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Mark's Market Blog

12-16-11: Occupy closes West Coast ports.

By Mark Lawrence

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Markets dropped significantly on news that, um, that, um, that markets dropped. It would appear to this casual observer that markets are likely to continue to drop for another several days, possibly the rest of the year. Many think market pressure will continue to mount until Bernanke and Draghi are forced to break out their checkbooks and start printing money.

S&P 500 June 29 2011 to December 16,2011

President / Beloved Leader for all time and eternity Kim Jong-Il of North Korea has died. The fact that this narcissistic sexaholic madman is dead is not all that interesting in and of itself. What is interesting is the unsettled succession has already resulted in unprovoked attacks on South Korean ships and islands; this is likely to get worse. More instability is really not what Asia and the world need right now, but more instability seems to be what's on the menu. South Korea's stock market is dropping severely on news that no one is sure who controls the North Korean nukes, missiles and large guns.

We're told the very last troups are leaving Iraq today. I wonder what that means. We have built several large military bases in Iraq which will prove invaluable in future middle-east actions (yes, there will be future middle-east actions.) I can't imagine we're abandoning them. Perhaps the troups there don't count? Perhaps they're manned by Haliburton mercenaries?

Before Angela Merkel was a politician, she was a professor of Quantum Chemistry. She's been said to be unique among German politicians in being interested in facts, not feelings. Wednesday she said that there was no quick or simple solution to the euro crisis. "This process won't last weeks," she said. "It won't last months. It will take years. This process will also be accompanied by setbacks. It is not the duration of the process that is decisive. What is decisive is whether we have the necessary patience and endurance, if we do not let reversals get us down." If you're wondering if there will be further Euro crises in the near future, I think you just got your answer.

Gold dropped this week below $1600 to $1575, and also dropped below its 200 day moving average and trend line for the first time in over a decade. Many are forecasting a significant drop in the price of gold in the next few months. We must view this as people all over the world in financial stress who are attempting to raise money by selling something, anything. Other metals - silver, copper, platinum, palladium - have been dropping too.

Gold 2007 to 2011

The Securities and Exchange Commission sued six former Fannie Mae and Freddie Mac executives on Friday for misleading the public about the mortgage giants' exposure to risky subprime mortgages as the housing bubble deflated.

The Euro broke below $1.30 this week for the first time in a year. Last May it was at $1.50. This trend is nearly certain to continue; start thinking about buying that Mercedes you've been lusting after, or perhaps schedule that trip to Europe. Next summer might be a good time.

Interest rates on Italian debt continued to climb back towards their recent highs, once again nearing the 7% level. Bond rates on other European contries continued to drop slightly, making it look like Italy is being thrown to the wolves. How odd are these interest rates? Actually, they're just getting back to the levels from before the Euro was introduced, so in some sense these rates are normal.

Europe Interest Rates 1995-2011

What happened to Italy? 15 years ago, just before joining the Euro, Italy was running a trade surplus. Today they're running a significant trade deficit. The value of a country's currency is supposed to control imports and exports - a country importing too much should have the value of their currency drop, lowering the prices on exports and raising the price on imports. The Euro has not dropped. Italy's deficit is about 20% due to imports from Germany, 20% due to imports from China, and 30% due to oil imports. China and the Arabs are causing trouble for everyone. We can expect that soon trade actions will be taken by many countries against China. It's less obvious how to handle the Arabs.

Albert Bartlett, emeritus Professor of Physics at the University of Colorado at Boulder, has asked, "Can you think of any problem in any area of human endeavor on any scale, from microscopic to global, whose long-term solution is in any demonstrable way aided, assisted or advanced by further increases in population locally, nationally or globally?"

It appears China's housing bubble is starting to pop. Apartment prices in Shanghai are down by as much as 40%, and Beijing has two years of inventory clogging their market, with over 1000 real estate offices now closed. Sound familiar?

Armed robbers in London held up the Dubai Royal family. They got two suitcases of cash which the royals said they brought along as their "holiday spending money," $3,100,000 in 50 pound notes. The robbers were apprehended minutes later and the money returned.

How wealthy are you? Do you have $10 in your pocket, enough money to pay off your credit cards, and positive equity in your house? If you do, that is if your net worth is $10 or more, then you have more money than the bottom 25% of all Americans collectively.

The Occupy Movement gets a whole section this week: "The Protestor" is Time Magazine's Person of the Year. This is just getting started, Time is ahead of the curve for once.

Thousands of demonstrators forced shipping terminals in California, Oregon, and Washington state to halt parts of their operations Monday and some intend to keep their blockade attempts ramped up overnight. Todd Gitlin, a sociologist at Columbia University and an authority on social movements, said that the 1960s anti-war movement grew gradually for years until bursting onto the world stage during the election year of 1968. "I would assume that the action today is going to be representative of what's going to be happening from now on," Gitlin said. "There will be more of a tendency toward militant disruptive activity. There's going to be a number of coordinated actions and this is going to go on for months."

Youth unemployment in the UK is now over 1 million, the highest level since records started in 1992. That's 1 million potential Occupy participants as I see it.

Movie review: Atlas Shrugged part I is available on DVD now. I liked it. The story has been updated and is now set in 2016, when unemployment in the US is well north of 25%, gasoline is $38 / gallon, infrastructure is crumbling everywhere, and trains are the only remaining economically viable form of transportation. Populism is on the rise politically and class warfare is being stoked by the government. I must caution you: 1) only about a quarter of all critics liked it, it seems the only people who do like it are conservatives who read the book (that would be me). 2) It's not at all obvious that part II and part III will ever be made.

According to Marissa Meyer at Google, some credit card companies can now use your purchasing decisions to predict whether you're going to get a divorce with 95% accuracy -- two years out.

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