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April 25, 2009
Issue 43  -  Relativity
Anytime you look at statistics or investments or even potential spouses, the key to determining how good or bad something is depends on relativity.  This is just having a point of reference.  With no points of reference, it is IMPOSSIBLE to make a judgment on anything.  If there was only one horse in the world and it had three legs and poor eyesight, no one could say if the horse was good or bad.  There is an old joke that in the land of the blind the one eyed man is king.  Relatively speaking, this guy is much better than his peers even though he wouldn't have any depth perception.  Politicians use our lack of understanding in this area all the time.
The Obama administration is trying to use this to their advantage right now.  From the Washington Times:

"Obama tells Cabinet to cut $100 million more

Acknowledging a "confidence gap" with taxpayers, President Obama on Monday ordered his Cabinet to find $100 million in total spending cuts over the next 90 days as a signal they are serious about spending money wisely.

"One hundred million there, $100 million here, pretty soon, even in Washington, it adds up to real money," the president said after meeting with his Cabinet at the White House, saying he will require them to cut at least 100 specific programs.

The president said the cuts, while not big, "send a signal we are serious" about looking for savings. He said the money, which he said will come from agencies' administrative costs, needs to be saved so it can be spent on higher priorities such as health care. "
President Obama says that saving 100 million here, 100 million there and soon it adds up to real money, but does it?  In a word no.  The average human has no way to process large numbers in their mind.  Once you get above a million, it's just overwhelming and most people just nod and agree.  Just think of watching a sold out Rose Bowl and remember there is just over 100,000 people in that gigantic stadium.  You need ten Rose Bowls for a million.  I remember back to the million man march and the Park Authority estimated, based on air born photos, that the attendance peaked somewhere around 400,000.  The Nation of Islam protested loudly that they were deliberately undercounting the attendance which they claimed was 1.5 million (later reduced to 870,000 +/- 25%).  First off, let me say that 400,000 people is A LOT.  Incredible for an organized event.  The Park Authority had made the estimate using grid analysis where they divide the photo into sections and based on how many people could theoretically be in the space and the density of the people actually there, a pretty good estimate can be made.  It would be impossible to fit 1.5 million people into the occupied photo grids but that didn't stop the promoters from calling foul.  They were also using a lack of knowledge in relativity and math in general.
So Obama is going to cut 100 million dollars.  Well if the deficit is going to increase 3 trillion dollars under him this year, what does that mean?  It means it is all for show.  When Obama's spokesman had a press conference announcing the cuts, he was pressed about the relative insignificance of 100 million dollars and his response was, "only in Washington is 100 million dollars insignificant."  Unfortunately, at this point in time, that is true, it IS insignificant.  The telling statement from the spokesman was his request to "make sure you report this cut tonight and let the voters decide."  Translation:  This will fool the public, just make sure you tell them.  There was no justification for the tininess of 100 million, just, "make sure you tell them."  The present reporters asked NO follow up questions and I 'm sure dutifully reported the cuts that evening.
This is bread and circuses, fool the public, they don't do math and they will think we are really doing something.  That is the mind set of the administration, pathetic.  $100 million equates to less than 15 minutes of spending for the U.S. Government over the next year!  That's like $2 for a family making $75,000 a year.  Two dollars.  That's nothing.  Insignificant.
Maybe Obama is worried about these issues:  (from GATA)

General Motors and Falling Tax Receipts

General Motors proposal to exchange $1 billion in unsecured bonds into common stock is desperation squared. If the company cannot pay its bonds, does anyone really expect that their stock is going to be worth anything. After a bond default like that no one would be stupid enough to lend to them again except maybe the government. My guess is that this proposed swap has little to do with staying in business for long, but is an attempt by the derivative writers to avoid paying much more in credit default swaps. If the owners of those $1 billion in bonds were smart, they have already bought the swaps and stand to make more money from a default than without it. Looks like we have 39 days until GM goes nuclear and delivers another death blow to the banks and economy. What about all of GM’s part suppliers? Are they going to get paid for deliveries? They are probably requiring prepayment or payment upon delivery at this point.

The Federal Government is now spending about double what they are collecting in taxes. The Federal debt is now $11,193,459,542,379.92 and has risen $1,169 billion since the fiscal year started 10/1/08. For the week of April 14, 2009 thru April 21, 2009 the Federal debt increased $21 billion. The corresponding period in 2008 saw a drop in the debt of $89 billion. Needless to say, if they government is losing money during the week of April 15 tax collections, they are in big trouble. This is like having the municipal water level at the Houston reservoirs drop during a category 3 hurricane. Regards,

So the federal income for April is down!  The situation is much, much worse than is being reported.  By the time this is over, the whole country will realize this.  I still see the stock market getting crushed later this year.  I am still in market with my 401k, but am getting a little nervous.  The swine flu outbreak is not making me feel any better.  Prepare for the administration and powers that be to up the ante on rhetoric and spin.  The statistics coming out of the authorities will get worse and worse as far as reliability.  They will use trickery and deception to fool the public.  Watch the phrasing of news stories as they are written in the best light to make the reader think everything is ok.  Fortunately, the data is still available.  This head line is a little hard to spin:

"U.S. mass layoffs rise to highest on record

NEW YORK (Reuters) - Large-scale U.S. layoffs rose again in March, according to Labor Department data on Thursday, as the economy struggles with what many expect will be the country's worst post-World War II recession.

Last month witnessed 2,933 more mass layoffs, defined as affecting 50 or more workers, than February. This brought the total number of people who lost their jobs in this manner to 299,388, the highest on a record that dates back to 1995.

The U.S. job market has been under severe strain as a crisis first evident in housing spread to the rest of the economy, severely curtailing corporate profits and consumer spending.

Ongoing pain was evident across sectors, with the Labor Department also reporting another record for blanket layoffs within manufacturing.

Mass layoffs now total 31,414 since the start of the recession in December 2007, resulting in the loss of more than 3.2 million jobs. The monthly mass layoff numbers are compiled from establishments with at least 50 initial claims for unemployment insurance filed against them during a five-week period.

Separate data out on Thursday showed the number of continuing unemployment claims climbing to a new record of 6.14 million. Weekly initial jobless claims also rose again, to 640,000.

"Over the past year, the deterioration in initial claims, continuing claims, and the insured jobless rate has been just as bad as they were during the 1981-1982 recession, which has been the most severe in the post-World War II period," said Steven Wood, chief economist at Insight Economics.


The job market is no where near a turning point.  I don't expect jobs to pick up significantly for several years.  Unemployment is going to get much worse.  The spinners will have a harder and harder time of making things seem hunky dory.  Notice how this headline is phrased:
"U.S. existing home sales fell 3.0 pct in March

WASHINGTON, April 23 (Reuters) - The pace of sales of existing homes in the United States fell 3.0 percent in March to a much lower-than-expected annual rate of 4.57 million units, the National Association of Realtors said on Thursday.

Economists polled by Reuters had forecast home resales to slip to a 4.70 million-unit pace from a revised 4.71 million for February, which was initially reported as 4.72 million.

The inventory of existing homes for sale fell to 3.74 million from the 3.80 million overstock reported for February. The median national home price rose 4.2 percent to $175,200 from February, boosted by seasonal factors. However, prices fell 12.4 percent compared to the same period a year ago.
If this had been the other way around the headline would have focused on being "much better than expected" rather than an absolute percentage loss.  Subtle ways to keep people unfocused and confused.  3% down, to most people, is not that big of a deal as their frame of reference is prices of goods or stocks.  A 3% sale at a big box store just doesn't excite anyone, so obviously, a 3% loss of jobs is not too bad.  This mis-referencing masks how massively bad this really is.  Compounded out over a year, 3% works out to a loss of 42.5% of the jobs!  Do you think a headline like this would cause a little more unrest: 
Latest Job Losses Project to 40% Unemployment
This is just as accurate as what was used.  The turning point is getting closer when the commodity market will start to spin up again, especially gold and silver.  This story gives a hint of what is to come:
China gold reserves apparently doubled

HONG KONG (MarketWatch) -- China has added to its gold reserves and now holds 1,054 metric tons of the yellow metal, according to a Friday report by the Xinhua News Agency, which cited comment by Hu Xiaolian, head of the State Administration of Foreign Exchange.

Hu said that China's gold reserves had risen by 454 metric tons since 2003 and that the total was being reported to the International Monetary Fund as per the organization's rules.

A Dow Jones Newswire report said the figure cited was nearly double China's reported gold reserves as of the end of last month, but noted that it wasn't clear which gold reserves Hu was referring to.

She said China's gold reserves now rank fifth in the world among nations which publicly disclose their holdings.

Analysts said China bullion buying reflects efforts to diversify their nearly $2 trillion stockpile of foreign exchange reserves.

"Chinese officials have been increasingly vocal about their concern on the U.S. dollar and the U.S. bailout policies of late, and have actively been seeking to diversify into other assets, especially commodities," said Martin Hennecke, an associate director with Tyche Group in Hong Kong…

The new kid on the block is accumulating gold while the old powers talk of selling gold.  Who do you think is right.  The old guard protecting the status quo, or the new paradigm makers?  This chart shows the current state of gold ownership, and that's if you believe the likely false number from the U.S.  Remember the gold in Fort Knox hasn't been audited since the 1950s.
This is an amazing development.  China now owns more gold than Switzerland.  Switzerland, the old school gold king and tax haven has been bypassed by China.  Communist China!  Don't ignore this as it is telling you about the future.  China is the future and they are buying more gold.  I don't know about you but I am aligning myself with up and comer.  Buy some gold and silver while they are still cheap.