that relate to the specific targets of attention within the behavior of agonizing with language.

When does agonizing arise? When there is a perception of potentially extreme risk without a clear assessment of the exact risk level(s), that is the essential condition which can lead to the behavior of agonizing.

Agonizing typically involves speculating about possible risks. The primary alleged risks identified in the agonizing may not be the real concerns of the one agonizing. However, the issue of “assessing risk before proceeding” is generally the basic issue in question, even if there is some imprecision about the sources of potential risk.

The agonizing could be considered a type of stalling or resisting. Agonizing can also be “mimicked” in order to justify a withdrawal from existing activities (which one may prefer not to directly identify as unappealing). There can be a real experience of distress, then an invention about some trivial dilemma as a justification for the distress. Further, the stated dilemma may not seem trivial to the one who invented it.

The language of the agonizing may be quite hysterical (and off-target / out-of-focus). A “ritual of confusion” (or other excuses) can be an important part of the coping behavior of agonizing.

In the most intense cases of agonizing, there is no blurring of the issues. The blurring is to perpetuate mild states of anxiety (without any other action) through frequent agonizing. As a state of actual panic is approached, a single dilemma may come in to focus with two very specific alternatives: “either this or that!”

So, with agonizing, there is a concern about possible risks. “What cautions should be exercised? What clarification should be sought? What pace is appropriate?”

Doing nothing may seem risky, but the action or actions under consideration may also seem risky. Can the risk levels be measured (as in compared to each other) and even reduced?

In interacting with someone who is practicing the behavior of agonizing, a few alternatives are possible. There is a common tactic of invalidating the agonizing, including through the use of what amounts to deception: “I am sure that everything is fine.” Of course, this can be favorable for momentarily calming down a person who has been agonizing (or if the intent is to distract them from ever attentively assessing risk, like by shaming them for their concern or caution).

Another tactic is to respect the basic concerns of the agonizing, but specifically invite a higher degree of precision and calm and focus. That validates the purpose but challenges the specific method of anxious panics of mental speculation. “If there are risks, then that would make sense to know in advance, so let’s find out together, okay?”

Another tactic is to increase the experience of fear in relation to one of the possible options. In many cases, an observer may encourage less assessment and more outward activity (adding their own distressed rage to spark a panic): “Stop just sitting there and do SOMETHING!” Or, there may be a repressive intent: “You have no idea at all what you are doing, do you? You better sit down right NOW… before you get yourself hurt, mister!”

Perhaps the most effective way of interacting with someone who is practicing the behavior of agonizing is to offer to assess the alleged risks for them (in a way that works for them). They may be terrified of even assessing any of risks (assuming that they are genuinely interested in assessing the risks that they reference in their speculations). They may lack confidence in their own capacity to assess risk. They may be desperately hoping (quietly or loudly) for someone to come and assess the risks for them.

So, someone else can hire an expert to assess the risk for them (like the risks related to a automobile that may need repair or to some physical complaint like a possible injury). Or, someone can suggest a specific expert that they can hire themselves… or a specific action that they can take to find an expert on their own.

The idea is to promote the precise assessment of risk without the stress of them having to make the assessment (for they may really lack the competence to do so). They are in distress about the possibility of risk. Maybe someone else will offer to “stand next to them” when they go to the doctor, for instance.

Maybe they are terrified of hearing “bad news” (at least without someone else there to help them “keep it together”), so the agonizing is basically a very indirect (and often ineffective) method of attempting to bait someone else in to encouraging them to “go get that checked out by an expert” and even offer to go with them or give them a ride. The underlying issue is a sense of lack of security. They feel distress with no confidence about their own competence to resolve the distress.

Either the distress will resolve or not. Either the energy of the distress will contribute to a future of increased tangible security or not.

Note that when someone feels secure, they are not averse to risk. They consider risk, assess any potential risks that are considered important, and then they take whatever other action that they take.

That is not what is going on with the behavior of agonizing. There is a foundation of insecurity.

The idea that “life should be free of risk” is a delusional linguistic construction designed for pacifying someone who is actually in distress. It is like stating affirmations while driving instead of actually looking at the road and the traffic signals.

There is such a thing as risk (an actual linguistic category). Some assessments of risk are more or less precise. Some levels of risk are more or less terrifying or intimidating or disturbing.

Agonizing can be sort of an “exhaustion response” in which someone experiences an intense terror that they wish to keep secret. The agonizing may be kept private. The person contemplates and speculates, then  may make some assessments of risk, perhaps also in secret.

How accurate are their perceptions of risk? Maybe the risks are much greater or much less than they perceive.

What are they afraid of? Maybe they say and maybe they do not.

Maybe they are so anxious (such as in the case of a neurological electrical misfire) that they simply have massive amounts of adrenalin even without any immediate threat. Maybe they just watched a movie that disturbed them much more than they recognize. There may be an irritability or frustration and no sense of the underlying issues- just a sensitivity to triggers that bring their background of distress beyond the threshold of awareness.

They may know they are in distress but may have no specific awareness of the causes: “Why am I so upset (when I should NOT be)?!?!”

That is also agonizing. They are invalidating the upset by identifying it linguistically as something that should not be happening. Then, with a terrified commitment to the idea that they should not be upset, they may attempt to find an explanation that they consider socially acceptable. That can be difficult. That can take a lot of time. A justification for the upset may even need to be slowly and carefully constructed: “now I know who is to blame for me being upset, which I should never ever be!”

By beginning with anxiety about the idea of being upset, they are set up for suppressing any upset that arises (such as anger or fear or disappointment). They may start with a rejection of certain emotions as “negative” or “unacceptable.” Then they proceed with a commitment to justifying their hysterical rejection of the emotions that they fear with intense paranoia (including the emotion of fear).

Since they reflexively assert that it is “bad” to admit fear, then they fear the display of fear. That is not just an occasional state but an ongoing paranoia. For most people, that is an almost constant state of anxiety since long ago in their early childhood before they learned to pretend not to be afraid.

So, in their conflicted emotional state, what actions can they be expected to take? Until their agonizing fulfills it’s purpose and they begin a new experiment, they may maintain the “holding pattern” of withdrawing from social interaction by practice agonizing to such an extent that the obsessive practice of agonizing destroys any potential for attentive communication beyond the limited scope of their favorite dilemma.

They may chatter, plus others may join them in their chatter, but unless the primary risks are assessed and then one alternative is determined to be clearly more repulsive than the other (riskier), then they may remain “stuck” in their agonizing. Or, perhaps they will be distracted from their dilemma or even will “deconstruct” their own inventing of the dilemma and lose interest in justifying whatever past patterns that they may been have been justifying through the the “great” dilemma that they have been practicing and rehearsing and refining and perfecting. They do it quietly in private at first, constructing something that they think will “seem acceptable.” Then they test it and if it works well for attracting the kind of interaction that they are targeting, they may parade their dilemma openly and widely, then act offended if something does not worship it enthusiastically enough.

If someone says in anxious agony “but should I do this or not,” then I may offer a different linguistic model that is not an “either/or dilemma:” “if you did it, how would you like it to go, and how exactly would you like to do it? If it seems too unsafe, then how could you make it safer or more reliable?”

Note that there is one major problem that people may have with those who are competent in the art of inventing dilemmas. Other people may find it to be a problem that they cannot easily enchant the other person and put them under the spell of their favorite dilemma. The one competent in consciously inventing dilemmas is not easily deceived by those who are less competent or less conscious in their invention of dilemmas.

The competent one may even make fun of the dilemma: “Should you or shouldn’t you? I just do not know! This is such a serious dilemma. Just out of curiosity though, can you name nine things about this dilemma that make it very serious and extremely disturbing? I was going to get a little sleep last night and eventually I almost started to doze off, but then I realized that if I did not practice insomnia for at least a few hours, then I might suddenly fall asleep and then have a horrible nightmare that would wake me up and then I would not be able to get back to sleep, which would be absolutely terrible and can even lead to agonizing about how to prevent contagious outbreaks of incurable hypochondria. So, what would be six of the most horrible things that could happen in a nightmare? Actually, do you think that six is the right number? How about seven? Seven or six… I just do not know! This is so confusing that I must continue it until I find a way to agonize the right way so that I can eventually become clear and calm by agonizing so well. Then again, if I pick six things to start with, then I could always sick a seventh after that, right? Why didn’t you think of that and then just tell me that sooner? Anyway, I know that I have a very serious problem, but I just do not know exactly what it is yet. Please be patient. This is very confusing for me, too. This is really such a serious problem though. I obviously need a lot of help with it because I would be unable to maintain it without competent assistance and outside validation.”

global stock markets are at a “precipice” (a potential cliff)

January 30, 2015

Notice that on the far right of this 12 month chart of a global stock market index (of the stock prices of 5,000 companies  worldwide), prices have dropped to near the 21,000 level three times in January, so far rallying back twice. Will they rally again? Perhaps, but if not, then a massive sell-off is likely (with an immediate surge in volatility).

 

wilshire 5000 year

 
Note also that the net change as of today since early July is “no change.” The last seven months have been quite weak relative to most of the last 10 years (shown below). The risk levels in current stock markets globally are currently exceeding the risk levels at the peak in 2007, at least according to certain ratios.

wilshire 5000 decade

A plunge may not develop Monday or next week, but, with risk levels so extremely high, this is a great time to move toward conservatism (away from the familiar complacent methods that produced massive losses  for most mainstream investors in 2008). There are a variety of simple methods to reduce risk or even to position in ways that would enormously benefit from another global stock market selling frenzy. Anyone who has questions about how to assess risk, reduce risk, and increase opportunity is welcome to contact me.

 

 

Measuring market risk and opportunity

December 20, 2014

Measuring market risk and opportunity
Through this presentation, you will understand a key factor in measuring the probability or risk of any investment suddenly losing significant value (especially if that market has been strong for a long time). You will also understand the opposite issue: the potential for a market to begin a sudden and lasting increase in value (especially if that market has been “dismissed” or “discounted” by mainstream investors for a long time).

The basic issue is extremely simple, though perhaps surprisingly ironic: when the masses are suddenly extremely enthusiastic about a particular market, that indicates a big increase in risk. We can call that the issue of sentiment or market saturation, which is similar to measuring the humidity of air.

When humidity (the amount of moisture in the air) is at 95% of what is physically possible, then how much higher can humidity levels rise? When humidity is 5%, how much lower can it go?

equilibrium relative humidity

If you imagine a container full of liquid set on an dry, hot stove, then at what point is there the greatest potential to make a lot of steam? A full pot can make a lot of steam. An empty pot cannot make any steam. A pot with a small amount of liquid can only make a small amount of steam.

Next, if you have a full pot, how much more liquid can you add to that pot? Until some of the current liquid is removed (like by heat vaporizing it or by a big spoon), there is less and less potential for new volume as the pot gets fuller and fuller, right?

oil sentiment lows

In terms of investment markets, the same principles apply (generally speaking). What circumstance coincides with the start of long rallies? When sentiment is unusually low (see the chart above of global oil prices), then there is a potential for a large, long increase in price.

Note that low sentiment does not predict exactly when prices will reverse or at what price level, but sentiment does indicate the percentage of investors that are currently skeptical about a market and thus could enter in (driving up prices). Sentiment (market saturation) is simply an indicator of risk and opportunity, not a predictor of specific reversal points.

oil sentiment highs

In contrast, if there are very few investors who are skeptical, then there is much less potential for a long, large rally from current price levels. As shown in the chart above, the potential for a sharp drop from current prices levels (a peak) corresponds to survey responses of “above average” sentiment (as in unusual enthusiasm or “bullishness”) toward that market.

Again, only if there is a huge majority of investors who are skeptical, then prices can make the most historic increases (as the flood of trend-following investors slowly buy in to that market, resulting in a rally that is long and large). So, one of the simplest strategies of an investment analyst would be to assess a variety of markets (such as oil, US stocks, US bonds, & various currencies) in order to identify notable extremes of sentiment (market saturation).

Where markets are most saturated, once can reduce risk (by shifting to tight stop-losses or only trading a type of insurance contract called an “option contract”). Or, one can simply exit any open positions (sell) and then stay out while focusing on which markets are currently the most “discounted” (the biggest discounts, such as oil in 1999 when prices were about $11 per barrel). Where markets are least saturated (in terms of optimistic sentiment) but are rapidly rising in sentiment, such as from 9% optimism suddenly jumping to 24% optimism, that leaves a lot of potential for additional increases in optimism, right?

Note that in late 2006, when oil market sentiment hit a major low (the lowest in at least 10 years), oil prices quickly went from around $50 per barrel up to well over $100 ($148). That kind of rally is what is possible when a market is at a historic low in sentiment.

HumidityDependanceOnTemperature 2
Next, back to some everyday examples, imagine that you have 5 sponges and you want to measure the probability of each sponge quickly becoming drier than it currently is. The simplest issue would be how dry (or how wet) each sponge already is, right?

If a sponge is very dry, there is very little risk of it getting much drier because it really cannot get much drier than it is. If a sponge is overflowing with wetness, then with even a very light squeeze, it could suddenly lose a lot of the liquid currently in that sponge. With a strong squeeze, a very wet sponge will pour out water, right?

squeezgin sponge

If you squeeze a dry sponge, then no moisture comes out. If you squeeze a very wet sponge, then lots of moisture comes. If you squeeze a moderately moist sponge, some moisture comes out, but not as much as with a really wet sponge.

Back to investment markets, when almost everyone is already “buying in” to a particular market, then there is a very small amount of people left to go from “not buying in to it” to “buying in to it.” So, at the point of a trend reversing, the remaining opportunity for a new surge of buying is at a minimum and the potential for large amounts of selling is at a maximum.

In 2008, sentiment in oil markets reached an extreme of 90% “bullishness.” That was followed by a price collapse of well over two-thirds in several months.

oil sentiment

Then, in late March of 2014, sentiment reached a new extreme: 91% enthusiasm (see the brown box above). There was also a record-breaking contrast between “large speculators” (who are reliably wrong at trend reversals) and “commercial investors” (AKA the smart money- those who are regularly ahead of trend reversals… perhaps because they respect the issue of market saturation). What do you think happened to oil prices after that record-breaking extreme of optimism (even more extreme than in 2008- even though prices were WAY below the 2008 levels)?

oil highs

As a closing note, I have been publishing accurate forecasts of investment markets since early 2003. In 2004, I used the phrase “the dominOIL effect” to explain the sequence of events that I expected to unfold as global oil prices spiked, resulting in dramatic changes to the global economy as well as the regional economies of Europe, Asia, and North America.

In recent years, I have frequently said “prices of fuel (including gasoline) will come down again, but many people will not like the reasons why. They may rejoice at first, but that is because they have absolutely no comprehension of why fuel prices are dropping. It is because global demand, as in the global economy, is turning conservative. It is because the economic boom of the 1990s has been over for 15 years already.”

stocks peak

Here is a chart of global stock markets showing the peak in 2007 and a slightly higher peak in 2014. From 2009 to March of 2014, demand from an expanding global economy drove up oil prices from near $40 to well over $100 again. However, when oil prices faltered in spring of 2014, was that because a new competitor pulled “market share” away from fossil fuels? No, it was not because of something within energy markets (like airplanes worldwide converting from petroleum-based fuels to nuclear energy). It was simply because the global economy could only afford to expand again up to the point of raising oil prices to just over $100.

There may be a few sharp rallies in fuel prices of course in the near future. Global stocks might even make a new high soon. It is not impossible.

However, what is absolutely certain is that when markets are most saturated, predictable risk is at a maximum. (Unpredictable risk is a different issue, but predictable risk is very simple: extremely optimistic sentiment). In contrast, when sentiment is at a historic low for a particular market but rising rapidly, predictable opportunity is at a maximum.

For those who are so wealthy that they choose to invest in ways that ignore logic and sentiment, the rest of us thank you very much for making it so easy for us. I am not wealthy enough (yet) to be so complacent. Some people just cannot afford to be so oblivious to risk (market saturation).

sponges

If you ally with those who are complacent and negligent, your results will follow accordingly. If you ally with those who are motivated and diligent, quite different results are predictable.

Not everyone can get above average results, but someone has to do it, right? Are you interested in joining me in producing far above average results for your investments and finances? If so, I invite you to contact me and we can identify your priorities and preferences.

Note again that market sentiment is just a very basic indicator of risk and opportunity. Once I know which markets have ideal conditions regarding low risk and multiplying opportunity, there are many other issues that I use to actually select which markets to trade, exactly when to trade them, precisely how, and so on. I explore several of those issues in this video:

Investing for stable, steady growth PART 4

June 7, 2013

Yesterday afternoon (June 5) I posted this quick update on facebook:

“US stocks were weak again today, but not weak enough to confirm that the long-term plunge has begun, if we do not see a 2% or greater drop tomorrow (intraday), then I expect another week or more of rebound before the capitulation phase begins and and the tide “takes over the waves.” If there is at least a 2% drop early tomorrow, it could be much larger by the end of the day. That will be a huge profit for a small number of investors and a small loss for a huge number of investors.”

While stocks were somewhat weak early today, the 4% decline of the last 7 or 8 trading days is NOT a clear capitulation (panic). So, if the small rebound that started today can hang on for another few days, I think that the US stock market might squeak out one more new high. (That means a recovery of the 4% drop since last week’s high. I forecast on May 21 the recent decline: https://jrfibonacci.wordpress.com/2013/05/21/investing-for-stable-steady-growth-part-2/)

bullish or bearish US stocks (DJIA)

However, even though the decline so far has not been a panic, before long, prices are likely to plunge, which is being confirmed in the last few weeks because the buying activity is clearly “exhaustion-buying.” Momentum data (TRIN, A/D,  etc…) show that it is taking a huge amount of buying just to keep prices as steady as they have been- dropping only 4% since last week.

Using common methods like leveraged investing (like how people borrow 50% or even 90% of the funds to invest in real estate), it would be simple to have made gains of between 8% and 40% in the last two weeks from this easily predicted decline. Leveraged investing would include purchasing leveraged funds (leveraged ETFs) or “margin” trading.

Using “cash only” for investing in unleveraged inverse ETFs, one could also have made  4% (without any short-term repositioning, though any competent trader would of course adjust position across the last few weeks if they had the buying power to do so). However, of course, the vast majority of people investing in complacency simply lost 4% across this easily predictable downturn. Given the “internal weakness” shown in the downturn, it confirms my longer-term forecast, but also has me expecting another wave of buying before unscrupulous buyers exhaust their buying power and a dramatic collapse of price ensues as panicking investors suddenly (over the next few months?) go from complacent to shocked, disappointed, frightened and anxious, etc…. Their under-estimation of risk is perhaps only exceeded by the incredible under-estimations of risk by aggressive real estate speculators in the US (and Europe, etc…).

Pioneers Festival Investors Day

Pioneers Festival Investors Day (Photo credit: Heisenberg Media)

realism about investment risk and opportunity

February 28, 2013
Investment Conference

Investment Conference (Photo credit: Salmaan Taseer)

I have an update on investing. First, keep in mind that I published predictions in 2004 of the rising of fuel prices in the US and elsewhere, which I said (in 2004) would be the primary factor that would break the trend of manic speculation in real estate borrowing (and prices)- which began by mid-2005 in “energy-sensitive” places like Phoenix and Las Vegas– and that the fuel price spike and real estate crash also would bring down prices of US financial stocks in particular (and stock market speculation in general)- which happened in 2007. Did you get all that? Now… here is another update.

US stock market prices are at a critical level of risk (and opportunity). About an hour ago, I bought 9 positions at $9 that I sold a moment ago at $19 (just over a 100% gain). That was just a small portion of my account that I was trading “for fun” (expecting a nice gain, but not especially concerned about the results of that individual trade).

Dangerous Risk Adrenaline Suicide by Fear of F...

Dangerous Risk Adrenaline Suicide by Fear of Falling (Photo credit: epSos.de)

English: Phillippine stock market board

English: Phillippine stock market board (Photo credit: Wikipedia)

The big opportunity (and risk) is in the immediate future. This week, I made around 8%-10% gains overall (and I have not done the math yet and probably won’t bother). My gains in the last 4 days alone are better than I expect most investors will do this year (because I expect most investors to be more disappointed in 2013 by the results of their choices than in any prior year in any of our lives).

Most of my investments right now are in a short-term investing fund called SPXS, which I bought in to today at $13.64. I expect that at some point tomorrow the value of those positions will rise so high that I will have at least doubled the gains I already made in the previous four days, but I expect to keep holding it for many days or even a few weeks.

That fund is the kind of fund that even relatively unsophisticated investors can access (like in regular IRAs and even some 401Ks). Similar funds that are even more accessible include RYURX and PSSAX. They are shown in the attached image, producing gains of over 40% in less than 2 months (in late 2008) in the same period of time that US stocks plummeted over 30% (and gold mining stocks were down by over 50%).

funds

Note that “any competent forecaster” forecast the US stock market crash (and the real estate market crash). In other words, anyone who did not forecast what actually later happened is not competent- especially if they in fact forecast something else.

So, I say that not only as someone who published forecasts of that, but also as someone who read many other authors who, looking at the same data and using the same correlations and logic, recognized the same risks and opportunities. Most people not only do not know how to assess the risk of real estate market and stock market crashes, but apparently do not have any commitment to produce “above average” results, instead settling for having average results and then complaining along with most everyone else when the issues that people like me write about in 2004 or 2003 come to public attention in 2008 (but then only to be dismissed again in a new wave of extreme complacency/trance).

Fox News Channel

Fox News Channel (Photo credit: Wikipedia)

People who are interested in how to adapt to economic realities, to both re-assess and reduce any risk as well as to benefit from easily recognizable shifts in trend are welcome to contact me privately. Note that just because most people only recognized issues like rising gasoline prices as a major economic issue in 2007 (not in 2004 like I did), that just shows a lack of commitment on their part. It was not hard to recognize the issue years before it made headlines. I reported on those issues years before the mainstream average investors expressed any interest in re-assessing the safety and prudence of their investment choices (or lack of safety and prudence).

Public Broadcasting Service

Public Broadcasting Service (Photo credit: Wikipedia)

Those who are waiting on Fox news and PBS to report on economics are like stock market investors in AIG who only found that AIG was in serious financial trouble AFTER they filed for bankruptcy. Note that the day before they filed for bankruptcy, their finances were just as bad as the day they filed and it was reported in the media. Most investors simply lacked the commitment required to assess the realistic risks of their investment alternatives. They just bought the things that advertisers and commission-earning salespeople (realtors, insurance sales people, etc) made the most profit by selling. Indeed, the financial balance sheet of AIG actually IMPROVED when they invoked the protections available through bankruptcy courts.

English: The top portion of the American Inter...

English: The top portion of the American International Group headquarters building in New York City at dusk; see a similar image of the building sunlit. (Photo credit: Wikipedia)

Again, most investors were shocked in 2007 and 2008 by the rise of fuel prices (which I detailed in 2004), the fall of real estate prices (which I referenced as far back as early 2003), as well as declines in stock markets. The naivete and complacency of the “average investor” is what makes it so incredibly easy for “above average investors” to make 40% in under 2 months (at the expense of less committed investors, since markets are all about the redistribution of unearned gains, right?).

“Far above average” investors can make much more than 40% in a couple of good months. For those who would like for me to document the easy triple digit gains that most people missed in 2008 as they instead suffered huge losses by investing with little or no commitment to realistic assessments of risk (and opportunity), let me know.

Lehman Brothers Rockefeller centre

Lehman Brothers Rockefeller centre (Photo credit: Wikipedia)

secrets of humble partnering- the key to consistent, easy investment gains

March 4, 2012

a simple, bold assertion: partnering with markets is the key to consistent, easy investment gains

Imagine two groups of people: one group keeps investing in an old, familiar industry and the other group invests in a new technology. Will their investment results be exactly the same or somewhat different?

For instance, will bicycle investors perform the same a automobile industry investors? Will telegraph investors perform the same as those who invest in telephone technology or even in the radio industry?

Recall the children’s story of “The Three Little Pigs.” You were probably tucked in a warm bed looking at pictures of the different results of investing in a straw hut, a wooden shack, or even a brick mansion. Some structures collapsed from a blowing wind while only one provided secure shelter from a hungry wolf.

So, different methods clearly produce different results, right? When hurricanes and tornadoes arrive, will a house built on the sand provide the same results as a house built on the rock?

You may be wondering whether childrens’ stories and proverbs from scripture could have anything to teach us about our investment results recently and in the future. Consider that in just the next couple of minutes, we might learn something very valuable from briefly exploring the principle that different methods produce different results.

Most concisely, here is my fundamental assertion about accessing easy gains; for those who partner with markets, consistent investment gains are easy. Also, for all the rest, investing that is risky but is not recognized as risky is what provides the source of those easy gains to those who partner with markets, because so many blindly under-estimate risks that a few notice long before the mobs learn about those risks, such as from the mass media reporting one statistics that are already a month old or even an entire quarter or year out-of-date. The masses may be unpleasantly surprised because what they had believed to be safe or stable may be suddenly recognized as not currently safe or stable.

Those select few who notice changes early may prudently make practical adjustments that are insightful, brave, and of course not popular… yet. However, once those adjustments get popular, the easy gains of selective investors can be immense.

So, some humbly partner with markets, while others instead simply ignore or even violently resist market realities, discarding the simple truth of market realities and risks in favor of idolizing various ideals and ideologies in which they have been indoctrinated. They may vainly worship the guidance of commercial advertising, or of salespeople earning commissions and bearing the title of “licensed advisor” or “licensed agent,” or of the mass media’s dramatic and confusing analysis developed by only the most politically-correct economists. The masses may as well even complain forever about the unsatisfying guidance they have been following without making any personal adjustments to continuing to follow it!

Those blind speculators following the blind advisors are inevitably surprised when they recognize the reality of their speculative gambling, typically focusing desperately on the latest possible saviors as well as on any convenient excuses and targets of blame to explain how they have been victimized, rather than openly admitting that they have been negligently responsible for producing for themselves the natural results of their high-risk investing. They may as well keep putting all of their hysterical faith in partisan politicians to rescue their favorite investments from the realities of markets and economics.

But couldn’t politicians rescue the bicycle industry from the automobile industry? Could politicians rescue the tent industry from the construction industry? Could politicians rescue the firewood industry from the coal industry or the woodstove industry from the electrical stove industry? Could politicians rescue the telegraph industry from the telephone industry (or from fax machines and email)?

Or, what if we pass a pro-telegraph constitutional amendment or make a treaty with every nation in the world to only use telegraphs? Subsidies and restrictions on competition can certainly influence isolated territories, but eventually, telegraph technology simply may not compete with things like CBs and cell phones.

Politicians simply cannot rescue everyone from the progress of technological innovation. Politicians cannot rescue anyone at all from personal responsibility for diet and exercise. Politicians certainly cannot rescue everyone from the realities of geology (such as the depletion of fossil fuels like oil, coal, and natural gas and the natural consequences of such depletion).

Markets are informal collectives formed by the spontaneous actions of masses of people. Politicians cannot rescue the masses of people from the masses of people and their own actions.

You may have heard that God helps those who help themselves. Consider that God helps those who are committed to partnering.

Those who partner with markets prosper. For those who ignore or even resist the realities of market risks and opportunities (and instead stay withdrawn to read headlines and continue blindly investing in the promises of politicians and insurance companies and so on), such masses are still subject to the risks of a redistribution away from them toward those who have been insightful and brave and adaptive. In other words, different methods produce different results!

To partner with markets to access easy gains, call
407 4 EZ GAINS
(407 439 4246)

[that # is just a voice mail. You can directly reach me at 480 265 5522.]

Published on Dec. 10, 2010

 

http://www.OneEyedKingsWealthClub.com

Related articles

greed & economic crisis

January 18, 2012

NOTE: the following text is just a summary. The video below details a demonstration of the conclusions or presuppositions referenced below.

Greed is a form of fear. When one fears losses, one hopes for gains. When the hope for gains extends beyond one’s awareness of risk, then one can be surprised at a sudden recognition of risk. When greedy, one neglects risk. When greedy, one is afraid of recognizing the actual risks and so one is vulnerable to pretense.

Gamblers study risk, accept risk, and accept their results as the results of gambling. The greedy hope for someone to guarantee them opportunities without risk, then blame others for the natural results of taking naive risks, then hope for sympathy and salvation from others.
The video essay touches several subjects including investor psychology, the similarities and differences between casino gambling and gambling on real estate and stock markets, how greed can be considered the source of the global economic crisis, and how the insurance industry is a legally-protected Ponzi scheme.
http://www.TheDominOILeffect.com
http://www.OneEyedKingsWealthClub.com
http:/jrfibonacci.wordpress.com

when do global stock markets crash?

September 21, 2011
If the costs of conducting “business as usual” rise enough that profit margins turn negative, wouldn’t any business owner consider shutting down? When costs rise so much that net operating profits do not just disappear, but turn into net operating losses, what would you do as a business owner? When continuing to operate a business clearly is less favorable than simply shutting down, then any business would likely close, right? What if a bunch of them closed at once?
That is probably one of the most unappealing possibilities conceivable. If one business depends on others (suppliers, customers, etc), and then even just one essential supplier shuts down, then other businesses depending on that supplier CANNOT continue to conduct “business as usual”- at least not until they can replace that supplier.
This is the same basic issue that people have been concerned about in regard to the government of Greece or of Minnesota, but those isolated budget issues are symptoms of a broader issue: the end of the age of cheap fossil fuel. I will come back to the rising cost of commodities in a minute.
First, if the government of Greece ceased to function, that would definitely effect the operation of private businesses in Greece, right? Private businesses typically rely on government courts not only to provide basic services like road maintenance, but in particular to enforce all legal contracts with organized coercion. If private businesses could not hire governments to use force to evict delinquent tenants and foreclose on them, or to force their suppliers and customers to do as they legally promised, then private businesses would be responsible for the additional cost of acting as it’s own collection agency, rather than hiring the court’s deputies to take their guns and enforce contracts with organized coercion.
From an economic perspective, one can think of any government as a collection agency that is organized and funded by the owners of private businesses in order to arbitrate debt claims for validity and then collect validated debts using organized coercion. The owners of private businesses uniformly agree to promote a sort of monopoly in the use of organized coercion. While there are different levels of government, like city and county and state and national, usually these concentric monopolies co-exist peacefully.
Of course, nations have a history of invading other nations. But outside of that, the only time that local and national governments have a major conflict is when there is a “civil war” between one operation of organized coercion that is claiming to have authority over smaller operations of organized coercion that then “secede” and band together, like to attempt to preserve the patterns of a prior system of relatively decentralized organized coercion.
For instance, let’s say that the government Treasury of Greece eventually defaults. It owes debt to the US, Italy, Germany, and so on. Well, what if Italy, Germany, and the US all start to fight over ruling Greece and cutting up it’s resources? That is basically a world war, like if it includes a distant global power like the US coming over to Europe to defend “US national interests” in Greece from the “axis” of an alliance between Italy and Germany.
Or, what if Germany or Greece wants to secede from the EU instead of being subject to the decisions issued down by the central EU authority? For instance, what if the EU decrees that Germany is liable for the debts entered in to by Greece. That might produce a civil war, right? If a lot of the debt that is owed to Germany (and Germans) is suddenly declared to be paid by Germans and Germany, there is also a logical or logistical issue there, right?
With the USSR, various smaller jurisdictions might “secede” and rebel from the central authority. With the US in the 1860s, the same could happen. With the EU today, it’s about the same. Also, Yugoslavia used to be one country, then, in the 1990s, ceased to function as a singularity and officially split in to several republics, but not before a civil war that involved the militaries of lots of outside nations.
When one government falters or is defeated militarily by another, that is not the end of government monopolies on organized coercion, but sudden changes in procedure can arise. Certain businesses also tend not to operate as profitably when there is a civil war going on and large portions of consumer population is getting killed or goes to war to kill their opponents. Consumption may shift towards the basic “staples” or even “the bare essentials.”
Sometimes a prior central unity of organized coercion is maintained and sometimes a new centralizing of organized coercion develops. Sometimes what happens is a split in to two or more independent operations of organized coercion. In the case of the European Union in recent years, numerous nations went from relatively informal alliances like NATO or NAFTA or the UN to a much more formal alliance of a single set of consistent procedures, passports, and currency, such as the EU and it’s Euro currency.
Now, before we look closer at prices of commodities and how rising commodities prices are related to global economic activity, let’s look at a chart of the cumulative stock prices of 1800 global companies, priced in Euros:
Here is the same global stock market index, but priced in US Dollars:
While the two charts are very similar, a few differences are notable.  In 2007, the Euro pricing topped and reversed prior to the $ pricing. In 2008, the Euro pricing made a low and started a multi-year rebound while the $ pricing made another low in early 2009  and then started a multi-year rebound. Finally, in early 2011, the Euro pricing topped and reversed while the $ pricing once again topped a few months later and then reversed sharply.
The pattern is obvious. The Euro pricing is the leader and the $ pricing is the laggard.
However, as I have indicated from the beginning, the real leader may not be stock prices at all. It may be that those fluctuations in stock prices are symptoms of a simpler development.
Since 2004, I have suggested that rising commodities prices, especially rising fuel prices, would eventually slow down and then de-stabilize the global economy. I even specified that the issue was debt, and that eventually the cost of borrowing to pay for increasingly scarce resources would “pop the credit bubble” and bring down real estate prices worldwide, which I have been forecasting since 2003.
Above is a chart of the prices of a bundle of global commodities (priced in US Dollars and shown in blue) and an index of the overall prices of 1800 global stocks (priced in US Dollars and shown in red). It is easy enough to note that eventually (by 2007), the mutual rising of those two lines diverged. As commodity prices soared to such a high level that economic activity declined, like when the price for a gallon of diesel exceed $11 in the UK in 2008,  stock prices fell first and kept falling.
Once demand for commodities dropped enough that commodity prices came down, stock markets were already “caught in a tide” of a deflating credit bubble. In other words, the aggressive borrowing that had allowed for global stock prices to keep up with global commodity prices from 2004-2007 did n0t resume. Previously stable lenders were in trouble.
Naturally, I am oversimplifying a bit, but the basic idea is that a relative scarcity of resources (especially fossil fuels like oil) drove up commodity prices leading to other effects. The “relative scarcity,” by the way, is not that supplies of tangible commodities were plummeting, but that demand was growing at a historic pace while supply volumes (production of crude oil, for instance) was flattening or even declining slightly.
In the case of oil, this development (relative scarcity of oil supplies- relative to ballooning demand) was predicted in the 1950s and was repeatedly referenced in the 1970s by US Presidents Nixon, Ford, and Carter. However, that was just a national issue, since as US oil production peaked, the US could afford to import oil from elsewhere. now, with global oil production peaking in 2006, a much more widespread issue is emerging.
This issue is not specific to a particular exclusive region of the globe like the US or to a single currency or to a particular system of organized violence (court system) which enforces the value of all currencies and indeed of all financial contracts. There is no particular national political solution to a global economic shortage of fuel. Courts only have power over human activity (including the “activity” of human perception or interpretations in language), but not over the geological facts of the volume of oil reserves globally. Reports can lie, but deceptive reports do not deceive the wells or the amount of oil in the oil deposits.
That bring us to a different perspective on the prices of the global stock market. Above, we reviewed the price of the global stock market relative to the US Dollar and also relative to the Euro, which we also saw has a clear history of forecasting the trend reversals of global stock prices measured in US Dollars.
Now, let’s look at about 4 years of global stock market prices relative to global commodity prices. This is a chart showing changes over time in how much tangible resources can be purchased by selling the same set of global stocks.
The most obvious thing is that this chart has gone down rather consistently for all 4 years. There was no recovery in the tangible purchasing power of the global stock market in 2009 and 2010 relative to that particular set of major global commodities called “CCI.”
Global stocks measured in US Dollars made a low in early 2009. Global stocks measured in Euro made a low prior to that in late 2008.
However, prior to both of those, the above chart of global stocks relative to global commodities made a low in mid-2008, then rallied in to late 2008, then floated a bit for a year or two and recently broke sharply below the lows of early 2011.
As in late 2008, we may now see prices of global commodities and global stocks tumble together. In late 2008, global commodity prices did the worst, then global stock prices, then- much better than either of those two- the Euro did quite well. However, by far, the US Dollar did better than any of those 3 other alternatives (for late 2008).
That is a fit with what I began predicting in 2003. Now, we are one the brink of a continuation of the shift that was notable in global stocks by 2007. Relative scarcity of global commodities is slowing global economy activity, especially in relation to fuels, but that rising fuel prices also cause rising prices in transportation costs of all things shipped long distances.
Rising fuel costs are not inflation. If it was just inflation, then US real estate prices would not have begun a historic plummet in 2005. If it was just inflation, then global stocks priced in whatever currency would not have plunged.
Back in 1999, when global oil prices began a rally and doubled in less than 12 months, the prices of a group of companies very dependent on the price of fuel fell by 40%: airlines in the US. Stock prices of ending institutions also declined, though not as far. Again, the decline in prices of airlines and lenders preceded the top of the high-tech bubble as well as the broader stock market decline of 2000-2002.
Commodity prices matter. When diesel hit $11 per gallon in the UK (and Germany) in 2008, people changed their behavior, including business owners.
Stock prices shifted (down). Currency values shifted (eventually, way up relative to historical norms).
Now, the instability in the EU that myself and others have been referencing for many years is now getting attention from the mainstream media in the US. While there is perhaps no open talk of civil war, there have been a series of riots, including riots not directly explained by economics or politics. However, when an economy is de-stabilizing, that can manifest in “short-fuse” public hysteria, in epidemics related to stressed immune systems, and of course in prices.
Previously, people perceived that stocks were quite safe, as in a “safe haven.” Then, when stocks fell, people perceived that real estate was safe. Then, when real estate was safe, people perceived that all commodities, including gold and silver, would be safe.
However, silver prices fell over 90%  from 1980 to 2000. Is that the kind of safety that people are seeking?
In late 2008, the Euro was safer than most alternatives (rising against a wide variety of alternatives), and the US Dollar was even safer than that. This time, the Euro may not do so well. The entire EU may not do so well.
The economy of the EU is much more dependent on foreign oil than the US. The economy of the EU is a bit more like the economy of Japan, which is even more dependent on foreign oil, and has been in a deflation for nearly 22 years now.
Will Europeans (others who have been invested in the EU) flood to the US Dollar and US economy? I think so. However, I do not think that the US economy will do well.
In fact,  as we look at the chart above of Japan, the Japanese currency (Yen) has done extremely well in recent decades even though the economy there (and stock market prices) have not done so well. As the court system in Japan is recognized as more and more crucial to the economy of Japan, the Yen have been very well-respected by the Japanese and others.
Will the Yen or the Euro or the US Dollar collapse in to hyperinflation or a civil split (civil war) resulting in the use of multiple currencies? Or, will the global centralizing of court systems continue as the UN, World Court, World Bank, and BIS continue extending their empire?
In the case of the USSR, the central government disbanded, but initially a monetary union was maintained by 15 of the independent states (operations of organized coercion). As time went on, the various independent jurisdictions (of organized coercion) issued their own currencies.
See http://en.wikipedia.org/wiki/Soviet_ruble#Replacement_currencies_in_the_former_Soviet_republics
Russia continued to use rubles, but in the old USSR, rubles were only good to purchase certain things from the government, rather like credits for a prisoner in jail or like gift certificates that can only be used with a certain store or certain catalog. The rubles had no particular functionality outside of the USSR. Now, Russian rubles are traded in open market exchanges at variable rates with other national currencies.
Relative to the US and the $, the EU and the Euro may do well, but I do not expect so at least in the mid-term. While many in the US are concerned about the creditworthiness of the US Treasury, everything is relative in investment markets.
Relative to US real estate, US Dollars have done very well for several years. Relative to US stocks, US Dollars did so well in 2008 alone that stocks are still way behind and, as of recent months, have resumed falling.
Today, I have titled this blog post “when do global stock markets crash” because today is an interesting juncture in global stock markets. In 2003, I was already forecasting the type of stock decline that developed in 2007. I am clear, especially when looking at prices of global stocks relative to global commodities, that the decline that began in 2007, which I forecast back in 2003, did not end.
Further, in the days and weeks and months ahead, I expect that more and more will realize that the global stock market top in 2007 is not going to be exceeded any time soon. I expect that market pricing of global stocks, including in the US, will reflect that recognition with a series of large declines and increasing volatility.
In other words, people will increasingly recognize the value of the operations of organized coercion within their midst and increasingly recognize the instability of most if not all private lending institutions. I expect that the attention to credit ratings as if they are anywhere near as important as cash and cash flow will end.
English: Various Euro bills.

Image via Wikipedia

When a currency is only accepted by one particular government and that government operation of organized coercion has a functional monopoly on the operation of all businesses within a jurisdiction, credit ratings may simply not be an issue. Similarly, with food stamps, there is no issue of credit rating. Prisoners are not lent funds by the prison. Soldiers do not apply for credit lines at the commissary, but are issued a ration of coupons. During wartime, that is also common for civilians, and something similar happened in the US in the 1970s in regard to gasoline.
Private credit markets are destabilizing. I have published warnings about this since 2003. But that is just the symptom of a simpler issue.
Human populations are increasingly demanding access to diminishing resources. Governments will change or arise to stabilize and regulate access to resources.
Governments are operations of organized coercion. Organized coercion is the basis of the purchasing power of all currencies (and all financial contracts).
Increasingly, populations will recognize the value of organized coercion to maintain order. They will seek to pay off old debt and will diminish involvement in borrowing as well as lending. Private credit markets as we know them may cease to function, as in the case of jurisdictions like the USSR or Cuba. Public trading of private corporations may drop in volume considerably, or private corporations may be socialized, as we see happening in the US within such fields as education, gambling, health insurance, and health care, plus, as of 2008, the auto industry and banking industry. Of course, the US national government with the FDIC, FHA, HUD, GNMA, FNMA, FDMC, SLMA and so on… have long been involved in direct financial responsibility for much of the US economy.
50 years ago, what percentage of the public lived in government housing? 50 years ago, what percentage of the population received subsidies (like social security or unemployment) from the federal government?
How about 100 years ago? Socialism has made immense progress in the US in the last 100 years, though many might resist even considering that idea or would at least propose some other alternative as favorable.
Imagine that if the bureaucracy of the EU were to so dominate the economy of Europe that after, for instance, 150 or 250 years, Europeans forgot that Germany and France were ever not united? That would be like New Yorkers and Georgians forgetting their historical roots- back when they had independent currencies and very distinct cultures, and even fought in wars against each other. Impossible?
However, a major logistical problem in the EU is the absence of a common language. Will a global empire establish English as the imperial language, or will the EU dissolve, or what?
Well, I do not know yet. But the EU is facing huge logistical problems, especially due to rising gasoline prices which have recently approached their highs of 2008 (in Europe and elsewhere), and the US is in position to receive a huge surge of people seeking a “safe haven.” However, perceived safe havens have a history of being perceived as safe only temporarily.

first harmony then prosperity

August 9, 2011
Harmony internally, then prosperity externally

Yes, “there is more to life than money.” Also important, “a fool and his money are soon parted.”

So be aware of the possibility of being foolish about wealth. Be aware of the possibility of being foolish about all of life or any of it. Then be aware of the possibility of being calm and clear and courageous about life, including the aspect of life regarding wealth.
Lately, many people are talking about financial risk and results that they have called surprising. Many of them have been investing their trust in mass media or massive bureaucracies like the insurance company AIG or the Federal Reserve or the government of the USSR– you thought I was going to say US, didn’t you?
What have been the consequences of investing trust in the mass media and massive bureaucracies? Have those results (perhaps such as being unpleasantly surprised) raised the question as to whether those methods might have been foolish? Is it possible that foolish methods of investing trust may produce the result of financial losses, rather like the saying goes that “a fool and his money are soon parted?”
What about discounting the importance of financial realities? Are finances suddenly important to you or were they always important and only recently recognized as important? How about this: are gasoline or electricity suddenly important to you or were they always important and only recently recognized as important because we could take them for granted until prices reached a point that we altered our perspective and our behavior based on things like rising gasoline prices.
For many years, I have been focusing on the possibility of rising fuel prices and their consequences on the economies of Japan, the USSR, Europe, and the US. My publication in 2004 of “the Real US Deficit: OIL” featured a section called “the DominOIL effect” relating to why I expected fuel prices to continue their dramatic rise that began in 1999 and what consequences I expected in the US, which I expected to be similar to what had been happening in Japan since 1989 and the UK and EU since 1999.
The next chart shows the all-time low of inflation-adjusted prices of gasoline in the US in 1999. Global oil prices also made a major low in 1999.
The last chart is a chart of the stock market of the UK. Next, here is what gas prices in the US were near the time of that article in 2004:
My central question (in this 2004 publication: www.gold-eagle.com/editorials_04/fibonacci110704.html) was “how many dollars will it cost to buy a gallon of gasoline next year?” Here is an 8-year chart of what happened:
(from here: http://www.indexmundi.com/commodities/?commodity=rbob-gasoline&months=120)
Some people have questioned my logic because of oil and gasoline prices falling sharply in 2008.  However, for those that have the courage to read my old articles, I did not say that demand for fuel would never drop or that prices would never drop.
On the contrary, I simply said that diminishing supplies (since the easily predictable peaking of global oil production in 2006) would raise prices enough to slow down the global economy, including that of the US. That predictable slowing of economic activity would predictably reduce demand for fuel, which would predictably drop prices. The drop in 2008 does not disprove the accuracy of the logic, but establish it. I may have even published all of that content, but it is pretty easy to see the logic one’s self if one is willing and able to face the simple facts.
How can the global economy expand after the 2006 peak in oil production? It must contract. Economic activity drops as fuel supply drops. Things like currency inflation or credit deflation are secondary financial measures relative to a primary tangible economic issue like an empty fuel tank in your car. Having lots of cash or credit but being out of gas in the middle of a desolate highway do not make a fool into a genius. Primary functional economic tangibles like gasoline and food are the things that we value having currency to access. No one cares much about currency (or gold) when they are starving, right?
So, it was the spiking of fuel prices by 2007 that were accompanied by the steep decline of global stock prices in 2008. After stocks began to plummet, fuel prices did too eventually- all as I predicted. Further, real estate borrowing had predictably diminished considerably as well, so real estate prices predictably declined dramatically, which resulted in financial trouble for many financial institutions, such as FNMA, AIG, and WaMu, as I specifically predicted in a video that has been online since 2006. (I can send a link to those interested.)
Once fuel prices fell, the global stock market began to recover. However, gasoline prices in the US recently approached their 2008 highs again (in red below).

In 2007, stocks peaked while gasoline (and silver) rose. Then silver peaked next in early 2008), then gasoline. Doesn’t that imply that rising fuel prices may have been the cause of the decline in prices of stocks (in the US and globally) and even of silver? Or maybe it was the high silver prices that brought down everything, right? ;)
When gasoline prices in the US reached a high enough level in April to reverse the spending behavior of the US economy, dropping demand enough to reduce purchases and bring down gasoline prices. However, that reduction in a fundamental behavior within the US economy also brought down the prices of the US stock market (blue above) and even of silver (green above).
In fact, those three things peaked on the exact same day: April 29th, 2011 (close-up shown below). But no one could have predicted that rising gasoline prices would have in any way effected the US economy or spending habits or stock prices or even silver prices, right? Rising fuel prices could not really have any effect on popping bubbles of speculative mania, would they?


Then again, maybe the cause was President Bush or President Obama, not gasoline prices. Or maybe they are personally responsible for gasoline prices- like maybe whether the prices of gasoline rise or fall is totally dependent on the choices of exactly one person.
But why did the Japanese economy slow down in 1989? Why did European economies begin to slow in 1999? Did $11 gallons of diesel in the UK in 2008 have any effect on the spending behaviors and economic activities of business and consumers within the UK?
Possible? Yes.
Predictable? Yes!
So, what is coming next? More selling of stocks and real estate. I’ve been warning of that since before 2004. I knew that the speculative bubbles would not last forever and were nearing their extremes. Real estate began peaking in 2005 (in places like Phoenix) and soon extended to most of the US (and much of Europe etc).  Stocks began peaking in the US in 2007 (at least for most sectors, excluding high tech, which peaked several years prior).
Of course there were a few exceptions, like the US stock sector HUI (shown above). However, the mining stocks of HUI are part of the same economy, too. They actually peaked in early April this year (pink):
What has done well? Here are a few examples of gains approaching 100% gains in the last 10 days:
What else did well lately? I sold a put option for $1.07 today that closed Friday at $.17. That change (up over 400%) is a pretty decent increase for a single day, right?
But remember, the mass media and massive bureaucracies may indicate that there is no such thing as predictability, or at least not in certain instances. Even notice that as you are reading this sentence, there is absolutely no way to predict that this sentence is going to end with a punctuation mark, is there?
No one could have predicted any of this. The future is completely unrelated to the past- not just your personal future, but even the future of how this sentence is going to end.
Nature does not have any patterns in it. And that, as always, is entirely the fault of the US President. Or the Federal Reserve. Or OPEC. Or this sentence.
So how are we going to fix the problem of nature not having any predictable patterns in it? First, let’s blame someone else because that has always worked marvelously in the past, right? Then let’s wait for the person that we blame to save us from them. Finally, let’s complain about how waiting for them to save us from them is still not working again as usual as always.
Just do not adjust. After all, adjusting could effect your actual results, and no one is interested in financial security or economic prosperity because that would be evil and shameful and of no functional relevance whatsoever. So, is any of this fooling you?
Keep in mind that sometimes translations can shift the implication of a message. If someone were to suggest that proudly foolish naivete about financial speculative bubbles was a major risk, deserving great caution, do you think that message might be translated like this: “proud attachment to ideals about wealth is dangerous” or even “the love of money is the root of all evil?”
It’s not ignorance that is most risky. It is believing that something is so when in fact it is not.
From an emotional or irrational attachment to false presumptions, blame and anger and grief and agonizing and proud argumentativeness and shame all may arise predictably. Learn that, either the easy way or the hard way, but learn it fast.
By the way, yesterday at the close of trading (Monday 8/8/2011), I purchased some call options on the US Stock market. Those positions rise in value when stock prices rise. After one of the biggest down days in US stocks in decades, I understood that the panic of the masses after the weekend downgrade of US debt could be a short-term buy signal for US stocks.
So, after stock futures dropped another 2% in overnight trading, they then reversed 4% and are again pushing toward an open of more than 2% up. That should produce overnight gains of well over 100% for those instruments.
UPDATE:
I sold those call options for a gain of only 40% overnight. But that was just the start of the day. It got better…..

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