Commentary for the Week of March 8

[Blogger Robert Moore is a frequent contributor to the Rick’s Picks forum and the author of some of the more provocative guest commentaries we’ve published.  In the essay below, he deconstructs talk by high-level bankers about offering savers a negative rate of return on Treasury Bills.  Robert also explains why, for Baby Boomers in particular, this could have dire consequences. RA] Well, it’s official: The U.S. government is thinking about becoming a predatory lender. On February 1, the Treasury Borrowing Advisory Committee -- a symposium composed mainly of representatives of the cabal of large U.S. banks that are referred to as “Primary Dealers” in Treasury auction-speak -- tabled the following, seemingly innocuous, little tidbit: “The question was asked if it made sense for Treasury to permit bids and awards at negative interest rates in marketable Treasury bill auctions. [A Treasury employee] noted that there were operational issues associated with such a rule change, but that the hurdles were not insurmountable.” The Primary Dealers are asking the Treasury if there is a way to allow people to bid more for a Treasury Security than the cash value of the security at maturity. For example, bidding $105 for a Treasury Bill that you know will be redeemable for only $100 from the Treasury at maturity. Many financial newsletter writers and mainstream media analysts will probably infer from this development that the market expectation is for more future deflation (declining money supplies and therefore decreasing general price levels), while traders will salivate at the prospect of higher speculative gains to be made on T-Bills that can be unloaded later at higher prices when the “greater fool” comes along. But what would this development mean for the individual long-term investor (aka “the greater fool”)?  It would mean, very simply, that they would be agreeing

[For well more than a year, the Mainstream Media have given us a steady flow of campaign bilge that, finally, has made the entire Republican field seem unappealing. Perhaps this was the Fourth Estate's goal all along. After all, it was a left-tilting press that conspired to help Obama win in 2008 by ignoring his complete lack of experience and extreme political views.  This time, with the same goal in mind but using the opposite approach, the news media have picked off the GOP candidates one by one, turning them into shooting-gallery ducks as their ex-wives and mistresses, former employees and business associates and a sordid parade of other detractors testified against them. And all for what?  Apparently, to ensure the still-likely nomination of Mitt Romney, a man whose candidacy excites no one. In the guest editorial below, Wayne Razzi, a Rick’s Picks forum regular who goes by the handle “Red Will Danaher,” explains how it came to pass that, in a time of national crisis, we are about to do no better in November than perpetuate the political status quo.  Could things have turned out differently? Unfortunately not, concludes Wayne. It may take catastrophe, rather than mere crisis, to bring about real change.  RA] Assume for a moment that you’ve been installed in the role of the maintenance manager of the Great American False-Choice Spectacle.  Your prime directive would almost certainly be to keep hidden the fact that outcomes matter little.  Thus, as we are repeatedly informed via popular media, you may strongly consider hiding the truth in plain sight, as there are few better places.  And so, that seems to be the case now more than ever as the strategy is executed through the chain of command and control that expertly utilizes mass media. The elitist, crusading cowards

Primer for Investing in Canadian Farmland [A while back, our good friend Tom McCafferty argued here that few investments are likely to outperform Canadian farmland over time. In the essay below, he explains how you can invest in Canadian farmland yourself.  Besides being a former farm realtor, Tom is the author of numerous acclaimed books on trading. His Options Demystified is a how-to primer we enthusiastically recommend to all who would seek to profit from puts and calls.  RA] “Put your money in land, because they aren't making any more of it!” This is the most famous of the Will Rogers quotes on land or real estate.  When I think about burying some serious money for the long run, I think of farmland.  In a recent op-ed for Rick’s Picks, I was very bullish on Canadian farmland.  My reasons: 1) Canadian farmland is very productive; 2) low cost on a global basis; 3) Canada is a stable country with a very adequate supply of water, energy and fertilizer; and 4) even the weather is cooperative as its growing season gets a little longer each year. Some of Rick’s readers ask for more details. When ever you invest in land as a non-resident, you need to check the local laws.  For example, when I was a farm realtor I had a group of Italians interested in buying a 2000-acre farm in Illinois.  Now Illinois has a law prohibiting non-resident aliens from owning farmland.  But it doesn’t prohibit corporations from buying farmland.  So, we created a corporation and bought the farm. How does this apply to buying a Canadian farm?  First, does Canada have any restrictions on how much land can be owned by non-residence aliens?  The answer varies by province, as it does in the United States by state jurisdictions.  Here’s

[Erich Simon has contributed some appropriately grim essays in the past. In the commentary below, he surveys the economic landscape as America’s descent into bankruptcy picks up speed. There will be no escaping the ravages of Depression, he says, even for those who have piled up gold against events that may lie beyond imagining. RA] Beginning in 1995, the Federal Reserve financed the arrival of financial Star Wars, leveraging fear over the Y2K computer bug. The spending spree that ensued bankrupted the last greatest nation on earth. To fuel it, global currencies were juggled, gold was suppressed (until 2004) and equity markets were pumped with hot air. The euro, a fallback currency, was invented in case of a dollar rout. With debt force-fed into economies of the East and West, the 30-year Treasury Bond was retired in 2001 to circumvent a possible collapse of auction demand. The job of the Fed is to disburse “wealth”—i.e., scarce national resources denominated in indigenous currency. Currency gives physical form to the work, and resultant savings, to construct a national means of production. The Fed is charged with maintaining the status quo, a quality of life that has in fact been trending downward for both rich and poor since the supposedly mild recession of 1991. Not long thereafter, free markets gave way to manipulated markets, which today are giving way to de facto markets. Wealth was ripped out of the pockets of savers, retirees and everyone else. And then it was spent. Military contractors -- along with the trinity of Wall Street Greed, Washington Corruption and Corporate Machiavellianism -- were vastly enriched by The Great Campaign to realign global-resource scarcity and human draw. This time, supposedly, it was going to be different. The rising tide of prosperity would encompass the whole world. In fact,

Chalk up a frustrating day for traders who came to their monitors yesterday with nothing in their quivers save Hidden Pivots and a winning attitude. There are days when our technical runes warn us not to expect much in the way of opportunity, and yesterday was just such a day. We should have known as much before we let the stock market put us in a trance during the second half of what was to become a tediously meaningless session. An hour earlier, during a weekly tutorial session held online for graduates of the Hidden Pivot Course, there were technical signs all over the charts suggesting that we might better use the remaining hours of the day by going fishing. And we don’t mean bottom-fishing as traders, but rather, fishing for trout or salmon -- or even for bass, assuming one would be so foolish as to risk making an otherwise pleasant outing in a Boston Whaler as frustrating as one spent waiting to pull the trigger on a trade.  (Yes, we do give the bass in particular credit for being smarter than most of us. But other traders?  They are mostly – and fortunately for us -- headless chickens, and if you can’t out-think them on a given day, it’s probably time to seek another line of work.) Anyway, over the next couple of hours, the market delivered on its technical promise to be as boring as possible, and so it went -- until exactly 3:35 p.m. EST. That’s when one of our favorite trading vehicles, the E-Mini S&Ps, exploded with the spike that you see in the chart.  This wilding spree came as no surprise to us, having been precisely anticipated in the Rick’s Picks chat room via the following recommendation at 2:29 p.m. “ES double-D pivot at

Americans can take comfort in the likelihood that the showdown between mortgage lenders and homeowners will not resemble Greece’s battle-to-the-death with its creditors. In the U.S., the banks are slowly losing ground to a populist, election-year tide that eventually will force lenders to accept a moratorium on mortgage debt for tens of millions of homeowners. In the rapidly escalating legal battle to bring this about, last week’s $25 billion settlement between the banks and the U.S. did not settle much of anything, since the banks in theory can still be sued into oblivion by aggrieved homeowners. The plaintiffs will be claiming in effect and with a straight face that they got in over their heads because lenders forced them to borrow more than they could repay. Who would have imagined just a decade ago that an army of reckless borrowers would seek the protection of the courts under the remorseless deadbeat’s battle flag “Kick me, beat me, make me write bad checks”?  That’s what it’s come down to, evidently, and woe to any bank that asks the court for help in turning a family out onto the street. The five big banks that signed onto the deal are undoubtedly running scared, since the legal latitude afforded those who could conceivably claim “questionable lending practices” has been widened to include just about anyone who lives in a home – including, presumably, tens of millions more homeowners who  are not yet underwater but eventually will be. Keep in mind that the costs of the yet-to-be-unveiled Homeowner Bailout Act of 2014 have already been socialized, since the GSEs have been originating 90% of all new mortgage loans. Contrast this with the increasingly dire situation in Greece, where lenders, backed by a docile and ignorant press, are still able to pretend that they have

[I'm running this commentary for a second day because of the high-minded discussion it has elicited.  Please be aware that an announcement next week concerning the latest bailout for Greece would probably generate a short-squeeze rally on Wall Street, much as it has a dozen times before.  Be that as it may, a potentially important target at 1353.00 that I'd flagged here for the E-Mini S&Ps has held thus far, the futures having spiked in the opening hour yesterday to...1352.75.  In other trading notes, a rally target for Bank of America shares was bullishly exceeded, although two more important ones remain: 13085 for the Dow -- a longstanding objective of ours;  and 119.91 for Goldman Sachs. Taken together, the prospect of simultaneous tops in so many bellwethers suggests that an important trend change could be imminent.  Click here for a free trial subscription to Rick's Picks if you'd like to keep abreast of further developments in real time. RA] The financial world is on pins and needles as "investors" await Europe’s latest, quasi-momentous decision on the fate of Greece. The Greeks themselves, no fools, were a step ahead of the politicians and bankers, rioting in the streets.  Many of them have probably imbibed enough austerity to last a lifetime. Keep tightening one’s belt a notch at a time and eventually you’re left with two bloody torso halves. Not that the bankers would mind the mess as long as they get paid. So what, actually is at stake in this latest chapter of the eurobailoutpalooza? The rescue package under discussion amounts to a piddling €130 billion, and we can’t see how it’s going to make much of a difference. Even if it’s only intended to buy a little time, a sum as meager as that may not see the Eurocrisis through

The stock market hasn’t been much fun to trade in a while, but that could change today as the broad averages approach some potentially important rally targets of ours. Want to know exactly where these targets lie but don’t subscribe?  Click here for a free trial subscription that will give you access to our proprietary numbers. One of them foresaw a 600-point rally in the Dow that is nearly complete. The other is a bullish target for the E-Mini S&Ps that smacked us in the eye yesterday with its clarity.  There are also two bank stocks whose deft handlers appear to be setting up suckers for the kill. These financial biggies are household names, but because they are in the thick of Europe’s bailout hoax, they are destined to go down with the ship. Under the circumstances, the hysterical, short-squeeze rallies that have driven their shares steeply higher may be ready to seven-out. We’ve been itching for months to find a good place to short this market. As many of you who trade will already know, except for a delightful, breath-of-spring plunge in late October/early November, it’s been a tiresome, uphill slog for patient bears. Now, although we can’t guarantee that the Hidden Pivot targets about to be hit are going to stop the bull dead in its tracks, we’re optimistic that they will provide an exceptional opportunity to get short. There are umpteen ways to do this, but we’ll probably concentrate on index futures and put options on certain equity trading vehicles. If you’re not familiar with the “camouflage” technique we use to help alleviate the stress of initiating a trade, you may be surprised at how easy it is. 'Unmained' This won’t be the first time we’ve laid out shorts in a market that was steaming relentlessly higher.

It’s a sad time for America when a firm that does what Facebook does is on track to become one of our largest companies. Based on capitalization, the web-based lubricator of social interaction could be in the top 50 within a few years, or even in the top 25 if analysts’ wildest expectations pan out.  Facebook’s IPO promises to top Google’s $27 billion offering, reaping early backers a giant windfall.  But wouldn’t it be far better if a company that actually made something were to enjoy such extravagant enthusiasm on Wall Street?  Facebook of course makes nothing, and what it sells is of little economic value to anyone. And yet its founder, Mark Zuckerberg, is about to become one of the wealthiest men in the world. A gushy tribute to his impending monetary success appeared on the op-ed page of the Wall Street Journal yesterday. Written by a Rutgers anthropology professor named Lionel Tiger, this paean to the biggest time-waster in the galaxy saw Facebook’s inventor as “bestrid[ing] vast business numbers once dreamt of only by toothpaste and soft-drink makers. This reflects a new commercial demography in which the consumer is not someone who wants something necesssary, but rather one who seeks to assert simply what he is. And the tool he uses in order to become nothing more or less than an efficient, interesting and socially propsereous primate is the Facebook page.” Hefner’s ‘Genius’ Karl Marx himself could not have come up with a more powerful indictment of capitalism or of the soulless craving it would seek to create for things we don’t really need. And yet, although he doesn’t say so explicitly, Prof. Tiger would seem to place Zuckerberg – whom he labels “the world’s richest primatologist” -- in the Pantheon of human genius with DaVinci, Einstein and